USA > Washington DC > Washington DC > Centennial history of the city of Washington, D. C. With full outline of the natural advantages, accounts of the Indian tribes, selection of the site, founding of the city to the present time > Part 38
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During the Presidential campaign of 1828, at the close of which Andrew Jackson was elected to the Presidency, his elevation was urged on every imaginable ground except that of the overthrow of the United States Bank. Although some of his zealous partisans adduced even the failure of the erops in certain localities as evidence that nothing could flourish under the rule of such an administration as that of John Quincy Adams, yet no man complained of the currency, or demanded any radical change in the American banking system, thus showing most conclusively that that system was univer- sally popular. But soon after General Jackson's inauguration, he managed to involve himself needlessly in a controversy with the management of the United States Bank. His Secretary of the Treas- ury demanded the removal of Jeremiah Mason, president of the branch of this bank at Portsmouth, New Hampshire, because Presi- dent Mason was not a stanch friend of the Jackson administration. But as this demand was not accompanied by any evidence of, or even any allegation of, misconduct or incompetency in President Mason, compliance therewith was necessarily declined. Nicholas Biddle was then president of the United States Bank, and during this contro- versy had of course stood by President Mason, and this was sufficient reason for President Jackson to make war on the institution of which Mr. Biddle was president.
In his annual message to Congress soon afterward, he took occasion to observe that the time would soon arrive when the question of granting a recharter to the Bank of the United States would come before that body, and stated that "both the constitutionality and expedieney of such an institution had been well questioned." The portion of the message containing this assertion was referred by the Hlouse to its Committee of Ways and Means, of which the Hon. George MeDuffie, of South Carolina, was chairman. The entire committee, including its chairman, were supporters of General Jack- son, and hence their report on this extraordinary statement is of special value. This committee gave grave consideration to the whole subject, and made a lengthy report, strongly in favor both of the constitutionality and expediency of a national bank. On the point of constitutionality, they said, in part,-for only brief extracts can be given in this work, and that more for the purpose of indicat-
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ing the direction of their thought than of presenting the argument in full:
"If the concurrence of all the departments of the Government, at different periods of our history, under every administration, and during the ascendency of both political parties into which the country has been divided, soon after the adoption of the present Constitution, shall be regarded as having the authority of such sanctions by the common consent of all well-regulated communities, the constitutional power of Congress to incorporate a bank may be assumed as a pos- tulate no longer open to controversy. In little more than two years after the Government went into operation, and at a period when most of the distinguished members of the Federal Constitutional Convention were either in the executive or legislative councils, the act incorporating the first Bank of the United States passed both branches of Congress by large majorities, and received the deliberate sanction of President Washington, who had then recently presided over the deliberations of the convention. The constitutional power of Congress to pass this act of incorporation was thoroughly investi- gated, both in the Executive Cabinet and in Congress, under circum- stances in all respects propitious to a dispassionate discussion. . .. No person can be more competent to give a just construction of the Constitution than those who had a principal agency in forming it; and no administration can claim a more perfect exemption from all those influences which sometimes pervert the judgment even of the most wise and patriotic, than that of the Father of his Country during the first term of his service."
On the point of expediency, the committee said: "Indeed, bank credit and bank paper are so extensively interwoven with the com- mercial operations of society, that, even if Congress had the constitu- tional power, it would be utterly an impossibility, to produce so entire a change in the monetary system of the country as to abolish the ageney of banks of discount, without involving the community in all the distressing embarrassments usually attendant on great political revolutions, subverting the titles of private property."
The committee also said, and this proved to be in the nature of a prediction, if not of a prophecy: "If the Bank of the United States were destroyed, and local institutions left without its restraining influence, the currency would almost certainly lapse into a state of unsoundness. The pressure which the present bank would cause in winding up its concerns would compel them either to curtail their discounts, when most needed, or to suspend specie payments. It is
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not difficult to predict which of these alternatives they would adopt under the circumstances in which they would be placed. . . . It has this decided advantage over the army and navy; while they are of scarcely any advantage except in the time of war, the bank is not less so in peace. It has another advantage still greater. If, like the army and navy, it should cost the nation millions annually to sustain it, the expedieney of the expenditure might be doubtful; but when it actually saves to the Government and to the country more millions annually than are expended in supporting both the army and navy, it would seem that, if there was one measure of national policy upon which all political parties of the country should be brought- to unite by the impressive lessons of experience, it is that of maintaining a national bank." The report which this committee made was concurred in by Congress, and the subject dropped for a time.
But neither reason nor the lessons of experience had any effect upon President Jackson's mind, especially where his friendship or enmity was strongly enlisted, as the latter was in this case against the president of the United States Bank; and he therefore continued to press the matter upon the attention of Congress. At length, in 1832, a bill was reported by a committee of his political friends in the Senate and passed through both Houses of Congress, which were strongly in his favor, rechartering the United States Bank. As was to be expected, President Jackson vetoed this bill, but explicitly stated that, had he been applied to, he would have furnished a plan of a charter which would have been constitutional. An attempt to pass the bill over the veto failed for want of the two-thirds majority required by the Constitution. Had it not been, therefore, for this constitutional ยท requirement, that in order to pass a bill over a veto two-thirds of each branch of Congress must sanction it, the United States Bank would have been rechartered, and the widespread derangement of the currency that followed, and the long-continued distress in all departments of business and of life, would not have occurred. The experience of the country with the veto power in this instance, and in numerous other instances in the subsequent history of the country, would seem to indicate the necessity, or at least the wisdom, of so amending the Constitution that a majority of both Houses of Congress should be as potent in passing a measure over a veto as in passing it in the first place. The wisdom of the President would thus be equally available as under the present system, and his power for evil would be reduced to a minimum.
Returning now to the narration of local events connected with
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the banks of the District of Columbia, it should be stated that in 1819 there was considerable excitement throughout the country in reference to the suspension of specie payments. But one old merchant and banker of Georgetown, named Romulus Riggs, pub- liely announced that the banks of the District were paying specie for their notes, and also stated that he held himself responsible for the announcement to that effect. The banks that were then in existence in the District were as follows: The Bank of Columbia, the Farmers and Mechanics' Bank, the Union Bank, all of Georgetown; the Central Bank of Washington and Georgetown; the Bank of the Metropolis, the Patriotic Bank, the Bank of Washington, all of Washington; the Bank of Alexandria, the Union Bank of Alexan- dria, and the Bank of Potomac, all of Alexandria; and besides these, the Branch Bank of the United States at Washington. So that Mr. Riggs apparently assumed a good deal of responsibility, but it does not appear that he was ever called upon to make good any of the paper of any of these banks.
A peculiar feature of the monetary history of the District was this: that in 1820 the practice prevailed of cutting paper dollars in such a way as to make change. In the latter part of May of this year, the banks adopted a resolution which was calculated to banish from circulation "such an inconvenient and unsightly sort of currency, and to bring silver into use in its place. Those who have cut notes on hand would do well to exchange them for silver before to-morrow evening." This advice was published May 31, so that it appears that June 1 was the last day on which these cut notes were received at the banks.
In 1834, three of the banks in the District of Columbia only, suspended specie payments, the others keeping therefrom by the presidents and directors of each, with the exception of the Bank of the Metropolis, cach pledging his individual property as security for the debts of their respective banks. The Bank of the Metropolis had other means of accomplishing the same results. Later, at the near approach of suspension of specie payments by the several banks of the District, together with the winding up of the affairs of the Branch Bank of the United States, it was suggested that it would be a most laudable act if the presidents and directors of all future banks established in the District, and the stockholders as well, should be required by the several charters to pledge their individual fortunes for the debts of the banks in which they were interested. The good effects, it was thought, which would follow such a requirement would
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be, first, extended confidence in each of the banks; second, the impos- sibility of loss to the community, even if such a bank should suddenly close its doors; third, increased devotion to the interests of the bank by the officers, and a more lively interest in the management of the bank by the stockholders.
In 1835, when it was thought the completion of the Chesapeake and Ohio Canal was near at hand, and the commerce of the cities of the District was about to be increased a hundred fold, it was plain that the means of carrying on such commerce was at the same time to be rudely taken away. The National Bank, it was conceded, must fall, and of course its branch in Washington, which had furnished from $1,000,000 to $1,500,000 of the circulating medium, must neces- sarily close its doors. Besides this, the charters of the several banks in the District would expire in March, 1836, and it was at least prob- lematical what disposition Congress would manifest toward them; and then, too, even if these charters should be renewed it was thought they could not supply capital sufficient for the necessities of trade, as they were small institutions, and the competition among them had caused a limited circulation of their notes. In order, therefore, to prevent the difficulties as thus portrayed to the minds of the public, it was thought necessary to establish a new bank to be called the Bank of the District of Columbia.
In December, 1835, Congress took up the question of the recharter of the banks of the District of Columbia, but not before it was necessary for them to do so, as the charters of all of them expired March 3, 1836. The debate was upon the resolution offered by Mr. Thomas, of Maryland, which was as follows:
" Resolved, That a select committee be appointed to inquire into the condition of the currency of the District of Columbia, to whom shall be referred all other memorials which may be presented to the present Congress, praying for an extension of the charters of the exist- ing banks in said District of Columbia, or for the establishment of any other bank or banks in their stead, and to inquire into the condi- tion of the currency in said District, to inspect the books and to examine into the proceedings of said banks, to ascertain whether their charters have been violated or not, and whether any abuses or mal- feasances have existed in their management -to send for persons and papers, to examine witnesses on oath, and to appoint a clerk to report their proceedings."
This resolution, after warm debate, in which the Hon. John Quincy Adams bore a most conspicuous part, and after it was amended
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by striking out the words, "to whom shall be referred all other memorials which may be presented to the present Congress," was adopted, and the following select committee appointed: Mr. Thomas of Maryland, Mr. Pierce of New Hampshire, Mr. Reed of Massachusetts, Mr. May of Illinois, Mr. Beaumont of Pennsylvania, Mr. Huntsman of Tennessee, Mr. Pinckney of South Carolina, Mr. Garland of Louisiana, and Mr. Claiborne of Mississippi.
On January 5, 1836, Mr. Benton, in the Senate, introduced a resolution for the appointment of a select committee of five members to aet with those appointed by the House, which was laid on the table. In consequence of there having been made charges of misman- agement on the part of the banks of the District of Columbia, a certain citizen of Washington published in the National Intelligencer of January 16, 1836, a statement showing that the banks of the District were prepared to meet their liabilities immediately, if necessary, in the following ratio: The Bank of Washington, 49.84 per cent .; Patriotic Bank of Washington, 71.81 per cent .; Bank of the Metropolis, 46.88 per cent .; Union Bank of Georgetown, 78.30; Farmers and Mechanics' Bank of Georgetown, 54.52 per cent .; Farmers' Bank of Alexandria, 43.21; Bank of Potomac, 51.85 per cent.
For each dollar of liabilities, except capital stock, each bank had assets as follows: Bank of Washington, $3.30; Patriotic Bank, $1.64; Bank of the Metropolis, $1.39; Union Bank of Georgetown, $2.46; Farmers and Mechanics' Bank of Georgetown, $3.05; Farmers' Bank of Alexandria, $1.57; Bank of Potomac, $2.32.
The entire circulation of the seven banks of the District at that time was $964,799.90. The specie possessed by them was $643,585.52. The aggregate liabilities of the seven banks, exclusive of their capital stock, was $2,813,925.26, and their cash funds amounted to $1,492,- 814.56. To meet these balances the banks had discount notes amount- ing to $3,141,559.95; real estate, $318,688.25, and stocks, $228,301.93; total, $3,688,550.13, a surplus of $2,367,439.43.
The bill rechartering the banks of the District was at length passed by Congress in June, 1836, their several charters being ex- tended to July 4, 1838. In August, 1836, the Branch Bank of the United States, in Washington, Richard Smith cashier, advertised its property for sale. In Washington this property consisted of somewhat more than forty lots, some of them vacant, and some of them having houses upon them. In Georgetown there were several lots with houses upon them; and besides all these, there was a tract of land in Vir- ginia and another in Maryland.
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On May 13, 1836, a notice was published in the press by the Bank of Washington, and by the Bank of the Metropolis in almost identical language, to the effect that notwithstanding information had reached Washington of the suspension of specie payments by the banks in New York, as well as by some of those in Philadelphia and Baltimore, they had determined to continue to pay specie; and, satisfied of the strength of their respective banks, "the president, directors, and cashier have determined to pledge their private fortunes for all just claims against the institution." This was a part of the notice in the case of each bank. Of the Washington Bank, W. Gunston was president, and J. Adams cashier; of the Bank of the Metropolis, General John P. Van Ness was president, and George Thomas cashier. The Farmers and Mechanics' Bank of Georgetown also refused to suspend.
The determination to suspend specie payments had been arrived at in New York on May 11, and was the result of the peculiar and great stringency of the times. This great stringency was itself the result of President Jackson's "Experiment," and was brought to a crisis by his famous "Treasury circular," issued a short time pre- viously, exacting specie in payment for all public lands, under the operations of which circular the receipts for public lands was reduced from $24,800,000 in 1836, to $6,700,000 in 1837. This circular, how- ever, permitted duties on imports into the Atlantic cities to be paid in bank notes. It is a singular circumstance that the Govern- ment itself, by one of its deposit banks, was the first to refuse the payment of specie. This occurred about May 1, 1836, at Natchez, Mississippi, Treasury drafts for a large sum of money being refused payment by the Planters' Bank of Mississippi, and protested. "All this comes of the ignorance and folly which enforced the Treasury circular. The Administration, however, in thus warring against the prosperity of the country, by undertaking to regulate the deposits, and the currency, for party purposes, has dug its own grave, and would bury the country also in it, rather than retract its wicked measures or acknowledge its errors. We anticipate that you must also suspend specie payments in the North, and look with deep anxiety for news by every mail."1
It was explained in the interest of the New York banks, that their suspension was rendered necessary by a continual drain upon their specie resources in response to demands from Philadelphia and
1 Letter written from Natchez, May 3, 1836, to a correspondent in Philadelphia.
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Baltimore; and the benefit of the measure was realized by the united action of the banks of New York. Then, when New York refused to pay specie in her dealings with Philadelphia and Baltimore, and other cities, it of course became necessary for those other cities to refuse to pay specie in their dealings with New York. The suspen- sion thus became general throughout the country, the Bank of the United States acting in concert with the other banks, and including also the Treasury banks; for, when the Treasury banks refused to pay specie, why should other banks pay specie to the Treasury banks? The Bank of the United States pursued this course, believing the measure to be a temporary and precautionary one, and with the desire to preserve its strength unbroken, so as to be able to lead the way to resumption as soon as the Government should become able to pay its creditors in specie.
But this universal suspension of specie payments by the banks of the country was a most striking object lesson; it was a most unequiv- ocal confession of the complete impotence of the banking system then in vogue. It also most clearly exposed the quackery of the politico- financial invention known as the Safety Fund, which, by being to a great extent relied upon, produced a delusion of safety, and, like a safety-valve which gets out of order for want of attention, became one of the most efficient causes of the suspension which ensued. It taught the banks to rely upon the supervision of a common authority, and to the chances of a common security, instead of upon that precau- tion and sagacious foresight which regulate individual enterprise.
But one of the most interesting and instructive features of the times was that already alluded to, with reference to the Government itself suspending specie payments. In Philadelphia, on May 12, some of that city's merchants called at the customhouse to make payment of bonds, in order to avoid suit for non-payment, as threatened by the Secretary of the Treasury in an order issued May 8. These merchants offered notes on the Government deposit bank in payment of the bonds, which were refused, the Government requiring payment in gold or silver. On the same day, the customhouse in Philadelphia, having certain liabilities to meet, refused to pay specie. On May 13, a mer- chant in Philadelphia, having to pay a certain sum to the Government, tendered payment to the Government deposit bank in its own notes, and they were refused, the merchant being told that the Government would receive nothing but gold or silver.
This refusal was in accordance with the following order, issued May 12:
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"To Collectors of Customs:
"If the bank where you deposit should suspend specie payments, you will yourself collect, and keep in your own hands, the public money for all duties at your port until further directions are given to you by this department how to deposit, transfer, or pay it. You must, of course, continue to adhere to the existing laws of Congress, . and to the former instructions of the Treasury, in respect to the kind of money receivable for customs, and by which it is understood to be your duty to require payments to be made in specie and in the notes of specie banks that are at par.
"LEVI WOODBURY, "Secretary of the Treasury."
A New York merchant, on May 12, 1837, wrote: "Had the President but intimated that specie would come back in time, or that drafts of New York for specie would be avoided, or that the circular would be revoked in the summer, it would have given confi- dence; and that is all that was wanted. But nothing - no, nothing was done, and the greatest disgrace any Administration has suffered to rest upon its head has fallen upon the present.
"To the dominant authority, then, I would say: You have failed; you have failed in establishing a 'better eurreney'; you have failed in the 'experiment'; you have failed in regulating exchanges; you have failed in a specie currency; you have failed in your safety-fund plan; you have failed in putting the deposits in safe keeping; you have failed in relation to the currency; you have failed in every thing but but one-you have succeeding in destroying the National Bank."
Throughout the country a national bank was the great desidera- tum. This was the constant and continuous refrain: "Give us a national bank." But that had been destroyed, because, as has been said before, of President Jackson's hostility to the president of that institution, not because of his understanding anything connected with the principles of banking or political economy, for of these he under- stood but little. The result was wide-spread distress. Bank notes in one part of the country were at a great discount, in another part of the country entirely worthless, and the people in the various cities were busy in fabricating paper representatives of every part of a dollar. In New York, merchants had recourse to checks upon restau- rants in the payment of small sums. In Washington, all kinds of paper were in cirenlation, the extreme limit being reached in the issue of notes by a certain barber, whose name might be given, who,
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upon the presentation of his notes for redemption, said: " What do I want of those things? I don't want anything to do with them; go and buy something with them!"
May 16, 1837, the Bank of the Metropolis of Washington issued printed notices announcing its suspension of specie payments, and then the Bank of Washington, which had sustained for three days a heavy run upon it for specie, finding itself standing alone in the city, resolved to close its vaults. It was, however, then prepared to redeem its circulating notes to the last dollar; but it was thought that such a course would only tend to embarrass the mercantile classes, with- out relieving the public. This bank, therefore, also suspended on the 16th, and was thought to be the last bank to suspend in the Union.
The fundamental vice of President Jackson was in introducing and carrying out his "experiment"; not so much in his antipathy to the Bank of the United States. His animosity could not so easily have destroyed that institution and caused the great evils that succeeded, had that animosity been confined within constitutional limits. But he permitted his animosity to lead him to the destruction of the bank, which the will of the people clearly indicated they wished to stand; and afterward, when the representatives of the peo- ple expressed their opinion by a vote of one hundred and nine to forty-six that the Bank of the United States was a safe place to keep the public deposits, and notwithstanding that the law had given to the Secretary of the Treasury unqualified and exclusive power over them, when the Secretary of the Treasury refused to remove them, then President Jackson removed the Secretary of the Treasury and placed another Secretary in his place who had no seruples as to their removal.
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