CONSIDERATIONS 
 
 ON THE 
 
 CURRENCY AND BANKING SYSTEM 
 
 OF THE 
 
 UNITED STATES: 
 
 BY ALBERT GALLATIN. 
 
 CAREY & LEA. CHESTNUT STREET. 
 1831. 
 

 
ADVERTISEMENT. 
 
 ERRATA. 
 
 PAGE. LINE. 
 
 7 8 
 
 FROM 
 
 bottom 
 u 
 
 READ 
 
 their . 
 underrated 
 
 instead of 
 
 the 
 overrated 
 
 18 
 
 11 
 
 
 
 
 it 
 
 may 
 
 38 
 
 13 
 
 top 
 
 M 
 
 many 
 was 
 
 tt 
 
 were 
 
 46 
 
 CO 
 
 4 
 17 
 
 bottom 
 
 ERASE 
 
 in No. IV. 
 
 ti 
 
 15.25 
 
 Oo 
 
 59 
 90 
 
 16 
 
 7 
 
 top 
 
 READ 
 
 15.85 
 relied on 
 
 n 
 tt 
 
 trusted 
 of receiving 
 
 95 9-10 bottom 
 
 95 . 10 
 
 98 . second column 
 
 tnn 
 
 M 
 
 ERASE 
 
 to receive 
 discount T 
 Middle District Sank 
 
 2.307.431 instead ot 
 
 discounting 
 4.307.431 
 
 annexed, which could not be inserted ia a Review. 
 
 New-York, January 1st, 1831. 
 
CONTENTS. 
 
 Introduction Page 5 
 
 Precious metals 6 
 
 Paper money 19 
 
 not convertible into specie 20 
 
 convertible at will 28 
 
 Banking system of the United States 39 
 
 Remedies enlargement of metallic currency 55 
 
 suppression of small notes 56 
 
 proper valuation of gold coins 57 
 
 miscellaneous provisions 65 
 
 Constitutional powers of Congress , 71 
 
 Stamp duties , 75 
 
 Bank of the United States 76 
 
 Objections answered . . . , 84 
 
 NOTES. A. Ratio of gold to silver. . . 93 
 
 B. Banks of Scotland ib. 
 
 C. Restrictions on private banking 95 
 
 STATEMENTS. I. Banks in operation, 1st January 1830 97 
 
 II. Situation of banks (ascertained) January 1st 1830. . 101 
 
 III. Capital of other Banks " " " 103 
 
 IV. Banks which have failed ib. 
 
 V. Depreciation of bank notes during the suspension of 
 
 specie payments. 106 
 
 VI. Situation of the United States Bank, 1819 to 1829 ib. 
 VII. Distribution of the nett circulation of the United 
 
 States Bank, September 1830 ib. 
 
 
CONSIDERATIONS, &c. 
 
 THE .framers of the Constitution of the United States were 
 deeply impressed with the still fresh recollection of the baneful 
 effects of a paper money currency, on the property and on the 
 moral feeling of the community. It was accordingly provided by 
 our National Charter, that no state should coin money, emit bills 
 of credit, make any thing but gold and silver coin a tender in pay- 
 ment of debts, or pass any law impairing the obligation of con- 
 tracts ; and the power to coin money and to regulate the value 
 thereof, and of foreign coin, was, by the same instrument, vested 
 exclusively in Congress. As this body has no authority to 
 make any thing whatever a tender in payment of private debts, 
 it necessarily follows, that nothing but gold and silver coin can 
 be made a legal tender for that purpose, and that Congress can- 
 not authorize the payment, in any species of paper currency, of 
 any other debts but those due to the United States, or such debts 
 of the United States as may, by special contract, be made paya- 
 ble in such paper. All the engagements previously contracted 
 at home, by the United States, were expressed in Spanish dok 
 lars ; all the moneys of account of the several states, were esti- 
 mated and payable in that coin; there might be some uncertainty 
 as to the precise weight of pure silver which it contained ; and 
 the assays made at the time, may not, for want of proper means, 
 have had all the accuracy of which that process is susceptible. 
 But they were made in good faith ; and the Act of Congress of 
 the year 1791, which declared that the dollar of the United 
 States should contain 37 Ij grains of pure silver, has irrevocably 
 fixed that quantity as the equivalent of a dollar of account, and 
 as the permanent standard of value, according to which all con- 
 tracts must be performed. The relative legal value of gold and 
 foreign coins to that standard, may from time to time be varied^ 
 provided that neither shall be so overrated, as to authorize the 
 payment of a debt with an amount in such coin of a less actual 
 value, than that of the silver to which it may be made to cor- 
 respond. 
 
 The provisions of the Constitution were universally considered 
 as affording a complete security against the danger of paper 
 
6 BANKS AND CURRENCY. 
 
 money. The introduction of the banking system, met with a 
 strenuous opposition on various grounds ; but it was not appre- 
 hended that bank notes, convertible at will into specie, and which 
 no person could be legally compelled to take in payment, would 
 degenerate into pure paper money, no longer paid at sight in 
 specie. At a later date, although occasional bankruptcies had 
 taken place, and might again be anticipated, there was no ap- 
 prehension of a general failure of the banks in three-fourths of 
 the states. Still less was it expected, and it was the catastrophe 
 of the year 1814 which first disclosed not only the insecurity of 
 the American banking system, as then existing, but also, that 
 when a paper currency, driving away, and superseding the use 
 of gold and silver, has insinuated itself through every channel of 
 circulation, and become the only medium of exchange, every 
 individual finds himself, in fact, compelled to receive such cur- 
 rency, even when depreciated more than twenty per cent., in 
 the same manner as if it had been made a legal tender. The es- 
 tablishment of the Bank of the United States was recommended 
 by the Treasury, and that Institution was incorporated by Con- 
 gress, for the express and avowed purpose of removing an evil, 
 which the difference in the rate of depreciation, between the 
 paper currencies of the several states, and even those of different 
 places in the same state, had rendered altogether intolerable. 
 The object in view has been obtained. The resumption of specie 
 payments, which the state banks had been unwilling or unable 
 to effect, took place immediately after that of the United States 
 had commenced its operations. And it has, for a number of 
 years, supplied the country with a currency safer, and, it must 
 at least be allowed, more uniform, than that which the state 
 banks could furnish. The question, whether the charter, which 
 expires in a few years, should be renewed, has been brought by 
 the President before Congress, with a suggestion that a national 
 bank, founded upon the credit and revenues of the government, 
 might be advantageously substituted, to that now in existence. 
 Reports favorable to the continuance of the present bank, have 
 been made by committees of both houses of Congress. Another 
 report, on the relative value of gold and silver, and intimately 
 connected with the subject of currency, has also been made by 
 the Secretary of the Treasury to the Senate. Availing ourselves 
 of the information afforded by those documents, and particularly 
 of the arguments adduced in Mr. M'Duffie's able report, we 
 intend to examine this important question, principally in refer- 
 ence to the currency of the country, considered as the common 
 standard, by which the value of all the other commodities is 
 estimated, and every contract is performed. 
 
 Whatever commodity or species of paper may, by law or 
 general consent, be universally received in any country, in ex- 
 change of every other commodity, and in payment of all debts, 
 
BANKS AND CURRENCY. 7 
 
 is the circulating medium or currency of such country, or in 
 other words, its common standard of the value of all commodities 
 whatever, and that which regulates the performance of all 
 contracts not specially excepted. It is therefore of primary 
 importance, that the commodity or substitute, which may be 
 selected for that purpose, should be of a value as permanent as 
 practicable, and the same in every part of the same country ; 
 and it is also highly desirable, that the same circulating medium 
 should be common to all countries connected by commerce. 
 Gold and silver are the only substances, which have been, and 
 continue to be, the universal currency of civilized nations. It 
 is not necessary to enumerate the well-known properties which 
 rendered them best fitted for a general medium of exchange. 
 They were used, not only as ornaments and objects of luxury, 
 but also for that particular purpose, from the earliest times. We 
 learn from the most ancient and authentic of records, that Abra- 
 ham was rich in cattle, in silver, and in gold ; that he purchased 
 a field for as much money as it is worth, and in payment weighed 
 four hundred shekels of silver, current (money) with the mer- 
 chant. And when we see that nations, differing in language, 
 religion, habits, and on almost every subject susceptible of 
 doubt, have, during a period of near four thousand years, agreed 
 in one respect; and that gold and silver have, uninterrupt- 
 edly to this day, continued to be the universal currency of the 
 commercial and civilized world, it may safely be inferred, that 
 they have also been found superior to any other substance in 
 that permanency of value, which is the most necessary attribute 
 of a circulating medium, in its character of the standard, that 
 regulates the payment of debts, and the performance of con- 
 tracts. 
 
 There is not, however, in nature, any perfect or altogether 
 permanent standard of value. There is not a single commodity, 
 the relative value of which, as compared to that of all other 
 commodities, is not subject to great and permanent changes as 
 well as to temporary fluctuations. But it will be found, that 
 the nature of the demand for precious metals, the comparative 
 regularity of the supply, and especially their much greater du- 
 rability and intrinsic value, than those of any other substance 
 otherwise fitted for a circulating medium, restrain the fluctua- 
 tions to which the relative value is liable, within far narrower 
 limits, than is the case with any other commodity which might 
 have been selected for a currency. 
 
 It is well known that the discovery of America was followed by 
 a great and permanentxhange in the price of the precious metals,- 
 which reduced it to one-fourth of their previous relative value 
 as compared to all other commodities. This great revolution was 
 due to a simultaneous vast increase of the supply and correspond- 
 ing reduction in the cost of production of the metals. The Ame- 
 
8 BANKS AND CURRENCY 
 
 rican mines of silver do not lie nearer the surface of the earth 
 than those of other countries ; the ore rarely yields more silver 
 than one-fourth per cent, of its weight; nor was there at the time 
 any improvement adopted that tended materially to lessen the 
 expense of extracting the silver from the ore.* The superiority 
 of the silver mines of America, appears to consist, principally, 
 in the magnitude of the beds, and the much greater quantity 
 of ore which can accordingly be dug out with the same labor. 
 The annual labor of one miner at the mine of Valenciana, 
 the most fertile of Mexico, was sufficient, in 1803, to extract 
 from the bowels of the earth, four hundred quintals of ore, 
 which produced one quintal of silver; and the annual produce 
 of the mine exceeded three millions of dollars in value, (about 
 220,000 Ibs. troy weight) : whilst, at the richest mine of Saxony, 
 the annual labor of eleven miners was necessary to extract the 
 ore sufficient to produce a quintal of silver; and the annual pro- 
 duce was less than ninety thousand dollars, (about 6,200 Ibs. 
 troy weight). Although the money price of mining labor appears 
 to be five times greater in Mexico than Saxony, and notwith- 
 standing the want of fuel and other circumstances which in- 
 crease the current expenses, the cost of production was still 
 much less at the Mexican than at the Saxon mine, and left a 
 considerable rent to the owner. The Saxon mine, though prob- 
 ably as rich as any that was in operation in Europe prior to the 
 discovery of America, could not, on account of the difference in 
 the rate of wages, be worked if situated in Mexico. It follows, 
 that all the American silver mines are superior to it in fertility, 
 though in that respect differing from each other, and gradually 
 decreasing from that of Valenciana, down to the poorest, which 
 probably affords no rent to the owner. 
 
 The American mines, or washings of gold, are in the same 
 manner more fertile, or, with the same labor, produce much 
 greater quantities of pure metal than those of Europe. But the 
 difference must have been less with respect to gold than to silver 
 mines. The relative value of gold to silver was, before the 
 discovery of America, at the ratio of 11 or 12, and is now at 
 that of 15 or 16 to 1. If the depreciation in the value of silver 
 has been at the rate of 4 to 1, that of gold has been only at the 
 rate of about 3 to 1 ; and this may afford some reason to think, 
 that, of the two metals, gold is probably the most permanent 
 standard of value. It must be observed, that, though wanted 
 for similar purposes, the relative value of gold to silver does not 
 depend on any supposed similarity or connexion between the 
 two metals, but is the result of their respective prime cost, which 
 determines the value of each in relation to that of all other 
 commodities. 
 
 Humboldt's A T e\v Spain. 
 
BANKS AND CURRENCY. 9 
 
 As the total importation of precious metals from America to 
 Europe had not, prior to the year 1596, exceeded a quantity- 
 equal to that contained in eight hundred millions of dollars, and 
 the depreciation was then already at the rate of about 3j to 1, 
 it is probable that the total amount of gold and silver existing 
 in Europe prior to the discovery of America, though worth then 
 four times as much, did not in quantity exceed that contained 
 in three hundred millions of dollars, money of the present 
 times. 
 
 The total amount of gold and silver produced by the mines 
 of America, to the year 1803, inclusively, and remaining there 
 or exported to Europe, has been estimated by Humboldt at 
 about five thousand six hundred millions of dollars; and the 
 product of the years 1804 1830, may be estimated at seven 
 hundred and fifty millions. If to this we add one hundred mil- 
 lions, the nearly ascertained product to this time of the mines 
 of Siberia, about four hundred and fifty millions for the African 
 gold dust, and for the product of the mines of Europe, (which 
 yielded about three millions a year in the beginning of this cen- 
 tury.) from the discovery of America to this day, and three 
 hundred millions for the amount existing in Europe prior to the 
 discovery of America, we find a total not widely differing from 
 the fact, of seven thousand two hundred millions of dollars. It 
 is much more difficult to ascertain the amount which now re- 
 mains in Europe and Am-erica together. The loss by friction 
 and accidents might be estimated, and researches made respect- 
 ing the total amount which has been exported to countries beyond 
 the Cape of Good Hope ; but that which has been actually con- 
 sumed in gilding, plated ware, and other manufactures of the 
 same character, cannot be correctly ascertained. From the im- 
 perfect data within our reach, it may, we think, be affirmed, 
 that the amount still existing in Europe and America certainly 
 exceeds four thousand, and most probably falls short of five 
 thousand millions of dollars. Of the medium, or four thousand 
 five hundred millions, which we have assumed, it appears that 
 from J to f is used as currency, and that the residue consists of 
 plate, jewels, and other manufactured articles. It is known, 
 that of the gross amount of seven thousand two hundred mil- 
 lions of dollars, about 1800 millions en* Jth of the whole in 
 value, and \th in weight, consisted of go-Id. Of the four thousand 
 five hundred -millions, the presumed remaining amount in gold 
 and silver, the proportion of gold is probably greater, on account 
 of the exportation to India and China having been exclusively 
 in silver, and of the greater care in preventing every possible 
 waste in an article so valuable as gold. 
 
 In order, therefore, to produce a revolution in the price of 
 gold and silver, such as was caused by that event, mines must 
 
 be discovered, which, in thirty or forty years, should produce, 
 
 R 
 
10 BANKS AND CURRENCY. 
 
 .in addition to the supply required by the increasing demand, 
 thirteen or fourteen thousand millions of dollars, or three times 
 the quantity now existing; and this increased supply must be 
 accompanied with a corresponding reduction in the cost of pro- 
 duction. It is obvious, that the discovery of one hundred new 
 mines, even superior in magnitude, and equal in other respects 
 to that of Valenciana, would only cause mines of inferior fer- 
 tility to be abandoned, and could produce no greater effect on the 
 price of silver, than reducing it to the actual cost of production 
 at the mine of Valenciana. The expense of extracting the silver 
 from ore of a given quality, once brought to the surface of the 
 earth, bears too small a proportion to the whole expense of work- 
 ing a mine, to render it possible that any improvement in that 
 process should cause any great reduction in the price of the metal 
 It does not appear that such reduction can be effected, other- 
 wise than, either by the discovery of numerous and large beds 
 of ore, much richer in silver than any yet worked, or by a great 
 reduction in the money price of labor in America. Judging 
 from analogy, the first event, at least to a sufficient extent, is 
 altogether improbable; and the last contingency cannot take 
 place but slowly and gradually. On the other hand, the dimi- 
 nution in the annual supply for the last twenty years, having 
 been exclusively caused by the convulsions attending the revo- 
 lutions of the new American states, is but temporary ; and the 
 successive numerous discoveries of new mines, during the seven- 
 teenth and eighteenth centuries, render it highly probable, that, 
 after order and security shall have been restored in those states, 
 a similar progress will take place, and continue, as heretofore, 
 to produce an increasing annual supply, corresponding with the 
 increasing demand. This demand, also, being always propor- 
 tionate to the wealth and prosperity of the civilized world, can 
 increase but gradually. It is, therefore, highly improbable, that 
 any new revolution should again occur, producing effects in any 
 degree similar to those which followed the discovery of Ame- 
 rica, or that there should be any other permanent alteration 
 in the price of the precious metals, but such slow and gradual 
 changes as cannot substantially affect the due performance of 
 the great mass of ordinary contracts. Before we examine the 
 temporary fluctuations in price, to which both gold and silver 
 are liable, it is necessary to inquire into the nature of the de- 
 mand for those metals. 
 
 Mines being, like tillable land, private property, and of dif- 
 ferent fertility, the rent of either, as well as the intrinsic value 
 of their respective produce, are regulated by analogous laws. 
 But there is an essential difference between the demand for 
 corn and that for the precious metals. That for corn, or the 
 ordinary article of food, is for an amount in quantity, without 
 much regard to value. That for gold and silver is for an amount 
 
BANKS AND CURRENCY. 11 
 
 in value and not in quantity. More food is consumed and may- 
 be wasted in plentiful years, than in those of scarcity. But there 
 is always a certain quantity of corn, or other usual article of 
 food, determined by population, and which must necessarily be 
 supplied at any price, without any other limits than actual de- 
 ficiency in the supply, or absolute inability to pay the market 
 price ; and in either case a portion of the suffering population 
 must perish. In a country requiring annually at least fifty mil- 
 lions bushels, or any other quantity of corn, for the necessary 
 subsistence of its inhabitants, there is a most imperative demand 
 for that amount, or a substitute for it ; and this must be satis- 
 fied, if the amount can be procured at all, and at any price, 
 provided the country can by any means pay for it. The demand 
 for corn is therefore for a certain quantity regulated by the 
 population, and not for a certain value proportionate to the in- 
 come, capital, or wealth of the country. 
 
 But the demand for gold and silver is, either for plate, jewels, 
 and other manufactured articles, such as plated ware, gilding, 
 &.c. ; in which those metals are used, or for currency. It is evi- 
 dent, that all, or nearly all those objects of demand being, with 
 the exception of currency, articles of luxury, the effective de- 
 mand for them, including both the wish to possess and the means 
 to pay, must be proportionate to wealth, and therefore for a cer- 
 tain amount in value and not in quantity. No individual can lay 
 out more than a certain portion of his income or capital in plate 
 and jewels. If the price of the precious metals is reduced to 
 one fourth of what it previously was, as happened during the 
 latter end of the sixteenth century, he will be able, with the 
 same income, to obtain four times the quantity of plate and gold 
 ornaments which he formerly possessed, because their value re- 
 mains the same. But the increased cheapness will in a very 
 inconsiderable degree, if at all, have a tendency to increase the 
 amount in value of gold and silver articles which will be used. 
 An individual may be induced by such great reduction in the 
 price of silver, to substitute silver spoons or forks to those made 
 of inferior metal ; but so long as silver spoons or forks are dearer 
 than those of any other metal, he cannot, his income remaining 
 the same, indulge his wish without retrenching his expenses in 
 some other respects, and without depriving himself of some other 
 comforts. What is true of every individual in every country, is 
 equally so of the aggregate of individuals, or of every country. 
 The demand for an increased value of plate, jewels, and other 
 articles manufactured, in whole or in part, of gold or silver, 
 with the exception perhaps of a few articles in general use 
 amongst all classes, will everywhere be nearly in proportion to 
 the wealth of each country respectively. And what is nearly 
 correct, as regards the demand for manufactures of gold and 
 
12 BANKS AND CURRENCY. 
 
 silver, is strictly true as applied to the demand for those metals 
 for currency. 
 
 As a silver dollar, or dollar bank note, passing from hand to 
 hand, effects in a given time, a year for instance, a great num- 
 ber of payments, the amount of currency wanted in any country 
 is always much less than the gross amount of payments made in 
 currency within the same time. The amount thus wanted is 
 that which is necessary and sufficient, for the payment of all 
 such purchases of land, labor and product of labor (embracing 
 every species of commodities and capital) as are paid with cur- 
 rency. Its value must always, therefore, bear a certain propor- 
 tion to the aggregate value of the land, labor, and all objects 
 whatever, thus paid for with currency. That proportion, as 
 well as that which the value of the annual purchases effected 
 with currency may bear to the value of the whole amount of 
 annual exchanges and purchases of the country, whether ef- 
 fected with currency or by any other means, must vary, and 
 cannot be precisely ascertained. But, whatever either of these 
 two ratios may be, the average value of the various objects pur- 
 chased, which are paid for in currency within a given time, a 
 year for instance, will always require a certain proportionate 
 value of currency. The average value of the objects, thus an- 
 nually paid for, determines the total average amount in value 
 of currency which is requisite, and in the case before us, the 
 average value of precious metals which is wanted for currency, 
 and for which there is an actual demand for that purpose. 
 
 Let it be supposed that the amount of currency wanted in a 
 country, is one-tenth part of the whole amount of the annual 
 payments made there in currency ; and that the currency con- 
 sisting exclusively of silver, there are annually in that country 
 one million of bushels of wheat sold and paid for in currency. 
 It is clear, that if the relative value of silver to wheat be such 
 in such country, that one ounce of silver is the equivalent and 
 common price of a bushel of wheat, one hundred thousand ounces 
 of silver will be necessary and sufficient to effect the payment of 
 all the wheat annually sold and paid for in currency. If on ac- 
 count of a reduction in the cost of its production, or from any 
 other cause, the value of silver, as compared to that of all other 
 commodities, should be reduced to one-half of what it previously 
 was, the value of wheat, as compared with that of all other 
 commodities, silver excepted, remaining the same as before, two 
 hundred thousand ounces of silver .would be necessary to effect 
 the payment of the one million of b\ishels of wheat sold for cur- 
 rency during the year. But although the quantity of silver (or 
 nominal amount of currency) wanted, was twice as great as be- 
 fore, the value would remain precisely the same, two hundred 
 thousand having become worth no more than one hundred thou- 
 sand ounces had previously been. If, instead of this, the value 
 
BANKS AND CURRENCY. 13 
 
 of silver had undergone no change, and either the quantity of 
 wheat, annually sold and paid for in currency, had increased to 
 two millions of bushels, its price remaining the same, or, the 
 quantity thus sold remaining the same, the value of wheat as 
 compared to all other commodities had doubled, as the two hun- 
 dred thousand ounces of silver, wanted to effect the payments 
 of the sales of wheat, would actually be worth twice as much 
 as the one hundred thousand ounces had been, the -value of cur- 
 rency wanted would be twice as great as theretofore. 
 
 What is true of the proportionate value of the currency, want- 
 ed to effect the payment of the quantity of wheat annually paid 
 for in currency, to the value of that wheat, is equally true of the 
 proportionate value of the currency, wanted to effect the payment 
 of the whole amount of land, labor, and products of labor, an- 
 nually paid for in currency, to the aggregate value of all those 
 objects. Although the proportion may vary, according to the 
 rapidity of the circulation, and to the means used in order to 
 economize the currency, it is always that aggregate value, which 
 determines the value of the currency wanted in any country. 
 Whilst that aggregate value remains the same, any great varia- 
 tion in the amount in quantity of the currency must be due to 
 a change, or cause a change, in its value, as compared with that 
 of all other commodities. Where gold and silver are the only 
 currency, any great and permanent increase in the quantity of 
 those metals used as currency, (the aggregate value of the ob- 
 jects annually paid for in currency remaining the same,) must 
 be due to a corresponding reduction in the cost of production 
 of gold and silver ; which cost, leaving to the owners of mines 
 a greater or less rent according to their fertility, determines the 
 value of those metals as compared with that of all other com- 
 modities. Where a paper has been substituted to a metallic 
 currency, any similar considerable increase in its amount must 
 cause a corresponding depreciation in its value, if the aggregate 
 value of the objects, annually paid for in currency, remains the 
 same. 
 
 The amount in value of the currency wanted to effect 
 the necessary payments, though but a comparatively small por- 
 tion, is one of the most important, productive, and necessary 
 portions of the capital of a nation. Its use is substituted to an 
 inconvenient barter or exchange of one commodity for another; 
 it enables every individual to dispose at all times, and with fa- 
 cility, of the whole surplus of the products of his industry, and 
 to purchase with the proceeds any of the products of the indus- 
 try of others which he may want ; it promotes the division of 
 labor, and vivifies the industry of the whole country. But when- 
 ever the precious metals used a? currency exceed in any country 
 the value wanted to effect the necessary payment?, the surplus 
 becomes a dag| and unproductive stock ; and it will, according- 
 
14 BANKS AND CURRENCY. 
 
 ly, be either converted into manufactured articles of those 
 metals, or be exported to other countries. If on the contrary 
 the currency should consist of an irredeemable paper, having 
 only an artificial and local value, and none whatever, either 
 in other countries or for any other purpose ; it is evident that 
 any excess in the nominal value of such currency, beyond the 
 actual value sufficient to make the necessary payments, must 
 cause a corresponding depreciation in that nominal value. If 
 fifty-five millions of ounces of pure silver, at its present value 
 as compared with all other commodities, are sufficient on an 
 average to effect all the payments made in the United States in 
 currency, the whole quantity of a paper currency substituted to 
 silver, cannot, on an average, whatever its nominal amount may 
 be, exceed in value fifty-five millions of ounces of pure silver, 
 or about seventy-one millions of dollars in our present coin. 
 Whether such currency amounted nominally to seventy-one, one 
 hundred, or one hundred and forty millions of dollars, its value 
 would not, on an average, exceed that of the seventy-one mil- 
 lions of silver dollars wanted to effect the necessary payments ; 
 and the paper money would generally depreciate at least in pro- 
 portion to the excess of its nominal amount beyond seventy-one 
 millions of silver dollars. Having recurred to numbers by way 
 of illustration, it is proper to observe, that we do not mean to 
 assert that the total value of currency wanted in any country 
 is a fixed sum. Even when no alteration has taken place in 
 the industry and commerce of a country, the amount of currency 
 may occasionally, to a certain extent, exceed that which is actu- 
 ally wanted, without affecting its price. An approximation of 
 the average amount, which always fluctuates within certain 
 limits, is all we pretend to give. 
 
 It is obvious that the aggregate value of the annual payments 
 made in currency, which regulates the value of the currency 
 wanted, must itself principally depend on the aggregate value 
 of the land, labor, products of labor, and in short of all the ob- 
 jects which are or may be annually sold or exchanged. The 
 amount of the value of currency wanted, or the demand for 
 currency in every country, depends therefore principally on its 
 wealth, but is modified in some degree by the state of society. 
 The wages of labor, and the rent of land, are, in most countries, 
 no inconsiderable portion of the objects which must be paid for 
 in money. Countries where slave is generally used instead of 
 free labor, or where, as in the United States, the greater part 
 of the land is occupied and tilled by the owners, or, when rented, 
 let generally on shares, will, therefore, with equal wealth, require 
 a less proportionate amount of currency in value. Less is also 
 wanted in purely agricultural countries, and everywhere by 
 those engaged in agriculture, than in any other profession. As a 
 far greater part of the income of almost every individual is ex- 
 
BANKS AND CURRENCY. 15 
 
 pended on articles of food, than on the product of any other one 
 branch of industry, farmers consume a much greater part of the 
 products of their own industry, and they therefore have a less 
 proportionate amount of those products to exchange for the pro- 
 ducts of the industry of others, than any other profession. Barter 
 continues also to be a principal mode of exchange in the country, 
 at least in a great portion of the United States, where the planter 
 and farmer obtain from time to time their supplies from the mer- 
 chant, and pay him annually with their crop. It may be said, 
 generally, that, with respect to the state of society, the want and 
 demand for currency increase in proportionate the density of the 
 population, the consequent multiplication and growth of towns, 
 and the division of labor. And these being almost exclusively 
 the result of the increasing growth, prosperity, and wealth of a 
 country, it may be correctly asserted, that the demand for cur- 
 rency in any country is generally proportionate to its wealth. 
 
 That demand increases in proportion to that of population, 
 only in as far as population is a principal element of wealth ; and 
 both will increase together, nearly in the same proportion, in a 
 country which in other respects is nearly stationary. But the 
 ratio of the population to the actual amount of currency, which 
 always corresponds nearly with the demand for it, will be found 
 to differ materially in various countries, according to the pro- 
 ductiveness of labor, to the accumulated amount of products of 
 labor or capital, and generally to the wealth of each respectively. 
 The perpetual melting of coins, makes, indeed, the amount of 
 coinage alone, and without many subsidiary investigations, a very 
 imperfect criterion of the amount of gold and silver coins exist- 
 ing in any country. A much more correct estimate may be made, 
 where paper or debased coin, neither of which can be advantage- 
 ously exported or used for any other purpose, constitute the whole 
 or greatest part of the currency. And resorting to both means, 
 an approximation sufficient for the purpose may be obtained. 
 
 We learn from Storch,that the paper money of Russia, amount- 
 ed, in 1812 1814, to five hundred and seventy-seven millions 
 of rubles, and the copper currency to about twenty-five millions. 
 Both being depreciated to one-fourth part of their nominal value, 
 were equivalent to one hundred and fifty millions of silver ru- 
 bles; to which adding the estimated amount of twenty-five mil- 
 lions of silver rubles still in circulation, gives a total of one hun- 
 dred and seventy-five millions, equal to less than one hundred 
 and thirty-two millions of dollars. The paper circulates, almost 
 through the whole empire, from Archangel to Odessa, and from 
 the banks of the Dwina to the confines of Asia. Excluding Riga, 
 Courl and, and the Asiatic provinces, the one hundred and thirty- 
 two millions of dollars are the total value of currency, for at 
 least thirty-five millions of souls, that is to say, at the rate of 
 less than four dollars a head. 
 
16 BANKS AND CURRENCY. 
 
 It will hereafter be shown, that the amount of currency of the 
 United States, did not, in 1829, probably exceed seventy-three 
 millions of dollars, or at the rate of about six dollars a head ; a 
 result nearly the same as that of the year 1819. The reasons, 
 why the amount is less than might have been inferred, from the 
 extensive commerce of the United States, and the wealth of our 
 large cities, have already been briefly indicated. 
 
 In France, where great pains have been taken to ascertain 
 the facts, as far as it is practicable, in a country, nine-tenths at 
 least of the currency of which consist of the precious metals, the 
 estimates vary, for different years and different amounts of popu- 
 lation, from two thousand to two thousand five hundred millions 
 of francs, but only from seventy-two to eighty francs, or from 
 thirteen and a half to fifteen dollars a head. 
 
 The bank notes of the Bank of England, and of country banks, 
 amounted, in the year 1811, to forty-four and a half millions 
 sterling, and those of Scotland to three millions and a half, equiva- 
 lent, together, to about forty-four millions specie, to which add- 
 ing about four millions' worth of debased silver, gives, on a popu- 
 lation of about twelve millions of souls, about 4 sterling, or 19 
 dollars a head. In 1829, the amount has been stated to be twenty- 
 two millions in gold, eight millions in silver, and twenty-eight 
 millions in English bank notes, to which, adding four millions 
 of Scotch notes, gives sixty-two millions, or about the same 
 result in proportion to the population ; since this, allowing the 
 same rate of increase since 1821, as between 1811 and 1821, 
 must now amount to between fifteen and sixteen millions of 
 souls. But, including the population and the bank notes of 
 Ireland, we would have a population of about twenty-three 
 millions, and a currency of about sixty-six millions sterling, or, 
 as in France, about fourteen dollars a head. 
 
 From these and more imperfect data, in relation to other 
 countries, we believe that the total amount of currency in 
 Europe and America, may be estimated at two thousand to 
 two thousand three hundred millions of dollars ; three-fourths 
 of which consist of the precious metals, and the residue of 
 bank notes and irredeemable paper money. 
 
 The amount in weight or quantity of gold and silver, is now 
 fifteen times as great in Europe and America, as it was prior 
 to the discovery of the last country. But the three hundred 
 millions previously existing, were then worth as much as twelve 
 hundred millions at this time. The increase, so far as it con- 
 sists only in amount, and has been caused by the reduced cost 
 of production, is, with respect to currency, of no importance 
 whatever. It is quite immaterial to the community, whether 
 one thousand ounces of silver, will, on an average, purchase 
 one thousand or four thousand given measures or weights of 
 every other commodity. Had not that reduction taken place, 
 
BANKS AND CURRENCY. 17 
 
 four hundred thousand millions of dollars in currency would 
 have answered the same purpose as is now effected hy sixteen 
 hundred thousand millions, without any other difference, than 
 probably the use of coins of base metal, instead of our dimes 
 and half dimes. But the increase from twelve hundred mil- 
 lions, (the present worth of the former three hundred millions,) 
 to four thousand five hundred millions, is an increase in value, 
 and indicates a corresponding, and, on account of the numer- 
 ous substitute^ for currency introduced by commerce and 
 credit, a still greater proportionate increase of the wealth and 
 prosperity of Europe and America together, during the two 
 last centuries. That increase of value has no otherwise con- 
 tributed to this increased wealth, than as far as it has added 
 to the amount of exchangeable commodities ; and the same 
 effect would have been produced by a similar increase in any 
 other commodity. The increased wealth and prosperity of 
 Europe and America are the cause, and not the effect, of the 
 increased amount in value of gold and silver, which they now 
 possess. The causes of that great increase of wealth, are not 
 to be found in the fertility of the mines of America, but in the 
 general progress of knowledge, skill, and every species of in- 
 dustry, in the consequent improvement of governments, laws, 
 and habits, in all that constitutes what is called civilization. 
 The influx of precious metals follows in every country, and 
 does not precede the corresponding increase of wealth. 
 
 As the regularity of the annual supply of the precious 
 metals is not affected by the seasons, the changes in the amount 
 of that supply, had, during the two last centuries, been grad- 
 ual, and hardly sensible from year to year. That, which has 
 taken place within the last twenty years, has been greater 
 than had been experienced, since the first great revolution 
 caused by the discovery of America. The annual supply of 
 the mines of America, Asia, and Europe, had reached'its high- 
 est point, in the years 1803-1810, and amounted then to fifty 
 millions of dollars, or to about one and one-fourth per cent, of 
 the whole quantity of precious metals then existing in Europe 
 and America. The convulsions of the former Spanish colonies 
 have, for the last twenty years, reduced the total annual sup- 
 ply to about twenty-seven millions, or to about three-fifths per 
 cent, of the whole amount now existing. A diminution of one- 
 half of the ordinary supply of any other commodity, the de- 
 mand remaining the same, would have produced a still greater 
 proportionate increase in its price. Continued during twenty 
 years, this diminished supply of the precious metals, whilst the 
 demand is still gradually increasing, cannot but have affected, 
 in some degree, their price ; and if prolonged much longer, the 
 effect would be visible ; but it has been gradual, from year to 
 year imperceptible, and affecting in no sensible manner the 
 
18 BANKS AND CURRENCY. 
 
 performance of contracts. This is obviously due to the 
 parative small amount of the ordinary supply, which does not 
 exceed one hundredth part of tHe stock on hand, whilst the 
 annual supply of corn and of most other natural products al- 
 ways exceeds, and that of most manufactured articles often 
 equals, the amount of the old stock. The superior durability 
 and value of the precious metals, over every other substance 
 (including even iron, copper, and other metals) fitted for a cir- 
 culating medium, which produce and preserve the great accu- 
 mulation of gold and silver, are the principal cause of their 
 great superiority over every other commodity, as a permanent 
 standard of value. 
 
 For the same reasons, any accidental inequality in the dis- 
 tribution of the precious metals, amongst the several countries, 
 in proportion to their respective wants, is promptly and easily 
 repaired; and any extraordinary demand from a particular 
 country met without difficulty, or sensibly affecting the price 
 of the metal required. The general supply of stock on hand, 
 is always sufficient to meet such demand, and the expenses 
 and charges of transportation are, on account of the greater 
 value of an equal bulk, far less than those of any other com- 
 modity, hardly ever exceeding in time of peace one per cent, 
 on the value, even when brought from the most distant countries 
 of the civilized world. During the four years which immedi- 
 ately followed the resumption of specie payments in England, 
 that occurrence caused an extraordinary demand of more than 
 twenty millions sterling in gold, or about twenty-four millions 
 of dollars a year, being near three times as much as the annual 
 supply of that metal ; and this demand was met without any 
 difficulty, or sensibly enhancing the price of gold. As the gold 
 coins of*France are, by the mint regulations of that country, a 
 little'SSS&ated in relation to those of silver, they always com- 
 mand a "Small premium, varying generally from one-fifth to 
 one-half per cent. This premium never exceeded the last 
 rate during the years of that demand; which is a conclusive 
 proof that it could not at most, and at any time, have en- 
 hanced the price of gold more than three-tenths per cent.; 
 since, in that case, the advance would have also taken place 
 in France, whence, in fact^ a considerable portion of that de- 
 mand was supplied. This decisive fact also shows, that it is 
 erroneously that the exportation of American gold coins, which 
 commenced in the year 1821, has been ascribed to that extra- 
 ordinary demand. The exportation has been continued unin- 
 terruptedly, after that cause had ceased to operate, and, as 
 will be seen hereafter, is due to the alteration from that epoch 
 in the rate of exchanges. 
 
 But it is nevertheless true, that as the value of the various 
 objects exchanged or sold annually in a country, and, what is 
 
BANKS AND CURRENCY. 19 
 
 more important, as the proportion of that value to the 
 amount of the actual payments which must be made in cur- 
 rency, are both subject to variations, the amount of currency 
 wanted in a country does, exclusively of the gradually increas- 
 ing demand caused by an increasing prosperity, vary at differ- 
 ent times in the same country. That amount ought, therefore, 
 in prosperous seasons, to exceed that* which is then necessarily 
 wanted, in order to be able to meet the greater demand which 
 at times takes place. There are, in every country, banks, 
 bankers, and great dealers, in whose hands the currency of the 
 country accumulates, to be thence again distributed amongst 
 the members of the community, according to their respective 
 wants. Obliged to meet those demands, it is their interest 
 and duty to keep always those reservoirs sufficiently full. In 
 countries where no artificial substitute has rendered the task 
 more difficult, and where specie is the sole or principal cur- 
 rency, although there may be occasional varieties in its value, 
 they are of rare occurrence and restrained within narrow 
 limits ; and an actual want of specie is hardly ever known. 
 
 The substitution of a paper currency to the precious metals, 
 does not appear to be attended with any other substantial ad- 
 vantage than its cheapness ; and the aetual benefit may be cal- 
 culated with tolerable accuracy. If in a country which wants 
 and does possess a metallic currency of seventy millions of dol- 
 lars, a paper currency to the same amount should be substituted, 
 the seventy millions in gold and silver, being no longer wanted 
 for that purpose, will be exported, and the returns may be con-, 
 verted into a productive capital, and add an equal amount to the 
 wealth of the country. If the banking system, founded on the 
 principle of a paper currency convertible at will into specie, 
 should be adopted, and notes of a very low denomination be ex- 
 cluded, it will be found, that the circulation would consist of about 
 sixty millions in bank notes and ten millions in silver.* But in 
 that case the banks, in order to sustain specie payments, must, on 
 an average, have in their vaults about twenty millions in spe- 
 cie. This is believed to be nearly the state of things at this 
 time in the United States, if, according to common usage, 
 we consider bank notes as constituting the whole of the paper 
 currency. There have been, therefore, on that principle, only 
 forty millions of dollars saved and added to the productive capi- 
 tal of the country. This, at the rate of 5 per cent, a-year, may 
 be considered as equal to an additional annual national profit of 
 
 * It has been lately stated, that the bank notes of every description in England, 
 amount to twenty-eight millions sterling; and the bullion in the vaults of the bank, 
 to thirteen millions. If this is correct, the capital saved is only fifteen millions, and 
 the annual profit, derived from the paper currency, six hundred thousand pounds sterling. 
 
20 BANKS AND CURRENCY. 
 
 two millions of dollars. The substitution of bank notes to a 
 metallic currency produces the same effect, as an addition of 
 two millions a-year, to the exports of the United States, or as a 
 diminution of taxes to the same amount. Being inclined to 
 think that the credits on the books of the banks, called deposits 
 in the United States, constitute to all intents and purposes a 
 part of their currency, we believe that the benefit derived from 
 {he banking system is still greater, and is tantamount to an an- 
 nual national saving, or additional profit, of near five millions of 
 dollars.* This is certainly an important advantage, provided the 
 system is conducted so as to afford complete security ; and it 
 would be altogether free of objection, if the banks were only 
 banks of deposit and issued no paper. Barns are certainly a 
 very expensive implement of agriculture. The capital expended 
 on those buildings, in the middle and northern states, is more 
 than the value of one year's crop of the farms, and causes there- 
 fore a deduction of more than 5 per cent, on the annual gross 
 produce of the earth. To dispense with barns would be a greater 
 jannual saving, than that which arises from the substitution of' a 
 paper to a metallic currency. Some favorable seasons occur, 
 when the farmer might thresh his wheat on a temporary floor 
 exposed to the weather, and dispense with a barn. Yet, in our 
 climate, every prudent farmer prefers security to a precarious 
 advantage, and would consider it a most wretched economy, not 
 to incur the expense necessary for that object. Similar is the 
 economy of that expensive instrument, the precious metals, if 
 the substituted paper currency is insecure. To unite that secu- 
 rity, which is derived from a uniform and permanent standard 
 of value, with the acknowledged and considerable saving arising 
 from the substitution, is the difficult problem to be solved, in 
 every country that resorts to that cheaper species of circulating 
 medium. 
 
 A paper currency is either convertible at will into specie, or 
 redeemable at some future time, or altogether irredeemable. The 
 two last descriptions are excluded by the Constitution of the 
 United States, and require examination, only because experience 
 has shown, that a currency of the first description may degene- 
 rate into one not convertible into specie, without, on that ac- 
 count, ceasing to be the only currency of the country. Some 
 persons are yet found who contend for issues of paper money 
 to an indefinite amount, without regard to the fundamental 
 principle, that the demand is for value, and that it is impossible 
 
 * We do not take into consideration the annual amount wanted to repair the loss 
 occasioned by friction in gold and silver coins. This has been greatly overrated by 
 respectable British writers, but according to the various opinions deduced from ac- 
 tual experiments, cannot exceed, taking the highest computation, and is probably 
 less, than seventy thousand dollars n-year, on a coinage of forty millions, 
 
 
BANKS AND CURRENCY. 21 
 
 to increase the amount of currency beyond certain limits, with- 
 out producing a corresponding depreciation in its value. A 
 recurrence to that principle is sufficient to dissipate the singu- 
 lar illusion under which that opinion is advanced. 
 
 We find, in a paper laid before the Senate during their lasf 
 session, that, according to the increase of population since the 
 year 1820, there ought to have been, since that time, a demand 
 for thirty-two millions of acres of the public lands, which, at 
 the present price of 1 J dollars per acre, would have yielded 
 forty millions of dollars, (or four millions a-year,) whilst the 
 annual sales amount only to one million, " the reason for which 
 is want of money to purchase." The remedy proposed in the 
 sequel, is an issue of paper money by government, the general 
 benefit of which, according to the writer, would be stupendous. 
 "Were our own government to increase our circulating medium 
 only fifty millions of dollars, income-yielding property would rise 
 two thousand millions of dollars." 
 
 The word " money" is used as synonymous with specie and 
 currency. But as currency is the thing by which every thing 
 else is valued, the value of every species of property is expressed 
 in currency. A planter, possessed of property, which, in usual 
 times, might be sold for one hundred thousand dollars, is accord- 
 ingly said to be worth one hundred thousand dollars, though he 
 may not, at any one time, have in his possession one thousand 
 dollars in currency. The word money comes thus to be used as 
 synonymous with wealth ; and, in that sense of the word, \YC 
 agree with the respectable writer of the paper in question, that 
 the reason why the sales of the public lands have not far exceed- 
 ed one million of dollars a-year, has been the Want of money f 
 that is to say, of wealth on the part of those who would have 
 wished to purchase. From the other writings of the same author, 
 we had concluded, that he was in favor of issues of paper money 
 almost to an indefinite amount. But it appears by this paper, 
 that he is perfectly aware, that a very limited amount of currency 
 is sufficient ; since he avers that an additional issue of fifty mil- 
 lions would produce, on the value of the productive property of 
 the country, an effect forty times as great as that issue. This re- 
 duces the question to one of quantity, and whether the amount 
 of currency supplied by the banking system now existing is 
 insufficient, and 6ught to be increased by an issue of government 
 paper. As it is the interest of the banks to issue as many notes 
 as can be kept in circulation, and as they are authorized by their 
 charters to issue more than three times the present amount, it is 
 clear that the obligation to pay their notes in specie on demand 
 is the sole reason why that amount is not greater. It is, there- 
 fore, absolutely necessary, in order to enlarge it, that the pro- 
 posed new issue should consist of a government paper money, 
 not convertible into specie on demand. It could not, accord- 
 
22 BANKS AND CURRENCY. 
 
 ing to the Constitution, be made a legal tender for the payment 
 pf debts between individuals, and might only be made receivable 
 n payment of debts due to the United States. It is evident that 
 such paper could not circulate a single day in competition with 
 jthat of the banks, which is received not only for that purpose, 
 but in payment of all debts, and is at all times convertible into 
 specie. The new paper would be immediately depreciated in 
 proportion to its amount, and produce no- other effect than that 
 of lessening the revenue of the United States in the same pro- 
 portion. It would be much more simple, if that was the object, 
 to reduce the rate of existing taxes ; with respect to the public 
 lands, to reduce the price at which they are now sold. We be- 
 lieve that this last measure would be equally just and consistent 
 with sound policy, and that the great change of circumstances 
 which has taken place, and principally the superabundant sup- 
 ply of public lands, compared with the effective demand at the 
 present price, imperatively require a reduction of that price. 
 Those lands are the property of the people of the United States 
 at large, and cannot be given gratuitously either to particular 
 individuals or to particular states. But they should not be kept 
 out of market by persevering in a price, that was adapted to the 
 time when it was fixed, and no longer accords, either with the 
 greatness of the supply, or with the wealth of the natural pur- 
 chasers, of those who want them for their own use, and who 
 may, if the expression is admissible, be considered as the con- 
 sumers of that commodity. 
 
 But supposing, for the sake of argument, that this additional 
 issue of paper by government should not experience any depre- 
 ciation, and should circulate at the same rate, as bank notes 
 convertible on demand into specie, not the slightest advantage 
 would accrue to the purchaser of public lands, or to any other 
 individual. If not depreciated, the same quantity of labor, of 
 wheat, or of any other commodity, will be necessary, and must 
 be given, in order to obtain an equal quantity either of that 
 paper, of bank notes, or of specie. If depreciated and circu- 
 lating, the farmer might indeed obtain two dollars of that paper, 
 instead of one in specie, for a bushel of wheat, and the laborer 
 receive one dollar nominal, instead of half a dollar in specie, 
 for a day's labor. But what benefit would arise to either? 
 Since the farmer would be obliged to pay also a double nominal 
 price for the labor he wanted, and the laborer a similar double 
 price for the farmer's wheat, and since both would likewise be 
 obliged to give a double price for any article they might want, . 
 when paid with that paper. This is so simple and obvious, that 
 we are entirely unable to understand on what grounds the con- 
 trary doctrine can be sustained. After having tried to discover 
 what was meant by those who pretend to argue in support of 
 excessive issues of paper money, we have found nothing but a 
 
BANKS AND CURRENCY. 28 
 
 repetition of the erroneous assertions, on which the famous Law 
 attempted to build the stupendous scheme which bears his name 
 and desolated France in the year 1720. He asserted, 1st, that 
 gold and silver were only the representative or sign of wealth ; 
 2d, that paper might be that sign as well as the precious 
 metals ; 3d, that by doubling or trebling the amount of that 
 sign, the national wealth would be increased to that amount ; 
 4th, that such increase of the currency would reduce the rate 
 of interest, and thereby promote industry. It is hardly neces- 
 sary to show that those assertions are a series of errors. The 
 precious metals are not merely the sign or representative of 
 wealth ; they have an intrinsic value, on account of the cost of 
 their production, and of the demand for other uses than cur- 
 rency, and are therefore wealth itself. It is because they have 
 an intrinsic and comparatively stable Value, that they have 
 become the standard of the value of every other commodity, 
 or, according to Law's vocabulary, the representative or sign 
 of wealth. A certain quantity of those signs is necessary for a 
 circulating medium ; but the quantity used adds nothing more 
 to the wealth of any country, than *the intrinsic value of that 
 quantity. Paper having no intrinsic value, never can, whatever 
 its amount may be, add any thing directly to the national 
 wealth. Its utility consists in the substitution of a sign of no 
 value for a sign which has an intrinsic value, and which may, 
 on that account, be used advantageously for other purposes 
 than that of a sign. Having performed that office, the increase 
 of paper, beyond the amount of the valuable sign of which it 
 takes the place, neither adds nor produces any wealth. The 
 multiplication of the signs, beyond the amount in value wanted, 
 can have no other effect than that of depreciating their nominal 
 value, and has none on the rate of interest, which depends, not 
 on the amount of those signs, or of currency, but on the pro- 
 portion between the amount or supply of capital which may 
 be loaned, and the demand for that capital. The result of 
 Law's scheme was a fatal illustration of his doctrines. By a 
 series of arbitrary acts on the part of government, and by con- 
 necting some splendid and illusory schemes with the bank, he 
 succeeded in putting in circulation about four hundred and 
 twenty millions of dollars in bank notes, or more than twice 
 the amount of the currency then wanted in France. This 
 paper was made a legal tender, to the total exclusion of the 
 precious metals. But the laws, and all the power of the French 
 government, were unequal to the task of sustaining that excess 
 of currency. The price of every species of merchandise natu- 
 rally rose 100 per cent. Government, with a view probably 
 to prevent a total catastrophe, reduced by a decree the notes 
 to one half of their nominal value. The bubble burst instan- 
 taneously. The whole currency of the country, the four hun- 
 
24 BANKS AND CURRENCY. 
 
 dred and fifty millions dollars of bank notes, could not, the next 
 day, have been sold for the value of the paper on which they 
 were printed. They were subsequently funded at the rate of 
 eighty for one. The public creditors, who had been paid in 
 notes, lost one hundred and fifty millions of their capital. Some 
 speculators in shares were enriched ; all the actual stockholders 
 were ruined ; and the calamity extended to all the industrious 
 and productive part of the community. Since that time banks 
 have not been connected with such gross commercial bubbles. 
 But in England, the South Sea scheme, and the joint stock 
 companies of the year 1825, were erected on the model of the 
 Mississippi Company of Law ; and the Assignats of the French 
 revolution, as well as all the other attempts to substitute an 
 excessive issue of pure paper money to a metallic currency, 
 have been but copies of his bank notes. 
 
 It has been contended by distinguished writers of a very dif- 
 ferent description, that an irredeemable paper currency, not 
 exceeding in its nominal amount that in value which is actually 
 wanted, might be altogether substituted to gold and silver, pro- 
 vided that government should always regulate the issues so as 
 never to exceed or fall short of that amount. The advantage 
 of such paper, over notes convertible on demand in specie, 
 would consist in saving the expense of the gold and silver ne- 
 cessary to pay such notes at the will of the holders, and in pro- 
 tecting the currency against both a panic, and the consequences 
 of any great drain of the precious metals from abroad ; dangers 
 to both of which notes payable in specie are exposed. It must, 
 in the first place, be observed, that the unavoidable effect of 
 an increased or diminished value of the currency, arising from 
 contraction or excess of its amount beyond certain limits, is ul- 
 timately to sink or to raise the price of every other commodity. 
 But this change may not affect immediately the price of the 
 commodities or of the labor applied to objects not susceptible 
 of being exported; and that of exportable commodities is 
 often affected by variations in the relative amount of supply 
 and demand, which are altogether foreign to the state of the 
 currency. The wisest government, with the purest views, 
 never has any other means of ascertaining, whether the amount 
 of a paper money is too limited or excessive, than the price of 
 the precious metals in such paper, because those metals are, of 
 all others, the commodity least liable to variations in its value. 
 The rate of exchanges may occasionally be a more sensitive 
 test, but is in reality a more circuitous and less certain mode of 
 resorting to the same standard of value. Thus government has 
 no means to ascertain, whether its issues are too contracted or 
 too large, till after the evil has actually taken place ; whilst 
 banks, obliged to pay their notes in specie, and skilfully direct- 
 ed, are constantly employed in preventing its occurrence. But 
 
BANKS AND CURRENCY. 25 
 
 supposing government to be endowed with such skill as to be 
 able always to adjust the proper amount of currency; an amount 
 which, if this is metallic, adjusts itself, and which, by banks 
 properly conducted, may be tolerably well regulated ; there is 
 still an ingredient, inherent to paper not convertible on demand 
 in specie, which no human skill can control. This is public 
 opinion, with respect to future contingencies, and therefore 
 purely conjectural. 
 
 It has been asserted, that the value of an irredeemable paper 
 money is altogether regulated by its amount, and does not, or at 
 least ought not, to depend on confidence in the solvency of the 
 government by which it is issued. The last assertion may be 
 strictly true, though we believe, that in point of fact, there has 
 hardly been any issue of paper, which in its origin was not 
 founded on an explicit or implied promise to redeem it. But, if 
 not depending on confidence in the solvency, the value of the 
 paper will most certainly be affected by the public confidence 
 in the skill, discretion, and probity of government, these being 
 the only guarantees against excessive issues, and experience 
 having but too well proved the natural disposition of every gov- 
 ernment which ever did issue paper, to resort, whenever pressed 
 by its exigencies, to that resource, without regard to amount 
 and consequences. Our principal concern, however, is with 
 paper, originally convertible on demand in specie, and which 
 has degenerated into a paper, the redemption of which is in- 
 definitely postponed. It is evident that the value of such cur- 
 rency must depend, at least in part, on the probability of its 
 being ever redeemed, or of specie payments being resumed, and 
 of the time when this will take place. And as there lies the 
 danger to which the currency of the United States is exposed, 
 we will illustrate that position by some instances. 
 
 The paper money issued by Congress during the war of the 
 American independence, experienced no sensible depreciation 
 before the year 1776, and so long as the amount did not exceed 
 nine millions of dollars. A paper currency, equal in value to 
 that sum in gold or silver, could therefore be sustained so long 
 as confidence was preserved. The issues were gradually in- 
 creased during the ensuing years, and in April 1778, amounted 
 to thirty millions. A depreciation was the natural consequence; 
 but had the value of the paper depended solely on its amount, 
 the whole quantity in circulation would have still been equal in 
 value to nine millions, and the depreciation should not have 
 been more than 3^ to 1 ; instead of which, it was then at the 
 rate of six dollars in paper for one silver dollar, and the whole 
 amount of the paper in circulation was worth only five millions 
 in silver. It is obvious that the difference was due to lessened 
 confidence. The capture of Burgoyne's army was followed by 
 
 the alliance with France, and her becoming a party to the war 
 
 D 
 
26 frA IX KS A .N D C L RRfiflC Y. 
 
 against England. The result of the war was no longer consid- 
 ered as doubtful, and sanguine expectations were formed of its 
 speedy termination. The paper accordingly rose in value ; and 
 in June, 1778, although the issues had been increased to more 
 than forty-five millions, the depreciation was at the rate of only 
 four to one. From the end of April of that year, to the month 
 of February, 1779, although the issues had been increased from 
 thirty-five to one hundred and fifteen millions, the average value 
 in silver of the whole amount of paper in circulation exceeded 
 ten millions, and it was at one time nearly thirteen millions, or 
 considerably more than that which could be sustained at the out- 
 set of the hostilities. But when it was discovered, that the war 
 would be of longer continuance, confidence in the redemption 
 of a paper money, daily increasing in amount, was again sud- 
 denly lessened. The depreciation increased from the rate of 6 
 to that of 30 to 1 in nine months. The average value in silver 
 of the whole amount of paper in circulation from April to Sep- 
 tember 1779, was about six millions, and it sunk below five 
 during the end of the year. The total amount of the paper was 
 at that time two hundred millions; and although no further 
 issues took place, and a portion was absorbed by the loan offices 
 and by taxes, the depreciation still increased, and was at the 
 end of the year 1780 at the rate of 80 dollars in paper for 1 in 
 silver. The value in silver of the paper currency, was then 
 less than two millions and a half of dollars ; and when Congress, 
 in March following, acknowledged the depreciation, and offered 
 to exchange the old for new paper at the rate of 40 for one, the 
 old sunk in one day to nothing, and the new shared the same 
 fate. 
 
 The aggregate of bank notes of the Bank of England and 
 country banks was nearly the same in the years 1810, 1813, and 
 1818, being, for each of those years respectively, about forty- 
 six millions, forty-six millions two hundred thousand, and forty- 
 six millions seven hundred thousand pounds sterling ; and 
 the value in gold of the aggregate amount of notes was, for each 
 of those years respectively, forty, thirty-five and a half, and for- 
 ty-five and a half millions. A result nearly similar, will be 
 found by comparing periods of years. The average amount of 
 the notes in circulation was about forty-six millions for the years 
 1810, 1811 ; forty-five millions two hundred thousand for the 
 years 1812 to 1816; and forty-four millions four hundred thou- 
 sand for the years 1817 to 1819; and the average value in 
 gold of those notes, for each of those periods respectively, was 
 forty-one, thirty-six, and forty-three millions. It is obvious 
 that those differences, in the respective value in gold of the 
 whole amount of the currency, did not depend on its amount, 
 but on the opinion entertained, either of the probable increase 
 or contraction of the notes, or of the resumption of the specie 
 
BANKS AND CURRENCY. 27 
 
 payments. Had the depreciation of the notes depended solely 
 on their excess, it would have been nearly the same in the year* 
 1810, 1813, and 1818, when that amount was nearly the same. 
 Reducing into gold the value of the whole ciirrency, no other 
 reason can he assigned but a greater or less degree of confidence, 
 why a paper currency worth forty-five and a half millions could 
 be sustained in 1818, whilst no greater value than thirty-five 
 and a half millions circulated in 1813. It is indeed evident, that 
 the confidence in the resumption of specie payments must have 
 been greater in 1810, and much greater in 1818, than in 1813; 
 and that, independent of the intrinsic value of the bank notes, 
 as regulated by their amount, they must, whenever depreciated, 
 acquire some additional value, according to the opinion enter- 
 tained of their being again converted into specie, and of the prox- 
 imity of that event. 
 
 A still more striking instance of the sudden alterations in 
 value, to which notes not convertible into specie are liable, is to 
 be found in that which took place in England, in the spring of 
 1815, on the landing of Bonaparte from the Island of Elba. The 
 bank notes had gradually risen in value since the peace, and 
 were not depreciated more than 12-|-per cent, in the beginning 
 of March. Towards the end of that month, and within less than 
 a fortnight, the depreciation was 25 per cent., although there 
 had been, during that time, neither additional issues of paper, 
 nor exportation of the precious metals. We will quote only one 
 more instance of a similar nature. During the general suspen- 
 sion of specie payments in the United States, the depreciation 
 of the bank notes varied in the several sea-ports. Those of the 
 Baltimore banks were at 20 per cent, discount in January 1815. 
 The Treaty of Peace was ratified and published in the month of 
 February ; and as the suspension of specie payments had not 
 lasted six months, and was caused by the war, a general expec- 
 tation immediately prevailed, that those payments would be 
 forthwith resumed. Accordingly, bank notes rose everywhere 
 in value, and, in March, the discount on those of Baltimore was 
 only 5 per cent. As that expectation was disappointed, the notes 
 again sunk in value, and, in July, those of Baltimore were again 
 at a discount of 20 per cent. It is believed, that no doubt can 
 remain, that a paper currency liable to fluctuations like those, 
 and originating in causes that batHe all calculation, never can, 
 by any skill whatever, be made a stable standard of value. 
 
 The paper currency of the United States is of a very dif- 
 ferent character, and, according to the general acceptation of 
 that term, consists almost exclusively of bank notes payable on 
 demand in specia. It may however be questioned, whether there 
 are not other species of paper founded on credit, which ought 
 to be considered as making part of the currency, and not merely 
 as substitutes. 
 
28 BANKS AND CURRENCY. 
 
 There are in England, where incorporated country bank, 
 issuing paper, are as numerous, and have been attended with 
 the same advantages and the same evils as our country banks, 
 some extensive districts, highly industrious and prosperous, where 
 no such bank does exist, and where that want is supplied by 
 bills of exchange drawn on London. This is the case in Lan- 
 cashire, which includes Liverpool and Manchester, and where 
 such bills, drawn at ninety days after date, are indorsed by each 
 successive holder, and circulate through numerous persons be- 
 fore they reach their ultimate destination, and are paid by the 
 drawee. It has been contended that these substitutes for cur- 
 rency, and in one respect performing its office, must be consid- 
 ered as forming part of it ; and this assertion has been carried 
 so far, as to insist that there was in England a circulation of one 
 hundred and fifty millions of dollars in bills of exchange, which 
 was of the same character. As this view of the subject would 
 materially affect the result of any inquiry respecting currency, 
 the question must be examined, and extended to private notes 
 and to bank deposits. 
 
 It is difficult to distinguish a note on demand drawn by a pri- 
 vate individual from a bank note, in countries where every in- 
 dividual is left at liberty to throw such notes in circulation as 
 part of the currency. The discrimination has always been made 
 on the Continent of Europe, where it is not believed that any 
 paper of that description has ever been permitted to be issued 
 by any person or company not specially authorized to that effect. 
 We are not aware that any similar general restriction exists in 
 Great Britain, or that others are to be found there, than the 
 clause, in favor of the Bank of England, which forbids banking 
 associations to consist of more than a limited number of part- 
 ners, and the late laws forbidding, except in Scotland, the issue 
 of notes under five pounds. The same liberty seems to have 
 originally existed in the United States, but has subsequently been 
 restrained by their several laws to incorporated banks. A soli- 
 tary exception is to be found in Mr. Stephen Girard's Bank, 
 which was previously established, and which, from his great 
 wealth, skilful caution, and personal character, is justly entitled 
 to as much credit as any chartered bank in the United States, 
 Congress has not, however, passed any law preventing the issue 
 of notes by the corporation of the city of Washington, and there 
 is still a small amount of paper in circulation, issued by the state 
 of North Carolina. In every other respect, the currency of the 
 United States, so far as it consists of notes, is strictly confined to 
 bank notes issued by chartered companies. 
 
 A bill of exchange, drawn by an individual or individuals, 
 who do not issue notes having the character of currency, ap- 
 pears to us to be clearly distinguishable from a bank note, though 
 it is a substitute, and lessens the amount of currency which 
 
BANKS AND CURRENCY 20 
 
 would otherwise be required. A payment made in bank notes 
 is a discharge of the debt, the creditor having no further re- 
 course against the person from whom he has received the notes, 
 unless the bank had previously failed. The bill of exchange 
 does not discharge the debt, the person who receives it having 
 his recourse against the drawer and every preceding indorser, 
 in case the drawee should fail or refuse to pay. But the essen- 
 tial distinction is, that the bills of exchange are only a promise 
 to pay hi currency, and that the failure of the drawers, drawees, 
 and indorsers does not, in the slightest degree, affect the value 
 of the currency itself, or impair that permanent standard of 
 value by which the performance of all contracts is regulated. 
 The case is, however, quite different, when the bills are drawn 
 by a bank authorized to issue bank notes which make part of 
 the currency. We perceive no difference between such drafts, 
 particularly when paid at sight, and either post notes or ordinary 
 notes. Five dollar drafts, drawn by the branches of the Bank 
 of the United States on the bank, circulate at this moment in 
 common with the usual five dollar notes. Similar drafts, varying 
 in amount to suit the convenience of purchasers, are daily 
 drawn by the bank on its offices, and by those offices on each 
 other, or on the bank. Many of those drafts pass through sev- 
 eral hands, and circulate several months, in distant parts of the 
 country, before they are presented for payment. The holders 
 of those bills have the same recourse against the bank, as the 
 holders of bank notes. Those bills are of the same character, 
 depend on the same security, and in case of failure would share 
 the same fate with bank notes. Though not usually included 
 in the amount of the circulation of the bank, we cannot but 
 consider the average amount in actual circulation, as making 
 part of the currency of the country. A question somewhat more 
 difficult arises with respect to credits in account current on the 
 books of the banks, commonly designated in the United States 
 by the name of " deposits," and which may perhaps be more 
 easily solved by reducing it to its most simple form, that is to 
 say, by first considering banks purely of deposit. 
 
 That of Hamburg, which still exists, is the most perfect of 
 the kind. It neither issues bank notes, nor discounts notes or 
 bills of exchange, but only receives silver in bars on deposit. 
 For every bar containing a certain weight, called " marc of 
 Cologn," (equivalent to 3,608 grains troy weight,) of silver of a 
 certain standard,* the bank gives a credit on its books of 442 
 lubs B co - (27 marcs 10 lubs B co ) money of account. Any person 
 having a credit on the books of the bank, may be paid in simi- 
 lar bars at the rate of 444 lubs B co - for a marc weight of Co- 
 
 * Containing, according to most authorities, forty-seven parts pure silver, and one 
 part of alloy. 
 
30 BANKS AND CURRENCY. 
 
 logn of silver of the same standard. The difference, which is 
 less than one-half per cent., defrays the expenses of the estab- 
 lishment. All the large payments are effected in Hamburg 
 by checks on the bank, and by a corresponding transfer of tl 
 credit on its books from one individual to another. The utility 
 of the establishment consists not only in the greater convenienc 
 and rapidity with which the payments are effected, but also 
 having substituted silver of an uniform standard, to a currency 
 which consisted of German coins, varying in standard, weight 
 and denomination. The aggregate amount of credits on tl 
 books of the bank, being at all times precisely equal, at the ral 
 above mentioned, to the quantity of silver in its vaults, it woulc 
 be incomprehensible, and, indeed, absurd, to suppose, that sucl 
 large capital, having an intrinsic value, should voluntarily be 
 buried in the vaults, unless its representative, or the credits on 
 the books of the bank, performed every office of currency. It 
 is undeniable that this is the fact in every respect, every pay- 
 ment being effected by transfers of those credits, and their con- 
 vertibility at any time into a determined weight of pure silver, 
 affording the best possible standard of value. This indeed regu- 
 lates exclusively the value of all the coins, whether in circula- 
 tion for small payments, or brought to market as bullion. 
 
 Let it be supposed now, that it had been found from long ex- 
 perience, that the quantity of silver in the vaults, through all 
 its fluctuations, had never been less than a certain sum, equiva- 
 lent, for instance, to two millions of dollars. The directors of 
 the establishment might conclude that this amount would, under 
 no circumstances whatever, be withdrawn, or in other words, 
 that this sum was the minimum of the currency wanted to effect 
 the payments made in bank. They might therefore think them- 
 selves justifiable, in withdrawing that dormant capital from the 
 vaults, and converting it into an active capital, by lending it to 
 individuals. In this case, the amount of credits on the books of 
 the bank would remain the same, as if that sum in silver had 
 not been withdrawn from its vaults ; and all the payments ef- 
 fected by the transfers of those credits would continue to be 
 made precisely as theretofore. The amount of those credits 
 would therefore continue to be, in every respect, the currency 
 of Hamburg, differing from what it was formerly, only in being 
 sustained by a less amount in specie, and in depending, for its 
 ultimate security, on the solidity of those to whom the silver 
 withdrawn from the vaults had been loaned. 
 
 What we have stated as a supposititious case, actually took 
 place in the Bank of Amsterdam, constituted on nearly the same 
 principles as that of Hamburg ; and from which the directors 
 secretly withdrew more than four millions of dollars, which they 
 lent principally to the Province of Holland and to the City of 
 Amsterdam. And it is, as is well known, what is alwayt done 
 
 
BANKS AND CURRENCY. - 31 
 
 openly and in perfect good faith by all our banks, as well as by 
 the Bank of England and by that of France. The credits in 
 account current or " deposits" of our banks are also, in their 
 origin and effect, perfectly assimilated to bank notes. Any per- 
 son depositing money in the bank, or having any demand what- 
 ever upon it, may at his option be paid in notes, or have the 
 amount entered to his credit on the books of the bank. The 
 bank notes and the deposits rest precisely on the same basis ; 
 for immediate payment on the amount of specie in the vaults j 
 for ultimate security on the solidity of the debtors of the bank, 
 In case of a run upon a bank, or of its failure, the security of 
 the holders of notes is lessened in proportion to the amount of 
 deposits due by the bank. We can in no respect whatever per- 
 ceive th'e slightest difference between the two : and we cannot 
 therefore but consider the aggregate amount of credits payable 
 on demand, standing on the books of the several banks, as being 
 part of the currency of the United States. This, it appears to 
 us, embraces not only bank notes, but all demands upon banks 
 payable at sight, and including their drafts and acceptances. 
 But in order that such deposits, bills of exchange, or other paper 
 founded on credit, should make part of the currency, it seems 
 necessary, that they should constitute a demand upon banks 
 that do issue currency, or that, as at Hamburg, a transfer of 
 credit on the books of the bank should be a legal tender. If, in 
 comparing the amount of currency in different countries, we 
 have only included specie and actual issues of paper, it was 
 partly in conformity with received usage, and partly from want 
 of information respecting the amount, in other countries, of the 
 bank credits, which may be considered as perfectly similar to 
 our deposits. 
 
 Credit is essential to commerce : but whenever it receives a 
 shock, a commercial revulsion and distress must necessarily 
 ensue. This will always affect the currency to a certain ex- 
 tent, since there must be a greater demand for it, in propor- 
 tion as the resources arising from credit are impaired. But 
 where, as in the United States, the currency itself rests on 
 credit, and the same institutions which issue that currency are 
 those from which accommodations are expected, want of 
 credit is most liable to be mistaken for a want of currency. 
 
 Although the causes of such distress, and of a real or pre- 
 sumed scarcity of currency, are of the same nature, they may* 
 as somewhat dissimilar in their immediate effects* be distin- 
 guished as external or internal. As the imports and exports 
 of a country are now but rarely effected by the same persons^ 
 there are always, in consequence of the commercial intercourse 
 between two countries, creditors and debtors on both sides; 
 It is obviously the interest of both to exchange or sell those 
 debts, when the exporter does not want to import, nor the im- 
 
32 BANKS AND CURRENCY. 
 
 porter to export merchandise. A bill of exchange, drawn from 
 the United States on England, is an obligation on the part of 
 the drawer to exchange, for a sum paid to him in the United 
 States, an equivalent in England. When the credits and debits 
 respectively payable at the same time are nearly equal, 
 the exchange is made on equal terms. In proportion as the 
 debt of the United States to England is greater than that of 
 England to the United States, the demand for bills on England 
 will become greater than the supply ; and the drawer will ob- 
 tain a greater sum in the United States, than that which by 
 his bill he obliges himself to pay in England. Whenever the 
 difference becomes so great, as to exceed the expense and risk 
 of transporting precious metals to England, those metals will 
 be exported in preference to a remittance in bills. When the 
 commercial transactions between two countries are compara- 
 tively small, and the stock of gold and silver large, their ex- 
 portation, particularly in neighboring countries, soon pays the 
 balance and restores the equilibrium. When, as between the 
 United States and England, the respective imports and exports 
 are very large, the balance due may be increased in propor- 
 tion ; and as the stock of the precious metals in the United 
 States is comparatively small, the exchange may remain for 
 years unfavorable, and the precious metals continue to be ex- 
 ported, until the balance is actually paid from the proceeds 
 of the exports generally, or converted, by the sale of American 
 stock, into a debt not immediately demandable. This appa- 
 rently continued drain was considered, in former times, as an 
 evil of great magnitude ; and severe laws were, in most coun- 
 tries, enacted against the exportation of specie. Experience 
 has shown, not only that those laws were inefficient, but also 
 that the best, if not only means, to insure a uniform and suffi- 
 cient supply of any foreign product, when there is no other 
 object in view, is to lay no restraint whatever on its importa- 
 tion and exportation. Commerce, when not interrupted by war, 
 or other causes, is always found to supply the amount of pre- 
 cious metals which may be wanted. Numerous striking proofs 
 might be adduced : it is sufficient to recollect, that the average 
 rate of exchange on England, from the beginning of 1821 to the 
 end of 1829, has been $4 87 cents per pound sterling, (about 
 9f per cent, premium on nominal par,) or 2f per cent, above 
 the true par; that it never was, during the whole of that 
 time, below $4 60, at which rate, gold being underrated by our 
 mint regulations, commences to be exported, and that that pe- 
 riod was in no degree remarkable for scarcity of specie. 
 
 Being obliged to refer to the rate of exchange, it must be re- 
 collected, that what is universally meant by par, is the promise 
 to pay, in another place, a quantity of pure silver or gold, equal 
 in weight to the quantity of pure silver or gold contained in 
 
 
BANKS AND CURRENCY S3 
 
 the coins, with which the drawer of the bill of exchange is paid. 
 When bills are drawn at long dates, and payable at a distant 
 place, the time which elapses between the purchase of the bill 
 from the drawer, and its payment by the drawee, must be taken 
 into consideration, in order to calculate what would be an equal 
 exchange, as distinguished from the par of exchange. There is 
 no other difficulty, but that of ascertaining their respective 
 weights, in order to calculate the par of exchange between coun- 
 tries having the same standard of value, or in which payments 
 are usually made with the same metal. This being the case in 
 the United States and in France, and the French kilogramme 
 being equivalent to about 15,435 grains, troy weight, the par 
 of exchange of the United States on France, is at the rate of 
 about 5 francs and 34J centimes for a dollar, since the French 
 franc contains 4 J grammes, and the United States' dollar 371^ 
 grains of pure silver. Allowing 1J per cent, on account of the 
 90 days which will usually elapse between the day on which 
 the value of a bill payable 60 days after sight is, in our country, 
 paid to the drawer, and the day on which that bill is paid in the 
 other country by the drawee, it will be found that the equal ex- 
 change between the United States and France is, on such bills, 
 at the rate of francs 5,41 if drawn from the United States on 
 France, and at the rate of francs 5,28 for one dollar, if drawn 
 from France on the United States. 
 
 But if one of the two metals is, by mint regulations, under- 
 rated or excluded in one country, whilst the other metal is in 
 the same manner excluded in another country, the usual pay- 
 ments will be made in different metals in those two countries ; 
 and the par of exchange between them must, then, as is the case 
 between the United States and England, depend on the relative 
 value of gold and silver at the time, and vary with every fluc- 
 tuation of that relative value. These fluctuations are, however, 
 confined within narrow limits; and the medium par of exchange 
 between the United States and England, deduced from the aver- 
 age premium on gold over silver coins in France, is about $4 75, 
 for one pound sterling, or near 7 per cent, above the nominal 
 par assumed in the usual quotations of exchange. It is in those 
 quotations supposed, that one pound sterling is equal to $4 44 4-9, 
 or, in other words, that one dollar is equal to 4.?. 6d. sterling. It is 
 not necessary to investigate, whether this presumed equality or 
 par was derived from the intrinsic value of some ancient Span- 
 ish dollar, no longer current, or whether it was adopted as con- 
 venient for the conversion of most of the currencies of the Brit- 
 ish colonies into British currency. It is certain that this imagin- 
 ary par does not even correspond with that which, though 
 erroneously, might be deduced from comparing separately the 
 gold and silver coins of the two countries with each other respec- 
 tively ; since this would be, if comparing gold to gold, about 
 
84 BANKS AND CURRENCY. 
 
 $4 56, and if comparing silver to silver, (at the former rate of 
 62 shillings sterling for one pound troy weight of silver, old British 
 standard,) about $4 63 for a pound sterling. The dealers in ex- 
 change are at no loss to make their calculations, whatever rate 
 may be assumed as par in the usual quotations : but this puzzle 
 and, in various respects, misleads those who, without investiga- 
 tion, naturally suppose that what has been assumed as such 
 the true par of exchange. 
 
 The causes of the fluctuations of exchange between distanl 
 places in an extensive country, or between different countrie 
 are of the same nature, and may occasion a similar transport 
 tion of the precious metals from one place to another. We wil 
 hereafter examine how that from one part of the United State 
 to another has been affected by the Bank of the United States. 
 But there is this difference, between a commercial distress and 
 presumed scarcity of currency, due to internal causes, whilst 
 the foreign exchanges remain favorable, and a similar distress 
 arising from la/ge foreign debts, and accompanied by an unfa- 
 vorable rate of exchange, that, in the last case, there is an ex- 
 portation of the coins of the country which cannot take place 
 in the first. If the same effects, in other respects, are never- 
 theless the same in both cases ; if in both, the same, and some- 
 times general distress equally prevails; if the same difficulty 
 occurs in the payment of debts ; if the same complaint is made 
 of want of money, whether specie is exported or not, it is obvi- 
 ous that there must be another cause, besides an actual scarcity 
 of currency, for the real distress which is felt ; and that what is 
 called " want of money," is not " want of currency." It will be 
 found that this cause is universally overtrading, and that the 
 want of money, as it is called, is the want of exchangeable or 
 saleable property or commodities, and the want of credit. The 
 man who says that he wants money, could at all times obtain 
 it, if he had either credit or saleable commodities. 
 
 Overtrading consists in undertakings or speculations of every 
 possible description, which fail altogether, or of which the re- 
 turns are slower than, under sanguine expectations, had been 
 calculated, or the proceeds of which, (too many, tempted by 
 temporary high prices or profits, having embarked in the same 
 branch of business,) greatly exceed the demand, and glut the 
 market. A great loss may be experienced by those who have 
 entered into any such undertakings with their own resources. 
 But when resting principally on credit, and pursued at the same 
 time by a great portion of the dealers or men of enterprise, a 
 general impossibility of fulfilling previous engagements takes 
 place, which affects even those w r ho are ultimately solvent. 
 When that mutual confidence, which is the sole foundation of 
 credit, is once shaken, the capitals that are usually loaned can 
 no longer be ebtained, the usual amount of bills of exchange, 
 
BANKS AND CURRENCY. 85 
 
 discounted notes, or other commercial papers founded on credit, 
 is lessened, and specie or currency itself becomes comparatively 
 scarce, partly because some is hoarded, principally because a 
 portion of its substitutes is withdrawn from circulation. Yet 
 specie, under those circumstances, acts but a subordinate part, 
 its scarcity being the effect, and not the cause, of the evil, and 
 the remedy to this consisting in restoring credit and confidence, 
 which will always procure a sufficient amount of currency, and 
 not in an attempt to increase the quantity of currency, which 
 can produce no substantial benefit until confidence is restored. 
 When it consists of paper founded on credit, any increase is 
 inefficient for remedying the evil, unless it be issued by an insti- 
 tution, the credit of which has, in the general wreck, remained 
 unaffected and unimpaired. 
 
 The commencement of the year 1793, was, in England, a 
 season of great and universal commercial distress. It had, as 
 usual, been preceded by a period of great apparent prosperity, 
 which had stimulated overtrading ; and this had been followed 
 by its unavoidable consequences. More than one hundred coun- 
 try banks failed, or suspended their payments ; the distress was 
 general, the credit of solvent houses was affected, the usual ac- 
 commodations, which enabled them to have their bills discount- 
 ed, and to meet the demands against them, were withdrawn, 
 and the complaint of want of money was universal. Under 
 those circumstances, government interfered, and loaned, or of- 
 fered to loan, to solvent dealers, five millions sterling in exche- 
 quer bills. The remedy was effectual ; the whole amount offered 
 to be loaned was not even applied for ; and, in a very short 
 time, confidence was restored, and every one who was not ac- 
 tually insolvent was able to meet his engagements. But exche- 
 quer bills are not currency, but only a promise to pay currency 
 at the end of one year. Government did not lend currency, or 
 add a single shilling to its amount. The credit of individuals 
 had received a severe and general shock, and that of govern- 
 ment, which was unimpaired, was substituted for private credit. 
 Those who had capital to lend, and would not advance it on pri- 
 vate security, or who, in other words, would not discount the 
 bills of individuals, lent that capital, or the currency which was 
 wanted, on public security, or, in other words, discounted the 
 exchequer bills, that is to say, the bills of government. The 
 distress, the pretended want of money, was relieved, not by any 
 additional issues of currency, the amount of which must there- 
 fore have been sufficient, but by restoring private confidence 
 and private credit. 
 
 It is also evident, that what was then effected by government, 
 might have been done by the Bank of England, had that insti- 
 tution, more sparing of its resources, during the preceding pe- 
 riod of prosperity and incautious enterprise, been enabled, when 
 
3fl BANKS AND CURRENCY 
 
 the revulsion took place, to lend its credit to solvent houses, by 
 discounting their bills, and increasing its issues of paper curren- 
 cy. It may be presumed, that, having already overstrained its 
 resources, the bank could not have done this, without endan- 
 gering its own credit, and running the risk of being unable to 
 pay its own notes, if their amount was increased. But the mode 
 adopted by government, and which proved so efficacious, mak< 
 it obvious, that, had the bank been enabled, without the aid 
 the treasury, to relieve the distress, and, what was called the 
 want of money, the relief afforded would have been the result 
 much less, if at all, of the enlarged issues of bank notes, than of 
 the bank lending its credit to those solvent dealers whose credit 
 was impaired. 
 
 As a bank cannot increase its discounts without increasing its 
 circulation, the two operations, being in its hands inseparable, 
 are generally confounded. The manner in which the British 
 government afforded relief in the year 1793, conclusively proves 
 that they are essentially distinct, even in a country where the 
 currency consists principally of paper founded on credit, and 
 that the demand always made on banks in times of pressure, for 
 enlarged issues of bank notes, is not a demand for currency but 
 for credit. Cautious and well-directed banks will always afford 
 great relief in such times, if enabled by the previous prudent 
 administration of their affairs to lend their credit to solvent deal- 
 ers ; which cannot be done without enlarging their issues. If, 
 on the contrary, this has already been done to its utmost extent, 
 if during a period of high prices and great apparent prosperity, 
 the spirit of enterprise, naturally excited by that state of things, 
 and which required then to be checked, has, on the contrary, 
 been stimulated by incautious loans and consequent issues of 
 paper on the part of the banks, the result will be, and has every- 
 where always been, as fatal as unavoidable. When the revul- 
 sion takes place, when, from excessive competition or imprudent 
 speculation, the market becomes glutted with a superabundance 
 of any species of commodity, often in the United States of land 
 itself, or when, from want of skill or any other cause, undertak- 
 ings have altogether failed, or when the slow returns of such 
 undertakings require years to be realized, and both capital and 
 credit are exhausted ; at the very time when the aid of banks 
 would be most wanted, those institutions, prematurely disabled, 
 instead of simultaneously enlarging their issues, and lending 
 their credit to solvent but embarrassed dealers, manufacturers, 
 and farmers, are compelled in self defence to contract their 
 issues and loans, and thus greatly to aggravate the evil, which 
 they had at least neglected to check, if they were not instru- 
 mental in its growth. 
 
 In countries, therefore, the currency of which consists princi- 
 pally of bank paper, banks will have a beneficial or pernicious 
 
BANKS AND CURRENCY. 37 
 
 influence on credit, and on a currency depending on credit, ac- 
 cording to the manner in which they may be administered ; use- 
 ful when their operations, in prosperous times and whilst under 
 their control, are regulated by probity, great discretion and 
 skill, pernicious when their administration is defective in any of 
 those respects. But in countries, where the currency consists 
 wholly or principally of the precious metals, and where bankers 
 lend money or discount bills, but do not issue a paper currency, 
 the two operations are never confounded ; and although not ex- 
 empt from commercial revulsions, these will be of less common 
 occurrence, and have little or no influence on currency itself.* 
 It may be confidently affirmed, that the precious metals, under 
 any circumstances whatever, and amidst all the temporary 
 fluctuations arising from a disproportion between supply and 
 demand, continue to be a more permanent standard of value 
 than any other commodity, or any species of paper resting on 
 an element so variable as credit. 
 
 We cannot conceal from ourselves, that specie-paying banks 
 are not only exposed to extraordinary drains from abroad, but 
 are also occasionally controlled by moral causes, the effects of 
 which cannot be calculated, nor without great skill and discre- 
 tion be always prevented. These never affect a metallic cur- 
 rency, which has an intrinsic value, varying less than that of 
 any other commodity, and not at all depending, as paper, on 
 confidence, fear, conjectures, or any of the fluctuations of pub- 
 lic opinion. It is equally clear, that extraordinary drains of 
 specie, occasionally inconvenient when the currency is purely 
 or principally metallic, may be fatal to one which consists of 
 bank notes convertible at will into specie. Supposing the cur- 
 rency of a country to consist of one hundred millions, a drain of 
 twenty millions from abroad would produce great inconvenience, 
 but not beyond that of contracting the metallic currency to 
 that extent, until commerce had supplied the deficiency. But, 
 if consisting of bank notes, sustained by twenty millions of specie 
 in the vaults of the banks, the basis being withdrawn, the whole 
 fabric is at once overthrown, and specie payments must be sus- 
 pended. 
 
 One of the most fatal effects of that suspension is the great 
 and unavoidable distress, which attends a return to a specie 
 currency, particularly when the suspension has been of long 
 continuance. Whilst this lasts, the loss falls on the creditors : 
 but new contracts are daily made, founded on the existing state 
 of the currency ; and should the suspension continue twenty 
 years, as was the case in England, as almost all the contracts in 
 force, and not yet executed, at the time when specie payments 
 
 * See hereafter Mr. Baring's evidence, and Mr. Tooke, respecting the effect of a 
 metallic currency, in France. 
 
58 BAtfKS AND CURRENCY. 
 
 are resumed, must have been made when the currency was 
 depreciated, the obligation to discharge them in specie is con- 
 trary to equity, falls on the debtors, who are always the part 
 of the community less able to bear the burthen, and proves 
 tfnore calamitous than the suspension had been. Short in dura- 
 tion as this had been in the United States, the effect was sensi- 
 bly felt : and to this cause, which also occasioned the failure 
 a number of new banks, must in a great degree be ascribed t 
 general distress of the years 1818 1819. The relief laws 
 some of the States, and in England the corn laws, may be tra 
 to the same source. In that country, after so long a suspension 
 of specie payments, the calamity has necessarily been far more 
 extensive and lasting. It is yet felt, and may still seek for 
 remedies worse than the evil, and call for small notes, excessive 
 issues, and all those measures which would necessarily lead 
 again to an inconvertible paper money. 
 
 Considerations of this nature may well have suggested to the 
 committee of the House of Representatives, the question, whether 
 a metallic currency would not, in the United States, have been 
 preferable to one consisting of bank notes. We would incline 
 to the affirmative, if the system was not already established, 
 and if we believed, that an attempt to return to a pure metallic 
 currency, which could not, without producing great evils, be 
 carried suddenly into effect, was at all practicable. Were not 
 this the case, we would think, that a system of commercial credit, 
 founded on deposits, bills of exchange, and other negotiable 
 paper, such as is carried on by the bankers of London, and by 
 all the bankers of the Continent of Europe, neither of whom 
 issues any notes in the shape of currency, \vould afford to com- 
 merce, at least in commercial cities, nearly, if not altogether, 
 the same accommodations and advantages which are found in 
 the present system. Commercial revulsions, and numerous fail- 
 ures amongst dealers, as they may occur w r herever there has 
 been excessive overtrading, though less frequent, do neverthe- 
 less occasionally take place in countries which have only a me- 
 tallic currency. But their effect is generally confined to the 
 dealers, extending but indirectly and feebly to the community, 
 and never affecting the currency, the standard of value, or the 
 contracts between persons not concerned in the failures. It 
 must be allowed at the same time, that, in the country, where 
 the system of deposits cannot exist to the same extent as in cities, 
 banks soberly and skilfully administered, stimulate industry by 
 the facility which their loans afford to men of enterprise, and 
 that the ability of those banks to make those advances, would 
 be much curtailed, if altogether precluded from issuing notes. 
 
 A very ingenious plan was proposed by Mr. Ricardo, and has 
 since been expounded and defended with great talent by Mr. 
 M'Culloch, intended to aflbrd security against the dangers to 
 
BANKS AND CURRENCY, 8^ 
 
 which every system of paper currency heretofore devised is 
 exposed. It is not applicable to the United States, as it is founded 
 on the exclusion of gold and silver coins, which, by our Consti- 
 tution, are alone a legal tender. Some plausible objections have 
 been made to it, which, for that reason, it is not necessary to 
 discuss ; and we will only give the outline of the plan. 
 
 It consists in the total exclusion of a metallic currency, with 
 the exception perhaps of the silver necessary for small pay- 
 ments, in making the notes of the Bank of England a legal ten- 
 der, and in imposing on that institution the obligation to pay 
 them, on demand, in gold bars of the proper standard. This 
 last provision would be sufficient to prevent any depreciation of 
 the notes, whilst, on the other hand, the gold bars paid by the 
 bank could not, either directly, or by being converted into coin, 
 take their place and add any thing to the amount of the cur- 
 rency. Any call on the bank for gold, would therefore necessa- 
 rily lessen that amount, and must also necessarily cease, when- 
 ever this was somewhat less than the amount in value, which is 
 indispensable in England for the payments in currency. For 
 whenever this point is reached, the notes must be worth at least 
 as much as their nominal value in gold at its ordinary price ; 
 and, in the case of unfavorable exchanges, the drain must alto- 
 gether cease, as soon as the currency is sufficiently contracted 
 to have raised its value to a rate corresponding with that of ex- 
 change. The inconvenience of that contraction would not, it 
 seems, he greater than if the currency was purely metallic. 
 Supposing forty millions sterling to be the minimum of the ab- 
 solutely necessary currency under an unfavorable state of for- 
 eign exchanges, the community would be protected against the 
 danger of any depreciation in the nominal value of the notes, 
 and the bank, under any circumstances whatever, against a 
 drain that could compel it to suspend its payments, provided the 
 value of the gold bars in its vaults was always equal to the ex- 
 cess of its issues over forty millions. The plan was carried into 
 effect, during a short period, by the Bank of England, and then 
 discontinued, for reasons which have not been explained, and 
 which it would be interesting to understand. 
 
 It is well known that the Bank of England, three banks in 
 Scotland, and the Bank of Ireland, are the only chartered bank- 
 ing institutions in the United Kingdom. The capital of the Bank 
 of England, amounting now to fourteen millions pounds sterling, 
 has been loaned altogether to government, at an interest of 3 
 per cent., and is not to be reimbursed till the expiration of the 
 charter. All the other banks of England, commonly called 
 country banks, consist of private copartnerships, without any 
 determined capital, and the members of which are liable to the 
 
4Q BANKS AND CURRENCY. 
 
 same responsibilities as any other commercial houses. With the 
 exception of Mr. Girard's Bank, all the banks established in the 
 United States are joint stock companies incorporated by law, 
 with a fixed capital, to the extent of which only the stockhold- 
 ers are generally responsible.* The business of all those banks 
 consists, in receiving money on deposit, in issuing bank notes, 
 and in discounting notes of hand or bills of exchange. A por- 
 tion of the capital is sometimes vested in public stocks; but 
 this is not obligatory ; and in this they differ essentially from 
 the Bank of England. The capital of this institution, being 
 loaned to government, and not depending on the solidity of the 
 paper discounted, affords a stable guarantee to the holders of 
 .notes and to the depositors. The bank can loan to individuals, 
 or advance to government (beyond its capital as above mention- 
 ed) nothing but the difference, between the aggregate of its 
 notes in circulation, and of the credits in account current on its 
 books, and the amount of specie in its vaults. But the Ameri- 
 can banks lend to individuals, not only that difference, but also 
 the whole amount of their capital, with the exception only of 
 such portion, as they may find it convenient, but are not obliged 
 to vest in public stocks. It follows that the security of the 
 holders of notes, and of the depositors generally, rests exclu- 
 sively on the solidity of the paper they have discounted. It 
 might seem, on the other hand, that, as the Bank of England 
 cannot apply its original capital to any immediate use, whilst 
 the American banks may, by curtailing their discounts, call in 
 their capital on any emergency, they might, without risk, put 
 in circulation a greater proportionate amount of notes. But 
 such curtailment can never be made to any considerable extent, 
 without causing much distress; and, in point of fact, a large 
 portion of their loans consists of what the merchants consider 
 as permanent accommodation, and, in the country, often rests 
 on real security. This departure from what has been generally 
 deemed the true banking principle, must, it is believed, be as- 
 cribed to the original disposition of the capital. 
 
 Whenever therefore an American bank is in full operation, 
 its debts generally consist, 1st, to the stockholders, of the capi- 
 tal ; 2d, to the community, of the notes in circulation and of the 
 credits in account current, commonly called deposits : and its 
 credits, 1st, of discounted notes or bills of exchange and occa- 
 sionally of public stocks; 2d, of the specie in its vaults and of 
 the notes of, and balances due by, other banks ; 3d, of its real 
 estate, either used for banking purposes or taken in payment of 
 debts. Some other incidental items may sometimes be intro- 
 duced ; a part of the capital is occasionally invested in road, 
 canal, and bridge stocks, and the debts, secured on judgments, 
 
 * The stockholders are made personally responsible, in some of the states. 
 
BANKS AND CURRENCY. 4i 
 
 or bonds and mortgages, are generally distinguished in the offi- 
 cial returns of the banks. In order to give a clear view of the 
 subject, we annex an abstract of the situation of the thirty-one 
 chartered banks of Pennsylvania, in November, 1829. 
 
 * Capital, - - - - $12,032,000 
 
 Notes in circulation, $7,270,000 
 
 Deposits, 81758,000 
 
 Surplus funds, --------- 1,142,000 
 
 $29,202,000 
 
 Bills discounted, -------- $17,526,000 
 
 Public stocks,f - - - - - y 
 
 Road, canal, and bridge stocks, - - - 4,620,000 
 
 Debts secured on mortgages, &c. ) 
 
 Real estate, - - 1,310,000 
 
 Notes of other banks, ) 
 
 And due by other banks, j 3,338,00 
 
 Specie, - - 2,408,000 
 
 $29,202,000 
 
 It will be easily perceived, 1st, that what is called the surplus, 
 ahd sometimes the reserved or contingent fund, is nothing more 
 than that which balances the account, or the difference betweea 
 the debits and credits of the banks ; and that, in order to be 
 enabled to repay, at the expiration of the charter, to the stock- 
 holders, the full amount of their stock* that fund or difference 
 ought, in every sound bank, to be sufficient to cover all the baa 1 , 
 debts, and all the losses, which may be incurred on the sale of 
 the various stocks held by it, and of its real estate : 2dly, that 
 the deposits may at any time be converted into bank notes, and 
 that both ought, in correct language, to be included under the 
 denomination of circulation ; 3dly, that the notes of other 
 banks on hand, form no part of the circulation, and ought, when 
 considering the banking system as a whole, to be deducted from 
 the amount of the notes in circulation; and that, for the same 
 reason, inasmuch as the balances due to other banks by the 
 several banks, are included in the deposits, the balances due by 
 such other banks ought also to be deducted from that item, 
 which Would reduce the aggregate of those two items, in the 
 preceding statement, from 16,028,000 to 12,690,000 dollars: 
 4thly, that the capital is the only item in the account apparent- 
 ly invariable, though it may occasionally be increased by legis- 
 lative permission, and lessened by purchases of their own stock 
 
 * Deducting so much of their own stock as has been purchased by the banks. 
 For want of materials, a similar deduction has not been made in the subsequent 
 statements. 
 
 t The public stocks aro not distinguished from others in the statement of the 
 Hank of Pennsylvania. Those held by the other banks amount to $1,588,000. 
 
42 BANKS AND CURRENCY. 
 
 by the banks ; and that all the other items are variable, and do 
 vary according to the operations of the banks : Sthly, that sup- 
 posing the second and third items of credits to remain the same, 
 the circulation, or aggregate of deposits and notes in circula- 
 tion, cannot be either increased or decreased, without a corre- 
 sponding decrease or increase, either of the bills discounted, or 
 of the specie, or of both ; Gthly, that by limiting by law the 
 amount of the debts due to the banks, as included in the two 
 first items of the credits, to a sum bearing a certain ratio to the 
 capital, and by likewise limiting, in a similar manner, the gross 
 amount of the notes in circulation, both which limitations are 
 always under the control of the banks, excessive issues may 
 be prevented: 7thly, that if the situation of the banks of 
 Pennsylvania in the aggregate be taken as a proper basis for 
 those limitations, the whole amount of debts due to a bank 
 ought not to exceed twice, nor the gross amount of its notes in 
 circulation, two-thirds of the amount of its capital. But it 
 must not be forgotten, that, although those limitations would be 
 useful in checking the amount of loans and issues, the ultimate 
 solvency of a bank always depends on the solidity of the paper 
 it discounts. 
 
 The capital of the state banks existing in the year 1790, 
 amounted to about 2,000,000 of dollars. The former bank 
 of the United States was chartered in 1791, with a capital of 
 10,000,000. The charter was not renewed; but in January, 
 
 1811, immediately before its expiration, there were in the 
 United States eighty-eight state banks, with a capital of 
 42,610,000 dollars, making then, together with that of the na- 
 tional bank, a banking capital of near 53,000,000. In June, 
 
 1812, war was declared against England ; and in August and 
 September, 1814, all the banks south and west of New-Eng- 
 land suspended their specie payments. 
 
 It has always been found difficult to ascertain with precision 
 the causes which, in each special case, produce an extraordinary 
 drain of specie, and compel a bank to suspend its payments. 
 Although it clearly appears that very large and unforeseen ad- 
 vances to government were the immediate cause of the suspen- 
 sion of the payments of the Bank of England in the year 1797, 
 it would seem, at this distance of time, to have been easy to 
 prevent that occurrence. The bills of exchange from abroad on 
 government, or any other floating debt, for the payment of which 
 the bank was required to make those advances, might with fa- 
 cility have been converted into funded debt. And when we 
 find, that, in less than seven months after the suspension, the 
 bank declared, by a solemn resolution, that it was enabled to 
 issue specie, and could with safety resume its accustomed func- 
 tions, if the political circumstances of the country did not ren- 
 der it inexpedient, it is hardly possible to doubt that the sus- 
 
BANKS AND CURRENCY. 43 
 
 pension, in its origin, as well as in its continuance, was a volun- 
 tary act on the part of government. Opinions are however di- 
 vided to this day on that subject ; and some distinguished Eng- 
 lish writers ascribe that event to some unaccountable panic. 
 There can be no doubt, that there was a great and continued 
 run on the bank for specie prior to the suspension ; and what 
 renders the transaction still more inexplicable, is, that, almost 
 immediately, and during some years after the suspension had 
 actually taken place, the bank notes, though no longer converti- 
 ble into specie, were at par. The question is not free of diffi- 
 culty as respects the similar event in the United States. 
 
 The following reasons were assigned by the directors of the 
 chartered banks of Philadelphia, in an address to their fellow- 
 citizens, dated the 30th of August, 181& 
 
 " From the moment when the rigorous blockade of the ports of the United 
 States prevented the exportation of our produce, foreign supplies could be paid 
 for in specie only, and as the importation of foreign goods in the Eastern States 
 has been very large, it has for many months past occasioned a continual drain 
 from the banks. This drain has been much increased by a trade in British Gov- 
 ernment Bills of Exchange, which has been extensively carried on, and has 
 caused very large sums to be exported from the United States. 
 
 " To meet this great demand for specie, the course of trade did, for a considera- 
 ble time, enable us to draw large supplies from the Southern States but the un- 
 happy situation of affairs there, having deprived us of that resource, and circum- 
 stances having occurred, which have in a considerable degree occasioned alarm 
 and distrust, it became a serious consideration, whether the banks should con- 
 tinue their exertions to draw within their vaults the specie capital of the country, 
 and thus facilitate the means of exporting it from the United States, or whether 
 they should suspend the payment of specie, before their means were exhausted." 
 
 The great drain from the east, alluded to by the Philadelphia 
 banks, is proved by the comparative view of the specie in the 
 vaults of the banks of Massachusetts, in June 1814, immediately 
 before the suspension of payments, and on the same days of the 
 preceding and succeeding years. 
 
 This amounted on the 1st of June 1811 to $1,709,000 
 " " 1812 " 3,915,000 
 
 " " " 1813 " 6,171,000 
 
 " 1814 " 7,326,000 
 " " " 1815 " 3,915,000 
 
 " " " 1816 " 1,270,000 
 
 And the fact, that a large amount of British government bills 
 was sent to this country from Canada in the years 1812 1814, 
 and sold at 20 and 22 per cent, discount, is corroborated by au- 
 thentic information from several quarters. Other causes, how- 
 ever, concurred in producing the suspension of specie payments. 
 1. The circulating capital of the* United States, which must 
 supply the loans required in time of war, is concentrated in the / 
 large cities, and principally north of the Potomac. The war 
 was unpopular in the Eastern States; they contributed less than 
 from their wealth might have been anticipated ; and the bur- 
 then fell on the Middle States. The proceeds of loans, (exclu- 
 
I 
 
 44 BANKS AND CURRENCY. 
 
 sively of Treasury notes, and temporary loans,) paid into the 
 Treasury from the commencement of the war to the end of the 
 year 1814, amounted to forty -one millions ten thousand dollars. 
 Of that sum the Eastern States lent, - - $2,900,000 
 
 New- York, Pennsylvania, Maryland, and the ) 
 
 T\' A i / /S i i i 
 
 District of Columbia, ( 
 
 The Southern and Western States,- - - - - 2,320,000 
 
 The floating debt, consisting of outstanding Treasury notes and 
 temporary loans unpaid, amounted, on the 1st of January 1815, 
 to eleven millions two hundred and fifty thousand dollars, about 
 four-fifths of which were also due to the Middle States. Almost 
 the whole of the large amount, advanced to government in tl 
 States, was loaned by the cities of New- York, Philadelphia, an< 
 Baltimore, and by the District. The banks made advances be- 
 yond their resources, either by their own subscriptions or by 
 enlarging their discounts in favor of the subscribers. They, as 
 well as several wealthy and patriotic citizens, displayed great 
 zeal in sustaining government at a critical moment ; and the 
 banks were for that purpose compelled to enlarge their issues. 
 
 2. The dissolution of the Bank of the United States deprived 
 the country of a foreign capital of more than seven millions of 
 dollars, vested in the stock of that institution, and which was 
 accordingly remitted abroad during the year that preceded the 
 war. At the same time, the state banks had taken up a con- 
 siderable part of the paper formerly discounted by that of the 
 United States. As the amount of this exceeded fifteen millions, 
 their aid in that respect was absolutely necessary, in order to 
 prevent the great distress, which must have otherwise attended 
 such diminution of the usual accommodations. 
 
 3. The creation of new state banks, in order to fill the chasm, 
 was a natural consequence of the dissolution of the Bank of the 
 United States. And, as is usual under such circumstances, the 
 expectation of great profits gave birth to a much greater num- 
 ber than was wanted. They_were extended -through the inte- 
 rior parts of the country, created no new capital, and withdrew 
 that which might have been otherwise lent to government, or 
 as profitably employed. From the 1st of January 1811, to the 
 1st of January 1815, not less than one hundred and twenty new 
 banks were chartered and went into operation, with a capital 
 of about forty, and making an addition of near thirty millions of 
 dollars to the banking capital of the country. That increase 
 took place on the eve of, and during a war which did nearly 
 annihilate the exports, and both the foreign and coasting trade. 
 And, as the salutary regulating power of the Bank of the Uni- 
 ted States no longer existed, the issues were accordingly in- 
 creased much beyond what the other circumstances already 
 mentioned rendered necessarv. We have obtained returns of 
 
BANKS AND CURRENCY. 
 
 45 
 
 the circulation and specie, for the latter end of the years 1810, 
 1814, and 1815, though not all of the same precise date, of a 
 sufficient number of banks to enable us to make an estimate of 
 the whole, which cannot vary essentially from the truth. Our 
 returns of the amount of deposits are too partial for insertion ; 
 our authentic returns embrace generally the states of Massa- 
 chusetts, New-Hampshire, Rhode Island, Pennsylvania, Mary- 
 land, Virginia, and the District of Columbia, and give the fol- 
 lowing result : 
 
 On or near 1st Jan. 1811 50 State Banks 
 1815120 " 
 1816134 " 
 
 Capital 
 
 Notes in 
 circulation 
 
 Specie 
 
 24,618,551 
 45,272,076 
 
 47,987,826 
 
 13,170,401 
 23,617,090 
 31,702,050 
 
 5,673,442 
 11,505,077 
 8,758,133 
 
 Having the amount of the capital and a few general returns 
 of all the other banks, partly guided by analogy, and partly 
 by their respective dividends, we annex the following estimate 
 of the whole : 
 
 
 Capital 
 
 Notes in 
 circulation 
 
 Specie 
 
 1st Jan 1811 Bank of the U S 
 
 10 000 000 
 
 5 400 000 
 
 5 800 000 
 
 88 State Banks, 
 
 42,610,601 
 
 22,700,000 
 
 9,600,000 
 
 Total 
 1815 208 State Banks 
 
 52,610,601 
 82 259 590 
 
 28,100,000 
 
 Af. Knn ooo 
 
 15,400,000 
 
 1816246 " " 
 
 89 822 422 
 
 68 000 000 
 
 19 000 000 
 
 
 
 
 
 Capital 
 $15,690,000 
 
 Circulation 
 5,320,000 
 
 Specie 
 8,200,000 
 
 26,000,000 13,750,000 3,000,000 
 40,930,000 25,630,000 5,800,000 
 
 The unequal distribution of the specie on the 1st of January, 
 1815, must be recollected. 
 
 At that time the banks of the four 
 states of Maine, Massachusetts, Rhode 
 Island, and New-Hampshire, had 
 
 The states of Pennsylvania and Mary- 
 land, with the District of Columbia, had 
 
 And all the other states 
 
 The increase of issues, from forty-five and a half to sixty- 
 eight millions, or of about 50 per cent, within the first fifteen 
 months of the suspension of specie payments, was the natural 
 consequence of that event. We must observe, that, where we 
 were obliged to resort to an estimate, the amount of bank notes 
 is set down rather too low than too high. Yet, we are confident, 
 that for the three dates we have given, the actual amount can- 
 not have exceeded thirty, forty-seven, and seventy millions re- 
 spectively. This last sum falls very short indeed of the one 
 hundred and ten millions which were supposed to have been 
 put in circulation by the banks, but is quite sufficient to ac- 
 count for the depreciation. It is equal to the present amount 
 of the currency ; and as the increase of wealth during the last 
 fourteen years has at least been in the same proportion as that 
 of the population, the amount which could have been wanted 
 
40 BANKS AND CURRENCY. 
 
 at that time may be estimated at about forty-six millions, in- 
 cluding both paper and specie. It is therefore clear that the 
 equal amount in bank notes alone, which had been put in cir- 
 culation by the state banks before the year 1815, were more 
 than could have been long sustained, preserving at the same 
 time their convertibility into specie. Under those circumstances, 
 the alarm caused by the capture of Washington, and the threat- 
 ened attack on Baltimore, was sufficient to cause a suspension 
 of specie payments. It took place at that particular crisis, and 
 appears to have originated in Baltimore. The example was 
 immediately followed in Philadelphia and New-York ; and it is 
 indeed known, that an attack was apprehended on both those 
 places, and that some of the banks of Philadelphia had sent 
 their specie to Lancaster. 
 
 We have stated all the immediate and remote causes within 
 our knowledge, which concurred in producing that event ; and 
 although the effects of a longer continuance of the war cannot 
 be conjectured, it is our deliberate opinion, that the suspension 
 might have been prevented, at the time when it took place, 
 had the former Bank of the United States been still in exist- 
 ence. The exaggerated increase of state banks, occasioned by 
 the dissolution of that institution, would not have occurred. 
 That bank would, as before, have restrained within proper, 
 bounds, and checked their issues : and, through the means ofj 
 its offices, it would have been in possession of the earliest symp-f 
 toms of the approaching danger. It would have put the Trea- 
 sury Department on its guard ; both acting in concert, woulc 
 certainly have been able at least to retard the event ; and, as 
 the treaty of peace was ratified within less than six months- 
 i after the suspension took place, that catastrophe would have! 
 been altogether avoided. 
 
 We have already adverted to the unequivocal symptoms of 
 renewed confidence shown by the rising value of bank notes, 
 which followed the peace. This would have greatly facilitated 
 an immediate resumption of specie payments, always more easy, 
 and attended with far less evils, when the suspension has been 
 of short duration. The banks did not respond to that appeal 
 made by public opinion ; nor is there any evidence of any pre- 
 parations, or disposition on their part, to pay their notes in 
 specie, until after the act to incorporate the new Bank of the 
 United States had passed. IWe are inclined to ascribe this prin- 
 cipally to the great difficulty of bringing the various banks, in 
 our several commercial cities, to that concert which was indis- 
 pensable.! But it cannot be concealed, that, in such a situation, 
 the immediate and apparent interest of the banks is in opposi- 
 tion to that of the public. It is well known, that the Bank of 
 England, though apparently disposed at first to resume its specie 
 payments, found a continued suspension extremely convenient 
 
BANKS AND CURRENCY. 47 
 
 and profitable ; that during that period of twenty years, its ex- 
 traordinary profits, besides raising the usual dividend from 7 to 
 10 per cent, amounted to thirteen millions of pounds sterling, 
 and that it accordingly threw obstacles in the way of the re- 
 sumption. The state banks of the United States were only in- 
 active in that respect, and did not impede that desirable event: 
 but they used the advantages incident to the situation in which 
 they were placed ; and to what extent their issues were gene- 
 rally increased, has already been shown. 
 
 It will not be asserted, that any reasonable expectation could 
 have been entertained of a voluntary return on the part of the 
 state banks to a sound currency, unless the depreciation had 
 become so great as to induce the community at large to reject 
 their notes. Whether this arose from inability or unwillingness, 
 a remedy was equally necessary. Congress does not appear to 
 have inquired whether they had the right to exercise any im- 
 mediate control over the issues of those banks ; and the question 
 seems to have laid between the establishment of a national 
 bank, and an attempt to force the state banks to pay in specie, 
 by the refusal of their notes in payment of debts and duties due 
 to the United States, so long as those notes were not on demand 
 discharged in specie. It is clear that such an attempt must have 
 failed altogether, during the year that followed the peace, and 
 so long as the expenses of government greatly exceeded its 
 receipts. The bank was chartered in April, 1816, and it must 
 for ever remain conjectural, whether, if that measure had not 
 been adopted, and after the floating debt, and all the arrearages 
 of the war had been paid or funded, and the receipts of the trea- 
 sury had become greater than its disbursements, an attempt, on 
 the part of the government, to collect the revenue, and to dis- 
 charge the public expenses in specie, would have compelled the 
 state banks to resume generally specie payments. It cannot, at 
 all events, be doubted, that the result was quite uncertain, and 
 that the attempt might have failed at the very outset, from the 
 want of any other currency than bank notes. It is indeed quite 
 probable, that, in that case, the impossibility to collect the re- 
 venue, might have induced government merely to substitute an 
 issue of its own paper to that of the banks. 
 
 It will be found, by reference to the Report of the Secretary 
 of the Treasury of December 1815, that his recommendation to 
 establish a National Bank was, in express terms, called " a propo- 
 sition relating to the national circulating medium," and was 
 exclusively founded on the necessity of restoring specie pay- 
 ments and the national currency. He states it as a fact incon- 
 testably proved, that the state banks could not at that time be 
 successfully employed to furnish an uniform national currency. 
 He mentions the failure of one attempt to associate them with 
 that view ; that another attempt, by their agency in circulating 
 
48 BANKS AND CURRENCY. 
 
 Treasury notes, to overcome the inequalities of the exchange, 
 has only been partially successful ; that a plan recently pro- 
 posed, with the design to curtail the issues of bank notes, to fix 
 the public confidence in the administration of the affairs of the 
 banks, and to give to each bank a legitimate share in the circu- 
 lation, is not likely to receive the general sanction of the banks ; 
 and that a recurrence to the national authority is indispensable 
 for the restoration of a national currency. Such was the con- 
 temporaneous and deliberate opinion of the Officer of the Gov- 
 ernment, who had to struggle against the difficulties of a paper 
 currency, not only depreciated, but varying in value from day 
 to day and from place to place. 
 
 *It was not till after the organization of the Bank of the 
 United States, in the latter part of January 1817, that delegates 
 from the banks of New- York, Philadelphia, Baltimore, and Vir- 
 ginia, assembled in Philadelphia, for the purpose of agreeing to 
 a general and simultaneous resumption of specie payments. A 
 compact proposed by the Bank of the United States, acceded to 
 by the state banks, and ratified by the Secretary of the Treasu- 
 ry, was the result of that convention. The state banks engaged 
 to commence and continue specie payments, on various condi- 
 tions, relative to the transfer and payment of the public balances 
 on their books to the bank of the United States, and to the sum 
 which it engaged previously to discount for individuals, or under 
 certain contingencies for the said banks, and also with the ex- 
 press stipulation, that the Bank of the United States, upon any 
 emergency which might menace the credit of any of the said 
 banks, would contribute its resources to any reasonable extent 
 in support thereof, confiding in the justice and discretion of the 
 banks respectively, to circumscribe their affairs within the just 
 limits indicated by their respective capitals, as soon as the inter- 
 est and convenience of the community would admit. To that 
 compact, which was carried into complete effect, and to the im- 
 portation of more than seven millions of dollars in specie from 
 abroad by the Bank of the United States, the community is in- 
 debted for the universal restoration of specie payments, and for 
 their having been sustained, during the period of great difficulty 
 and of unexampled exportation of specie to China, which im- 
 mediately ensued. 
 
 Among the difficulties which the bank had to encounter, must 
 be reckoned the effort made to alleviate the distress which 
 always attends the return from a depreciated, to a sound cur- 
 rency. The Western States having less capital, are, in the course 
 of trade, generally indebted to the Atlantic seaports. Whether 
 owing to larger purchases of public land than usual, to an ex- 
 
 * The following details are borrowed from the pamphlet signed "Monitor," 
 which is well known to have come from an authentic source. 
 
BANKS AND CURRENCY. 
 
 49" 
 
 cited spirit of enterprise, or to any other cause, it appears, that 
 at that time, the amount of debts due by the West, either to the 
 East or to Government, was unusually large. The several west- 
 ern offices of the Bank of the United States discounted largely, 
 probably to too great an extent. The eastern creditors were 
 generally paid, the western state banks relieved, and the debt 
 transferred to the Bank. Thus we find that the issues of the Bank 
 of Kentucky, which, in 1816, exceeded one million nine hundred 
 and fifty thousand dollars, were, in 1819, reduced to six hundred 
 and seventy thousand dollars. This could not be done, without 
 large issues of branch notes, or of drafts on the Parent Bank 
 and the northern offices which drained these of their capital.* 
 Although great curtailments had taken place, near six millions 
 and a half of dollars of the capital of the bank were, in the 
 spring of the year 1819, distributed amongst the interior western 
 offices^ whilst the whole amount allotted to the offices north and 
 east of Philadelphia, was less than one million. The proper 
 equilibrium could not be reinstated without a revulsion and an 
 uncommon pressure on the west* in order to lessen the amount 
 of its debt. The attempts to counteract that effect by the cre- 
 ation of a great number of local banks, could not but fail, and 
 must have aggravated instead of relieving the evil. The unpopu- 
 larity which attached to the Bank of the United States, when 
 it found itself compelled to enforce the payment of such a large 
 debt, and the attempt to alleviate the distress by relief laws, 
 which, though injudicious, ought not, in that state of things, to 
 be too severely judged, are well known, and were the natural 
 consequences of the course which had been originally pursued. 
 The year 1819 having been one of great difficulty, we annex 
 an estimate of the situation of the banks for the latter end of it. 
 The Secretary of the Treasury gave a partial one, in his report 
 oh currency of the year 1820, to which we have made some 
 additions and corrections from bank returns of a nearer date to 
 the 1st of January 1820, than he had then obtained. The por- 
 tion, on estimate, embraces almost the whole of the banks of 
 Connecticut, New Jersey, New York, and Maryland, Mr. S. 
 Girard's, about one-half of those of South Carolina, Louisiana, 
 and Alabama, and one-fourth of those of Kentucky. The re- 
 turns of those of the other states are complete. 
 
 1st January, 1820. 
 
 212 ascertained State Banks 
 95 estimated " " 
 307" State Banks 
 United States Bank - - 
 , Tojal 
 
 Capital 
 
 Notes in 
 circulation 
 
 Deposits 
 
 Specie 
 
 62,735,842 
 39,374,769 
 
 26,641,574 
 14,000,000 
 
 19,444,959 
 11,800,000 
 
 10,672,263 
 6,000,000 
 
 102,110,611 
 35,000,000 
 
 40,641,574 
 4,221,770 
 
 31,244,959 
 4,705,511 
 
 16,672,263 
 3,147,977 
 
 137,110,611 
 
 44,863,344 
 
 35,950,470 
 
 19,820,240 
 
 * Mr. Cheves's Exposition. 
 G 
 
50 BANKS AND CURRENCY. 
 
 It appears from that statement, that the amount of notes in 
 circulation was only about one million less than immediately 
 before the suspension of specie payments, whilst on, the other 
 hand, the amount of specie in the vaults of the banks was nearly 
 two millions greater. But it has been seen, that, on the 1st of 
 January 1816, the paper currency amounted to sixty-eight 
 millions. So great a reduction in the issues of the banks, could 
 not have been effected without a corresponding diminution of 
 their discounts. Debts contracted during the suspension of s 
 cie payments, and whilst the currency was depreciated, becam 
 payable at par. The distress, therefore, that took place at tha 
 time, may be clearly traced to the excessive number of state 
 banks incorporated subsequently to the dissolution of the fir 
 Bank of the United States, and to their improvident issues. 
 Those of the country banks of Pennsylvania alone, amounted, 
 in November 1816, to 84,756,460, and had been reduced in 
 November 1819, to $1,318,976. A committee of the Senate of 
 that state, appointed in December 1819, to inquire into the 
 extent and causes of the present general distress, ascribe it, as 
 we do, to the improvident creation of so many banks, as will 
 appear from the following extract from their report : 
 
 " At the following session, the subject was renewed with increased ardor, and 
 a bill authorizing the incorporation of forty-one banking institutions, with capitals 
 amounting to upwards of seventeen millions of dollars, was passed by a large ma- 
 jority. This bill was also returned by the governor, with additional objections ; 
 but two-thirds of both houses (many members of which were pledged to their 
 constituents to that effect) agreeing on its passage, it became a law on the 21st 
 of March 1814, and thus was inflicted upon the commonwealth an evil of a more 
 disastrous nature than has ever been experienced by its citizens. Under this law, 
 thirty-seven banks, four of which were established in Philadelphia, actually went 
 into operation." 
 
 The numerous failures which had preceded the year 1819, or 
 have since taken place, have also been principally due to the 
 same causes. We have an account of 165 banks that failed 
 between the 1st of January 1811 and the 1st of July 1830. The 
 capital of 129 of these amounted to more than twenty-four mil- 
 lions of dollars stated as having been paid in. The whole 
 amount may be estimated at near thirty millions ; and our list 
 may not be complete. The capital of the state banks now ex- 
 isting amounts to about 110 millions. On a total capital of one 
 hundred and forty millions, the failures have amounted to thirty, 
 or to more than one-fifth of the whole. Of the actual loss in- 
 curred, we can give no account. There are instances in which 
 the stockholders, by paying for their shares in their own notes, 
 and afterwards redeeming their notes with the stock in their 
 name, suffered no loss ; and this fell exclusively on the holders 
 of bank-notes and depositors. In many cases, where the whole 
 stock has been lost, the holders of notes have nevertheless ex- 
 perienced a partial loss. In the most favorable cas*es, the stock- 
 holders lost a considerable portion of their stock : and all the 
 
 
BANKS AND CURRENCY. 51 
 
 debts will be ultimately paid. But even then there has been 
 a heavy loss on the community ; the notes having been gene- 
 rally sold by the holders at a depreciated rate, at the time when 
 the failure took place. We believe that the pecuniary loss sus.- 
 tained by the government, on the loans raised during the sus- 
 pension, and from bank failures, exceeded four millions of dollars. 
 The active industry of the country has enabled it to recover 
 from that depressed state ; and we will now give a view of the 
 situation of the state banks and of that of the United States, 
 at the close of the year 1829. We have returns of two hun- 
 dred and eighty-one state blanks, which have a capital of 
 95,003,557 dollars. Of the forty-eight other banks we have 
 only the capital, amounting to 15,188,711 dollars, and some 
 incomplete returns ; and of thirty banks of the state of New- 
 York, of which we have complete returns, fourteen only are 
 for the 1st of January 1830, the sixteen others being for the 
 1st of January, 1828. This last circumstance makes the 
 amount of specie appear probably one million of dollars less 
 than it actually was at the end of 'the year 1829. The forty- 
 eight banks, of the situation of which we have no return, are 
 distributed as follows, viz. 
 
 In Connecticut, - 3 
 
 New- York, - 7 
 
 New-Jersey, .......13 
 
 Pennsylvania,* ....-..-.-. 1 
 
 Delaware, 1 
 
 Maryland, 4 
 
 South Carolina, 4 
 
 Louisiana, - - - {branches of) 1 
 
 Alabama, --.- 1 
 
 Ohio, (all) ...... 11 
 
 Michigan and Florida, - 2 
 
 Estimating these in the same manner as in the preceding 
 statements, we have the following results : 
 
 1. For the states of Maine, New-Hampshire, Vermont, Mas- 
 sachusetts, and Rhode-Island, 
 
 Capital, $30,812,692 
 
 Notes, 7,394,566 
 
 Deposits, 4,203,895 
 
 Specie, - 2,194,768 
 
 For the states of Connecticut, New-York, and New-Jersey, 
 
 Capital, - 26,585,539 
 
 Notes, 12,737,539 
 
 Deposits, r - - 14,594,145 
 
 Specie, - - - 2,841,746 
 
 * Mr. Girard's bank, the capital of which is rated at $1,800,000, being the sum on 
 which the stamp duty was formerly paid. 
 
5$ BANKS AND CURRENCY. 
 
 For the states of Pennsylvania, Delaware, Maryland, and 
 the District of Columbia, 
 
 Capital, - - - - , - $25,566,622 
 
 Notes, - - ......... 11,274,086 
 
 Deposits, - 10,850,739 
 
 Specie, 4,170,592 
 
 For the four Southern States, 
 
 Capital, $17,600,129 
 
 Notes, 12,183,863 
 
 Deposits, 6,952,194 
 
 Specie, - - - 3,046,141 
 
 For the Western States,* 
 
 Capital, 9,629,286 
 
 Notes, 4,684,860 
 
 Deposits, 4,180,146 
 
 Specie, 2,686,396 
 
 II. Distinguishing the cities of Boston, Salem, New- York, 
 Philadelphia, Baltimore, Charleston, and New-Orleans, from 
 ihe rest. 
 
 Remainder 
 Seven cities. of the United States. 
 
 Capital, .... $.53,211,605 - - - 56,980,663 
 
 Notes, ..... 17,144,422 - - - 31,130,492 
 
 Deposits, .... 23,137,129 - - r 17,643,990 
 
 Specie, .... 7,258,025 - - - 7,681,618 
 
 III. Situation of the Bank of the United States, on the 1st 
 of November, 1829. 
 
 Cr. Dr. 
 
 Funded debt $11,717,071 Capital, $34,996,270 
 
 Notes discount- Notes in circulation, - - 13,048,984 
 
 ed, - - - $32,541,124 Deposits, 14,778,809 
 
 Domestic bills, 7,476,321 Balance in transitu from 
 
 40,017,445 bank and offices on each 
 
 Foreign account, - - - 1,161,001 other, ...... 732,062 
 
 Due from banks, 843,551 Surplus fund, after deduct 
 
 Notes of ditto, 1,531,528 ing losses already char ge- 
 
 2,375,079 able to it, including that 
 
 Specie, 7,175,274 oT Baltimore, .... 2,766,129 
 
 Real estate, 3,876,404 ' 
 
 66,322,274 
 
 66,322,274 
 
 IV. The progressive improvement of the Bank of the United 
 States, and the talent with which it has been administered, 
 are exhibited in the following comparative view of the princi- 
 pal items of its situation, on the first days of November, 1819 
 and 1880: 
 
 * There arc not now any slate bank* in operation in the states of Kentucky, In- 
 diana, Illinois, and Missouri. 
 
BANKS AND CURRENCY. 53 
 
 November 1. 1819. 1830. 
 
 $otes discounted on Bank Stock, - $7,759,980 719,195 
 
 Notes discounted on personal security, 21,423,622 32,665,035 
 
 Domestic Bills, -----.-- 1,386,174 7,954,290 
 
 Deposits, - - - 4,705,512 12,650,752 
 
 Specie, 3,147,977 11,436,175 
 
 Due to Baring, Brothers & Co. - - 2,333,937 
 
 Due from ditto, 2,778,653 
 
 Bank notes issued, 4,221,770 18,004,680 
 
 deduct in transitu, .... 411,059 2,823,135 
 
 In actual circulation, 
 
 - - $3,810,111 15,181,545 
 
 V. The following estimate gives the general result for the 
 end of -the year 1829 
 
 / 
 281 Banks ascertained, 
 
 Capital 
 
 Notes 
 
 Deposits 
 
 Specie 
 
 95,003,557 
 15,188,711 
 
 39,174,914 
 9,100,000 
 
 32,531,119 
 8,250,000 
 
 11,989,643 
 2,950,000 
 
 329* 
 
 United States Bank . . . 
 
 110,192,268 
 35,000,000 
 
 48,274,914 
 ; 13;048,984 
 
 40,781,119 
 14,778,809 
 
 14,939,643 
 7,175,274 
 
 145,192,268 | -61,323,898 
 
 55,559,928 
 
 22,114,917 
 
 It will be perceived, by the last item of No. IV., that there 
 is always a large amount of the notes of the Bank of the United 
 States, issued and inserted in the usual returns, which are not 
 in actual -circulation. They consist of notes received in pay- 
 ment of duties, or otherwise, by other offices than those by which 
 they had been issued, and transmitted back to them. The 
 amount, at the end of 1829, in No. IV., is that of the nett circu- 
 lation. On the other hand, the drafts from the bank on offices, 
 and from these on the bank ajid on each other in actual circu- 
 lation, should, as has been observed, be considered as making 
 part of it. The total annual amount of those drafts is about 
 twenty-four millions of dollars, and they are on an average paid 
 within fifteen days after being issued. The amount always in 
 circulation may therefore be estimated at one million, which, 
 added to the thirteen millions of bank notes, gives fourteen mil- 
 lions for the actual circulation of the bank. We may therefore 
 estimate the total amount of the paper currency of the United 
 States, on the 1st of January, 1830, at aboufe^sbtty-two millions 
 and a half " -* . 
 
 ATltheTbanks receive notes issued by the other institutions, 
 the returns of which, that have been obtained, being incom- 
 plete, have not been inserted in the preceding statements. From 
 an examination of a number of these, in various sections of the 
 
 * We have not included in this amount several banks lately chartered, hut not in 
 operation on the 1st of January, 1830. 
 
54 BANKS AND CURRENCY. 
 
 country, and embracing banks with an aggregate capital of 
 more than twenty millions of dollars, we think that the notes 
 of that description make more than one-fifth of the total amount 
 of their issues, in those situated north of the Potomac, and about 
 one-eighth in the Southern States. The average of notes of 
 state banks on hand, in the Bank of the United States and its 
 offices, amounted, during the year 1829, to about one million 
 and a half. There is, therefore, always a sum of about nine ot 
 ten millions of dollars, or not less than one-seventh part of the 
 whole amount issued, which is not in actual circulation. If the 
 banks did not receive any notes but their own, it would seem 
 that a nearly equal amount of these would be returned upon 
 them, and that the real amount of those in actual circulation 
 should not be estimated at more than fifty-three and a half mi 
 lions of dollars. We have however adopted throughout the 
 usual mode of computation. 
 
 If to the amount of notes we add the deposits, we will have 
 a total of either one hundred and eighteen, or one hundred and 
 nine millions, according to each of those two modes of compu- 
 ting, for the circulation of all the banks. This is sustained by 
 a sum of twenty-two millions in specie, which makes no part of 
 the circulation. There are no means of ascertaining correctly 
 the portion which consists of the precious metals. The silver 
 coinage of England forms nearly one-seventh part of the whole 
 circulation of that country. At that rate, that of the United 
 States, allowing for the various considerations which may affect 
 the question, cannot be estimated at more than ten millions. It 
 is well known, that gold has been altogether excluded by the 
 mint regulations. 
 
 We have therefore the following results, according to the 
 .view of the subject, which may be adopted : 
 
 Gross amount of notes issued, - ... - $62,500,000 
 Silver coins, - - 10,000,000 
 
 Usual mode of computing, 1, .... 72,500,000 
 And if deposits are included, - - - - - 55,500,000 
 
 2, .... 128,000,000 
 
 But if the bank notes of other banks on hand are 
 
 deducted, the notes in circulation will be - $53,500,000 
 Silver, 10,000,000 
 
 3, .... 63,500,000 
 And if deposits are included, 55,500,000 
 
 4, .... 119,000,000 
 
 Which last appears to us the most correct mode of compu- 
 tation. 
 
BANKS AND CURRENCY. 55 
 
 Although we have freely expressed our opinion, that, taking 
 into consideration all the circumstances which belong to the sub- 
 ject, it might have been preferable in the United States to have 
 had nothing but a metallic currency, we are quite aware that 
 this is not at this time the question. We are only to inquire, 
 whether any other or better security can be found, than that 
 which is afforded by the Bank of the United States, against 
 either the partial failures of banks, the want of an uniform 
 currency, or a general suspension of specie payments. The 
 great difficulty arises from the concurrent, and perhaps debate- 
 able jurisdiction of the general and state governments : and we 
 are to examine, not only what are the provisions necessary to 
 attain the object intended, but also by what authority the 
 remedy, must be administered. 
 
 The essential difference between banking and other commer- 
 cial business, is, that merchants rely, for the fulfilment of their 
 engagements, on their resources, and not on the forbearance of 
 their creditors, whilst the banks always rely, not only on their 
 resources, but also on the probability that their creditors will 
 not require payment of their demands. We have already seen, 
 that this probability is always increased or lessened, in propor- 
 tion as the issues of the banks are moderate or excessive. One 
 of the most efficient modes to reduce the amount of bank notes, 
 as compared to the total amount of the currency of the country, 
 consists in the increase of the metallic currency which circulates 
 amongst the people, independent of that which is kept in reserve 
 in the vaults of the banks. It is evident, that, inasmuch as only 
 a certain amount of sound currency is wanted, and can be sus- 
 tained, that part which consists of bank notes must be lessened, 
 and thereby made safer, as the metallic portion is increased. 
 Whenever also the soecie of the banks is drained by any extra- 
 ordinary demand whatever;, delays, and often difficulties,* may 
 arise in the importation of a supply from abroad ; which is, 
 however, the only resource, when the circulating metallic cur- 
 rency has nearly disappeared. 
 
 We have had an opportunity to witness in France the salutary 
 effects of a currency consisting principally of the precious 
 metals, not only in cases of great national' difficulty, but also for 
 the specific purpose of reinstating a bank momentarily endan- 
 gered by over issues of paper. But we prefer referring to the 
 evidence of a very able and practical witness, who was also 
 deeply interested in the issue, and we will extract this, from the 
 work of another distinguished and practical writer.* 
 
 " Of the comparative facility with which the coffers of a bank 
 which has suffered too great a reduction of its reserves by im- 
 prudent issues of paper may be replenished out of a circulation 
 
 * Tooke on Currency. 
 
56 BANKS AND CURRENCY. 
 
 consisting in great proportion of coin, notwithstanding a coinci- 
 dent demand for large payments abroad, a strong instance is af- 
 forded in the case of the Bank of France, in 1817 and 1818. 
 The circumstance is thus stated in Mr. Baring's evidence in 
 March 1819. (Vide Report of Lord's Committee on the resump- 
 tion of cash payments, p. 103.) Speaking of a drain which that 
 bank had experienced, he says : 
 
 " Their bullion was reduced, by imprudent issues, from one hundred and sev- 
 enteen millions of francs, to thirty-four millions of francs, and has returned, by 
 more prudent and cautious measures, to one hundred millions of francs, at which 
 it stood ten days ago when I left Paris, This considerable change took place 
 since the first week in November, when the amount of specie in that bank was 
 at its lowest. It must, however, be always recollected, that this operation took 
 place in a country, every part of the circulation of which is saturated with specie, 
 and, therefore, no inference can be drawn in favor of the possibility of so rapid 
 an operation in this country, where, owing to the absence of specie in.circulation, 
 the supply must entirely come from abroad ; for in Paris, though some portions 
 may have come from foreign countries, the great supply must undoubtedly have 
 come through all the various small channels of circulation through that kingdom." 
 
 "Again, in the same evidence, p. 105: 
 
 "Q. Has not France, after two years of great scarcity in corn, and two years 
 of foreign contribution, been able Jx> contribute a proportion of the precious 
 metals to the wants of Russia and Austria ? 
 
 " A. Undoubtedly, the precious metals have been supplied from France to Rus- 
 sia and Austria, and shipped, to a considerable amount, to America, notwith- 
 standing the payments to foreign powers, and very large payments for imported 
 corn, whilst, at the same time, wine having almost totally failed for several years 
 past, they were deprived of the most essential article of their export." 
 
 " And, in reference to these payments, in the preceding an- 
 swer, Mr. Baring states, that they 
 
 'Produced no derangement whatever of the circulation of that country 
 (France.)' 
 
 " It may not be unimportant further to remark, that the state 
 of the currency in France, ever since the suppression of the 
 assignats, appears to be decisive of the grecrt advantages attend- 
 ing a metallic circulation, in times of political difficulty and 
 danger. On no one great occasion did her efforts appear* to be 
 paralyzed, or even restricted, by any derangement of the cur- 
 rency ; and in the two instances of her territory being occupied 
 by an invading army, there does not appear to have been any 
 material fluctuation in- its value." 
 
 We perceive but two means of enlarging the circulating me- 
 tallic currency, 1st, the suppression of small notes; 2d, the 
 measures necessary to bring again gold into circulation. 
 
 The first measure is that, which, after long experience, a most 
 deliberate investigation, and, notwithstanding a strenuous oppo- 
 sition by the parties interested, has been finally adopted and per- 
 severed in by the government of Great Britain. By the sup- 
 pression of all notes of a denomination less than 5 sterling, in 
 England, Wales, and Ireland, the amount of the circulating 
 metallic currency has become equal to that of bank notes of 
 
BANKS AND CURRENCY. 57 
 
 every description. That metallic currency consists of eight mil- 
 lions sterling in silver, which is receivable only in payments not 
 exceeding forty shillings, and of twenty-two millions sterling in 
 gold. This measure has given a better security against fluctua- 
 tions in the currency, and a suspension of specie payments, than 
 had been enjoyed during the thirty preceding years. In France, 
 where the Bank of France is alone authorized to issue bank 
 notes, and none of a denomination under five hundred francs, 
 its circulation hardly ever reaches ten millions sterling, or about 
 one-tenth part of the currency of the country. In the United 
 States, all the banks issue notes of five dollars. The states of 
 Pennsylvania, Maryland, and Virginia, and perhaps some 
 others, have forbidden the issue of notes of a lower denomina- 
 tion, to the great convenience of the community, and without 
 experiencing any of the evils which had been predicted. We 
 have seen, in Pennsylvania, the chasm occasioned by that sup- 
 pression instantaneously filled by silver, without the least dimi- 
 nution in the amount of currency. We cannot but earnestly 
 wish, that the other states may adopt a similar measure, and 
 put an end to the circulation of the one, two, and three dollar 
 notes, which is of no utility but to the banks. Those small notes 
 are, as a currency, exclusively local, and a public nuisance : 
 and, in case of the failure of any bank, the loss arising from 
 them falls most heavily on the poorest class of the community. 
 We have no other data to estimate the proportion they bear to 
 the whole amount of notes, than the returns of the banks of 
 Massachusetts and Maine, subsequent to January 1825; by 
 which it appears, that, in those states, those small notes make 
 one-fifth part of the whole paper currency. But we would 
 wish to go further than this, and, in order to bring gold more 
 generally into circulation, that all notes under the denomination 
 of ten dollars might be suppressed. The five dollar notes of the 
 Bank of the United States, constitute less than one-sixth part of 
 its circulation, and amount in value to two-thirds of that of its ten 
 dollar notes. From those data, taking into consideration the 
 amount of currency of the states where the small notes do not 
 circulate, and allowing that a portion of the five would be sup- 
 plied by ten dollar notes, the reduction in the amount of the 
 paper currency, arising from a suppression of the small notes, 
 may be estimated at six, and that produced by the suppression 
 of the five dollar notes at about seven millions. Both together 
 would probably lessen the paper currency by one-fifth, and sub- 
 stitute silver and gold coins in lieu thereof. 
 
 We have already adverted to the erroneous value assigned to 
 gold coins by the laws which regulate the Mint of the United 
 States. The relative value of that metal to silver was, by the 
 law of 1790, fixed at the rate of 15 to 1. In England it was at 
 that time at the rate of 15.2 to 1 ; and it had in France, after 
 
 B 
 
58 BANKS AA : D CURRENCY. 
 
 an investigation respecting the market price of both metals, 
 been established at the rate of 15 \ to 1, as early as the year 
 1785. From that to this time, gold coins have never been be- 
 low par in that country, and have generally commanded a pre- 
 mium, varying from one-fifth to one per cent., but which, on an 
 average, has been rather less than one-half per cent. This ratio 
 in all those instances is that of gold to silver coins, but the dif- 
 ference is greater between gold and silver bullion. Whether 
 the expense of coinage is defrayed gratuitously by government, 
 or a seignorage is charged to individuals, coins not debased or de- 
 teriorated will almost always command a higher price than bul- 
 lion containing the same quantity of pure metal, on account of 
 their greater utility, and of the cost of coinage. It is only when 
 there is at the same time a redundancy of coin, a scarcity of 
 bullion, and a great demand for plate or other manufactures, 
 that, when the general coinage is sound, coins will be melted, 
 and the price of bullion be equal to that of coins. Should, 
 however, the coinage be deteriorated, new good coins will be 
 melted as soon as they issue from the mint, and there is no rem- 
 edy but a general recoinage at the public expense. According 
 to the mint laws of England, an ounce of standard gold (contain- 
 ing, like ours, eleven-twelfths pure and one-twelfth alloy) is 
 coined into 3 175. lO^c/. sterling; and, in the present sound 
 state of its gold coinage, the average price of bullion of the 
 same standard may be estimated as 77s.7^. No solid reason can 
 be assigned, why the actual cost of coinage should not be charged 
 by government. In point of fact, the delay of two months, which 
 eiapse between the deposit of bullion in the Mint of the United 
 States, and the delivery of the coins, is nearly equal to a charge 
 of 1 per cent; but does not assist in defraying the expenses of 
 the mint, and has the disadvantage of being the same on both 
 metals. When the annual silver coinage of our mint reaches three 
 millions of dollars, the expense may be estimated at 1 per cent 
 The expense on the same value of gold, no silver being coined, 
 would amount to about one-half per cent. The coinage of six 
 millions, half in silver and half in gold, might be estimated at 1 
 per cent, on the first, and one-fifth per cent, on the gold. It is 
 obvious, indeed, that it is more expensive to coin five silver 
 pieces, worth one dollar each, than one gold piece worth five 
 dollars. A seignorage at the last-mentioned rate might be ad- 
 vantageously substituted to the present mode, and would only 
 require a moderate constant appropriation, that might enable 
 the mint to pay for the bullion at the time, or at least, within 
 ten days of its delivery. 
 
 In France, the mint allows 3091 francs for each kilogramme 
 of standard gold. This is coined into gold coins of the nominal 
 value of 3100 francs, being a deduction or seignorage of less than 
 thfee-tenths per cent. The mint price of standard silver is 197 
 
BANKS AND CURRENCY. f>9 
 
 francs the kilogramme, which is coined into silver coins of the 
 nominal value of 200 francs; the deduction or seignorage 
 amounting to Ij per cent. This is too great, and is, at least in 
 part, the cause of the almost constant premium on gold coins. 
 Whilst the relative value of gold to silver coins is fixed at the 
 rate of 15j to 1 ; that of gold to silver bullion, is at the rate of 
 3.091 : 197, nearly equal to 15.69 : 1. This last ratio cannot 
 essentially differ from the true average market relative price of 
 the two metals, since the mint has been abundantly supplied 
 with both for the last forty-five years. 
 
 But whether we estimate that relative value, by deducing it 
 from the premium on the French gold coins, or by assuming 
 that of gold to silver bullion as purchased by the French mint, 
 or at the apparent market rate in England during.the three or 
 four last years, which would give respectively the ratios of about 
 15.6, 15.7, and 15.25 to 1 ; it is evident that our gold coins are 
 underrated at least 4 per cent. The necessary consequence is 
 the disappearance of gold coins, and their exportation to Eu- 
 rope, whenever the exchange will admit of it. According to 
 that regulation, a ten dollar gold coin, or Eagle, contains 270 
 grains of standard gold ; and as the 20 shillings sterling gold 
 coin, or Sovereign, contains 123 grains of gold of the same 
 standard, about $4.56 in gold coin of the United States, contain 
 a quantity of pure gold equal to that contained in a Sovereign. 
 Allowing 1 per cent, for charges and transportation, our gold 
 coins may commence to be exported to England as soon as the 
 exchange rises to $4.61 per pound sterling; which rate corre- 
 sponds with nearly 3f per cent, above the nominal, and 3 per 
 cent, below the true par, calculating this at the ratio of near 
 15.6 to 1, or $4.75 per pound sterling. We find by the tables 
 of exchange annexed to the report of the Secretary of the Trea- 
 sury, that, with the exception of the year of the embargo, un- 
 less incidentally for a few days, the exchange on London, from 
 1795 to 1821, never rose to $4.62 per pound sterling, or about 
 
 4 per cent, above the nominal par ; or in other words, that dur- 
 ing the whole of that period, the exchange was constantly fav- 
 orable to the United States, having never been higher, with the 
 exception aforesaid, J .,;:; ,J per cent, below the true par. This 
 is the reason why our gold coins, though underrated, were not 
 exported, till the year 1821 ; when the exchange rose from 
 $4.60 to $4.98 per pound sterling ; and our gold coins began to 
 be exported, a premium of one-half per cent, upon them being 
 given, when the premium on the nominal par of exchange was 
 
 5 per cent, corresponding to an exchange of near $4.67 per 
 pound sterling. From that time to the~end of the year 1829, the 
 exchanges have, with few short exceptions, been unfavorable to 
 the United States ; and the exportation has continued, not only 
 during that period, but also during the last nine month?, though 
 
60 BANKS AND CURRENCY. 
 
 the exchange has this year been but little if any above the true 
 par. It is perfectly clear, that, whilst our gold coins are thus 
 underrated, they will be exported, whenever the exchange 
 rises above $4.61 to $4.64 per pound sterling; and that, if rated 
 according to the true or approximate relative value of gold to 
 silver, they would not be exported to England till the exchange 
 had risen to at least $4.80 to $4.83, or more than 1 per cent, 
 above the true par. 
 
 If the intention is to exclude the gold coins altogether, it is 
 quite unnecessary to coin gold. If it is intended that they should 
 make part of the circulation, they must be rated at or near their 
 true relative value. Unless this is done, the circulating metallic 
 never can be sufficiently enlarged to insure to the country a 
 sound currency. The question, whether the two metals should 
 circulate simultaneously, has never been made a matter of doubt 
 when there has been no paper currency. Both are then indis- 
 pensable, gold for large payments and principally for remittances 
 and travellers, and sSver for small daily payments. The Secre- 
 tary of the Treasury correctly states, that, " if there were no 
 paper medium like that of the Bank of the United States, cir- 
 culating freely in all parts of the Union, and everywhere con- 
 vertible into the standard, at a very moderate discount, gold 
 coins would be almost indispensable. Without them, every trav- 
 eller, even from state to state, and often from one county to 
 another, must encumber himself with silver, or be exposed to 
 vexatious embarrassments and impositions." A country which 
 wishes to make gold the only standard of value, is still compelled 
 to admit a silver coinage for small payments. Where silver is 
 the standard, gold would still be found necessary unless supplied 
 by paper. It is true, that so long as five dollar notes exchange- 
 able everywhere for specie do circulate, gold, though rated at 
 its value, will be less in demand, and that many persons will 
 prefer the notes. But even in that case, both may at least be 
 permitted to circulate concurrently, leaving to every individual 
 the option of either. At all events, if thus rated, they would 
 assist in filling the vaults of the banks, and thereby throw a 
 larger quantity of silver in circulation. 
 
 It has been objected to the simultaneous circulation of the two 
 metals, that the fluctuation in their relative price, increases the 
 uncertainty of the standard. This is true, but not to the extent 
 which a first view of the subject may suggest, and, even to that 
 extent, producing so small an effect that it may be altogether 
 neglected. 
 
 There are four contingencies which may cause a fluctuation 
 in the relative price of gold and silver, as either may either rise 
 or fall, as compared to the value of all other commodities. 
 Supposing a country where silver is made the only legal tender, 
 it is clear that in two of those contingencies, namely, if the 
 
BANKS AND CURRENCY. 61 
 
 price of gold should rise, or if that of silver should fall, every 
 payment would have still been made in silver, if both metals 
 had been a legal tender, and the option given to the debtors to 
 pay with either. As the probability of those several contingen- 
 cies is perfectly equal, it follows that, in one-half of the fluctua- 
 tions which may take place in the relative price of the two 
 metals, it is perfectly immaterial, whether one or both are made 
 a legal tender. With respect to the two other contingencies ; if 
 the price of silver should rise, that of gold remaining the same 
 as compared to all other commodities, the debtors in the coun- 
 try where both metals were a legal tender, would pay in gold, 
 and therefore in perfect conformity with the original contract; 
 whilst, in the country where silver alone was a legal tender, 
 they would be obliged to pay in that metal, that is to say, to 
 pay a greater value than according to the original contract : 
 and, on the other hand, if the price of gold should fall, that of 
 silver, as compared to all other commodities, remaining the 
 same, the debtors would, in the country which admitted only 
 silver as a legal tender, be obliged to pay in that metal in con- 
 formity with the contract ; while in the country where both 
 metals were a legal tender, the debtors would pay in gold, that 
 is to say, a sum less than according to the contract. Whatever 
 may be the amount of fluctuation, the stability of the standard 
 of value is not, by adopting only one metal as such, improved 
 to a greater extent than has now been stated. But the fact is, 
 that the fluctuations in the relative price of gold and silver 
 coins are so small in a country where the mint is open to all 
 individuals, and under proper regulations, that, when compared 
 with the variations to which coins issuing from the same mint 
 are liable, they may be altogether disregarded. 
 
 It has been sometimes erroneously supposed, that governments 
 might alter by their own regulations the actual relative value 
 of the two precious metals. This might be done to a considera- 
 ble extent, if these had no intrinsic value ; that is to say, if they 
 could be obtained without capital or labor, or if, whatever the 
 cost of production might be, they were of no utility whatever 
 except for currency. In the first case, governments might at- 
 tach any value they pleased to either metal, in the same manner 
 as is now done with paper money. In the latter case, there 
 being no other demand except that of governments, the price 
 of either metal might be reduced so low, as to compel an aban- 
 donment of all the poorer, but not lower than the cost of pro- 
 duction at the most fertile mines. But the intrinsic value of 
 the precious metals," combined with the general demand for 
 them, determines their market price. Governments are among 
 the principal, but not the only consumers. If the demand for 
 cither gold or silver for the purpose of currency was to cease 
 altogether, it would have an effect on the market price of the 
 
62 BANKS AND CURRENCY. 
 
 metal excluded ; but a government, which uses both as cur- 
 rency, cannot affect their permanent relative value. It may, 
 however, to a certain extent, prevent great fluctuations, by 
 coining at all times for all individuals who may bring in bullion, 
 allowing always the same regular price, and paying for it with- 
 out delay, and without any other charge than the actual cost 
 of coining. 
 
 It has already been stated, that the relative mint price of 
 gold and silver bullion in France (about 15.7:1) is very near 
 the average market price of those two metals. And by giving 
 always the same regular price for each, government has, to a 
 certain degree, prevented any great fall in the price of either. 
 It is only during short and extraordinary periods, that the fluc- 
 tuations have been so great, as that the gold coins did, either 
 fall to the par of silver coins, or rise to a premium of one per 
 cent. During by far the greater part of the period of forty- 
 five years, which has elapsed since that regulation took place, 
 this premium has fluctuated from one-fifth to one-half per cent. ; 
 so that the variations in the relative price of the two metals 
 have, with the few exceptions above mentioned, been less than 
 one-third per cent. And even these would have been less, had 
 not, as has already been stated, the silver coins been overrated 
 by charging about one-half per cent, too much on their coinage. 
 
 It is believed that there is no mint which issues more faithful 
 and perfect coins than that of the United States. The ex- 
 treme variation from standard fineness, as determined by the 
 annual assay, does not exceed one-fifth per cent, on the silver 
 coins ; on the gold coins it is too small to be appreciated. On 
 a large sum as delivered from the mint, the weight, if not pre- 
 cisely accurate, would almost uniformly be found to fail in ex- 
 cess. But trivial deviations in weight on single pieces are una- 
 voidable : they rarely exceed one-third per cent, on the hea- 
 viest silver, and are less than one-sixth per cent, on the gold 
 coins. If, to those unavoidable deviations, be added the loss 
 which coins experience by friction, it will be found that they 
 exceed in value the fluctuations in the relative market price 
 of the gold and silver coins issued under proper mint regula- 
 tions, and therefore that these are a, quantity which may be 
 neglected, and which, in fact, is never taken into consideration 
 at the time of making the contract. 
 
 The importance of preserving a permanent standard of value 
 is the leading principle, which we have tried to enforce in this 
 paper ; and it is for that express purpose that we consider an 
 alteration in the mint regulations, which alone can bring gold 
 into circulation, as absolutely necessary. The rate heretofore 
 adopted had its origin in a mistake, and was not at all intended 
 for the purpose of excluding gold. It did not produce that effect 
 for thirty years, on account of the favorable rate of exchanges. 
 
BANKS AND CURRENCY. 63 
 
 To persist in it, now that experience has shown the evils it pro- 
 duces, and amongst others the undeniable exportation of gold, 
 and of gold coins, at a time when the exchanges may be three 
 per cent, under the true par, instead of being adherence to the 
 original plan, is an obvious deviation from its avowed object. 
 We are sacrificing reality to a pure shadow, when for the sake 
 of an abstraction, and in order to avoid a contingent and doubt- 
 ful fluctuation of one-half per cent, in the standard of value, 
 we promote, by the total exclusion of gold from circulation, that 
 increase of the paper currency, which alone can materially en- 
 danger that standard. 
 
 But even this objection may be removed by raising the mint 
 price of gold only to that rate, which will render it almost im- 
 possible that its legal value should ever be higher than its mar- 
 ket price. We would, therefore, suggest the adoption, in the 
 relative legal value of the gold and silver coins, of a ratio not 
 much above that of 15.6:1, rather than one nearer to the aver- 
 age relative value of the two metals. As the exchange must 
 rise more than one per cent, above the true par derived from 
 the legal relative value which may be adopted, before Ameri- 
 can gold coins can be exported, this would not take place to 
 England, until the exchange had risen to at least $4 81 per 
 pound sterling. On the other hand, that ratio being lower than 
 that of the relative value of gold and silver bullion either in 
 England or in France, there would be no danger of the price 
 of the gold falling below that of tU, silver coins. On the con- 
 trary, it is extremely probable, that the gold coins would gene- 
 rally, as in France, command a small premium, and be used 
 with great convenience as subsidiary to silver, which would re- 
 main as heretofore our standard of value. Either of the ratios 
 of 2700:173 (equal to about 15.6089:1), and of 125:8 (equal to 
 15.625:1) would answer that purpose. According to the first, 
 the weight of the eagle would be in standard gold, 259.5 ; and 
 according to the second 259.2 grains. The last ratio is the most 
 simple, and is capable of a definite expression in decimals. The 
 only advantage of the first, the expression of which, though less 
 simple, is however perfectly definite, consists in making the cor- 
 responding value of the pound sterling almost equal to $4 75, 
 (nearly 4.7505,) which would afford much convenience in the 
 calculations of duties and exchange. The corresponding value 
 of the pound sterling, according to the second ratio, would be 
 near $4 75.6. We think, that at all events, the ratio should 
 not exceed that of 675:43, (nearly equal to 15.7:1,) which would 
 give two hundred and fifty-eight grains for the weight of the 
 eagle in standard gold, and about $4 77.8 for the corresponding 
 value of the pound sterling.* 
 
 * See Note A, 
 
C4 BAI\K8 AND CURRENCY. 
 
 Another consideration may be adduced in favor of the pro- 
 posed reform of our gold coins. It seems to be well ascertained 
 that the United States contain one of the most extensive deposits 
 of gold that has yet been discovered. It extends from the central 
 parts of Virginia, in a south-west direction, to the state of Ala- 
 bama. It is said to have yielded the value of near half a mil- 
 lion of dollars this year, and it is not improbable that it will ere 
 long afford an annual produce of several millions. It appears 
 but just to afford, to those employed in collecting that natural 
 product, a certain and the highest home market of which it is 
 susceptible. This cannot be the case, so long as gold is only a 
 merchandise for exportation, and will be effected by making it 
 a current coin, and reducing the charge of coinage in the man- 
 ner which has been before suggested. In every point of view, 
 we consider this last measure, that of enabling the mint to pay 
 immediately for the bullion, and of substituting, to the delay of 
 two months, a small duty on the coinage not higher than its cost, 
 as of no inconsiderable importance. 
 
 Great Britain, in adopting gold as the sole standard of value, 
 has found it, however, absolutely necessary to admit silver coins 
 for payments not exceeding forty shillings. This limitation 
 would, it seems, have been sufficient for the object intended. 
 But, whether in order to prevent the exportation, or only the 
 better to assert the adherence to an abstract principle, the new 
 silver coinage has been overrated about nine per cent, by coin- 
 ing the troy pound weight of standard silver into sixty-six in- 
 stead of sixty-two shillings. This debased coin is attended with 
 the same inconvenience as a paper currency issued by govern- 
 ment. There is, on account of the profit, a temptation to issue 
 too much ; and no sure means can be found of ascertaining the 
 amount wanted for effecting the payments to which that por- 
 tion of the currency is applicable. It is worthy of remark, that 
 England, from a scrupulous adherence to a single standard, should 
 have actually established two distinct standards of value, one 
 for wholesale and. the other for retail transactions. It is obvi- 
 ous, that since a debased coin can be neither profitably exported 
 nor applied to other purposes, any considerable excess, beyond 
 what is actually wanted for effecting small payments, must cause 
 a depreciation. Should government be ever so moderate in its 
 issues, the facility with which that coin may be, not counter- 
 feited, but illegally imitated and put into circulation, must ulti- 
 mately defeat the object intended. In the meanwhile, should 
 the excess be such, that the retailers of every description, who 
 are obliged to take in payment silver inapplicable to wholesale 
 purchases, could not dispose of the surplus, they must, to indem- 
 nify themselves, add something to their prices. We believe this 
 to be already the fact, and that this, like every other depreci- 
 
BANKS AND CURRENCY. 65 
 
 ated currency, operates as a tax, which affects principally all 
 those who are compelled to purchase every thing by retail. 
 
 These two measures, suggested for the purpose of enlarging 
 the circulating metallic currency, recommend themselves by 
 their simplicity, and are founded on the beneficial experience 
 of almost every other country. In Europe, England alone has 
 resorted to a single standard, and that nominally, since her silver 
 circulation amounts to eight millions sterling, or to more than 
 one- third of her gold, and almost to one-third of her paper cur- 
 rency. We believe that small notes, or tokens, circulate no 
 longer anywhere but in Russia, Sweden, and Scotland. The 
 situation of two of those countries is in nowise parallel to that 
 of the United States. Twenty shilling notes continue to circu- 
 late in Scotland ; but the solidity of the banking system of that 
 country offers an anomaly which has not been satisfactorily ex- 
 plained. The numerous failures of country banks in England 
 have been sometimes ascribed to their not being incorporated 
 companies ; which is disproved by the solidity of the numerous 
 Scotch banks of the same description, and by the repeated fail- 
 ures of our own chartered banks ; and sometimes to their not 
 being permitted by law to consist of a sufficient number of part- 
 ners. But of the twenty-nine banks of Scotland which are not 
 chartered, seventeen are voluntary associations, consisting of 
 from three to nineteen partners, the credit of which is as good 
 as that of the other twelve unincorporated, and of the three 
 chartered banks of that country. We believe, that independent 
 of the peculiarities which distinguish the Scotch banking sys- 
 tem, its superior stability must be principally ascribed to the 
 persevering but cautious enterprise, to the great frugality, and 
 generally to the habits of that nation.* 
 
 It is difficult to devise the more direct means by which the 
 over-issues of banks may be checked. Several of the states have 
 as yet taken no measures to that effect. Many appear to have 
 tried to apply rather penal than preventive remedies. The laws 
 by which it has been attempted to limit either the loans or the 
 issues made by the banks, have generally been intended to pre- 
 vent what never can take place. Amongst more than three 
 hundred banks, either now existing or which have failed, and 
 of which we have returns, we have not found a single one, the 
 loans of which amounted, so long as specie payments were in 
 force, to three times, or the issues to twice the amount of their 
 capital. It is clear, that provisions applicable to such improba- 
 ble contingencies are purely nominal. The statements we have 
 given show that the average amount of notes issued by the 
 state banks does not, taken together, exceed forty-four per cent* 
 nor the aggregate amount of their notes and deposits, eighty-one 
 
 * See Note B. 
 I 
 
66 BANKS AND CURRENCY. 
 
 per cent, of their capital. The loans made by those banks, of 
 which we have returns in that respect, amount to 129,815,441, 
 and their aggregate capital to 89,779,557 dollars. Those facts 
 afford sufficient data to form an opinion of the necessary pro- 
 visions in that respect. The restrictions can only be made in 
 reference to the capital actually paid in, and to apply to the 
 amount of loans and issues, which, with the exception of de- 
 posits, are the only items that can be always limited by the 
 banks. And the deposits, independent of being voluntary, coul " 
 not without much inconvenience, both to the banks and thei 
 customers, be restricted to a fixed amount. We think that no 
 bank should be permitted to extend its loans, including stocks 
 of every description, and every species of debt in whatever 
 manner secured, beyond twice the amount of its capital. We 
 find provisions to that effect in the laws of Massachusetts and 
 Louisiana. That proportion is forty per cent, greater than that 
 of the banks above mentioned, and greater, as we think, than 
 is consistent with the safety of almost any bank. The aggre- 
 gate of the loans made and of the stocks owned by the former 
 Bank of the United States, never amounted to seventy per 
 cent., nor that of the existing bank to fifty per cent, beyond 
 the amount of their respective capitals. This restriction alone 
 necessarily checks the aggregate amount of the issues and de- 
 posits of a bank ; which, in that case, never can together ex- 
 ceed the amount of its capital, beyond the specie in its vaults, 
 and the nominal value of its real estate. But we believe that 
 a positive restriction on the issue of notes, so that they never 
 should exceed two-thirds of the capital, would be highly bene- 
 ficial. The only objection is, with respect to country banks, 
 which have not the same proportionate amount of deposits as 
 the city banks, and may on that account claim a greater latitude 
 with respect to notes. But it will be perceived by the following 
 statement, which includes thirty banks of the state of New- York 
 that have more than three-fourths of the whole banking capital 
 of the state, and all the chartered banks of Pennsylvania and 
 Massachusetts, that, taking into consideration both notes and de- 
 posits, the proportion of these to the capital is far greater in the 
 country than in the city banks. The relative proportions are, 
 in New- York and in Pennsylvania as seven to four, and in Mas- 
 sachusetts as three to two. A reduction in the amount of notes 
 to two-thirds of that of the capital would not affect this state, 
 and would still leave in Pennsylvania and New- York, the pro- 
 portion of notes and deposits to capital, much greater in the 
 country, than in the city banks. The circulation of these is, in 
 both states, less than their capital. The restriction proposed 
 would still leave the circulation of the country banks, in Penn- 
 sylvania, of 4,235,000 on a capital of 3,506,000 dollars, and in 
 New- York of 6,737,000 on a capital of 4,926,000 dollars. 
 
 i 
 
Massachusetts, 
 
 Specie, - - 
 
 Capital, - - 
 
 Notes, - - 
 
 Deposits, - - 
 
 Circulation, - 
 
 Pennsylvania, 
 
 Specie, - - 
 
 Capital, - - 
 
 Notes, - - 
 
 Deposits, - - 
 
 Circulation, - 
 
 New-York, 
 
 Specie, - - 
 
 Capital, - - 
 
 Notes, - - 
 
 Deposits, - - 
 
 BANKS AND CURRENCY. 
 
 City. 
 
 $ 747,684 - - - 
 13,450,000 - - - 
 
 67 
 
 Country. 
 
 239,526 
 5,702,400 
 
 2,357,678 .... 2,160,000 
 2,202,092 .... 658,190 
 
 4,559,770 .--- ~2,818,190 
 
 $1,639,134 .... $ 775,537 
 
 9,903,930 .... 3,506,403 
 
 3,648,719 .... 3,659,650 
 
 5,046,183 .... 1,795,266 
 
 ~8,"694,902 .... 5,454,916 
 
 $1,169,581 - - 
 10,711,200 - - 
 
 3,394,257 - - 
 6,662,174 - - 
 
 - - $ 390,710 
 . - 4,926,153 
 
 - - 4,567,023 
 
 - - 3,692,326 
 
 Circulation, - 10,056,431 - - - - 8,259,349 
 
 We do not wish, by the preceding observations, to be under- 
 stood as objecting generally to the extension of the banking 
 system to the country, but only to the indiscriminate establish- 
 ment of banks, without regard to the actual wants and means 
 of the districts which may apply for that purpose. There is a 
 general spirit of enterprise in the United States, to which they 
 are greatly indebted for their rapid growth ; and it is difficult 
 to ascertain, in all cases, to what extent it should be encouraged, 
 and when it ought to be checked. The remarks apply particu- 
 larly to the newly settled parts of the country, which present a 
 state of things, different from that found in any other part of the 
 civilized world, and to which, therefore, even the most generally 
 admitted principles of political economy will not always apply. 
 
 Amongst the first emigrants, there are but few possessed of 
 much capital ; and these, generally employing it in the purchase 
 of land, are soon left without any active resources. The great 
 mass bring nothing with them, but their industry, and a small 
 stock of cattle and horses. A considerable portion of the annual 
 labor is employed in clearing, inclosing, and preparing the land 
 for cultivation. Those difficulties, and all the privations incident 
 to their new situation, are encountered with unparalleled spirit 
 and perseverance. Within a very short time, our numerous new 
 settlements, which in a few years have extended from the Mo- 
 hawk to the great western lakes, and from the Alleghany to the 
 
68 BANKS AND CURRENCY. 
 
 Mississippi and beyond it, afford the spectacle of a large popu- 
 lation, with the knowledge, the intelligence and the habits which 
 belong to civilized life, amply supplied with the means of sub- 
 sistence, but without any other active capital, but agricultural 
 products, for which, in many instances, they have no market. 
 It is in this last respect, that their situation essentially differs 
 from that of any other country as far advanced in civilization. 
 We might even add, that there is, in several ancient settlements 
 of the United States, a less amount of active capital, than in the 
 interior parts of many European countries. The national indus- 
 try, out of the seaports, has, at least till very lately, been exclu- 
 sively applied to agriculture ; and circulating capital will rarely 
 be created, out of commercial cities, without the assistance of 
 manufactures. 
 
 With the greatest abundance of provisions, it is impossible 
 for a new country to purchase what it does not produce, unless 
 it has a market for its own products. Specie is a foreign product, 
 and, though one of the most necessary, is not yet always that 
 which is most imperatively required. We may aver from our 
 own knowledge, that the western counties of Pennsylvania had 
 not, during more than twenty years after their first settlement, 
 the specie necessary for their own internal trade and usual 
 transactions. The want of communications, and the great bulk 
 of their usual products, reduced their exports to a most incon- 
 siderable amount. The two indispensable articles of iron and 
 salt, and a few others almost equally necessary, consumed all 
 their resources. The principle, almost universally true, that 
 each country will be naturally supplied with the precious metals 
 according to its wants, did not apply to their situation. House- 
 hold manufactures supplied the inhabitants with their ordinary 
 clothing, and the internal trade and exchanges were almost ex- 
 clusively carried on by barter. This effectually checked any 
 advance even in the most necessary manufactures. Every spe- 
 cies of business required the utmost caution, as any failure in 
 the performance of engagements in the way of barter, became, 
 under the general law of the land, an obligation to pay money, 
 and might involve the party in complete ruin. Under those 
 circumstances, even a paper currency, kept within proper 
 bounds, might have proved useful. We know the great diffi- 
 culties which were encountered by those who first attempted to 
 establish the most necessary manufactures, and that they would 
 have been essentially relieved, and some of them saved from 
 ruin, by moderate bank loans. Yet there were instances where 
 those difficulties were overcome, and the most successful manu- 
 factures of iron and glass were established and prospered prior 
 to the establishment of any bank ; but the general progress of 
 the country was extremely slow, and might have been hastened 
 by such institutions soberly administered. It is obvious that in 
 
BANKS AND CURRENCY. 69 
 
 this and other similar cases, where there is an actual want of 
 capital, this should, in order to insure success, be obtained from 
 the more wealthy parts of the country, either by subscriptions 
 to local banks, or by the establishment of branches of the city 
 banks. 
 
 Some of the first settlements in other parts of the country, 
 were, for a length of time, in a similar situation. The progress 
 of others, under more favorable circumstances, has been much 
 more rapjd. The western parts of the state of New- York have 
 always enjoyed a nearer and more accessible market. The ac- 
 quisition of Louisiana, the invention of steam-boats, and the im- 
 proved communications by land and water, have entirely changed 
 the state of things west of the Alleghany mountains. Still, and 
 notwithstanding the unparalleled increase of population, and the 
 rapid progress in every respect of the new states or settlements, 
 their wealth does not, in any degree, correspond, either with 
 that population, or with their advances in agriculture. All new 
 colonies, either from Europe to America, or from the ancient 
 settlements to the more interior part of America, have, under 
 different modifications, been ever placed in a similar situation. 
 To this must be ascribed the issues of paper money by the seve- 
 ral states, whilst under the colonial government. This currency, 
 in many instances useful, was, as usual, often carried to excess, 
 and depreciated accordingly. The same causes continue to pro- 
 duce similar effects. The eagerness for country banks is natural, 
 but often mistakes its object. They may be safely established 
 in flourishing towns or villages, either commercial or manufac- 
 turing, provided their issues are restrained within proper bounds. 
 It is to the abuse, and not to the use, that we object. The profits 
 of agriculture are so moderate, at least in the middle states, and 
 the returns so slow, that even loans on mortgages are rarely use- 
 ful. But when made by banks, on notes at sixty days, without 
 any other substantial security than real estate, they never can 
 be relied on as an immediate resource, and, when payment is 
 urged, they almost always prove ruinous to the borrowers, and 
 are often attended with heavy losses to the banks. The example 
 of Pennsylvania has clearly shown, that the calamities inflicted 
 by the failures of country banks, established in unfit places, or 
 for want of experience, improperly administered, have been still 
 more fatal to the inhabitants of the districts in which they were 
 situated, than to the state at large. It is well known that the 
 same observation applies, with equal, if not greater force, to 
 other states than Pennsylvania. 
 
 The revised statutes of the state of New- York, besides several 
 salutary provisions for the bona fide payment of the stock sub- 
 scribed, to prevent any dividend greater than the actual profits, 
 and generally for the prevention of frauds, contain one of pri- 
 mary importance, adopted also in Maryland and some other 
 
70 BAXKS AND CURRENCY. 
 
 states, by which the charter is forfeited, whenever the bank re- 
 fuses or declines to pay on demand, its notes or deposits in specie. 
 But the restriction on loans and discounts, which limits their 
 amount to three times that of the capital, is purely nominal ; and 
 the responsibility imposed on stockholders, though already adopt- 
 ed in some other states, has been considered as objectionable. As 
 a substitute, and with a laudable intent to protect the community 
 against partial failures, a " safety fund" has since been establish- 
 ed by law, consisting of a tax of one-half per cent, on the capital 
 of every bank, and which is applicable to the payment of the 
 notes of any that may fail. This must have a tendency to en- 
 courage excessive issues of paper, which could not be sustained 
 if resting only on the credit of the bank by which they are made. 
 But, unacquainted as we are with the reasons alleged in favor 
 of that measure, it appears to us unjust; 1st, by making insti- 
 tutions properly managed, responsible for the conduct of others 
 at a great distance, and over which they have no control ; 2d, 
 because, on account of the disproportion between the aggregate 
 of the circulation and deposits of the city and country banks re- 
 spectively, the first are made to pay, in the safety fund, about 
 twice as much in proportion as the country banks. This will 
 appear evident by referring to the last statement, and does not 
 accord with the principles of a government founded on the equal 
 rights of all.* 
 
 One of the most efficient securities afforded by the state laws 
 against improvident issues of notes, is to be found in that of Mas- 
 sachusetts, by which banks are obliged to pay interest at the 
 rate of 24 per cent, a year, on all notes or deposits which they 
 may neglect or refuse to pay in specie on demand. A similar 
 provision, but at the rate of 12 per cent., has been enacted by 
 the state of Louisiana, and is also inserted in the charter of the 
 Bank of the United States. Another great guarantee against 
 improper management, is the obligation to make and publish 
 annual statements of the situation of the banks. The mystery 
 with which it was formerly thought necessary to conceal the 
 operations of those institutions, has been one of the most prolific 
 causes of erroneous opinions on that subject, and of mismanage- 
 ment on their part. It is highly desirable that this measure 
 should be adopted in the states where those returns are not yet 
 made obligatory. The annual statements of the Bank of the 
 United States, and of the banks of all the New-England states, 
 of Pennsylvania, Virginia, Georgia, and others, to Congress, 
 and to the states respectively, have in no instance injured any 
 institution that was properly administered. Publicity is, in most 
 cases, one of the best checks which can be devised : it inspires 
 
 * See Note C. 
 
BANKS AND CURRENCY. 71 
 
 confidence, and strengthens credit ; whilst concealment begets 
 distrust, and often engenders unjust suspicions. 
 
 There is still another measure, better calculated perhaps 
 than any other, to give complete security against the danger of 
 insolvency. It has been already observed, that the original 
 capital of the Bank of England, amounting to more than four- 
 teen millions sterling, has been loaned to government, and, re- 
 maining in its hands, affords the best security to the holders of 
 notes and to depositors. The propriety of extending a similar 
 provision to country banks has been strongly urged in England ; 
 and the same measure, with respect to our banks, generally, 
 has also been suggested. It is quite practicable, and seems. un- 
 objectionable in a country possessed of so large a capital as Eng- 
 land, and where the large amount of public debt would enable 
 the banks to comply with the condition without any difficulty. 
 But this might not be practicable here, where the banking 
 capital is much larger than the amount of all other public 
 stocks, and we apprehend that mortgages on real estate must, 
 if such provision becomes general, be resorted to for want of 
 such stocks. We must also refer to our former observations 
 respecting the nature of our banking capital. Should this be 
 permanently vested in mortgages or stocks, the accommodations 
 which the banks afford to individuals might be too much cur- 
 tailed. If these objections can be removed, the plan proposed 
 would give to the banking system of the United States a so- 
 lidity, and inspire a confidence, which it cannot otherwise pos- 
 sess. 
 
 The constitutional powers of Congress on the subject, are the 
 next and principal object of inquiry. 
 
 We have already adverted to the provisions of the Constitu- 
 tion, which declare, that no state shall either coin money, emit 
 bills of credit, make any thing but gold and silver coins a ten- 
 der in payment of debts, or pass any law impairing the obliga- 
 tion of contracts, and which vest in Congress the exclusive power 
 to coin money, and to regulate the value thereof, and of foreign 
 coin. It was obviously the object of the Constitution to consoli- 
 date the United States into one nation, so far as regarded all 
 their relations with foreign countries, and that the internal 
 powers of the general government should be applied only to ob- 
 jects necessary for that purpose, or to those few which were 
 deemed essential to the prosperity of the country, and to the 
 general convenience of the people of the several states. Amongst 
 the objects thus selected, were the power to regulate commerce 
 among the several states, and the control over the monetary 
 system of the country. 
 
72 BANKS AND CURRENCY. 
 
 This last-mentioned power is, and has ever been, one of pri- 
 mary importance. It is for want of such general power, that 
 Germany has always been inundated with coins often debased, 
 and varying from state to state in standard and denomination : 
 the same defect was found in the former United Provinces of 
 the Netherlands: and the banks of deposit of Hamburg and 
 Amsterdam, were originally established for the purpose of cor- 
 recting that evil. Even under the articles of confederation, 
 Congress had already the sole and exclusive right and power of 
 regulating the alloy and value of coins struck by their own au- 
 thority, or by that of the respective states. It was on a most 
 deliberate view of the subject, that the same powers were con- 
 firmed and enlarged by the Constitution, and the individual 
 states excluded from any participation, which might interfere 
 with the controlling power of the general government. With 
 the exception of those which are connected with the foreign re- 
 lations of the United States, either in war or in peace, there are 
 no powers more expressly and exclusively vested in Congress, of 
 a less disputable nature, or of greater general utility, than those 
 on the subject of currency. Arbitrary governments have, at 
 various times, in order to defraud their creditors, debased the 
 coin, whilst they preserved its denomination, and thus subverted 
 the standard of value by which the payment of public and pri- 
 vate debts, and the performance of contracts, ought to have 
 been regulated. This flagrant mode of violating public faith 
 has been long proscribed by public opinion. Governments have, 
 in modern times, substituted for the same purpose issues of paper 
 money, gradually increasing in amount, and decreasing in value. 
 It was to guard against those evils, that the provisions in the 
 Constitution on that subject were intended : and it is the duty, 
 not less than the right, of the United States, to carry them into 
 effect. 
 
 The first paragraph of the eighth section of the first article, 
 provides that Congress shall have power " to lay and collect 
 taxes, duties, imposts, and excises, to pay the debts and provide 
 for the common defence and general welfare of the United 
 States; but ail duties, imposts, and excises, shall be uniform 
 throughout the United States." 
 
 It has sometimes been vaguely asserted, though, as we be- 
 lieve, never seriously contended, that the words " to provide for 
 the common defence and general welfare," were intended, and 
 might be construed, as a distinct and specific power given to 
 Congress, or, in other words, that that body was thereby in- 
 vested with a sweeping power, to embrace within its jurisdic- 
 tion any object whatever, which it might deem conducive to 
 the general welfare of the United States. This doctrine is ob- 
 viously untenable, subversive of every barrier in the Constitu- 
 tion which guards the rights of the states or of the people, ex- 
 
BANKS AND CURRENCY. 73 
 
 pressly contradicted by the tenth amendment, which provides, 
 that the powers not delegated to the United States by the Con- 
 stitution, nor prohibited by it to the states, are reserved to the 
 states respectively, or to the people ; and tantamount to an as- 
 sertion, that there is no Constitution, and that Congress is om- 
 nipotent. Mr. Jefferson stigmatizes this construction as ' a 
 grammatical quibble, which has countenanced the general gov- 
 ernment in a claim of universal power. For, (he adds,) in the 
 phrase, to lay taxes, to pay the debts and provide for the general 
 welfare, it is a mere question of syntax, whether the two last 
 infinitives are governed by the first, or are distinct and co-ordi- 
 nate powers ; a question unequivocally decided by the exact 
 definition of powers, immediately following." 
 
 The words " to provide for the common defence and general 
 welfare of the United States," are as obligatory as any other 
 part of the Constitution ; they cannot be expunged, and must 
 be so construed as to be effective. Mr. Jefferson did not deny 
 this, which is indeed undeniable ; and he only contended, that 
 the words did not convey a distinct power, but were governed 
 by the preceding infinitive ; that is to say, that this clause in the 
 Constitution, instead of giving to Congress the three distinct pow- 
 ers, 1st, to lay taxes, &c., 2dly to pay the debts, 3dly to provide 
 for the common defence and general welfare of the United 
 States, gave only that " to lay and collect taxes, duties, imposts, 
 and excises, in order to pay the debts and provide for the com- 
 mon defence and general welfare of the United States." He 
 states the question as one of syntax, susceptible of only two con- 
 structions; one which w r ould give, as a distinct, a sweeping power 
 inconsistent with the spirit and other express provisions of the 
 Constitution, and which he accordingly rejects ; the other, which 
 he adopts, and which admits, but confines the application of the 
 words " to provide for the general welfare," to the only power 
 given by that clause, viz. that of laying taxes, duties, &c. 
 
 This appears to have been the construction universally given 
 to that clause of the Constitution, by its framers and contempo- 
 raneous expounders. Mr. Hamilton, though widely differing in 
 another respect from Mr. Jefferson in his construction of this 
 clause, agrees with him in limiting the application of the word* 
 " to provide for the general welfare," to the express power given 
 by the first sentence of the clause. In his report on manufac- 
 tures, he contends for the power of Congress to allow bounties 
 for their encouragement, and, after having stated the three 
 qualifications of the power to lay taxes, viz. 1st, that duties, im- 
 posts, and excises, should be uniform throughout the United 
 States ; 2nd, that no direct tax should be lard unless in propor- 
 tion to the census ; 3d, that no duty should be laid on exports ; 
 he argues on the constitutional question in the following word* : 
 
74 BANKS AND CURRENCY. 
 
 " These three qualifications excepted, the power to raise money is plenary and 
 indefinite ; and the objects to which it may be appropriated, are no less compre- 
 hensive than the payment of the public debts and the providing for the common 
 defence and general welfare. The terms ' general welfare,' were doubtless in- 
 tended to signify more than was expressed or imported in those which preceded ; 
 otherwise numerous exigencies, incident to the affairs of a nation, would have 
 been left without a provision. The phrase is as comprehensive as any that could 
 have been used ; because it was not fit that the constitutional authority of the 
 Union to appropriate its revenues, should have been restricted within narrower 
 limits than the ' general welfare ;' and because this necessarily embraces a vast 
 variety of particulars, which are susceptible neither of specification nor of defi- 
 nition." 
 
 " It is therefore of necessity left to the discretion of the national legislature, 
 to pronounce upon the objects which concern the general welfare, and for which, 
 under that description, an appropriation of money is requisite and proper. And 
 there seems to be no room for a doubt, that whatever concerns the general inter- 
 ests of learning, of agriculture, of manufactures, and of commerce, are within 
 the sphere of the national councils, as far as regards an application of money. 
 
 " The only qualification of the generality of the phrase in question, which seems 
 to be admissible, is this ; that the object to which an appropriation of money is 
 to be made, be general and not local ; its operation extending, in fact, or by pos- 
 sibility, throughout the Union, and not being confined to a particular spot." 
 
 " No objection ought to arise to this construction, from the supposition that it 
 would imply a power to do whatever else should appear to Congress conducive to 
 the general welfare. A power to appropriate money with this latitude, which is 
 granted too, in express terms, would not carry a power to any other thing not 
 authorized in the Constitution, either expressly or by fair implication." 
 
 Mr. Hamilton insisted that the power to lay and collect taxes 
 and duties, implied that of appropriating the money thus raised^ 
 to any object which Congress might deem conducive to " the 
 general welfare." But he confines throughout the application 
 of those words to the power given, as he understood it, by the 
 first sentence of the clause. Mr. Jefferson, who agreed with 
 him in that respect, denied altogether that the power to lay 
 taxes implied that of applying the money thus raised to objects 
 conducive to the general welfare. It cannot be objected to this 
 construction, which is the most literal, that the words " for the 
 general welfare" are thereby rendered of no effect. For there 
 are several cases, in which the laying a tax or duty does alone 
 effect the object in view, without the aid of an appropriation 
 or of any other distinct act of the legislature. On that point, 
 however, and on that alone, they differed. But it is foreign to 
 the object now under consideration, and we do not mean to dis- 
 cuss it. All that is necessary for us is, that, as admitted by both, 
 the power to lay duties and taxes, is vested in Congress, and may 
 be exercised, to provide (or, in order to provide) for the general 
 welfare of the United States, without any other limitation than 
 the three qualifications specified by the Constitution, and above 
 stated. 
 
 It has indeed been lately contended by some distinguished 
 citizens, that the words "general welfare," referred only to the 
 powers expressly vested in Congress by the Constitution : or, in 
 other words, that the power to lay duties and taxes could not be 
 exercised but for the purpose of carrying into effect some of 
 
BANKS AND CURRENCY. 75 
 
 those specific powers. It seems to us, that this, if intended, 
 would have been distinctly expressed, instead of using the words 
 " general welfare." And although it is undeniable, that a con- 
 structive power cannot be legitimately claimed, unless neces- 
 sary and proper for carrying into execution, or fairly implied 
 in, a power expressly delegated ; we do not perceive why it 
 should be necessary, in order to justify the exercise of a power 
 expressly given, that it should be exercised in reference to an- 
 other similar power. But we do not mean to discuss this ques- 
 tion, which is also foreign to our object. Allowing, for the sake 
 of argument, the validity of the objection, it does not apply to 
 cases where the object, in reference to which the duty or tax is 
 laid, is clearly embraced within the powers of the general gov- 
 ernment. Although, because the power to protect manufactures 
 is not expressly vested in Congress, that to lay taxes in order to 
 effect that object should be denied, the power of laying a tax 
 or duty, for the purpose of carrying into effect an express pro- 
 vision of the Constitution, would still be undeniable. 
 
 Congress has the power to lay stamp duties on notes, on bank 
 notes, and on any description of bank notes. That power has 
 already been exercised ; and the duties may be laid to such an 
 amount, and in such a manner, as may be necessary to effect the 
 object intended. This object is not merely to provide generally 
 for the general welfare, but to carry into effect, in conformity 
 with the last paragraph of the eighth section of the first article, 
 those several and express provisions of the Constitution, which 
 vest in Congress exclusively the control over the monetary sys- 
 tem of the United States, and more particularly those which 
 imply the necessity of a uniform currency. The exercise of the 
 power for that object is free of any constitutional objection, pro- 
 vided the duties thus laid shall be uniform, and applied to the 
 Bank of the United States as well as to the state banks. The act 
 of laying and collecting the duties, which is expressly granted, 
 is alone sufficient to effect the object. As no appropriation of 
 money is wanted for that purpose, the exercise of power which 
 is required, is purely that of laying duties; and it is not liable 
 to the objection, that to assert that the authority to lay taxes 
 implies that of appropriating the proceeds, is a forced construc- 
 tion. It is equally free of any objection derived from any pre- 
 sumed meaning of the words " general welfare," since the power 
 to lay duties will, in this instance, be exercised, in order to carry 
 into effect several express provisions of the Constitution, having 
 the same object in view. Congress may, if it deems it proper, 
 lay a stamp duty on small notes, which will put an end to their 
 circulation. It may lay such a duty on all bank notes, as would 
 convert all the banks into banks of discount and deposit only, 
 annihilate the paper currency, and render a Bank of the United 
 States unnecessary in reference to that object. But if this last 
 
76 BANKS AND CURRENCY. 
 
 measure should be deemed pernicious, or prove impracticable, 
 Congress must resort to other and milder means of regulating 
 the currency of the country. The Bank of the United States, 
 as has already been shown, was established for that express pur- 
 pose. 
 
 An act incorporating a bank, is not an act either to raise or 
 appropriate money. The power to establish the bank cannot, 
 in any way, be founded on that clause of the Constitution which 
 has reference to the general welfare of the United States. It is 
 sanctioned exclusively by that clause which gives to Congress 
 power to make all laws, which shall be necessary and proper 
 for carrying into execution any of the powers vested in the 
 government of the United States. And the first object of in- 
 quiry is the meaning of the words " necessary and proper" in 
 that clause. 
 
 We are aware, that it has at times been suggested that the 
 word " necessary." in its strict sense, means " that without 
 which the specific power cannot be carried into effect," and 
 ought to be so construed. If appeal be made to verbal criticism, 
 it may be answered, that if such was the meaning of the word 
 " necessary," in that sentence, the word " proper" would not 
 have been added ; since that which is necessary in that strict 
 sense is of necessity proper. This last expression must, there- 
 fore, be taken in connexion with the first ; and since it was con- 
 templated, that what was called necessary might be proper or 
 improper, the words " laws necessary and proper" do not ap- 
 pear to have been intended in that most limited sense, which 
 implies absolute impossibility of effecting the object without the 
 law, but to mean such laws as are fairly intended, and highly 
 useful and important for that purpose. We believe this to be the 
 fair, and to have been the uniform construction of the Constitu- 
 tion, and that indeed without which it could not have been car- 
 ried into effect. In order to prove that this has ever been deem- 
 ed the natural and clear construction, we will not resort to the 
 establishment of light-houses, or to other numerous precedents, 
 the authority of which may be disputed. We will appeal to the 
 most general and important law of the United States, such as it 
 was enacted from the first organization of the government un- 
 der the Constitution, and to a provision in it, which, under its 
 various other modifications, has uninterruptedly, and without 
 any constitutional objection, remained in force to this day. 
 
 The laws to lay and collect duties on imports require, and 
 have always required, a variety of oaths, and particularly that 
 of the importers or consignees, with respect to the correctness 
 of the invoices of goods imported, both as to quantity and as 
 to cost or value. Yet this provision, however useful and im- 
 portant, is not so absolutely necessary, in that strict sense of 
 the word, as that the laws could not possibly be carried into ef- 
 
BANKS AND CURRENCY. 77 
 
 feet without it. There are countries, France for example, where 
 those duties are efficiently collected without the assistance of 
 similar oaths. This may be done at least as effectually by an ap- 
 praisement of the merchandise, as by resorting to the oa.ths of 
 the parties. In point of fact, there has always been a discretion- 
 ary power to appraise, which has lately been enlarged. Since it 
 is on that provision, and not on the oath, that the ultimate re- 
 liance for the faithful collection of the duties is placed, those 
 duties might be collected without the assistance of oaths, by sub- 
 stituting in every instance an appraisement or valuation. Oaths 
 are not, therefore, necessary for the collection of duties, in that 
 strict sense which is contended for : they are not that, without 
 which the duties could not be collected. The observation indeed 
 applies to various other provisions of the revenue laws. Any 
 one who will $ve them a perusal, will find several implying 
 powers not specially vested in Congress, the necessity of which 
 was not absolute, and without which the object of the law might 
 still have been effected. The oaths and various other provisions 
 have been resorted to, as means only highly useful, important, 
 and proper, but not as being of absolute necessity for carrying 
 the law into effect* 
 
 Whenever it becomes the duty of Congress to carry into ef- 
 fect any of the powers expressly defined by the Constitution, it 
 will generally be found that there are several means to effect the 
 object. In that case, and whenever there is an option, each of 
 the means proposed ought not to be successively objected to, as 
 not being strictly necessary because other means might be re- 
 sorted to, since this mode of arguing would defeat the object 
 intended, and prevent the passage of any law for carrying into 
 effect the power, which it was the duty of Congress to execute. 
 If every provision of a revenue law was successively opposed 
 on that ground, no efficient revenue law could be passed. In the 
 present case, it is proposed to resort, either to a stamp duty or 
 to a Bank of the United States, in order to regulate the cur- 
 rency. Unless some other equally efficient mode can be sug- 
 gested, this important object will be defeated, if both means are 
 successively rejected, as not strictly necessary. But, on the 
 other hand, the means proposed for carrying into effect any spe- 
 cial or expressed power vested in Congress, should be highly 
 useful and important, having clearly and bona fide that object in 
 view which is the avowed purpose, and not be intended, under 
 color of executing a certain special power, for the purpose of 
 effecting another object. 
 
 It was on this ground, that the former Bank of the United 
 
 * The opinion of the Supreme Court, in the cose of M'Culloch vs. State of Mary- 
 land, had not been seen by the writer of this essay, when it was committed to the 
 press : and the important inference, drawn from the use of the words " absolutely 
 necessary," in another clause of the Constitution, had escaped his notice. 
 
78 BANKS AND CURRENCY. 
 
 States was at first opposed. That Bank had not been proposed 
 for the express purpose of regulating the currency, but as inci- 
 .dent to the powers of regulating commerce, of collecting the 
 revenue, of the safe keeping of public moneys, and generally, 
 of carrying on the operations of the Treasury. There, had been 
 at that time but three banks established in the United States ; 
 their operations were confined within a very narrow sphere; 
 there had been no experience in the United States of the utility 
 of a bank in assisting the operations of government, but that 
 which, during a short time, had been afforded by the Bank of 
 North America, incorporated, in the first instance, by Congress, 
 under the articles of confederation. The Bank of the United 
 States was considered by its opponents, as not being intended 
 for the purpose alleged, but as having for its object the consoli- 
 dation of a moneyed aristocracy, and to further the views at 
 that time ascribed to a certain party and to its presumed leader. 
 And the fears then excited respecting that object, and the sup- 
 posed influence of the Bank in promoting it, though long since 
 dissipated, have left recollections and impressions which may 
 still have some effect on public opinion in relation to the consti- 
 tutional question. 
 
 Experience, however, has since confirmed the great utility and 
 importance of a Bank of the United States, in its connexion with 
 the Treasury. The first great advantage derived from it, consists 
 in the safe keeping of the public moneys, securing, in the first 
 instance, the immediate payment of those received by the prin- 
 cipal collectors, and affording a constant check on all their trans- 
 actions ; and afterwards rendering a defalcation in the moneys 
 once paid, and whilst nominally in the Treasury, absolutely im- 
 possible. The next and not less important benefit is to be found 
 in the perfect facility with which all the public payments are 
 made by checks, or Treasury drafts, payable at any place where 
 the Bank has an office ; all those who have demands against gov- 
 ernment, are paid in the place most convenient to them ; and 
 the public moneys are transferred, through our extensive terri- 
 tory, at a moment's warning, without any risk or expense, to the 
 places most remote from those of collection, and wherever pub- 
 lic exigencies may require. From the year 1791 to this day, 
 the operations of the Treasury have, without interruption, been 
 carried on through the medium of banks; during the years 1811 
 to 1816, through the state banks; before and since, through the 
 Bank of the United States. Every individual who has been at 
 the head of that department, and, as we believe, every officer 
 connected with it, has been made sensible of the great difficul- 
 ties, that must be encountered without the assistance of those 
 institutions, and of the comparative ease and great additional 
 security to the public, with which their public duties are per- 
 formed through the means of the banks. To insist that the ope- 
 
BANKS AND CURRENCY. 79 
 
 rations of the Treasury may be carried on with equal facility 
 and safety, through the aid of the state banks, without the in- 
 terposition of a Bank of the United States, would be contrary to 
 fact and experience. That great assistance was received from 
 the state banks, while there was no other, has always been freely 
 and cheerfully acknowledged. But it is impossible, in the nature 
 of things, that the necessary concert could be made to exist be- 
 tween thirty different institutions; and in some instances, heavy 
 pecuniary losses, well known at the seat of government, have 
 been experienced. To admit, however, that state banks are ne- 
 cessary for that purpose, is to give up the question. To admit 
 that banks are indispensable for carrying into effect the legiti- 
 mate operations of government, is to admit that Congress has 
 the power to establish a bank. The general government is not 
 made by the Constitution to depend, for carrying into effect 
 powers vested in it, on the uncertain aid of institutions, created 
 by other authorities, and which are not at all under its control. 
 It is expressly authorized to carry those powers into effect by 
 its own means, by passing the laws necessary and proper for 
 that purpose, and in this instance, by establishing its own bank, 
 instead of being obliged to resort to those which derive their 
 existence from another source, and are under the exclusive con- 
 trol of the different states, by which they have been estab- 
 lished. 
 
 It must at the same time be acknowledged, that, inasmuch as 
 the revenue may be collected, and the public moneys may be 
 kept in public chests, and transferred to distant places without 
 the assistance of banks, and as all this was once done in the 
 United States, and continues to be done in several countries, 
 without any public bank, it cannot be asserted, that those insti- 
 tutions are absolutely necessary for those purposes, if we take 
 the word " necessary" in that strict sense which has been al- 
 luded to. All this may be done, though with a greater risk,, 
 and in a more inconvenient and expensive manner. Public 
 chests might be established, and public receivers, or sub-trea- 
 surers, might be appointed in the same places where there are 
 now offices of the Bank of the United States, and specie might 
 be transported from place to place, as the public service requir- 
 ed it, or inland bills of exchange purchased from individuals.* 
 
 * With the exception of the power of receiving private deposits, the object of 
 which provision is not perceived, this is precisely the species of National Bank, 
 which has been suggested in the President's last message. The question, whether 
 the purchase of drafts would, as we think, be a charge on the Treasury, or prove, as 
 seems to be expected, a source of profit, is one of secondary importance. It is suffi- 
 cient to observe, that the issues of the state banks could not, nor indeed is it antici- 
 pated in the message that they would, be checked by this plan. It would not, there- 
 fore, effect the great object contemplated by the Constitution, to carry which into 
 effect is enjoined by that instrument, and for which we principally contend, viz. that 
 of securing a sound and uniform currency. 
 
80 BANKS AND CURRENCY. 
 
 The superior security and convenience afforded by the bank, in 
 the fiscal operations of government, may not be considered as 
 sufficient to make its establishment constitutional, in the opinion 
 of those who construe the word " necessary" in that strict sense. 
 
 But it is far from being on that ground alone, that the ques- 
 tion of constitutionality is now placed. It was not at all antici- 
 pated, at the time when the former Bank of the United States 
 was first proposed, and when constitutional objections were rais- 
 ed against it, that bank notes issued by multiplied state banks, 
 gradually superseding the use of gold and silver, would become 
 the general currency of the country. The effect of the few 
 banks then existing, had not been felt beyond the three cities 
 where they had been established. The states were forbidden by 
 the Constitution to issue bills of credit : bank notes are bills of 
 credit to all intents and purposes ; and the state could not do, 
 through others, what it was not authorized to do itself: but the 
 bank notes, not being issued on the credit of the states, nor guar- 
 antied by them, were not considered as being, under the Con- 
 stitution, bills of credit emitted by the states. Subsequent events 
 have shown, that the notes of state banks, pervading the whole 
 country, might produce the very effect which the Constitution 
 had intended to prevent, by prohibiting the emission of bills of 
 credit by any state. The injustice to individuals, the embar- 
 rassments of government, the depreciation of the currency, its 
 want of uniformity, the moral necessity imposed on the commu- 
 nity, either to receive that unsound currency, or to suspend 
 every payment, purchase, sale, or other transaction, incident to 
 the wants of society, all the evils which followed the suspension 
 of specie payments, have been as great, if not greater, than 
 those which might have been inflicted by a paper currency, 
 issued under the authority of any state. We have already ad- 
 verted to the several provisions of the Constitution, which gave 
 to Congress the right, and imposed on it the duty to provide a 
 remedy ; but there is one which deserves special consideration. 
 
 Whatever consequences may have attended the suspension 
 of specie payments in Great Britain, there still remained one 
 currency which regulated all the others. All the country bank- 
 ers were compelled to pay their own notes, if not in specie, at 
 least in notes of the Bank of England. These notes were, as a 
 standard of value, substituted for gold : and, if the currency of 
 the country was depreciated, and fluctuating in value from 
 time to time, it was at the same time uniform throughout the 
 country. There was but one currency for the whole, and 
 every variation in its value was uniform as to places, and at 
 the same moment operated in the same manner everywhere. 
 But the currency of the United States, or, to speak more cor- 
 rectly, of the several states, varied, during the suspension of 
 specie payments, not only from time to time, but at the same 
 
BANKS AND CURRENCY. 81 
 
 time from state to state, and in the same state from place to 
 place. In New-England, where those payments were not dis- 
 continued, the currency was equal in value to specie : it was, 
 at the same time, at a discount of seven per cent, in New- York 
 and Charleston, of fifteen in Philadelphia, of twenty and twenty- 
 five in Baltimore and Washington, with every other possible 
 variation in other places and states. 
 
 The currency of the United States, in which the public and 
 private debts were paid, and the public revenue collected, not 
 only was generally depreciated, but was also defective in respect 
 to uniformity. Independent of all the other clauses in the Con- 
 stitution which relate to that subject, it is specially provided, 1st, 
 that all duties, imposts, and excises, shall be uniform through- 
 out the United States ; 2d, that representative and direct taxes 
 shall be apportioned among the several states, according to their 
 respective numbers, to be determined by the rule therein speci- 
 fied ; and that no capitation or other direct tax shall be laid, 
 unless in proportion to the enumeration. Both these provisions 
 were violated whilst the suspension of specie payments con- 
 tinued. It is clear, that after the quota of the direct tax of each 
 state had been determined, according to the rule prescribed by 
 the Constitution, it was substantially changed by being collected 
 in currencies differing in value in the several states. It is not 
 less clear, that the clause which prescribes a uniformity of du- 
 ties, imposts, and excises, was equally violated by collecting 
 every description of indirect duties and taxes in currencies of 
 different value. The only remedy existing at that time, was 
 the permission to pay direct and indirect taxes in treasury notes. 
 But those notes did not pervade every part of the country in the 
 same manner as bank notes ; they were of too high denomina- 
 tion to be used in the payment of almost any internal tax ; they 
 were liable also to vary in value in the different states; and 
 they could operate as a remedy, only as long as their deprecia- 
 tion was greater than that of the most depreciated notes in cir- 
 culation. 
 
 We will now ask, whether, independent of every other con- 
 sideration, Congress was not authorized and bound to pass the 
 laws necessary and proper for carrying into effect, with good 
 faith, those provisions of the Constitution ? and whether that 
 could or can be done, in any other manner than, either by re- 
 verting to a purely metallic, or by substituting a uniform paper 
 currency to that which had proved so essentially defective in 
 that respect, and which, from its not being subject to one and 
 the same control, is, and for ever will be, liable to that defect ? 
 The uniformity of duties and taxes of every description, whether 
 internal or external, direct or indirect, is an essential and funda- 
 mental principle of the Constitution. It is self-evident, that that 
 uniformity cannot be carried into effect without a corresponding 
 
82 BANKS AND CURRENCY. 
 
 uniformity of currency. Without laws to this effect, it is abso 
 lutely impossible that the taxes and duties should be uniform, as 
 the Constitution prescribes : such laws are therefore necessary 
 and proper, in the most strict sense of the words. There are but 
 two means of effecting the object, a metallic, or a uniform paper 
 currency. Congress has the option of either ; and either of the 
 two, which may appear the most eligible, will be strictly con- 
 stitutional, because strictly necessary and proper for carrying 
 into effect the object. If a currency exclusively metallic is pre- 
 ferred, the object will be attained by laying prohibitory stamp 
 duties on bank notes of every description, and without excep- 
 tion. If it is deemed more eligible, under existing circumstances, 
 instead of subverting the whole banking system of the United 
 States, and depriving the community of the accommodations 
 which bank loans afford, to resort to less harsh means ; recourse 
 must be had to such, as will insure a currency sound and uni- 
 form itself, and at the same time check and regulate that which 
 will continue to constitute the greater part of the currency of 
 the country. 
 
 Both those advantages were anticipated in the establishment 
 of the Bank of the United States ; and it appears to us that the 
 bank fulfils both those conditions. As respects the past, it is a 
 matter of fact, that specie payments were restored and have 
 been maintained through the instrumentality of that institution. 
 It gives a complete guarantee, that under any circumstances, 
 its notes will preserve the same uniformity which they now pos- 
 sess. Placed under the control of the general government, rely- 
 ing for its existence on the correctness, prudence, and skill with 
 which it shall be administered, perpetually watched and occa- 
 sionally checked by both the Treasury Department and rival 
 institutions ; and without a monopoly, yet with a capital and 
 resources adequate to the object for which it was established ; 
 the bank also affords the strongest security which can be given 
 with respect to paper, not only for its ultimate solvency, but also 
 for the uninterrupted soundness of its currency. The statements 
 we have given of its progressive and present situation, show 
 how far those expectations have heretofore been realized. 
 
 Those statements also show, that the Bank of the United 
 States, wherever its operations have been extended, has effectu- 
 ally checked excessive issues on the part of the state banks, if 
 not in every instance, certainly in the aggregate. They had 
 been reduced, before the year 1820, from sixty-six to less than 
 forty millions. At that time, those of the Bank of the United 
 States fell short of four millions. The increased amount re- 
 quired by the increase of population and wealth during the ten 
 ensuing years, has been supplied in a much greater proportion 
 by that bank than by those of the states. With a treble capital, 
 they have added littie more than eight millions to their issues. 
 
BANKS AND CURRENCY. 83 
 
 Those of the Bank of the United States were nominally twelve, 
 in reality about eleven millions greater in November 1829, than 
 in November 1819. The whole amount of the paper currency 
 has, during those ten years, increased about forty-five, and that 
 portion which is issued by the state banks only twenty-two and 
 a half per cent. We have indeed a proof, not very acceptable 
 perhaps to the bank, but conclusive of the fact, that it has per- 
 formed the office required of it in that respect. The general 
 complaints, on the part of many of the state banks, that they 
 are checked and controlled in their operations by the Bank of 
 the United States, that, to use a common expression, it operates 
 as a screw, is the best evidence that its general operation is 
 such as had been intended. It was for that very purpose that 
 the bank was established. We are not, however, aware that 
 a single solvent bank has been injured by that of the United 
 States, though many have undoubtedly been restrained in the 
 extent of their operations, much more than was desirable to 
 them. This is certainly inconvenient to some of the banks, but 
 in its general effects is a public benefit to the community. 
 
 The best way to judge whether, in performing that unpopu- 
 lar duty, the Bank of the United States has checked the opera- 
 tions of the state banks more than was necessary, and has abused, 
 in order to enrich itself at their expense, the power which was 
 given for another purpose, is to compare their respective situa- 
 tions in the aggregate. In order to avoid any erroneous infer- 
 ence, we will put out of question those banks of which we could 
 only make an estimate, and compare, with that of the United 
 States, those only of which we have actual returns. 
 
 The profit of banks, beyond the interest on their own capital, 
 consists in that which they receive on the difference between 
 the aggregate of their deposits and notes in circulation, and the 
 amount of specie in their vaults. We have given the aggregate 
 situation for the end of the year 1829 of 281 banks with a capi- 
 tal of 95,003,557 dollars, the deposits and circulating notes of 
 
 which amounted together to $71,706,033 
 
 from which deducting the specie in their vaults, - 11,989,643 
 
 leaves for the said difference, 59,716,390 
 
 or 62.8 per cent, on their capital. 
 
 The notes in circulation of the Bank of the United States 
 (adding one million for its drafts in circulation) amounted in 
 November 1829, to $14,042,984, and together with the deposits, 
 
 to $28,827,793 
 
 from which deducting the specie in its vaults, - - 7,175,274 
 
 leaves for the difTercnco, 21, 652,5 1U 
 
 or 61.8 on its capital. 
 
84 BANKS AND CURRENCY. 
 
 It is clear that those state banks, taken in the aggregate, hare 
 no just reason to complain, since that of the United States im- 
 poses no greater restraints on them than on itself. It will also 
 be perceived that it had in specie, more than one-fifth part of 
 the aggregate of its notes in circulation and deposits ; whilst the 
 state banks had little more than one-sixth ; and the Bank of the 
 United States had in addition a fund of about one million of dol- 
 lars in Europe. The difference would have been more striking, 
 had we taken a view of the situation of all the state banks, in- 
 cluding those on estimate; for the difference between the aggre- 
 gate of their notes and deposits, and their specie, is 67| on their 
 capital. 
 
 This view .of the subject applies to the present time, when 
 the Bank of the United States has surmounted the difficulties 
 which it had, in its origin, to encounter, and has reached a 
 high degree of prosperity. It did not go into operation till the 
 commencement of the year 1817, and such were the losses which 
 it first experienced, that its dividends, during the first six years 
 of its existence, fell short of 3^ per cent, a year. The dividend 
 has since gradually increased from 5 to 7 per cent. ; but the 
 average, during the thirteen years and a half ending on the 1st 
 of July 1830, has been but 4 T \\ per cent a year. An annual 
 dividend of about 9 per cent, during the residue of the time to 
 which the charter is limited, would be necessary, in order that 
 the stockholders should then have received, on an average, 6 
 per cent a year on their capital. The dividends of the state 
 banks vary too much, and our returns are too imperfect in that 
 respect, to enable us to estimate the average ; but it has certain- 
 ly far exceeded that of the Bank of the United States. 
 
 The manner in which the Bank checks the issues of the state 
 banks is equally simple and obvious. It consists in receiving the 
 notes of all those which are solvent, and requiring payment 
 from time to time, without suffering the balance due by any to 
 become too large. Those notes on hand, taking the average of 
 the three and a half last years, amount always to about a mil- 
 lion and a half of dollars ; and the balances due by the banks in 
 account current (deducting balances due to some) to about nine 
 hundred thousand. We think that we may say, that, on this 
 operation, which requires particular attention and vigilance, 
 and must be carried on with great firmness and due forbear- 
 ance, depends almost exclusively the stability of the currency 
 of the country. 
 
 The President of the United States has expressed the opinion, 
 that the bank had failed in the great end of establishing a uni- 
 form and sound currency, and has suggested the expediency of 
 establishing " a National Bank, founded upon the credit of the 
 government and its revenues." He has clearly seen, that the 
 uniformity of the currency was a fundamental principle derived 
 
BANKS AND CURRENCY. 85 
 
 from the Constitution, and that this, unless the United States 
 reverted to a purely metallic currency, could not be effected 
 without the aid of a National Bank. But it appears to us, that 
 the objection of want of uniformity, which may be supported in 
 one sense, though not in the constitutional sense of the word, 
 applies generally to a paper currency, and not particularly to 
 that which is issued by the Bank of the United States. And al- 
 though we are clearly of opinion, that the United States at 
 large are entitled to the pecuniary profit arising from the sub- 
 stitution of a paper, for a metallic currency, we are not less 
 convinced, that this object cannot be attained in a more eligi- 
 ble way and more free of objections, than through the medium 
 of a National Bank, constituted on the same principles as that 
 now existing. On both those topics we will make but few ob- 
 servations, those branches of the subject having been nearly 
 exhausted, in their report, by the Committee of the House of 
 Representatives. 
 
 It has already been observed, that the substitution of paper 
 to gold and silver is a national benefit, in as far as it brings into 
 activity an additional circulating capital, equal to the difference 
 between the amount of paper, and that of the reserve in specie 
 necessary to sustain the par value of that paper. But it is clear, 
 that the community derives no other immediate benefit from 
 the substitution, than the accommodations which the banks are 
 thereby enabled to afford, and for which the borrowers pay the 
 usual rate of interest. The immediate profit derived from the 
 paper currency, is received exclusively by the banks; about three- 
 fourths by the state banks, and one-fourth by that of the United 
 States. So far as relates to profit, it is only to that one-fourth 
 part of the whole, that the measures of the general government 
 are intended to apply. Several of the states, by levying a tax 
 on the capital or on the dividends of their own banks, receive 
 the public share of those profits. Other states have resorted to 
 the mode suggested by the President, and have established 
 banks of the state exclusively founded on its resources and 
 revenue. 
 
 The proposition has not been suggested to resort to a third, 
 though the most simple mode, that of issuing, without the aid 
 or machinery of any bank whatever, a government paper pay- 
 able on demand in specie. We unite in considering it altogether 
 inadmissible. Government may put its paper in circulation by 
 lending it, like banks, to individuals ; and this is, in fact, the 
 proposition which has been suggested. But unless this mode is 
 adopted, to issue paper in any other way, is to borrow money ; 
 and the United States at this time wish to discharge and not to 
 contract a debt. Nor would such a paper, without a mixture 
 of banking operations, control in the least the issues of state 
 banks, and assist in establishing a general sound currency. 
 
86 BANKS AND CURRENCY. 
 
 The general objections to a paper issued by government, have 
 already been stated at large. Yet it must be admitted, that 
 there may be times when every other consideration must yield 
 to the superior necessity of saving or defending the country. If 
 there ever was a time, or a cause which justified a resort to 
 that measure, it was the war of the independence. It would be 
 doing gross injustice to the authors of the revolution and found- 
 ers of that independence, to confound them with those govern- 
 ments, which from ambitious views have, without necessity, in- 
 flicted that calamity on their subjects. The old Congress, as the 
 name purports, were only an assembly of plenipotentiaries, 
 delegated by the several colonies or states. They could only 
 recommend, and had not the power to lay taxes ; the country 
 was comparatively poor ; extraordinary exertions were neces- 
 sary to resist the formidable power of Great Britain ; those ex- 
 ertions were made, and absorbed all the local resources; the 
 paper money carried the United States through the most ardu- 
 ous and perilous stages of the war ; and, though operating as a 
 most unequal tax, it cannot be denied that it saved the country. 
 Mr. Jefferson was strongly impressed with the recollection of 
 those portentous times, when in the latter end of the year 1814, 
 he suggested the propriety of a gradual issue, by government, 
 of two hundred millions of dollars in paper. He had, from the 
 imperfect data in his possession, greatly overrated the amount 
 of paper currency which could be sustained at par ; and he had, 
 on the other hand, underrated the great expenses of the war. 
 Yet we doubt whether, in the state to which the banks and the 
 currency had been reduced, much greater issues of Treasury 
 notes, or other paper not convertible at will into specie, would 
 not have become necessary, if the war had been of much longer 
 continuance. It is to be hoped that a similar state of things 
 will not again occur ; but at all events, the issue of a govern- 
 ment paper ought to be kept in reserve for extraordinary exi- 
 gencies. 
 
 The proposition then recurs, to issue a paper currency paya- 
 ble on demand in specie, through the medium of a bank, found- 
 ed on the revenue of the United States ; or, in other words, to 
 convert the general government, or its treasury department, 
 into a banking institution. The experiment has been made in 
 four of the states, and may have succeeded on a smaller scale, 
 and where all the agents are personally know r n to government, 
 and are not merely in name, but in reality, under its immediate 
 superintendence. But if thirty-five millions of dollars are to be 
 placed at the disposal of three hundred bank directors, selected 
 by the government of the United States, and living in twenty- 
 five different states or territories, with the authority to contract 
 debts in behalf of the public to an equal amount, and to lend 
 the whole to individuals at their discretion ; we must inquire, 
 
BANKS AND CURRENCY. 87 
 
 liow and over whom that enormous power will be exercised. 
 However they may have differed with respect to removals from 
 office, the various administrations, with some exceptions, com- 
 manded by the public interest, have all preferred, in appoint- 
 ing to office, their friends to their opponents ; and in making the 
 selections at a distance, there is not perhaps, out of ten officers 
 who are appointed, one who is personally known either to the 
 President or to any of the heads of the departments. It is mor- 
 ally impossible that the direction of the branches of the pro- 
 posed bank should not fall into tiie hands of men generally se- 
 lected from political considerations, often of a local nature. 
 Without salary, or any personal interest in the concern intrusted 
 to their care, they would also be altogether irresponsible. The 
 duties of the other officers of government may always be, and 
 always are, defined by law : for any wilful official misconduct, 
 for any act of oppression towards individuals, they may be prose- 
 cuted and punished. But the power vested in a bank director 
 is in its nature discretionary, and error of judgment may always 
 be pleaded, for having improperly granted or withdrawn an ac- 
 commodation. The exercise of that arbitrary power over the 
 property and private concerns of individuals would be so odious, 
 that, if the attempt was made, we are confident that it would 
 not be long tolerated. Considered as a source of profit, which 
 is its only recommendation, it is equally obvious, that the plan 
 could not succeed ; that whenever there was a temporary pres- 
 sure, and what is called a want of money, the debtors would ask 
 and obtain relief, and that the same measure of indulgence 
 would gradually be extended to every quarter of the Union. It 
 seems indeed self-evident, that a government, constituted like 
 that of the United States, cannot by itself manage and control 
 a banking system spread over their extensive territory; and 
 we know, on the other hand, that the same object may be at- 
 tained through the means of a bank governed and controlled 
 as that of the United States. It may be added, that, if an ob- 
 jection is raised against that institution, because the power to 
 incorporate a bank is not expressly granted by the Constitution, 
 it appears to be equally applicable to the plan that has been 
 suggested ; since there is no clause in that instrument, that ex- 
 pressly authorizes the government of the United States to dis- 
 count the notes of individuals, or to become a trading company. 
 The United States are, however, justly entitled to participate 
 in the advantages which the bank derives from its charter, by 
 being permitted to issue paper, and to extend its operations over 
 the whole country ; and that institution must also be allowed, 
 in addition to the usual interest on its capital, a reasonable profit; 
 since it incurs all the risks, and is liable for all the losses inci- 
 dent to those operations. The government receives already a 
 portion of the profits, in the ah \po of those services, which are 
 
88 BANKS AND CURRENCY. 
 
 rendered here gratuitously, and form in England no inconsidera- 
 ble part of the benefit allowed to the bank. But for the residue, 
 \ve would prefer to a bonus, either a moderate interest on the 
 public deposits, or a participation in the dividends when exceed- 
 ing a certain rate. There can be no doubt, that, independent 
 of perfect security, the United States would, in that way, derive 
 greater pecuniary advantages, than from any bank managed by 
 its own officers. 
 
 In order to attain perfect uniformity, the value of a paper 
 currency should, in the United States, be always the same as 
 that of the gold and silver coins, of which it takes the place. It 
 is impossible to fulfil that condition better, than by making that 
 currency payable on demand in specie and at par. This cannot 
 be done but at certain places designated for that purpose. The 
 holder of a bank note cannot, at any other place, give such note 
 in payment of a debt, or exchange it for specie, without the 
 consent of another party. Strictly speaking, it is not, there- 
 fore, at any other place, of the same value with specie. This 
 is equally true of any bank note, or convertible paper, in any 
 other country. A note of the Bank of England, being only paya- 
 ble in London, will not be of the same value with gold or silver 
 in Scotland, Ireland, or even at Liverpool, unless the exchange 
 between those places respectively and London should be at par. 
 This defect is inherent to every species of paper currency, even 
 when payable on demand. There were three hundred and 
 twenty-nine state banks, and twenty-two offices of the Bank of 
 the United States, in operation on the 1st of January, 1830. 
 We had therefore three hundred and fifty-one distinct curren- 
 cies, all convertible into specie, but each at different places. A 
 note of the Bank of the United States, or of the Bank of North 
 America, both payable at Philadelphia, was no more exchange- 
 able for gold or silver, at Bedford, in Pennsylvania, than at Cin- 
 cinnati ; the only difference consisting in the greater distance 
 from the place of payment, which renders a fluctuation in the 
 rate of exchange more probable. When, therefore, it is ob- 
 jected as a want of uniformity, that the notes issued by the 
 Bank of the United States, and its several offices, are not indis- 
 criminately made payable at every one of those places, the ob- 
 jection does not go far enough. In order to attain perfect uni- 
 formity, or to render those notes everywhere precisely equal in 
 value to specie, they should be made payable at every town or 
 village in the United States. But, although it may be admitted, 
 that the notes of the Bank of the United States now consist 
 nominally of twenty-four currencies, each payable at a distinct 
 place, they still fulfil the condition of uniformity required by the 
 Constitution ; and the defect complained of is not peculiar to 
 them, but would equally attach to any other possible species of 
 bank notes or paper currency. 
 
BANKS AJND CURRENCY. &} 
 
 Those notes, wherever made payable, are, by the charter, re- 
 ceivable in all payments to the United States : and as the bank 
 is obliged, without any allowance on account of difference of 
 exchange, to transfer the public funds from place to place within 
 the United States, any loss arising from that cause falls on the 
 institution. For that purpose, therefore, all the notes issued by 
 the bank constitute but one uniform currency, with which all 
 the duties, taxes, imposts, and excises, may be paid. Not only 
 the condition of uniformity imposed by the Constitution is strict- 
 ly fulfilled, but by far the greater part of the notes which may 
 happen to circulate out of the states in which they are made 
 payable, is also absorbed by that operation. The objection is 
 reduced to the simple fact, that individuals who may still hold 
 such notes, cannot always exchange them at par at a place dis- 
 tant from that where they are payable. In answer to this, it 
 must, in the first place, be observed; that notes are never found 
 in that situation, but by the act of the parties themselves. The 
 bank and its offices never issue or make payments in notes pay- 
 able at another place than that of issue, but at the request of 
 individuals, whose convenience it may suit to apply for such 
 notes. Through whatever channel a man residing in New-Or- 
 leans may have come in possession of ten thousand dollars in 
 notes payable at Charleston, it has always been with his own 
 consent, and never by the act of the bank. When this objec- 
 tion is made, what in fact is complained of, is, that the bank 
 will not, or cannot, transfer the funds of individuals, as well as 
 those of the public, from place to place, gratuitously ; an opera- 
 tion which has no connexion with the uniformity of currency. 
 Supposing there were no bank notes in circulation, and there 
 was no other but a uniform metallic currency, the man who 
 had taken a cargo of flour from Louisville to New-Orleans, must, 
 in order to transfer the proceeds back to Louisville, either have 
 purchased a bill of exchange, or transported the specie. This 
 he may still do, since the institution of the bank ; and he has 
 no more right to ask from the office at New-Orleans, to give 
 him, in exchange for the specie, bank notes payable at Louis- 
 ville, than to require that it should pay the freight of his flour 
 from Louisville to New-Orleans. 
 
 But supposing there was any weight in the objection, it is in- 
 herent to the nature of a paper, which cannot, in that respect, 
 be made better than a metallic currency. If A contracts to pay 
 a certain sum to B, it must be at a certain specified place. He 
 cannot engage to do it at five or six different places, at the 
 option of B, since it would compel him to provide funds at all 
 those different places, and therefore to five or six times the 
 amount of his debt. It is true, that the Bank of the United 
 States has, through its extensive dealings in exchange, facilities 
 to give accommodations in that respect, which no individual 
 
90 BANKS AND CURRENCY. 
 
 can have. But it is its interest to extend, as far as is safe and 
 practicable, the circulation of its notes ; and one of the best 
 means to effect that object, is to pay everywhere their notes, 
 wherever issued, whenever that is practicable. The five dollar 
 notes are already made thus payable ; and, in reality, payment 
 of notes of every denomination, wherever made payable, is rarely 
 refused at any of the offices. The bank may be safely trusted 
 for giving the greatest possible extension to a species of accom- 
 modation, which it is its interest to give : but the condition cari 
 never be made obligatory, either on that institution, or on any 
 other bank, by whatever name designated, or on whatever 
 principle constituted, without endangering its safety. It is ob- 
 vious, that no bank which has branches, can have funds at 
 every place sufficient to meet a sudden demand for the payment 
 of a large amount of notes payable elsewhere, which may for- 
 tuitously or designedly have accumulated at some one place. 
 Even supposing this to be practicable, the condition imposed 
 must necessarily occasion an additional expense, much greater 
 than the benefit derived from it ; and if this was done through 
 the means of a bank founded on the public revenue, it would be 
 a tax laid on the community, for the advantage of a few indi- 
 viduals. 
 
 A similar objection has been made with respect to the deal- 
 ings in domestic exchange of the bank. These consist of two 
 correlative but distinct operations. The bank purchases at Phila- 
 delphia, and at every one of its offices, bills of exchange pay- 
 able at different dates, and on all parts of the United States 
 where there are such offices ; and the bank and its offices sell 
 their drafts on each other, payable at sight. The amount of both 
 has been progressively increasing, to the great convenience of 
 the public. That of bills of exchange was 29,335,254, and that 
 of bank drafts 24,384,232 dollars, during the year 1829. In the 
 same year the transfers of public moneys, which are effected by 
 treasury drafts, analogous to bills of exchange at sight, have 
 amounted to 9,066,000 dollars. The three items together make 
 a total of 62,785,486 dollars, transmitted by the bank in one 
 year, through the medium of bills and drafts, which are thus 
 substituted to the transportation of specie to the same amount. 
 The purchase of bills of exchange is an operation similar, as re- 
 lates to interest, to the discounting of notes. The interest ac- 
 cruing, from the time of purchase or discount to that when they 
 become due, is equally allowed in both cases. Deducting this, 
 the gross profit, on the purchase of bills, arising from the rate 
 of exchange at which they were purchased, amounted in the 
 year 1829 to 227,224 dollars, or less than three-fourths per 
 cent. The premiums on the sale of bank drafts amounted to 
 42,826 dollars ; but to this must be added the interest accruing 
 on the drafts actually in circulation, and which, estimating, as 
 
BANKS AND CURRENCY. 91 
 
 before stated, the time during which, on an average, they re- 
 main so, at fifteen days, amounts to near sixty-one thousand dol- 
 lars. The profit on those drafts is therefore near one hundred 
 and four thousand dollars, or about three-sevenths per cent. The 
 interest lost by the bank on the treasury drafts, is from fifteen 
 to twenty thousand dollars ; and the charges for transportation 
 of specie, postage, and incidental expenses, amounted, in the 
 year 1829, to 49,847 dollars. The nett profit of the bank, on 
 the aggregate of those transactions, is, therefore, about two 
 hundred and sixty-four thousand dollars, or a fraction more than 
 two-fifths per cent, on the whole amount. 
 
 There is not, it is believed, a single country where the com- 
 munity is, in that respect, served with less risk or expense. It 
 is obvious that no one will sell his bills to the bank, unless that 
 institution purchases them at a higher, or at least as high rate 
 as any other person ; and that no one will purchase its drafts, 
 unless they are as cheap as any others at market, or are con- 
 sidered safer. There is no other ground of complaint, unless it 
 be that the bank can afford to purchase bills dearer, and to sell 
 its drafts cheaper, than any body else. This is certainly a pub- 
 lic benefit ; and the only consideration which has been urged 
 with some degree of plausibility, is, that one of the reasons 
 which enables the bank to obtain a higher price for its drafts, 
 is the greater degree of security which they offer ; whilst, at the 
 same time, its peculiar situation would enable it to sell them 
 cheaper than other persons. Without admitting the validity of 
 this observation, or denying that the current rate of exchange 
 ought to regulate the price of those drafts, we would wish that 
 they might be sold at par, whenever it happens that the opera- 
 tion, from the situation of its funds, is in no degree inconvenient 
 to the bank. Government receives its full share of the profits on 
 those operations. As its business is done gratuitously, it not only 
 saves the interest as above stated, but also the premium which 
 it would otherwise have to pay on the sale of its drafts. This, 
 calculated at the same rate as ifor other bills of exchange, would 
 amount to more than seventy, and together with the interest, to 
 about ninety thousand dollars a year. 
 
 We have also heard complaints made against the purchase of 
 foreign bills by the bank at the south, and the sale of their own 
 bills on Europe at the east. That this may interfere with the 
 business of capitalists who deal in exchange, is true ; but the 
 principal public consideration seems to be, whether the bank 
 confers a benefit on the southern planters or merchants, by en- 
 tering into competition for the purchase of their bills, and on the 
 public by offering for sale cheaper or safer means of making 
 remittances abroad. Another great advantage is found in the 
 facility, thereby afforded to the bank, of having a fund in Eng- 
 land on which it receives interest, and which, on an emergency, 
 
92 BANKS AND CURRENCY. 
 
 answers the same purpose as specie. That branch of business, 
 either for the year 1829, or for the average of that and the two 
 preceding years, amounted to 3,580,000 dollars. 
 
 The principal advantages derived from the Bank of the United 
 States, which no state bank, and, as it appears to us, no bank 
 established on different principles, could afford, are, therefore : 
 First and principally ; securing with certainty a uniform, and, 
 as far as paper can, a sound currency : Secondly ; the complete 
 security and great facility it affords to government in its fiscal 
 operations : Thirdly ; the great convenience and benefit accru- 
 ing to the community, from its extensive transactions in domes- 
 tic bills of exchange and inland drafts. We have not adverted 
 to the aid which may be expected from that institution in time 
 of war, and which should, we think, be confined to two objects. 
 
 First. The experience of the last war has sufficiently proved, 
 that an efficient revenue must be provided, before, or immedi- 
 ately after that event takes place. Resort must be had, for that 
 purpose, to a system of internal taxation, not engrafted on taxes 
 previously existing, but which must be at once created. The 
 utmost diligence and skill cannot render such new taxes pro- 
 ductive before twelve or eighteen months. The estimated 
 amount must be anticipated ; and advances to that extent, in- 
 cluding at least the estimated proceeds of one year of all the 
 additional taxes laid during the war, may justly be expected 
 from the Bank of the United States. 
 
 Secondly. It will also be expected, that it will powerfully 
 assist in raising the necessary loans, not by taking up, on its own 
 account, any sum beyond what may be entirely convenient and 
 consistent with the safety and primary object of the institution, 
 but by affording facilities to the money lenders. Those, who, 
 in the first instance, subscribe to a public loan, do not intend to 
 keep the whole, but expect to distribute it gradually with a 
 reasonable profit. The greatest inducement, in order to obtain 
 loans on moderate terms, consists in the probability that, if that 
 distribution proceeds slower than had been anticipated, the sub- 
 scribers will not be compelled, in order to pay their instalments, 
 to sell the stock, and, by glutting the market, to sell it at a loss : 
 and the assistance expected from the bank is to advance, on a 
 deposit of the scrip, after the two first instalments have been 
 paid, such portions of each succeeding payment, as may enable 
 the subscribers to hold the stock a reasonable length of time. 
 As this operation may be renewed annually, on each successive 
 loan, whilst the war continues, the aid afforded in that manner 
 is far more useful than large direct advances to government, 
 which always cripple the resources, and may endanger the 
 safety of a bank. 
 
NOTES AND STATEMENTS. 
 
 NOTE A. 
 
 RELATIVE VALUE OF GOLD AND SILVER. 
 
 It has already been observed, that the intrinsic value and average market 
 price of current coins are greater than those of bullion of the same weight 
 and standard ; and that the difference is, on account of the greater compa- 
 rative expense of coinage, greater with respect to silver than to gold coins. 
 The ratio of 15.7 to 1 is nearly that of gold to silver bullion in France, and 
 it has been found to correspond, during a long period, with the market price 
 in that country ; whilst the average price of the gold and silver coins has 
 been in the ratio of about 15.6 to 1, making a difference of about f per cent, 
 between the two ratios. The English market is, with respect to silver, 
 much more uncertain, from the want of a constant demand and uniform 
 mint price. Silver is accordingly exported in preference to France, and 
 gold to England. The respective prices, as quoted in England, give the 
 ratio of gold coins to silver bullion. If this average ratio is taken at 15.85 
 to 1, and the average English market price of standard gold bullion at 
 771 7, .the ratio of gold to silver -bullion will be found to be less than 15.8 
 to 1 ; and, making the above-mentioned allowance of per cent, for the 
 difference between the two ratios, that of gold to silver coins, as deduced 
 from the British average market prices, does not exceed 15.7 to 1. It is, 
 in order to guard against any exportation of silver, in preference to gold 
 coins, and any possible danger of altering the present standard of value, 
 that we are desirous that this ratio should not be exceeded. The premium 
 on gold coins in France, has, in the text, been generally rated at one half 
 per cent The true average taken for six years was only one-third per 
 cent. 
 
 NOTE B. 
 
 ON SCOf CH BANKS. 
 
 "Chiefly extracted from the Report of the Select Committee of the House 
 of Commons on Promissory Note? of Scotland and Ireland. May 26, 
 1826. 
 
 EXTRACT. 
 
 " There are at present thirty-two banks in Scotland, three of which are 
 incorporated by act of Parliament, or by royal charter, viz. The Bank of 
 Scotland, the Royal Bank of Scotland, and the Bank called the British Linen 
 Company. 
 
 The National Bank of Scotland has 1238 partners. 
 
 The Commercial Bank of Scotland hae 521. 
 
 The Aberdeen Town and County Bank has 446. 
 
 Of the remaining banks -there are three in which the number of partners 
 exceeds 100; six in which the number is between 20 and 100; and seven- 
 teen in which the number falls short of 20. 
 
 The greater part of the Scotcli banks have brandies in connexion with 
 the principal establishment, each branch managed by an a wont acting under 
 
94 BANKS AND CURRENCY. 
 
 the immediate directions of his employers, and giving security to them for 
 his conduct. 
 
 The Bank of Scotland had, at the date of the last return received by 
 your committee, sixteen branches, established at various periods between 
 the year 1774 and the present. 
 
 The British Linen Company had twenty-seven branches. 
 
 The Commercial Banking Company in Edinburgh, thirty-one. 
 
 The total number of branches established in Scotland from the southern 
 border to Thurso, the most northerly point at which a branch bank exists, 
 is one hundred and thirty-three. 
 
 Speaking generally, the business of a Scotch bank consists chiefly in the 
 receipt and charge of sums deposited with the bank, on which an interest 
 is allowed, and in the issue of promissory notes upon the discount of bills, 
 and upon advances of money made by the bank upon what is called a cash 
 credit. 
 
 The interest allowed by a bank upon deposits varies from time to time, 
 according to the current rate of interest which money generally bears. At 
 present the interest allowed upon deposits is four per cent. 
 
 It has been calculated that the aggregate amount of the sums deposited 
 with the Scotch banks amounts to about twenty or twenty-one millions. 
 The precise accuracy of such an estimate cannot of course be relied on. 
 The witness by whom it was made thought that the amount of deposits could 
 not be less than sixteen millions, nor exceed twenty-five millions, and took 
 an intermediate sum as the probable amount. 
 
 Another witness, who had been connected for many years with different 
 banks in Scotland, and has had experience of their concerns at Stirling, 
 Edinburgh, Perth, Aberdeen and Glasgow, stated that more than one-half 
 of the deposits in the banks with which he had been connected were in sums 
 
 from ten pounds to two hundred pounds." 
 
 ******** 
 
 " On sums advanced by the banks on the discount of bills of exchange, 
 and upon cash credits, an interest of five per cent, is at present charged. 
 
 A cash credit is an undertaking on the part of a bank to advance to an 
 individual such sums of money as he may from time to time require, not 
 exceeding in the whole a certain definite amount, the individual to whom 
 the credit is given entering into a bond with securities, generally two in 
 number, for the repayment on demand of the sums actually advanced, with 
 interest upon each issue from the day on which it is made. 
 
 Cash credits are rarely given for sums below one hundred pounds ; they 
 generally range from two to five hundred pounds, sometimes reaching one 
 thousand pounds, and occasionally a larger sum. 
 
 The bank allows the party having the cash credit, to liquidate any por- 
 ,tion of his debt to the bank, at any time that may suit his convenience, and 
 reserves to itself the power of cancelling, whenever it shall think fit, the 
 credit granted." 
 
 The amount of deposits, on which the Scotch banks allow interest, may 
 be estimated at about 18,000,000 sterling. One-half is said to consist of 
 small sums deposited by mechanics, fishermen, and laborers; and that part 
 of the system may be considered as analogous to that of the Saving Banks, 
 and as having the same beneficial effect. 
 
 The cash credits are generally for sums from 200 to 500 pounds, some- 
 times as high as 1000, and sometimes as low as 50. The total amount, 
 for which credits are opened, is estimated at six, and the average amount 
 actually drawn, and due to the banks, at four millions sterling. They are 
 generally granted to shopkeepers commencing business, and to tradesmen 
 generally. The great advantage of this system, which is thus far substi- 
 tuted to the discounting of notes, is, that the borrower never draws more 
 
 
BANKS AND CURRENCY. 95 
 
 from the bank than what is absolutely necessary for the purposes of his 
 business. The banks require that the capital loaned should be actively and 
 constantly employed. One of the witnesses says, " I would say that no 
 cash account is at all well operated upon, unless, at the close of it in a year, 
 the amount of the transactions on each side is, at the very least, five tunes 
 the amount of the grant. When the account continues stagnant for any 
 length of time, we intimate to the holder, that, at a fixed period, he must 
 
 it up." 
 
 he total amount of the notes in circulation is stated for 1825 : 
 in notes of 5 and upwards .......... 1,230,000 
 
 in do. of under 5, never lower than 1, . 2,080,000 
 
 pay i 
 T 
 
 at 3,310,000 
 
 The great and efficient method of preventing the over-issuing of bank 
 notes, and the depreciation of their value, consists in the practice, rigorously 
 adhered to by all the banks, of exchanging each other's notes twice a weelr, 
 and paying immediately the balances. For that purpose, " all the banks of 
 Scotland have agents at Edinburgh, who exchange their notes twice a 
 
 week, Monday and Friday ; and the balances (are) paid by short dated 
 
 bills (ten days) on London. The state of those balances is looked at by the 
 banks, with the utmost jealousy and attention ; if any thing in any de- 
 gree wrong were to appear, the banks would instantly correct it, and force 
 a bank acting improperly to alter its mode of conduct." This method is 
 the same which, though with less rigor and uniformity, is successfully used 
 by the allied banks of Boston, and by the Bank of the United States, for 
 preventing excessive issues of paper. 
 
 It is asserted, that the whole loss sustained in Scotland by the public, by 
 bank failures, through more than a century, has amounted to no more than 
 36,344 ; and this result seems to be altogether ascribed to the peculiar 
 features briefly noticed in this note. 
 
 NOTE C. 
 
 RESTRICTIONS ON PRIVATE BANKING. 
 
 It is also provided by a law of the State of New- York, (1818,) that " no 
 person, association of persons, or body corporate, except such bodies corpo- 
 rate as are expressly authorized by law, shall keep any office for the pur- 
 pose of receiving deposits, or discounting notes or bills, or issuing any 
 evidence of debt to be loaned, or put in circulation as money : nor shall 
 they issue any bills or promissory notes or other evidences of debt as private 
 bankers, for the purpose of loaning them, or putting them in circulation as 
 money, unless thereto specially authorized by law." 
 
 The prohibition to issue any species of paper, that can be put in circula- 
 tion as money, is perfectly proper, and indeed necessary : but that of receiv- 
 ing deposits, or discounting notes or bills, must have had some special and 
 temporary object in view, and does certainly require revision. Why indi- 
 viduals should not be permitted to deposit their money with whom they 
 please, is not understood. In such cases, interest is generally allowed, and 
 this practice promotes frugality, and should rather be encouraged than for- 
 bidden. So long as credit is deemed essential to commerce, the discounting 
 of notes or bills, by private individuals, creates competition, and is a public 
 benefit. Incorporated banks cannot conveniently alter, either the rate at 
 
96 BANKS AND CURRENCY. 
 
 which they discount, or the time at which the notes discounted must be 
 paid or renewed. Private capitalists may and do modify their loans, in both 
 respects, according to the state of the money market, and to the wants of 
 the community. They will discount at the rate of four or five per cent, 
 when the use of capital is worth no more ; and, being still controlled by the 
 general law of the land, they never can legally receive more than the legal 
 rate of interest. And they may, to the great benefit of commerce, discount 
 business notes due at three and six months date. The advantages, if not 
 the necessity, of this accommodation are such, that it is understood, that the 
 law in question is, in that respect, daily disregarded. The prohibition al- 
 luded to has no other effect, than that of deterring some prudent capitalists 
 from engaging in that business, and of enhancing the premium, which, 
 those who, in order to meet their engagements, negotiate the evidences of 
 debt due to them, must pay for the discount. 
 
BANKS AND CURRENCY. 
 
 97 
 
 A List of the State 
 
 STATEMENT I. 
 Banks in operation on the 1st of January, 
 1830. 
 
 Capital. 
 
 MASSACHUSETTS. 
 
 Massachusetts 800.000 
 Union ; 800.000 
 
 Oxford . . . 
 
 Capital. 
 100000 
 
 Sunderland 
 Sutton 
 
 . . 100.000 
 . . 75.000 
 
 Phoenix 
 
 . , 200.000 
 . . 120.000 
 . . 210.000 
 
 Washington 
 66 Banks.. 
 
 MAINE. 
 Portland 
 
 . . 500.000 
 . 20.420.000 
 
 Newburyport ......... 
 
 ! Beverly 
 j Boston 
 
 100.000 
 . . 900.000 
 
 . . 200.000 
 
 
 250000 
 
 
 100000 
 
 
 90O fMlT) 
 
 Saco 
 
 . . 100.000 
 
 
 120 000 
 
 
 . . 200.000 
 
 
 900OOO 
 
 Bath 
 
 . . 100.000 
 
 
 1 800 000 
 
 Lincoln 
 
 . . 100.000 
 
 
 200 fl() 
 
 A ugusta ; i 
 
 . . 100.000 
 
 
 
 Kennebunk 
 
 100.000 
 
 
 1 7*i 000 
 
 
 . . 100.000 
 
 
 
 Waterville 
 
 50.000 
 
 
 100 000 
 
 Bangor 
 
 50.000 
 
 
 inn ooo 
 
 Casco t 
 
 . . 200.000 
 
 Manuf. & Mech's. (Boston) . 
 
 . . 750.000 
 . , 250.000 
 . . 100.000 
 . . 150.000 
 100000 
 
 
 300000 
 
 Manufacturers . .- 
 
 . . 100.000 
 
 
 Merchants * 
 
 .. 150.0.0 
 
 Merrimack ........ . 
 
 South Berwick 
 
 50000 
 
 Thomaston 
 
 50.000 
 
 Suffolk 
 
 750 000 
 
 Union 
 
 50.000 
 
 
 qnn nnn 
 
 
 60.000 
 
 Bedford Commercial .... 
 
 . . 250.000 
 . . 100.000 
 750000 
 
 18 Banks.. 
 
 
 .. 2.000.000 
 
 
 Andover ............ 
 
 . . 100.000 
 
 NEW-HAMPSHIRE, 
 Union .-....-- 150.000 
 
 
 350000 
 
 
 500000 
 
 
 100 000 
 
 Concord, (Lower) 
 
 80.000 
 
 
 100000 
 
 
 100.000 
 
 
 150000 
 
 Exeter 
 
 100000 
 
 I Junker Hill 
 
 i Kn flOfi 
 
 Strafford . - 
 
 100000 
 
 
 150 000 
 
 Cheshire >. 
 
 100 000 
 
 Central 
 
 50.000 
 1 000000 
 
 
 . . 165.500 
 
 i r;t v 
 
 Rockingham 
 
 100.000 
 
 
 500000 
 
 Commercial i . . 
 
 . . 100.000 
 
 
 500000 
 
 
 150.000 
 
 
 120 000 
 
 Dover 
 
 128 070 
 
 i Eagle 
 
 500 000 
 
 
 100.000 
 
 
 300000 
 
 Farmers ... 
 
 65000 
 
 ! Fail River 
 Pal mouth 
 
 . . 200.000 
 100000 
 
 
 83100 
 
 
 50.000 
 
 
 100000 
 
 Grafton 
 
 . . 100.000 
 
 ! Fraftk-lin (Boston) 
 
 100000 
 
 
 60.000 
 
 Franklin (Greenfield) 
 
 100000 
 
 
 60.000 
 
 Globe . . . 
 
 1000000 
 
 18 Banks.. 
 VERMONT. 
 
 .. 1.791.670 
 
 
 100000 
 
 
 1 oo ooo 
 
 ' Hoosatonic 
 
 100000 
 
 63000 
 
 Leicester 
 
 100000 
 
 Lowell 
 
 100000 
 
 ! Man. & Mech's. (Nantucket) 
 i Mendon . , 
 
 . 100.000 
 100 000 
 
 Windsor 
 
 80000 
 
 
 50000 
 
 
 . . 200000 
 
 Rutland 
 
 60.000 
 
 M.Trhants, (New-Bedford) . 
 ' Millbiiry . 
 
 . . 250.000 
 100000 
 
 
 30000 
 
 St Albans 
 
 20 000 
 
 : Norfolk 
 
 200000 
 
 
 30 000 
 
 North Bank 
 
 . . 750.000 
 
 Vergennes 
 
 . . . 30.000 
 
98 
 
 BANKS AND CURRENCY. 
 
 STATEMENT I. Continued. 
 
 Orange County 
 
 Capital. 
 29.625 
 40.000 
 
 Thames 
 
 Capital. 
 153.500 
 133.000 
 333.850 
 400.000 
 339.600 
 53.000 
 
 4.485.177 
 
 369.000 
 400.000 
 500.000 
 312.000 
 110.000 
 500.000 
 1.000.000 
 1.490.000 
 2.000.000 
 278.000 
 240.000 
 165.000 
 1.000.000 
 2.031.200 
 1.000.000 
 352.000 
 500.000 
 100.000 
 406.153 
 184.000 
 86.000 
 74.000 
 480.000 
 200.000 
 500.000 
 225.000 
 75.000 
 250.000 
 300.000 
 510.000 
 120.000 
 106.000 
 220.000 
 2.050.000 
 700.000 
 750.000 
 500.000 
 
 ' Bennington 
 
 Fairfield Co 
 
 10 Banks.... 
 
 RHODE ISLAND. 
 Providence 
 
 
 432.625 
 
 
 
 500.000 
 100.000 
 500.000 
 150.000 
 75.000 
 105.350 
 60.000 
 120.000 
 499.950 
 200.000 
 50.000 
 150.000 
 220.000 
 500.000 
 87.858 
 37.360 
 25.000 
 300.000 
 50.000 
 38.000 
 67.000 
 20.000 
 50.000 
 50.000 
 500.000 
 75.000 
 42.000 
 66.275 
 15.660 
 20.000 
 100.000 
 394.600 
 103.990 
 70.000 
 60.000 
 40.000 
 100.100 
 65.750 
 50.000 
 40.000 
 83.750 
 40.000 
 100.000 
 44.485 
 25.000 
 51.269 
 75.000 
 
 Stoning ton . 
 
 13 Banks.... 
 
 NEW-YORK. 
 
 State Bank at Albany 
 
 ' Rhode Island 
 
 
 i Bristol 
 
 
 Warren . 
 
 Geneva 
 
 i Smithfield Union 
 
 Utica 
 
 Newport 
 
 Mech's. and Farmers, Albany . 
 Catskill 
 
 
 Rhode Island Union 
 
 Phoenix ... . 
 
 
 New- York 
 
 Commercial, (Bristol) 
 
 Merchants .. . 
 
 
 
 Union, (Providence) 
 
 Farmers, (Troy) . 
 
 Pautuxet 
 
 Albany 
 
 Burrillville Agr'l. and Man'g.. . 
 Cranston 
 
 Mohawk 
 
 Union 
 
 Eagle, (Providence) 
 
 America 
 
 Eagle, (Bristol) 
 
 City Bank . 
 
 i Franklin 
 
 Trov 
 
 j Freeman's 
 
 Ontario 
 
 1 Kent 
 
 Chenango 
 
 Landholders 
 
 Middle District 
 
 Merchants (Newport) 
 
 Auburn .. . 
 
 Merchants, (Providence) 
 
 Central, (Cherry Valley) 
 
 N. E. Commercial, (Newport) . 
 Phoenix, (Westerly) 
 
 Jefferson County 
 
 Tradesmens 
 
 R I Central 
 
 Dry Dock Co 
 
 Scituate 
 
 North River 
 
 Warwick 
 
 Commercial . .' 
 
 
 
 
 Rochester 
 
 Mechanics and Man'g. (Prov.) . 
 1 Hight St. Bank . . . 
 
 
 Franklin 
 
 Smithfield Exchange 
 
 
 Village Bank. . ... 
 
 Orange County 
 
 Smithfield Lime Rock 
 
 
 Cumberland 
 
 Manhattan Co 
 
 
 Delaware and Hudson . . 
 
 Mount Vernon . . . 
 
 Fulton 
 
 N E Pacific 
 
 Chemical 
 
 Union (Bristol) 
 
 37 Banks.... 
 
 NEW-JERSEY. 
 
 State Bank Camden 
 
 Hope (Warren) 
 
 20.083.353 
 
 
 Centreville 
 
 266.050 
 71.984 
 132.550 
 280.000 
 93.700 
 100.000 
 90.000 
 350.000 
 27500 
 
 Woonsocket Falls 
 
 Mount Hope (Bristol) 
 
 47 Banks.... 
 CONNECTICUT. 
 
 " " New-Brunswick... 
 " " Elizabethtown 
 " " Newark 
 
 6.158.397 
 
 146.437 
 150.000 
 1.252.900 
 1.218.500 
 100.000 
 100.000 
 104.390 
 
 Farmers Bank New Jersey . . . 
 
 Norwich . 
 
 Newark Bank'g. and Ins. Co. . . 
 
 Hartford 
 
 Phcenix 
 
 Trenton Bankin^ Co 
 
 214.740 
 52.025 
 30.000 
 30.000 
 
 j Bridgeport . 
 
 Cumberland 
 
 Union (New- London) 
 
 Commercial 
 
 Windham Co 
 
 Far's. and Mech's. Rah way 
 
BANKS AND CURRENCY. 
 
 STATEMENT L Continued. 
 
 Orange Bank ... . ........ 
 
 Capital. 
 50.000 
 75.000 
 30.000 
 30.000 
 93.460 
 
 Capital. 
 Farmers and Merchants 414 045 
 
 
 Franklin 406 500 
 
 Salem Banking Co. 
 
 Marine 235 000 
 
 
 Hagerstown 250 000 
 
 Washington Bonk 
 
 Farmers of Maryland 820 000 
 
 18 Banks.... 
 
 PENNSYLVANIA 
 Pennsylvania .. 
 
 
 2.017.009 
 
 Westminster 175 000 
 
 Frederick County 175 000 
 
 '2.500.000 
 1.800.000 
 1.000.000 
 1.250.000 
 247,228 
 90-000 
 77.510 
 125.318 
 346.155 
 171.466 
 187.380 
 
 Bank of Maryland 200 000 
 
 
 13 Banks 6,250.495 
 
 Philadelphia 
 
 North America 
 
 DISTRICT OF COLUMBIA. 
 
 \Vashineton 479 120 
 
 
 Charnbersburgh 
 
 Chester County 
 
 
 Delaware County 
 Gettysburgh 
 
 Alexandria 500.000 
 
 Pittsburgh 
 Carlisle '. 
 
 Potomac 500.000 
 Mechanics of Alexandria 372.544 
 
 
 
 Farmers of Bucks Co 
 
 60.000 
 400.000 
 300.000 
 158,525 
 134.235 
 
 102.123 
 
 112.500 
 107.033 
 168.720 
 129.500 
 133.340 
 200.000 
 1.000.000 
 529.330 
 500.000 
 249.630 
 124.990 
 149.980 
 395-000 
 40.000 
 20.000 
 1.800.000 
 
 14.609.963 
 
 Farmers and Mechanics ) AKfr Qn n 
 of Georgetown 
 Patriotic 250.000 
 
 
 Farmers of Reading. . . . , 
 
 Harrisburgh 
 
 9 Banks.... 3.875.794 
 
 Monongahela Bank of > 
 Brownsville $ 
 Northampton 
 
 VIRGINIA. 
 
 Bank of Virginia 2.740.000 
 
 Westmoreland 
 York 
 
 Germantown 
 
 Montgomery County 
 Northern Liberties 
 
 Bank of the Valley 654.000 
 North-Western Bank ) T~7 inn 
 
 
 of Virginia $ ' ' 
 4 Banks.... 5.571.100 
 
 NORTH CAROLINA. 
 
 Cape Fear . 7% 000 
 
 Mechanics of Philadelphia 
 Schuytkill 
 
 Sonthwark 
 
 
 Penn Township 
 
 
 Miners Bank of Pottsvilie 
 Erie 
 
 Newbern FOO.COO 
 
 State Bank l.COO.COO 
 
 
 SBa-iks 3.195.000 
 
 33 Banks.... 
 
 DELAWARE. 
 
 Delaware Bank, Wilmington.. 
 Farmers Bank of Del. 
 
 SOUTH CAROLINA. 
 
 Bank of State of S. Carolina. . . 1. 156.000 
 Planters and Mechanics, ) , mn nrn 
 Charleston $" 1<()OC 
 State Bank 800.000 
 
 110.000 
 500.000 
 120.000 
 100.000 
 ot known, 
 do. 
 
 Wilmington and Brandy wine. . 
 Bank of Smyrna 
 Commercial Bank of DeL ... IS 
 
 South Carolina . . 675.000 
 
 Union 1.000.000 
 
 
 4 Banks 
 
 5 Banks.... 4.631.000 
 
 830000 
 
 2 not known. 
 6 Banks. 
 
 MARYLAND. 
 
 Bank of Baltimore 
 Union . . . 
 
 1.197.550 
 1 500 000 
 
 GEORGIA. 
 
 Bank of State of Georgia 1 .303.436 
 
 Planters Bank of do 566.000 
 Marine and Fire Insurance Not given. 
 Augusta GOO.COO ' 
 
 Darien 464.276 i 
 
 
 384.000 
 318.400 
 
 Central 922.317 j 
 
 Commercial and Farmers .... 
 
 Augusia Insurance 110 000 
 
 
100 
 
 BANKS AND CURRENCY. 
 
 STATEMENT I. Continued. 
 
 Macon , 
 
 Merchants and Planters 
 
 Capital. 
 
 $ 75.00Q 
 
 142.000 
 
 9 Banks.... 4.203.029 
 
 LOUISIANA. 
 
 Louisiana State Bank 
 
 Orleans , 
 
 Bank of Louisiana 
 
 Branch of Bank of Louisiana 
 
 1.248.720 
 
 424,700 
 
 2.992.560 
 
 1.000.000 
 
 4 Banks.... 5.665.980 
 
 ALABAMA. 
 
 Bank of State 
 
 " of Mobile... 
 
 495.503 
 148.000 
 
 2 Banks.... 
 
 MISSISSIPPI. 
 
 Bank of State of Missis- > 
 sippi and Branches \ ' * ' 
 IBank. 
 
 TENNESSEE. 
 
 Bank of State of Tennessee 
 
 1 Bank. 
 
 643.503 
 
 950.600 
 
 737.817 
 
 OHIO. 
 
 Chilicothe 
 
 Steubenville , 
 
 Western Reserve Bank 
 
 Belmont Bank of St. Clairsville 
 
 Commercial of Scioto 
 
 Farmers of Canton 
 
 Farmers and Mechanics ) 
 of Steubenville j " 
 
 Franklin of Columbus 
 
 Lancaster Ohio Bank 
 
 Mount Pleasant 
 
 Marietta 
 
 Capital. 
 
 500.000 
 100.000 
 
 100.000 
 100.000 
 100.000 
 
 100.000 
 
 100.000 
 100.000 
 100.000 
 72.000 
 
 11 Banks.... 1.454.386 
 
 MICHIGAN. 
 
 Bank of Michigan 100.000 
 
 1 Bank. 
 
 FLORIDA. 
 
 Bank of Florida .. 75.000 
 
 Bank. 
 
 RECAPITULATION. 
 
 Massachusetts 
 
 Maine .. . 
 
 New-Hampshire ....... 
 
 Vermont 
 
 Rhode Island.., 
 
 Connecticut 
 
 New- York 
 
 New-Jersey 
 
 Pennsylvania 
 
 Delaware 
 
 Maryland 
 
 District of Columbia.... 
 
 Virginia 
 
 North Carolina 
 
 South Carolina 
 
 Georgia 
 
 20.420.000 
 2.050.000 
 1.791.670 
 432.625 
 6.118.397 
 4.485.177 
 
 20.083.353 
 2.017.009 
 
 14.609.963 
 830.000 
 6.250.495 
 3.875.794 
 5.571.100 
 3.195.000 
 4.631.000 
 4.203.029 
 
 Louisiana . 
 Alabama.. 
 Mississippi 
 Tennessee 
 
 Ohio 
 
 Michigan . 
 Florida .. 
 
 Delaware 
 Do... 
 
 329 
 1 
 
 330 
 
 5.665.980 
 643.503 
 I 950.600 
 
 737.8,17 
 
 1.454.386 
 
 10.000 
 
 L 75.000 
 
 110.101.898 
 
BANKS AND CURRENCY. 
 
 101 
 
 STATEMENT II. 
 Situation of State Panics, of which returns have been obtained. 
 
 1st of January, 1811. 
 
 STATE 
 
 No. of 
 Banks 
 
 Capital 
 
 Circulation 
 
 Specie 
 
 I! Massachusetts 
 
 15 
 6 
 13 
 1 
 4 
 6 
 4 
 1 
 
 6.292.144 
 1.250.000 
 1.917.000 
 269.760 
 6.153.050 
 4.895.202 
 2.341.395 
 1.500.000 
 
 2.082.331 
 496.077 
 542.508 
 227.423 
 3.221.948 
 2.730.000 
 927.397 
 2.942.717 
 
 1.354.666 
 255.998 
 394.470 
 49.474 
 819.322 
 850.000 
 450.000 
 1.499.512 
 
 
 1 Rhode Island 
 
 II New- York 
 
 
 II Maryland 
 
 1 District of Columbia . . 
 
 
 50 
 
 24.618.551 
 
 13.170.401 
 
 5.673.442 
 
 
 
 || 1815. 
 
 | Massachusetts. ....... 
 
 20 
 8 
 10 
 14 
 4 
 37 
 17 
 7 
 2 
 1 
 
 10.950.000 
 1.380.000 
 941.152 
 2.027.000 
 2.413.230 
 11.678.238 
 7.832.002 
 3.266.457 
 4.029.097 
 754.900 
 
 3.022.112 
 1.046.783 
 596.323 
 549.405 
 1.194.439 
 6.100.248 
 3.970.000 
 1.546.540 
 4.616.240 
 975.000 
 
 6.753.669 
 444.816 
 475.688 
 431.859 
 308.199 
 1.330.829 
 740.000 
 259.074 
 760.943 
 
 
 
 | Rhode Island 
 
 | New- York 
 
 
 
 1 District of Columbia . . 
 
 
 
 120 
 
 45.272.076 
 
 23.617.090 
 
 11.505.077 
 
 
 | 1816. 
 
 
 25 
 11 
 
 10 
 16 
 
 4 
 38 
 20 
 7 
 2 
 1 
 
 11.575.000 
 1.410.000 
 998.121 
 2.317.320 
 2.273.000 
 12.880.397 
 8.406.782 
 3.311.544 
 4.090.762 
 724.900 
 
 1.126.743 
 901.991 
 627.817 
 576.526 
 1.322.684 
 11.401.390 
 5.615.000 
 2.173.453 
 6.031.446 
 925.000 
 
 1.270.469 
 312.079 
 259.549 
 358.160 
 303.167 
 4.005.644 
 760.000 
 283.838 
 774.031 
 431.246 
 
 
 
 | Rhode Island 
 
 | New- York 
 
 
 1 Maryland 
 
 [District of Columbia .. 
 1 Virginia. . 
 
 K * 
 | Louisiana 
 
 
 134 
 
 47.987.826 
 
 31.702.050 
 
 8.758.183 
 
 
102 
 
 BANKS AND CURRENCY. 
 
 
 
 STATEMENT II. Continued. 
 
 1st of January, 1820. 
 
 STATE. |Sf| Capital 
 
 Circulation 1 Deposits Specie 
 
 Loans 
 
 Massachusetts 
 
 28 
 15 
 10 
 1 
 30 
 2 
 6 
 1 
 35 
 6 
 1 
 13 
 4 
 3 
 3 
 4 
 2 
 2 
 3 
 18 
 19 
 2 
 2 
 1 
 1 
 
 10.485.700 
 1.654.900 
 1.005.276 
 44.955 
 2.982.026 
 467.937 
 2.068.790 
 214.740 
 12.881.780 
 974.900 
 86.290 
 5.525.319 
 5.212.192 
 2.964.887 
 2.475.000 
 3.401.510 
 924.000 
 321.112 
 1.545.867 
 4.307.431 
 1.697.4i3 
 202.857 
 140.910 
 250.000 
 900.000 
 
 2.460.697 
 1.380.582 
 589.114 
 185.342 
 738.192 
 138.234 
 1.058.769 
 110.624 
 3.282.020 
 405.972 
 44.435 
 838.030 
 2.733.746 
 3.851.919 
 1.063.873 
 3.477.071 
 459.850 
 166.686 
 898.129 
 815.406 
 1.203.869 
 276.288 
 52.021 
 135.258 
 275.447 
 
 3.378.565 
 278.924 
 117.441 
 46.121 
 503.512 
 75.780 
 876.633 
 152.603 
 4.297.034 
 211.454 
 27.153 
 1.444.902 
 882.056 
 635.761 
 825.305 
 1.268.982 
 339.375 
 958.381 
 279.869 
 1.035.672 
 454.452 
 216.748 
 15] .604 
 773.652 
 212.980 
 
 1.337.172 
 521.317 
 228.831 
 49.690 
 406.867 
 44.645 
 301.009 
 21.413 
 2.003.295 
 115.502 
 21.030 
 265.234 
 993.673 
 705.582 
 395.791 
 813.750 
 290.543 
 192.708 
 343.882 
 693.381 
 433.612 
 86.350 
 74.715 
 252.563 
 79.608 
 
 
 Maine 
 
 New-Hampshire 
 
 Rhode Island 
 
 
 New- York 
 
 
 Pennsylvania 
 Delaware 
 
 
 District of Columbia 
 
 
 South Carolina 
 
 Louisiana 
 
 
 
 Kentucky 
 
 Ohio 
 
 
 
 
 Mississippi. . . 
 
 
 212 
 
 62.735.842 
 
 26.641.574 
 
 19.444.959 
 
 10.672.163 
 
 4 
 
 4/^o/ January, 1830. \J 
 
 Massachusetts 
 
 66 
 18 
 18 
 10 
 47 
 10 
 30 
 5 
 32 
 4 
 9 
 9 
 4 
 3 
 1 
 9 
 3 
 
 1 
 
 1 
 
 20.420.0^0 
 2.050.000 
 1.791.670 
 432.625 
 6.118.397 
 3.692.577 
 15.637.353 
 844.284 
 12.810.333 
 830.000 
 5.525.495 
 3.875.79<j 
 5.571.101 
 3.195.000 
 1.156.000 
 4.203.029 
 4.665.980 
 495.503 
 950.600 
 737.817 
 
 4.747.784 
 549.110 
 743.457 
 680.379 
 673.836 
 1.503.460 
 7.959.280 
 374.799 
 7.308.368 
 376.000 
 1.733.659 
 k 946.059 
 r 3.857.964 
 1.431.543 
 1.175.000 
 2.719.356 
 1.301.483 
 522.637 
 540.190 
 30.550 
 
 2.545.23U 
 497.072 
 173.682 
 124.880 
 861.031 
 452.444 
 10.354.500 
 307.201 
 6.841.448 
 300.000 
 1.864.397 
 564.894 
 1.974.171 
 452.389 
 793.000 
 1.382.634 
 2.016.560 
 136.656 
 547.756 
 339.174 
 
 987.213 
 208.921 
 226.423 
 428.817 
 343.389 
 337.788 
 1.560.291 
 83.667 
 2.414.669 
 170.000 
 777.009 
 228.914 
 832.732 
 179.268 
 129.000 
 1.305.141 
 1.492.674 
 127.596 
 77.665 
 78.461 
 
 28.59W894 
 2.565.256 
 2.466.291 
 856.814 
 6.909.705 
 4.195.690 
 20.370.693 
 1.153.407 
 21.474.173 
 not known 
 6.627.270 
 3^37.272 
 7.698.906 
 4.621.810 
 2.605.504 
 6.252.474 
 6.796.351 
 237.060 
 1.927.435 
 628.436 
 
 Maine 
 
 New-Hampshire .... 
 Vermont 
 Rhode Island 
 
 Connecticut 
 
 New- York . 
 
 lYew-Jersey 
 
 Pennsylvania . . . 
 
 
 Maryland .... 
 
 District of Columbia. 
 Virginia 
 
 North Carolina 
 South Carolina 
 
 Georgia . . 
 
 Louisiana 
 
 Alabama 
 
 Mississippi 
 
 
 Total.... 
 
 Capital on which 
 oans are not given. 
 New-York 4.394.000 
 Delaware 830.000 
 
 281 
 
 95.003.557 
 5.224.000 
 
 39.174.914 
 
 32.531.119 
 
 11.999.643 
 
 129.815.441 
 
 Capital on which 
 oans are given 
 
 89.779.557 
 
BANKS AND CURRENCY. 
 
 103 
 
 STATEMENT III. 
 
 Number and Capital of the State Banks, of the situation of 
 which returns have not been obtained. 
 
 STATES. 
 
 First of January, 
 1811 1815 1816 1820 1830 
 
 No. 1 Capital JNo. I Capital 
 
 No.| Capital 'JNo. | Capital JNo. 
 
 Capital 
 
 Massachusetts. . . 
 
 8 
 5 
 
 g 
 
 4 
 
 1 
 1 
 
 1 
 1 
 
 4 
 
 815.250 
 1.933.000 
 7.253.000 
 739.740 
 
 1.576.600 
 3.475.000 
 210.000 
 754.000 
 
 100.000 
 240.460 
 895.000 
 
 1 
 
 10 
 22 
 11 
 5 
 5 
 
 3 
 
 2 
 3 
 5 
 2 
 2 
 
 1 
 2 
 2 
 ]> 
 
 88 
 
 100.000 
 
 3.655.750 
 l(i.533.08fi 
 2.121,932 
 3.390.580 
 966.9SO 
 
 811.838 
 92.000 
 1.576.600 
 3.730.900 
 623.580 
 677.400 
 
 100.000 
 212.962 
 959.175 
 1.434.719 
 
 1 
 3 
 
 10 
 23 
 11 
 5 
 5 
 
 3 
 
 10 
 3 
 5 
 
 3 
 
 2 
 
 1 
 4 
 2 
 21 
 
 75.000 
 450.000 
 
 4.017.575 
 16.493756 
 2.072.115 
 2.504.200 
 974.500 
 
 982469 
 421.415 
 2.776.600 
 3.832.758 
 1.502.600 
 697.400 
 
 ' 100.000 
 815.281 
 2.057.000 
 2.061.927 
 
 C 
 
 o~ 
 
 13 
 
 1 
 
 13 
 
 2 
 
 2 
 1 
 
 5 
 24 
 1 
 
 3221.400 
 16 919.984 
 1.916.209 
 1.800.000 
 
 6.G21.841 
 
 2.000.000 
 
 1.673.420 
 148.000 
 
 573.915 
 4.500.000 
 100.000 
 
 3 
 
 7 
 13 
 1 
 *1 
 4 
 
 4 
 
 1 
 ] 
 
 11 
 
 1 
 
 1 
 
 792.600 
 4.440.000 
 1.172.725 
 1.800.000 
 not known 
 725.000 
 
 3.475.000 
 
 1.000.000 
 148.000 
 
 1.454.386 
 
 100.000 
 75.000 
 
 New-Hampshire . 
 Connecticut. 
 New- York 
 New- Jersey 
 Pennsylvania . .. 
 Delaware 
 Maryland 
 Dist. of Columbia 
 Virginia 
 North Carolina . . 
 South Carolina . . 
 
 Louisiana 
 Alabama 
 Mississippi 
 Tennessee 
 Kentucky 
 Ohio 
 
 Indiana 
 Illinois 
 
 Michigan 
 Florida 
 
 
 38 
 
 17.992.050 
 
 36 987.514 
 
 112 
 
 41.834.596 
 
 95 
 
 39.474.769 
 
 48 
 
 15.188.711 
 
 * And Bank of Wilmington, not included 1 
 
 49 
 
 STATEMENT IV. 
 
 A List of the Banks which have failed, or discontinued their 
 business, from 1st January 1811, to 1st July 1830. 
 
 Capital. 
 MASSACHUSETTS. 
 
 Essex 300.000 
 
 New-Bedford 150.000 
 
 Northampton 75.000 
 
 Farmers, (Belchertown) 100.000 
 
 Brighton 150.000 
 
 Button... 75.000 
 
 6 Banks.... 850.000 
 
 MAINE. 
 
 Maine 300.000 
 
 Penobscot 150.000 
 
 Wiscasset 100,000 
 
 Hallowel 150.000 
 
 Kennebeck 100.000 
 
 Passamaquoddy 50.000 
 
 Castine 100.000 
 
 Lincoln and Kennebeck . . 200.000 
 
 8 Banks.... 1.150.000 
 
 Capital. 
 RHODE ISLAND. 
 
 Farmers and Mechanics, > ^QQ QQQ 
 
 Far's. Exchange, Gloucester. . 
 
 IBank.., 200.000 
 
 NEW-HAMPSHIRE. 
 
 Coos 100.000 
 
 Concord.. 29.600 
 
 2 Banks.... 129.600 
 
 CONNECTICUT. 
 
 Eagle 500.000 
 
 Derby 100.000 
 
 2 Banks... 600.000 
 
104 
 
 BANKS AND CURRENCY. 
 
 STATEMENT 
 
 IV. Continued. 
 
 Capital. 
 NEW-YORK. 
 
 J Barker's Exchange 495250 
 
 Capital. 
 MARYLAND. 
 
 Elkton 110000 
 
 Utica Insurance Co 100.000 
 
 Conococheague ... 157 500 
 
 Columbia ,..- 167.650 
 
 Cumberland 107 862 
 
 Hudson . . 110000 
 
 Somerset and W 90 000 
 
 Niagara 108 000 
 
 Somerset 195 850 
 
 1 Pittsburgh 300.000 
 
 Caroline . 103 045 
 
 j Washington and Warren 400.000 
 
 Havre de Grace 132 075 
 
 New-York Manufacturing Co. 700.000 
 
 City . 838 540 
 
 Franklin . 510000 
 
 Planters P George's County 86 290 
 
 Middle District 487 776 
 
 
 Calskill Aqueduct Association 
 
 9 Banks 1 821 162 
 
 
 
 10 Banks.... 3.378.676 
 NFW TFR^FV 
 
 DISTRICT OF COLUMBIA. 
 Columbia 901.200 
 
 
 Union of Alexandria 340000 
 
 Jersey City Bank 200 000 
 
 Central 252 995 
 
 Patterson 160 000 
 
 Franklin. . 163265 
 
 ' State Bank Trenton 92 400 
 
 
 i Protection and Lombard 200 000 
 
 4 Banks 1 657 460 
 
 Franklin 300 000 
 
 
 Monmouth 40 000 
 
 
 Manufacturing 150 000 
 
 VITCGTNrA 
 
 Salem and Philadelphia . . 
 
 
 Hoboken 
 
 OhioCo 60.000 
 
 
 Charleston M. arid C. Co 32.580 
 
 7 Banks 1 142 400 
 
 Winchester 122 930 
 
 
 Monongalia 25 000 
 
 PENNSYLVANIA. 
 
 Farmers and Mechanics, ) 
 Harper's Ferry }" 19 ' 480 
 South Branch 25 000 
 
 Washington . 92 070 
 
 Farmers, Merchants, and > OA Af)C . 
 
 Farmers and Mechanics ) -, AQt . 
 ofGreencastle \"' "4.485 
 
 Mech's. Jefferson Co. \'~ ZbA ^ 
 Warrentown 60.000 
 
 Do do of Pittsburgh 65 337 
 
 Leesburg Union . 20 000 
 
 Juniata 164478 
 
 Loudon Co 30.000 
 
 Marietta and Susquehan- 
 nah Trading Co. " 239 ' 430 
 Pennsylvania Agr'l. and 
 Man'g.Bank " lla102 
 Delaware Bridge ... 99 715 
 
 10 Banks.... 421.415 
 NORTH CAROLINA. 
 
 Allegheny . 144 807 
 
 
 Beaver 7fi PS^l 
 
 Fayetteville 
 
 
 Bertie 
 
 Centre . 159 610 
 
 
 Huntingdon 123 122 
 
 SOUTH CAROLINA. 
 
 Northumberland, Union 
 
 Cheraw 20 000 
 
 and Columbia 
 
 Hamburg , 
 
 North- Western Bank 77.688 
 
 
 Union of Pennsylvania 124.792 
 
 
 Silver Lake 64.882 
 
 IBank 20.000 
 
 Fayette, New-Salem 
 
 
 Harmony , 
 
 
 Wilkesbarre Branch 
 
 GEORGIA. 
 
 
 Darien 480 000 
 
 16 Banks.... 1.811.558 
 
 1 Rinlr 
 
 DELAWARE. 
 
 LOUISIANA. 
 
 Planters Bank SOO 000 
 
 Farmers and Mechanics > 
 
 Bank of Louisiana 724 000 
 
 of Delaware <"' 45 - 000 
 
 
 IBank. 
 
 2 Banks.... 924.000 
 
 
 
BANKS AND CURRENCY. 
 
 105 
 
 STATEMENT IV, -Continued. 
 
 Capital. 
 ALABAMA. 
 
 Planters and Merchants 164.175 
 
 Tombeckbe 156.937 
 
 Steamboat 16.000 
 
 3 Banks.... 337.112 
 
 TENNESSEE. 
 
 Fayelteville Transfer 110.000 
 
 Farmers and Mechanics > iftnonn 
 of Nashville {'' 
 
 Nashville and Branches 994.560 
 
 Tennessee Bank, (old) 371.107 
 
 3 Brandies of do 300.0GO 
 
 .Mashvillo Brarif h of do 20t.77f> 
 
 Rogeraville Branch do 67.140 
 
 4 Banks and 5 Branches . 2.229.782 
 
 KENTUCKY. 
 Farmers and Mechanics \ 
 
 of Lexington, (slock fy . . . 489.700 
 
 notes at par) J 
 
 Versailles 111.180 
 
 Kentucky and Branches 2.756.220 
 
 Flemingsburg 61.626 
 
 Limestone 135.825 
 
 Shepherdsville 55.880 
 
 Hinkston Exporting Co 50.120 
 
 New-Castle 40.520 
 
 Cynthiana 47.900 
 
 Centre Bank of Kentucky .... 120.000 
 
 Union of Elizabelhtox vn 39.400 
 
 Farming and Commercial Bk. 37.219 
 
 Greenville 46.640 
 
 Newport 54.700 
 
 Southern Bank of Ky 1 17.222 
 
 Farmers of Harrodsburg 81.000 
 
 " " Somerset 22.379 
 
 Lancaster Exporting Co 39.900 
 
 Insurance 
 
 Barboursyille 
 
 Cumberland Bank of Burkville 
 
 Burlington 
 
 Bank of Columbia 
 
 Frankfort 
 
 Georgetown 
 
 Greensburgh 
 
 Green River 
 
 Christian Bank 
 
 Bank of Henderson 
 
 : of Washington 
 
 Commercial Bank of Louisville 
 
 Mount Sterling 
 
 Morgantown 
 
 Monticello 
 
 Farmers Bank of Jessamine 
 
 Owingsville 
 
 Petersburg Steam Mill 
 
 Farmers Bank of Gallatin 
 
 Far's. and Mechanics of Logan 
 
 Do. do. of Shelby ville 
 
 Amount carried forward 2.307.431 165 
 
 Capital. 
 
 Amount brought forward 2.307.431 
 Far's. and Mech's. of Springfield 
 
 Winchester Com'l 
 
 Commonwealth Bank 2.000.000 
 
 (tiQminaL) 
 
 18 Banks.... 4.307.431 
 
 OHIO. 
 
 Miami Exporting Co. ) 
 Cincinnati j '" 
 
 Columbia, New Lisbon 
 
 Granville Alex'n. Soc 
 
 Farmers Bank of New Salem. 
 
 Gorman of Wooster 
 
 Muskingum 
 
 Farmers arid Mechanics ) 
 of Cincinnati j " ' 
 
 Cincinnati .... 
 
 Dayton Manufacturing , 
 
 Lebanon Miami Bank'g. Co. . , 
 
 Urbana Banking Co ,., 
 
 Farmers and Mechanics ) 
 
 Man'g. Chilicothe j ' ' 
 
 Hamilton 
 
 Zanesville Canal and > 
 
 Manufacturing Co. $ " ' 
 
 West Union 
 
 Lake Erie 
 
 Steubenville 
 
 Muskingum of Zanesville 
 
 Jefferson Co 
 
 Bank ofXenia.. . 
 
 468.9G6 
 
 50.000 
 
 12.002 
 57.000 
 25.000 
 97.800 
 
 184.776 
 
 216.430 
 61.622 
 86.491 
 49.685 
 
 99.575 
 22.707 
 79.125 
 
 100.000 
 100.000 
 100.000 
 100.000 
 
 18 Banks 1.911.179 
 
 INDIANA. 
 
 Farmers and Mechanics Bk. . . 1 30.000 
 
 Bank of Vincennes 127.624 
 
 2 Banks.... 257.624 
 *. ILLINOIS. 
 
 Edward-svnle 
 
 105.720 
 57.190 
 
 2 Banks.... 162.910 
 
 MISSOURI. 
 
 Bank of Missouri 250.000 
 
 " " St. Louis 150.000 
 
 2 Banks.... 400.000 
 MICHIGAN. 
 "iBank. 
 
 Munroe 
 
 10.000 
 
 RECAPITULATION. 
 
 129 Banks $24.212.339 
 
 36 do not known. 
 
106 
 
 BANKS AND CURRENCY. 
 
 STATEMENT V. 
 
 Depreciation, per cent., of Bank Notes, during the suspension 
 
 of specie payments. 
 
 'hilatlel- I Ne\v- 
 phia. I York. 
 
 1814. September . 
 
 October 
 
 November . 
 
 December . 
 1915. January . . . 
 
 February . . 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 August .... 
 
 September. 
 
 October . . . 
 
 November. 
 
 10 
 14 
 
 16 
 
 20 
 
 19 
 
 20 
 
 21 \ 
 
 15 
 
 14 
 12J 
 13 
 16 
 
 Balli- 
 more. 
 
 18J 5. December 
 
 1816. January .. . 
 February . . 
 
 March 
 
 April 
 
 May 
 
 June 
 
 July 
 
 A ugust 
 September . 
 October.. .. 
 November . 
 December . 
 
 1817. January . . . 
 February . . 
 
 Hiil:i,l;|. 
 
 _!^ ia ;_ 
 14 
 11 
 11 
 
 m 
 
 New- 
 Vorlt. 
 
 STATEMENT VI. 
 
 Average amount, for the years 1819^-1829, of the principal 
 items of the Situation of the Bank of the United States. 
 
 1319 
 1820 
 1821 
 
 1822 
 1893 
 1824 
 1825 
 
 1826 
 1827 
 1828 
 1829 
 
 Discounts. 
 
 32211.674 
 
 28.808.267 
 27.099.050 
 28.574.893 
 30.584.919 
 29.478.255 
 29.327.219 
 29.592.103 
 27.948.592 
 30.320.944 
 32.703280 
 
 336.7(50 
 1.526.600 
 1.598.473 
 2.394.688 
 2.588.245 
 2.563.672 
 3.270.699 
 3.592.145 
 4.568.297 
 6.018.784 
 8.417.021 
 
 7.236.153 
 8.258.701 
 11.859.296 
 13.116.004 
 10.911.700 
 13.373.095 
 19.807.fiG5 
 17.885.210 
 17.724.192 
 17.127.077 
 13.925.701 
 
 Seres" Real Estate. Specie. 
 
 39.784.587 
 
 38.593.568 
 
 40.556.619 
 
 44.085 785 
 
 44.084.864 
 
 45.415 022 1.393.193 
 
 52.405.583 1.566.728 
 
 51.069.45!- 
 50.244.081 
 
 53.966.805 2.298.352 
 55 046.002 2.474.750 
 
 245.846 
 579.152 
 736.370 
 
 1.745.566 
 2.118.560 
 
 2.743.834 
 5.214.773 
 6.469.224 
 3.711.145 
 4.899.686 
 5.909.351 
 4.686.557 
 5.174.643 
 6.327.758 
 6.205.107 
 
 5.734.682 
 
 6.581.628 
 
 6.990.073 
 
 G.3G5.570 
 10.401.786 
 12.918.108 
 12.885.829 
 12.578.523 10.235 
 13.727274 
 
 15.172.164 
 
 5.056 829 
 
 4 410.332 
 
 5 609.220 
 5.502.335 
 4071271 
 5.H35.491; 
 8.836.646 
 
 5528 
 10.808.244 
 
 14.454.169 12.414.390 
 
 15011.352 
 
 The actual amount of circulation is generally four-fifths of the gross amount, the 
 rest being notes in transitu, or accumulated in offices where they are not payable. 
 
 STATEMENT VII. 
 Actual circulation of the Bank of the United States in Septem- 
 ber, 1830, showing where the Notes were payable. 
 
 Where payable. 
 
 Notes in 
 circulation. 
 
 Bank United States 1.367.180 
 
 Portland 79.280 
 
 Portsmouth 101.985 
 
 Boston 271.180 
 
 Providence 1 13.920 
 
 Hartford 171.532 
 
 New-York 834.733 
 
 Baltimore 528.638 
 
 Washington 647.602 
 
 Richmond 469.440 
 
 Norfolk 532.400 
 
 ^ayetteville 713.760 
 
 Charleston 835.840 
 
 Savannah 522,605 
 
 Amount carried forward 7.190.095 
 
 Where payable. 
 
 Amount brought forward 
 
 Mobile 
 
 New-Orleans 
 
 -St. Louis 
 
 Nashville 
 
 Louisville 
 
 Lexington 
 
 Cincinnati . . , 
 
 Pittsburgh 
 
 BufTaloe 
 
 Burlington 
 
 Agencies Cincinnati > 
 and Chihcothe < 
 
Philadelphia, February, 1831, 
 
 Just Published, by Carey <$f Lea, 
 
 And sold in Philadelphia by E. L. Carey <$ A. Hart ; in New- York by G. 4' 
 C'. $ H. Carvill; in Boston by Carter <f Hendee in Charleston by W.H. Berrett 
 in New-Orleans by W. M'Kean ; by the principal booksellers 'throughout the 
 
 Union, 
 
 AND IN LONDON, BY JOHN MILLER, ST. JAMES'S STREET. 
 VOL. V. 
 
 (To be continued at intervals of three months,) 
 
 OF THE 
 
 ENCYCLOPAEDIA AMERICANA : 
 
 A 
 
 POPULAR DICTIONARY 
 
 OF 
 
 ARTS, SCIENCES, LITERATURE, HISTORY, AND POLITICS, 
 
 BROUGHT DOWN, TO THE PRESENT TIME, AND INCLUDING A COPIOUS COLLECTION 
 OF ORIGINAL ARTICLES IN 
 
 AMERICAN BIOGRAPHY: 
 
 On the basis of the Seventh Edition of the German 
 
 CONVERSATIONS-LEXICON. 
 
 EDITED BV DR. FRANCIS LIEBER, 
 ASSISTED BY EDWARD W1GGLESWORTH, ESQ. 
 
 To be completed in twelve large volumes, octavo, price to subscribers, bound in cloth, two 
 dollars and a half each. 
 
 EACH VOLUME WILL CONTAIN BETWEEN GOO AND 700 PAGES. 
 
 THE CONVERSATION LEXICON, of which the seventh edition in twelve volumes 
 has lately been published in Germany, originated about fifteen years since. It 
 was intended to supply a want occasioned by the character of the nge, in which 
 the sciences, arts, trades, and the various forms of knowledge and of active life, 
 had become so much extended and diversified, that, no individual engaged in busi- 
 ness could become well acquainted with all subjects of general interest ; while 
 the wide diffusion of information rendered such knowledge essential to the char- 
 acter of an accomplished man. This want, no existing works were adequate to 
 supply. Books treating of particular branches, such as gazetteers, &c. were too 
 confined in character ; while voluminous Encyclopaedias were too learned, scien- 
 tifie, and cumbrous, being usually elaborate treatises, requiring much study or 
 previous acquaintance with the subject discussed. The conductors of the CON- 
 VERSATIONS-LEXICON endeavored to select from every branch of knowledge what 
 was necessary to a well-informed mind, and to give popular views of the more 
 abstruse branches of learning and science ; that their readers might not be in- 
 eommoded, and deprived of pleasure or improvement, by ignorance of facts or 
 expressions used in books or conversation. Such a work must obviously be of 
 great utility to every class of readers. It has been found so much so in Germany, 
 that it is met with everywhere, among the learned, the lawyers, the military, art- 
 ists, merchants, mechanics, and men of all stations. The reader may judge how 
 well it is adapted to its object, from the circumstance, that though it now consists 
 of twelve volumes, seven editions, comprising about ONE HUNDRED THOUSAND COPIES, 
 have been printed in less than fifteen years. It has been translated into the 
 Swedish, Danish and Dutch languages, and a French translation is now preparing 
 in Paris. 
 
108 ENCYCLOPAEDIA AMERICANA. 
 
 A great advantage of this work is its liberal and impartial character ; and there 
 can be no doubt that a book like the ENCYCLOPAEDIA AMERICANA will be found 
 peculiarly useful in this country, where the wide diffusion of the blessings of 
 education, and the constant intercourse of all classes, create a great demand for 
 general information. 
 
 In the preparation of the work thus far, the Editors have been aided by many 
 gentlemen of distinguished ability ; and for the continuation, no efforts shall bo 
 spared to secure the aid of all who can, in any way, contribute to render it worthy 
 of patronage. 
 
 The American Biography, which is very extensive, will be furnished by MR. 
 WALSH, who has long paid particular attention to that branch of our literature, 
 and from materials in the collection of which he has been engaged for some years. 
 For obvious reasons, the notices of distinguished Americans will be confined to 
 deceased individuals: the European biography contains notices of all distin- 
 guished living characters, as well as those of past times. 
 
 The articles on Zoology have been written expressly for the present edition by 
 DR. JOHN D. GODMAN; those on Chemistry and Mineralogy, by a gentleman 
 deeply versed in those departments of science. 
 
 In relation to the Fine Arts, the work will be exceedingly rich. Great atten- 
 tion was given to this in the German work, and the Editors have been anxious to 
 render it, by the necessary additions, as perfect as possible. 
 
 To gentlemen of the Bar, the work will be peculiarly valuable, as in cases 
 where legal subjects are treated, an account is given of the provisions of Ameri- 
 can, English, French, Prussian, Austrian, and Civil Law. 
 
 The Publishers believe it will be admitted, that this work is one of the cheapest 
 ever published in this country. They have been desirous to render it worthy of 
 a place in the best libraries, while at the same time they have fixed the price so 
 low as to put it within the reach of all who read. 
 
 Those who can, by any honest modes of economy, reserve the sum of two dollars and fifty 
 cents quarterly, from their family expenses, may pay for this work as fast as it is published ; 
 and we confidently believe that they will find at the end that they never purchased so much 
 general, practical, useful information at so cheap a rate. Journal of Education. 
 
 If the encouragement to the publishers should correspond with the testimony in favor of 
 thoir enterprise, and the beautiful and faithful style of its execution, the hazard of the under- 
 taking, bold as it was, will be well compensated; and our libraries will be enriched by the 
 most generally useful encyclopedic dictionary that has been offered to the readers of the Eng- 
 lish language. Full enough for the general scholar, and plain enough for every capacity, it is 
 far more convenient, in every view and form, than its more expensive and ponderous prede- 
 cessors. American Farmer. 
 
 The high reputation of the contributors to this work, will not fail to insure it a favorable 
 reception, and its own merits will do the rest.Sillimaris Journ. 
 
 The work will be a valuable possession to every family or individual that can afford to 
 purrhat-o it; and we take pleasure, therefore, in extending the knowledge of its merits. 
 *\'iit ion-iil Jii.tclli.gciicer. 
 
 The EiKydoptedia Americana is a prodigious improvement upon all that has gone before 
 it ; a thing for our country, as well as the country that gave it birth, to be proud of; an incx- 
 Iriustiblo treasury of useful, pleasant and familiar learning on every possible subject, so ar- 
 raiiiM'd as to bo speedily and safely referred to on emergency ,~as well as on deliberate inquiry; 
 ;nut !i 'tier still, adapted to the understanding, and put within the reach of the multitude.. 
 * * * Tlu; Encyclopedia Americana is a work without which no library worthy of the 
 narni; can hereafter be made up. Yankee. 
 
 The copious information which, if a just idea of the whole may be formed from the first, 
 volume, this work atlbrds on American subjects, fully justifies its title of an American Die 
 tionary; while at the; same time the extent, variety and felicitous disposition of its topics,; 
 make it the most convenient and satisfactory Encyclopaedia that we have ever seen.' 
 National Journal. 
 
 If the succeeding volumes shall equal in merit the one before us, we may confidently antici- 
 pate for the work a reputation and usefulness which ought to secure for it the most flattering 
 encouragement and patronage. Federal Gazette. 
 
 The variety of topics is of course vast, and they are treated in a manner which is at once 
 so ('till of information and so interesting; that the .work, insle;;'i of being merely referred to, 
 im^h! I)'.- regularly perused with as much pleasure as profit. Baltimore American. 
 
 We view it as a publication worthy of the age and of the country, and cannot but believe 
 the discrimination of our countrymen will sustain the publishers, and well reward them foi 
 this contribution to American Literature. Baltimore Patriot. 
 
 Wi 1 cannot doubt, that \\v. succeeding volumes will equal the first, and we hence warmly 
 recommend the work to the patronage of the public, as being by far the best work of the kind 
 ever offered for sale in this country U. . Gazette. 
 
SUGGESTIONS 
 
 ON THE 
 
 BANKS AND CURRENCY 
 
 O F 
 
 THE SEVERAL UNITED STATES, 
 
 IN REFERENCE PRINCIPALLY TO THE 
 
 SUSPENSION OF SPECIE PAYMENTS. 
 
 BY ALBERT GALLATIN. 
 
 X 1 
 
 NEW- YORK: 
 
 WILEY AND PUTNAM. 
 
 1841. 
 
Printed by J. P. Wright, IS New Street, N. Y. 
 
TABLE OF CONTENTS. 
 
 Page 
 
 PRELIMINARY OBSERVATIONS, 
 
 Presumed Advantages of a Paper Currency, 9 
 
 Tendency to degenerate into Irredeemable Paper, .... 20 
 
 Fatal Consequences, 22 
 
 CAUSES AND INCIDENTS OF THE BANK SUSPENSIONS, ...... 25 
 
 Suspension of 1837, 25 
 
 Resumption of 1838, 37 
 
 Subsequent Suspensions, 41 
 
 REMEDIES, 46 
 
 By the States, 46 
 
 State Debts Pennsylvania, 47 
 
 Restrictive System Chartered Banks of New York, ... 54 
 
 Free Banking Law of New York, 67 
 
 By the United States, 86 
 
 Specie Treasury, 86 
 
 A National Bank, 88 
 
 A Bankrupt Law, 96 
 
 APPENDIX. 
 
 Documents relating to the Resumption of 1837, 101 
 
 Letters of the Author, written in April and May, 1830, . . . 120 
 
 I. Situation of the Banks in May 1837 and May 1838, . . 123 
 
 II. Approximate View of the Population, Banking Capital, 
 
 and Debts of the several States and Territories, . . . 124 
 
PRELIMINARY OBSERVATIONS. 
 
 ALL the Banks of the United States are joint stock companies, 
 generally incorporated by the special laws of the several States ; 
 in a few late instances established in conformity with the provi- 
 sions of a general law. In neither case are the shareholders 
 responsible beyond the amount of the capital subscribed. All 
 these joint stock companies are banks of deposit, discount and 
 issue ; they all discount negotiable paper, purchase and sell do- 
 mestic and occasionally foreign bills of exchange, receive depo- 
 sits, or open cash credits to individuals, and issue bank notes, 
 always, nominally at least, payable on demand in specie (a). 
 These notes have become the local and sole currency of the 
 several places or sections of country where they are respective- 
 ly made payable. Banking in America always implies the right 
 and the practice of issuing paper money as a substitute for a 
 specie currency. 
 
 On the 1st of January 1830 and 1840, respectively, the capi- 
 tal, liabilities payable on demand, and resources, of all the char- 
 tered banks in the United States, were, as far as can be ascer- 
 tained, nearly as follows, viz. : 
 
 1830. 1840. 
 
 Number of Banks 322 659 
 
 Capital $ 145,000,000 $343,000,000 
 
 Actual Circulation and Deposits, payable on demand, 100,000,000 158,000,000 
 
 Other liabilities not great 44,000,000 
 
 245,000,000 545,000,000 
 
 Discounted Paper, Stocks and Securities, altogether 216,000,000 513,000,000 
 
 Specie 20,000,000 32,000,000 
 
 236,000,000 545,000,000 
 
 (a) Post-notes, not payable on demand, may be sold and purchased, as other 
 negotiable paper, vary in value, and do not form part of the currency proper. 
 
 2 
 
10 
 
 There can be no doubt that, in their origin, the Banks were 
 instituted for the purpose of affording accommodations to the 
 commercial interest, and of supplying the want of a capital pro- 
 portionate to the extent of the legitimate commerce of the coun- 
 try. The prodigious increase of banking capital and accommo- 
 dations within the last ten years, so much exceeding that which 
 might be actually wanted for promoting the productive industry 
 of the country, has been attended with consequences affecting 
 all classes, and so fatal, in reference to the currency, that it ap- 
 pears proper, in the first place, to ascertain what are the benefits 
 actually bestowed on the community at large by the substitution 
 of a paper for a specie currency: and these advantages must be 
 reduced to their true value, by distinguishing those which belong 
 exclusively to the issues of paper money, from those which 
 might be equally enjoyed with banks and bankers issuing no pa- 
 per currency and carrying on every other species of banking 
 operations. 
 
 These advantages appear to be, commercial punctuality, and 
 the facilities afforded in effecting payments, collecting debts, and 
 making remittances ; the conversion of unproductive into pro- 
 ductive capital ; the saving of a capital tantamount to the enjoy- 
 ment of an additional capital, and bearing a certain proportion 
 to the amount of paper issues. All but the last might be equally 
 attained with banks or private bankers who issued no paper 
 currency. 
 
 Punctuality in fulfilling engagements should be practised by 
 all ; but it is essentially a commercial virtue. Credit, at least to 
 a certain extent, is absolutely necessary to commerce. Every 
 merchant must, for the fulfilment of his own engagements, de- 
 pend principally on the punctual payment of the debts due to him. 
 This punctuality is so necessary, and the advantages derived 
 from it have become so habitual, that the memory of its origin 
 may be lost. It was indubitably due to the establishment of 
 banks. At the close of the war of Independence, Philadelphia 
 was the only place in the United States where commercial 
 punctuality was general, and that city was indebted for it to 
 the Bank of North America. The same effect was succes- 
 sively produced, as banks were established, in New- York, 
 Boston, Baltimore, and the other commercial cities ; and final- 
 
11 
 
 ly almost universally, or wherever country banking has pene- 
 trated. 
 
 It must be observed, that a very small banking capital was 
 sufficient for that purpose, since that object was attained, in each 
 of the several commercial cities, by a single bank, with a capital 
 of not more than five to eight hundred thousand dollars. The 
 merchant who did not pay his discounted note could no longer 
 receive accommodations from the bank ; and the protest of a 
 note, either discounted or placed in the bank for collection, be- 
 came soon sufficient to prostrate his credit. But the result would 
 have been the same, had the bank been only one of deposit and 
 discount, and not of issue. Commercial punctuality is as indis- 
 pensable and universal in all the cities of continental Europe as 
 in America, though no banks of issue existed there, except in 
 Amsterdam, in Paris, and very lately in some other towns of 
 France. This great advantage, though it had its origin here in 
 banks of issue, is not one which belongs exclusively to such 
 banks. 
 
 The same observation will apply to the conversion of unpro- 
 ductive into productive capital, which has been effected by our 
 banks. Every merchant, every person, who enjoys or earns a 
 certain income, always keeps on hand a certain amount of cur- 
 rency proportionate to his engagements, to his wealth, and to his 
 wants. So long as it remains in his possession, it is altogether 
 unproductive. Deposited in bank, it becomes a part of the funds 
 applied by the banks to discounts, or in other words, to advances 
 made to the commerce, manufactures, and generally to the pro- 
 ductive industry of the country. But, in order to produce that 
 effect, it is sufficient that the bank should be one of deposit, and 
 not that it should issue bank notes. Throughout Europe, the 
 same description of persons who here make deposits, or, which 
 is the same thing, who keep an account with our banks of issue, 
 do deposit or keep an account with private bankers who issue 
 no bank notes. And those bankers give the same facilities in 
 effecting payments, collecting debts, and making remittances, 
 which are afforded by the American banks of issue. 
 
 It is therefore principally, if not exclusively, in the substitution 
 of a paper currency, which costs little or nothing, for one in gold 
 and silver, which has an intrinsic value, that the benefit derived 
 
12 
 
 from the paper issues does consist. The actual circulation of all 
 the banks in the United States does not, when in a healthy 
 situation, much exceed eighty millions of dollars. Deducting 
 twenty millions in specie, which the banks must keep, on an 
 average, to meet demands on that part of their liabilities, there 
 remain sixty millions, which, instead of being applied to the 
 purchase of gold and silver currency, are applied to productive 
 purposes, and add as much to the productive capital of the 
 country. It may already be inferred that the deposits must not 
 be included in the computation, and that the profit consists only 
 of the difference between the actual issues and the specie kept 
 to meet demands on that account : but this branch of the subject 
 requires further explanation. 
 
 The exchange of the commodities produced in different coun- 
 tries, or in different districts of the same country, is the basis of 
 all the commercial transactions between those countries or dis- 
 tricts. As that commerce becomes more extensive and regular, 
 the principle of the division of labor is applied ; the purchase 
 and importation of the foreign, and the exportation and sale of 
 the domestic commodities given in exchange, become distinct 
 branches of business ; masses of respective credits and debits 
 are created ; and by far the greater part of the actual payments 
 is effected by the transfer of those credits, through the medium 
 of foreign or domestic bills of exchange. 
 
 A small portion only is paid in currency ; for when the balance 
 of indebtedness is large, an extension of credit is generally 
 granted. In large transactions, even not of a commercial nature, 
 such as the purchase of land, it will be found that the payments 
 are also principally made by the transfer of credits accumulated 
 for that purpose, and rarely to a large amount in specie. 
 
 The deposits in banks are but occasionally made in specie. 
 They generally consist of transfers of credit from banks, or arise 
 from a note owned by the party, and discounted in his favor. 
 Whatever their origin may be, they are credits opened in the 
 books of banks, in favor of individuals to whom they are pay- 
 able on demand. And as payments between country and coun- 
 try, or district and district, are effected by the transfer of 
 credits through the medium of bills of exchange, so also pay- 
 ments in all the transactions of any importance, between inhabi- 
 
13 
 
 tants of the same city or district, are effected by checks on the 
 banks, that is to say, by the transfer of those bank credits which 
 are called deposits. 
 
 These checks, like bills of exchange, may be considered as a 
 substitute for currency ; or, as a special currency, between deal- 
 ers and dealers, when the credit in bank (deposit) is in favor of 
 a dealer ; between consumers and dealers, when the deposit has 
 been made by a person not in active business. They differ from 
 bank issues, in that they are not received, as bank notes are, as 
 a full payment of a debt ; and that, if not paid by the bank, the 
 drawer is still responsible. The bank note is taken in payment 
 solely from the general confidence reposed in the bank ; the 
 check, from the special confidence placed in the drawer. 
 
 But the deposits, or cash credits on the books of a bank, are a 
 liability of the bank payable on demand like bank notes. In re- 
 ference to such bank, the actual issues and deposits, though not 
 always pressing on it at the same time and to the same extent, 
 are liabilities of the same nature, and for which provision must 
 be equally made. 
 
 Of the great benefits derived from these deposits, considered 
 as substitutes for currency, and effecting payments with much 
 greater facility than can be done with the precious metals, there 
 can be no doubt. The perpetual transfers of twelve millions of 
 dollars of individual deposits, that is to say, of credits in favor 
 of individuals, in the several banks of the city of New- York, 
 together with one or two millions of notes of a large denomina- 
 tion, which pass daily from bank to bank, and make no part of 
 the general circulation, are sufficient to effect annually payments 
 amounting to about twelve hundred millions. It appears by the 
 late statements of the Bank of France, that although the private 
 deposits of that institution do not exceed seventy millions of 
 francs, the transfers (mouvemens) of these were sufficient to ef- 
 fect, in six months, payments (liquidations) amounting to seven- 
 teen hundred and forty-two millions. By an analogous, though 
 not perfectly similar, process, the actual daily payment of an ul- 
 timate balance of two or three hundred thousand pounds in spe- 
 cie or in notes of the Bank of England, effects daily payments of 
 four or five millions sterling in the clearing-house of the London 
 bankers. The same benefits were derived from the ancient 
 
14 
 
 Bank of Amsterdam ; and the Bank of Hamburg is founded on 
 the same principle. Neither of these institutions ever issued pa- 
 per money, or was even a bank of discount. It was only as 
 banks of deposit, and solely by the transfers of credits substituted 
 for payments in specie, that they accomplished the purpose of 
 discharging, with increased facility, almost all the engagements 
 growing out of the commercial transactions of those two 
 cities. 
 
 It is important to observe that, if all our State banks were 
 converted into banks only of discount and deposit, but not of is- 
 sue, the failure of one or more of them could affect only the de- 
 positors, and not the community at large ; and that, if even the 
 supposition of a general failure by all such banks were admissi- 
 ble, it would only derange the beneficial system of transfers of 
 credit, but would not affect the standard of value, which, since 
 no paper currency had been put in circulation, would, for the 
 community, continue to be the legal coin of the country, and no- 
 thing else ; whilst, under the existing system, the deposits, blend- 
 ed, as liabilities payable on demand, with the issues of the banks, 
 contribute to endanger their safety, and may occasionally, in 
 our great cities, cause a suspension of specie payments. 
 
 On the other hand, since those deposits would still exist and 
 produce the same beneficial effects, if there were no other banks 
 but only of discount and deposit, it does not appear correct to 
 reckon their amount as part of the additional capital acquired 
 by the establishment of our banks of issue. It may, however, 
 be objected, that in rejecting, as not belonging to banks of issue, 
 the advantages which might have been obtained by banks only 
 of discount and deposit, it has been taken for granted that such 
 private banks or joint stock banking companies, issuing no paper 
 currency, might be established and sustained in America. This 
 position may be denied ; and it may be asserted, that banks giv- 
 ing sufficient accommodation to the productive industry of the 
 country could not exist here, unless they had the right to issue 
 bank notes. 
 
 This assertion might have been quite correct fifty years ago, 
 and is partly true even now. It must be admitted in the first 
 place, that there are, as yet, but few men in the United States, 
 
15 
 
 With a sufficient capital to carry on with safety banking opera- 
 tions, and fewer still who do not find more profitable employ- 
 ment for that capital. The necessity of concentrating for thai 
 purpose small capitals, and of forming banking associations, is ob- 
 vious : and although the shareholders in such companies are satis- 
 fied with dividends generally not exceeding the ordinary rate of 
 interest, and always falling short of the profits of a private 
 banker, the machinery of such institutions is much more expen- 
 sive, and their gross profits must at least be sufficient to pay 
 the interest, to defray those expenses and to cover contingent 
 losses. 
 
 An examination of the statements of the State banks will 
 show, that the resources of those of the commercial cities, par- 
 ticularly of those with a large capital, consist principally of their 
 deposits; and that, though their profits would be somewhat di- 
 minished, they would be still sufficient to enable the banks to 
 continue their legitimate operations. 
 
 On the 1st of January, 1841, the twenty-two chartered banks 
 of the city of New York, with a capital of little more than 
 twenty millions of dollars, had more than twelve millions of 
 individual deposits, besides near two millions deposited by coun- 
 try or foreign banks, and a gross circulation of apparently about 
 five, but in fact of less than three millions (b). Their loans and 
 discounts exceeded twenty-seven millions, and the stocks owned 
 by them were less than three millions. Had they been only 
 banks of discount and deposit, the aggregate of their assets bear- 
 ing interest, and amounting to thirty millions, would have been 
 lessened about three millions, or ten per cent. This would, in 
 the aggregate, have reduced their dividends from 6| to 6 per 
 cent. But those returns embraced several banks which have 
 incurred heavy > losses, and made no dividend. The sound 
 
 (6) They had in their possession on the same day more than three millions, in 
 notes of each other or of other banks. The returns of the city banks are made 
 before they have exchanged the notes of each other received during the day. On 
 the 19th February, 1834, the apparent circulation of nineteen city banks amounted 
 to 4,740,000, and the actual circulation after the exchanges, to 3,040,000. (Report 
 of Union Committee.) The daily payments in notes and checks into the several 
 city banks amount to about 4,000,000, in ordinary time3. 
 
16 
 
 banks would still have divided at least seven per cent, which 
 is amply sufficient ; and, by converting the stocks owned 
 by them into discounts, there would have been no diminution in 
 the amount of their commercial loans. 
 
 On the other hand, the country banks, under which denomi- 
 nation must be included those of all the interior States and of 
 the interior parts of the other States, depend principally on their 
 circulation ; and although, in many places, the dividends have 
 been extravagant, yet it must be acknowledged that, if the bank 
 notes were altogether suppressed, the banking capital now em- 
 ployed in the country would be considerably reduced, and be- 
 come confined to those towns which are the principal centres of 
 its commercial transactions. 
 
 Strong reasons might be adduced to show that such a reduc- 
 tion would ultimately be beneficial. It is extremely doubtful 
 whether the banking system, with its indispensable strict punc- 
 tuality, can, under any circumstances, be beneficially applied to 
 purely agricultural purposes. The only material improvement 
 which has during the last fifty years taken place in Virginia, her 
 having become one of the first wheat-growing States, cannot be 
 ascribed to her banks. In every other respect, what has she 
 gained by the circulation of bank notes ; and what progress has 
 she made, since the introduction of banks, in agriculture, manu- 
 factures, commerce, or population? The situation of the plant- 
 ers who cultivate the fresh and fertile soil of Alabama and of 
 Mississippi, affords an irrefragable proof of the calamities inflict- 
 ed on an agricultural country by an exaggerated banking sys- 
 tem, and by excessive issues. 
 
 The inquiry might be pursued farther. Yet as those evils 
 may be ascribed to the abuse and not to the temperate use of 
 banks and bank paper, and as the advantages of banking are 
 now considered independent of the evils it produces, it may for 
 the present be conceded that banks purely of discount and de- 
 posit could not, in the interior parts of the country, be generally 
 substituted for banks of issue ; and that, in computing the addi- 
 tional capital acquired by the banking system, the deposits in 
 country banks may be added to the amount of issues. This 
 would make the whole addition to the capital ninety instead of 
 sixty millions. The estimate is founded on the present reduced 
 
,17 
 
 amount of issues and deposits, and not on that of the years 
 1836-37, when they were, together, fifty per cent, greater (c). 
 
 The increase of capital, be it more or less, appears to be, if 
 not absolutely the only, at least the principal advantage derived 
 from a paper currency. It has been denied by some, that even 
 this did confer any benefit on the community at large. It has 
 been asserted that the whole profit was engrossed by the issu- 
 ers, or, at best, shared only by those whom the issues of paper 
 enabled to obtain additional loans of money ; that this profit, in- 
 stead of being in any way advantageous to the community, was 
 made at its expense ; that it made the rich richer, and the 
 poor poorer ; and that the whole system was one of fraud and 
 iniquity. 
 
 It is not perceived on what ground the charge can be sus- 
 tained, unless it be insisted that the state of society, in its present 
 civilization, is so unjust and nefarious that every addition to the 
 capital of a nation, every increase of national wealth, produces 
 the same baneful effects, and is a positive evil. That such in- 
 crease, when effected by the introduction of a paper currency, is 
 always dangerous, and may be attended with most calamitous 
 consequences, is fully admitted. But if a complete guarantee 
 could be obtained that the paper currency would always remain 
 equal in value to gold and silver, the danger would .be avoided. 
 And so long as this is the fact, the additional capital, thus sup- 
 plied, operates in the same manner, and is attended with the same 
 effects, as any other increase of national wealth. 
 
 The immediate benefits of any acquisition of wealth or capital 
 
 (c) In the report of the Secretary of the Treasury, of April, 1840, Statement JJ, 
 page 1374, it is thus estimated : 
 
 1st January, 1837. 1st January, 1840. 
 
 Actual Circulation 112,652,000 86,170,000 
 
 Deposits 127,397,000 75,696,000 
 
 240,049,000 161,866,000 
 
 Our estimate is as follows : 
 
 Actual Circulation 86,000,000 
 
 Country Deposites 37,000,000 
 
 123,000,000 
 
 Deduct Specie in Banks 33,000,000 
 
 Additional Capital gained by our Banking system 90,000,000 
 
18 
 
 most certainly accrue to those who have acquired it. This ac- 
 quisition makes the rich richer, or, to speak more correctly, par- 
 ticularly in this case, it increases the number of those who be- 
 come rich or independent. But this is not done at the expense 
 of the community : the process does not make the poor poorer. 
 On the contrary, every increase of capital puts in activity a 
 greater quantity, and, all other things remaining equal, has a ten- 
 dency to enhance the wages of labor. This is consistent with 
 theory, and confirmed by experience. Production is always in- 
 creased in proportion to the increased wealth of a country, 
 labor is better paid, commodities are rendered cheaper, and 
 more comforts brought within the reach of the poor. In Ameri- 
 ca, the quantity of uncultivated land, a dormant capital which 
 perpetually calls for labor in order to render it productive, is the 
 primary cause of that greatest of all the worldly blessings this 
 nation enjoys. Manual labor is better remunerated in America 
 than in any other country. But even here, circulating capital, 
 that capital which consists of accumulated consumable. commo- 
 dities, is necessary before labor can be employed. The agri- 
 cultural laborer, who, without any capital, migrates westwardly 
 to a new settled country, is immediately employed, and receives 
 competent wages. Yet the product of his labor does not be- 
 come available till after the ensuing crop : he must in the mean- 
 while be fed and clothed ; and this would be impossible, and he 
 would have no means of existence, had not the farmer who em- 
 ploys him an accumulated capital sufficient for that purpose. 
 
 Since the principal advantage of a paper currency consists in 
 the additional capital it supplies, such currency is most useful, 
 above all most wanted, but unfortunately a more dangerous 
 expedient, in those countries and places where there is the 
 least amount of circulating capital as compared to the demand 
 for it. This is eminently the case in newly settled countries, 
 with a rapidly increasing population. We find accordingly the 
 local governments of America perpetually resorting to emissions 
 of paper money under the colonial regimen ; and that, at this 
 moment, the excess of issues occurs principally in the Western 
 States, and generally wherever country banks have been estab- 
 lished. 
 
 The converse of the proposition would seem to be equally 
 
19 
 
 true, and that, in countries saturated with capital, the addition 
 to it by the issue of bank notes does not compensate for the 
 perpetual fluctuations and alarms growing out of that system. 
 There may be substantial reasons, why Great Britain perseveres 
 in it : they have not been fully explained, and are not under- 
 stood by the writer of this essay. But wherever a paper cur- 
 rency has been introduced, the permanency of its value should 
 be the indispensable condition of its existence. 
 
 The unanimous assent of all civilized nations has made goldf 
 and silver their universal circulating medium and standard on 
 value. By forbidding any other legal tender in payment of\ 
 debts, the constitution of the United States, without absolutely 
 excluding every other circulating medium, has imperatively / 
 rendered the precious metals the only standard of value. The / 
 substitution of a paper for a gold or silver currency is therefore / 
 admissible, only on the express condition, that it shall always be 
 equal in value to the legal coin of which it is the representative ; 
 and that equality cannot be maintained, unless the paper be at 
 all times convertible, on demand, into such coin, at its nominal 
 value. Any deviation from that principle is unjust in itself, and 
 an evasion of the constitutional provision. It is a violation of 
 existing contracts, renders all subsequent engagements un- 
 certain, destroys confidence, and impairs private and public 
 credit. 
 
 Banks of issue, deposits and discounts have therefore a double 
 duty to perform ; first, to be at all times ready to pay their 
 notes and deposits in specie, so as to preserve the constitutional 
 standard of value ; secondly, to give accommodations by ad- 
 vances to the productive industry of the country ; for which 
 purpose, indeed, they were instituted. But the first duty is 
 positive and absolute : they are bound in the first instance to 
 fulfil their engagements : it is the express condition on which 
 the banks were permitted to issue paper : they have no right 
 whatever to issue a depreciated currency. The second duty is 
 discretionary and subordinate to the first : it can be exercised 
 rightfully, only so far as can be done without running the risk of 
 placing themselves in a situation that would put it out of their 
 power to fulfil their engagements. 
 
 These two duties are therefore to some extent contradictory ; 
 
20 
 
 and the question has been agitated in England, whether they 
 ought not and might not be separated. This will not be now 
 discussed, as it is believed that, at least for the present, such 
 separation would, as a general measure, be impracticable in the 
 United States. 
 
 The present situation of the banking system has proved, but 
 too conclusively, the general inclination to increase immoderately 
 the banking capital and the number of banks ; and also the gene- 
 ral tendency of all the banks to extend their loans and discounts 
 beyond what prudence and their primary duty would dictate ; 
 and it is believed that this defect is inherent to all joint stock 
 banking companies. 
 
 Not only is it the interest of the shareholders, so long as they 
 are not personally responsible beyond the amount of their shares, 
 to obtain as large a dividend as possible, but the evil grows out 
 of the manner in which joint stock companies must be governed. 
 The direction must necessarily be placed in the hands of a few 
 men, who have comparatively but little interest in the bank. 
 Most of them are selected amongst men in active business, in 
 order that they may be able to judge of the solidity of the pa- 
 per offered for discount ; and as they are not paid, it is impossi- 
 ble to expect that they should attend without deriving some 
 compensation for the sacrifice of a portion of their precious 
 time. This may consist in part from the discounts they obtain 
 for themselves, which may always be kept within reasonable 
 bounds. But the power and consideration attached to the office 
 can be obtained only by granting favors ; whilst, on the contrary, 
 a refusal renders the directors unpopular. To this may be 
 added a want of sufficient moral responsibility. The honorable 
 merchant, who would feel disgraced by his own individual fail- 
 ure, is not affected by that of the bank of which he may be a 
 director. It is well known that this general observation does 
 not apply to bank directors alone, but to all public bodies. Of 
 all the causes, however, which contribute to an improper extent 
 of discounts, the most general and efficient, the most prolific 
 source of the errors of bank directors, is the natural sympathy 
 which they feel for men who are engaged in similar pursuits to 
 their own. It may, upon the whole, be affirmed, that banks, 
 
21 
 
 though money lenders, are in fact governed rather by the bor- 
 rowers than by the lenders. 
 
 It is known to every body, that the liabilities payable on de- 
 mand, of the best conducted banks, are always necessarily much 
 greater than their immediately available resources. In order to 
 be sustained, not only must they enjoy general confidence, but 
 their existence depends on the will of the commercial commu- 
 nity. If, in a time of extraordinary pressure, those who are 
 deeply embarrassed should, under great excitement, either from 
 selfish motives, or rather from error in judgment, think it desira- 
 ble to shelter themselves under a genera] relaxation, they may, 
 if sufficiently numerous and influential, force, and have in fact 
 occasionally lent their aid in forcing, banks to suspend, or to 
 persevere in suspending specie payments. 
 
 Such a general suspension is therefore the natural general dis- 
 ease of the banking system ; it is that to be most guarded against, 
 as it is also in its consequences the most fatal ; much more so 
 than the occasional failures of some individual banks, which, 
 though an evil, are rare (d), local, and not contagious. 
 
 The example of the suspension by the Bank of England, which 
 continued more than twenty years, has sometimes been adduced 
 in proof that such an event was a very tolerable evil, and an 
 expedient to which resort might occasionally be had. 
 
 What were the inducements of the British Government for 
 resorting to that expedient in the year 1797, after having, during 
 the next preceding one hundred years, carried on several wars 
 without having found such measure necessary, and what actual 
 advantages, political, financial, or commercial, she derived from 
 it, it is not necessary or perhaps proper to discuss in this place. 
 But it cannot be doubted that that act dissolved the charm ; 
 and that, since the resumption, the alarms and inconveniences 
 connected with paper issues have been increased and aggrava- 
 ted by the feeling that, as the bank had once, so it might again 
 suspend its specie payments. The effect in America has been, 
 to familiarize the idea that a continued suspension might become 
 
 (d) This will be adverted to hereafter. Not one of the city banks of New York 
 has failed since the year 1829. 
 
22 
 
 the ordinary state of things, and that banks might fail without 
 becoming bankrupts. 
 
 But the situation of the United States is very different from that 
 of Great Britain, when a general suspension of the banks takes 
 place. Great Britain is governed by one, and the United States 
 by twenty-six independent legislatures. There a single bank con- 
 trols the whole system ; here it is left at the mercy of an indefi- 
 nite number of banks, independent of each other. Accordingly, 
 the issues of the irredeemable notes of the Bank of England 
 were at first kept within reasonable bounds, and the depreciation 
 for several years was almost insensible. It increased gradual- 
 ly ; and during the years 1811-1815, the notes of the Bank 
 had sunk from 20 to 25 per cent, below their nominal value. 
 Even under more favorable circumstances, the evils which 
 follow a departure from sound principles could not ultimately 
 be averted. 
 
 The great difference, however, between the effects of a gene- 
 ral suspension in the two countries respectively, is the uniformi- 
 ty of the depreciation in England, whilst the reverse is the case 
 in America. The notes of the Bank of England were alone sub- 
 stituted there for the precious metals, as a legal tender. All the 
 other banks of issue, the private bankers of England, and the 
 joint stock companies of Scotland, were still obliged, when called 
 upon, to redeem their own issues in notes of the Bank of Eng- 
 land, or, which was the same thing, in drafts on London. What- 
 ever the depreciation might be, 'whatever evils might be caused 
 by its fluctuation, still that depreciation was at the same time 
 the same throughout every district of Great Britain and of Ire- 
 land :' it affected in a direct manner all foreign exchanges and 
 transactions : it had no immediate and direct effect on domestic 
 ^exchanges. 
 
 In the United States the depreciation is different at the 
 -same time in the different States, in different districts of the same 
 State, and occasionally in the different banks of the same district. 
 The effect is not confined to foreign exchanges ; the different 
 and fluctuating depreciation affect domestic exchanges, and 
 every species of domestic transactions. Those evils have in- 
 creased with the protracted continuance of the suspension, and 
 
23 
 
 the effect on the moral feeling of the community has been most 
 lamentable. 
 
 When banks suspend specie payments, their debtors have a 
 right to discharge the debt in the depreciated paper of those 
 institutions. But, because the banks offer to pay their own debts 
 with the same paper, it is not perceived whence the right ac- 
 crues to individuals to pursue the same course towards each 
 other. They have not the legal right, since, in case of a suit, 
 the debt can only be discharged in the legal coin of the country : 
 nothing but gold or silver is by the constitution a legal tender. 
 Morally, every debtor is still bound to pay his creditors, the sus- 
 pended banks only excepted, in coin, or at least in the depre- 
 ciated currency at its market price in gold or silver. It hap- 
 pens, however, that the great mass of merchants, who reside in 
 the same place, being at the same time debtors and creditors, 
 find it more convenient still to pay each other by the transfer of 
 bank deposits, or to take and pay the bank paper at its nominal 
 value. This, whilst confined to those who have a common in- 
 terest in pursuing that course, may not be improper, and is con- 
 venient. But it is utterly unjust towards those who are credi- 
 tors at home and debtors abroad, towards all those who have 
 only debts to collect and none to pay, or who, if they have pay- 
 ments to make as consumers, are obliged to purchase at en- 
 hanced prices. The loss falls, heavily and most unjustly, on those 
 who live on wages, which do not advance with the enhanced 
 prices of articles of consumption, but which, on the contrary, 
 generally fall during a period of universal derangement. 
 
 The injustice is still greater between those different cities and 
 States where the depreciation is not the same. When the par- 
 ties have failed or are unable at once to meet their engagements, 
 amicable arrangements must take place ; and the creditors, in 
 such cases, are satisfied to receive what the debtor can pay. 
 But those debtors, residing in States or places where the local 
 currency is most depreciated, who can pay, now begin to think 
 that, because they pay and are paid at home with that currency, 
 they are absolved from the obligation to pay in any other way 
 their creditors who reside in other places or States. It amounts 
 to this ; you must receive this depreciated paper at par, or you 
 may institute a suit, and the creditor, who knows the expenses 
 
24 
 
 and delays of the law, and who must realize his active debts in 
 order to meet his own engagements, is compelled to submit. In 
 process of time, the people generally acquiesce ; the banks seem 
 to forget altogether in what consists their primary duty, and, un- 
 der pretence of alleviating the distress, consult only their own 
 convenience. The same feeling at last penetrates into the legis- 
 lative halls ; and the State legislatures, which at first had ap- 
 peared disposed to enforce a prompt return of the banks to their 
 duty, yield and authorize, sometimes even encourage, an almost 
 indefinite continuance of the suspension. 
 
 It would be painful to pursue the subject any farther, and to 
 advert to the recklessness, gross neglect, inconceivable misman- 
 agement, amounting to a breach of trust, to the disgraceful and 
 heretofore unheard-of frauds, which have occasionally occurred, 
 or to that which is perhaps still worse, the apathy or lenity with 
 which those enormities are viewed. 
 
 It may with truth be affirmed, that the present situation of the 
 currency of the United States is worse than that of any other 
 country. The value even of the irredeemable paper money of 
 Russia has, during the last forty years, been more uniform ; and 
 in its fluctuations, the tendency has been to improve and not to 
 deteriorate that value. No hesitation is felt in saying that, 
 whatever may be the presumed advantages of a moderate use 
 of a paper currency, convertible into specie on demand, to have 
 no issue of paper would be far preferable to the present state 
 of things. The object of this essay is to inquire whether any 
 practicable remedies can be applied to the system. 
 
25 
 
 CAUSES AND INCIDENTS OF THE 
 BANK SUSPENSIONS. 
 
 ALL active, enterprising, commercial countries are necessarily 
 subject to commercial crises. A series of prosperous years al- 
 most necessarily produces overtrading. Those revolutions will 
 be more frequent and greater in proportion to the spirit of enter- 
 prise, and to the extension or abuse of credit. But, however 
 prices may be affected, and whatever may be the evils growing 
 out of the crisis, there will be no violation of contracts, and the 
 standard of value will not be affected in countries where there 
 is no paper currency. The danger of a suspension of specie 
 payments, which immediately deranges that standard, is neces- 
 sarily increased in proportion to the amount of issues of paper 
 of that description ; and that amount depends, in a great degree, 
 on the denomination of the bank notes permitted to be issued as 
 currency, on the number of the banks of issue, and, in the United 
 States, on the capital invested in bank stock (e). 
 
 All these dangerous elements are found united in a greater 
 degree in the United States- than in any other commercial 
 country. The large field opened for enterprise, the free insti- 
 tutions of the country^ and the indomitable energy of the people, 
 have produced results astonishing and without parallel in the 
 history of other nations. A wilderness has within forty years 
 been converted into the abode of six millions of civilized and 
 most industrious people. Expensive communications have been 
 opened, superior in extent and importance to those of continental 
 Europe. The American commerce and navigation extend to 
 every quarter of the globe, and are inferior to those of no other 
 country but England. But there are evils which, to a certain 
 extent, appear to be the necessary consequence of a state of 
 high commercial prosperity, and which in America are much 
 
 (e) The capital of the banks is, in the United States, universally loaned to tra- 
 ders : generally speaking, the European banks and bankers lend only the amount 
 of their circulation and deposits. The capitals of the Bank of England and of the 
 Bank of France are vested in public securities. 
 
 A 
 
26 
 
 increased by the want of a capital proportionate to the extent of 
 commercial and other undertakings. 
 
 Overtrading has been the primary cause of the present crisis 
 in America. Abundant proofs of the fact are found in the 
 immoderate use of foreign credit, as well as in the excessive 
 importations and sales of public lands in the years 1834-37. 
 
 Of imports 
 
 During the nine years, 1822-1830, the average annual amount was $59,000,000 
 
 three " 1831-1833, " " " 83,000,000 
 
 four 1834-1837, " " " 130,000,000 
 
 In " 1836 alone, " " " 168,000,000 
 
 The average annual excess of imports over the exports 
 amounted to four millions during the first nine years ; to 
 eighteen millions during the three next ensuing ; to thirty-four 
 millions during the four last, and to sixty-one millions in the 
 year 1836 alone. 
 
 The average annual sales of public lands, which, during the 
 first nine years, did not exceed 1,300,000 dollars, and which 
 during the years 1831-35, had reached 4,500,000, amounted in 
 1835 to seventeen, and in 1836 to twenty-five millions. Specu- 
 lations in unimproved town lots, mines, and every description of 
 rash undertakings, increased at the same rate. 
 
 The fault, or error, originated with the people themselves. 
 The traders and speculators have attempted to ascribe their dis- 
 asters altogether to legislative acts ; to those of the Administra- 
 tion or to other collateral causes, which have indeed aggravated 
 the evils, but the effects of some of which have been exagge- 
 rated. Still, although it would be improper to abridge the 
 freedom of action which all individuals should be permitted to 
 enjoy, it is certain that the spirit of enterprise did not require 
 any artificial stimulus. 
 
 The prodigious increase of State banks was the result of State 
 legislation. From the 1st of January 1830 to the 1st of Janu- 
 ary 1837, three hundred new banks were created, with a capital 
 of one hundred and forty-five millions of dollars. This increase 
 was undoubtedly due to the eagerness for capital applicable to 
 commercial accommodations or other purposes. It may be as- 
 cribed in part to the expiration of the charter of the Bank of the 
 United States, and to the anticipation of that event. It was 
 
27 
 
 thought necessary, in some places, to fill the chasm in capital and 
 commercial accommodations that must follow the dissolution of 
 that institution. The same effect had been produced in the 
 years 1810-16, on the occurrence of the expiration of the char- 
 ter of the former national bank ; and in both cases the in- 
 crease far exceeded the apprehended loss and the wants of the 
 country. 
 
 The great increase of banks took place accordingly in the 
 Western States, where capital was most wanted. During the 
 years above mentioned, the increase in the banking capital of 
 the North- Western States amounted to near twenty, and that of 
 the South- Western to almost fifty-five millions of dollars (f). 
 
 But that increase was far beyond what might have been 
 wanted for useful purposes. Near three-fifths of the foreign 
 merchandize imported into the United States are imported into 
 New York. That city is also the principal place of deposit for 
 the sale of the domestic manufactures of the country ; and it is 
 also the centre of all the monied transactions of the United 
 States. In the year 1837, the capital of all the banks of that 
 city hardly exceeded twenty millions of dollars ; and it was suf- 
 ficient for all the legitimate operations of commerce. When an 
 unexpected increase of the public deposits enabled and induced 
 those banks to expand their discounts beyond their ordinary 
 rate, that excess excited over-trading, and was applied to extra- 
 ordinary and dangerous speculations. 
 
 In order to obtain or to assist in obtaining the capital wanted 
 for the new banks, for internal improvements, and for some other 
 miscellaneous purposes, debts were incurred by several States, 
 amounting from 1830 to 1838 to near one hundred and fifty mil- 
 lions of dollars. The debt contracted by the Atlantic States 
 was almost entirely for internal improvements ; no part of it for 
 banking purposes, and it fell little short of sixty millions. That 
 contracted by the North- Western States amounted to about 
 thirty-eight millions, of which thirty-one millions five hundred 
 
 (/) The designations of the Secretary of the Treasury of the United States 
 are adopted here, as convenient for reference. According to these, Ohio, Indiana, 
 Illinois, Michigan, Missouri, and Kentucky, are the North- Western ; and Tennes- 
 see, Alabama, Mississippi, Louisiana, and Arkansas, the South- Western States. 
 
28 
 
 thousand dollars were for internal improvements, and the residue 
 for banking capital. That incurred by the South- Western 
 States was about fifty-two millions, of which more than forty- 
 four millions were for banking capital, and the residue for internal 
 improvements. 
 
 The population of the United States^ by the census of 1840, 
 exceeds seventeen millions, of whom ten millions seven hundred 
 and sixty thousand are in the Atlantic, four millions one hundred 
 and thirty thousand in the North- Western, and two millions two 
 hundred and thirty thousand in the South- Western States. 
 
 It may be observed, that the reason why so much more capi- 
 tal was applied in the South- Western than in the North-Western 
 States to banking purposes, is to be found in the difference of 
 capital wanted for the employment of slave and free labor re- 
 spectively. The northern farmer advances no more than twelve 
 months wages to the laborer he employs. The southern plant- 
 er, who wishes to increase the product of his land, must advance 
 the price of the slave himself, which amounts perhaps to five or 
 six times the net product of his annual labor. The application 
 of banking accommodation to purely agricultural purposes has 
 accordingly been much greater, and has been attended with far 
 more fatal effects, in the South-Western States, than in any other 
 section of the Union. But even the State debts, created for in- 
 ternal improvements, have co-operated in aggravating the evils 
 under which we now labor. Not only were their proceeds ap- 
 plied to purposes of which the returns were slow and uncertain, 
 but they also supplied the means of paying balances or obtain- 
 ing credits abroad. Thus, extravagant importations were en- 
 couraged, whilst, at the same time, some of those stocks became 
 objects of speculation at home, in which individuals and banks 
 were involved, and which proved injurious to all the parties con- 
 cerned ; to the States, as well as to the purchasers. Several of 
 the States neglected to provide a revenue sufficient to pay the 
 annual interest accruing on their debts. Additional loans were 
 resorted to for that purpose ; and occasionally forced loans were 
 required by the States from the banks, which lessened their re- 
 sources, and had a tendency to produce or to protract the sus- 
 pension of specie payments. 
 
 It has ever been the opinion of the writer of this essay, that a 
 
29 
 
 public debt was always an evil, to be avoided whenever practi- 
 cable ; hardly ever justifiable except in time of war ; to be resort- 
 ed to even then with sobriety, and never to be incurred without 
 providing at the same time an additional revenue, sufficient to 
 pay the interest and ultimately to discharge the principal of the 
 debt. A long life of experience and observation has produced 
 an intimate conviction of the soundness of those principles. In- 
 dependently of the great, manifest and permanent evils inflict- 
 ed by the abuse of public credit, every public debt absorbs 
 a capital which otherwise would have been applied to pur- 
 poses as least as productive as those for which the debt was in- 
 curred. It has a tendency, perhaps, more than any other cause, 
 to concentrate the national wealth in the hands of a small number 
 of individuals. The interest must at all times be paid by taxes 
 extracted from the proceeds of the productive labor of the com- 
 munity ; and it feeds the drones of society. 
 
 These considerations do not by any means justify the sugges- 
 tion, that a nation is not bound to discharge the engagements con- 
 tracted, even perhaps improvidently, by its Government. A son 
 who inherited a large estate might, with as much propriety, 
 think himself under no obligation to discharge the liens on his 
 inheritance. In the United States, where such engagements 
 have always been contracted by the immediate representatives 
 of the people, and those representatives elected by universal suf- 
 frage, there is not even the color of a pretence for the supposi- 
 tion, that the people are not bound by the acts of those repre- 
 sentatives. Any such suggestion should at once be indig- 
 nantly dismissed as dishonest and disgraceful. The errors of 
 legislation may be regretted ; but they bind the nation. 
 
 The early agitation of the question respecting the renewal of 
 the charter of the Bank of the United States, the veto of the bill 
 passed by the two Houses of Congress for that purpose, and the 
 removal of the public deposits long before the expiration of the 
 charter, are the principal acts of the executive branch of the Gen- 
 eral Government which may have affected the state of the 
 currency. 
 
 Previous to any of these, there had been an improper interfe- 
 rence, on the part of the Treasury Department, in the choice of 
 some of those officers whose appointment did by the charter be- 
 
30 
 
 long exclusively to the directors of the mother bank. This, in- 
 stead of strengthening, had a tendency to weaken the natural 
 and legitimate influence of that department over the general 
 management of the bank : it was an unfortunate and novel intro- 
 duction of party feelings into the fiscal concerns of the nation. 
 
 The President had an undoubted right to put his veto on a law 
 which renewed the charter of an institution which, in his opin- 
 ion, was not constitutional. But there was no necessity for the 
 early attack on an institution, the charter of which did not expire 
 till two years after the end of the term for which the President 
 had been elected. 
 
 The currency of the country was as sound in the year 1829, as 
 may probably be expected under any system which admits the sub- 
 stitution of paper for the precious metals. It seems to have been 
 unwise to interfere with this, without having previously weighed 
 the probable consequences and without having prepared a proper 
 substitute. The President indeed suggested the possibility, not 
 of dispensing altogether with a national bank, but of establishing 
 one founded on different principles. It appears, however, that he 
 entertained only general views on the subject, and had not adopt- 
 ed any determinate plan of action. In point of fact, no such plan 
 or substitute was ever offered ; and the final result was to leave 
 the currency at the mercy of State banks and State legislation. 
 
 The immediate consequences were, to encourage the creation 
 of new State banks, to place the Government and the Bank of 
 the United States in an unnatural hostile attitude to each other, 
 to change the character of that institution, which could not pre- 
 viously be justly charged with any wilful misconduct, and to 
 convert every discussion connected with the subject into pure 
 party questions. 
 
 The early removal of the public deposits seems to have been 
 unnecessary ; and the reasons alleged for it were altogether in- 
 sufficient. On a similar previous occasion, those deposites had 
 been removed only a week prior to the expiration of the charter 
 of the former Bank of the United States. Not the slightest in- 
 convenience was felt on that account. And it may be generally 
 observed, that the course pursued at that time by all parties, was 
 such that the bank expired quietly without agitating the public 
 /nind. The subject did not, as of late, absorb every other public 
 
31 
 
 consideration, and become the great political or party question of 
 tne country. 
 
 The specie circular, issued at a subsequent date, and which 
 directed the payments to the Treasury for public lands, and 
 only for public lands, to be made in specie, appears to the writer 
 of this essay to have been improper. The order was issued 
 several months before the suspension of specie payments by the 
 banks. Whether the President thought the practice of paying 
 in notes of specie-paying banks, generally acquiesced in for a 
 period of more than forty years, to be consistent with or con- 
 trary to the constitution, the rule should have been general. It 
 is not seen on what principle two different rules were estab- 
 lished, and a distinction made between payments into the 
 Treasury, on account of duties on importations, and those for 
 purchases of public lands ; between those who claimed lands, 
 by entries according to law, or by actual settlement. 
 
 The only effect of that measure, so far as it has been ascer- 
 tained, was to cause a drain of specie on the banks of New 
 York, at a time when it was important that that point should 
 have been strengthened. It transferred specie from the place 
 where it was most wanted in order to sustain the general cur- 
 rency of the country, to places where it was not wanted at all. 
 It thus accumulated so much in Michigan, that, whilst it was 
 travelling from New York to Detroit, the Secretary of the 
 Treasury was obliged to draw heavily on Michigan, in favor of 
 New York and other sea-ports. Had no interference taken 
 place, and had the transactions of individuals been left to their 
 natural course, it is clear that the lands would have been paid 
 for in Eastern funds, and that the double transmission of specie, 
 where it took place, would at least have been avoided. 
 
 Independently of the objections to which premature and inter- 
 mediate measures may be liable, the charges against the 
 President, for having interfered in the currency, resolve them- 
 selves into the single fact of having prevented the renewal of 
 the charter of the Bank of the United States. The direct and 
 immediate effects cannot be correctly ascertained ; but they 
 have been greatly exaggerated by party spirit. That he found 
 the currency of the country in a sound, and left it in a de- 
 plorable state, is true : but he cannot certainly be made respon- 
 
32 
 
 sible for the aberrations and misdeeds of the Bank under either 
 of its charters. The unforeseen, unexampled, accumulation of 
 the public revenue was one of the principal proximate causes of 
 the disasters that ensued. It cannot be ascribed either to the 
 President or to any branch of Government ; and its effects might 
 have been the same, whether the public deposits were in the 
 State banks, or had been left in the national bank, organized 
 and governed as that was. 
 
 By the provisions of the act, respecting the tariff, generally 
 called the Compromise Act, the reduction of the duties, to the 
 amount deemed sufficient, after the final payment of the public 
 debt, to meet the national expenditures, was made gradual 
 and could at first operate but slowly. But in order to prevent 
 the accumulation of monies in the Treasury, every foreign article 
 which did not compete with domestic industry was made duty 
 free ; and this measure seems to have been deemed sufficient by 
 all parties to effect the purpose. This proved to have been a 
 mistake. It may be that the repeal of the duties on certain ar- 
 ticles encouraged too large importations in that respect ; but all 
 the causes which excited overtrading were in full operation. 
 And it is probable that the danger of an accumulated revenue 
 did not sufficiently attract the attention of the legislature. 
 
 A revenue, consisting exclusively of duties on importations 
 and of the proceeds of the sales of public lands, must necessarily 
 be subject to great fluctuations ; and such had been experienced 
 in the year 1817, and at other times. But they were not felt, 
 and therefore not particularly attended to, so long as, in addi- 
 tion to an annual fixed appropriation, all the surplus revenues 
 were appropriated and applied to the payment of the principal 
 of the public debt. That payment was the safety-valve which 
 prevented any dangerous accumulation of monies in the Treasu- 
 ry. Whether any systematic arrangement, connected with such 
 of the expenditures for the defence of the country, as may be 
 lessened or increased according to circumstances, might not 
 have been devised, is an important question which will hereafter 
 well deserve the consideration of Government. No such pro- 
 spective measures, however, had been deemed necessary ; and 
 more than forty millions of accumulated revenue became depo- 
 sited in the State banks, thus affording a new extraordinary fund 
 
33 
 
 for bank accommodations and expansions. These were unfor- 
 tunately encouraged by the Treasury Department, which seems, 
 on this occasion, to have yielded to the general clamor of those 
 who represented the withdrawal of the capital and loans of the 
 Bank of the United States as threatening ruin to commerce. 
 Apprehensive that the deposite banks of the city of New York 
 could not, on account of the limitations in their charters, suffici- 
 ently extend their discounts, the Secretary of the Treasury had, 
 before the Act of June 1836, directed those institutions to lend 
 a part of the public deposits to the other city banks* 
 
 This course was sanctioned by that act, which directed that 
 the public deposits in any bank should not exceed three-fourths 
 of its capital ; and the law, by directing that the banks should 
 pay interest whenever those deposits exceeded a certain sum, 
 rendered their partial application to discounts actually necessary. 
 
 But Congress, justly alarmed at that great increase of the 
 public moneys in the Treasury, thought proper to distribute it 
 among the several States. The propriety of this measure, and 
 its consistency with the spirit of the constitution, may be ques- 
 tioned. Subsequent events have shown that the amount intend- 
 ed to be withdrawn from the Treasury was too large, and that, 
 as might have been anticipated, the revenue of the next ensuing 
 years fell short of the current expenditures. But, viewed in 
 reference only to the banking system and to the paper currency 
 of the country, the process, though protracted and spread over 
 fifteen months, was much too prompt. The Legislature was 
 not, and could not indeed be aware, how slow and gradual the 
 diminution of discounts must be, in order that universal distress 
 may not ensue. 
 
 The public deposits in the city banks of New York amounted 
 to fourteen millions of dollars. At the same time that they were 
 ordered to be withdrawn, the state of the money market in Eng* 
 land arrested the progressive and exaggerated credits heretofore 
 granted to the American merchants, and on the continuance of 
 which they had relied. The consequent necessity of making 
 large remittances to England, whilst those expected from the 
 South- West began to fail, and the simultaneous withdrawal of 
 the public deposits, may be considered as the principal proximate 
 causes of the suspension of specie payments in 1837. In the city 
 
34 
 
 of New York the great destruction of capital by the fire of De- 
 cember 1835, frauds committed on one of the principal banks, 
 and some other local incidents, co-operated in producing that 
 result. The Bank of the United States had but little share 
 in it. 
 
 It would be idle to inquire whether, if the charter of that in- 
 stitution had been renewed, and if it had been the sole place of 
 deposit of the forty millions of public moneys, the suspension 
 might have been prevented. That would have depended en- 
 tirely on the manner in which the bank might have been 
 administered. 
 
 That institution had ceased to be a regulator of the currency 
 as early as the years 1832-33, when its discounts and other in? 
 vestments were increased from fifty-five to sixty-five millions, 
 that is to say, at the rate of 85 per cent, beyond its capital ; 
 whilst those of the sound banks of our great commercial cities 
 did not exceed the rate of 60 per cent, beyond their capital. It 
 is not necessary to inquire whether this expansion was the natu- 
 ral consequence of the course of trade, whether the Bank of the 
 United States was in any degree influenced by considerations 
 connected with its own existence, or whether the machinery 
 carried away the directors instead of being governed by them. 
 It is obvious, that it is only by keeping its discounts at a lower 
 rate than those of the State banks, that these can be its debtors ; 
 and that it is only by enforcing the payment of the balances, that 
 it can keep them within bounds, and thus regulate the currency. 
 A contrary course will induce the State banks to enlarge their 
 own discounts, and will engender excessive issues, followed by 
 necessary contractions and unavoidable distress. 
 
 But a great change had taken place in the situation of that bank. 
 On its dissolution in March 1836, it accepted a new charter on 
 onerous conditions from the State of Pennsylvania, and, contrary 
 to what had been anticipated, the greater part of its circulation was 
 almost immediately returned to it for redemption. It now ap- 
 pears, by a statement of its affairs dated 1st Feb. 1836, and laid 
 at the time before the stockholders, that its actual circulation 
 amounted on that day to $24,360,000, and its deposits to 
 $4,400,000. On the 1st Jan. 1837, the actual circulation was re- 
 duced to $11,450,000, and the deposits to $2,330,000. Those 
 
35 
 
 funds on which, in addition to its capital, the bank must rely for 
 making or continuing its discounts, were in ten months reduced 
 from near twenty-nine to about fourteen millions, or more than 
 one half. It was impossible to have, within that short period, 
 reduced the discounts to the same extent. Accordingly the 
 bank had already incurred other liabilities not payable on de- 
 mand, amounting to near seven millions of dollars ; its specie 
 had been lessened from $7,650,000 to $2,640,000 ; and it was as 
 powerless and as unable to prevent the suspension as the other 
 State banks. Its situation was not known to the banks of New 
 York, when application for relief was, at the moment of the cri- 
 sis, made by that city to that institution. The manner, how- 
 ever, in which the relief was granted did not weaken it. 
 
 It must be acknowledged that, great as was the distress during 
 that winter, and notwithstanding all the ominous circumstances 
 of the times, the danger of a general suspension was not antici- 
 pated by the banks or the merchants of New York, nor indeed, 
 it seems, any where else, before the month of March 1837. 
 From that time, the city banks made the most strenuous efforts 
 to avert the event, and so successfully as to arrest the drain of 
 specie, the amount of which in their vaults was not lessened be- 
 tween the first and the last day of April. The Comptroller of 
 the State and the other Commissioners of the Canal Fund, on 
 being applied to and made acquainted with the imminent im- 
 pending danger, had also agreed to lend to the banks three mil- 
 lions five hundred thousand dollars of State Stocks, which they 
 were authorised to issue, but the proceeds of which were wanted 
 only gradually within the two or three ensuing years. The loan 
 was on the express condition, that the Stocks of the State, which 
 were then above par in England, should be used as remittances, 
 and to that extent lessen the intense demand for specie for the 
 same purpose. The necessity of a law, authorising the banks to 
 purchase the Stock, caused an unavoidable delay, which pre- 
 vented the execution of the agreement : for, on the very day on 
 which the law was passed, the drain on the banks, which had gra- 
 dually increased, became so intense, that they concluded the 
 same night to suspend their specie payments. It cannot be af- 
 firmed that this drain was any thing more than the result of a 
 general panic. Yet there were symptoms of combination in 
 
36 
 
 the manner in which it was conducted. Such were the situa- 
 tion and feelings of the banks throughout the whole country, that 
 they all, without any exception, and almost without deliberation, 
 instantaneously suspended, as fast as the mail could convey the 
 intelligence of the suspension in New York. 
 
 The Legislature of New York was on the eve of adjourning 
 when the suspension took place. Under the excitement of the 
 moment, and without sufficient deliberation, a law was passed, 
 commonly called the Suspension Act, altogether unnecessary, and 
 in some respects mischievous. 
 
 By the general laws of the State, or by the charters of the 
 several banks, it was already enacted, 1st, that whenever a bank 
 suspended specie payment during ten days (g), it should thence- 
 forth cease its operations, save only the collection and payment 
 of its debts, unless, on application to the Chancellor or Circuit 
 Judge, and an examination of its affairs, it was permitted by that 
 officer to continue its operations; 2dly, that if, at the expiration 
 of one year, the bank did not resume its payments, it should be 
 deemed to have surrendered its rights, and be adjudged to be 
 dissolved. 
 
 The Suspension Act released, for the term of one year, the 
 banks from any forfeiture of their charters incurred on account 
 of a suspension of specie payment. It left the general law to 
 operate at the expiration of the year as before provided. Its 
 only effect, in that respect, was to release the banks from the ob- 
 ligation of submitting the statement of their affairs to the Chan- 
 cellor, and to allow them to continue their operations without his 
 permission ; reserving, however, the power already vested in the 
 Bank Commissioners, to apply for an injunction in any special 
 case, when the situation of the bank appeared to require it. 
 This alteration was quite unnecessary. It would have been far 
 more eligible to allow the general law to operate ; and this 
 special provision conferred no real benefit on the banks (h). 
 
 () The term for the old banks, whose charters were renewed about the year 
 1831, was three months. 
 
 (A) One bank alone, wishing to rest on the general, without any aid from a spe- 
 cial law, applied tp the Vice-Chancellor, and continued its operations by virtue of 
 
37 
 
 The only other enactment of the law, intended to favor the 
 banks, was that which placed them on the same footing as indi- 
 viduals, by allowing no costs in suits under fifty dollars. But 
 nothing was more easy than to institute suits on ten five-dollar 
 notes together, and the result was the same as if the enactment 
 had not taken place. The city banks were compelled silently 
 to withdraw their five-dollar notes from circulation: and the 
 only effect was a substitution in the city circulation of notes 
 worse than theirs. 
 
 In another respect the special law was injurious to the city 
 banks, by compelling them to take in payment of their debts, 
 the notes of the country banks. 
 
 But the moral effect of the law was bad. Though it had in 
 reality made no alteration in the existing law, it had the appear- 
 ance and was generally considered as sanctioning the sus- 
 pension : and the act was quoted in other States, and used as a 
 pretence for passing suspension laws of a very different cha- 
 racter. 
 
 As soon, however, as the first shock was over, the banks of 
 the city of New York adopted a course of action preparatory 
 to an early resumption : and in the month of August, they 
 addressed a circular letter to the principal banks of the other 
 States, requesting their co-operation, and proposing a convention 
 of delegates from the banks of the several States, for the pur- 
 pose of agreeing on a uniform course of measures and on the 
 time when the resumption should take place. The South- 
 Western States were not ready for any immediate action. 
 Encouraging answers were received from the other Western 
 and from the Southern banks, as well as from some other quar- 
 ters. The Boston banks would not commit themselves, but at 
 the last moment appointed delegates. The banks of Philadelphia 
 adopted a resolution, that it was inexpedient at that time to 
 appoint delegates ; and the banks of Baltimore followed the same 
 example. 
 
 his order to that effect. But the proof, that the banks did not want the act, is 
 found in the fact that the Manhattan Company, which did not comply with any 
 of its provisions, continued its operations, and passed through the ordeal with thei 
 same facility as the other banks. 
 
38 
 
 The principal reason alleged by the Philadelphia banks for 
 their refusal was ominous. They declared their belief that the 
 general resumption of specie payments depended mainly, if not 
 exclusively, on the action of Congress, without whose co- 
 operation all attempts at a general system of payments in coin 
 throughout this extensive country must be partial and tem- 
 porary. 
 
 What was the action and co-operation of Congress which 
 was then alluded to ? The only subject of complaint at that 
 time against Congress, in reference to the currency, was its 
 refusal to renew the charter of the Bank of the United States. 
 No other action on its part had been asked than a renewal of 
 that charter, or the creation of a new bank. The employment 
 of the old bank under its new charter, as the fiscal agent of 
 Government, was perhaps contemplated. Whatever the object 
 might be, any attempt, or appearance of an attempt, to coerce 
 Congress by a wilful coaikruance of the suspension, was highly 
 improper. The banks of New York insisted that, whatever 
 might be the action of Congress on the currency, the duty of 
 resuming remained the same, and must be performed by the 
 banks. The Philadelphia banks ultimately appointed delegates 
 to the convention, which met at New York on the 27th Novem- 
 ber 1837. 
 
 At that meeting, though allusion was still made to some 
 expected action of Congress, it was principally urged, not that 
 the banks were unprepared for resuming, but that the state of 
 the country generally rendered a resumption inexpedient for 
 the present, that the time had not yet come when a day for that 
 purpose could be designated ; and that the continuance of a hasty 
 resumption would be precarious. 
 
 The banks of New York insisted, that it was monstrous to 
 .suppose that, if the banks were able to resume and to sustain 
 .specie payments, they should have any discretionary right to 
 discuss the question, whether a more or less protracted sus- 
 pension was consistent with their views of the condition and 
 .circumstances of the country. Numerous facts were adduced 
 Jo prove the ability of the banks to resume, that the British debt 
 was settled or postponed, that the danger of an extraordinary 
 ^exportation of specie was now out of question, and that no other 
 
39 
 
 known causes existed, which could prevent a general, though 
 not universal, resumption of specie payments within a very short 
 period. 
 
 In allusion to the action of Congress, and in reply to the 
 complaint, that the banks of New York had improperly persisted 
 in calling the convention contrary to the opinion of those of 
 Philadelphia, it was answered with frankness, that the objections 
 of the Philadelphia banks, or, to speak more correctly, of the 
 United States Bank of Pennsylvania, were viewed as nothing 
 more nor less than as an intended protracted suspension for an 
 indefinite period of time. In corroboration, the extraordinary 
 conduct of that bank was alleged, in having put in circulation, 
 since the suspension, a large amount of the notes of the late 
 Bank of the United States, thus substituting the paper currency 
 of a dead and irresponsible body for its own. 
 
 Although the convention was nearly divided, nothing more 
 could be obtained than general professions, and a resolution to 
 meet again in April, for the purpose of considering, and, if 
 practicable, determining upon the day when specie payments 
 might be resumed. 
 
 The conflict was clearly between the United States Bank of 
 Pennsylvania and those of New York. The other banks of 
 Philadelphia, though divided in opinion and sound, had yielded, 
 and Baltimore had thought proper to follow the same course. 
 On the other hand, the disposition of the North- Western and 
 Southern States was generally favorable to an early resumption, 
 though they seem to have apprehended that they might not be 
 able to sustain specie payments, if Philadelphia and Baltimore 
 persisted in suspending. No such apprehension was felt in the 
 Eastern States. Yet the banks of Boston, though earnestly 
 desirous that the resumption might be effected without delay, 
 and ready to co-operate, did, in the two conventions, and to the 
 last moment, sustain by their votes and influence the views of 
 the United States Bank. Such were the baneful effects of party 
 applied , to the fiscal concerns of the nation, and such the con- 
 sequence of that institution having become, or been generally 
 viewed as, the great antagonist of the Administration and the 
 rallying point of its opponents. 
 
 The banks of New York, determined in their course, had 
 
40 
 
 persevered in measures which would have enabled them to re- 
 sume nearly two months earlier than they did. The exchanges 
 had become decidedly favorable : and the agreement with the 
 Comptroller for a loan of the residue of the State Stocks, which 
 was renewed and concluded in November 1837, enabled them, 
 according to the express terms of the contract, to replenish 
 without difficulty their vaults with specie. Aware, however, of 
 the importance of a co-operation on the part of the other banks, 
 they had, in the first convention, in vain asked that an earlier 
 day should be appointed for the adjourned meeting, and then 
 waited for its result. It was soon ascertained* when that assem- 
 bly met, that a simultaneous resumption could not be obtained : 
 and it was then only requested, that the convention should re- 
 commend an early day for that purpose. Fair as was the pro- 
 spect at first, the vote to recommend so late a day as the 1st of 
 January 1839, was carried ; and the banks of New York were 
 left to resume alone and without any assurance of an earlier co- 
 operation. 
 
 But the circumstances of the times were eminently propitious. 
 Not only had the foreign debt been settled or postponed, and all 
 the exchanges, whether domestic or foreign, become decidedly 
 favorable, but one million sterling in specie had been imported, 
 under the auspices of the Bank of England, through the agency 
 of a commercial house. The city banks resumed with more 
 than seven millions of dollars in specie ; their gross circulation 
 reduced to three millions, and their other liabilities payable on 
 demand considerably diminished. The public deposits of the 
 United States, which on the 1st of January 1837 exceeded ten 
 millions of dollars, had all been paid. Their loans and discounts, 
 amounting on the 1st of January 1837 to forty-six millions, had 
 been reduced to thirty-two. They had been admirably seconded 
 by the country banks of the State, whose specie and city funds 
 had been increased, and the circulation and discounts reduced 
 in the same proportion. Much credit is due to the Bank Com- 
 missioners for their efforts in promoting that result. 
 
 Above all, the sound and most powerful portion of the com- 
 merce of New York had now taken an active part in promoting 
 an immediate resumption. The Debtor Interest, which, com- 
 bined with that of the United States Bank of Pennsylvania, and 
 
41 
 
 with the mistaken views of some and the unfounded apprehen- 
 sions of others, had constantly attempted to impede the course 
 pursued by the banks, was silenced. They resumed, sustained 
 by that general support of the commercial community and by 
 that general confidence which are indispensable for the main- 
 tenance of specie payments. They resumed in good faith and in 
 full, redeeming the country paper which, during the suspension, 
 had become the general currency of the city ; freely substituting 
 their own circulation, and paying without distinction, when re- 
 quired, all their liabilities. The resumption was effected without 
 the slightest difficulty ; and it is but just to add, that no attempt 
 was made to impede it, either by the United States Bank of 
 Pennsylvania, or from any other quarter. 
 
 The banks of Boston, and generally of New England, were 
 the first to adopt the same course. Public opinion ; operating 
 first on the Governor of Pennsylvania, compelled the United 
 States Bank to resume in the month of July ; and the example 
 was soon followed South and West throughout almost all the 
 States. That happy state of things was of short duration. In 
 October 1839, the United States Bank again suspended its pay- 
 ments ; and again the South and the West adopted, or were 
 obliged to pursue, the same course. After a short and vain at- 
 tempt on the part of that institution to resume in January last, 
 we are again reduced to the same situation. Boston and the 
 Eastern States, New York and the adjacent part of New Jersey, 
 and of late Charleston, sustain specie payments. Every where 
 else, with perhaps some insulated exceptions, there is no other cur- 
 rency but irredeemable paper, more or less depreciated ; and 
 the suspension is almost everywhere sanctioned by the State 
 legislation. 
 
 The facility with which specie payments had been resumed 
 had produced, in some quarters, the erroneous belief, that the 
 country had entirely recovered from the injuries inflicted by 
 years of overtrading and inflated prices. Commercial business 
 was revived too early, and bank facilities were too easily 
 granted. The foreign importations of the year 1839 again 
 amounted to one hundred and sixty-two millions, the exports to 
 one hundred and twenty-one, and the excess to forty millions. 
 But the suspension of October 1839, and its consequences to 
 6 
 
42 
 
 this day, must be ascribed almost exclusively to the United 
 States Bank. 
 
 It has already been seen that, before the 1st of January 1837, 
 and within the first ten months of its new position as a State 
 bank, its legitimate means of discounting, other than its capital, 
 that is to say, its circulation and deposits, had been reduced 
 from twenty-nine to fourteen millions. Deducting the necessary 
 amount of specie, its available means applicable to discounts 
 or" other investments, did not, including its capital, exceed forty- 
 seven millions. Indeed, the onerous conditions imposed by the 
 State charter and the purchase, at an advance of fifteen per 
 cent., of the seven millions held by the United States in the 
 stock of the old bank, made the truly available means consid- 
 erably less. In that situation, its loans and profits, under a wise 
 and cautious administration, should have been reduced to the 
 amount corresponding with the actual means. 
 
 Instead of pursuing that course, a bold attempt was made, as 
 soon as the suspension of May 1837 had taken place, to take ad- 
 vantage of that state of things for commencing a system of ope- 
 ration, foreign to the ordinary and legitimate transactions of any 
 bank, and which might eventually, according to the sanguine 
 expectations of the projectors, control the whole commerce of 
 the country, reinstate the circulation of the Bank, and restore its 
 pristine preponderance. It is obvious that this could not be 
 carried into effect, even if the result had been as propitious as it 
 has proved to be fatal, without prolonging the general suspen- 
 sion of specie payments. It became the interest of the Bank 
 that this should be the case ; and here may probably be found 
 the principal cause, not at the time suspected, of the course pur- 
 sued in that respect by that institution. 
 
 As early as the month of June 1837, a considerable portion 
 of the available funds of the Bank was diverted from their legi- 
 timate object, and, instead of being applied to the gradual reduc- 
 tion of its liabilities, was loaned to the president and other offi- 
 cers or directors of the Bank, in order to be employed in 
 advances on cotton shipped to Europe. A special agency, in 
 reference to that object, was established in London in the ensu- 
 ing month of November. The advances were greatly increased, 
 and continued during a period of near two years. Although no 
 
43 
 
 loss may have been incurred by the Bank, the gross impropriety 
 of loans to such an amount to officers of the Bank, is not the less 
 evident. The sequel is well known. Other improvident loans 
 were made. The Bank over-loaded itself, by purchase, or 
 otherwise, with stocks of every possible description. It has been 
 alleged that it was not the fault of the administrators of the 
 Bank, if those stocks subsequently fell in value. The fault 
 consisted in having converted the Bank into a stock-jobbing as- 
 sociation. In the meanwhile, as other means were wanted, an 
 enormous debt was contracted abroad. 
 
 On the 1st of April 1839, the foreign debt of the Bank amount- 
 ed to twelve millions eight hundred thousand dollars, and the 
 various stocks owned by it to near twenty-three millions (i). 
 Its credit had indeed been artificially sustained ; and its stock 
 was selling at a considerable advance. It was nevertheless on 
 the verge of destruction. In August of the same year, it was 
 compelled to issue post notes, which soon fell to a discount of 
 more than one per cent, a month. In September, the Bank 
 drew largely on Europe without funds, and partly without ad- 
 vice. In order, if possible, to provide funds for that object, and 
 also, as has been acknowledged, for the purpose of breaking the 
 banks of New York, payment of the bills thus sold in that city 
 was suddenly required in specie, and the amount shipped to 
 Europe. The attempt was a failure in both respects ; the banks 
 stood, and the bills were dishonored. On the 9th of October, 
 the United States Bank suspended its payments ; and it is not 
 improper to observe that, a fortnight later, another attempt was 
 made, under its auspices, by the debtor interest of New York, 
 to compel the banks to expand their discounts and thus prepare 
 the way for another general suspension. The banks, as might 
 well be expected, unanimously refused to yield. 
 
 From that time, the fate of that institution was considered as 
 sealed by every impartial observer. Nevertheless, the other 
 banks of Philadelphia still persevered in sustaining it, and 
 suffered it to become largely indebted to them. The State 
 protracted its existence, and, as an equivalent, exacted new 
 
 (i) $6,300,000 of which, consisting principally of Mississippi and Michigan 
 stocks, and previously contracted for, were not yet entered on the ledger. 
 
44 
 
 loans from it. In the meanwhile, it could no otherwise meet its 
 liabilities abroad than by new loans, obtained on onerous con- 
 ditions ; and in order to sustain its expiring credit, a resumption 
 was at last deemed absolutely necessary. 
 
 For that purpose, the other banks of Philadelphia agreed to 
 return five millions of its circulation held by them, and to take 
 in lieu thereof, post notes, payable in about twelve months after 
 date. They thought that a loan of two millions and a half 
 would be sufficient to enable them to grant that accommodation, 
 and that with such aid they would be able to resume and main- 
 tain specie payments. The loan was obtained principally in 
 Boston, partly in New York. As it was principally paid in 
 checks upon Philadelphia and in Baltimore funds, it added but 
 little to the available resources. 
 
 Besides this postponement of five millions of its debt, the 
 United States Bank was, rather unexpectedly, assisted by a 
 further loan obtained abroad, which added more than three 
 millions of dollars to its immediately available resources. The 
 attempt to resume nevertheless failed ; and it was impossible 
 that it should not have failed. The element indispensable for 
 sustaining any bank, confidence, was utterly lost. It seems 
 incredible that it should not have been foreseen, that, as soon as 
 the United States Bank paid in specie, every person who held 
 its notes would instantaneously seize the opportunity of convert 
 ing them into cash (k). 
 
 The principal liabilities of the United States Bank, payable on 
 demand, consisted of more than thirteen millions and a half of 
 bank notes and post notes, which, by the arrangement with the 
 other Philadelphia banks, were 
 
 Reduced to about 7,650,000 
 
 Due to banks of the several States 3,250,000 
 
 Due to individual depositors 2,970,000 
 
 Guarantee of bonds of Planters Bank, &c 240,000 
 
 $14,110,000 
 
 (k) The opinion of the writer of this essay was asked, at the time when 
 application was made in behalf of the Philadelphia banks for the loan mentioned 
 in the text. It was decidedly against a compliance with the request ; and the 
 reason assigned, was the total impossibility, on the part of the United States 
 
45 
 
 During the three weeks that the Bank paid in specie, its pay- 
 ments amounted to about five millions six hundred and thirty 
 thousand dollars, viz. : 
 
 Bonds of Planters Bank, 240,000 
 
 To individual depositors, only 176,000 
 
 To State banks 1,044,000 
 
 And, redemption of bank notes 4,170,000 
 
 Of this last item, one million and a half were for notes in the 
 hands of the other banks of Philadelphia beyond the five millions 
 included in the agreement ; five hundred thousand for post notes 
 over-due, and eleven hundred thousand for accumulated notes 
 which had been protested and sued for. The drain, instead of 
 being extraordinary, and such as could not have been anticipa- 
 ted, was in reality less than, under all the circumstances of the 
 case, might have been expected. 
 
 In the preceding sketch, the acts of the Bank have been con- 
 sidered only in reference to their effect on the currency of the 
 country. It may be affirmed that, in this respect, that bank, sub- 
 sequent to the first general suspension of May 1837, has been 
 the principal, if not the sole, cause of the delay in resuming, and 
 of the subsequent suspensions. In every respect it has been a 
 public nuisance. The original error consisted in the ambitious 
 attempt to control and direct the commerce of the country ; in 
 the arrogant assumption of a pretended right to decide on the 
 expediency of performing that which was an absolute duty ; and 
 in a manifest and deliberate deviation from the acknowledgecj 
 principles of sound and legitimate banking. 
 
 It is not intended here to investigate the facts of a more culpa T 
 ble nature which are laid to the charge of the administrators of 
 the Bank. The application of nine hundred thousand dollars se- 
 cret service money, should be made public. The mismanage T 
 ment and gross neglect, which could in a few years devour two- 
 thirds of a capital of thirty-five millions, are incomprehensible, and 
 have no parallel in the history of banks. The catastrophe has had 
 an injurious effect abroad on the securities of the several States, 
 
 Bank, of sustaining specie payments now that confidence was entirely lost. The 
 writer added that, if the other Philadelphia banks would discard that of the United 
 States and resume alone, not one, but three millions ought to be advanced for 
 that purpose by the banks of the city of New York. 
 
46 
 
 impaired commercial credit, and shaken confidence between man 
 and man. It is natural that the shareholders, so deeply injured, 
 should cling to the hope of preserving the institution, and of thus 
 partly repairing their losses. Every facility consistent with the 
 public good should be granted, every forbearance practised, eve- 
 ry delay allowed, which may enable them to save the remnants 
 of the wreck. But it is due to the moral feeling of the country, 
 not less than to the security of its fiscal concerns, that this dis- 
 graced and dangerous corporation should not be permitted any 
 longer to exist. How, after so many violations of its charter, its 
 existence has been so long protracted, is indeed unintelligible ! 
 
 REMEDIES. 
 
 STATE LEGISLATION. 
 
 IT can hardly be expected that twenty-six independent States 
 should all adopt such systems of legislation, as may secure a 
 sound and uniform currency. But there are some great centres 
 of commerce, which necessarily control the banking operations 
 of the greater part of the country. In the present course of 
 trade, the great importing sea-ports are generally creditor places ; 
 and the principal centres alluded to will be found to be, Boston, 
 New- York, Philadelphia and Baltimore, Charleston, and New- 
 Orleans. Providence, on account of its manufactures, Savannah 
 and Mobile, on the sea-coast, Cincinnati, Louisville, and St. 
 Louis, in the interior, are the next most important points. Some 
 approximation of the relative importance of the great centres 
 may be derived from the aggregate of the foreign imports 
 and of the exports of each of them respectively. Supposing 
 the whole to consist of one hundred parts, Boston has about 
 twelve, New- York forty-seven, Philadelphia and Baltimore four- 
 teen, Charleston and Savannah seven, New-Orleans and Mobile 
 
47 
 
 twenty. The influence of domestic manufactures, of mines, and 
 of other considerations, must of course vary the result. 
 
 Of those great centres, the two first are secure ; and Charles- 
 ton appears to have adopted a correct course. The banking 
 system of New-Orleans is founded on principles so different from 
 those of the Atlantic States, particularly in reference to the large 
 amount loaned on real estate security, that it is difficult to form a 
 correct opinion of it. But the elements of wealth are so great, 
 and the interest of sustaining a sound currency so obvious, that, 
 notwithstanding the embarrassed situation of the adjacent States, 
 great hopes are entertained of an ultimate favorable result in that 
 quarter. Under all the circumstances of our present situation, 
 it seems that, provided a correct course should be adopted by 
 the banks of Philadelphia, and by the Legislature of Pennsylva- 
 nia, an early and nearly general resumption of specie payments 
 would naturally take place. 
 
 The first step that appears absolutely necessary does not ap- 
 ply to Pennsylvania alone. All the States which have incurred 
 debts, and which have not yet adopted efficient measures in that 
 respect, must provide for the punctual payment of the interest 
 and the gradual extinguishment of their debt. This must be 
 done by providing an actual revenue, by taxes whenever neces- 
 sary, and not by any new loans, or any other temporary expe- 
 dient. The States must rely on their own resources, neither on 
 any direct or indirect assumption of State debts by the General 
 Government, nor on any assistance to be derived from the banks : 
 neither must the banks depend on the aid of the States for car- 
 rying on their operations. The difficulties are greater in some 
 States than in others. A great error has been committed by 
 those which have advanced their credit for the especial purpose of 
 establishing banks, in places where a very moderate banking ca- 
 pital was sufficient for all legitimate purposes. Sanguine expec- 
 tations have induced others to undertake premature, and far too 
 extensive, internal improvements, which, in their unfinished state, 
 are nearly or altogether unproductive. The honor and interest 
 of every State require, and justice demands, that its credit should 
 be restored. Public and private credit are intimately connected. 
 That of individuals is impaired when public faith is not pre- 
 served. A resumption of specie payments, on the part of banks 
 
48 
 
 and of individuals, will at once inspire a greater confidence in 
 the stocks of the States where it may take place. There is none 
 whose resources are not adequate to the object in view. 
 
 Philadelphia had a sound capital, greater in proportion to its 
 commerce than that of New- York, or of almost any other city 
 in the Union ; its banks proper were sound and cautiously ad- 
 ministered : not one of them had ever failed/ But they have for 
 several years been pressed by two great evils, the United States 
 Bank and the State Legislature. They have at last got rid of 
 the first burthen, from which they ought to have detached them- 
 selves long ago. Their available means are undoubtedly im- 
 paired by the efforts they made to sustain the Great Bank, and by 
 the debt due to them on that account. Still, provided they are 
 sustained by the commercial community and by public opinion, 
 and provided the State Legislature ceases to oppress them un- 
 der color of granting them relief, there does not seem to be any 
 real obstacle to their soon resuming their former wonted and 
 honorable situation. 
 
 The suspension of specie payments of October 1839, was le- 
 galized by the Legislature of Pennsylvania, on condition that the 
 banks, thus indulged, should make certain loans of money to tho 
 State, and resume their payments in January 1841. To take 
 from them their most available resources, had a direct tendency 
 to put it out of their power to resume their payments within the 
 prescribed time. Those resources, which should have been ap- 
 plied to the reduction of the liabilities of the banks, and to the 
 measures necessary for a resumption, were diverted from their 
 legitimate object, in order to defray the annual expenditures, or 
 to pay the interest on the debt of the State. 
 
 The two last General , Assemblies of Pennsylvania have, 
 however, adopted efficient measures to arrest the progress of the 
 debt, and to provide for the payment of the interest. A new an- 
 nual revenue, derived from taxation alone, and which is expected, 
 according to the most correct, estimates, not to fall short of two 
 millions two hundred thousand dollars, is specifically pledged to 
 the maintenance of the public credit; and the interest on the 
 public debt cannot exceed two millions, and will probably fall 
 short of that sum. The ordinary expenses of Government, and 
 the repairs of the public works, appear to be nearly, if not al- 
 
49 
 
 together, provided for by the tolls and other revenues of the 
 State. Thus far, great praise is due to the Legislature for hav- 
 ing extricated the State from the difficulties in which it had been 
 involved, and for having fearlessly resorted to those direct means 
 which alone could effect the purpose. 
 
 After having accomplished the principal object, nothing else 
 remained than to provide for the payment of arrears, and the or- 
 dinary annual expenditures of the current year, amounting to- 
 gether to three millions one hundred thousand dollars. It is 
 deeply to be lamented that, instead of also pursuing the simplest 
 and most direct course for this object, the Legislature should 
 have resorted to a novel, complex, and most condemnable plan. 
 
 A loan for the sum thus wanted is authorised, for which a 
 five per cent, stock will be issued, to be redeemed at the end of 
 five years, or earlier at the pleasure of the Legislature. To that 
 loan, certain banks (/) are alone authorised to subscribe, to an 
 amount bearing, according to their respective capitals, a ratio 
 varying from eight to twenty-five per cent, to the capital. And, 
 on paying into the State Treasury the amount subscribed in 
 their bank notes of one, two and five dollars, they are credited 
 on the Treasury books for an equal amount of the stock. 
 
 The notes thus issued are payable only in the same stock, and 
 in the following manner. The holder of the notes to an amount 
 of one hundred dollars, on surrendering the same to the issuing 
 bank, receives an order on the Auditor General for a certificate 
 of an equal amount of the stock, and the notes surrendered are 
 cancelled. The State, until the notes are thus redeemed, pays 
 to the banks interest, at the rate of one per cent, a year, on the 
 stock for which they are credited on the Treasury books. And 
 after the notes have been thus redeemed and funded, the State 
 pays, through the agency of the banks, the interest of five per 
 cent, to the holders of the stock which has been issued in pay- 
 ment of the notes. That interest 'is paid out of the proceeds of 
 the tax on bank dividends ; and if this should not be sufficient, 
 the deficiency is paid out of the revenue provided by the act. 
 
 All the notes issued under the provisions of the act, are 
 
 (T) Viz., as appears from the subsequent provisions, those banks which are subject 
 to a tax on their dividends. 
 
 7 
 
50 
 
 receivable for debts due to the commonwealth and to the issuing 
 banks respectively, and also on deposit, by the said banks 
 respectively, payable in like currency, special contracts for 
 deposits excepted. All the notes rnay be re-issued from the 
 Treasury and from the issuing banks respectively ; and the 
 banks generally may receive and issue any of the notes created 
 by the act. 
 
 All the banks, except that of the United States, which own 
 any portion of the funded debt of the State, may, on transferring 
 the same as security to the Auditor General, issue notes to an 
 equal amount, of the same denomination, and receivable and 
 redeemable in the same manner as the notes before described. 
 But the banks which are exempted from a tax on their dividends 
 shall not issue a greater amount of notes, than in the aforesaid 
 ratio to their respective capitals ; and the banks subject to that 
 tax shall not, under this section of the act, issue a greater amount 
 than seven per cent, of their respective capitals. The interest 
 on the stock thus transferred is suspended, during the time the 
 said stock remains in the hands of the Auditor General (m). 
 
 17th Sect. No bank, which shall comply with the provisions 
 of this act, shall be subject, by way of penalty or otherwise, to a 
 greater rate of interest than six per cent, per annum. The 
 resolution of April 1840, which provided for the resumption of 
 specie payments, is repealed. And all the provisions of any act 
 of incorporation, or of any law of the State, which provided for 
 the forfeiture of any charter, by reason of the non-payment of 
 any of the liabilities of the bank, or which prohibited the banks 
 from making loans and discounts, issuing their own notes, or 
 declaring dividends during the suspension of specie payments, 
 are suspended, until further legislative action, and until the 
 Legislature shall provide for the repayment of the loan of 
 three millions one hundred thousand dollars authorised by the 
 act. But the dividends are limited to five per cent, during the 
 suspension. 
 
 (m) It appears, therefore, that all the banks, whether subject to, or exempt from 
 a tax on their dividends, are authorised to issue notes in the ratio to their capitals 
 fixed by the law ; and that, in addition thereto, the banks subject to that tax may 
 issue notes to an amount not exceeding seven per cent, of their capital. 
 
51 
 
 The banks subject to a tax on their dividends, which shall not 
 take their due proportion of the loan, according to the ratio fixed 
 by law, (not including, it seems, the seven per cent, additional 
 which appears to be optional,) and the other banks, which shall 
 not deposit at least five per cent, on their capitals respectively, 
 shall remain subject to the provisions of the laws now in force, 
 and be excepted from the benefit of the provisions of the 17th 
 section of the act. Nor shall the United States Bank be 
 entitled to the said benefits, unless the stockholders consent to 
 be subject to any general laws to be hereafter passed for the 
 regulation of the banks of the commonwealth. There are other 
 provisions authorising and facilitating the dissolution and liquida- 
 tion of that bank, with the consent of the stockholders. 
 
 The residue of the act provides, for raising an additional 
 revenue, and for appropriating the proceeds of the loan of three 
 millions one hundred thousand dollars, viz. about two millions 
 two hundred thousand for repairs and arrears on account of the 
 internal improvements, and about eight hundred thousand for 
 schools and the other ordinary annual expenses of Government. 
 Those objects were evidently blended in the same law with the 
 provisions respecting the banks, in order to ensure the adoption 
 of these provisions. 
 
 Viewed simply as a fiscal operation, it makes the banks only 
 the agents of the State. They sign the notes pro forma, and 
 redeem them in its behalf. The State puts the notes in circu- 
 lation, uses them for its own benefit, redeems them with its own 
 stock, pays the interest, and is bound at the end of five years to 
 pay the principal, in specie, with its own funds. The banks, for 
 their agency, receive the compensation of one per cent, a year 
 on the notes, so long as they remain in circulation. The notes 
 are substantially an emission of bills of credit, by the State and 
 for the use of the State. How far this operation may in itself 
 be proper, or consistent with the Constitution of the United 
 States, are questions which do not come within the scope of this 
 essay. The measure, considered only in reference to its effect 
 on the currency and on the resumption of specie payments, 
 hardly requires to be discussed. It is almost sufficient to have 
 stated the provisions of the law. 
 
 The banks of Philadelphia, notwithstanding the difficulties 
 
52 
 
 which they had to encounter, had succeeded in keeping their 
 currency, their deposits, their liabilities payable on demand, all 
 which is generally called " Philadelphia funds," at a discount, 
 compared with specie, of less than five per cent. An emission 
 of a new species of currency is now authorised, which, being 
 only a promise to issue a State stock to the same amount, is, on 
 the day when it is issued, worth intrinsically no more than that 
 stock, or less than eighty per cent, of its nominal value. It may 
 be, that the demand created by having made that currency 
 receivable in payment of debts to the commonwealth and to the 
 bank, may enhance that value. This is altogether conjectural : 
 and it cannot certainly be expected that it will become equal to 
 that of the actual currency at this moment of the Philadelphia 
 banks. Under the most favorable aspect, it is still a legalized 
 emission of a depreciated, fluctuating and irredeemable paper, 
 analogous to a falsification of the legal coin of the country. 
 And in order to carry this plan into effect, it has been deemed 
 necessary to compel the banks to receive that paper in payment 
 of the debts due to them, arid to give a solemn legislative 
 sanction to a protracted suspension of specie payments ; that is 
 to say, to a continued immoral and illegal violation of engage- 
 ments and contracts, for a term which may be not less than five 
 years. 
 
 Had there been no other object in view, than that of provid- 
 ing for the discharge of the arrears and necessary expenses of 
 the year, for which a loan was indispensable, the simple and 
 direct course was to borrow the money on the best terms on 
 which it could be obtained. This is the cheapest and wisest, as 
 it is the most honest mode. Every other complex, and, as it is 
 called, ingenious contrivance is nothing but quackery, if not 
 something worse. There is indeed much difficulty, when heavy 
 taxes become necessary, in selecting those which will be most 
 equal and productive, least oppressive and arbitrary. But there 
 is no more mystery in directing, in ordinary times, the finances 
 of a nation, than in arranging the fiscal concerns of a commer- 
 cial house. In both cases, if it becomes necessary to borrow, 
 you must pay for the money, according to its market price, and 
 to the credit of the borrower. Indeed, in that respect, the State 
 has the advantage of not being trammelled by its own absurd 
 
53 - 
 
 usury laws, which may compel the individual to pay a dearer 
 price for the loan than he otherwise would. 
 
 In the year 1798, the United States borrowed five millions at 
 eight per cent, per annum. During the last war, they gave 
 their six per cent, stock for money, at the rate of eighty per 
 cent, of its nominal value. Which was the most eligible mode 
 is a debatable question. But, on both occasions, they were 
 obliged to give, and gave without hesitation, their stock for the 
 highest price it could command. It is what every Government, 
 which has any regard for its credit, always does. The State of 
 New York wanted also three millions of dollars for the service 
 of this year. The market price of her stocks is higher than 
 that of those of Pennsylvania. Yet she did not attempt to bor- 
 row at five per cent., but has authorised a voluntary loan at the 
 rate of six per cent. It is probable that a similar stock, issued 
 by Pennsylvania, could not, at this moment, have been negotiated 
 at par. But, with the knowledge that efficient provision had 
 been made for the payment of the interest of the public debt, 
 and that a course of measures had been adopted which would 
 prevent its increase, had the Legislature only taken measures for 
 hastening, instead of protracting, the resumption of specie pay- 
 ments, the effect on the public credit of the State would have 
 been immediate ; and a direct loan at six per cent, might have 
 been negotiated on favorable terms. 
 
 There is, indeed, no other remedy, so far as it depends on the 
 State, for the evils inflicted by the act of the late General As- 
 sembly. For, if the banks accept the proposal, they may claim, 
 as a condition of the contract, that all the suspending clauses of 
 the act shall continue in force, until provision shall have been 
 made for the re-payment of the loan. This cannot be done 
 otherwise than by negotiating a money loan in the ordinary 
 way. Whether this shall be done by the next Legislature, de- 
 pends on the will of the people. At this time, and had it not 
 been for that most unfortunate impediment, there would have 
 been no more difficulty in resuming specie payments in Phila- 
 delphia within sixty days, provided the commercial community 
 of that city required it, than there is now in sustaining those 
 payments in New York. New England and New York should, 
 at all times, give every possible aid in promoting that object. It 
 
54 
 
 is a national concern, on account both of the importance of that 
 city, and of its great influence over the commercial transactions 
 and currency of the West and of the South. 
 
 The dangers of a paper currency are such, that it becomes 
 necessary to inquire whether the banking system adopted, in 
 those States where the result has been most favorable, may 
 not be susceptible of improvement. For that purpose the laws 
 which govern the banks of New York will now be examined. 
 They are better known to the writer than those of any other 
 State ; the system has been at least as successful here as in any 
 other part of the Union ; and it now embraces both restricted 
 chartered banks, and free banking associations established under 
 a general law. 
 
 The various legal provisions, by which the banks of the State 
 of New York are governed, consist principally of general laws 
 respecting monied corporations, partly of clauses inserted in 
 the several charters and nearly the same in all, but which it 
 would have been better to have included amongst the general 
 laws. 
 
 The privileges granted by the charters are, 1st, the Act of In- 
 corporation itself, which enables the bank to contract, to sue 
 and be sued, and generally to act, in reference to the object for 
 which it is incorporated, in the same manner as might be done 
 by a natural person ; 2dly, the limitation of responsibility to the 
 capital of the bank, thus rendering the shareholders irresponsible 
 jn their personal capacity ; 3dly, the monopoly, till lately, of car- 
 rying on banking operations. 
 
 Those operations are not expressly defined by the general 
 laws of the land, but by the charters themselves, and substan- 
 tially as follows, viz. : that the bank shall have power to carry 
 on the business of banking, by discounting bills, notes, and other 
 evidences of debt ; by receiving deposits ; by buying and selling 
 gold and silver bullion, foreign coins, and bills of exchange ; by 
 issuing bills, notes, and other evidences of debt ; and by exer- 
 cising such other incidental powers as shall be necessary to 
 carry on such business. 
 
55 
 
 It might be inferred by implication, that the banks could not 
 legally carry on any other species of business. For greater 
 security, it is further expressly provided in all the charters : 1st, 
 that no bank shall hold any real estate but such as is requisite 
 for its immediate accommodation, or such as may be mortgaged, 
 conveyed or purchased in satisfaction of debts, or for the purpose 
 of securing debts; 2dly, that it shall not, directly or indirectly, 
 deal or trade in buying or selling any goods, wares, merchan- 
 dizes, or commodities whatsoever, or in buying or selling any 
 stock created under any act of the United States, or of any par- 
 ticular State, unless in selling the same when truly pledged, 
 by way of security, for debts due to the said corporation. 
 
 The location, duration, and capital of each bank respectively, 
 are also determined by its charter. The other provisions refer 
 to the following objects, viz. : 
 
 1. Capital. No bank can commence its operations until the 
 whole of its capital has been paid in specie or current bank bills ; 
 nor until an affidavit to that effect, and stating that no stock- 
 holder has paid any part of his shares by a discounted note, 
 or directly or indirectly with any loan from the bank, has been 
 made by the President and Cashier of the bank and filed with 
 the Comptroller. False swearing in that respect is deemed per- 
 jury, and punished as such. 
 
 For the purpose of preserving the capital, the banks are for- 
 bidden, besides other provisions, to make any dividend except 
 from their surplus profits. In calculating the profits, all the ex- 
 penses, the interest due on debts contracted by the bank, and 
 all the losses, including therein all the debts due to the bank on 
 which no interest has been paid for one year, must be deducted ; 
 and if the amount of losses should exceed that of the profits then 
 possessed, the deficiency must be charged as a reduction of the 
 capital ; and no dividends can be paid until the deficit of the 
 original capital shall be made good. That capital cannot be 
 reduced without leave of the Legislature. 
 
 2. Restrictions on Banking Operations. The banks are for- 
 bidden to have an amount of bank notes in circulation exceed- 
 ing a rate which varies according to their respective capitals, 
 so as not to exceed once and a half its amount when that 
 capital is not more than one hundred thousand dollars, nor sixty 
 
56 
 
 per cent, of that amount, when the capital is, or exceeds, two 
 millions; to extend their loans and discounts beyond twice 
 and a half the amount of their respective capital ; to issue notes 
 not payable on demand, or bearing interest (post notes) ; to issue 
 notes of a less denomination than one dollar ; to purchase their 
 notes for less than their nominal value ; to lend or discount on 
 the security of their own stock ; to charge more than six per 
 cent, interest on discounted notes payable within sixty-three 
 days ; to make, directly or indirectly, any loans or discounts to 
 their directors respectively, to an amount exceeding in the 
 aggregate one third of their capital. 
 
 3. Directors. Besides the limitation on their own discounts, 
 they are made personally liable, if consenting to any act in vio- 
 lation of the laws respecting monied corporations. Every 
 director must have a number of shares determined by the 
 charter. No director or officer of the bank is permitted to pur- 
 chase, discount, or loan money on a note which has been rejected 
 by the bank. 
 
 4. Inspection and Publicity. -It is the duty of three bank 
 commissioners, appointed by the Governor and Senate, to inspect, 
 once at least in every four months, the affairs of every bank ; 
 to examine all their books, papers, notes, bonds, and other evi- 
 dences of debt ; to ascertain the quantity of specie on hand, and 
 generally the actual condition of the banks and their ability to 
 fulfil their engagements. The commissioners are authorised to 
 examine upon oath all the officers of the banks, or any other 
 person, in relation to their affairs and condition ; and they 
 must report annually to the Legislature abstracts from the re- 
 port made to them, and such other statements as they may deem 
 useful. 
 
 5. Suspension and Dissolution. All the banks created subse- 
 quent to the year 1828 are, by provisions inserted in their char- 
 ters, directed, as has already been stated, to discontinue their 
 operations, unless permitted by the Chancellor, if they shall 
 neglect or refuse, for ten days, to redeem in specie any evidence 
 of debt issued by them. This special provision has not been 
 inserted in the charters of the old banks which have been re- 
 newed since that time. During a suspension of specie pay- 
 ments, the suspending banks are obliged to pay damages, at the 
 
57 
 
 rate of ten per cent, a year, on every evidence of debt, the pay- 
 ment of which has been demanded and refused. 
 
 It is provided by the general laws, that, if any bank shall 
 have lost one half of its capital stock, or shall have suspended the 
 payment of its bills in specie for ninety days, or shall refuse to allow 
 its officers to be examined upon oath by the commissioners, the 
 said commissioners may, and, if they ascertain that the bank is 
 insolvent, or has violated any of the provisions binding on such 
 bank, they shall, apply to the Court of Chancery for an injunction 
 against such bank and its officers. The Attorney General, and 
 every creditor, director, and, in some cases, stockholder of the 
 bank, may also apply for an injunction. 
 
 The Chancellor, upon any such application, may, according to 
 circumstances, suspend or dismiss any of the officers of the 
 bank, restrain it from exercising its corporate powers, seques- 
 trate its property, dissolve it as an insolvent corporation, and 
 appoint a receiver for the liquidation of its affairs. 
 
 It is further provided by the act of 3d December 1827, which 
 sanctioned the first part of the Revised Statutes, that " the char- 
 ter of every corporation, that shall thereafter be granted by the 
 Legislature, shall be subject to alteration, suspension, and repeal, 
 in the discretion of the Legislature" (n). 
 
 Finally, it is enacted by the third part of the Revised Statutes, 
 passed as one act on the 10th December 1828, that " whenever 
 any incorporated company shall have remained insolvent for 
 one whole year ; or for one year shall have neglected or refused 
 to pay and discharge its notes or other evidences of debt ; or 
 for one year shall have suspended the ordinary and lawful busi- 
 ness of such corporation ; it shall be deemed to have surren- 
 dered the rights, privileges and franchises granted by any act of 
 incorporation, or acquired under the laws of this State, and shall 
 be adjudged to be dissolved" (o). 
 
 6. Safety Fund.'Eivery bank chartered, or the charter of 
 which has been renewed subsequent to the act of April 2d 1829, 
 pays annually, during six years, to the Treasurer of the State, a 
 
 (n) Revised Statutes, Part I., Chap, xviii., Title 3d, Section 8, 
 (o) Revised Statutes, Part III., Chap, viii., Title 4th, Art. 2d, Section 38. 
 ft 
 
58 
 
 sum equal to one half of one per cent, on its capital. These 
 payments, called the " bank fund," are appropriated to the pay- 
 ment of such of the debts of any of the said banks which shall 
 become insolvent, as shall remain unpaid, after applying the pro- 
 perty and effects of such insolvent bank. And whenever the 
 fund shall be reduced, by the payment of such debts, to less than 
 three per cent, upon the aggregate capital of the banks, every 
 bank shall again renew its annual payments of one-half of one 
 per cent, on its capital, until the fund shall again amount to three 
 per cent, on the aggregate capital. 
 
 It cannot be denied that the banking system of the State of 
 New York, since it has been subject to these regulations, has 
 proved superior to most, and inferior to none, of the plans adopted 
 in other States. The banks, though they did suspend, were the 
 first to resume, arid have ever since maintained specie payments. 
 Since the year 1830, only two banks subject to the regulations, 
 have been dissolved. One of these, having a capital of one 
 hundred thousand dollars, was for some irregularity dissolved 
 by act of the Legislature. It paid all its debts, and the whole of 
 its capital to the stockholders. The other (the City Bank of 
 Buffalo) was dissolved by process of law ; and its entire capital 
 of four hundred thousand dollars is sunk. During the same 
 period of ten years, and under a regimen till lately much less 
 severe, not less than nine banks in Boston, with a capital of three 
 millions six hundred thousand dollars, have failed, or been dis- 
 solved ; but in five of those cases, the creditors suffered no ulti- 
 mate loss. 
 
 The provisions, which define and limit the legitimate opera- 
 tions of the banks, as well as those which ensure the actual 
 payment of the capital, or are intended to preserve it entire, 
 have proved efficient and do not seem to require any alteration, 
 It has been often suggested, and instances have been adduced to 
 prove, that provisions for ensuring the actual payment of capital 
 might be evaded. The instances adduced have occurred when 
 the provisions were inadequate. None has taken place amongst 
 the New York banks subject to the present system. It will not 
 be asserted that such instances may not occur ; but when they 
 are so extremely rare, to argue thence, that the provisions are 
 unnecessary or inefficient, is as illogical as an attempt to prove 
 
59 
 
 that, because some criminals escape, laws for the punishment of 
 crimes are unnecessary and inefficient. 
 
 For the enforcement of those provisions and of the other 
 restrictions on banking operations, an inspection and thorough 
 investigation of the affairs of the banks, by officers unconnected 
 with those institutions, were necessary ; and those investigations 
 by the Bank Commissioners, as well as the publicity given to 
 their statements, have proved eminently useful. No further 
 provision in this respect seems necessary. 
 
 Two additional regulations only, of primary importance, will 
 be suggested. The first relates to the restrictions on the amount 
 of loans and discounts ; the other to the provisions in case of 
 suspension of specie payments. 
 
 The restriction on the amount of issues was originally almost 
 nominal, inasmuch as it far exceeded the amount which any bank 
 might or did issue. The amount now permitted is still too 
 great, at least for banks which have but a small capital. This 
 condition may still be retained ; but it will lose much of its impor- 
 tance, provided the restriction upon the loans and discounts 
 shall be modified. 
 
 All the debits and credits of a bank may, for the sake of per- 
 spicuity, be reduced, on the one side, to the capital, circulation 
 and deposites ; on the other, to the real estate, the amount of 
 loans, discounts, and other investments bearing interest, and the 
 specie. For all the other items, of which the principal are the 
 notes of other banks on hand, and the balances due to and from 
 other banks, may be included under some of the general heads 
 above mentioned. Thus, for instance, all the balances due to 
 other banks are deposits ; and all the notes of other banks, or 
 balances due by them, should, if the bank has been properly ad- 
 ministered, be available resources, tantamount to specie. It 
 is obvious, that the maximum of the investments bearing inter- 
 est will regulate all the other varying items. 
 
 Supposing, for instance, that the maximum of discounts, loans, 
 and other investments, bearing interest, should never exceed 
 once and three-fifths of the capital of the bank, and that the 
 statement of a bank, having a capital of one million, should on 
 any given day be as follo'ws, viz. : 
 
60 
 
 Capital $1,000,000 
 
 Circulation and deposits. .. 1,000,000 
 
 2,000,000 
 
 Real estate $ 100,000 
 
 Loans, discounts, stocks, &c. 1,600,000 
 Specie 300,000 
 
 2,000,000 
 
 it is evident that, since the capital and real estate are constant 
 quantities, and the amount of loans, &c. is at its maximum, any 
 increase in the circulation and deposits, or any other liabilities of 
 the bank, must necessarily produce a corresponding increase of 
 specie or available resources of the bank. And the effect of this 
 would be to strengthen instead of weakening the bank ; since the 
 ratio of available resources to liabilities payable on demand 
 would thereby be increased. The efficiency of the provision de- 
 pends entirely on the reduction of the maximum of loans and 
 discounts, so that they shall not exceed the amount necessary to 
 ensure a sufficient dividend. 
 
 That maximum is now fixed at twice and a half the amount 
 of the capital, which would yield a gross profit of at least fifteen 
 per cent. ; and, after deducting three per cent, for expenses, tax, 
 and contingencies, leave a dividend of twelve per cent, on the 
 capital; and a dividend of even fifteen per cent, has accordingly 
 been sometimes realized by country banks with a small capital. 
 Considered as a whole, the excessive and fatal expansions of the 
 years 1836-1837, could not have taken place, had the maximum 
 been properly regulated. On the 1st of January 1837, the 
 loans, discounts and stocks of the ninety banks subject to the 
 bank-fund law, and having a capital of thirty-two millions five 
 hundred thousand dollars, amounted to sixty-nine millions, that is 
 to say, to twice and one-eighth of their capital. The conse- 
 quence was, an amount of circulation and deposits of forty-five 
 millions, with less than six millions in specie (/?). 
 
 As the legal interest of New-York is seven per cent, the ave- 
 rage interest on discounts may, independent of occasional profits 
 on exchange, be estimated at six and a half per cent. If, there- 
 fore, the maximum of loans, discounts, and all other investments 
 
 (p) The Manhattan Company, which was not subject to the law, with a capi- 
 tal of $2,050,000, had extended its loans and discounts to $5,450,000 ; and its 
 circulation and deposits amounted to $4,920,000. 
 
61 
 
 bearing interest, was reduced to once and a half the amount of 
 the capital, the gross profits would amount to nine and three 
 quarters per cent., and, after deducting three per cent, for ex- 
 penses, &c. leave a dividend of six and three quarters per cent, 
 on the capital. In point of fact, a reference to the numerous 
 bank statements of different States, which have been lately pub- 
 lished, will show, that the average amount of the loans, dis- 
 counts, &c. of well-administered banks, is nearly in that ratio. 
 
 On the 1st January 1840, the loans, discounts and stocks of the 
 ninety banks of the State of New- York, subject to the bank- fund 
 law, and having a capital of thirty-two millions five hundred and 
 fifty thousand dollars, amounted to fifty-three millions four hundred 
 and twenty thousand dollars, that is to say, in the ratio of one hun- 
 dred and sixty-four to one hundred of their capital. The capital of 
 the eighteen city banks, of the same description, amounted to six- 
 teen millions six hundred thousand dollars, and their loans, dis- 
 counts and stocks to twenty-five millions and forty thousand dol- 
 lars, that is to say, in the ratio of one hundred and fifty-one to one 
 hundred of their capital. The aggregate dividend of the eigh- 
 teen city banks was 6'87 per cent., and that of the seventy-two 
 country banks 8*82 per cent, on their capital. The great im- 
 portance and practicability of a provision fixing that maximum are 
 obvious. The ratio, at most, of one hundred and sixty to one 
 hundred of the capital may be proper, as, under that, banks will 
 hardly ever exceed one hundred and fifty to one hundred. 
 
 With respect to suspensions, the provision which compels all 
 the new banks to discontinue their operations, except the secur- 
 ing and collecting of debts, whenever they shall decline for ten 
 days to redeem in specie any evidence of debt issued by such 
 banks respectively, should, in the first place, be expressly ex- 
 tended to all their liabilities payable on demand, and be made 
 applicable to all the banks without exception. 
 
 This being done, and in case the Chancellor should permit any 
 bank thus suspended to proceed in its business, the alteration 
 proposed is that, notwithstanding the leave thus given, the bank 
 should, until it had resumed payments in specie, be prohibited 
 to issue any of its notes, to increase the aggregate of its loans 
 and discounts, or to increase the amount of loans previous- 
 ly obtained by any of its officers or directors. For the purpose 
 
62 
 
 of rendering the first of these provisions efficient, it would be 
 further necessary to prohibit any bank whatever to issue the 
 notes of any bank which had suspended specie payments. The 
 following advantages would ensue. 
 
 In the first place, it is a natural remedy. Since the banks have 
 been permitted to issue a paper currency on the express con- 
 dition of its being at all times redeemable in specie, the 
 permission should cease whenever the* condition is not per- 
 formed. The prohibition would also have a direct tendency to 
 enable the solvent 'banks to resume within a short time. And 
 finally, it would make it the interest of all the parties immediately 
 concerned, and of the whole community, to prevent a suspen- 
 sion, or to make it of the shortest possible duration. 
 
 Experience has shown, that persons laboring under embar- 
 rassments, or from some temporary, selfish or erroneous motives, 
 may promote, or protract, a general suspension. If they are 
 made certain, that such a measure will make money more scarce, 
 as it is called, instead of more abundant, and that their situation 
 will be worse instead of being improved, one of the causes which 
 most seriously endangers the banking system will be removed. 
 
 Other improvements of less importance might be suggested. 
 
 The amount discounted for any one director might be limit- 
 ed ; the banks might be prohibited from making any loans to the 
 president or cashier ; and these two officers should not be per- 
 mitted to deal in stocks. 
 
 The annual tax of one half per cent., imposed under the name 
 of "safety fund," is unjust towards the banks which are well ad- 
 .ministered, and injurious to the community at large. To make 
 a bank responsible for the misconduct of another, sometimes very 
 .distant, and over which it has no control, is a premium given to 
 neglect of duty and to mismanagement, at the expense of the 
 banks which have performed their duty and been cautiously ad- 
 ministered. That provision gives a false credit to some institu- 
 tions, which, not enjoying perfect confidence, would not other- 
 wise be enabled to keep in circulation the same amount of notes ; 
 #nd it therefore has a tendency unnecessarily to increase the 
 amount of paper money. The fund would be inadequate in 
 ase of any great failure ; and it provides at best only against 
 
63 
 
 ultimate loss, and not at all against the danger of a general 
 suspension. 
 
 It has been suggested that, although every legislative attempt 
 to make a paper currency payable at different place?, a general 
 and uniform currency for an extensive country, is improper and 
 must fail (q), yet the safety fund tax might be rendered less 
 improper, by applying it to each county, or other district of 
 country prescribed by law, respectively. Thus the banks would 
 each be made responsible, to the extent of the tax, for the banks 
 only within the same county or district. They would all there- 
 by be induced to watch and regulate those in their own vicinity. 
 
 In connexion with this branch of the subject, there is a measure 
 which, though belonging to the administration of banks rather 
 than to legal enactments, is suggested on account of its great 
 importance. Few regulations would be more useful, in prevent- 
 ing dangerous expansions of discounts and issues on the part of 
 the city banks, than a regular exchange of notes and checks, and 
 an actual daily or semi-weekly payment of the balances. It 
 must be recollected, that it is by this process alone that a Bank 
 of the United States has ever acted, or been supposed to act, as 
 a regulator of the currency. Its action would not, in that re- 
 spect, be wanted in any city, the banks of which would, by adopt- 
 ing the process, regulate themselves. It is one of the principal 
 ingredients of the system of the banks of Scotland. The bank- 
 ers of London, by the daily exchange of drafts at the clearing- 
 house, reduce the ultimate balance to a very small sum; and 
 that balance is immediately paid in notes of the Bank of Eng- 
 land. The want of a similar arrangement amongst the banks 
 of this city produces relaxation, favors improper expansions, and 
 is attended with serious inconveniences. The principal diffi- 
 culty in the way of an arrangement for that purpose, is the want 
 of a common medium other than specie for effecting the pay- 
 ment of balances. These are daily fluctuating ; and a perpetual 
 drawing and redrawing of specie from and into the Banks is 
 Unpopular and inconvenient. 
 
 (gO This subject will again be adverted to in reference to a Bank of the United" 
 States. 
 
64 
 
 In order to remedy this, it has been suggested, that a general 
 cash office might be established, in which each bank should 
 place a sum in specie, proportionate to its capital, which would 
 be carried to its credit in the books of the office. Each bank 
 would be daily debited or credited in those books for the balance 
 of its account with all the other banks. Each bank might at 
 anytime draw for specie on the office for the excess of its credit 
 beyond its quota ; and each bank should be obliged to replenish 
 its quota, whenever it was diminished one half, or in any other 
 proportion agreed on. 
 
 It may be, that some similar arrangement might be made in 
 every other county, or larger convenient district, of the State. 
 It would not be necessary to establish there a general cash 
 office. Each of the banks of Scotland has an agent at Edin- 
 burgh, and the balances are there settled twice a week, and 
 paid generally by drafts on London. In the same manner 
 the balances due by the banks, in each district, might be paid 
 by drafts on New York, or any other place agreed on ; and 
 the notes of the several banks in the same district would be 
 received by all, and be a common and uniform currency for the 
 whole district. But the process, which is practicable for a 
 country of no greater extent than that portion of Scotland 
 where banks are established, cannot be extended beyond certain 
 limits. It cannot certainly be applied to the whole of the United 
 States, nor, it is believed, to the whole State of New York, so 
 as to make the notes issued by all the banks a uniform currency 
 for the whole. 
 
 Paper money is from its nature a local currency, confined 
 to the place where it is made payable and to its vicinity. 
 The selection of the place or places where it is made payable 
 may be left to each bank respectively ; but they should not be 
 compelled by law to make it payable or redeemable at more 
 than one place. In order to obviate this difficulty, the country 
 banks of the State of New York have been enjoined, by a late 
 law, to redeem their notes at New York or Albany, at a certain 
 fixed discount. This is, in fact, an attempt to regulate the rate 
 of exchange ; which is not a proper object for legislation, and 
 should be left to be regulated by the course of trade. 
 
 Although the former general laws prohibited only notes 
 
65 
 
 Tinder one dollar, a subsequent act did, for a short time, extend 
 the prohibition to all notes under five dollars. This is in itself a 
 proper measure ; inasmuch as it lessens the gross amount of 
 issues ; contributes, as far as it goes, in making the wages of 
 labor and the articles of consumption which are daily retailed, 
 payable only in specie ; and protects the poor classes of the com- 
 munity against the contingency of a depreciated currency. The 
 prohibition would be still more useful and efficient, if it could be 
 extended to all notes under twenty dollars. But there has been 
 a. universal demand for notes under five dollars, not only in this, 
 but in many other States; and the issue of notes of that descrip^ 
 tion has again been permitted by a law of this State. 
 
 It is believed that this demand may be principally ascribed to 
 the act of Congress, which has rated silver under its true value 
 as compared with gold. It seems to be at all times improper 
 to give a legal relative value to the two precious metals, differ- 
 ent from their respective market price. This indeed varies 
 according to the variations, in the respective demand and supply 
 in different countries. But these variations are small, and an 
 average ratio may be assumed sufficiently correct for all prac- 
 tical purposes during a number of years. If a contrary course 
 be pursued, the precious metal which is underrated will cease to 
 circulate freely, and will become a merchandise. It may also 
 be observed, as regards the United States, that gold is imported 
 from countries where it is not produced, and can therefore be 
 naturally imported only when exchanges are favorable ; whilst 
 silver is imported directly from Mexico and other parts of 
 America, of which it is the natural annual product, and must, as 
 the cotton of the United States, be necessarily exported annually, 
 without regard to price or rate of exchange. Before the act of* 
 Congress alluded to, the silver crop of Mexico did naturally 
 flow into the United States ; it now seeks the more favorable 
 market of England. 
 
 But the immediate effect of that act on the currency of the 
 country, has been to give to the silver, necessary for change or 
 small payments, a legal nominal value less than its actual worth. 
 It is believed that a similar experiment had never before been 
 attempted in any country. Everywhere else, as well as in 
 America, the silver coins, daily wanted for exchange, had been 
 
66 
 
 made either to correspond, or to be inferior in value, to gold 
 coins, or to silver coins of a higher denomination. The necessa- 
 ry result is to drive silver from circulation ; and that inconve- 
 nience has been in part obviated, only by permitting small foreign 
 silver coins, though depreciated from five to ten per cent., to 
 pass at their nominal value. Hence, the demand for notes of 
 one and two dollars was so urgent, that foreign notes of that 
 denomination became a general circulating medium, in open 
 violation of the laws of this State. To permit its banks to issue 
 small notes, became in fact a measure necessary, in order to 
 protect the community against a worse description of paper. 
 
 There seem to be but two remedies for that evil, and they 
 depend on the action of Congress. The first, and, it is believed,, 
 the most proper, would be to alter the ratio of gold to silver, 
 according to their true relative value. This would render a 
 new gold coinage necessary, and might cost about three hun- 
 dred thousand dollars, in order to redeem the existing coinage 
 at its nominal value. The other mode would be, to adopt the 
 British plan, and to issue as tokens, not as a legal tender, but as 
 a voluntary currency, a silver coinage depreciated by alloy five 
 to ten per cent. In that case the coinage must, like that of cop- 
 per coins, be made by Government, and not for individuals ;. 
 and it is necessary, in order to prevent any excess beyond the 
 amount actually requisite for the wants of the community, that 
 the Mint should at all times, when required, redeem such coinage 
 at its nominal value. 
 
 According to a return made to the State's Senate, the 
 amount of the different denominations of the notes issued by the 
 several banks of this State was on the 1st of January 1836, as 
 follows : 
 
 Under five dollars $2,589,714 
 
 Of five do 6,029,933 
 
 Of ten and twenty 5,687,004 
 
 Of fifty and one hundred 3,131,175 
 
 Of above one hundred 3,451,100 
 
 $2U,888,926 
 
 The country banks had in circulation only twenty-five thou- 
 sand dollars in notes of a higher denomination than one hundred 
 dollars. 
 
67 
 
 FREE BANKING. 
 
 NOTWITHSTANDING the comparatively favorable result of the 
 New York restrictive system of chartered banks, it has been 
 strenuously assailed ; and the attempt has been made to sub- 
 stitute for it that which has been called free banking. 
 
 A monopoly, embracing all the ordinary banking operations, 
 had in this State been created in favor of the chartered banks. 
 By an act passed in 1818 and confirmed, as included in the first 
 part of the Revised Statutes, by the act of December 3d, 1827, 
 it was enacted that, " no person, association of persons or body 
 corporate, except such bodies corporate as are expressly author- 
 ised by law, (the chartered banks,) shall keep any office for the 
 purpose of receiving deposits, or discounting notes or bills, or 
 issuing any evidences of debt, to be loaned, or put in circulation 
 as money ; nor shall they issue any bills or promissory notes or 
 evidences of debt as private bankers, for the purpose of loaning 
 them, or putting them in circulation as money, unless thereto 
 specially authorised by law." 
 
 So much of that law as forbade any person or association of 
 persons to keep offices for the purpose of receiving deposits or 
 discounting notes or bills, was repealed by a law passed Februa- 
 ry 4th, 1837 (q). It is not believed that any such prohibition, 
 that of receiving deposits or discounting notes or bills, has ever 
 existed in any of the other States, or in any other country. It 
 was denounced by the writer of this essay more than ten years 
 ago. And it must be well understood, that, in the discussion 
 respecting free banking, the only question at issue relates ex- 
 clusively to the power of substituting bank notes, or paper mo- 
 ney, for a specie currency. It is now universally agreed, that 
 with that single exception, every other species of banking opera- 
 tions, not only must be open to all, but requires no more restric- 
 tions than any other species of commerce. 
 
 (q) But any corporation, created by the laws of any other State or country, is 
 still forbidden to keep any office for the purpose of receiving deposits, discounting 
 notes or bills, or issuing bank notes. 
 
68 
 
 The term " free banking," or, to speak more correctly, free 
 issuing of paper money, embraces two distinct propositions ; 
 first, that all persons, or associations of persons, should be permit- 
 ted to issue paper money on the same terms ; secondly, that pa- 
 per money may be issued by all persons, or associations, without 
 any legislative restrictions. 
 
 The exclusive right of issuing a paper currency, granted to 
 the chartered banks, was a monopoly ; and monopolies can never 
 exist without violating, to a certain extent, individual rights. 
 But the actual evils produced by that particular monopoly have 
 been greatly exaggerated, and should be reduced to their true 
 value. 
 
 The right of issuing paper money as currency, like that of 
 issuing gold and silver coins, belongs exclusively to the nation, 
 and cannot be claimed by any individuals. If it be insisted that 
 Government has no right to part with it, unless it be granted to 
 all, it must be recollected that a right which from its nature can- 
 not be exercised by an individual, is for him a nullity. The 
 right in question can be exercised only by men of wealth, or by 
 impostors. The poor classes cannot enjoy it : the right claimed 
 is only, that all wealthy persons should be placed on an equal 
 footing. 
 
 The monopoly also is in that case limited to the formation of 
 the banks. The favored or original subscribers expect to make 
 a profit of about five per cent, upon their shares ; and thus far 
 the monopoly extends. From the moment the bank has been 
 organised, the monopoly ceases ; every person may participate 
 and become an associate in the banking business who can pur- 
 chase bank shares ; and these, being generally of twenty-five or 
 fifty dollars each, are within the reach of almost all the sober 
 and industrious members of the community. 
 
 Competition amongst the monopolists had also rendered the 
 privilege valueless. There is not a single city bank, chartered 
 subsequent to the year 1833, the stock of which is not below 
 par. The small profit anticipated by the original subscribers has 
 not been realised. On the other hand, the partiality exhibited 
 by the Legislature in granting charters, had prevented any im- 
 moderate increase of the banking capital of this city, and that 
 was a beneficial result; for the permission of issuing paper 
 
money, when given to all, has a tendency to increase its quan- 
 tity, and the dangers to which such issues are always liable. 
 
 The opposition to the banking system was originally, in this 
 State, as much against paper currency, by whomsoever issued, 
 as against the monopoly enjoyed by the banks ; and the pre- 
 ceding observations have been introduced principally because, 
 in pursuing too eagerly that which was almost a shadow, the 
 opponents seem to have lost sight of the principal object, and to 
 have remained satisfied that there should be a dangerous excess 
 of paper money, provided every body should be permitted to 
 issue it. 
 
 But, even if it should be satisfactorily proved that the mono- 
 poly of chartered banks has been attended with favorable results 
 as regards the soundness of the currency, the dangers of special, 
 substituted for general, legislation are a paramount objection. 
 The very essence of law consists in its being equal and gene- 
 ral ; and, although there are some necessary exceptions, special 
 legislation should never be resorted to whenever it can possibly 
 be avoided. 
 
 The danger of special laws is greatest when they relate to 
 monied institutions, or to special appropriations of money. It is 
 generally believed, that the original charters of some of the city 
 banks were, about thirty years ago, obtained by direct corrup- 
 tion. Although, in latter years, nothing more has been alleged 
 against the Legislature than the influence of party spirit, or 
 yielding to personal solicitations, yet the danger, and even the 
 suspicion, of being controlled by more degrading motives should 
 be avoided. The fatal consequences of the baneful influence of 
 the banking interest in other States are but too well known. In 
 the case now under consideration, it is believed that a general 
 law maybe substituted for special legislation. The principal 
 object will be obtained, provided the law be equal, that is to say, 
 provided that all may be permitted to issue a paper currency on 
 the same terms. But it is at the same time the firm conviction 
 of the writer, that it is necessary, in order to secure a sound 
 currency, that restrictions should be imposed upon all those who 
 do issue the paper. 
 
 The proposition, that a paper currency may be issued by all, 
 without any legislative restrictions, appears to be founded on an 
 
70 
 
 erroneous application of the principle of free trade. Free com- 
 petition, in producing or dealing in any commodity, causes a re- 
 duction in the cost, or an improvement in the quality of the com- 
 modity. In money dealings, the same competition furnishes the 
 use of money, and procures discounts of negotiable paper on the 
 cheapest possible terms. But, issuing a paper currency is not 
 dealing in money, but making money. The object, with respect 
 to such currency, is not to produce a commodity cheaper, or 
 varying in value, but, on the contrary, to furnish a substitute 
 perfectly equal to gold or silver, and therefore of comparatively 
 invariable value. Competition cannot make a cheaper curren- 
 cy, unless by making it worse than the legal coin of which it is 
 the representative. In that case, it becomes analogous to a de- 
 based coin ; and, if permitted to circulate, the bad generally 
 drives away the faithful currency. 
 
 The general currency is always the standard of value of the 
 country. To fix that standard, is as important and necessary 
 as to fix the standard of weights and measures. Both are pre- 
 liminary enactments which regulate and govern the freest possi- 
 ble trade. Gold and silver are the only standard of value recog- 
 nised by the constitution. The power to regulate the value of 
 gold and silver coins, as well as that of fixing the standard of 
 weights and measures, is vested in the General Government. If 
 ; any State Legislature permit the substitution of a paper for a 
 gold or silver currency, it is bound so to regulate that curren- 
 cy, that it shall not alter the constitutional standard of value. 
 The unrestricted right of coining gold or silver might be claimed 
 with as much propriety as that of coining a paper currency. 
 
 No restrictions should be imposed on the acts of individuals, 
 or associations, but such as are necessary to secure the rights of 
 others, or to protect the whole community. But thus far the 
 restrictions are proper and necessary. It will not be denied, that 
 the evils of a depreciated currency, and those resulting from ei- 
 ther the failure or the suspension of payment of those who issue 
 a paper currency, universally fall most heavily on the poorer 
 classes, and the most ignorant members of society. Restrictive 
 laws are necessary for their immediate protection, as well as in 
 order to guard against the general evils of an irredeemable 
 currency. 
 
71 
 
 It has been asserted, but not a single argument has been ad- 
 duced in support of the assertion, that an indefinite number of 
 unrestricted banking associations, or private bankers, would se- 
 cure the community against the dangers of depreciation, suspen- 
 sion, or failure. If we appeal to experience, we find that the at- 
 tempt to introduce that system in Michigan has been a complete 
 failure, and has been the source of innumerable frauds. In some 
 States, banks have been so unrestricted, and charters so liberally 
 granted, that the result differed but little from complete free bank- 
 ing. Indeed, what more unrestrained system can be devised, than 
 one which has produced nine hundred banks and branches, and, 
 under which, all the restrictive laws are suspended in one half of 
 the States. The evils under which we labor are principally due 
 to the want of proper restriction upon the banks. The result 
 has been favorable in proportion as the restraints have been most 
 efficient. 
 
 Abroad, the privilege of issuing bank notes or private nego- 
 tiable paper as currency, has nowhere, except in the British 
 dominions, been considered as belonging of right to private in- 
 dividuals, or to joint stock associations. The experiment of free 
 banking has been made only in Great Britain. With respect to 
 the country bankers, the experiment may be considered as a 
 failure. The number of bankruptcies and the amount of losses 
 have been as great as under the former loose system of the 
 banks of the several States ; and, in proportion, far greater than 
 in New York, under its better regulated system (r). The 
 establishment of joint stock banking associations in England is 
 of too recent a date, to form any definitive opinion of their 
 eventual success. As yet, the example of the banks of Scotland 
 can alone be appealed to in favor of free banking. 
 
 These banks cannot be compared to those of our large cities. 
 They are, in fact, subordinate to the Bank of England ; dependent 
 for the payment of their balances on their London funds, hardly 
 ever called on for specie, and suspending their specie payments 
 
 (r) The commissions of bankruptcy in England against bankers amounted to 
 ninety-two during the years 1814-16 ; to sixty-five during the year 1825 and the' 
 three first months of 1826* The annual average was eight, from 1817 to 1824 
 inclusive. 
 
72 
 
 whenever the Bank of England does suspend. But there must 
 be a difference of habits between Scotland and even England, 
 such as to have induced Parliament not to include the first in 
 the general regulation which prohibits the issue of notes of a 
 less denomination than five pounds. The difference is still 
 greater between Scotland and America. 
 
 The spirit of enterprise will always be proportionate to its 
 field, to the prospects open to it by the extent, geographical 
 situation, and other circumstances of the country. The Scotch 
 are an enterprising people ; but the great and indeed extraordi- 
 nary progress they have made in agriculture, manufactures and 
 commerce, has been gradual and regular, obtained by perse- 
 vering industry, and accompanied by a degree of prudent caution 
 and of frugality altogether unknown in America. The popula- 
 tion of Scotland is so far stationary, that it consists almost ex- 
 clusively of natives of the land. The property, standing and 
 character of every member of the commercial community are 
 generally known. All persons may nominally establish banks ; 
 but their notes could not circulate unless received by the old 
 banks ; and these perfectly check each other by the regular 
 payment of their respective balances. There is another ingre- 
 dient, belonging to all the free banks of Great Britain, which 
 will be immediately adverted to, and which would, it is believed, 
 present an insurmountable obstacle to the introduction of unre- 
 stricted banks in America. 
 
 It would not be fair to draw general inferences against free 
 banking, from the consequences of the defective system of New 
 York. It will be perceived that the preceding observations 
 have no reference to that system, and apply generally to the 
 most perfect plan which might be devised. The provisions of 
 the free banking act of New York will now be examined. 
 
 That law was passed in April 1838, at a time when the gene- 
 ral prejudice against chartered banks, growing out of the war- 
 fare waged against them, had received additional strength from 
 the suspension of specie payments, and when their monopoly 
 was generally deprecated. Unfortunately no substitute, or ra- 
 tional plan of free banking, had been prepared by its advocates. 
 The act bears internal evidence, that it was prepared by specu- 
 
73 
 
 lators, who took advantage of the opportunity for procuring a 
 law that would suit their purpose. 
 
 There was, however, an intrinsic difficulty in passing a law 
 founded on correct principles. The condition alluded to, as 
 common to all private bankers who have ever been permitted 
 to issue a paper currency, and to all the free banking associa- 
 tions of the same description which have ever existed, is the 
 personal responsibility, to the whole extent of their fortune, of 
 the private bankers and of all the shareholders in the banking 
 associations. That responsibility is and has always been deem- 
 ed essentially necessary. But whilst there were in existence 
 ninety chartered banks spread over the whole State, whose share- 
 holders were not subject to that responsibility, it would have 
 been a mockery to authorise nominally free banks, with that re- 
 sponsibility attached to the associates. We may go farther, and 
 say that such a plan would not be practicable, even if banks of 
 a different description had not existed. 
 
 That degree of reciprocal confidence does not and cannot 
 exist here, which would induce men of property to risk the 
 whole of it, for the sake of obtaining the interest, or very little 
 more than the ordinary interest, on their share in the association. 
 That which is actually the fact in Scotland, is not practicable 
 here. The laws, habits, and public opinion are not the same. 
 American merchants, indeed, give large, and often indiscreet 
 credits, but always in the expectation of a large profit. -The 
 shareholders of the Bank of Commerce, consisting of some of the 
 most wealthy and respectable merchants and other men of capi- 
 tal of this city, aware of the greater confidence placed in char- 
 tered banks than in the new banking associations, have autho- 
 rised the directors to accept a charter, if it could be obtained ; 
 but with the express condition, that it should not impose per- 
 sonal responsibility on the shareholders. No stronger proof 
 can be given of the insurmountable reluctance to such a pro- 
 vision. 
 
 It is evident that some other guarantee is necessary, when 
 there is no personal responsibility. That guarantee has hereto- 
 fore always been that of the actual payment in specie of a 
 capital fixed by law. This is the substitute which has always 
 been required from the chartered banks, and which should have 
 10 
 
74 
 
 been the essential condition imposed on the contemplated bank- 
 ing associations. The omission of any efficient provision for 
 that purpose is the fundamental error of the law. It declares, 
 indeed, that the capital shall not be less than one hundred thou- 
 sand dollars, but does not specify of what that capital shall con- 
 sist, nor when or how it shall be paid. The principal provisions 
 of the act are the following. 
 
 The persons associated must file, in the office of the Secretary 
 of State, a certificate specifying the name, place, duration, and 
 capital of the association ; and they may provide, by their arti- 
 cles of association, for an increase of their capital. 
 
 The banking business, which the associations may carry on, 
 is defined nearly in the same words used in the charters of the 
 old banks ; and they are in the same manner forbidden to hold 
 real estate otherwise than as is provided in the same charters. 
 
 No association shall, for the space of twenty days, have less 
 than twelve and a half per cent, in specie on the amount of its 
 circulation; nor, if its capital should be reduced, make dividends 
 until the deficit shall have been made good ; nor issue bank 
 notes of a denomination less than one thousand dollars, payable 
 at any other place than that where its business is carried on. 
 By a subsequent amendment to the law, the associations are for- 
 bidden to issue post notes; and the provision respecting specie 
 is repealed. 
 
 The associations shall pay damages at the rate of fourteen per 
 cent, per annum, for non-payment only of every note in circu- 
 lation, the payment of which shall have been demanded and 
 refused. 
 
 The bank notes, which any association may issue, must be 
 prepared and countersigned by the Comptroller of the State ; 
 and he is not to deliver to any association, notes to a greater 
 amount than that of State stocks, or of mortgages, previously 
 deposited with him by the associations respectively. The stocks, 
 &c. thus deposited are pledged for securing the payment of the 
 notes put in circulation, and shall be sold accordingly, whenever 
 required for that purpose. By a subsequent law, mortgages and 
 the stocks of the State alone are receivable. 
 
 Semi-annual statements of the affairs of every association, 
 
75 
 
 verified by the oath of the president or cashier, must be trans- 
 mitted to the Comptroller and published by him. 
 
 Upon the application of creditors or shareholders, the Chan- 
 cellor may order a strict examination to be made of all the 
 affairs of any association ; and the result of such examination, 
 together with his opinion thereon, shall be published in such 
 manner as he may direct. 
 
 If any association shall neglect to transmit to the Comptroller 
 the statements required, or if it shall have made dividends in 
 violation of the provision above stated, or if it shall violate any 
 of the provisions of the act, such association may be proceeded 
 against and dissolved by the Court of Chancery. 
 
 The shares of the associations shall be transferable on their 
 books ; and every person, to whom such transfer shall be made, 
 shall succeed to the rights and liabilities of prior shareholders. 
 No shareholder shall be liable in his individual capacity for any 
 contract or debt of the association, unless declared to be so liable 
 by the articles of the association ; and no association shall be 
 dissolved by the death, or insanity, of any of the shareholders. 
 
 All contracts made and notes issued by any such association 
 shall be signed by the president, or vice-president, and cashier. 
 All suits, actions, and proceedings brought or prosecuted, in be- 
 half of such association, may be brought or prosecuted in the 
 name of the president ; and all persons, having demands against 
 the association, may maintain actions against the president. 
 Such suits or actions shall not, in either case, abate by reason of 
 the death, resignation, or removal from office of such president, 
 but may be continued and prosecuted to judgment, in the name 
 of, or against his successor in office, who shall exercise the 
 powers and enjoy the rights of his predecessor. 
 
 All judgments and decrees rendered against such president, 
 for any liability of the association, shall be enforced only against 
 the joint property of the association. No change shall be made 
 in the articles of association, by which the rights, remedies, or 
 security of its existing creditors shall be weakened or impaired. 
 
 The original certificate filed with the Comptroller affords no 
 security that the capital has been paid. It does not appear to 
 require the sanction of an oath; and there is no penalty for 
 making a false certificate. There is no provision, declaring of 
 
76 
 
 what the capital shall consist, or in what manner it shall be paid. 
 The only provision, in that respect, is the obligation to deposit 
 the stocks or mortgages, equal in amount to that of the bank 
 notes issued by the association. Beyond that deposit, which 
 by the supplementary law must amount to one hundred thou- 
 sand dollars, no provision whatever is made for the residue 
 of the capital. This may be nominal or real, consisting, at the 
 will of the parties, of specie, mortgages or stocks of any descrip- 
 tion, of nominal debts, or of nothing at all. There is no provi- 
 sion to prevent the shareholders from paying their shares by 
 giving their own notes. Even the minimum of securities de- 
 posited with the Comptroller, and intended as a guarantee for the 
 payments of the issues, was not determined by the original law. 
 An association depositing ten thousand or one thousand dollars, in 
 stock of the most equivocal character, and announcing a capital 
 of some millions of dollars that did not exist, was permitted to be- 
 gin its operations. Heretofore, it had been deemed essential that 
 the whole capital should be paid in specie. An honest institu- 
 tion, with a capital consisting of nothing but mortgages, has 
 nothing to lend, and must necessarily begin its operations by 
 contracting a debt. And those mortgages afford no available 
 resources to meet the liabilities to which a banking association 
 must necessarily be liable. 
 
 The dangers of an excessive capital, concentrated in associa- 
 tions invested with the attributes and privileges of a corporate 
 body, are undeniable, and have been lately sufficiently exempli- 
 fied. That danger is greatly increased, if the duration of such 
 associations is indefinite. This had always been attended to. 
 No bank had ever been chartered in this State with a capital 
 exceeding two millions of dollars ; and none could either increase 
 or reduce it without the consent of the Legislature. With the 
 exception of two institutions, incorporated for other objects, the 
 duration of a bank did not exceed twenty-five years. No pro- 
 vision was made in either respect by the free banking law ; and 
 as a specimen of the expectations of the first projectors, we an- 
 nex a statement of the applications made during the first six 
 months after the law had gone into operation. 
 
77 
 
 Name and Style of Company. 
 
 Where located. 
 
 Capital 
 subscribed. 
 
 May be in- 
 creased to 
 
 Chart- 
 ered for 
 
 
 
 Dollars. 
 
 Dollars. 
 
 Years 
 
 Bank of Western New York . 
 
 New York city 
 
 500,000 
 
 500,000 
 
 100 
 
 Bank of Western New York . 
 
 Rochester 
 
 180,000 
 
 180,000 
 
 100 
 
 North American Trust & Banking Co. 
 
 New York city 
 
 2,000,000 
 
 50,000,000 
 
 463 
 
 Bank of the United States in New York 
 
 New York city 
 
 200,000 
 
 50,000,000 
 
 62 
 
 Mechanics' Banking Association . 
 
 New York city 
 
 128,175 
 
 10,000,000 
 
 99 
 
 Staten Island Bank 
 
 PortRichmond 
 
 100,000 
 
 5,000,000 
 
 100 
 
 Erie County Bank .... 
 
 Buffalo 
 
 100,000 
 
 100,000 
 
 112 
 
 Lockport Bank and Trust Company 
 
 Lockport 
 
 500,000 
 
 2,000,000 
 
 262 
 
 Bank of Central New York . 
 
 Utica 
 
 100,000 
 
 2,000,000 
 
 4050 
 
 Bank of Syracuse .... 
 
 Syracuse 
 
 100,000 
 
 1,000,000 
 
 500 
 
 American Exchange Bank 
 
 New York city 
 
 500,000 
 
 50,000,000 
 
 100 
 
 Farmers' Bank of Orleans 
 
 Gaines 
 
 200,000 
 
 500,000 
 
 25 
 
 St. Lawrence Bank 
 
 Ogdensburgh 
 
 100,000 
 
 2,000,000 
 
 100 
 
 Merchants' and Farmers' Bank 
 
 Ithaca 
 
 150,000 
 
 2,000,000 
 
 201 
 
 Willoughby Bank . 
 Stuyvesant Banking Company 
 New- York Banking Company 
 EastRiverBank of theCity of New York 
 Chelsea Bank. . . . ' < '. 
 
 Brooklyn 
 New York city 
 New York city 
 New York city 
 New York city 
 
 100,000 
 300,000 
 1,000,000 
 100,000 
 1,000,000 
 
 100,000 
 2,000,000 
 20,000,000 
 25,000,000 
 10,000,000 
 
 100 
 199 
 100 
 152 
 150 
 
 Farmers' Bank of Ovid . 
 
 Ovid 
 
 100,000 
 
 1,000,000 
 
 112 
 
 Tenth Ward Bank 
 
 New York city 
 
 100,000 
 
 10,000,000 
 
 462 
 
 Bank of Waterville 
 
 Waterville 
 
 100,000 
 
 1,000,000 
 
 1000 
 
 Millers' Bank of New York . 
 
 Clyde 
 
 300,000 
 
 1,000,000 
 
 1000 
 
 Albany Exchange Bank. 
 
 Albany 
 
 100,000 
 
 10,000,000 
 
 602 
 
 Exchange Bank of Genesee . 
 
 Alexander 
 
 100,000 
 
 500 000 
 
 162 
 
 Farmers &MechanicsBank of Genesee 
 
 Batavia 
 
 100,000 
 
 1,000,000 
 
 162 
 
 Genesee County Bank . 
 
 LeRoy 
 
 100,000 
 
 1,000,000 
 
 161 
 
 United States Bank of Buffalo 
 
 Buffalo 
 
 100,000 
 
 5,000,000 
 
 200 
 
 Bank of Kinderhook 
 
 Kinderhook 
 
 125,000 
 
 300 000 
 
 50 
 
 Merchants' Exchange Bank of Buffalo 
 
 Buffalo 
 
 200,000 
 
 5,000,000 
 
 100 
 
 Le Roy Bank of Genesee 
 
 Le Roy 
 
 100,000 
 
 1,000,000 
 
 161 
 
 Mechanics' and Farmers' Bank 
 
 Ithaca 
 
 100,000 
 
 1,000,000 
 
 362 
 
 Genesee Central Bank . 
 
 Attica 
 
 100,000 
 
 1,000,000 
 
 300 
 
 WoolGrowers'Bank oftheState of NY. 
 
 New York city 
 
 100,000 
 
 2,000,000 
 
 100 
 
 Bank of Lowville .... 
 
 Lowville 
 
 100,000 
 
 500,000 
 
 463 
 
 Erie C anal Trust &B anking C ompany 
 Hudson River Bank 
 
 Buffalo 
 New York city 
 
 200,000 
 100,000 
 
 10,000,000 
 20,000,000 
 
 300 
 150 
 
 Powell Bank . . . . . 
 
 Newburgh 
 
 130,000 
 
 1,000,000 
 
 100 
 
 Patriot Bank of Genesee. . . " 
 
 Batavia 
 
 100,000 
 
 1,000,000 
 
 161 
 
 Bank of Brockport . . . . 
 
 Brockport 
 
 150,000 
 
 1,000,000 
 
 160 
 
 Ithaca Bank . . . . . 
 
 Ithaca 
 
 250,000 
 
 1,000,000 
 
 662 
 
 Deposite Bank of Albany 
 
 Albany 
 
 100,000 
 
 5,000,000 
 
 161 
 
 Bank ofWaterford 
 
 Waterford 
 
 100,000 
 
 5,000,000 
 
 161 
 
 Silver Lake Bank of Genesee . 
 
 Perry Village 
 
 100,000 
 
 1,000,000 
 
 161 
 
 Bank of the City of New York 
 
 New York city 
 
 100,000 
 
 50,000,000 
 
 500 
 
 Fort Plain Bank .... 
 
 Fort Plain 
 
 100,000 
 
 500,000 
 
 161 
 
 Troy Exchange Bank . 
 United StatesTrust&BankingCompy 
 Railroad Bank of Coxsackie . 
 
 Troy 
 New York city 
 Coxsackie 
 
 100,000 
 1,000,000 
 100,000 
 
 10,000,000 
 50,000,000 
 1,000,000 
 
 661 
 500 
 161 
 
 James Bank 
 
 Jamesville* 
 
 106,000 
 
 1,000,000 
 
 661 
 
 North Bank 
 
 New York city 
 
 100,000 
 
 10,000,000 
 
 462 
 
 Bank of Warsaw . 
 
 Warsaw 
 
 100,000 
 
 1,000,000 
 
 161 
 
 Bank of North America . 
 
 New York city 
 
 100,000 
 
 50,000,000 
 
 200 
 
 State Stock Security Bank 
 
 New York city 
 
 
 
 
 
 * Saratoga co. 
 
 12,319,175 
 
 487,680,000 
 
 
78 
 
 It is sufficiently apparent, from the provisions of the act, that 
 the free banking associations, though not designated by the ob- 
 noxious name of corporations, and though organised under a 
 general law, and not by a special charter, have all the essential 
 and necessary attributes of a corporation. From the moment 
 they are organised, they are in character assimilated with the 
 chartered banks. They are, as joint stock companies, governed 
 in the same manner, and with the same defects inherent to such 
 companies which have already been mentioned. They have 
 the same power and privileges, are liable to the same abuses, 
 and differ only in name, and in that they are exempted from the 
 restrictions imposed on the chartered banks (rr). 
 
 It must be kept in mind, that all the arguments in favor of 
 banking, not simply free to all, but free also of any restriction, 
 are founded on the presumption that the character and personal 
 responsibility of the banker or bankers afford a sufficient security, 
 and preferable, as is asserted, to any derived from restrictions. 
 It is evident that, when the shareholders are not personally 
 responsible, as was the case in every system of free banking 
 ever attempted anywhere prior to the New York experiment, 
 some other permanent guarantee, and not depending exclusively 
 on the character of directors, who are not always the same, 
 must be provided. It is on that account that precautions are 
 necessary, not only for the payment, but also for the preservation 
 of the capital, which is the guarantee substituted for that respon- 
 sibility. This is, in fact, the object of the restrictions imposed on 
 the chartered banks. 
 
 (rr) The free banking law is, at least, so generally understood. The new asso- 
 ciations have, by the judgment of the Court for the Correction of Errors, been de- 
 clared, not to be bodies politic or corporate within the spirit and meaning of the 
 constitution. The decision thus expressed might seem to leave it doubtful whether 
 they were not, however, monied corporations within the spirit and meaning of the 
 Revised Statutes : in which case, they would be subject to all the general laws re- 
 ppecting such corporations. But it was provided by the act of 14th May 1840, that 
 no such association should issue notes not payable on demand and without interest, 
 and that all those associations should be subject to the inspection of the bank com- 
 missioners ; which would have been unnecessary had those institutions been con. 
 sidered as monied corporations; since all of those having banking powers were 
 made subject to both those provisions by the Safety Fund act. 
 
79 
 
 The original free banking act did not forbid the issuing of 
 post notes ; it has in that respect been amended ; but the law, 
 as it now stands, contains no provision forbidding the dealing in 
 stocks, nor in relation to the amount either of loans, discounts 
 and other investments, or of the debts, which the new banking 
 associations may contract. They are authorised to loan money 
 on real security, and are generally, with respect to their ope- 
 rations, left still more free than the United States Bank of Penn- 
 sylvania. Those restrictions might, by the ardent friends of 
 free banking, be deemed useless, if the shareholders were 
 personally responsible ; they become necessary when there is 
 no such responsibility. There are other provisions now in force 
 with respect to chartered banks, the propriety of which, in 
 reference to the new associations, cannot, it is believed, be 
 disputed. 
 
 Although the law was passed during the general suspension 
 of the banks, no efficient provision is found in it to guard against 
 the recurrence of the same catastrophe. The only penalty, in 
 that respect, is the obligation to pay damages, at the rate of 
 fourteen per cent, per year on bank notes, the payment of which 
 is demanded and refused. And experience has proved that a 
 similar provision was, in case of a general suspension, almost 
 nugatory. But there is none in the act, either for constraining 
 the associations, which shall have suspended their payments, to 
 discontinue their operations, nor for a dissolution, as the neces- 
 sary consequence of not resuming specie payments within a 
 year. The Chancellor is authorised to dissolve the institution, 
 only in case it shall have violated some of the provisions of the 
 act ; that is to say, in case it should not have the amount of 
 specie required, or should have made dividends with a reduced 
 capital, or have failed in transmitting the semi-annual statements 
 to the Comptroller (s). But, under the law, as it now stands, 
 there is nothing to prevent associations, which have suspended 
 their payments, from continuing their operations during an un- 
 limited term of years. 
 
 () Even those statements are complex, partly unintelligible, and differently 
 understood and prepared by the several associations. 
 
80 
 
 The only object which seems to have attracted the attention 
 of the Legislature, is, not the danger of a suspension, but the 
 ultimate redemption of the notes put in circulation. The pro- 
 vision in reference to that object is the only condition, not 
 imposed on the chartered banks, to which the new associations 
 are subject. They must deposit with the Comptroller certain 
 securities, equal in amount to that of the bank notes which they 
 are permitted to issue. 
 
 This provision, even as now amended, secures the ulti- 
 mate redemption of about nine-tenths of the circulation ; it is 
 no protection against the immediate depreciation of the notes 
 whenever the banking association fails or suspends. Those 
 only who can wait realize that portion which is ultimately re- 
 covered by the sale of the securities. In the meanwhile, the 
 notes dispersed in very small sums, amongst a number of 
 persons, generally those who are least able to discriminate, are 
 sold at a lower price than even their actual worth ; and the loss 
 falls on those least able to bear it and who require protection. 
 It is the belief of the writer, that this provision is in fact injurious ; 
 inasmuch as it gives an unmerited credit to institutions which do 
 not deserve it, and inspires a general unfounded confidence, on 
 the part of those who from their situation cannot have the in- 
 formation necessary to discriminate between a good and a 
 doubtful bank note (t). On one point, at least, there can be but 
 one opinion : nominal restrictions or provisions which do not 
 fulfil the object for which they were intended, ought to be 
 repealed. 
 
 The consequences of the act have been nearly such as might 
 have been expected. Several respectable associations have 
 been formed under the law, with the intention of carrying on 
 honestly legitimate banking business. Three such are now in 
 operation in this city, one of which has committed the error 
 of having part of its small capital paid in mortgages. All 
 three carry on their business, and are governed on the same 
 
 (t) It would be extremely desirable, that the people might be persuaded to adopt 
 as a general rule, never to receive or offer in payment a bank note not payable at 
 the place where it is offered. 
 
81 
 
 principles and in the same manner, as the chartered banks. 
 It may be added, that they have also been formed in the 
 same manner. A number of persons unite themselves, in 
 order to establish a bank, take a part of the capital, invite after- 
 wards others to unite with them, and generally preserve the 
 control of the bank. Whether it be the chartered Bank of the 
 State of New York, or the free Bank of Commerce, the process 
 in the formation of both is the same. The only difference in 
 that respect is, that the founders of the one were obliged to 
 obtain the special leave of the Legislature, and that those of the 
 other were enabled to make their arrangements under the 
 auspices of a general law. There can be no doubt that, under 
 such a law, if new, real and honest banks are wanted, they will 
 be formed, and that, when they are found not to be profitable, 
 there will be no desire to increase their number. Under the 
 present imperfect system of free banking, there is, however, this 
 difference between the two species, that the confidence placed 
 in the new associations rests exclusively on the personal stand- 
 ing and character of those who control them ; whilst that which 
 is placed in the chartered banks is founded, not only on the 
 personal character of the directors and officers, but also on the 
 guarantee offered f by the restraints imposed on them by law. 
 Limited confidence only can be placed in joint stock companies, 
 which are not laid under efficient restrictions, and subject to 
 strict inspection and examination. The character of the presi- 
 dent and directors of the Bank of the United States was as 
 irreproachable, as that of the directors and officers of any of the 
 banking institutions of New York. 
 
 But if some banks, formed and governed on sound principles, 
 have been established under the free banking law, it may also 
 give birth to associations of a different character. Some have 
 their origin in ignorance, others in the sanguine expectations of 
 bold speculators ; occasionally they may be founded in fraud. 
 One of the most common errors has been the belief, that an as- 
 sociation, the capital of which consisted exclusively of mortgages, 
 could carry on profitably ordinary banking operations. It is 
 clear, that such an institution has nothing to lend but the notes 
 which it may be authorised to issue, and the deposits which it 
 11 
 
82 
 
 may receive ; and that, whatever confidence may be placed in 
 its ultimate means, there can be none in its available resources. 
 The largest association of this description has hardly attempted 
 to put its notes in circulation ; it has hardly been known as a 
 banking institution, properly so called. But, whatever may have 
 been the nature of its operations, and although it is hardly pos- 
 sible that its mortgages should be worth less than one half of 
 their nominal value, the market price of its stock is not more 
 than ten or twelve per cent. In this case the loss, so far as is 
 known, falls only on the shareholders. But the conclusive proof 
 of the unsoundness of the system is found in the fact that, out of 
 about eighty associations, formed under the law, more than 
 twenty have failed in the course of two years and a half (u) ; 
 whilst, as has already been stated, two only, out of the ninety 
 chartered banks, have failed during a period of ten years. 
 
 The numerous failures of country bankers in England, in par- 
 ticular years, have already been alluded to. A more correct 
 view of the subject will be obtained by taking the average of a 
 number of years. The number of commissions of bankruptcy 
 issued, during the twelve years, 1814 to 1825, against bank- 
 ers, amounted to one hundred and ninety-four ; the number of 
 bankers was estimated to amount to about one thousand. The 
 ratio of failures to the number of bankers was, therefore, six- 
 teen per cent, in ten years. The ratio of failures to the number 
 of chartered banks, in the State of New York, has been less 
 than two and a quarter per cent, during the last ten years. 
 Here, we compare personally responsible private bankers with 
 banks, in which the capital actually paid has been the guarantee 
 substituted for personal responsibility, and which have been re- 
 gulated by efficient restrictions. The assertions, that the commu- 
 nity will be better protected, and individuals of all classes less 
 likely to be imposed upon, under a system in which there is 
 neither personal responsibility, nor any assurance of a sufficient 
 and real capital actually paid, nor any legal restrictions that 
 
 (u) The securities of twelve of these, which had been deposited with the Comp- 
 troller, are at this moment advertised for sale by him, in order to pay their circu- 
 lation. 
 
83 
 
 may prevent the dilapidation of that capital, is a pure theoreti- 
 cal opinion wholly unsustained by experience. 
 
 Whenever an application is made, either for the reduction of 
 the capital of a chartered bank, or for the renewal of the char- 
 ter, or even for changing the location of a bank from one street 
 to another, these banks continue to be represented as privileged 
 bodies ; and they are invited to surrender their charters, and to 
 convert themselves into free associations under the general law. 
 
 It is extraordinary that intelligent men should still consider 
 the chartered banks as enjoying exclusive privileges. The mo- 
 nopoly is now destroyed ; and all persons, or associations of 
 persons, may now establish banks on more easy terms than those 
 imposed on the chartered institutions, and with all the privileges 
 enjoyed by them. If 'any importance be attached to the obliga- 
 tion of depositing an amount of State stocks or mortgages, 
 equal to that circulation, though useless and even injurious, it 
 may easily be extended by a legislative act to the chartered 
 banks. But, if the enemies of monopolies will only take the 
 trouble to examine the general laws respecting monied cor- 
 porations and the special charters of the banks, they will find 
 that these banks do not enjoy a single privilege which is not 
 common to the free banking associations ; and that what they are 
 pleased to call privileges, consists, on the contrary, altogether of 
 restrictions. There is not now the slightest foundation for the 
 assertion, and it has become quite senseless. 
 
 Two things are requisite, in order that the chartered banks 
 may convert themselves into free associations ; first, that a law 
 should be enacted for that purpose ; secondly, that the free 
 banking law should be so modified as to make the conversion 
 proper. 
 
 There is not now any oth r legal mode, by which the conver- 
 sion can be effected, than by a dissolution of the corporation, and 
 a subsequent association of the shareholders. The manner in 
 which a corporation can be voluntarily dissolved, is prescribed 
 by law. The process would last one or two years, during which 
 the bank must suspend all its active operations ; and, in order to 
 accomplish the object, it must pay all its liabilities before the 
 shareholders can have access to the capital, and either divide it, 
 
84 
 
 or form with it a new association. It must therefore, in the first 
 instance, lose all its deposits and redeem all its circulation, and 
 then, at the end of two years, begin anew without either. Every 
 person practically acquainted with banking, knows that, under 
 this process, five or six years would elapse before the bank could 
 recover its former situation. 
 
 But, even if a law were passed authorising the immediate 
 transmutation, no sound bank would, or at least ought to, avail 
 itself of the provision ; for if it did, it would immediately lose the 
 public confidence. It would at once be presumed, that a bank 
 pursuing that course wanted to be free of restrictions, to launch 
 into some speculative operation, and to escape responsibility. 
 The fact is, that the greater confidence, placed in the chartered 
 banks, is entirely due to the restrictions imposed by law upon 
 them. 
 
 It is at the same time highly desirable, that all the banks and 
 banking associations should be placed under the same regimen, 
 and by virtue of a general law, instead of special charters or 
 any special legislation. It seems that this might have been 
 done with great facility, at the time when the free banking law 
 was enacted. Nothing more was necessary, in order to destroy 
 the monopoly, than a short act authorising the forming of free 
 associations, with all the corporate attributes given by the pre- 
 sent law, but precisely on the same terms, which are imposed 
 on the chartered banks by the general laws of the State. This 
 would at once have placed all on an equal footing. This having 
 been done, an examination of those laws and the lessons of ex- 
 perience would have enabled the Legislature to select and modi- 
 fy such of the existing restrictions, and to add such new condi- 
 tions, as in its opinion were proper and -necessary. Whether 
 the system, thus adopted, had embraced few or many restric- 
 tions, or had repealed them altogether, that which was proper 
 and necessary for the new associations was equally so for all the 
 chartered banks carrying on the same business. The power 
 reserved by the Legislature, to modify and alter any charter, 
 extended to all the chartered banks, with the single exception of 
 the Manhattan, and perhaps of the Dry Dock Company. The 
 four other banks, not under the Safety Fund, are understood to 
 
85 
 
 have assented, in conformily with the Suspension Act, that the 
 Legislature might modify or repeal their charters. 
 
 There does not seem to be, at present, any serious obstacle to 
 the same course of proceeding. No special act, Affecting singly 
 any one of the new banking associations, can be passed ; but the 
 Legislature may at any time alter or repeal the act itself. Vest- 
 ed interests must be respected ; and for that purpose, it would 
 be sufficient to limit the duration of all such existing associations 
 to a limited term of years, and their capital to the amount act- 
 ually paid at the time when the new amended law did pass. 
 The restrictions, deemed necessary and proper by the Legisla- 
 ture, would then be extended to all the existing free associations 
 and chartered banks, as well as to all other free associations 
 which might thereafter be formed. The object should be, that 
 all the charters should merge in the general law ; and that the 
 law should be precisely the same for all those engaged in the 
 same pursuit. What restrictions should, in the opinion of the 
 writer, be preserved or added, have already been fully stated. 
 
 It is believed, and the belief is corroborated by the result of 
 private banking in England, and by what is known respecting 
 the new joint stock companies of that country, that there is dan- 
 ger in granting the unrestricted power of issuing a paper cur- 
 rency, even when accompanied by the personal responsibility of 
 those who issue the paper. But this applies only to notes of a 
 certain denomination. Notes of one hundred dollars, and of a 
 higher denomination, circulate almost exclusively between dealers 
 and dealers, and might, like bills of exchange, be permitted to 
 circulate without any restrictions, or other guarantee than the 
 personal responsibility of the persons or associations by whom 
 they were issued. 
 
86 
 
 ACTION OF CONGRESS. 
 
 THE objects to which, in reference to currency, the powers 
 vested in the General Government may, it is believed, be ap- 
 plied; and which will probably become, at this time, subjects of 
 discussion, are the Sub-Treasury, a Bank of the United States, 
 and a Bankrupt Law. 
 
 The Government of the United States has the undoubted right 
 to entrust the custody of the public monies to its own officers ; 
 and this is sometimes necessary. It may also, and every indi- 
 vidual has the same right for debts due to him, require the pay- 
 ment of taxes, and other branches of the revenue, to be made 
 exclusively in gold or silver. And it is bound to carry into 
 effect the provision of the constitution, which directs that all 
 duties, imposts and excises shall be uniform throughout the 
 United States. 
 
 From the time when the Government was organised, till very 
 lately, it had been thought safer, whenever it was practicable, 
 to commit the custody of the public monies to banks, rather than 
 to intrust them to the officers of Government ; and there is no 
 doubt in that respect, whenever the money can be deposited in 
 sound and specie-paying banks. In that opinion the whole com- 
 munity coincides. The character of the late, as well as that of 
 the present receiver for the city of New York, is irreproachable. 
 Yet it would be difficult to find any individual in his senses, who 
 would not deposit his money in a sound city bank, rather than 
 in the hands of the receiver. The capital of the bank is a better 
 security than the bonds of any private person ; and the banks 
 are answerable for contingent losses, such as fire or robbery, 
 for which a public officer cannot be made responsible. So 
 long, also, as the bank currency remains equivalent to the pre- 
 cious metals, it is much more convenient both for Government, 
 for those who have duties to pay, and for all the parties con- 
 cerned, to conform to the general usage rather than to require 
 payments in specie. 
 
 But the depreciated currency of banks, which have suspended 
 
87 
 
 specie payments, cannot be received in payment of duties and 
 of other taxes, without a violation of the principles of justice, 
 and of the positive injunction of the constitution. And instances 
 may occur in some sections of the country, where it would be 
 unsafe even to make a special deposit of the public monies in 
 any bank in that section. At a time when one half of the public 
 revenue is collected in places where all the banks have sus- 
 pended specie payments, Treasury notes appear to afford the 
 most convenient means of complying with the constitution, and 
 of rendering the duties uniform throughout the United States (v)> 
 Some other means of accomplishing that object must be devised, 
 if it should please Congress to suppress the use of those notes, 
 and to repeal altogether the Sub-Treasury act. 
 
 The specie clause, as it is called, of the act is, however, liable 
 to serious objections. It had already been previously provided, 
 that the Secretary of the Treasury should not employ any bank 
 which had suspended specie payments. The new provision, 
 which extended the prohibition to all the banks without exception, 
 was in fact operative against those banks alone which continued 
 to pay in specie. Those who had duties to pay might be an- 
 noyed ; but it was quite immaterial to fhe banks which had 
 ceased to pay any of their liabilities in specie, whether the du- 
 ties were paid in coin ; the demand for it did not fall upon them. 
 It was quite otherwise in the places where specie payments 
 were sustained ; and the law in that respect, though probably 
 not thus intended, was a warfare directed exclusively against 
 those institutions which performed their duty, and, not without 
 some difficulty, sustained a sound currency. It is true that, in 
 the actual state of things, and whilst the revenue falls short of 
 the expenses, the law, though occasionally annoying, does not 
 produce any sensible effect ; but this also proves that it was not 
 necessary. 
 
 Whenever the revenue shall exceed the expenditure, the law 
 
 (c) The Treasury notes are a mere transcript of the English Exchequer bills. 
 Used as soberly as they have been of late years by the Treasury Department, and 
 provided they are kept at par, they are the most convenient mode of supplying a 
 temporary deficiency in the revenue ; as well as the most convenient substitute for 
 currency, in the payment of duties, during a suspension of specie payments. 
 
88 
 
 will operate, and, if the excess should again be considerable, the 
 drain of specie this would occasion, might indeed break any bank, 
 and render the suspension of specie payments universal. It 
 cannot be perceived, in what manner the measure can, in any 
 way whatever, have a tendency towards restoring a general 
 sound currency. It is utterly impossible to substitute, other- 
 wise than very gradually, a currency consisting exclusively of 
 the precious metals, for that which now pervades the whole 
 country. 
 
 Any great accumulation of the public monies is attended with 
 such evils, that it must at all events be averted. If consisting of 
 gold and silver accumulated in the Treasury chest, it is an active 
 capital taken from the people and rendered unproductive. If 
 deposited in banks, or consisting of bank paper, it may again 
 produce a fatal expansion of the discounts and issues of the banks, 
 attended by over-trading, and followed by contractions and a 
 general derangement. 
 
 Another objection to the law was that, with the exception of 
 Congress and of the officers of the General Government, it 
 seemed as if the whole community was opposed to the measure. 
 If necessary and proper for that Government, it was equally so 
 for that of every individual State. And yet it was not adopted, 
 or even proposed, by the Legislature of a single State. On the 
 contrary, even in some of those most friendly, and to the 
 last most faithful, to the late Administration, a direct and legal 
 sanction was given to the collection of the State revenue in a 
 depreciated and irredeemable currency, instead of requiring 
 payment in specie, as was done by the act of Congress. 
 
 This country had a sound currency, and there was no general 
 suspension of specie payments, so long as either of the two Banks 
 of the United States was in existence. The refusal to renew 
 the charters was, in both instances, followed by a large increase 
 of State banks, and shortly after by a general suspension of 
 payments. The resumption which took place in 1817, imme- 
 diately followed, and has been generally ascribed to, the estab- 
 lishment of the second national bank. Notwithstanding the ef- 
 forts of the banks of New York and of New England, 
 subsequent to the suspension of 1837, a general resumption- 
 has not yet taken place. A considerable portion of the com- 
 
89 
 
 rnercial community therefore hopes, that a new Bank of the 
 United States will accelerate such resumption, and again secure 
 a currency equivalent to gold and silver. This confidence, if 
 sustained by a proper administration of the contemplated bank, 
 might go far towards attaining the object in view. Confidence 
 is certainly a most powerful element in sustaining any system of 
 paper currency* 
 
 On the other handj a national bank has ever been, and, from 
 its nature, must be, generally unpopular. It will always be as- 
 sailed by those who are opposed generally to banks ; by many, 
 as not warranted by the constitution ; and at present, from consi- 
 derations connected with the state of parties. It must also be 
 admitted that great power is always liable to be abused ; and it 
 cannot be doubted, that the catastrophe of the United States 
 Bank has shaken confidence, and given additional strength to 
 the arguments against a bank of that name and character, and 
 with such a large capital. 
 
 These considerations render it necessary to act with great 
 caution and due deliberation ; to form a just estimate of the ad- 
 vantages which may be expected from the intended bank ; and to 
 inquire by what provisions the substantial objections against the 
 institution may be obviated. 
 
 The opinions of the writer respecting the constitutional pow- 
 ers of Congress, the great utility of a national bank as the fiscal 
 agent of Government, and the aid which may be derived from 
 it to regulate the general currency of the country, are the same 
 as heretofore. The constitutional question has been so long and 
 in so many shapes under consideration, that the subject appears 
 to be exhausted ; and nothing needs be added in that respect. 
 Independently of the temporary accommodations which a Bank 
 of the United States affords to Government, when required to 
 supply a temporary deficiency in the revenue, and of the advan- 
 ces which it may, in extraordinary times, make to the contract- 
 ors of public loans, there cannot be any doubt that, as regards 
 the security and transmission of public monies and the general 
 convenience of the Treasury, a national bank is far preferable to 
 those of individual States. The experience of the writer, under 
 both systems, permits him to make the assertion with perfect 
 confidence. 
 
 12 
 
90 
 
 The only way in which a Bank of the United States can 
 regulate the local currencies, is by keeping its own loans and 
 discounts within narrow bounds, and rigorously requiring a 
 regular payment of the balances due to it by the State banks. 
 The object might be attained without its aid, in places where 
 the local banks will, by adopting the same course, check each 
 -*other and regulate themselves. Where this does not take place, 
 the interference of the National Bank is of great importance 
 and highly useful. But the measure is practically difficult and 
 generally unpopular ; though it might be rendered more pal- 
 atable, if the bank was forbidden to use the public deposits, 
 beyond a certain amount, for its own benefit. 
 
 This favorable result may be reasonably expected whenever 
 a general resumption shall have taken place. But doubts may 
 be entertained, whether, under existing circumstances, the bank 
 can cause a general resumption without the aid of State legis- 
 lation, or the co-operation of the State banks ; and it is perfectly 
 clear, that it cannot act as a regulator of local currencies, in 
 those places where the banks, from any cause whatever, con- 
 tinue to suspend their specie payments. It would seem neces- 
 sary to ascertain in what places, and particularly in which of 
 the great centres of commerce, a National Bank is desired, 
 and, from the confidence it might inspire, would induce a re- 
 sumption. 
 
 Some other advantages, of a more doubtful nature, seem to be 
 expected from a Bank of the United States ; such as an increase 
 of commercial facilities ; a greater uniformity in domestic 
 exchanges ; and a hope that its notes may, to a great extent, 
 advantageously supersede those of the local banks. 
 
 An increase of the mass of commercial loans is not at all 
 desirable. The number of banks and the amount of their dis- 
 counts is already too great ; and in order to be useful, the effect 
 of the loans and of the circulation of the National Bank, should 
 be to lessen, and not to increase, the gross amount of both. 
 
 The great inequality and fluctuations of the domestic ex- 
 changes, so far as they are the result of depreciated currencies, 
 cannot be remedied by a Bank of the United States, as long as 
 they continue to be the local circulating medium. After that 
 evil shall have been removed by a resumption of specie pay- 
 
91 
 
 ments, the bank cannot and ought not to interfere, any farther 
 than as purchasers and sellers of exchange and drafts, in the 
 same manner as other money dealers. It is only as an addi- 
 tional dealer, with greater funds and facilities than any other, 
 that the bank may bring exchange nearer to par, or, in other 
 words, transmit on cheaper terms funds from one place to 
 another, as they may be wanted. 
 
 But it is a great error to suppose that it can afford a gene- 
 rally uniform currency; or one which shall, at the same time, be 
 of the same value in all places. This is to confound exchange 
 and currency, and to suppose that paper money may not only 
 be a true representative of gold and silver, but can perform that 
 which gold and silver cannot accomplish. 
 
 The fluctuations in the rate of exchange, like those in the 
 market price of commodities, depend on the relative amount of 
 supply and demand ; and these again on the relative indebted- 
 ness and the actual means of making remittances. When 
 American coins can purchase in New York bills on London, 
 which will produce there an amount of British coins, containing 
 as much pure gold as was contained in the American coins with 
 which the bills were purchased, it is called the true par of ex- 
 change. If the amount of British coins, obtained in London for 
 the bills, contain less pure gold than the American coins paid 
 for the bills, it is a clear proof, that the same quantity of pure 
 gold is worth less in New York than in London; and this 
 cannot be altered by substituting in New York, for coin, a paper 
 money which has no other property than that of being con- 
 vertible into coin at New York at its nominal value. The case 
 is precisely the same between New Orleans and New York, or 
 between any two places whatever. 
 
 A National Bank may find it possible, and convenient, to give 
 occasional facilities in that respect. But it can no more issue a 
 currency necessarily payable, at the option of the holder, in 
 several places, than a merchant can bind himself to be ready to 
 pay a debt at five or six different places, at the 'option of his 
 creditor and without notice. 
 
 If the bank should issue all its notes payable at one place, they 
 would be currency at the place of issue ; and, in every other 
 place, they would be worth more or less than the local currency, 
 
92 
 
 or than gold or silver, according to the rate of exchange 
 between such places respectively, and the place of issue where 
 alone they were made payable. If the notes are, as heretofore, 
 made payable at various places, such issues will make part of 
 the local currency of the places where they are respectively 
 made payable, and cannot pay debts elsewhere, any more than 
 the notes of local banks. 
 
 It would seem generally to follow, that the circulation of a 
 Bank of the United States cannot be otherwise extended, than 
 in as far as it may supersede the local currencies of the several 
 States. In former times, that circulation was principally in the 
 South and in the West, as will appear by the following authen- 
 tic statement of the places where the notes in actual circulation 
 of the Bank of the United States were payable, in September, 
 J830: 
 
 Payable in New England $834,492 
 
 " New York 834,733 
 
 Philadelphia 1,367,180 
 
 " Baltimore and Washington 1,176,240 
 
 " the Southern States 3,074,045 
 
 " the N. Western States, including Buffalo and Pittsburg. . . 3,261 ,547 
 
 the South-Western States 4,799,420 
 
 $15,347,657 
 
 It may be doubted whether a similar proportionate amount 
 can now be circulated in quarters which have become satura- 
 ted with paper money. It is not impossible that this may take 
 place in those States where the evils of a depreciated currency 
 have become intolerable. 
 
 An additional demand, to a moderate amount, for notes, prin- 
 cipally of five dollars, payable at New York or Philadelphia, 
 may also be expected on account of their great convenience in 
 travelling, and for small remittances. Checks and bills of ex- 
 change are safer and more convenient than bank notes, for large 
 remittances. 
 
 If a Bank of the United States can, notwithstanding the obsta- 
 cles of conflicting opinions and interests, be again created by 
 Congress, it will be necessary to guard against the evils which 
 such an institution may produce. The views of the writer, such 
 
93 
 
 as they are, have already been stated in the preceding pages. 
 Those provisions that seem most important, in reference to a 
 National Bank, will be recapitulated. 
 
 The danger of an abuse of the power, which must necessarily 
 be given, is increased in proportion to the magnitude of the capi- 
 tal. This should not be greater than is necessary for the object 
 intended. The bank is not wanted in order to increase the 
 amount of commercial accommodations. A small capital would 
 suffice for its operations, in its character of fiscal agent of the 
 Government. For the purpose of regulating, as far as practica- 
 ble, the local currencies, it is not necessary that, at least at first, 
 it should be extended beyond the great centres of commerce. 
 The power hereafter, if found requisite, to increase the capital, 
 might be reserved by Congress. A large capital is not wanted 
 for the purpose of sustaining an adequate circulation ; and this 
 may be increased, without danger, beyond its ordinary limits, 
 provided the amounts of loans and discounts be kept within nar- 
 row bounds. The Bank of England, with a capital of fourteen 
 millions sterling, sustains a circulation of at least eighteen mil- 
 lions. The Bank of France, with a capital of sixty-eight mil- 
 lions of francs, (about thirteen millions of dollars,) has a circula- 
 tion of two hundred and forty millions, and generally in its vaults 
 two hundred and thirty millions of specie. It may be added, 
 that, under existing circumstances, the plan may fail altogether, 
 unless the amount required be moderate (w). 
 
 It is believed that a capital of fifteen millions of dollars, paid 
 altogether in specie, or in bank notes equivalent to specie, would 
 be amply sufficient. To this may be added, if deemed eligible, 
 and to be viewed as an ultimate guarantee, five millions of dol- 
 lars in a five per cent, stock of the United States. The bank 
 should not be authorised to dispose of that stock, without the 
 leave of Congress, or perhaps of the Treasury Department. No 
 other description of stocks should be admitted as part of the 
 capital. 
 
 Besides the restrictions imposed by the charter of the late 
 
 (to) The views of the writer have in that respect been modified since the year 
 1811, by observations abroad, by practical banking experience at home, and by the 
 aberrations of the late Bank of the United States. 
 
94 
 
 bank, the amount of loans, discounts, and all other investments 
 bearing an interest, should be limited, so as not to exceed once 
 and a half the amount of the capital, or, at most, sixty per cent, 
 beyond it. It has already been shown, that, with that limitation, 
 after the maximum of such investments has been reached, 
 the amount of specie must necessarily increase with that of 
 circulation and deposits. When such reciprocal increase 
 takes place naturally, it produces no inconvenience. If it should 
 be the result of a considerable increase of accumulated revenue, 
 it will produce the same evils which, under any circumstances, 
 are the consequence of such an increase. Taxes to a large 
 amount would be intolerable, if they were not expended, and if the 
 money drawn from the people was not immediately restored to 
 circulation. But if, notwithstanding the measures which may 
 be adopted by Government, in order to prevent an undue accu- 
 mulation, this should occasionally take place, the restriction on 
 the amount of loans and discounts will prevent the application 
 to that object of the excess of public deposits. Whether the 
 amount of specie in the bank should be increased from that 
 cause, or by a natural extension of its circulation and individual 
 deposits, that specie will afford an ample security for the pay- 
 ment of all the liabilities of the institution. In that case, the 
 bank would be the great reservoir which might, if applied pro- 
 perly, supply sudden demands, and, at critical times, sustain the 
 other banks, protect the local currency, and lessen the commer- 
 cial distress. 
 
 It is presumed that the ordinary restrictions, forbidding to 
 deal in real estate, merchandise or stocks, will be retained, and 
 that the bank will be confined strictly to pure and legitimate 
 banking operations. 
 
 The provisions which have been already suggested in case of 
 a suspension of specie payments, appear indispensable, as well as 
 pne which will declare the bank to be necessarily dissolved, if 
 the suspension continues more than a year. 
 
 Whether the bank should absolutely be forbidden to issue 
 post notes ; and whether a limitation on the amount of dividends, 
 which in fact will be limited by the restrictions on the amount 
 of loans and discounts, be necessary ; are questions which may 
 deserve consideration. But, in order to enforce the restrictions 
 
95 
 
 and conditions of the charter, whatever they may be, a rigorous 
 and regular inspection by officers appointed by Government is 
 absolutely necessary. The power to make occasional examina- 
 tions by committees of either branch of the Legislature may be 
 reserved, but is not adequate to the purpose. In that respect, 
 the law of New York, for the establishment of bank commis- 
 sioners, may serve as a model. It has been tested by the ex- 
 perience of ten years, and has been attended with none but 
 beneficial results. The power given to them, to inspect all the 
 books and papers, without excepting the accounts of individuals, 
 and that of examining upon oath all the officers of every bank, 
 and every other person, concerning its affairs, are both neces- 
 sary and have never been abused. In the case under conside- 
 ration, the commissioners would naturally be placed under the 
 superintendence of the Treasury Department. The appoint- 
 ment of directors by Government may be useful, but is less im- 
 portant. 
 
 Amongst many suggestions that have been made, and which 
 deserve consideration, there is one which appears important, 
 principally in order that the bank may have a truly national 
 character and not degenerate into a local institution. It is pro- 
 posed that the general control of the bank should be separated 
 from the local business of the place where it may be located. 
 Nothing more is meant by this, than that the office of discount 
 and deposit for that place should be as distinct from the gene- 
 ral direction, as the branches which are located in other places ; 
 and that such office should be considered simply as one of the 
 branches. In that case, the members of the general direction 
 might be but few ; no more than one or two from any one 
 State ; and it would, therefore, be necessary, in order to secure 
 the constant attendance of those from other States than that in 
 which the main bank was located, that they should receive a 
 competent and even liberal salary. But this general board, 
 though separated from the office of discount, must still necessa- 
 rily sit in a great commercial city. 
 
 The constitution of the United States provides, that Congress 
 shall have power to establish an uniform rule of naturalisation, 
 and uniform laws on the subject of bankruptcies throughout the 
 United States. 
 
96 
 
 The true meaning of the word " bankruptcies" has been ques- 
 tioned. But whether, according to the sense in which the word 
 was generally used and understood at the time when the con- 
 stitution was adopted, it embraces all persons unable or unwil- 
 ling to pay their debts, or is confined only to traders and 
 dealers, it is conceded on all hands, that it is applicable to all 
 who are universally admitted to be traders or dealers. And it 
 cannot be denied that bankers, or dealers in money, are included 
 within that description. 
 
 In other respects the power is given in express terms, and in 
 the most general manner. It is, to pass laws on the subject of 
 bankruptcies. Congress is not, therefore, bound by the specific 
 provisions of the pre-existing laws, on that subject, of any 
 country. It may define what acts shall constitute bankruptcy ; 
 what shall be the remedy in reference both to the creditor and 
 to the debtor ; and what shall be the mode of proceeding. The 
 question to be examined is, whether the law shall apply to 
 banking corporations. The intrinsic propriety of including those 
 institutions can hardly be denied ; and no act of Congress could 
 be more useful and efficient, for the purpose of securing a gen- 
 eral sound currency. 
 
 The general evil under which the whole country labors, is 
 that, owing to the dissimilar, imperfect, fluctuating, or relaxed 
 legislation of the several States, those institutions or corporate 
 bodies which have been permitted to issue a paper currency, 
 on the express condition that it should be at all times redeema^ 
 ble, on demand, in gold or silver, are suffered with impunity to 
 break their engagements, and to pay their debts in a depreciated 
 paper, not equivalent to that which, by the constitution, is de- 
 clared to be the only tender in payment of debts. A law which 
 shall declare it to be an act of bankruptcy, on the part of all 
 those who issue notes or evidences of debt to be put in circula- 
 tion as money (y), to continue, for a certain length of time, to 
 decline or refuse to redeem in specie such notes or bills, would 
 afford the most general and efficient preve/ntive and remedy 
 
 (y) These are the technical words used in the law of New York, in relation to 
 the issuing and circulation of bank notes. 
 
97 
 
 that can be devised. It would alone be sufficient to arrest the 
 evil, to place all the States on a footing of equality, and to 
 restore and maintain the soundness of all the local currencies. 
 
 The laws of the same purport, enacted by New York, and by 
 some other States, are in fact bankrupt laws applied to that special 
 object. Those States, and all those which maintain, or are de- 
 sirous of maintaining specie payments and a sound currency, 
 are deeply interested in making the law general. It must also 
 be observed, that incorporated banks enjoy already all the privi- 
 leges which a bankrupt law can afford to debtors ; that is to 
 say, that, on surrendering all the property which belongs to the 
 corporation, no further demand can be made either against it, 
 nor, in their individual capacity, against its members. It is, 
 therefore, strictly consistent with justice, that they should be 
 made subject to the provisions of that branch of the bankrupt 
 law, which is intended to protect the creditors. In point of fact, 
 the whole, or almost the whole, banking business of the United 
 States is carried on by incorporated banks. To exempt them 
 from the operation of a general law is, not only the grant of a 
 banking monopoly, but an exclusive privilege in favor of a spe- 
 cial class of dealers ; and the occupation of those dealers, that 
 of substituting a paper for a specie currency, is of all others the 
 most dangerous to the community, and that which requires to 
 be most strictly restrained by legal enactments, instead of being 
 exempt from the provisions of a law, which applies to every 
 other description of dealers. 
 
 Although the great utility and strict justice of the application, 
 of a general bankrupt law to incorporated banks may not be de- 
 nied ; it seems that the power of Congress in that respect has 
 been questioned, by some persons, as an infringement of the 
 rights of the States, and as not being warranted by the constitu- 
 tion. The object of this essay is to suggest such provisions as 
 appear useful and practicable, on subjects which are familiar to 
 the writer, rather than to discuss constitutional questions, which 
 may be beyond his competency. But, in this instance, the ob- 
 jection seems so extraordinary, that some desultory observations 
 may be permitted. 
 
 The power to establish uniform laws on the subject of bank- 
 13 
 
98 
 
 ruptcies throughout the United States, is not implied but ex- 
 press ; and it is given in the most general and extensive terms 
 that could be devised, without any other limitation than that 
 which may be deduced from the meaning of the word " bank- 
 ruptcies," and which does not apply to the question under con- 
 sideration. The laws must be uniform. It may perhaps be said, 
 that the condition of uniformity is not violated, by exempting 
 from the operation of the law a certain class of dealers, pro- 
 vided all the dealers of that description are exempted. But this 
 would be a dangerous principle. The power of passing laws 
 on the subject of bankruptcies, like that to regulate commerce 
 among the several States, of which it is in fact only a part, must 
 be uniform in every respect. To permit every other species of 
 property to be freely carried from one State to another, and to 
 except slaves, by forbidding their being transported from one 
 slaveholding to another slaveholding State, would certainly be 
 considered as a direct violation of the constitution. 
 
 The power of the several States, to create corporations or 
 artificial bodies is universally acknowledged. And, although 
 the privilege may not be absolutely essential, yet as by usage it 
 is almost universal, the power to confine the responsibility to 
 the property owned by the corporation as such, and to make its 
 members irresponsible, is also admitted. But it is not perceived, 
 on what principle, those artificial bodies can in any other respect 
 be, any more than natural persons, rightfully exempted from the 
 legitimate general laws of the United States. Such exemption 
 has not heretofore been claimed. The incorporated banks may, 
 in many instances, be sued in the courts of the United States. 
 Judgments may be obtained in those courts against them, and 
 execution levied on their corporate property. Their real estate 
 is liable to taxation, whenever the United States lay a direct 
 tax on property of that description. Their notes were made 
 liable to the stamp duty, in common with the notes of private 
 individuals. The individual States might have claimed the right 
 to exempt those institutions in all those respects, with as much 
 propriety, as in reference to a bankrupt law. The claim might 
 be extended to all other associations of persons, incorporated for 
 establishing manufactures, or for any other enterprise whatever ; 
 and associations, not only for carrying on manufactories, but 
 
99 
 
 also fisheries, the fur trade, and other species of business, have 
 actually been incorporated by some of the States. 
 
 A system of free banking has been introduced into the State 
 of New York, by authorising associations for that purpose, 
 which are not by law considered as corporations ; and it is 
 hoped that the system will become general and operate a conver- 
 sion of all the chartered banks into free and not incorporated 
 associations. Would it be just that they should be subject to 
 the bankrupt law, whilst the chartered banks remained exempted 
 from its operation ? 
 
 It may perhaps be alleged that, inasmuch as the States have 
 respectively passed laws ,providing for the manner in which the 
 property of the incorporated banks may be sequestered, placed 
 in the hands of trustees or receivers, and be distributed amongst 
 the creditors, the United States have no right to interfere, and 
 to provide other means for the same purpose. But it has been 
 generally admitted, and the doctrine is sound and rational, that 
 so long as Congress does not exercise a discretionary power 
 given to it by the constitution, the laws of the States on such 
 subjects are legitimate and obligatory ; but that they are super- 
 seded by the laws of Congress, whenever that body thinks it 
 proper to exercise such discretionary power. This has hap- 
 pened very lately in the provisions respecting pilots : the sanc- 
 tion of Congress has been given to the quarantine laws of the 
 several States : it has been adjudged, that they had the right to 
 naturalize aliens, until Congress had passed a general law on 
 that subject, and that, from that time, the right ceased. 
 
 Some difficulties may be suggested respecting the practica- 
 bility of applying the provisions of a bankrupt law to corpora- 
 tions ; but it is believed that they may be easily surmounted. 
 
 There are some acts, considered by the English laws as acts 
 of bankruptcy, which could not be done by a corporation. The 
 only consequence would be that, since the act could not be done, 
 the law in that respect could not be applied to the incorporated 
 banks. But Congress is not at all bound by the special provi- 
 sions of the English bankrupt laws. It is generally authorised 
 to pass laws on the subject of bankruptcies ; and it may there- 
 fore define what shall be considered as acts of bankruptcy, and 
 adapt the definition to the object in view. It has already been 
 
100 
 
 suggested that nothing more was wanted in reference to banks, 
 than to make it an act of bankruptcy for all those who issue 
 paper money, to refuse for a certain length of time to redeem it 
 in specie. 
 
 There are also some penalties, which are inapplicable to cor- 
 porations, and from which they would of course be exempted. 
 But there is a point which deserves consideration. No bank- 
 rupt law would be passed in this age, and in this country, which 
 would condemn a bankrupt to death. By parity of reasoning, 
 it may be insisted that the act of Congress, which will not in- 
 flict the pain of death on the natural person, ought not to kill, 
 or, in other words, to dissolve the artificial body. This may be 
 granted : the power of dissolving may be left to the State which 
 created. The essential object of a bankrupt law, with respect 
 to the creditor, is to preserve from dilapidation the property in 
 the possession of his debtor, and to make an equal division of it 
 amongst all the creditors. This may be attained, without put- 
 ting to death the person, or dissolving the corporate body (z). 
 
 (z) The establishment of a Mint in New York would have a tendency to sus- 
 tain the currency. Foreign coins are generally exported in preference to those of 
 the United States. A very considerable proportion of the foreign gold and silver 
 coins, which pass through the banks of the city of New York, would be converted 
 into American coins, if it could be done without the expense, risk, delay, and incon- 
 venience of sending them to Philadelphia. The practical injury is much greater 
 than may be generally supposed. It must not be forgotten that New York is the 
 principal place of importation, and still more so of the exportation, of the precious 
 metals; and that it is also, as being the most exposed, that which it is most impor- 
 tant to protect against the danger of a suspension of specie payments. 
 
APPENDIX. 
 
 DOCUMENTS RESPECTING THE RESUMPTION OF SPECIE 
 PAYMENTS IN THE YEAR 1838. 
 
 CIRCULAR. To the principal Banks in the United States. 
 
 New York, August 18th, 1837. 
 
 Sir, At a general meeting of the officers of the banks of the city of New- 
 York, held on the 15th of this month, the following resolution was unani- 
 mously adopted, viz : 
 
 Resolved, That a committee be appointed to correspond with such banks 
 in the several States as they may think proper, in order to ascertain at what 
 time and place a Convention of the principal banks should be held, for the 
 purpose of agreeing on the time when specie payments should be resumed, 
 and on the measures necessary to effect that purpose. 
 
 Having been appointed a committee in conformity with that resolution, 
 we beg leave to call your attention to the important subject to which it refers. 
 
 The suspension of specie payments was forced upon the banks imme- 
 diately by a panic and by causes not under their control, remotely by the 
 unfortunate coincidence of extraordinary events and incidents, the ultimate 
 result of which was anticipated neither by Government or by any part of the 
 community. 
 
 But it is nevertheless undeniable, that, by accepting their charters, the 
 banks had contracted the obligation of redeeming their issues at all times 
 and under any circumstances whatever; that they have not been able to 
 perform, that engagement; and that a depreciated paper, differing in value 
 in different places, and subject to daily fluctuations in the same place, has 
 thus been substituted for the currency, equivalent to gold or silver, which, 
 and no other, they were authorised and had the exclusive right to issue. 
 
 Such a state of things cannot, and ought not, to be tolerated any longer than 
 an absolute necessity requires it. We are very certain that you unite with 
 us in the opinion, that it is the paramount and most sacred duty of the banks 
 to exert every effort, to adopt every measure within their power, which may 
 promote and accelerate the desired result; and that they must be prepared 
 to resume specie payments within the shortest possible notice, whenever a 
 favorable alteration shall occur in the rate of foreign exchanges. 
 
 "We are quite aware of the difficulties which must be surmounted, and of 
 the impropriety of any premature attempt. No banking system could in- 
 deed be tolerated which was not able to withstand the ordinary and una- 
 voidable fluctuations of exchange. But the difference is great between con- 
 tinuing and resuming specie payments : and we do not believe, that the 
 banks in the United States can, without running the imminent danger of 
 another speedy and fatal catastrophe, resume such payments before the 
 foreign debt shall have been so far lessened or adjusted, as to reduce the rate 
 of exchanges to true specie par, and the risk of an immediate exportation of 
 the precious metals shall have thus been removed. 
 
102 
 
 The appearances in that respect have become more flattering; and it is 
 not improbable that the expected change may take place shortly after the 
 next crop of our principal article, of exports shall begin to operate. Yet we 
 are sensible that we must not rely on conjectures, and that the banks cannot 
 designate the time when they may resume, before the ability to sustain specie 
 payments shall have been ascertained by the actual reduction in the rate of 
 the exchanges. 
 
 But even when the apprehension of a foreign drain of specie shall have 
 ceased, the great object in view cannot be effected without a concert of the 
 banks in the several sections of the Union. Those of this city had the mis- 
 fortune to be, with few exceptions, the first that were compelled to declare 
 their inability to sustain, for the time, specie payments. It appears that it 
 became absolutely necessary for the other banks to pursue the same course; 
 and it would be likewise impracticable for those of any particular section to 
 resume without a general co-operation of at least the principal banks of the 
 greater part of the country. A mutual and free communication of their re- 
 spective situations, prospects and opinions, seems to be a necessary prelimi- 
 nary step, to be followed by a Convention at such time and place as may be 
 agreed upon. 
 
 As relates to the banks of this city, we are of opinion that, provided the 
 co-operation of the other banks is obtained, they may, and ought to, we 
 should perhaps say that they must, resume specie payments before next 
 spring, or, to be more precise, between the first of January and the middle of 
 March 1838. 
 
 Both the time and place of meeting in Convention must of course be de- 
 termined in conformity with the general wishes of the banks. In order to 
 bring the subject in a definite shape before you, we merely suggest the latter 
 end of October as the proper time, and this city as the most'eiigible place 
 for the proposed Convention. 
 
 A sufficient time will have then elapsed to enable us to judge of the mea- 
 sures which Congress may adopt in reference to the subject. Whatever 
 may be its action on the currency, the duty of resuming remains the same, 
 and must be performed by the banks. If any thing indeed can produce an 
 effect favorable to their views, it will be the knowledge of their being sin- 
 cerely and earnestly engaged in effecting that purpose. An early indication 
 of the determination of the banks will have a beneficial influence, by making 
 them all aware of the necessity of adopting the requisite preliminary mea- 
 sures; and the information is also due to all the varied interests of the 
 country. 
 
 We address this letter to no other bank in your city or State than those 
 herein designated ; and we pray you to collect and ascertain the opinions of 
 the others, and to communicate the general result as early as practicable. 
 We have the honor to be, &c. 
 
 ALBERT GALLATIN, 
 GEORGE NEWBOLD, 
 C. W. LAWRENCE, 
 
 Committee. 
 
 Extract from the Minutes of the Board of Delegates of the Banks of the City 
 and Incorporated Districts of the County of Philadelphia. 
 
 At a special meeting of the delegates of all the banks in the city and the 
 incorporated districts of the county of Philadelphia, held on Tuesday eve- 
 ning, August 29th, 1837, the following preamble and resolutions were, on 
 motion, unanimously adopted, viz : 
 
 Whereas a proposition has been submitted to this meeting, on behalf of the 
 
103 
 
 officers of the banks of the city of New York, for calling a convention of dele- 
 gates from the principal banks in the United States, to be held in New York 
 in the month of October next, for the purpose of adopting measures for the 
 resumption of payments in specie by the banks: after mature reflection upon 
 this proposal, and the reasons assigned for it, this meeting has not been able 
 to adopt the views presented in the communication; and they deem it proper 
 to state briefly and without reserve the reasons of their dissent. 
 
 The banks of Philadelphia fully concur with the banks of New York in 
 their anxiety for a general resumption of specie payments with the least 
 practicable delay, and they would cordially unite in the proposed convention 
 if they thought it at all adapted to promote that object. But they believe 
 that the general resumption of specie payments depends mainly, if not ex- 
 clusively, on the action of Congress the body charged with the general 
 power over commerce, and the exclusive power over the coinage, and with- 
 out whose co-operation, all attempts at a general system of payments in coin 
 throughout this extensive country must be partial and temporary. 
 
 That body is on the point of assembling, being expressly convened to 
 deliberate on this very subject. 
 
 Now, the banks of Philadelphia are of opinion, that, at such a moment, a 
 convention of the banks of the United States would be superfluous at least, 
 if not injurious. It seems superfluous, because the banks can do nothing, 
 and ought to promise nothing, until they know what, the action of Congress 
 will be. The communication from New York mentions a precise period 
 when the banks of New York may, and ought to, and must, resume specie 
 payments. With every respectful deference to the better judgment of the 
 signers of the communication, the banks of Philadelphia are not prepared to 
 make any pledges, nor to name any time, for the resumption, because they 
 think that the whole matter depends much more on Congress than on them- 
 selves. They do not wish to excite expectations which they may not be 
 able to realize ; and they believe that a premature effort might be followed 
 by a relapse, which would be permanently fatal to the credit of our banking 
 institutions. If, moreover, such a convention, composed of delegates from 
 sections of the country of very unequal resources, and in very different stages 
 of preparation, should not agree upon any general system of action, these 
 very discussions would weaken confidence in the convention ; while, if they 
 could agree, their union upon any course of measures might not recommend 
 that course to public favor, because it would be considered as one specially 
 favorable to the interests of banks themselves. It is thus that the convention 
 might prove not merely useless, but injurious. The mere assemblage of a 
 body, more numerous probably than Congress itself, meeting at the same 
 time, deliberating on the same subject, might easily be made to wear the 
 appearance of an attempt to interfere with, or to influence the movements of, 
 that body. The avowed object of the convention too to fix a time for re- 
 suming specie payments independent of Congress might have the effect of 
 misleading both Congress and the country. If the resumption be practicable 
 by the banks alone, Congress might consider itself under no obligation to in- 
 terpose a very erroneous and dangerous conclusion. If the banks confi- 
 dently name a day when they not only may, but must resume, whatever 
 be the action of Congress, or the state of the country, or the condition of the 
 foreign exchanges, they promise what they may not be able to perform, and 
 so lose, rather than gain credit by the effort. A more prudent course, in the 
 deliberate judgment of this meeting, would be for the banks in the United 
 States to continue steadily their present preparations for resuming specie 
 payments ; to wait quietly the action of Congress, without interference of any 
 kind ; and be ready to give an immediate and zealous co-operation in any 
 measures which that body may adopt for the common benefit of the coun- 
 try. Under these impressions, they are constrained to adopt the following 
 resolutions : 
 
104 
 
 Resolved, That, in the opinion of the banks of Philadelphia, it Is inexpedi- 
 ent, at this time, to appoint delegates to the proposed convention. 
 
 Resolved, That a copy of these resolutions, certified hy the President and 
 Secretary of this meeting, he forwarded to the banks of New York, with an 
 assurance, that while the banks of Philadelphia reluctantly differ from those 
 of New York as to the specific measure proposed, they do ample justice to 
 the zeal and patriotism which have dictated it; that they are not the less 
 auxious to accomplish the common object ; and that, if the proposed conven- 
 tion should suggest any thing which promises to be useful to the country, the 
 banks of Philadelphia will as cordially co-operate in executing it as if they 
 had been fully represented in the convention. 
 Extract from the Minutes : 
 
 W. MEREDITH, President. 
 
 J. B. TREVOR, Secretary. 
 
 CIRCULAR. To the principal Banks in the United States. 
 
 New York, Oct. 20th, 1837. 
 
 Sir, At a general meeting of the officers of the banks of the city of New 
 York, held on the 10th of this month, the committee appointed on the 15th of 
 August last, laid before the meeting the communications received from banks 
 in the several States, in answer to the circular of the committee of the 18th 
 of August last. 
 
 Whereupon, it was unanimously "Resolved, That the banks in the several 
 States be respectfully invited to appoint delegates to meet on the 27th day of 
 November next, in the city of New York, for the purpose of conferring on 
 the time when specie payments may be resumed with safety, and on the 
 measures necessary to effect that purpose." 
 
 We pray you to communicate this letter to such other banks in your 
 State as you may deem proper ; and leaving the number of delegates entirely 
 to yourselves, we only beg leave to urge the importance of having every 
 State represented. 
 
 We have the honor to be respectfully your most obedient servants, 
 
 ALBERT GALLATIN, 
 GEORGE NEWBOLD, 
 C. W. LAWRENCE, 
 
 Committee. 
 
 Extract from the Minutes of the Proceedings of the Bank Convention, held 
 at New York on the 27th November to the 2d December 1837. 
 
 Present Delegates of Banks from the following States, viz. : Maine, 
 Vermont, New-Hampshire, Massachusetts, Rhode Island, Connecticut, 
 New York, New Jersey, Pennsylvania, Delaware, District of Columbia, 
 Virginia, North Carolina, South Carolina, Georgia, Ohio, Kentucky, and 
 Indiana. 
 
 Thursday, November 30, 1837. 
 
 The Convention met according to adjournment. 
 
 Mr. Van Ness, from the committee appointed to report upon the proper 
 measures to be pursued " to effect a general resumption of specie pay- 
 ments," &c. reported the following Resolutions, and requested that they 
 should be considered a Report in part : 
 
 1st. Resolved, That it be recommended to the Banks of the several States 
 
105 
 
 to resume specie payments on the first day of July next, without precluding 
 an earlier resumption on the part of such banks as may find it necessary or 
 deem it proper. 
 
 2d. Resolved, That a committee of delegates be appointed, whose 
 
 duty it shall be to correspond with the several banks, and to collect all the 
 necessary information concerning their respective situations, and the rate of 
 foreign exchanges, and who shall be authorised, if they deem it necessary, to 
 call, on giving thirty days' notice, another meeting of this Convention, inviting 
 the attendance of delegates from the banks of the States not represented at 
 this meeting. 
 
 3d. Resolved, That (notwithstanding the foregoing resolutions) it will be 
 the duty of each and every bank in the United States to resume specie pay- 
 ments at the earliest period when their own means and the state of the ex- 
 changes will enable them to do so with a proper regard to their own safety, 
 and the interests of the community. 
 
 On motion of Mr. Eyre of Pennsylvania, the resolutions were laid on the 
 table, to enable him to present a Report and Resolutions from a minority of 
 the same committee. 
 
 Mr. Eyre then submitted the following Report and Resolutions : 
 
 The minority of the committee, to whom the resolution of Mr. Howard, of 
 Maryland, was referred, submit the following Report and Resolutions, as ex- 
 pressing briefly their views upon the subject referred : 
 
 Thatfthey have proceeded in their deliberations upon the subject commit- 
 ted to them, under a deep sense of its momentous importance in relation to 
 the particular interests represented in this Convention ; still more to the gen- 
 eral welfare ; with unaffected respect to public expectation, and a thorough 
 conviction that nothing can excuse the continuance of suspension after the 
 necessity which demands it shall have ceased. It will not be denied that the 
 banks are prompted by their own interest to a fesumption at the earliest pos- 
 sible period, when it is known that since the month of May last, they have 
 been steadily contracting their business to an unprecedented amount, and to 
 the utmost limit short of general bankruptcy. 
 
 It will be conceded that the resumption, accompanied by a revival of con- 
 fidence, to be more and more firmly reinstated, is demanded by every con- 
 sideration of the public welfare ; and the banks, sustained as they have been 
 in the face of penalties and forfeitures, by a candid, just and generous com- 
 munity, cannot fail to be alive to the duty of cultivating the favor, and re- 
 garding most respectfully the opinion and general expectation, of their fel- 
 low citizens. Nor can it be overlooked, that, as their justification is, and has 
 been from the beginning, necessity and self-preservation, for the country as 
 well as themselves, it will lose its force whenever the apprehended dangers 
 are at an end. 
 
 It will be conceded that an efficient and maintained recurrence to specie 
 payments requires a simultaneous action throughout the country, and it is 
 admitted on all hands, that your resolves will be only advisory, not com- 
 pulsory. 
 
 In order to this, the restoration of domestic exchanges to their natural and 
 regular condition and action is indispensable, and this must mainly depend 
 upon the ability of the Southern and Western States, for resumption is not a 
 measure of mere volition. 
 
 It cannot, therefore, but be a matter of much regret, that in your delibera- 
 tions, you are not assisted by the counsels of delegates from the important 
 points of Louisiana, Mississippi, Alabama, Tennessee, and some other 
 States. 
 
 Yet the ability of these States, and their willingness to concur and co-ope- 
 rate with you in every reasonable and judicious measure which you may re- 
 commend, cannot be questioned, although the want of certain information 
 
 14 
 
106 
 
 leaves you at a loss to know, with desirable precision, at what period, or to 
 what amount, their staples, on which their ability depends, will be brought 
 into activity. 
 
 In regard to the question of resumption, the first thing which presents it- 
 self to our consideration is, the time when it is to be attempted. 
 
 Shall it be now ? 
 
 In the present condition of foreign and domestic exchanges, it is believed 
 that an immediate resumption of specie payments is utterly impracticable; 
 none, even the most sanguine, have ever been heard to impugn, or even to 
 express doubt of the undeniable truth of this position. This measure will 
 therefore be passed by. 
 
 Shall it then be at a future period, now to be fixed by this Convention ? 
 
 Against such a measure, many objections exist in the minds of the minori- 
 ty of your committee, some of which will be stated. 
 
 No one can foretell with satisfactory probability, when our domestic ex- 
 changes will be restored to order and regularity. 
 
 It must depend upou the value and quantity of the^ staple products of the 
 Southern and Western States, and the same dependence attaches to our fo- 
 reign Exchanges. 
 
 Until our foreign debt shall have been reduced, the present high rate of ex- 
 change must necessarily continue ; so long too, the demand for specie, for 
 the purposes of remittances, must last, and while it lasts, the opening of your 
 vaults would be to impair your means, and to drain the country of its specie 
 to a ruinous extent. Again, to fix now a period of specie payments, would be 
 to count with dangerous confidence upon speculative opinions and contin- 
 gencies. 
 
 Who can assure us that, at a day not so remote as to be for that reason 
 inadmissible, our foreign debt will be sufficiently liquidated to bring down 
 exchange and check the exportation of specie ? 
 
 Who can say what is to be the quantity or prices of our staples of this 
 year's crop, in the foreign market ? 
 
 There must be much allowance for the time necessary for getting them there, 
 and for their sale also much, too, as regards their value, to the vacillation 
 of prices, and to the force of the foreign policy by which it has been attempt- 
 ed, and with too much success, to break them down. 
 
 Besides these considerations, we cannot but. look with apprehension to the 
 insufficiency of the domestic supply of bread stuffs. 
 
 That there will be a large importation is presumed, and to that extent your 
 means will be impaired, the foreign debt kept stationary, or possibly in- 
 creased. Again, if the reliance upon contingencies should embolden you to 
 fix a day, and in it you should be disappointed, you will have repeated the 
 distress occasioned by severe curtailment, without accomplishing the object 
 proposed, and with certain ruin to many. You will shake public confidence 
 in your disposition, or your ability, to its foundation. 
 
 How and when can you hope to restore it ? 
 
 Again : In the interval which would elapse until the arrival of the period 
 you may fix upon, may it not happen that in some instances there will be an 
 expansion of circulation, which will aggravate public calamity? Then, too, 
 may not the measure now under consideration tempt to large importation of 
 foreign goods by your own merchants ? May it not encourage the foreign 
 manufacturer to force his goods upon the country, and glut the market ? Ei- 
 ther of these would necessarily keep you in a state of indebtedness propor- 
 tionally, and to keep up the exchanges ; nor is the ardent commercial spirit 
 of enterprise round the Cape to China, &c. to be lost sight of. 
 
 Afford the specie, and it will be extended to a dangerous excess, for the 
 temptation is great. 
 
 Again : If you fix an early day of resumption, you increase the hazard of 
 
107 
 
 disappointment. If you fix upon a distant day, may it not happen that you 
 postpone resumption beyond the period when in justice you ought to have 
 resumed ? 
 
 Finally : Are you prepared to dismiss the hope that Congress will aid in 
 relieving the country ? 
 
 Entertaining these views, briefly expressed, but which your intelligence will 
 carry out, the minority of the committee cannot advise the determination, at 
 this time, of the precise period when the resumption of specie payments may 
 be effected. Natural causes are in operation, which, by judicious action, you 
 may assist, but you may retard their progress by rash and 'imprudent at- 
 tempts to force them ; and you will, moreover, be able to assure yourselves 
 and the public that the resumption, so anxiously desired by all, will be ac- 
 complished as soon as it is practicable, and then certainly. 
 
 In accordance with what has been said, the minority of your committee 
 offer the following resolutions : 
 
 Resolved, That this Convention will appoint a committee of delegates, 
 to whom shall be confided the important trust of diligently inquiring, and de- 
 liberately judging, when the condition and circumstances of the country shall 
 have been such as to justify an early resumption of specie payments by the 
 banks, at a fixed period. 
 
 2d. That when the said committee shall, in the exercise of sound discre- 
 tion, be satisfied that such period has arrived, it shall be their duty to make 
 it known to the presiding officer of this Convention, and that it shall be his 
 duty thereupon, to summon a meeting of this Convention, with due notice to 
 
 its members, at , to the end that the measure of resumption may 
 
 be promptly adopted. 
 
 Saturday, December 2d, 1837. 
 
 The Convention met, according to adjournment, when the following reso- 
 lutions were adopted : 
 
 1st. Resolved, That the Convention entertains a deep anxiety and a firm 
 determination to accomplish the resumption of specie payments at the earli- 
 est period when it may be permanently practicable. 
 
 2d. Resolved, That in the opinion of this Convention the present circum- 
 stances of the country are not such as to make it expedient or prudent now to 
 fix a day for the resumption of specie payments. 
 
 3d. Resolved, That when the Convention terminates its present session, it 
 shall be adjourned to meet in the city of New York, on the second Wed- 
 nesday of April next, for the purpose of considering, and if practicable de- 
 termining, upon the day when specie payments may be resumed. 
 
 4th. Resolved, That this Convention strongly recommends to all the banks 
 in the United States to continue, by proper measures, to prepare themselves 
 for a return to specie payments within the shortest practicable period, after 
 the next meeting of the Convention. 
 
 5th. Resolved, That the banks in those States not now represented, be 
 earnestly requested to send delegates to the adjourned meeting of this Con- 
 vention, and that the several delegates from all the States be desired to pro- 
 cure all such information in regard to the condition of the banks in their re- 
 spective States, as may be attainable. 
 
 At a meeting of the Officers of the Banks of the City of New- York, held 
 on the 15th December, 1837 
 
 The delegates appointed to represent the said Banks in the Convention of 
 the Banks of the several States, which met at New- York, on the 27th of 
 
108 
 
 November last, and on the following days, to the 1st of this month, made the 
 following report, Whereupon it was 
 
 Resolved, That the said report be accepted and published. 
 
 PETER STAGG, Chairman. 
 
 W. M. VERMILYE, Secretary. 
 
 REPORT. 
 
 The delegates appointed to represent the Banks of the city of New- York, 
 in the general Bank Convention, held in the said city, on the 27th of No- 
 vember, 1837, respectfully submit, together with a copy of the proceedings 
 of the Convention, the following report, explanatory of their votes in that 
 body : 
 
 The banks of the several States have been vested with the power, and, in 
 most of the States, especially in that of New- York, with the exclusive pri- 
 vilege of issuing a paper currency, on the express condition, that they should 
 at all times, and whenever the demand was made, redeem it in gold or silver, 
 the only constitutional legal tender or currency, with which debts may be 
 discharged. Nothing, therefore, but the inability to perform the condition, 
 can justify a suspension of specie payments on the part of the Banks. 
 
 The immediate causes which thus compelled the banks of the city of 
 New- York to suspend specie payments, on the 10th of May last, are well 
 known. The simultaneous withdrawing of the large public deposits, and of 
 excessive foreign credits, combined with the great and unexpected fall in the 
 price of the principal article of our exports, with an import, of corn and bread 
 stuffs such as had never before occurred, and with the consequent inability 
 of the country, particularly of the South- Western States, to make the usual 
 and expected remittances, did, at one and the same time, fall principally and 
 necessarily on the greatest commercial emporium of the Union. After a 
 long and most arduous struggle, during which the banks, though not alto- 
 gether unsuccessfully, resisting the imperative foreign demand for the precious 
 metals, w r ere gradually deprived of a great portion of their specie, some 
 unfortunate incidents of a local nature, operating in concert with other pre- 
 vious exciting causes, produced distrust and panic, and finally one of those 
 general runs, which, if continued, no banks that issue paper money payable 
 on demand, can ever resist; and which soon put it out of the power of those 
 of this city to sustain specie payments. The example was followed by the 
 banks throughout the whole country, with as much rapidity as the news of 
 the suspension in New- York reached them, without waiting for an actual 
 run, and principally, if not exclusively, on the alleged grounds of the effects 
 to be apprehended from that suspension. Thus, whilst the New- York city 
 banks were almost drained of their specie, those in other places preserved 
 the amount which they held before the final catastrophe. 
 
 If the share of blame, which may justly be imputed to the banks, be ana- 
 lyzed, it will be found to consist in their not having, at an early period, duly 
 appreciated the magnitude of the impending danger, and taken, in time, the 
 measures necessary to guard against it ; in their want jof firmness when the 
 danger was more apparent and alarming; in yielding to the demands for 
 increased, or continued bank facilities, instead of resolutely curtailing their 
 loans, and lessening their liabilities. Whether the most acute foresight, and 
 the most powerful exertions, could have enabled the banks to have averted 
 the blow, is a question which we are not called upon to discuss. 
 
 Whatever explanations maybe given concerning the past, since nothing 
 but. actual inability can be alleged as an excuse for having ceased to perform 
 the express condition on which the privilege to issue a paper currency had 
 been granted, it is equally obvious, that nothing can justify a protracted 
 suspension, but the continued inability to resume and sustain specie pay- 
 ments. This principle is indeed so evident, that, as an abstract proposition, 
 jts correctness is universally admitted: and all agree in expressing their 
 
109 
 
 " thorough conviction, that nothing can excuse the continuance of suspension, 
 after the necessity which demands it shall have ceased." But, in enume- 
 rating the objections to an early resumption, or to fixing a day for it, the 
 discussion was not confined to arguments derived from a supposed continued 
 inability on the part of the banks to resume ; but ah appeal was also made 
 to considerations of presumed expediency, connected with the general si- 
 tuation of the country, and on which the simple fact of the ability of the 
 banks to resume, and sustain specie payments, does not depend. 
 
 It is but too well known, that a general suspension of specie payments by 
 the banks is not confined to them alone, but extends instantaneously to the 
 whole community. As they had substituted their paper for the metallic 
 currency, and as even the portion of specie which still circulated, disappears 
 at once, when the general bank suspension takes place, the depreciated bank 
 paper currency alone remains, both as the only medium of payment, and, 
 by a necessary consequence, as the practical standard of value. Thus, by a 
 strange anomaly, whilst the courts of law can consider nothing but gold or 
 silver as the legal payment of debts, every individual, without exception, 
 who is not compelled by process of law, or who does not resort to the tribu- 
 nals for redress, pays all his debts with, and receives nothing in payment 
 but, an irredeemable, depreciated currency. A general usage, openly at 
 war with law, usurps its place ; and the few cases where the laws are en- 
 forced, are only exceptions to the universal practice. Instead of the perma- 
 nent and uniform standard of value provided by the constitution, and by 
 which all contracts were intended to be regulated, we have at once fifty dif- 
 ferent and fluctuating standards, agreeing only in one respect, that of impair- 
 ing the sanctity of contracts. Even restrictive and penal laws are openly 
 and daily violated with impunity, by every body, in circulating notes for- 
 bidden by law. It is impossible that such a state of things should not gradu- 
 ally demoralize the whole community ; that a general relaxation in the 
 punctual and honorable fulfilment of obligations and contracts, should not 
 take place ; that that which operates as a general relief law, should not be 
 attended with the same baneful effects which have always attended posi- 
 tive laws of the same character ; and that, if the present illegal system be 
 much longer continued, the commercial credit and prosperity of the country, 
 and more particularly of this city, should not be deeply and permanently 
 injured. 
 
 When we see such extensive, general, and, we may say, intolerable evils, 
 flowing from a general suspension of specie payments by the banks, it is 
 monstrous to suppose that, if they are able to resume, and sustain such pay- 
 ments, they should have any discretionary right to decide, or even to discuss, 
 the question, whether a more or less protracted suspension is consistent with 
 their own views of " the condition and circumstances of the country." There 
 would be no limit to such supposed discretion. Thus, for instance, should 
 the hope of a favorable action of Congress on the currency be still alleged as 
 a motive for delay, would not this be tantamount to protracted suspension for 
 an indefinite period of time ? 
 
 The banks are bound by the strongest legal and moral obligations to re- 
 sume specie payments whenever they are able to maintain such payments. 
 It is the paramount duty to which every other consideration must yield. 
 Their ability to perform that duty is the only question which they have a 
 right to discuss, and which they are bound to examine with the utmost care 
 and candor. 
 
 Strictly speaking, the power to issue paper money should cease whenever 
 the express condition on which the privilege was granted cannot be per- 
 formed. It is only through the indulgence of the Legislature, and of the 
 community, that the banks are still permitted, for a while, to continue their 
 issues. If there be, indeed, any considerations affecting the general welfare, 
 which can render the continuance of an irredeemable currency desirable, 
 
110 
 
 after the time when the banks are or shall think themselves able to resume 
 specie payments, the application for a further protraction must come from, 
 the parties interested, and not from the banks ; and it must be made, not to 
 the banks, but to the Legislature. 
 
 It was urged, that some respectable merchants, here and in other places, 
 were opposed to an early resumption. During the late trying crisis, some of 
 the most respectable and solvent members of the commercial community might 
 have been under the necessity of requiring some indulgence, at least in point 
 of time. But there is not one of those honorable men, who would not think 
 himself disgraced and degraded, if, after having obtained the requisite time, 
 he delayed the fulfilment of his engagements a single day after he had be- 
 come able to do so. That which they require from the banks is, therefore, 
 unjust and unreasonable : for they ask them to do that, from which, in their 
 own case, they would shrink ; and which, if done by any one in his individ- 
 ual capacity, they would consider as disgraceful and dishonorable. 
 
 It was indeed insisted, that some of the general considerations to which we 
 have alluded, made it dangerous for the banks to attempt to resume specie 
 payments. \Ve will advert to all the objections truly of that character; but 
 deem it unnecessary to take further notice of that founded on an expected 
 action of Congress, or to dwell on those clearly arising from local or particu- 
 lar interests, such as the want of extended bank accommodations, and the 
 supposed facilities afforded by a protracted suspension for the collection of 
 debts. Yet, we must not be understood as admitting that such protraction 
 would, in any respect, be advantageous to the community at large; believ- 
 ing, on the contrary, as we do, that its general and permanent interests would 
 be sacrifice-.! to temporary ease and particular classes, should the suspension 
 be continued any longer than absolute necessity requires. 
 
 Amongst the considerations deemed by us to be irrelevant to the true and 
 only question before the banks, that most strongly urged was the alleged 
 necessity of a previous " restoration of domestic exchanges to their natural 
 and regular condition and order." This is confounding cause and effect. 
 The obligation to pay specie, is the check which regulates the exchanges 
 and prevents them from rising much above the specie par. The suspension 
 of specie payments, and the consequent great difference in value, as com- 
 pared with specie, of the several local bank currencies, are the cause of the 
 great corresponding inequalities of the domestic exchanges, so justly com- 
 plained of; and the evil cannot otherwise be overcome, than by a general 
 resumption of specie payments. If A, in Philadelphia, is obliged to lose ten 
 per cent., in order to draw his funds from Nashville, it is because (whether 
 owing to excess in circulation, or to great indebtedness, is immaterial) the 
 Tennessee bank currency is worth ten per cent, less than that of Philadel- 
 phia. If specie payments were resumed in both places, he would lose, at 
 most, two or three per cent, on the exchange. But A is now permitted, by 
 general usage, to pay his debts at home in Philadelphia bank paper, worth 
 six per cent, less than specie. He apprehends that, if the Philadelphia 
 banks should resume specie payments before those of Tennessee, being 
 obliged to pay his own debts in paper equal to specie, he would lose 16, in- 
 stead of 10 per cent., on the Tennessee exchange. The argument, derived 
 from the present condition of domestic exchanges, resolves itself, therefore, 
 into one of expediency. It is founded on the inadmissible supposition, that 
 in order to accommodate special interests, and to benefit certain classes, the 
 banks, though, from their situation and resources, able to resume specie pay- 
 ments, have a right to protract the suspension, to postpone the payment of 
 their own debts, and to delay the performance of the paramount duty they 
 pwe to the community at large, of restoring a currency equal to gold or 
 silver. 
 
 The only question, on which the convention was called upon to deliberate, 
 freing the ability of the banks to resume and sustain specie payments, it 
 
Ill 
 
 appeared to the delegates of both the city and country banks of New York, 
 that an early day might at this time be designated for that purpose. 
 
 In their first circular of the 18th of August, the committee of corres- 
 pondence of the city banks had pointed out such a favorable alteration in the 
 rate of foreign exchanges, as would remove the danger of an immediate ex- 
 portation of the precious metals, and a concert on the part of the principal 
 banks of the country, as the only requisites for resuming with safety. 
 
 In reference to the first point, several estimates of the amount of foreign 
 debt still due, neither provided for, nor postponed, and which probably would 
 be demanded, and must be paid, before the first of July next, were alluded 
 to in the course of the discussion. Those estimates varied from five to 
 twenty millions of dollars. The lowest calculation appeared to rest on 
 correct data : but if somewhat too low, the difference might be readily pro- 
 vided for, by the first proceeds of the cotton crop, and by the sale of State 
 stocks. But it was not at all necessary to resort to calculations of the amount 
 of our foreign debt. Its effect on foreign exchanges, and on a consequent 
 drain of specie for exportation, is the only point in which the banks are con- 
 cerned, and which could affect the question under consideration. 
 
 At the very time when the convention was deliberating, the exchange on 
 London, which had been as high as 121, had fallen to 114, nominal ; and 
 the true par being a fraction above 109J nominal, the exchange was in fact 
 but four per cent, above par in city bank paper. But that paper was itself 
 at five per cent, below specie ; and the rate of exchange was, therefore, one 
 per cent, below specie par. In other words, any given quantity of New 
 York bank notes could purchase bills on London, exceeding by one per cent, 
 the corresponding amount in specie which the same quantity of bank notes 
 could purchase. Ninety-nine gold sovereigns cost as much as a bill on 
 London of one hundred pounds sterling. Under such circumstances, specie 
 could not be exported without a loss, and accordingly the exportation had 
 altogether ceased. It is well known that, within a week after the adjourn- 
 ment of the convention, a further fall had reduced the rate of exchange to 
 llli nominal ; that is to say, to 2i per cent, below the true specie par, and 
 within less than 2 per cent, of being at par with New York bank notes. 
 But, reverting to the time when the convention was sitting, the requisite 
 alteration was no longer a matter of conjecture ; and the fact, that the ex- 
 change had fallen below the true specie par, and that the exportation of 
 specie had ceased, had actually taken place. 
 
 Apprehensions were nevertheless expressed, of the effect which large 
 importations of grain and merchandise might hereafter have on the foreign 
 exchanges, and of an expected drain of specie for the China trade. It 
 appeared to us, that if, after the principal acknowledged cause of the sus- 
 pension, and which presented the greatest obstacle to the resumption, had 
 actually ceased to operate, we were permitted to allege conjectures and 
 contingencies, as a proper ground for protracting the suspension, there was 
 no time at which some plausible reasons of a similar character might not be 
 adduced, and the resumption be indefinitely postponed. 
 
 With respect to the danger of excessive importations, it might indeed be 
 apprehended that, whenever the pressure of the foreign debt was removed, 
 the commercial community might, with its characteristic energetic spirit of 
 enterprise, resume its business too soon, and on too large a scale. And it is, 
 on that account, highly important, that the banks should seize eagerly that 
 eventful moment, and, as it may be called, the turn of the tide, for an imme- 
 diate resumption, before new undertakings may raise new obstacles to the 
 accomplishment of that object. 
 
 The danger of unfavorable exchanges, and of an extraordinary exportation 
 of specie, being now out of question, what other causes could impair the 
 ability of the banks, generally, or in some sections of the country, to resume 
 specie payments within a very short period ? 
 
112 
 
 The four great South-Western States were not represented in the con- 
 vention : and it will be admitted that some of them may not be ready as 
 early as the other parts of the Union. It is, on that point, sufficient to 
 observe, 1st. That, being largely debtors, their not resuming immediately 
 cannot in any way affect the stability of specie payments by the other 
 States. 2d. That the resumption by other States will not, in the slightest 
 degree, impair the productive industry of those districts, whose great natural 
 resources will, notwithstanding the peculiar situation of their banks, early 
 and powerfully promote the payment of debts and the renewal of sound 
 business. 
 
 By no other portion of the country was it intimated, that there were any 
 banks whose particular situation required a longer time than might be 
 wanted by those of New York : unless this should have been implied in 
 some allusions to the respective indebtedness to each other, of the several 
 cities or districts. In such cases, justice requires, and it may be done in a 
 very short time, that the necessary curtailments should be made in the 
 debtor places, and the resources thus obtained should be applied to the dis- 
 charge of such debts, and, when necessary, to the purchase of specie. This 
 is, in fact, the course pointed out by the resolution, unanimously adopted by 
 the convention : " That this convention strongly recommends to all the 
 banks of the United States, to continue, by proper measures, to prepare them- 
 selves to return to specie payments, within the shortest practicable period 
 after the next meeting of the convention." 
 
 We have every reason to believe, that the banks represented in the con- 
 vention were in a sound state ; and, in every respect, as well prepared and 
 able to resume specie payments as those of the city of New York. It 
 would indeed be strange that it should be otherwise. New York suffered 
 incomparably more than any other city ; the failures were far more nume- 
 rous ; its banks were subject more than any others to the causes which pro- 
 duced the suspension, and alone to a run of domestic origin, alone drained of 
 the greater part of their specie, whilst banks in other places preserved the 
 greater part of theirs. 
 
 The only reason which remains to be examined, is the apprehension that 
 confidence may not have been sufficiently restored to ensure a permanent 
 resumption. The causes which occasioned the distrust, the panic, and the 
 run on some of the banks, have ceased to operate. Such coincidence of 
 extraordinary events and unfortunate incidents, as produced the catastrophe, 
 must be rare, and may never again occur. It must be conceded, that it is 
 impossible that confidence should be restored, until the banks shall have re- 
 sumed specie payments, or designated an early day for that purpose. 
 Combined with the conviction of the ability of the banks to resume, and 
 with the fact that their paper shall have become equal, or nearly equal, in 
 value to specie, nothing is wanted for restoring entire confidence, but the 
 simultaneous resumption by the principal banks, acting in concert. 
 
 Although the convention could not be prevailed upon, either to>fix at this 
 time a day on which to resume, or to meet again on an earlier day than the 
 llth of April ; although it is peculiarly to be regretted that, from incidental 
 considerations, it should not have yielded to our request to meet in the first 
 days of March ; yet the conference has been attended with considerable 
 advantages. There has been a free and mutual interchange- of opinions. 
 The serious attention of all the banks has been drawn to the absolute neces- 
 sity of an early resumption; and the suggestion of a postponement for an 
 indefinite time, if ever seriously entertained, has been abandoned. We may 
 now rely with confidence on a great unanimity from the Eastern, Southern, 
 and North-Western sections of the Union, in fixing, at our next meeting, the 
 earliest practicable day for the resumption of specie payments. It is true 
 that the banks of Philadelphia and Baltimore appeared to contemplate a 
 
113 
 
 more remote time than we did, not certainly because of being less able or 
 prepared than ourselves, or others, but on general grounds. It now appears, 
 from official returns, that the banks of Pennsylvania are, in every respect, 
 better prepared than those of the city of New York. And it has been 
 announced by the highest authority in that State, that " the banks of Penn- 
 sylvania are in a much sounder state than before the suspension ; and that 
 the resumption of specie payments, so far as it depends on their situation and 
 resources, may take place at any time." The great fall at this early day in 
 the rate of foreign exchanges, which has exceeded our most sanguine ex- 
 pectations, had not been anticipated by them. A fact so important, and 
 which gives a new aspect to the whole subject, cannot fail to have a power- 
 ful influence on their decision. We entertain sanguine hopes, that this and 
 the course of events will remove their objections, and induce them to unite 
 and act in concert with us. We are under the firm conviction, that the 
 result depends on their determination, and that, if they agree to it, the re- 
 sumption may with facility be effected at an early day. Should they 
 persevere in the opinion, that an early resumption is inexpedient and dan- 
 gerous, it may, considering the magnitude of their capital, prove difficult for 
 the other banks, and particularly for those of this city, with their resources 
 alone, to maintain permanently specie payments. 
 
 In the meanwhile, the line of our duty is obvious : and we have only to 
 continue, by every measure in our power, to strengthen ourselves, and to be 
 prepared, at the earliest possible day, to fulfil our engagements, and to 
 resume and maintain specie payments. To the early completion of the 
 measures now in train for that purpose, we respectfully, but most earnestly 
 call the immediate attention of the city banks, as an indispensable requisite 
 before a day can be fixed for resumption. The country banks, with most 
 laudable exertions, have taken all the necessary steps, and are prepared to 
 resume at any time. 
 
 ALBERT GALLATIN, 
 GEO. NEWEOLD, 
 C. W. LAWRENCE, 
 CORNS. HEYER, 
 JOHN J.PALME R, 
 PRESERVED FISH. 
 G. A. WORTH. 
 December 15, 1837. 
 
 At a meeting of the officers of the banks of the city of New York, held on 
 the 28th of February, 1838, the committee on the " resumption of specie 
 payments" submitted the following Report in part, viz. : 
 
 In contemplation qf the resumption of specie payments, by the banks of 
 the city of New York, on or before the tenth day of May next, and under the 
 uncertain condition of a simultaneous or early resumption by the banks of 
 some of the other great commercial cities, it is incumbent on those of New 
 York to adopt all the measures, within the limits of their resources, which 
 may enable them not only to resume, but also to maintain, specie pay- 
 ments. 
 
 Much has already been done in that respect, the result as well of causes 
 not under the control of the banks, as of positive action on their part. 
 
 1. It appears by the annual returns of the Bank Commissioners that, ex- 
 clusively of the Dry Dock Bank, which is not included in the return of this year, 
 the gross amount of all the liabilities of the city banks, payable on demand, 
 15 
 
114 
 
 deducting therefrom the notes and checks of other banks held by them, and 
 the balances due to them by other banks, amounted, 
 
 On the 1st of January, 1836, to $26,918,105 
 
 1837, to 25,485,287 
 
 " " 1838, to 12,920,694 
 
 making a diminution in the liabilities of more than twelve millions and a half 
 during the year 1837. 
 
 2. The detailed statement for the 1st of January, 1838, rendered by the 
 several city banks to their standing committee, shows a balance to their credit 
 of more than four millions, due to them by banks out of the State, and of 
 more than two millions in account with all the banks out of the city. Ample 
 means, as also appears by those statements, have been provided by the 
 country banks of the State, for the redemption of their notes which circulate 
 in the city. 
 
 On a view of the whole subject, we may confidently say, that the relative 
 strength of the banks is, and at the time of the resumption will be, greater 
 than it was during the last two years, and probably at any former time. 
 
 The fall in the rate of foreign exchanges, now considerably below par in 
 our city paper, renders it absolutely certain that no exportation of specie can 
 take place, and more than probable that a considerable influx may be ex- 
 pected. This fact, now indisputable, must have an effect on public opinion, 
 and ought to remove the apprehensions of those who may have believed our 
 efforts for an early resumption premature. Secure, as all the banks in the 
 United States are, against foreign demands, we are justified in expecting 
 their co-operation. If this is obtained, we do not perceive any obstacle to an 
 early, easy and safe resumption of specie payments. 
 
 A continued suspension, on the part of some of the other great commercial 
 cities, can alone render the resumption on our part difficult, and may prevent 
 a free application of the legitimate banking resources of New York. Yet 
 such is the favorable relative state of the balances between this and the other 
 parts of the Union, that, for the present at least, but little need be apprehend- 
 ed from the effect of natural causes. Of deliberate acts of hostility, as there 
 could be no motive for such, there should be no apprehension on our part. 
 We trust that, supported by the community of the city and by this State, the 
 banks will be able to surmount all obstacles, and, on or before the tenth of 
 May, to resume and maintain specie payments. 
 
 The preparatory measures on their part appear to be, 1st, a reduction of 
 their liabilities out of the State, and drawing in their foreign funds ; 2d, an 
 equalization of the balances due to and from each other, and a mutual re- 
 turn of their notes, which may enable all to resume on an equal footing and 
 with equal safety ; 3d, a sufficient increase of their specie. On these points 
 the committee will submit a separate report. 
 
 Signed, ALBERT GALLATIN, 
 
 PETER STAGG, 
 GEO. NEWBOLD, 
 CORNS. HEYER, 
 JOHN J. PALMER, 
 C. W. LAWRENCE, 
 F. W. EDMONDS. 
 
 Whereupon, the report was unanimously adopted by the meeting. 
 On motion, Resolved, That the same be published. 
 
 Signed, BENJ. M. BROWN, Chairman. 
 W. M. VERMILYE, Secretary. 
 
115 
 
 Extract from the Minutes of the Proceedings of the adjourned meeting of the 
 Bank Convention, held at New York, on the llth to the 16th April, 1838. 
 
 Present Delegates of banks from the following States, viz. : Maine, Ver- 
 mont, New Hampshire,* Massachusetts, Rhode Island, Connecticut, New 
 York, New Jersey, Delaware, Maryland,* District of Columbia, Virginia, 
 North Carolina, Indiana, Illinois, Missouri, Mississippi, and from Pittsburgh, 
 (Pennsylvania.)t 
 
 The following letter, among others, was placed upon the minutes of the 
 Convention: 
 
 Philadelphia, April 4th, 1838. 
 
 Sir, At a meeting, held this day, of committees from all the banks of the 
 city and liberties of Philadelphia, a notice was received from you of the ad- 
 journed meeting of the Convention of Banks, to be held at New York on the 
 llth of this month. The banks of Philadelphia having declined to send del- 
 egates to that adjourned meeting, I have been instructed to apprise you of 
 their determination, and, as a just mark of respect to the Convention, as well 
 as to yourself personally, to state the reasons of their absence. This duty I 
 hasten to perform. 
 
 On the 19th of August 1837, an invitation was given to the banks of Phila- 
 delphia, in behalf of the banks of the city of New York, to meet in conven- 
 tion at the city of New York, " for the purpose of agreeing on the time when 
 specie payments should be resumed, and on the measures to effect that pur- 
 pose." The reason assigned for the invitation was, that " it would be im- 
 practicable for those of any particular section to resume, without a genera] 
 explanation of at least the principal banks of the great ports of the country ; 
 a mutual and free communication of their respective situations, prospects, and 
 opinions, seem to be a necessary preliminary step." To this the banks oi 
 Philadelphia answered on the 29th of August, stating their belief that " the 
 general resumption of specie payments depends mainly, if not exclusively, 
 on the action of Congress, the body charged with the general power ovei 
 commerce, and the exclusive power over the coinage ; and, without whose 
 co-operation, all attempts at a general svstem of payments in coin, through- 
 out this extensive country, must be partial and temporary ;" and they con- 
 cluded with a declaration, " that it is inexpedient at this time to appoint dele- 
 gates to the proposed Convention." 
 
 At a subsequent period, on the 21st of October 1837, a second invitation 
 was received from-the banks of the city of New York, for a similar meeting 
 on the 27th of November. Although entertaining precisely the same opin- 
 ions as to the inexpediency of any resumption, without previously under- 
 standing the intentions of the Government, the banks of Philadelphia are yel 
 unwilling to do any thing which might seem to be discourteous to the banks 
 of the city of New York, and accordingly sent delegates to the Convention. 
 After remaining in session for a week, that body was unable to name any da^i 
 for the resumption ; but adjourned to meet again the llth of April, "for the 
 purpose of considering, and if practicable, determining upon the day when 
 specie payments may be resumed;" at the same time resolving, "that the 
 banks in those States not now represented, be earnestly requested to send del- 
 egates to the adjourned meeting of this Convention ; and that the several del- 
 egates from all tiie States be desired to procure all such information in regard 
 to the condition of the banks in their respective States, as may be attainable." 
 
 On the 26th of January, a delegation from the banks of the city of New- 
 
 * The delegates from Maryland and New Hampshire withdrew, 
 t And those from Pittsburgh declined voting on the final question. 
 
116 
 
 York visited Philadelphia, and while there addressed a letter to the Phila- 
 delphia banks, stating that they were desirous of ascertaining "if the Philadel- 
 phia hanks will agree with them to name a day, not later than the period 
 mentioned, (May,) when they will simultaneously adopt the same measure." 
 
 To this the Philadelphia banks answered, on the 31st of January, stating, 
 that " It is undoubtedly true, that any resumption, to be easy, must be simul- 
 taneous ; and, to be effectual, must be general. Nor is it less true, that a 
 partial resumption, by any party to the Convention, must derange the rela- 
 tions of the whole to each other, and disturb the preparations which all are 
 making to produce an uniform result at the period fixed by the Convention. 
 The banks of Philadelphia, therefore, consider it scarcely just or respectful to 
 the banks of other States, whose co-operation was in the first instance in- 
 vited, to take any steps in opposition to what was settled by the Convention, 
 without full concert with the other members of that body, who separated un- 
 der conviction that no action would take place on a matter so important to 
 their interests, until they were re-assembled ;" and added, " on a careful 
 consideration of all these circumstances, the banks of Philadelphia think it 
 premature to name any day for the resumption of specie payments until the 
 adjourned meeting of the Convention." 
 
 Soon after the return of that delegation, the hanks of the city of New York 
 published, on the 28th of February, a declaration, that, " in contemplation of 
 the resumption of specie payments by the banks of the city of New York, on 
 or before the tenth of May next, and under the uncertain contingency of a 
 simultaneous or early resumption by the banks of some of the other great 
 commercial cities, it is incumbent on those of New York to adopt all the 
 measures, within the limits of their resources, which may enable them not 
 only to resume, but also to maintain, specie payments." And immediately 
 a general meeting of the citizens of New York adopted the following resolu- 
 tion : " That this meeting hails with great satisfaction, the declarations, on 
 the part of the New York city hanks, of their purpose to resume specie pay- 
 ments on or before the ]0th of May next." 
 
 From this review it is manifest, that the convention contemplated was one 
 embracing delegates from every part of the Union ; meeting in good faith to 
 confer on subjects of equal interest to them all ; exchanging opinions frankly ; 
 giving information as to the conditions of the respective sections they repre- 
 sented, so as to fix some scheme of action which might unite all interests, 
 and combine all efforts. That was the design of the original meeting of the 
 convention that ought to be the object of the adjourned meeting, It was, 
 therefore, seen with equal surprise, and regret, that the banks of New York 
 announced their determination to resume on a day named. This was done 
 without waiting for the meeting of the delegates, which they had themselves 
 invited to New York. It was done in obvious opposition to the spirit of con- 
 sultation and inquiry, which were presumed to be the whole purpose of the 
 convention. It was done in disregard of the friendly but decided opinion of 
 the Philadelphia banks, that it would be neither just nor courteous to act until 
 the convention were re-assembled. Of the propriety of this determination 
 by the banks of the city of New York, the banks of Philadelphia do riot pre- 
 sume to offer an opinion. But it is manifest, that this decision gives an en- 
 tirely new character to the convention. The party who convoke the assem- 
 bly to confer with the other banks on the several interests of all, has, without 
 waiting for their arrival, decided the question exclusively in reference to his 
 own peculiar interests. It meets them to discuss what is already settled ; 
 and the only point which remains will be, not whether the banks of New 
 York and the banks of all the other States should resume specie payments, 
 but simply, whether the banks of the city of New York having decided to 
 resume specie payments on a day named, the banks of the other States must 
 do the same. In that question the banks of Philadelphia desire to take no 
 
117 
 
 part. They do not wish to give any advice in regard to the course which 
 the banks of the city of New York have resolved to pursue; they do not 
 wish to receive any from those banks touching their own cours3. Accord- 
 ingly, they deem it better to abstain altogether from a meeting in which their 
 delegates can no longer find an appropriate place. 
 
 I need scarcely add, that this determination implies not the slightest want 
 of respect to the convention, or to its highly respectable presiding officer, but 
 is founded exclusively on consideration of duty to themselves, and to the 
 general interests of the country. 
 
 I have the honor to be, very respectfully, 
 
 Signed, W. MEREDITH, Chairman. 
 
 SAMUEL HUBBARD, ESQ. 
 
 President of the Convention. 
 
 Attest, J. B. TREVOR, Secretary. 
 
 At a meeting of the association of the delegates of the banks of the city of 
 Philadelphia and districts, held on the 4th day of April 1838, the following 
 resolutions were adopted: 
 
 Resolved, That it is inexpedient to send delegates to the adjourned meet- 
 ing at New York, of the bank convention, on the llth of this month. 
 
 Resolved, That the following letter be transmitted by the chairman of this 
 meeting to the president of that convention, to explain the reasons of the ab- 
 sence of the delegates from Philadelphia. 
 
 Extract from the Minutes : 
 
 J. B. TREVOR, Secretary. 
 
 On motion of Mr. Brockenbrough of Virginia, it was 
 
 Resolved, That the correspondence furnished to the convention, by Mr. 
 Newbold of New York, with the Secretary of the Treasury, be placed upon 
 the minutes of the proceedings of this convention. 
 
 (COPT.) 
 [PRIVATE.] Bank of America, April 7, 1838. 
 
 Dear Sir, So much is said in the public press, and daily repeated else- 
 where, of the hostile disposition of the Government towards the Banks, and 
 of the measures in contemplation by the Treasury Department, calculated, it 
 is said, to injure and embarrass the Banks, and to retard, if not prevent, their 
 resumption of specie payments, that I am induced to address you on the 
 subject. Not, however, that any thing is necessary to satisfy me that those 
 assertions and assumptions are wholly unfounded ; but that you may, if you 
 shall deem it expedient and proper, take measures to correct the misrepre- 
 sentations and remove the fears and apprehensions that they may have ex- 
 cited in the community, and especially in the minds of many honest and 
 honorable men. 
 
 It is loudly and confidently asserted, and widely and industriously circu- 
 lated, that the measures that will be pursued by the Treasury in the 
 collection and disbursement of the public money, will render it difficult for 
 the Banks to resume and maintain specie payments. Fears and apprehen- 
 sions are thus excited, confidence impaired, and the best efforts of the banks 
 are in some degree paralyzed. Designing men avail of this state of things 
 to promote and affect their special purposes, and industry and talent are not 
 wanting to make their efforts essentially mischievous. Permit me, therefore, 
 to ask whether there is no way by which the mischief may be abated and 
 successfully counteracted. Of this you will best judge and determine your- 
 self. My present object is more immediately in reference to the approaching 
 convention of Bank Delegates to be held in this city, on the llth inst. ; and 
 being satisfied that efforts will there be made to impress the belief, that the 
 fears and apprehensions alluded to are well founded, and that it would 
 
118 
 
 therefore be unsafe and inexpedient for the Banks to fix a day for the re- 
 sumption of specie payments. I consider it to be of the utmost importance 
 that such efforts should be effectively met, and that all unfounded suspicions 
 and suggestions should be removed or successfully confronted. I beg, there- 
 fore, respectfully to suggest for your consideration, whether you will not be 
 pleased to enable and authorise me to communicate to the convention, if it 
 shall be necessary, your views and wishes on the subject of the resumption 
 of specie payments, and the course, or probable course, of the Treasury in 
 reference to the Banks, after they shall have resumed. It is an important 
 crisis for this city and this State indeed for the whole Union; and being 
 anxious to do every thing in my power to promote and accomplish the right 
 result a general resumption of specie payments I am sure that you will 
 excuse me for these suggestions, be your conclusions respecting them what 
 they may. 
 
 I am, with great respect, dear sir, your obedient servant. 
 
 Signed, GEORGE NEWBOLD. 
 HON. LEVI WOODBURY, Secretary Treasury U. S. 
 
 Washington. 
 
 Treasury Department, 9th April, 1838. 
 
 Sir, I have to acknowledge the receipt of your letter of the 7th inst. In 
 order that you may fully understand the views and wishes entertained by 
 this department, on the subject of a resumption of specie payments by the 
 Banks, and the course to be pursued by the Treasury towards them, I here- 
 with enclose copies of two private letters written some weeks since in answer 
 to inquiries similar to yours. 
 
 It is only necessary to add, that the same views are still cherished, and 
 that the notes of specie- paying banks at par where offered, are now received 
 for duties, and will undoubtedly continue to be. They are and will be paid 
 out when acceptable to the public creditors, and no accumulation of them 
 beyond our current expenditures is anticipated at any point whatever during 
 the present or ensuing year. 
 
 I am, sir, very respectfully, your obedient servant, 
 
 Signed, LEVI WOODBURY. 
 
 GEORGE NEWBOLD, ESQ., President of the Bank of America. 
 
 Washington, 18th March, 1838. 
 
 Dear Sir, In reply to yours of the 14th inst., I hasten to remark, that the 
 Treasury Department has long been anxious as yourself and many others, 
 for the resumption of specie payments by the banks. All has been and will 
 be done by it, which comes within its limited powers, to promote, at the ear- 
 liest day possible, so desirable an event. 
 
 I do not hesitate to say fully and frankly, that the impression is altogether 
 erroneous, that specie is to be purchased and hoarded by the Government. 
 Only a few thousand dollars of it have yet been raised on Treasury Notes, and 
 none is intended to be hereafter, except to the extent needed to supply the 
 current demands of the Government. Whatever may be thus obtained or 
 received for public dues of any kind, will be forthwith paid out again to de- 
 fray the appropriations ; and the settled policy of the Department has been, 
 and will be, to keep nothing idle in the Treasury, while the power exists to 
 issue Treasury Notes to meet contingencies and deficiencies, as they may 
 hereafter occur. Respectfully yours, 
 
 Signed, LEVI WOODBURY. 
 
 NATHAN APPLETON, ESQ. 
 
 Boston, Mass. 
 
119 
 
 Washington, March 18, 1838. 
 
 Dear Sir, In reply to yours of the 16th inst., I hasten to remove any er- 
 roneous inferences from the rumor mentioned. 
 
 The settled policy of the Department, and one which it makes known to 
 all inquirers, is to promote the resumption of specie payments by the banks, 
 so far as its limited powers may permit. 
 
 Consequently it has not, and will not hereafter, purchase specie, beyond 
 what may be needed for immediate disbursements ; and in that way will 
 neither hoard it nor compete with others for its possession. 
 
 All we receive in any way will immediately be paid out again to defray 
 appropriations. 
 
 I make these statements explicitly and promptly, and have forwarded simi- 
 lar ones to Boston, in order that no injurious apprehensions need be enter- 
 tained as to the financial operations of the Government. 
 
 Respectfully yours, 
 
 LEVI WOODBURY. 
 J. D. BEERS, ESQ. 
 
 New York City. 
 
 * Friday, April 13^, 1838. 
 
 Mr. "Ware of Maine, from the committee of one for each State, made the 
 following report : 
 
 That said committee have adopted the following resolutions, which they 
 recommend to the convention for consideration and adoption, viz. : 
 
 Resolved, That it be recommended to all the banks of the several States, 
 to resume specie payments on the first Monday in October next, without 
 precluding an earlier resumption on the part of such banks as may find it 
 necessary or deem it proper. 
 
 Resolved^ That it is important to the success of the effort to return to specie 
 payments, and to restore the currency to a sound condition, that the banks 
 should be sustained by the General Government. 
 
 Monday, April 16th, 1838. 
 
 The Convention proceeded to the consideration of the Report and Resolu- 
 tions, when Mr. Brockenbrough, of Virginia, moved to amend the same, 
 by striking out all after the word " Report," and insert in lieu thereof the 
 following : 
 
 Whereas, it is found necessary, in order to simultaneous action by the 
 banks, in the resumption of specie payments, so to proceed in designating a 
 period for that purpose as to secure the nearest approach to unanimity ; and 
 whereas, whilst, in the judgment of this Convention, the return to specie pay- 
 ments, and preservation of the currency in a sound condition, will depend 
 essentially on the course of the General Government, yet this Convention re- 
 gards it as the duty of the banks to make the effort in good faith, exclusive of 
 any direct reference to the prospective measures of the Government. At 
 the same time, the Convention has been happy to observe, in recent letters of 
 the Secretary of the Treasury, specific assurances of an intention to sustain 
 the banks, so far as it may be done through the fiscal operations of that de- 
 partment of the Government.* 
 
 Resolved, That it be recommended to all the banks of the several States to 
 resume specie payments on the first day of January next, without precluding 
 
 * The allusions to the course of tho General Government referred principally to 
 the threatened Sub-Treasury plan, which was considered as hostile to the banks 
 which intended to resume specie payments. 
 
120 
 
 an earlier resumption on the part of such banks as may find it necessary or 
 deem it proper. 
 Which Preamble and Resolution were adopted by the Convention. 
 
 [The banks of New York, finding that a majority of the Convention was against 
 a general resumption so early as May, had only requested that, at least, the day re- 
 commended should be the 1st of July. This was refused ; they resumed alone on 
 the 10th of May ; and, although the Convention had thought it unsafe to recom- 
 mend an earlier day than the 1st of January, 1839, public opinion compelled almost 
 all the banks to resume in July.] 
 
 Letters written in 1830, relating to Mr. Gallatiri's subsequent Pamphlet on 
 Currency, published the same year. 
 
 New York, 27th April, 1830. 
 To ROBERT WALSH, Jr., Philadelphia: 
 
 Dear Sir, It is doubtful whether I will have time to prepare, in sea- 
 son, such an article in relation to currency as you desire, and still more so, 
 whether I can write any thing on that subject worthy of the public, and cor- 
 responding with your views. So much has been written on that question, that 
 it does not seem to me that anything new can be advanced, in support of what 
 are admitted, by almost all enlightened and disinterested men, to be correct 
 principles. The only points at all dubious, at least in my opinion, are those 
 of local currencies, or what is commonly called " country notes," and of the 
 simultaneous circulation of gold and silver. Was it practicable, the follow- 
 ing outline would appear to me preferable to any other, as combining safety, 
 convenience and facilities sufficient to promote industry and prudent enter- 
 prise : 
 
 1. No other but the Bank of the United States, nor any individual, asso- 
 ciations or corporations, to be permitted to issue any bank notes, bills of credit, 
 or paper, in the nature of currency; but all such bank or bankers to be 
 left, without restrictions or special tax, at liberty to pursue, in other respects, 
 their proper occupation, viz. : to receive deposits, to discount notes, and to 
 deal in bills of exchange or bullion ; thereby assimilating them to the bankers 
 of London, and to all those of the continent of Europe ; neither of whom is- 
 sue a single shilling of paper currency. 
 
 2. The Bank of the United States to issue no notes of a denomination un- 
 der one hundred dollar s^ (a restriction the sSfme as that of the Bank of 
 France,) those of a lower denomination excepted, which it may make re- 
 deemable at whichever of its- offices they may be presented for payment. 
 
 3. Gold and silver United States coins to circulate, either on the new Brit- 
 ish plan of issuing silver at ten or fifteen per cent, above its intrinsic value, 
 but not to be a legal tender for sums above ten dollars ; or simultaneously for 
 all purposes, but rating gold at its true value, which may be done so near 
 the true ratio of gold to silver (about 15'6 to 1) as to obviate every practical 
 objection. 
 
 4. All foreign coins to be excluded; copper coins to remain as now, but 
 not to be a legal tender for more than fifty cents. 
 
 You may perceive that I am an ultra-bullionist, which it is right you 
 should know. But I am perfectly sensible, that Congress will not attempt 
 to prohibit the issue of notes by State banks ; that we have no other securi- 
 ty against their over-issues but State laws, which some States will not 
 enact, and the Bank of the United States; that our reliance for a sound cur- 
 
121 
 
 rency, and therefore for a just performance of contracts, rests on that institu- 
 tion ; and that, in order to enable it to check and counteract the evil tendency 
 of the local currencies, it must be permitted to issue notes of a smaller deno- 
 mination than would otherwise be eligible. The principal object at this time 
 is to preserve what we have, rather than to aim at what cannot be obtained. 
 But I know too well, from sad experience, how difficult it is, without the aid 
 of party, to carry any measure however useful, which is opposed from sec- 
 tional or interested views. And yet, though aware of the unavailing effect 
 of argument under such circumstances, I would be disposed to contribute my 
 mite, if I thought I could add any thing to what has been done by others. 
 It is also so long since my mind was made up on the subject, that I have not 
 lately collected any facts. The evidence reported by the committees of both 
 Houses of Parliament, previous to the resuming of specie payments in Great 
 Britain, is the last document of any importance which I read with atten- 
 tion. A correct statement of the amount and nature of our currency is 
 an indispensable preliminary to any essay on the subject. The ordinary 
 returns of the Bank of the United States and of the several State banks, of 
 the latest dates that can be obtained, not in the aggregate for each State, but 
 showing the situation of each bank, would be sufficient, as I am familiar with 
 those returns. The cashiers of the several offices of the Bank of the United 
 States might with ease procure most of them. If you can obtain these for 
 me, I will try to write, with the understanding that, if prevented or not satis- 
 fied myself, I will put my notes in your hands, to be used as you may think 
 proper. I have, &c. 
 
 ALBERT GALLATIN. 
 
 New York, 22d May, 1830. 
 To the Hon. G. C. VERPLANCK, M. C., Washington : 
 
 Dear Sir, I have been much gratified by the Report of the Committee 
 of Ways and Means on the Bank of the United States, which I think to be 
 the ablest paper that has issued this session, fiom any committee of either 
 house. The constitutional question is treated with great ability, and placed 
 on the most solid ground that could have been selected. I would, indeed, 
 be inclined to go farther than the committee, and to insist that the term " bill 
 of credit" in the constitution, embraces every species of paper currency, and 
 therefore precludes the issuing of bank notes under State authority. That 
 a purely metallic currency would be preferable to one hundred independent 
 local paper currencies, is indisputable ; and considering the perpetual ten- 
 dency manifested everywhere, by every Government or public institution, to 
 abuse the power of issuing paper, it is at least doubtful, whether it would not 
 be safer to abstain altogether from issuing that dangerous instrument as cur- 
 rency. Admitting this to be impracticable, I cannot, though aware of the 
 objections to a powerful monied institution, perceive any better check against 
 over-issues, or any other security for preserving a proper standard of value, 
 than the Bank of the United States, or at least one founded on the same prin- 
 ciples. 
 
 There are, however, some positions in the report, to which, as now inform- 
 ed, I cannot yield an unqualified assent. 
 
 I was, at the time, of opinion, that specie payments might have been re- 
 stored in 1815, without the establishment of the bank (a), although that 
 institution gave the best practicable security against a recurrence of the evil. 
 
 (a) I might have added, that, though not then in office, I strongly urged in the 
 autumn of 1815, the adoption of such moasures as might have effected the object; 
 funding the excess of Treasury Notes afloat, and receiving no notes of suspended 
 banks in payment of duties and taxes, or of public lands. 
 16 
 
122 
 
 I also think that the depreciation of a paper currency does not exclusively 
 depend on, or always correspond with, its excess ; and tbafthis 'depreciation 
 does not occasion that of a simultaneously circulating metallic currency ; and 
 although I am an ultra-bullionist, it seems to me that the loss arising from, 
 the suspension of specie payments, which was incurred by Government 
 during the war, is overrated in the report. But on those and some other 
 points connected with the general question of currency, to which I have paid 
 great attention, I only wish to be enlightened; and the principal object of 
 this letter is to request you to have the goodness to supply me, if in your pow- 
 er, with such further documents as may throw light on the subject. I can at 
 present only point out the following, to which you may add such other as 
 you may think useful, and are within your reach. 
 
 1. The Report itself with the annexed tables. 
 
 2. Mr. Crawford's Report of 1820, therein alluded to. 
 
 3. The Report of the Committee of the Senate of this session on the Bank 
 of the United States. 
 
 4. The Report (dates not recollected, 1813 to 1817] showing the amount 
 respectively subscribed in the several States, &c. to the loans obtained during 
 the war. 
 
 5. The Report, or Reports, showing the amount of Treasury Notes issued 
 during the war, their redemption by funding or payment, with the dates of 
 such issues and redemption. 
 
 6. The late Report, of the Secretary of the Treasury to the Senate respect- 
 ing the relative value of gold and silver. 
 
 I think that the immediate causes which produced the suspension of specie 
 payments, are not sufficiently investigated in the report. Excessive issues of 
 bank notes, and perhaps withdrawing of specie, will be the answer. But 
 what was the cause of those excessive issues, which had not operated, for the 
 three j'ears immediately following the dissolution of the first Bank of the 
 United States? This is an important question, as connected with the degree 
 of security afforded by the present Bank against another suspension in time 
 of war, and with the extent to which it may at such time afford or promote 
 the loans wanted by Government. A knowledge of the precise situation of 
 the principal banks in June 1812, and when they stopt payment in specie, 
 would materially assist in discovering the immediate cause of that event. 
 J am, <fec. 
 
 ALBERT GALLATIN. 
 
123 
 
 G d 
 
 1 
 
 M 
 
 G 
 2< 
 A era 
 
 = S J 
 
 co 03 SQ 
 
 l*j 
 
 - 
 
 Ills 
 
 <b O TJH XO 
 >< C<) O 00 v 
 
 
 I I 
 
 II i 
 
 -ill 
 
 CO vOOO O O O CD 
 
 :g: 
 
 r*" c} ^ oo I-H 
 
 _ _ 
 1-55 -^ c5 
 
 O^ O C^ l^* O CO 
 
 -pa -g 
 
 O 00 I-H i i Qp 
 V* |F *M ^1 9 
 
 ^CO Cl Tf CD CO 
 
 t^ O CO ~- v l 
 I-H * OS Tt< .-i 
 
 ^ 
 
 I-H C5 O 
 
 IT* j^- o 
 
 tC^H 
 
 5 S 
 
 rH C5 
 
 co~ r*" eo" 
 
 ^ 5c > (H f -i o 
 
 O (?Q O<VD ^O 
 
 i2 
 
 ~dl ^ob^do^cq. 
 
 a 
 
 llllll 
 
 
 35 
 
 _ 
 
 _- 
 
 
 '' 
 
 !S 9 p S 
 
 J3 Q o O 
 
124 
 
 Approximate Statement of the Population, nominal Banking Capital, ana 
 Debts of the several States, at the end of the year 1840. 
 
 
 January 1S40. 
 
 January. 1840. 
 
 July 1841. 
 
 Taxable 
 
 
 Population. 
 
 Bank Capital. 
 
 Interest. Debts. 
 
 Property. 
 
 Maine, 
 
 501,793 
 
 4,671,500 
 
 5&6 550,000 F 
 
 
 N. Hampshire, 
 
 284,574 
 
 2,939,508 
 
 None 
 
 72,560,000 
 
 Vermont, 
 
 291,948 
 
 1,325,530 
 
 None 
 
 
 Massachusetts, 
 
 737,699 
 
 34,485,600 
 
 5st - 4,290,000 F 
 
 208,360,000 
 
 Rhode Island, 
 
 108,830 
 
 9,880,500 
 
 None 
 
 32,640,000 
 
 Connecticut, 
 
 310,015 
 
 8,832,223 
 
 None 
 
 97,120,000 
 
 New York, 
 
 2,428,921 
 
 52,028,793 a 
 
 5 21, 000, 000 d 
 
 641, 360,000 # 
 
 New Jersey, 
 
 373,306 
 
 4,822,607 
 
 None 
 
 
 Pennsylvania, 
 
 1,724,022 
 
 59,286,405 b 
 
 5 38,350,000 e 
 
 400,000,000 g- 
 
 Delaware, 
 
 78,085 
 
 1,071,318 
 
 None 
 
 
 Maryland, 
 Dist. of Colum. 
 
 469,232 
 43,712 
 
 10,571,630 
 1,768,074 
 
 5&6 11,490,000 F 
 None 
 
 100,000,000 g 
 
 Virginia, 
 
 1,239,797 
 
 8,471,856 
 
 o&6 6,320,000 F 
 
 206,900,000^ 
 
 N. Carolina, 
 
 753,110 
 
 3,100,750 
 
 None 
 
 
 S. Carolina, 
 
 594,398 
 
 11,584,355 
 
 5 6 5,560,000 F 
 
 200,000,000 
 
 Georgia, 
 
 689,690 
 
 15,119,219 
 
 Not known 
 
 
 Florida, 
 
 54,307 
 
 4,619,836 
 
 Not known 
 
 
 Alabama, 
 
 600,000* 
 
 11,996,232 
 
 5**. 11,500,000 
 
 
 Mississippi, 
 
 375,651 
 
 30,379,403 c 
 
 5 st. 7,000,000 
 
 
 Louisiana, 
 
 351,176 
 
 41,736,768 
 
 5 *t. 23,730,000 F 
 
 
 Arkansas, 
 
 95,642 
 
 1,951,888 
 
 5&6 3,000,000 F 
 
 
 Tennessee, 
 
 829,210 
 
 7,687,556 
 
 6 7,150,000 F 
 
 121,000,000 # 
 
 Kentucky, 
 
 785,000* 
 
 8,939,003 
 
 3 3,790,000 
 
 272,000,000 
 
 Missouri, 
 
 381,102 
 
 1,116,123 
 
 5 2,500,000 F 
 
 
 Illinois, 
 
 474,404 
 
 5,423,185 
 
 6**. 12,210,000 
 
 
 Indiana, 
 
 683,314 
 
 2,595,221 
 
 5 11, 890,000 F 
 
 97,000,000 
 
 Ohio, 
 
 1,510,467 
 
 10,507,521 
 
 6 12.940.000/ 
 
 126,000,000 
 
 Michigan, 
 
 211,705 
 
 1,229,200 
 
 6 5,340,000'r 
 
 
 Wiskonsin, 
 
 30,752 
 
 200.000 
 
 None 
 
 
 Iowa, 
 
 43,068 
 
 100,000 
 
 None 
 
 
 Total, 
 
 17,063,830 
 
 358,441,804 
 
 188,610,000 
 
 
 * Partly on estimate. c Great part of this annihilated. 
 
 a Including 15,227,321 free banks, half of which nominal. 
 
 b Including 35,000,000 U. S. Bank, two-thirds of which destroyed. 
 
 d Debt proper, deducting 2,054,000 Old debt provided for, $ 13,320,000 
 
 Issued to Companies 2,845,000 
 
 In part of authorised do. est'd. 1,830,000 
 
 Loan authorised last session. . 3,000,000 
 
 21,000,000 
 
 e Mr. Reed estimates interest on old 5 per cents, at 1,762,500, making Principal 
 35,250,000 Loan authorised last session, 3,100,000 Total, $38,350,000. 
 
 / May be increased two or three millions for completing the works ; but the 
 tolls and taxes are sufficient to pay the interest. 
 
 g In all these States the taxable property is assessed less than its value. 
 F All the amounts thus designated are taken from Mr. Flagg's statement. 
 st. The debts thus designated are, in part or wholly, payable, interest and princi- 
 pal, at 4s. Gd. st. per dollar, or at 9i per cent, above their nominal value. Thus 
 the State of Mississippi will have to pay in London .1,575,000 sterling, equal to 
 $7,665,000 for the 7,000,000 which it has received. 
 

LOAN DEPT 
 
 ow, or 
 
 (V081990 
 
 . 
 
 aw 
 
YB 23? 
 
 in 
 
 C031T4D35M 
 
 THE UNIVERSITY OF CALIFORNIA LIBRARY