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 84
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tailing loans, and, while they were doing that, they con- tinued the issue of bank notes thereby continuing the evil which they were striving to avert.
What is the state of the bank now?
On the 1st of March, (see monthly statement marked No. 35,) the bank had §6,800,000 specie, $2,840,000 notes of other banks, and funded debt none !! making an aggregate of $9,640,000, to meet its circulation of $23,717,000, deposites $17,050,000, and foreign debts owing $1,876,000, making an aggregate of $42, 643,000; and this evil exists while a reaction or contraction is op- erating to a considerable extent.
This contraction commenced on the 7th of October last, and is evidenced by the following circular, which indicates, beyond all doubt, that the bank had over- traded.
CIRCULAR.
BANK UNITED STATES, Oct. 7, 1831.
SIR :- The unusually heavy reimbursements of six millions of funded debt, which was on the 1st instant, advertised by the Government to take place on the 1st and 2d days of January next, but which, according to subsequent notice from the Treasury Department under yesterday's date, may, it appears, be demanded of the bank, by the public creditors, at any period of the pre- , sent quarter, is calculated to press very inconveniently upon the parent bank, and upon the office at New York; the more so, from our uncertainty as to the time when the necessary provision must be made, and from the prevailing active demand for money. Be pleased, therefore, so to shape your business immediately, as that without denying reasonable accommodation to your own customers, or sacrificing the interest of your office, you may throw, as early as possible, a large amount of available means into our hands in Philadelphia and New York, and at the same time abstain, as far as prac- ticable, from drawing upon either of those points; checks and short drafts on the local banks, and on indi- viduals, will prove particularly acceptable for several months to come, and whenever direct claims ofthat kind, on those two places are not to be procured, you might materially aid ns, by taking drafts upon the large cities nearest to them.
I am, respectfully, your obedient servant, W. MCILVAINE, Cashier.
Addressed to the Cashiers of all the offices.
Since the 1st of September last, the bank has dimi- nished its means to meet the demands which may come upon it-
First. The whole of the funded debt which it then held, $3,497,681 06
Second. The difference between the specie it then held, 11,545,116 51
And the amount it possessed on the 1st April, 6,799,753 63
$4,745,362 88
Making an aggregate diminution of its means to meet its momentary demands, since the 1st of September, of $8,243,043 94, whilst during the same period, those de- mands have increased $4,197,871 51, viz. the circula- tion, deposites, and foreign debt, the aggregate of which was, on the 1st September $38,452,758 67, and on the 1st April, $42,650,630 18. The measures and the ef- fect appear to be similar to those preceding 1819. The extensive discounting of domestic bills and drafts, pay- able at distant branches, the amount being on the 1st April, per monthly statement, $20,354,748 79. The orders for curtailing at the western branches, and the curtailing at the principal offices in the Atlantic cities, and at the Bank of the United States, the amount of which, at the Bank of the United States, between the 5thı day of January and the 29th day of March, is $1,810,408 37; at the office of New York, between the
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$259,305 43; at the office of Boston, between the 5th day of January and the 29th day of March, is $167,860 85; (and that too, on a discount line of less than two and a half millions of dollars;) at the office of Baltimore, between the 16th January and the 2d of April, $123,741 63, and on a discount line of a little more than two millions of dollars, as will be seen by the weekly statement of those offices and the Bank of the United States, marked No. 36.
The most remarkable feature which represents itself to the view of the committee, connected with the pre- sent situation of the bank, and the course of operations upon it since the 1st of September last, is the increase in the circulation of its notes, which amounted on the 1st September to $22,399,447 52, and on the 1st April to $23,717,441 14,making the increase of $1,317,993 62. During this period the bank undertook to check the exportation of specie by supplying bills at such a rate as left no inducement for individuals to ship it; to do which they exhausted all the funds which they could procure from every source. Over $5,000,000 were re- mitted, as per statement marked No. 16, and still left them with a debt of more than $1,700,000 in Eu- rope at this period. The cause which led to this necessity still yet exists, with an increase to the extent of the increase of circulation, and but for a decline in the price of specie in Europe, it would still continue to be exported.
The committee would present another striking ala- logy between the situation of the bank in April, 1819, and its present condition. At the first mentioned pe- riod, Mr. Cbeves informed the Secretary of the Trea- sury that the bank would not pay the Louisiana debt of three millions without negociating a loan in Europe, and two millions were actually borrowed in Europe, the indulgence of the government being obtained to that effect. The bank, at this time, is precisely in the same situation; it has asked the government to postpone the redemption of the thrce per cents. from 1st of July to 1st October, and has assumed the payment of one quarter's interest on these stocks, being substantially equivalent to borrowing seven millions of the govern- ment's money for three months.
The supplying of exchange by the bank, as has been done for the last five months, and the curtailing of dis- counts, are but mere palliatives, as the committee fully believe; and they are persuaded that no measure can be invented torestore a sound currency, and a regular state of things generally, and give a solid and permanent va- lue to property, but the withdrawal of a large portion of notes now in circulation, by the bank, which will com- pel other banks to do the same.
The committee will here introduce a quotation from Mr. Rush, in his Treasury Report in 1828; which fully accords with their sentiments. " It is the preservation of a good currency which can alone impart stability to property, and prevent those fluctuations on its value, hurtful alike to individual and national wealth." Again, hic says, " this advantage the bank has secured to the community, by confining within prudent limits its is- sues of paper, whereby a restraint has been imposed upon excessive importations, which are thus kept more with- in the true wants and capacitics of the country. Ac- cording to the triennial report of the directors to the stockholders on the 1st of August of 1828, the amount of circulation then was $13,044,760 71; and on the 1st of April last, as before stated, it was $23,717,441 14, presenting the astonishing difference of $10,671,780 43, in less than four years. Can this be considered, accord- ing to the sound doctrine of Mr. Rush, confining its is- sues of paper to prudent limits, whereby a restraint has been imposed upon excessive importations? That great contractions arc injurious, the committee consider they have adduced an authority that cannot well be doubted, and that a great one is now in operation, there are too many general cvidences in confirmation of the fact to be refuted. A particular one will suffice, which is ta-
VOL. IX. 38
ken from the documents called for by the Senate, and presented to that body by the Secretary of the Trca- sury, on the 12th of March last; in which will ne found a communication from the president of the bank, stating that the amount of branch notes redcemed by the Bank of the United States at Philadelphia, during the month of February last, only, to be $726,000; and the amount redeemed in 1831, during the same month, was only $368,910.
In a letter under date of the 26th of March last, to the chairman of the committee, the president of the bank says, "that the amount of branch notes redeemed at the New York office during the year 1831, was $13,219,635, and at Philadelphia, $5,398,800, making a total of $18,618,435, with an increase of circulation between the 2d of February 1831, and the 2d of January 1832, of more than six millions of dollars, as per monthly statements, and decrease of its means, between the 2d of February 1831, and 1st of April 1832, to meet imme- diate demands, of more than twelve millions of dollars, viz:
In specie, funded debt, and notes of other banks, which, at first named date, amounted, as per monthly statements, to And the last to $21,756,668 10 9,640,000 00
$12,116,668 10
Making, as just stated, a diminution in the active means immediately applied to the extinguishment of its debts, of considerably more than half of its former capacity, to effect the same object.
With such an increase of issues, and the influence of a most powerful reaction now operating upon the fiscal energies of the country, as is exhibited by the difference of the redemption of branch notes at the periods and places above mentioned, together with such reduction of its means, to meet its engagements, must, we fear, compel them still further to curtail their accommoda- tions.
It is evident from the circulars addressed to the branches, and correspondence with them since Octo- ber last, that the chief ohject of the bank has been to sustain itself-the statements accompanying this report, clearly proving that the bank has not increased its facili- ties to the trading community, in any part of the Union.
The Bank of the United States, among other condi- tions of its charter, is bound to make collections of the public revenue, to transfer the same, or any part there- of, from one point to another, that they may be required, and to make any and all payments for the account of the government, whether for principal, interest, civil list, army, navy, pensions, or for any other purpose what- ever, free of all and any changes for such services.
For performing this duty, the bank has claimed, and has received from the treasury department, and the country generally, for some years past, merit to an ex- tent that could not have been surpassed, even if all those services it performs were gratuitous. This and other circumstances have led the committee to an investiga- tion of the subject, as far as the limited time would al- low, before closing their labors, to see how far the bank is entitled to the credit bestowed upon it, and to what extent the bank has aided the government in its fiscal operations, beyond the obligation imposed in obedience to its charter.
The government, in its collections through the Bank of the United States, receives nothingbut specie, or notes of the Bank of the United States, and makes its pay- ments in nothing else. If the notes of State banks arc received by the bank in place of its own, it is a private matter between such banks and the Bank of the United States, and one with which the government does not concern itself; and it is to be presumed that the Bank of the United States is too watchful and vigilant in the pro- tection of its own interests, not to see that it obtains from the State Banks, for the notes thus taken, specic or its equivalent, or its own notes, in exchange, and
298
UNITED STATES BANK.
[MAT
thereby be provided with a fund from the collection of the revenue, equal in value, to that in which they are required to pay.
The largest portion of the revenue, particularly from imports, as it is universally known, is collected in the Atlantic cities, north of the Potomac. Those cities be- ing the great marts of supply to nearly the whole of the United States, and places to which remittances centre from almost every part of the country, creates a demand for funds upon them, from nearly every quarter, con- stantly, and generally at a premium. Therefore, so far as the bank is called upon to transfer funds from those cities to other places, it becomes a matter of pro- fit, and not of expense to it, and the greater the dis- tance, the greater the premium; and the larger the amount thus required to be transferred by the govern- ment, and the greater the distance, the greater the pro- fit and advantage to the bank.
That the bank has aided the Government thus far the committee are unable to discover, or that they are under any obligations to the bank for those services, they are at a loss to imagine. How far the bank has aided the Governmentinits fiscal operations, as it claims to have done, will be seen by a communication from the president of the bank to this committee, hereafter adverted to in another part of this report; and also in a report of the committee of the stockholders, at the triennial meeting on the 1st of September, 1831, in the following words: " That the bank, through the whole course of its operations, has effectually assisted the Treasury in the collection and distribution of the pub- lic revenue, and that, of late years, it has been signally efficient in preventing the discharge of the public debt from disturbing the operations of commerce, or the va- lue of pecuniary investments."
Now the committee are not able to discover upon what principles the foregoing declaration is made. By referring to that correspondence, in 1819, between the then president of the bank and the then Secretary of the Treasury, the committee discover that the bank was then applying to the Treasury Department to aid in its operations, and was receiving all that it could pro- mise.
On the 20th March, 1819, the president of the bank closed a communication to the then secretary, Mr. Crawford, thus-"I have ventured to trouble you with .those views with the hope that you will pardon the liberty, and with the conviction that if you can serve this institution in any of them which you shall deem consistent with the public good,you will feel a pleasure in doing so." The Secretary of the Treasury, in clos- ing his answer, under date of the 27th March, 1819, says, "every facility which it is in the power of this de- partment to afford the bank, in its efforts to support specific payments, and to restore the currency to a natu- ral state, may be confidently relied upon."
By a reference to a statement of the public deposits in the Bank of the United States each month, from March 1818, to March 1832, inclusive, marked No. 37, it will be seen that from the 1st of January 1823, up to the month of March 1832, there has been only one pe- riod, (November 1825,) when the public deposites did not exceed four millions of dollars, in the hands of the bank, and they frequently amounted to eight, nine, ten and eleven; and on one occasion to twelve millions of dollars.
By a reference to document marked No. 38, it will be found that since the month of March 1824, at all the different periods.immediately following the redemption by the government of portions of its funded debt, there is no one time when the bank was not left with more than one million and a half of dollars of public depo- sites; and in many instances with four and five millions, which sums were, immediately after, increasing by the constant accumulated collection of the public revenue.
The bank, as it collects the revenne, knows, or ought to know, that it will be called upon by the government
to reimburse it, and in all cases of redemption of the funded debt, three months notice is given by the Trea- sury of such intention. With such notice, and with proper management on the part of the bank, the com- mittee cannot see that either the government requires any aid, or that the community can be effected by the course of the operation.
The bank has its legitimate banking capital with which to do its regular business, and accommodate the community. Asit collects the public revenue it is ena- bled both to avail itself of the advantage of employing it to its own benefit, and the accommodation of the com- mercial community who principally contribute to its payment, by commencing the discounting of business paper, payable within or about the time they know they will be called upon to make the payments on account of the government; and, as they gradually approach that period, they must always shorten the period which the business paper has to run, until they arrive at the time the call from government is made upon them when the business paper will have been paid off, the bank then pays the government, and the government immediately again circulates it among the community.
The operation, as thus described, appears to the com- mittee too plain and simple to require any further illus- tration; and if the principle is sound, and has been acted upon by the bank, they cannot discover, in what man- ner the operations of commerce could have been dis- turbed, or the value of pecuniary investments have been affected by the payment of the public debt by the go- vernment.
But if the bank has, as the revenue has accumulated to the Treasury Department, gone on discounting upon it, or loaning it out, disregarding the period when they would be called upon to reimburse it, the committee can readily perceive that when that order arrived, they would be found not only deficient in preparation, but in a state of surprise, and that the payments would first embarrass the bank, and then lead it to press and em- barrass the commercial community.
From the observations made, and the examination of documents during the course of this investigation the committee have strong reason to apprehend that the course pursued by the bank has been upon this latter principle. If so, the bank has incurred a high respon- sibility.
The committee believing the subject of the late post- ponement of a portion of the 3 per cent. stocks, intend- ed as they understood, to have been paid on the 1st of July by the government, to be within the province of their inquiries; and believing, also, that it had a strong connexion with the present state and situation of the affairs of the bank, and for the purpose of ena- bling them to form a correct and truc opinion- upon that subject, they made a call upon the president of the bank, for the correspondence in relation to the post- ponement of that payment in the following words: "Will you please give a copy of the correspondence connect- ed with your application in March last, requesting a suspension by the Government, of the payment of a portion of its debt intended to have been made on the 1st July next, or a statement of the arrangement made in relation to that subject.". Which correspondence was communicated by the president of the bank, with the following remarks: " I have made no application to the Government, nor have I requested any suspension of the payment of any portion of the public debt."
" The inquiry, I suppose, relates to this circumstance, 'I received a letter from the acting Secretary of the Treasury, dated the 24th of March, 1832, informing me that Government was about to issue a notice on the 1st of April, of their intention to pay, on the 1st of July next, one-half of the three per cent. stock, and to do it . by paying to each stockholder one-half of the amount of his certificate.' He added,
' If any objection occurs to you either as to the
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amount or mode of payment, I will thank you to sug- gest it.'
" Thus invited by the Government to a communica- tion marked 'confidential,' to give my opinions on a measure contemplated by the Government, I felt it my duty to express my views of its probable operation; in my reply, therefore, dated 29th of March, I stated " that so far as the bank is concerned no objection occurs to me, it being sufficient that the Government has the ne- cessary amount of funds in the bank to make the con- templated payments.' I then proceeded to observe, that in the present situation of the commercial commu- nity, and with a very large amount of revenue, (amount- ing to nine millions,) to be paid before the 1st of July, the debtors of the Government would require all the forbearance, and all the aid that could be given them: and that the payment proposed by creating a demand for the remittance of several millions of dollars to Eu- ropean stockholders, would tend to diminish the usual facilities afforded to the debtors of the Government, and might endanger the punetual payment. For this rea- son, I thought it for the interest of the Government, to postpone the payment till the next quarter. 1 further stated, that the plan of paying to each stoekholder only one-half of his loan, would not be so acceptable as if luis whole loan were repaid at onee.
"Having thus performed my duty in giving the opi- nion asked, 1 left it, of course, to the government to de- cide. On the part of the bank, I sought nothing, I re- quested nothing. After weighing the circumstances, the government were desirous of adopting the measure, but the difficulty I understood to be this, that the sink- ing fund would lose the quarter's interest, from July to October, of the sum intended to be paid in July; and that the government did not feel itself justified in ma- king the postponement, unless that interest could be saved; but that it would be made, provided the bank would make the sinking fund whole on the 1st October. To this I said, that, as the bank would have the use of the fund during the three months, it would consent to save the sinking fund harmless, by paying three months interest itself; and so the matter stands."
Now, it will be seen, that the bank, in all this, has had not the least ageney, except to offer its opinion, when it was asked, in regard to a measure proposed by the government; and then to offer its aid in carrying that measure into operation.
The committee cannot discover any ability which the bank possesses or will possess, to give increased aid to public debtors in the payment of the nine millions of dollars falling due (as is said) in the quarter ending with the 1st of July; but, on the contrary, they believe that such is the situation of the bank now, and such will be the demands which it will be called upon to meet, that it will require the aid of all the accumulated collections for the government, to sustain itself. The committee are fully of opinion, that though the bank neither " sought" for, nor "requested" a postponement of the payment by the government, as stated in the declara- tion of the president, yet if such postponement had not been made, the bank would not, on the 1st of July, have possessed the ability to have met the demand,
without causing a scene of great distress in the commer- 'the Bank of the United States, the offices at Baltimore, cial community.
The committee are unable to discover in what manner the bank could afford aid to the Government, in car- rying into effect the measure they proposed, which the president of the bank, in his remarks, speaks of ha- ving proffered to them. All that the Government could ask of the bank on the 1st of July, or at any other time, would be, to pay over to them the amount it had collected for their account, when they wished to employ , maximum amount in January last, and ending on the it-the same as a principal would call upon his agent to pay to him moneys which he had collected for his be- nefit.
intention of the Government to pay off during the year, a great portion of the 3 per cent. stocks; and the sub- ject of making an arrangement with the holders, was, on that day, referred by a resolution of the board, as follows:
Resolved, That the subject of the communication just made by the president, be referred to the commit- tee of exchange, with authority to make, on behalf of the bank, whatever arrangements with the holders of the 3 per cent. stock of the United States as may, in their opinion, best promote the convenience of the publie, and the interests of this institution.
This proceeding on the part of the board, nearly tuo weeks before they were officially informed of the inten- tion by the Government to make the proposed payment on the 1st of July, demonstrates fully, to the minds of the committee, an acknowledgment on the part of the administration of the bank, of its inability to meet the de- mands which the contemplated payments of the Govern- ment 3 per cents. would bring upon it, without produc- ing the distress before alluded to.
In a letter to the Secretary of the Treasury, from the president of the bank, dated the 29th March, 1832, marked No. 40, is the following:
" Owing to a variety of causes, but mainly to the great amount of duties payable for the last few months, there has been a pressure upon the mercantile'classes, who have been obliged to make very great efforts to comply with their engagements to the government. That pressure still continues, and it may be prolonged by the same cause-the amount of duties still payable during the next three months. This state of things seemed to re- commend all the forbearance and indulgence to the debtors which can be safely coneeded. The inconve- nienee, then, of the proposed measures is, that the re- payment of the six or seven millions of dollars, more than half of which is held in Europe, may create a de- mand for the remittance of these funds, which would operate injuriously on the community, and, by abridg- ing the facilities which the debtors of the government are in the habit of receiving from the bank, may endan- ger the punctual payment of the revenue, as the bank would necessarily be obliged to commence early its pre- parations for the reimbursement of so large an amount of public debt.
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