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 39
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Next came one of President Jackson's greatest official mistakes. This was in permitting the law which passed the House March 1, 1837, designed to counteract the evil effects of the specie circular,- by providing that, under certain conditions, and in accordance with certain regulations, no duties, taxes, or sums of money payable for lands should be collected or received otherwise than in the legal cur- rency of the United States, or in notes of banks which were payable and paid on demand in said legal currency of the United States, -to fail, by retaining it in his possession until after Congress had adjourned. This act was passed by the Senate by a vote of 41 to 5, and by the House by a vote of 143 to 59.
The nature of the financial distress may be inferred from the fact that on Saturday evening, May 20, 1837, a public meeting was
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held to consider the propriety of an issue of corporation notes to serve the purpose of change during the suspension of specie payments by the banks. Thomas Munroe was called to the chair, and Edward Hanley and Henry Bradley made secretaries. Two series of resolu- tions were introduced, opposed to each other, one favoring the issue of corporation notes, the other opposing such issue. Speeches were made by several gentlemen on either side of the question. Mr. Cun- ningham and Mr. Hoban spoke against the proposition, and Mr. G. Sweeney and Mr. D. Clagett in favor of it. But when the corporation came to act on the suggestion of the meeting, they found that a law of Congress, which had been approved June 30, 1834, forbade the corporations of Washington, Georgetown, and Alexandria to issue any new promissory notes or bills of a less sum than $10; hence the entire subject was indefinitely postponed.
The banks of Washington which had suspended specie payments were requested by resolution to resume, so far as the $5 notes were concerned. To these resolutions each bank replied separately. These banks were the Bank of the Metropolis, of which John P. Van Ness was president; the Patriotic Bank, of which W. A. Bradley was president, and the Bank of Washington, of which Richard C. Wash- ington was president; the first on the 29th of May, and the other two on the 30th. The substance of each reply was, that while the bank was anxious to comply with the request, yet it could not be done with safety or with benefit to the public by any one bank or by the banks of any one city. The Chesapeake and Ohio Canal Company, unable to obtain corporation notes of $1 and $2, determined to issue notes of its own in sums of $2, $1, and fifty cents, in order to carry on its business. These notes, while serving the purposes of the company, found their way among the people generally, and "enabled them to transaet their little everyday business."
An act was passed by Congress May 25, 1838, which was in part as follows:
" Be it enacted, That the charters of the Farmers and Mechanics' Bank of Georgetown, the Bank of the Metropolis, the Patriotie Bank of Washington, the Bank of Washington, and the Farmers' Bank of Alexandria, and the Bank of Potomac, in the town of Alexandria, be, and the same are hereby, extended to the 4th of July, 1840, provided that said banks, each for itself, shall conform to the following con- ditions:
"1. To cease receiving and paying out all paper currency of a less denomination than $5, on or before the promulgation of this act.
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"2. To redeem all their notes of the denomination of $5, in gold or silver, from and after the first day of August of the present year. "3. To resume specie payments in full on or before the first day of January, 1839, or sooner if the principal banks of Baltimore and Richmond shall sooner resume payments in full."
These conditions were justly considered very harsh by the banks. With respect to the first, it was clearly seen that to prohibit the use of notes less than $5 could only cause great inconvenience to persons who had to pay out small sums; and the prohibition to cir- culate their own $5 notes, or, in other words, the requisition that they should pay them in full in specie on and after the 1st of August (which meant the same thing, for so large a part of the District circulation was in $5 notes), made it necessary for the banks to con- siderably reduce their discounts. It was freely declared that the conditions imposed upon the banks of the District were such as the several Congressmen would not have imposed on the banks of their respective States.
Specie payments were generally resumed early in 1839, and in this connection, when Nicholas Biddle resigned the presidency of the United States Bank, March 29, 1839, it was said of him by a friend of General Jackson, who was at the same time an opponent of the bank, that Mr. Biddle's course with reference to cotton, the great staple of the country, during the eighteen months previous to his resignation, had saved the country $25,000,000, and had enabled the banks to resume specie payments. This resumption was not, how- ever, of long duration. Distress began to be felt in the succeeding summer, and finally, on October 10, the banks in Philadelphia sus- pended, giving as the reason therefor that the failure of the harvests in England, in 1838, caused a demand on the Bank of England for more than £6,000,000 for export to the Continent in payment for grain. The withdrawal of so large an amount of specie produced at once a depres- sion of the value of cotton and other American produce, and lessened our means in England of paying for the large amount of importations of foreign merchandise. There had been for this reason a continual drain upon the banks for specie to ship to Europe to supply this deficiency. The banks, therefore, thought it best to suspend, and thus to keep the gold and silver at home. On the 11th of October, the banks of Baltimore followed the lead of the Philadelphia banks, and on the same day the banks of the District of Columbia, at a meet- ing of the representatives of several of them, passed the following resolutions :
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" WHEREAS, Information is received that the banks of Philadelphia and Baltimore have suspended specie payments for the present, and it being the opinion of the several banks in the cities of Washington here represented that the safety of the banks and the interests of the community will not be promoted by an attempt to sustain specie payments while the suspension of Northern banks shall continne; and
" WHEREAS, The banks here have abundant means to meet all their liabilities, yet as a considerable part of these means has become unavailable for the present, as specie funds, by the suspension of the banks of Philadelphia and Baltimore; be it therefore
" Resolred, That it be, and is hereby, recommended to the several banks here represented, to suspend specie payments for the present, with the pledge of said banks to resume as soon as the banks of Philadelphia and Baltimore shall do so."
The Patriotic Bank was not represented at this meeting and did not suspend, as it had some time before reduced its circulation con- siderably. At this time, there were six banks in the District -two in Alexandria, one in Georgetown, and three in Washington. In order to show that they were worthy of public confidence, the following statement of their condition on the 1st of February, 1840, was pub- lished :
Amount of capital, $1,762,880; notes in circulation, $651,640.65; post notes, $12,000; individual deposits, $749,304.44; publie deposits, $248,377.90; due to other banks, $250,209.60; unclaimed dividends, $14,900.24; profit and loss, 8270,873; total liabilities, $3,960,185.83. Resources - Amount of bills and notes discounted, $2,447,600.65; specie, $323,689.89; specie funds, $154,753.75; due from banks, $256,- 801.41; notes of other banks, $197,373.38; real estate, $218,152.99; sundry stocks, $286,142.28; legal expenses, $25,077.81; suspense ac- counts, $50,593.67; total, $3,960,185.83. Surplus, profit and loss above, $270,873; from which, after deducting suspense accounts, errors, etc., equal to 894,220.50, there remained a net surplus of $176,652.50.
On July 1, 1840, the question came up in Congress as to whether the charters of the banks of the District should be con- tinned, on that part of a motion by Mr. Cooper, of Pennsylvania, which was an amendment to Mr. Petrikin's, which prohibited, after a certain day, the issue of notes of a denomination less than $20. It was decided in the negative by a vote of 83 to 98, so that this part of Mr. Cooper's amendment was rejected. The question then recurred on so much of Mr. Cooper's amendment as prohibited after the 1st of January, 1841, the issue of notes of a less denomination than
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$50, and it was decided in the negative by a vote of 60 to 106. The question then came up on agreeing to the following amendment: " Provided, also, that the president and directors of each of the banks shall jointly and severally, in their individual capacity, be liable for all notes issued or debts contracted by said banks respectively, from and after the day this act goes into effect, to be recovered as other debts of like amount are recovered." This was decided in the affirm- ative by a vote of 92 to 90.
The question then came up on the following amendment: " Pro- rided, that said banks shall not make any dividends during the time the said banks shall refuse to pay all their liabilities on demand," which was decided in the affirmative by a vote of 145 to 25. The question then came on this further amendment: "And the president and directors of any of the said banks, who shall make any such division of profits, or declare any such dividend, or consent to or vote for the same, shall be liable to pay double the amount of the sum so divided or declared, to be recovered of them, in their individual capacity, by any person suing for the same, as debts of like amount are recoverable, one-half of said forfeiture to go to the person suing, and the other half to the corporation where said bank is located." Justices of the peace within the District of Columbia were given jurisdiction in all actions for debt against the banks whose charters were extended, for sums not exceeding $100, and no appeal was allowed unless the president or one or more of the directors of the bank should make affidavit that such appeal was not taken for the purpose of delay. This amendment passed by a vote of 94 to 78.
An amendment was then passed, by a vote of 96 to 76, that the said banks should not 'issue notes of a less sum than $10. Then followed an amendment that their notes should be redeemable at all times in specie, or, on failure to redeem as required, the charter of any bank so failing should be forfeited. This amendment passed by a vote of 101 to 77. Then came the following amendment: "That in case said banks, or any of them, shall refuse or fail to pay their notes in specie, any person shall and may have remedy by judgment and execution at law, at a notice of ten days, before any justice of the peace of the said District." This was passed by a vote of 87 to 71.
The question then came up on ordering the above amendments to be engrossed and the bill to be read a third time, when it was decided in the negative by a vote of 69 to 90. A motion to reconsider the ques- tion was lost by a vote of 94 to 86, not two-thirds in the affirmative.
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Mr. Halleman then introduced a bill to continue the charters of the banks in the District of Columbia for certain purposes: "That the provisions, restrictions, and enactments of the Act of Congress of May 25, 1838, entitled ' An Act to Extend the Charter of the Union Bank of Georgetown, in the District of Columbia,' be, and the same are hereby, extended to the Farmers and Mechanics' Bank, of George- town; the Bank of the Metropolis; the Bank of Washington; the Patriotie Bank, of Washington; the Bank of Potomac, and the Farmers' Bank, of Alexandria. Provided, that whenever in the original act the 4th of July, 1838, occurs, it shall be construed to mean the 4th of July, 1840, and whenever the 4th of July, 1842, occurs, it shall be construed to mean the 4th of July, 1844."
On Friday, July 3, 1840, Mr. Underwood moved to amend the bill by adding:
"That if the said banks, or any or either of them, shall, within ninety days from and after the passage of this act, resume specie payments, then the said banks, or such of them as shall so resume, shall be entitled to all the rights and privileges conferred by their present charters until the 4th of July, 1842, unless Congress shall at any time otherwise direct; but if such banks so resuming shall at any time after such resumption again suspend specie payments, or refuse to pay any of their notes or other obligations in specie, then such suspension or refusal shall operate as a forfeiture of their respective charters, except for the purpose of winding up their affairs under the provisions and restrictions contained in this act; and provided, further, in all cases where the said banks, or either of them, thereafter refuse payment of any of their notes or obligations, there shall be a summary remedy therefor before any justice or judge having jurisdiction of the case by giving five days' notice, wherein there shall be no supersedeas, stay, execution, or injunction, or certiorari allowed, nor any appeal, except upon an affidavit of merits by the president, cashier, or directors.
"SECTION 2. That if the president and directors of either of said banks shall violate the provisions aforesaid, they, and each of them, shall be fined in a sum not less than $100 nor more than $1,000 for every offense, to be recovered by presentment or indictment in any court of record having jurisdiction thereof."
This amendment was sustained by a vote of 98 to 70. The bill as thus amended was ordered to be engrossed for a third reading by a vote of 108 yeas to 69 nays. It was then read a third time, and passed by a vote of 115 to 75, and sent to the Senate. In this body
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it was reported without Mr. Underwood's amendment; was returned to the House, and there passed by a vote of 124 to 19; again sent to the Senate, and then to the President, for his signature.
Upon this action of Congress, the National Intelligencer said: "As things now stand, the people of the District of Columbia are made an exception to the privileges enjoyed by all the rest of the American people, by being deprived of the use of those facilities indispensable, under the existing circumstances of the country, to the prosecution of almost any branch of trade or manufactures. The extension of the charters of these banks was resisted by a large proportion of the friends of the Administration with a dogged preseverance which cannot fail to fix the attention and excite the surprise of every distant reader, as it has excited the surprise of everybody, in and out of Congress, who was not privy to the design to abolish the banks entirely."
While the bill above referred to was under discussion, Mr. Dawson, of Georgia, made a very able speech in opposition to the attempt to compel the banks to resume specie payments. He said: "I am against destroying the relation of creditor and debtor. I will not vote to depreciate the value of property, to raise the value of money, and thereby to empower the creditor to bring all the property of the debtor under the hammer. That will be the operation of the bill. All you, by voting for this bill, appreciate money one hundred per cent., and depreciate all property fifty per cent. At one blow, you cut off the five heads of these District banks, and throw them bleeding into these ten miles square; and you tell them, 'Now die, and close up your respective concerns - for you may live no longer.' For the sake of your political experiment in bringing a 'hard money currency' into this devoted District, you stand by with stony hearts and look npon the ruin of these defenseless people as if it were a spectacle exhibited at a theater, all to carry out your beautiful scheme of reform and a 'hard money currency.' Well, sir, let the example be carried out; let those who are for compelling these defenseless people of the District to use nothing but hard money go into their own States and get the State legislatures to collect the taxes in hard coin, and to pay for all their works of improvement in the same hard money. Try it there, and how long do you think your Govern- ment will exist? I call upon you to come out from the bushes and show your faces. Do to the people of this District as you are willing to do to the people of your own States," etc.
When Congress adjourned, July 21, 1840, after having failed to take action looking to a continuance of the corporate existence of
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the banks, bank privileges were suspended in the District, on July 4. After that day no bank could reissue its notes, make any discounts or loans, or ineur or receive any new obligation. The result was that bank notes of any kind could scarcely be found in quantities sufficient to transact the daily businesss of the community. By many it was believed there was no hope for the District except in a change in the administration. During several years the people of the Dis- triet had been for the most part intensely Whig in their political sentiments, and this was sufficient for many in Congress to do what they could in any way to punish them. This fact is more clearly set forth in the chapter on municipal affairs, and hence is only referred to in this connection in order to point out briefly the reasons for the non-action of Congress in regard to a matter of grave import to the commercial interests of the people of the District.
As every one knows, the change in the administration so long hoped for by these people at length came, in the election of William Henry Harrison to the Presidency, and of John Tyler to the Vice- Presidency. Not long after the result of this election became known, a memorial to Congress was circulated for the signatures of merchants, tradesmen, mechanics, and other citizens of Washington, setting forth that "the condition of your memorialists resulting from the present state of the incorporate banks in the city of Washington is such as, in their opinion, calls for some effectual and speedy remedy to be applied by your honorable body," and closing with the following: " Your memorialists therefore humbly pray that the act passed by your honorable body, at your last session, entitled, 'An Act to Continue the Corporate Existence of Certain Banks in the District of Columbia for Certain Purposes,' may be speedily repealed, and that the banks of the city of Washington may again be chartered for a reasonable time, with snch provisions for the security of the public interests as may seem just and proper, and not inconsistent with a due degree of usefulness to your memorialists and their fellow-citizens."
The next day after the adjournment of Congress, IIon. William Cost Johnson, member from the Fifth District of Maryland, and one of the ablest men in the House, issued an address to the people of the District of Columbia, in which he made use of the following language:
"It was known that the voice of the District, if not their votes, was against the continuance of the present Executive head, and that fact was at once the reason and the cause why the House of Repre- sentatives would not, in an eight-months' session, grant a single
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request of the committee [the District Committee of the House, of which Mr. Johnson was chairman ], or even give a single request or measure emanating from the committee a decent hearing or respectful consideration.
" A Congress professing to be Democratic, and the Constitution, which they have sworn to support, making it the Legislature for the District, and with the fullest knowledge of the sentiment of the people of the District in relation to various measures-this Congress, thus constituted and thus advised, whilst they were vociferous and declama- tory about their Republican principles, set all the obligations of the Constitution in this respect at defiance. Not only did they disregard every principle of Republicanism in refusing to obey the will of the people of this District in relation to their own measures and business, but to punish the people who have the temerity to refuse allegiance to Mr. Van Buren, they went counter in their vindictive feelings to their own pretended principles, refused to recharter one of the banks of the District which had not suspended specie payments, and again refused to recharter the banks generally with a condition that they should immediately resume specie payments. With a malignant pleasure, they seemed to revel in their work of ruin and destruction, in serving the President and maintaining their principles; principles as disreputable to the head as they were perverting to the heart."
In the meantime, two of the banks of the District, the Bank of the Metropolis, and the Farmers and Mechanics' Bank of Georgetown, resolved to pay all their notes and other obligations in specie, this action being taken on July 6, 1840. The published notice of the former bank was signed by John P. Van Ness, president, and Richard Smith, cashier; and that 'by the latter by J. I. Stull, cashier.
It is well known that one of the principal reasons for the over- throw of the Democratic Party in 1840, by the election of Willian Henry Harrison, was that there might be a reform of the currency, which had been thrown into almost inextricable confusion by President Jackson, and continued in that condition through the administration of President Van Buren. In order to effect this reform as soon as possible, President Harrison called Congress together in extra session, and at this extra session Congress passed a bill providing for a " Fiscal Bank," which was only another name for a national bank, to be located in the city of Washington. Henry Clay was one of the principal supporters of the proposed bank, remaining in Congress mainly for the purpose of assisting to perfeet this and other necessary legislation. But, unfortunately for the country, President Harrison
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died before the opportunity came for him to assist this necessary work by his signature, and the Vice-President, John Tyler, became the President. President Tyler, when the bill establishing the Fiscal Bank was presented to him for his signature, returned it to Congress with his objections, two in number - first, that he was conscientiously opposed to a national bank, because in his view such an institution was clearly unconstitutional, and he had taken an oath to support and defend that sacred instrument. This was a great surprise and a great disappointment to the party that had elevated him to power, but he said that the Whigs, when they nominated him for the Vice- Presidency, knew what his views had always been, and so in fact had no one to blame but themselves for finding themselves in the condi- tion that they were. President Tyler's other reason for vetoing the Bank bill was that there was a possibility of some one or more of the States having a Branch Bank of the United States established within her or their borders against the will of the people, as under the bill as it was presented to him such branch could be established in any State, provided that State should not decide against it at the first meeting of its legislature after the passage of the bill by Con- gress. So that all the States that desired precisely such an institution were deprived of the great benefits that would have followed the establishment of such an institution within their limits because of the fear in the President's mind that some one State might have a branch bank established, and thus have its benefits forced upon her against her consent. This latter reason of the President was in all probability as flimsy an argument as has ever appeared in a state paper; and then, with reference to the first reason,-his conscientious opposition because it was in his view unconstitutional,-it may be said that such conscientious convictions with reference to the organic law were hardly sustained by his subsequent career in the Presidential office. After the veto of the Fiscal Bank bill, Congress attempted to frame one which, as they understood it, was in accordance with the President's views as to what a national bank should be, giving to it the name of a "Fiscal Corporation," to be located within the District of Columbia, with a capital of $21,000,000. The bill providing for this Fiscal Corporation was likewise vetoed by the President, because he was unable to see the difference between a "Fiscal Bank" and a " Fiscal Corporation." If one was unconstitutional, so was the other.
Here again were strikingly illustrated the evils of which the veto power is capable. Hlad Congress been able to pass a measure over the veto by a majority vote, instead of a two-thirds vote, the country
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