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 82

Author: Hazard, Samuel, 1784-1870
Publication date: 1828
Publisher: Philadelphia : Printed by W.F. Geddes ;
Number of Pages: 440

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 82

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The president states, the "application was again renew. ed, and a select committee of the House of Representa- tives, reported in favor of allowing the appointment of signers, on the 27th of February, 1823; hut there was no action of the House upon it." And he refers us to_ " pamphlet, vol. iii. No. 11.

On the 1st of December, 1826, the president was in-

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structed to endeavor to procure the necessary change. He says, " he reported on the 27th of February, 1827, that no action on the subject would take place at that session of Congress, and, accordingly, the matter was referred to the committee on offices." See Doc. 3. c. He adds, " the opinion of Mr. Binney, Mr. Webster, and Mr. Wirt, the Attorney General, was taken on the subject of issuing branch drafts." See Doc. 3. c.

On the 6th of April, 1827, the following communica- tion was made to the board of directors: " The commit- tee on the offices, to whom was referred, on the 23d of Feb. last, the report of the president ofthe bank, stat- ing the unsuccessful result of the application to Con- gress for an alteration of the charter, which would au- thorize the signature of notes by other persons than the president and cashier, report, that in various part of the Union, but more especially in the southern and western sections, there is a constant and unceasing de- mand at the offices for the smaller denominations of notes, which it is impossible to supply." They there- fore suggest that the " discount offices should be in- structed to draw checks on the cashier of the bank for smaller sums than they have hitherto been in the habit of furnishing. In order to save the labor of preparing such checks at the offices, as well for the greater secu- rity of the bank and the community, it has been deem- ed best to prepare the blank forms of uniform appear- ance, and to distribute them from the parent bank. Such forms have been accordingly revised, and are now submitted to the board with the recommendation of the committee, that the experiment be tried, and, if found useful to the community, be permanently adopted." See Doc. 3. c.

The document marked 4, D, is a correspondence be- tween the president of the bank and the secretary of the treasury, on the character of these bank drafts, which has already been printed and submitted to Con- gress.

The paper marked 5, E, contains instructions to the branch bank as to the issue of branch orders. On the 21st of April, 1827, the cashier of the parent bank writes a circular to the respective branches, informing them, among other things, that the directors have deem- ed it best that blank forms of an uniform appearance should be prepared with skill and care at the parent bank, and thence distributed to'such of the southern and western offices as seem to stand most in need of tbem, or to be able best to employ them usefully. Enclosed I send you a specimen of the 5 and $10 blank drafts adopted.

After being numbered, registered, and appropriated here to certain offices, a suply of them will be forwarded as soon as possible, with instructions to the cashier of each office to have every four hundred drafts in succes- sion, and as they may be wanted,filled in the order of some one officer of the branch, by whom they must be endors- ed lengthwise, and about the middle of the draft, paya- ble to bearer before they be signed by the president and casher. When completed, they are to be furnish- ed to the customers of the bank, or other persons who may wish to procure them. The entries respecting them, both here and at the branches, are intended for convenience sake, to be analogous to those of branch notes. Their receipt under the denomination of branch drafts, is to be similarly acknowledged by the cashier, and in duplicate through the respective presidents. They are besides to be reported on the weekly state of the office, as branch draft paper received, used, and on hand.

And whenever they may be transiter between the offices, must be so noticed at the foot of the statement, like other packages."

On the 7th of January, 1831, a resolution passed the board to issue drafts of the denomination of twenty dol- lars. These branch orders, when discharged by the parent bank, are re-issued by that bank when it has no small notes of its own. The paper marked 6 F, contains a statement of the amount of branch drafts issued, on

hand, in circulation, and the offices from whence issued. By this table it will be perceived that $10,781,635 have been issued; $3,371,544 are on hand; and $7,410,090, are in circulation.

The foregoing is a succinct history of the issue of branch drafts. Whether it can be justified under the charter of the bank, the committee will leave to the better judgment of Congress.

The third case is the selling coin, and particularly American coin. The attention of the committee was drawn to this subject by the fact that the General Go- vernment had, on one occasion, to pay the bank two per cent. on ten thousand Spanish dollars, which it want- ed for the benefit of the navy in South America. To an interrogatory put to the President on this subject, he replied, "the bank is authorized to deal in bullion. It buys and sells bullion. All foreign coins are bullion. Their being a legal tender does not make them the less bullion, and the bank having bought them at a premium, sells them at a premium. The obligation of the bank is, to pay the claims on it in coin, American coin, or le- galized coin; and if the foreign coin is worth intrinsical- ly, or commercially, more than the American coin, the difference in value must be worth the difference in spe- cie, and there seems no reason why the bank should sell its bullion any more than its bills of exchange, at less than their value." He then refers the committee to a correspondence, marked No. 4.

Although the bank acted under legal advice, it may be well questioned whether foreign coin is bullion. The Constitution gives to Congress the right to regulate its own and foreign coin; when, therefore, the latter has a value prefixed to it by law, and is suffered to be used, with that regulated value, in like manner with our own coin, it would seem not to have lost the name and char- acter of coin, and is made by force of law what it would be, if carried through the mint and subjected to the condition of our own coin; and, therefore, to deal in it as a commodity, is calculated to disturb its legal value, and render at least that portion of the metallic currency uncertain and fluctuating.

If, however, the committee have taken a wrong view of this subject, so far as foreign coin is concerned, it seems by the statement of the President of the Bank, to be virtually admitted that our own coin is not bullion, and therefore does not come within the objects. of trade allowed to the Bank by the ninth fundamental rule of the charter. By reference to the statement of specie sold by the Bank, marked No. 24, it will be found that the sum of $84,734 44 of American gold coin has been parted with.

The fourth case is, selling stock obtained from Go- vernment under special acts of Congress. They have thought it their duty to present the subject to the con- sideration of Congress.

It is necessary here to observe, that the charter must have intended some meaning in prohibiting the bank from dealing in stocks. There is, perhaps, no subject so fruitful in speculations as stocks, and none which is so fluctuating and liable to be influenced by the slight- est causes, often producing ruin or immense fortunes in the most sudden manner. To prevent such a great moneyed institution, then, as the Bank, from dealing in this article, which its vast means could raise or depress at pleasure, seems to have been a wise provision in the charter. The right of the bank to acquire or sell stocks, is a special one; it must be done by virtue of a law of Congress. The charter itself provided that a part of its capital might be paid in the stock of the Govern- ment, and such stock, particularly, might be disposed of. But the committee suggest whether this will ap- ply to other stocks obtained by virtue of a subsequent law of Congress, unless that law specially confers the power to dispose of it. In two important loans obtain- ed from the Government since the charter was granted, the Bank has parted with a valuable stock: and these cases will illustrate the point now submitted to Con-

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gress. While the committee refer to the transactions of the Bank in the funded debt of the United States, for the purpose above mentioned, they also have in , view the presentation of the subject to show, not only the manner of disposing of that stock, but whether it was not contrary to the express understanding with the Government at the time of obtaining the stocks. For the loans of four millions of dollars, of five per cents. made in 1821, and the five millions of four and a half per cents. made in December, 1824, there was strong indi- vidual competition, at a premium for a part or the whole, against the bank; yet the bank had a preference over the individual offers, upon the principle that it would be more advantageous to give it to the Bank at a reduc- ed rate, and participate as a partner, tban give it to in- dividuals at a premium. This was confirmed at the trea- sury.

The president of the bank, in a letter dated 15th De- cember, 1824, which will be found among the documen- tary testimony, after saying he had taken the whole of the $5,000,000 loan at par, says, "and since we have ta- ken the loan at par, on the distinct ground of our having the means of doing it, it would he advisable, in every point of view, not to sell any of the Florida loan in Bos- ton." By a statement of the amount of funded debt sold by the bank, marked No. 6, it will be seen that, as ear- ly as June and July, 1825, the year after it was taken, the bank began to sell this stock, and continued to do so, sometimes at a premium, and sometimes at a loss, up to the 27th day of Novemher, 1829, on which day they had disposed of all but S93,925 92, and that too at a loss of $4,443 34, notwithstanding offers were made by individuals for a large amount, at a premium, and re- jected by the Government, upon the principle before stated. The same document shows that there was, be- tween February, 1829, and October of the same year, sold of the $5,000,000 Florida loan, $1,742,261, at a loss of $17,661 09. For this loan, the committee are not aware of there being any offers by individuals at a premium. The same document shows, that, between February 1826, and February 1832, the whole of the $4,000,000 loan of 5 per cents. of 1821, has been dis- posed of at a premium of $136,789 25. The premium paid for which, at the time it was taken, was provided for in a semi-annual appropriation of $60,000, in the re- port of the 1st of July, 1821, before adverted to. By these operations, it will be obviously perceived, that, if the bank is allowed to sell stocks acquired by special agreements with the Government, it can secure, by speculations, all the advantage which the Government might possess, in putting up its loans to the highest bidder. It not only destroys competition, but takes the loan of the Government from other individuals, who would have given a premium for it, and which the go- vernment refuses, because it expects to derive a greater profit in another way, but in which it may be defeated, by an immediate sale of the loan, and which, if the right to sell by the bank is acknowledged, might have been made directly to those very individuals who had just of- fered a premium. In relation to the four million loan of five per cents. of 1821, Mr. Cheves, in his report on the 1st of October 1822, says: "The four million loan of five per cents. are longer irredeemable, than any other stock of the government of the United States, and hence probably this stock is more valuable than any other stock of the United States." Ile also says, "the more the bank can retain of this stock, the better for the institution." In the whole of which, the committee most fully concur; for, it may be mentioned with feel- ings of pride, that such is the high credit of the govern- ment, its stock is better than specie, and would be to the bank, in any emergency, precisely the same.

The committee proceed to mention the 5th case, which is making donations for roads, canals, and other objects, the amount of which is, $4,620 00, as will ap- pear by document No. 8. Two of the largest ol these items, amounting to three thousand dollars, are for turn- | having been particularly required of him.

pike roads, made too, after the General Government had declined to make appropriations for similar ob- jects .·

A question would naturally arise whether the public funds in the bank, for that institution, is expressly found- ed upon the principle that it is necessary to, and con- stitutes a part of the treasury of the United States, can be appropriated to objects indirectly, by the officers of that institution, when the Government directly refuses to expend its revenues on the very same objects. The committee have looked in vain for any authority in the charter to give away the money of the stockholders. If the charter contains the powers by which the bank is to act, and they are to be strictly pursued, there is then no grant to make gratuities for any object whatever.

The consequences of the exercise of such a right, might be fraught with very great injury to the stock- holders, certainly of dangerous interference in the rival trade of different sections of the country, and of perni- cious influence upon the operations of Government.

The committee approach the last ground, which is the building houses to rent or sell, and erecting other structures in aid ofthat object. They will merely pre- sent the fact and the law, and leave the House to place their own construction upon the case.

By an extract from the minutes of the board of direct- ors, communicated to the Senate on the 18th day of March last, the following facts appear, viz.

"The committee on the offices, to whom was, this day, referred a letter to the president, from George W. Jones, agent, dated May 23d, recommending to the bank the construction of two canal basins, and the erec- tion of warehouses around one of them, according to the plan submitted by him, recommend to the board the adoption of the following resolution:

" Resolved, that the board approve of the formation of two canal basins at Cincinnati, proposed by Mr. Jones; one of them to be on square number fifty-five; (55,) and the other to be on the square of ground be- tween Walnut and Vine streets, and Canal and St. Clair on Court streets; and that he be authorized to erect forthwith, warehouses on the margin of this last mention- ed basin, not exceeding six in number, either in one block or separately, as he may deem most expedient for the interest of the bank."

These six ware houses were built. It is also under- stood, says the same extract, that several other houses have been built by the agent at Cincinnati; but, as they were erected in part by contributions in labor and mate- rials, by debtors to the bank who had no other means of payment, and, in part, by disbursements, no accurate statement of either their number or cost is on the file. The agent has been instructed to specify these details, in order to complete this return.

In reference to the foregoing, the committee believe it enough merely to quote the following provision of the charter, to wit : " The land, tenements, and hereditaments, which it shall be lawful for the said corporation to hold, shall be only such as shall be requisite for immediate ac- commodation, in relation to the convenient transaction of its business, and such as shall have been bona fide mort- gaged to it, by way of security, or conveyed to it in satisfaction of debts previously contracted in the course of its dealings, or purchased at sales upon judgments which shall have been obtained for such debts."

This closes the view of the committee on the subject of the violations of the charter.

In considering the second general head as to any cir- cunistances of mismanagement of the bank, your com- mittee have fully appreciated the delicate character of some of the duties assigned them, and the high respon- sibility of the office of inspecting the books, and cxa-

· The president furnished this statement without ex- plaining the grounds of these donations, no explanation

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mining into the proceedings of the Bank of the United States.

It is possible that the improvements were in the neigh- borhood of the real estate of the bank, and arc made upon the ground that said donations would increase the value of that real estate.

In discharging that trust, they have not felt themselves at liberty to inquire into the private concerns of any in- dividuals, of any denomination, unless the public interest was involved in their transactions with the president and directors of the bank, The investigation was ordered by the House under peculiar circumstances, and in an- ticipation of a debate on the renewal of a charter of a national bank, whose annual operations amount to two or three hundred millions of money, whose influence extends to the remotest parts of the Union, and whose connection with the Federal Government gives it a pub- lic character. Impressed with the importance of tbe great variety of interests involved, your committee have executed the office assigned them, by inquiring, gene- rally, into the proceedings of the bank, not only for the purpose of ascertaining whether its powers had been violated or abused, to the injury of the private and pub- lic interests of the country, but with a view to obtain information for the use of the House, and to suggest, should Congress determine to continue a national bank, such modification as the proceedings of the existing insti- tution would seem to have rendered necessary.

Adhering to these rules, the committee believed it entirely within their province to inquire whether the influence of the bank, acknowledged by all to be of vast control, and, if improperly directed, of dangerous tendency, had insinuated itself either into the manage- ment of the press, or the direction of the government. This could only be done by an examination of the trans- actions of the bank with editors and public functiona- ries. And here the committee wish it to be distinctly understood, that they du not pretend to set up the ab- surd idea, that editors or officers are excluded from the right common to the rest of the citizens, of borrowing money when and where they please, from banks or in- dividuals, without being answerable, in the slightest de- gree, to any person whatever. But while this admission is demanded by the clear rights of the parties to whom it relates, it will not be denied, that if they obtain more favors than the rest of their fellow citizens, it is, at least, a just cause of complaint against the bank, and however they may be innocent of any improper or sinister con- nection with that institution, it does not, by any means, disprove the fact, that some other influence may have been intended to operate upon their minds wbolly un- suspected by them at the time. If, therefore, it should appear that these individuals received larger loans than those who are its usual customers, that they receive these loans without the security usually required under cir- cumstances not known in any other case, it would seem to the committee that, instead of a complaint from those whose transactions with the bank have thus been inves- tigated, the grievance is entirely on the other side. Whether such cases do exist, the committee will leave to the better judgment of the House to decide, upon the facts which they have collected, and now respect- fully submit.

befriending Mr. Noah, and assisting him in the purchase of a share in a newspaper; and he asked if the bank would discount the notes of these parties, adding that, although as a merchant he did not wish to appear as a borrower, or to put his name on paper not mercantile, yet he would, at any time, do so, whenever it might be necessary to secure the bank. I do not recollect (says the witness) whether he then mentioned the time which the notes would have to run. The committee being au- thorized to discount any paper the security of which they might approve, agreed to do them. As Mr. Bur- rows was going out of town, I (the president and wit- ness) gave him the money out of my own funds, and the notes were afterwards put into my possession. They remained with me a long time, as I had no occasion to use the funds, nor was it till the close of the year that my attention was called to them by the circumstance that a new board of directors and a new committee of exchange would be appointed: the same committee which made the loan should consummate it. I had seen, also, in the public prints, many reproaches against the bank for lending money to printers and editors, and I was unwilling that any loan made by the bank should seem to be a private loan from one of its officers. Hav- ing no use for the money, it would have been perfectly convenient to let the loan remain as it was, but I thought it right that every thing done by the bank should always be distinctly known and avowed, and, therefore, gave the notes to the. chairman of the committee, Mr. Tho- mas P. Cope, who entered them on the books." This is the account given by the president himself of the transaction in its origin. The money, $15,000, was ad- vanced on the 26th of March; the notes bear date on the 1st of April thereafter, and were ten in number for fifteen hundred dollars each, with the interest added on as they respectively became due, which was on the 1st of April and October of the years 1832, '33, '34, '35, "'36, and amounted, with the interest thus added, to $17,975. At the time they were entered on the books of the bank, on the 2d of January last, the president received the money for them. These notes were plac- ed on the books of the bank at this time, and it will be seen, on the 2d of March they were withdrawn, as will appear hereafter. On the 9th of August last, after the foregoing transaction had taken place, J. W. Webb and M. M. Noah made an application to the bank for a loan of $20,000, accompanied by a letter from a gentleman formerly a director of the Bank of the United States, to the president of the bank, in the following words :- " I cheerfully forward the enclosed as requested. I see no reason against this application being treated as a fair business transaction." This was accompanied with sundry letters of Webb and Noah, and the depositions of persons in their service as to their solvency and abili- ty to pay the loan requested, all of which will he found marked No. 9. This loan, at six months, was granted, with no other security but that which is just mentioned, the largest loan made on that day. On the 16th of De- cember following, another application was made, by these same parties, for a loan of $15,000, which was granted, for six months, by the exchange committee, without any additional security, or recommendation. At this time, there was a considerable pressure in the money market, and many notes of the citizens of Phila- delphia were rejected. It was one among the largest loans of the day. These loans, together with the loan made in March to Burrows, amounted to the sum of $52,975, which consisted of notes drawn and endorsed by the editors only.

It had been repeatedly alleged that the bank had em- ployed its funds for the purpose of subsidizing the press, and the charge was reiterated during the debate .upon the resolution authorizing this inquiry. The attention of your committee was particularly drawn to this sub- ject, at an early period of their examination, by a com- munication from an editor of a New York paper, who The committee will now submit the facts in relation to the manner in which this loan has been disposed of, first premising that the resolution for inquiring into the affairs of the bank was introduced into the house on or about the 17th of February. The loan of August was reduced $2000 at its maturity, on the 10th of February last. On the 2d of March last, Mr. Silas E. Burrows had been accused to a member of the committee, through the president of the bank. The evidence re- lating to this case will be found in papers 8 and 9, and in which are presented the following facts: On the 26th of March, 1831, a Mr. Silas E. Burrows applied to the president of the bank, and informed him, to use the language of the president, that " he was desirous of obtained from the exchange committee, discounts to the

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amount of thirty-two thousand four hundred and forty- six dollars, being the largest sum loaned on that day, and while many notes of citizens of Philadelphia were rejected. That the notes for $17,975, payable in 1832, '33, '34, '35, and '36, were paid and withdrawn by him on the 2d of March, without the knowledge of Webb and Noah, as they state. On the 14th of the same month, Burrows obtained another discount from the bank of $14,150, and on the 15th of the same month, the note of Webb and Noah for $15,000, loaned them on the 16th of December previously, and not due till June next, was paid off by two draftsfrom Webb, ob- tained at the United States Branch Bank at New York, accompanied with the following remarks, contained in a letter to the president of the bank, dated New York, March 11th, 1832, and found in No. 9; viz: " Although the loans to us by the Bank of the United States are purely of a business character, and made upon statements showing the necessity of the accommodation to our es- tablishment, and of our ability to meet our payments, there can be no doubt but that the enemies of the bank, as also our political opponents, will endeavor to give a false coloring to the whole transaction. The loan, though strictly defensible, is a large one, and the amount may give rise to the charge of indiscretion on the part of the directors. This, it is not only our duty, but our desire, to prevent, if possible; and, therefore, with some little inconvenience to ourselves, we have made arrange- ments to pay the note of $15,000 in the course of a few days."

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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 82

Author: Hazard, Samuel, 1784-1870 Publication date: 1828 Publisher: Philadelphia : Printed by W.F. Geddes ; Number of Pages: 440

Author: Hazard, Samuel, 1784-1870
Publication date: 1828
Publisher: Philadelphia : Printed by W.F. Geddes ;
Number of Pages: 440