USA > Pennsylvania > The Register of Pennsylvania : devoted to the preservation of facts and documents and every other kind of useful information respecting the state of Pennsylvania, Vol. IX > Part 106
Note: The text from this book was generated using artificial intelligence so there may be some errors. The full pages can be found on Archive.org (link on the Part 1 page).
Part 1 | Part 2 | Part 3 | Part 4 | Part 5 | Part 6 | Part 7 | Part 8 | Part 9 | Part 10 | Part 11 | Part 12 | Part 13 | Part 14 | Part 15 | Part 16 | Part 17 | Part 18 | Part 19 | Part 20 | Part 21 | Part 22 | Part 23 | Part 24 | Part 25 | Part 26 | Part 27 | Part 28 | Part 29 | Part 30 | Part 31 | Part 32 | Part 33 | Part 34 | Part 35 | Part 36 | Part 37 | Part 38 | Part 39 | Part 40 | Part 41 | Part 42 | Part 43 | Part 44 | Part 45 | Part 46 | Part 47 | Part 48 | Part 49 | Part 50 | Part 51 | Part 52 | Part 53 | Part 54 | Part 55 | Part 56 | Part 57 | Part 58 | Part 59 | Part 60 | Part 61 | Part 62 | Part 63 | Part 64 | Part 65 | Part 66 | Part 67 | Part 68 | Part 69 | Part 70 | Part 71 | Part 72 | Part 73 | Part 74 | Part 75 | Part 76 | Part 77 | Part 78 | Part 79 | Part 80 | Part 81 | Part 82 | Part 83 | Part 84 | Part 85 | Part 86 | Part 87 | Part 88 | Part 89 | Part 90 | Part 91 | Part 92 | Part 93 | Part 94 | Part 95 | Part 96 | Part 97 | Part 98 | Part 99 | Part 100 | Part 101 | Part 102 | Part 103 | Part 104 | Part 105 | Part 106 | Part 107 | Part 108 | Part 109 | Part 110 | Part 111 | Part 112 | Part 113 | Part 114 | Part 115 | Part 116 | Part 117
"The establishment of the Bank of the United States will open the sources of an uniform currency, independ- ent of the state banks, and as the people will then be supplied with a medium which can be used for every public and private purpose, the peremptory requisition of the resolution of Congress, for the collection of the revenue in the lawful money of the United States, after the 20th of February 1817, becomes at once, just, po- litic and practical."
Mr. Crawford was equally desponding, as the follow- ing course of his correspondence with the bank will show. On the 29th of November 1816, he writes thus:
".Is the principal banks in the middle states, in the month of August last, explicitly stated to this depart- ment, their determination not to resume specie payments before the first of July 1817, there is no reason to expect their co-operation before that period; unless a change has in the mean time been effected in their situation; or unless inducements more powerful than those presented in the treasury proposition of the twenty-second July last, can now be presented to them."
"The determination, therefore, which they have formed not to resume specie payments before the first day of July 1817, is an explicit declaration that they not only will not hear any part of the sacrifice required to restore the disordered state of the currency, but that they will not forego any of the advantages to be derived from that event. If the view here presented be substantially correct, although changes in the situations of the banks may have taken place, favorable to the early resump- tion of specie payments, yet there does not appear to be any well founded reason to expect any change in the de- termination which they have formed on that subject. When the friendly character of the proposition made by the treasury to the banks, on the twenty-second July last, and the extraordinary manner in which it was received is well considered, it does not appear probable that any in- ducement can be offered by the government sufficiently strong, to divert them from the policy of making the highest possible profit upon the public debt which they hold. In directly addressing their love of acquisition, we can offer them nothing equivalent to the gain which they expect from an adherence to their previous deter- mination. To appeal to their fears by refusing to re- ceive their bills in payments to the government, if that op- peal should be ineffectual, would be to visit the sins of the banks, upon the great mass of unoffending citizens, un- less the government was prepared to furnish a sufficient legal currency to meet the indispensable demands of the community. It is important therefore at this time, to ascertain the extent to which the operations of the bank will be able to supply a national currency by the twentieth of February next, unaided by the state banks."
On the 17th December 1816, he again writes:
-
Then followed the circular to the state banks, ol the twentieth of December, urging them to resume specie payments on the twentieth of February.
These exhortations proved wholly ineffectual.
In his letter to the president of the bank, dated Ja- nuary 6, 1817, he speaks of the " extreme hesitation of the banks in answering the treasury proposition of the the twentieth ult." He says that " shumild a majority of the state banks refuse to conform to the treasury proposi- tion, the money remaining in their vaults to the credit of the United States, will be transferred to the Bank of United States and to its branches, in the manner already communicated to you." Ile adds, "whilst the public money was received by and deposited with the state banks, its own interest might stimulate it to make exer- tion, not only to sustain its credit, but to accommodate the government in its fiscal operations. Stript of that inducement, it is difficult to foresee the course which those institutions will adopt, especially if the treasury pro- position, is rejected by them." And again: " If how- ever, the state banks reject the treasury proposition, I think there will be much reason to doubt their intention to resume specie payments on the first of July, or on any other day. Of the correctness of this opinion, the board of directors are more competent to determine than I am, and will of course adopt such precautionary mea- sures, as the probability of such an event may require."
On the sixteenth of January he writes, " It is proper to state that the City Bank, and the Mechanics Bank of New York, have resolved to resume specie payments on the 20th day of February next. If the other bunks of that place refuseto come into the measure, it may be doubt- ful whether those two banks may not be induced to re- scind their resolution, and enter into measures with the Bank of the United States, under the authority given to the directors in this letter."
On the 24th of January 1817, he says, " Yet it is ma- nifest that without the state banks can be brought into an arrangenent by which their paper can be received in pay- ment of taxes, that there will be no medium, upon the 20th of February next, in which those dues can be paid."
These declarations of the secretary, prove that he had been wholly unable to induce the state banks to re- sume specie payments on the 20th of February, and the Bank of the United States, and the Bank of the United States alone, by calling a convention of the state banks, and proposing terms of indulgence and of support, was enabled to accomplish that object in the manner al- ready described in the answer to question Ist. But the resolution, a proper resolution in itself, was so inefl'ectual, that from April 30, 1816, to Jan. 24, 1817, the two secre- taries had made no progress whatever, towards execut- ing it.
Finally, the report of the committee of Congress to investigate the affairs of the bank in January 1819, ex- pressly declares:
" The officers then (on the 7th of January 1817) at the head of the treasury, had repeatedly urged the commencement of operations with the laudable view, as it appears, of hastening the resumption by the state banks, of their notes in specie. Efforts on the part of the trensury to induce the local banks to that measure, appear to have been abortire, until the Bank of the United States made certain propositions which induced regula- tions between it and the state institutions, which finally resulted in a compact." And Mr. Lowndes, in his speech upon that report, in February 1819, states "that the state banks had refused every proposal for the resump- tion of specie payments. He would not say they were unwilling, but they were afraid to adopt them. The remonstrances and encouragement of the government were unavailing. It was then that the national bank, certainly not in the spirit of narrow jealousy, entered into that compact with the state banks," &c. &c.
13. Suppose that the experience of England corres- ponded with our own after the war, and that the price per ounce, to what cause would you attribute that fall'
"I shall have the honor to communicate in a few days a proposition which is intended to be submitted to the state banks by the treasury, as a last effort to engage them to resume specie payments on the twentieth of | of gold sunk below the mint price, four and a half pence February next."
372
UNITED STATES BANK,
[JUNE
14. Did not the Bank of England notes, which had The bank in 1822 had so much bullion at the mint, that been in 1814, twenty-five per cent. below the value of | other holders of bullion could not get it coined for so gold, rise in 1815, to within two and a half per cent. of their par value?
15. Did not the Bank of England give notice on the first of January 1817, that it would pay off a million sterling, and did it not actually commence paying in specie?
16. Did not the Bank of England, in October 1817, give a further notice that it would pay in specie all its notes dated prior to 1817?
17. Did it not continue to pay in specie, although the restriction act had been continued by parliament till the fifth of January 1819, and did not the bank pay from the first of January 1817, to the first of January 1819, £6,756,000 sterling in specie?
18. Was not this second attempt of the Bank of England to resume specie payments, defeated by par- liament in prohibiting them from paying their notes in specie?
19. In resuming specie payments the third time, did not the bank commence one year before the period re- quired by Mr. Peel's bill?
The experience of England, so far from correspond- ing with our own, was directly the reverse of our own. Its situation bore no analogy whatever to ours. From the rupture of the treaty of Amiens till the battle of Wa- terloo, England had for cleven years kept large armies on the continent, and subsidized the great powers of the continent. She was the universal paymaster, and had to pay mainly in specie. The peace stopped that de- mand for specie, while it revived its commerce with Europe and the United States, making all the world its debtors, and pouring bullion into her ports from Europe and America. That the price of bullion should, under these circumstances fall, was natural, and the fall was rendered inevitable by a great reduction in the issues of the Bank of England itself. These things are perfectly understood. "The tendency," says Tooke, in his work on high and low prices, " the tendency to an improvement of the exchanges, and to a decline in the price of gold, was looked upon to follow, as a matter of course, the " cessation of government expenditure abroad, and the great preponderance of our commercial exports, "now that the ports of the continent were opened ta us."-page 49. And again-Sir Henry Parnell on paper money, page 113 :- "In the years preceding 1816, the directors, in expectation that cash payments would be restored in 1817, according to the provision of the existing law, had reduced the amount of their notes in circulation from £28,039,690 as it stood in April 1815, to £24,441,430 on the sixth of January 1816. In conse- quence of this great reduction of paper having raised the foreign exchanges, and brought the price of bullion down nearly to the mint price, a more favorable state of things could not exist for accomplishing the restoration of cash payments," &c. &c. But the same peace which made England a universal creditor, made the United States a still greater debtor to England, and although at the first moment of peace, the belief of the early resump- tion of specie payments in this country, depressed the price of specie in exchange for notes, yet in a few months, when that hope was disappointed, the paper fell back into its former depreciation. The condition of England was, therefore, the very reverse of our own-and the ability or the anxiety of the Bank of England to resume specie payments, furnished no pre- cedent for a similar course for our own state banks, un- til they were encouraged or compelled to it by the Bank of the United States. So much as to the general aspect of the question. As to the details stated in these inqui- ries, as far as I have had time to cxamine them, I believe they are inaccurate. Thus, the price of gold did not fall four and a half pence below the mint price after the war. It did not fall to that price until July 1822, a pe- riod of seven years after the war, and even then owing to a circumstance purely accidental, which was this :-
long a period, that the loss of time while it would remain at the mint, induced them to sell it for cash, at four and a half pence below the mint price, being not quite half per. cent. discount. This may all be seen in Mushet on the currency, page 139, and the tables annexed to it.
Then, too, it would be supposed from the strain of the inquiries, that the bank had made a general resumption of specie payments. But this is not the fact-the re- sumption was only partial, of a particular kind of notes. But the general resumption did not take place I be- lieve till 1822, six or seven years after the peace, where- as that of the United States was on the 20th February" 1817, two years after the news of peace had arrived here. The fact is, that much of the early embarrass- ments of the Bank of the United States, arose from its being urged by the government to resume specie pay- ments, before the country was fully prepared for them. In England, with all their advantages, the resumption was partial and gradual-in the United States it was complete and sudden. But the effort was made in obe- dience to the wishes of the government, and all its con- quences fell on the bank alone.
20. What in your opinion caused the rise in the trea- sury notes, which in December 1814, sold in Boston at twenty-five to twenty-seven per cent. discount, and on the 10th of September 1816, at two per cent., and in government stocks from fifty-five to one hundred dol- lars?
The reason was, that in December 1814, the Boston banks paid specie, and the treasury notes were not pay- able in specie, and of course were not better than the notes of banks which did not pay specie. They were not near so good, for such was the discredit into which the government had fallen, that even in the middle states the notes of the government were at a great discount, even in exchange for the notes of banks not paying specie. In September 1816, the Bank of the United States was going into operation, and the expectation was generally that it would soon do, what it actually soon did, occasion a general resumption of specie pay- ments. So with regard to government stocks. In De- cember 1814, the financial situation of the government, was considered entirely desperate; so much so, that in the middle states, the government six per cents. were much below twenty per cent. discount, even for the notes of banks not paying specie. In September 1816, on the contrary, peace had restored confidence in the stability of the government, and there was a general be- lief of the carly resumption of specie payments.
21. It is said that the Bank of the United States was the cause of the resumption of specie payments, and [that the state banks could not have resumed them with- out the aid of that institution ;- are these your opinions? Decidedly,
22. Were not the treasury balances transferred from the state banks to the United States Bank, in February 1817, and did not the banks in New York, Philadel- phia, and Baltimore, reduce their balances by July 1817, about five millions of dollars?
23. Would you consider the transfer of these balan- ces calculated to aid the state banks, and that they were better able to resume and to sustain specie payments af- ter than before the public deposits were transferred to the United States Bank and its branches?
Undoubtedly, it would aid them to resume specie payments, and for this obvious reason. They were in- debted to the United States, and if they had resumed specie payments, would have been liable to a demand in specie from the treasury, which they could not have met. By the transter, the bank assumed their debts to the government, and gave them time to pay the bank, and promised to assist them if they became embarrassed in consequence of resuming specie payments. It was on these very conditions, and these only, that they com: menced specie payments.
1832.]
UNITED STATES BANK.
373
24. At what time was the Branch Bank established in New York?
On the 22d of January, 1817.
25. Did the Branch Bank owe balances to the city banks in New York, and pay twenty or thirty thousand dollars for interest on these loans from May to Decem- ber 1817?
The interest was paid from the 29th of April, to the 1st of October. It is difficult at this distant day to un- derstand precisely the circumstances by which the ba- lances of the banks of any one city happened to turn for a few months against the bank, but in the efforts to restore specie payments, such a casualty was not unna- tural. If the government funds were transferred from the state banks to the Bank of the United States, which gave time to the state banks, and if the Bank of the United States then paid out on account of the govern- ment to its own notes for the treasury deposits of state bank paper, not really, though nominally convertible into specie, the probability is that the city banks of New York, relieved from their old debt to the govern- ment, would by the large issues of the Bank of the Uni- ted States, become its creditor. In addition to this, it appears from a letter of the president of the bank, pub- lished by Congress in 1819, that this balance must have arisen mainly from the collections made by the branch at New York for the city banks, of notes on distant places; that is, that the branch transmitted to the south and west, bills of exchange owned by the city banks, issuing for them its own paper, while it received for them only the paper of distant state banks of doubtful solidity, and the president of the bank, after stating that $300,000 in specie were ready to be sent to New York to pay these balances, adds :- " The state banks ought not to forget, however, that this balance did not originate in their claims upon the Bank of the United States."
26. Will you explain how a borrowing bank ean aid a lending bank in sustaining specie payments?
The case is very simple. Owing to indulgences given by the banch brank in New York to the city banks near them, it fell into debt for a few months. But up to the period when this balance accrued, the banks of New York were in debt to the branch at New York: immedi- ately after the balances were liquidated, they resumed their position as debtors, and I believe ever since that, with very few, if any occasional exceptions, they have continued so to the present day. Even at the moment when these accidental and temporary balances were duc, the Bank of the United States was a creditor, of the state banks in the aggregate of many millions of dol- lars, and so far from being a borrowing bank, was in fact the creditor and supporter of the state banks.
27. Was not the capital of the branch at New York, on the 29th of May 1819, S245, 287 91 }
No. At that time no specifie capital was assigned to the offices, and the capital on which it was doing business, consisted mainly of its debt to the bank and other of- fices.
On the 26th of May 1829, the nearest weekly state- ment to the 28th of May, its means were are follows: Its debt to the Bank of the United States, which was in fact its capital, $1,135,000 Speeic on hand, 209,000
Debts from state banks, and notes of state banks on hand, 363,000
Its circulation was, 1,096,000
Public and private deposits, 1,1-18,000
$3,951,000
Its discounts, $1,614, 192 90.
28. Could a bank with such a limited means aid the banks of New York, possessing some fifteen millions of capital, in sustaining specie payments at a crisis like that of 1819, when the parent bank was in a perilous con- dition?
preceding question will show its means of sustaining itself and sustaining others, and also prove that the state banks in New York were actually in debt to the branch.
29. Did not the Bank of the United States, nn the 28th November 1816, resolve to remit to the hoklers of United States Bank stock residing in Europe, their di- vidends free of expense, and was that arrangement cal- culated to aid the United States Bank, or the other banks, in resuming or sustaining specie payments?
1 should think it was. The dividends of foreign stockholders must be remitted to them in some way. If the bank did it, this could not add to the amount to be remitted, or increase its pressure on the country. On the other hand, if the measure created a demand in Europe for the stoek, the purchase of it on foreign ac- count was equivalent to a remittance in specie, and so far operated to relieve the bank from a demand for spe- cie to remit.
30. Did not the United States Bank commence ope- rations by discounting the notes of its stockholders on pledged stock, which soon amounted to eleven millions, by receiving three-fourths of its second instalment in the same manner-by increasing its discounts in the first fifteen months to an amount exceeding forty millions of dollars, and by throwing into circulation, in about the same time, some ten millions of paper money?
As far as I have had time to examine these details, I think they are erroneous.
1st. The bank did not commence operations by dis- counting the notes of its stockholders. The first instal- ment was payable on the first of July 1816. From the statements contained in the report of the committee of Congress, it appeared that it was paid,
In coin, 1,428,694 55
In stock, 6,971,305 45
8,400,000 00
The second instalment, January 1, 1817, subscription by United States, 7,000,000 00
Cash, 3,534,557 99
Coin or notes of specie paying bank stock, 6,263,522 33
S9,798,080 32
Now, the whole amount of bills discount- ed except 500,000, loaned to govern- ment on the 24th February 1817, amounted to 2,930,067 33
And of that amount, the whole amount discounted on bank stock up to 30th of January 1817, was 182,642 40
An amount which so far from increasing was actually diminished; for on the 30th of April, they were 129,000 00
The whole therefore of the 9,797,080 32 which could have been paid by dis- counts on the stock was 182,642 40 Not certainly three-fourths, but rather less than two per eent.
Nor 2d, Did the bank within fifteen months from its establishment increase its loans to more than 40 millions of dollars, and issue "ten millions of paper money."
On the 1st of March 1818, its issues were only 8,339,448 20, not ten millions. Its investments on the 1st of March 1818, amounted to 41,181,750 80. But then of these investments $11,244,514 19 were the loans on stock being the mere conversion into that form of the 10,941,033 +1 of government stock which the government redeemed-making an increase of only 300,480 78 in the exchange from stock to stock loans.
In regard to the opinion that the bank too carly ex- panded its loans and issues, there is one deeisive anwer, that the bank, from the first hour of its creation, was urged and goaded by the government into an enlarge- ment of its business in a manner which, however it may
The capital of the banks in New York, was only $11,150,000 and not 15,000,009. The answer to the be regretted or reproached, it was certainly difficult to
374
UNITED STATES BANK.
[JUNE
resist, and the fault, if fault there were, belonged rather to the government than the bank. There can be no testimony on that subject more conclusive than the speech of Mr. Lowndes, one of the committee of inves- tigation, delivered in Februry, 1819.
"Even after the 20th February 1817, the bank might have pursued the cautious policy of withholding its ac- commodations from the government of the people, un- til the reduction of other paper, had made its issues ne- cessary and safe. It might have preferred its interest to its duty. The state banks unable to comply with the requisitions of Congress, which demanded from them the resumption of specie payments, must have lost their credit with the community. The government indeed might have been embarrassed, the public debtors dis- tressed, and the state institutions have been brought "to the alternative of avowed bankruptcy"-but these com- petitors for public favor and employment, would have been removed, and the national bank would have en- tered into the full enjoyment of the monopoly, which the ruin of every other institution would have prepared. This might have been its interest. But there were other interests to be consulted-those of the govern- ment and the people. The bank had not been cstablish- ed for the purpose of giving to its stockholders the har- vest which such a policy might provide. It was the in- strument by whose use we hoped to secure the resump- tion of specie payments, constructed not for its own sake, but for ours. The act of the legislature, and the proceedings of the treasury department, would show how incompatible with the objects of the institution would have been that postponement of its operations, or that gradual commencement of them, which was recom- mended now, when the difficulties of the time were for- gotten. The fourteenth Congress was aware that a nar- row view of its exclusive interests, might induce the national bank, to adopt the policy which the committee had described. The acts which they passed provided that, as soon as the amount of the first subscription ($8,400,000) should be received, the bank should thenceforth commence and continue its operations. The twenty-second section reserved to Congress, the power if it should not go into operation before the first Mon- day in April, (at which time its third instalment was not due) to declare its charter void. This was the measure of the legislature to secure the early operations of the bank. Those of the treasury department were in en- tire consonance with its principles."
"The first object which the government expected to be attained by the national bank, was that of throwing into general circulation by the 20th of February, an amount of notes sufficient to enable the public debtors to comply with their engagements."
Need help finding more records? Try our genealogical records directory which has more than 1 million sources to help you more easily locate the available records.