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 88
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Signed, WM. M'ILVAINE, Cashier.
22. Were not similar instructions given in October, November, December, January, and February, and did not the demand for money, which the circular states to have been " active" on the 7th of October last, conti- nue to increase?
The Secretary of the Treasury, on the 1st of Octo- ber, 1831, announced that on the 1st of January, about six millions of the public debt was to be, reimbursed, On the 5th of October, 1831, the Secretary gave notice that all these six millions should be immediately reim- bursed on demand, This was done when the govern- ment had not three millions and a half in the Bank to pay these stocks. For instance, it directed that three millions should be paid in Philadelphia, when the go- vernment had only $33,000 in the Bank at Philadel- phia. Such a measure required great caution on the part of the Bank, and accordingly the Branches were instructed to avoid as much as possible pressing on New York and Philadelphia with their drafts, but to pay a portion of their debts to the northern Atlantic offices, where these reimbursements on account of the govern- ment were to be made.
The demand for money which was "active" in Octo- ber, has very much subsided, mainly in consequence of the measures then adopted.
23. Was not the pressure on Louisville and Cincin- nati, so severe that on the 3d of March, orders were giv- en not to insist on the proposed reduction, but to pro- ceed to accomplish the object they had in view in as gentle a manner as possible, under circumstances so dis- tressing?
The pressure on Louisville and Cincinnati, was ow- ing, not to any reductions of loans, for none had taken place at Cincinnati, and but a trifling amount at Louis- ville, but wholly to the rise of the river Ohio, over which the Bank has no control. In answer to the in- structions to these Branches, to pay moderately and gently a portion of their debts, the Cashier of the Branch at Cincinnati, wrote: "We could have accom- plished, I think, all that was expected, but our city is thrown into a state of unparalleled distress by this aw- ful visitation. Nothing like it has ever been experienc- ed here in the memory of man, About two thousand houses were inundated in that space, and in the centre of the town; the ware-houses of a large number of our heavy customers were of the number. The private distress, and the shock to the business of the place, cannot be described."
And the Cashier at Louisville wrote :-
" All the lower part of our city is inundated, and every approach, except hy water, impeded. The river is now higher than ever known, and still rising rapidly, and it is fearful to contemplate the disastrous conse- quences to the whole country binding on the Ohio and Mississippi; business here is prostrated for a time," &c. &c.
These were the "distressing circumstances" under which they were directed to give every relief in their power.
24. Did not the President of the Bank (Mr. Cheves) inform the Secretary of the Treasury, in April 1819, that the Bank could not pay the Louisiana debt of three millions, without negociating a loan in Europe?
not two millions actually borrowed in Europe, and did not the President ask other indulgencies?
The Bank negociated such a loan, under the impres- sion communicated to the Secretary that it was necessa- ry, but Mr. Cheves, I believe, asked no indulgence of any kind. He stated certain things which he deemed rights that the Bank could fairly claim; but even these the Treasury could not, or did not, grant; so that the Bank was left to its own resources, which effectually re- heved it from its temporary embarrassment.
. 25, Has not the Bank asked Government to postpone the redemption of the three per cents. from July to October, and has it not assumed the payment of one quarter's interest, being substantially equivalent to a loan of six or seven millions for three months, made by Government to the Bank of the United States?
The Bank has not asked the Government to postpone the payment of the three per cents. On the contrary, when the Bank was asked by the Government whether it saw any objection to the payment in July, it answer- ed immediately, that it saw none as far as concerned the Bank-but the Government on account of its own inte- rests exclusively, wished to make the postponement, and the Bank removed the only difficulty to the mea- sure at its own expense.
26. Had your lowest circulation been gradually in- creased-had not nearly twenty millions been added to your bank note circulation since 1824-and had not your facilities to trade been extended in four years pre- ceding the Ist of January last, from 33 to 66 millions of dollars-do you think the Bank would have found any difficulty, in transporting sufficient funds abroad to re- deem that portion of the three per cents. which is held in Europe, and which might not have been reinvested here?
These questions contain a series of errors:
1st. The circulation has increased since 1824, not twen- ty millions, but only $14,182, 151-an increase which has been gradual, notwithstanding the addition du- ring that period of nine branches where that addi- tional circulation had taken place.
2d. The loans of the Bank exclusive of bills of ex- change for transfers, have increased, not 33 millions, but 19 millions: and
Sd. The Bank would have found not the least difficul- ty in making the transfers alluded to-and never sup- posed it would have any.
27. When an institution with investments amounting to seventy-five millions, commanding the foreign and do- mestic exchanges of the country, and monopolizing the government deposits, cannot at the moment we are ex- porting our annual crop of cotton, amounting to twen- ty milhons, transfer a few millions of its funds abroad without embarrassing its operations and seriously dis- tressing traders-is there not reason to believe that its business has been too much and too rapidly extended?
If, as I presume, this is intended to apply to the Bank -it is without foundation.
The Bank can readily transport any portion of its funds abroad, and has actually during the last seven months made such transfers to the amount of 5,008, 154 dollars.
38. Can any bank confining itself to the legitimate business of a banker, which never forces its loans upon trade, or its notes into circulation by extraordinary means, ever be compelled to curtail its loans, or to ask indulgence from its creditors?
Every bank, whatever be the amount of its circula- tion and loans, must often have occasion to diminish its business, because a prudent banker may, under certain circumstances of trade, make loans and-issue notes, which, when these circumstances change, he should re- duce.
29. Do you not consider the Resolutions of the Board of Directors in 1830 and '31, to make long loans at reduced rates of interest, on pledges of stock, as a Was I species of forced loan; and the expedient of issuing
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branch drafts from the branches as an experiment to force the circulation of your bank notes?
I cannot perceive the least analogy between a forced loan and a voluntary loan. In 1830 and '31, the Go- vernment of the United States paid off certain stocks owned by the Bank. A portion of these were rein- vested in loans secured by stocks issued by the Govern- ment of Pennsylvania. The one was not more forced than the other.
The expedient of issuing branch notes was intended merely to supply the physical impossibility of signing other notes. It did not necessarily increase the amount of issues beyond what they would have been, if the notes, instead of being signed at the branches, had been signed by other officers at the parent Bank.
30. Did not the Bank, by adding to our paper circu- lation near fourteen millions from the Ist of January, 1828, to the 1st of January, 1832, adopt the most ef- fectual measure to raise our foreign exchange, depre- ciate our currency, enlarge importations, force the ex- portation of our specie, and diminish its ability to meet its engagements both at home and abroad›
The actual increase of circulation was not " nearly fourteen" millions, but only $11,394,868.
It is a little remarkable that if any period in the whole history of this,country were selected, during which the state of things was directly the reverse of that describ- ed in this question, it would be precisely the four years here mentioned. For,
1st. The foreign exchanges have been uniform and sometimes favourable to this country. Within twelve months past the exchanges between this country and England were actually in favor of this country.
2d. Our currency was never less depreciated; there never having been a moment in which the silver curren- cy of the United States was the slightest fraction of a per centage above the paper currency.
3d. The importations have been adapted to the fair demands of the country: if a heavy fall importation oc- curred, it was balanced by a lighter spring importation. Thus during the winter of 1831-32, the importations were very great: the importations of 1832-3 will be pro- portionally small.
4th. The exportations of specie during that period have not been equal to the importations; and
5th. The Bank, so far from wanting ability to meet its engagements abroad, has never had so large an amount of funds in Europe. In the year 1831 it had $3,700,000 in the hands of its correspondents in Eu- rope.
UNITED STATES BANK.
IN THE HOUSE OF REPRESENTATIVES. FRIDAY, May 11, 1832.
Ma. MCDUFFIE, from the Select Committee appointed to examine the books and proceedings of the Bank of the United States, submitted the following as the views of the minority of the said committee.
REPORT OF THE MINORITY.
The minority of the committee, appointed to exa- mine the books and proceedings of the Bank of the United States, dissenting trom the report of the majori- ty, beg leave to present the grounds of their dissent, for the consideration of the House.
The majority of the committee have submitted, witli- out expressing any decided opinion on them, six cases which they alleged to have become subjects of imputa- tion against the Bank, touching the violation of its char- ter.
The first of these cases relates to usurious loans, and occurred as far back as 1822, during the presidency of Mr. Cheves. The Branch Bank at Lexington, had re- ceived a large amount of the notes of the Bank of Ken-
tucky, a portion of them as Government deposits. The notes were considerably depreciated. The branch having declined issuing any of its own notes, in ohedi- ence to orders of the mother Bank, an individual applied for a loan of these depreciated bank notes, alleging that he wanted them to pay a debt, and that they would an- swer his purpose as well as any other bills. The loan was granted. The Bank of Kentucky was, at the time, regularly paying to the branch, interest on these notes, and finally redeemed all that remained, a few months after the loan in question. It thus appears, that these bills were as good as cash to the bank, and the borrow- er alleged that they were of equal value to him. It is difficult to conceive any solid ground for considering this a case of usury. it would be as reasonable to say, that it would have been usury, for the Bank of Kentue- ky itself, to make a loan of its own depreciated notes. The utmost fairness was exhibited by the branch bank, in this transaction, the loan was made with reluctance after repeated applications, and yet the directors of the mother bank, many years afterwards, and since Mr. Biddle has been at the head of the institution, refunded to the borrower of the Kentucky notes, the full amount of the difference between their nominal and their real value, at the time of the loan, with interest. This has been also done in another similar case; so that, in the only two cases which have been brought to the view of the directors at Philadelphia for the purpose of having the amount of the depreciation refunded, the applica- tion has been granted with a promptness and liberality highly creditable to the institution.
The minority of the committee will barely remark, upon these transactions, that being free from all impu- tations of intentional usury, and never having been sanctioned by the Directors of the mother Bank, but, on the contrary corrected, they cannot furnish the slightest ground for alleging that the charter has been violated.
The second ground of imputation noticed by the ma- jority of the committee is, "the issuing of branch or- ders as circulation."
On this point, the minority deem it sufficient to re- mark, that a branch order is nothing more nor less than a draft or bill of exchange drawn by a branch upon the mother bank; and that the charter expressly authorizes, as one of the primary operations of the Bank, the'buy- ing and selling of bills of exchange. If the Bank has a right to issue' these drafts at all, it cannot, surely, be made a ground of just complaint against it, that they are used as circulation. That is exclusively the affair of the community. The Bank cannot be justly made respon- sible for the use which the public may choose to make of these drafts. It is the high credit of the bank that gives the character of circulation to this paper; and it is the voluntary act of the community receiving it as such.
In fact, there is no part of the bank which has been so beneficial to the public. It has, in practice, furnish- ed the southern and western States with the means of affecting their exchanges with the north, without any expense whatever.
It may well be doubted, however, whether an exten- sive and permanentissue of these drafts might not prove very inconvenient to the Bank itself, in a certain state of the domestic exchanges, and it would be, therefure, a judicious measure, to supersede the necessity in which these drafts originated, by authorizing other officers than the president and cashier of the mother IJank, to sign notes for circulation.
Third ground of imputation, as relates to the viola- tion of the charter, is, " the selling of coin, particular- ly American coin."
The minority would respectfully suggest, that the ma- jority have entirely overlooked the nature and essential purposes of the flank. It may be well defined to be "an institution established for the purpose of dealing in money." Now, money is a current coin; yet a com- mittee of Congress very gravely bring it forward as a
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charge, touching the violation of its charter, too, that it has been guilty of dealing in current coins, and, parti- cularly, American coins, the very end for which it was created.
As relates to dealing in current coin, the right to do so is involved in the right of lending money and of re- ceiving it back. The authority to deal in bullion is ex- pressly granted in the charter, because bullion is not current coin, and, of course, the right to deal in it is not necessarily involved in the right of carrying on banking operations.
The fourth ground of imputation is "the sale of stock, obtained from Government, under special acts of Congress."
This charge is, if possible, more extraordinary than the last. If acts of Congress, which expressly author- ized the Bank to subscribe for Government stock, had any meaning at all, they certainly meant to authorize the bank to acquire the right of property in the stock for which it was authorized to subscribe. The right to sell this stock at pleasure, is of the very essence of the right of property, and is as clearly conveyed to the cor- poration by the act authorizing a subscription, as the right to receive the interest.
The right to sell, therefore, is indisputable.
But the majority of the committee seem to suppose that the policy which forbids the Bank to speculate in stocks, with its immense resources, by which the price might be "raised and depressed at pleasure," equally forbade the Bank to sell the stock for which it had sub- scribed by the express authority of the Government. Now it is apparent, that the evil of dealing in stocks, by such an institution, can only exist in cases of buying and selling stocks at the pleasure of the Bank. To raise and depress prices, the bank must have the right, both to buy and to sell alternately, as may suit its purposes of speculation. But it has never pretended to claim, much less to exercise, the right of buying Government stocks, except under the express authority of Congress, and by an express stipulation with the Treasury De- partment. And after it has obtained a large amount of Government stocks in this mode, it is difficult to con- ceive how it could raise the price of these stocks by coming into the market as a seller, or how it could pro- mote the purposes of a stock-jobbing speculation, by depressing the price, the only effect which could result from offering for sale. When these stocks were sold in 1825, there was an extraordinary pressure upon the mo- ney market of the whole commercial world. They constituted the very resource which the hank most re- quired in such an emergency; and it is now matter of history, that it was partly hy the wise, judicious, and timely use of this resource, that the Bank of the Unit- ed States averted from this country the calamity of a general failure of the banks, and a widely extended scene of commercial bankruptcy.
The majority of the committee seem to regard it as a matter of complaint, that the Government permitted the bank to subscribe for these stocks, in preference to individuals. If this is, indeed, a just cause of com- plaint, it should be made against the Government, and not against the bank. When Congress expressly au- thorizes the Secretary of the Treasury to obtain a loan from the bank, and the Secretary stipulates the terms of that loan, it is impossible to conceive how any blame can be imputed to the bank, if it faithfully performs its engagements.
The fifth ground of imputation presented in the re- port of the majority is, "making donations for roads, canals, and other objects."
In two instances, the directors subscribed small sums to certain internal improvements in the vicinity of the real estate of the bank. This they did in the exercise of their proprietary right, and with a view to the improve- ment of the value of their property. For this exercise of power, they are responsible to the stockholders alone; and the question is, whether they have or have !
not made a proper application of the funds of the cor- poration, with a view to the promotion of its interests? To what extent the value of the real estate of the bank has been increased, by the internal improvement in question, has not heen ascertained; but it may he well supposed that it exceeds the sums appropriated by the directors to, and in the construction of these improve- ments.
The other "donations" to which the report refers, consists of small sums contributed to the fire insurance companies, for the safety of the bank property, and against which it is not pretended that any objection can be fairly raised.
The last ground of imputation, as touching the viola- tion of the charter, is "building houses to rent or sell, and erecting other structures in aid of that object."
The bank is expressly authorized to purchase real estate; which has been mortgaged to secure debts pre- vionsly contracted, and also such as may be sold under judgments and executions in its own favor. In the ex- ercise of this right, the debtors of the bank are as much interested as the bank itself. For it must be apparent, that if the bank were not permitted to bid at these sales, the property of its debtors would be frequently sacrificed, at a sum greatly below its value. It has been only for the purpose of saving itself from loss, and the property of its debtors from being thus sacrificed, that the bank has ever purchased any real estate, except what has been necessary for its banking houses. There is no description of property which a banking institution is so unwilling to own as real estate. Such an institu- tion is entirely unsuited to the management of such pro- perty, as much so as a farmer would be to manage the discounts of a hank.
Owing to the extensive failures of the persons in- debted to the bank, in the western country, prior to 1817, the directors were unavoidably compelled to take a very large quantity of real estate; as the only means of avoiding still greater losses than they have actually sus- tained. They have disposed of this estate as rapidly as they could, consistently with the interests of the institu- tion. On a portion of it, they have erected improve- ments, to prepare it for sale, and hy means of which they will save the stockholders from a great portion of the loss which would have otherwise occurred, and will recover a large amount of the debts which were some years ago set down as desperate. If, for this course of con- duct, the directors are rendered obnoxious to censure, then will they be condemned for the very faithfulness of their stewardship. It is too obvious to require, or to justify the use of argument, that the right of the bank to improve its real estate, is inseparably connected with the right to purchase-to hold, or to own it. On this subject, the House is referred to the exposition of the President, marked A. The next subject to which the report of the majority adverts, is the loan to James Watson Webb & Co. It is proper to remark, in the ffrst place, that the only sums ever loaned to this co- partnership, were the sums of twenty, and of fifteen thousand dollars, the former in August, and the latter in December, 1831. It is also proper to remark, that the first sum was reduced to $18,000, at the maturity of the note given for it; and that the latter sum was en- tirely paid off in March last, by Mr. Webb; and, as he expressly states on oath, without being requested by the bank to do so. The whole amount of the accom- modations ever obtained from the hank, by Messrs. Webb & Noah, was $35,000; and the whole amount now due by them is $18,000.
The grounds and securities upon which these accom- modations were granted, will now be stated. Mr. Webb produced to the directors a full statement of the affairs of the co-partnership, setting forth the value of their property, and the annual income derived from their pa- per. From this statement, which was anthenticated by the oath of their hook-keepers, it appeared that the nett annual income of the paper, from advertisements and
1832.]
UNITED STATES BANK.
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subscriptions, was $25,750, after dedueting ten per cent. for bad debts, and defraying all the expenses of their establishment. Upon the whole, it appeared that this was one of the most profitable, as it is certainly the largest commercial newspaper, in the Union, with an immense advertising patronage, and a large and rapidly increasing subscription list.
With these exhibits, Mr. Webb produced the letter of Mr. Walter Bowne, Mayor of the city of New York, and formerly a director of the Bank of the United States, a man of wealth and high character, enclosing the ap- plication for the loan, and stating that " he did so with pleasure, and saw no reason against this being treated as a fair business transaction." Several of the directors, as well as the president of the bank, were examined on oath, in relation to this transaction, and as the clearest mode of exhibiting its true character to the House, ex- tracts from these examinations will be given.
The following is the testimony of Mr. Biddle, relative to these loans:
Ques .- "Did you consider the loans made to James Watson Webb & Co. fair business transactions, such as you could not refuse without subjecting the bank to the imputation of indulging political partiality? State fully the views and considerations on which you voted in favor of those loans."
Ans .- "I certainly considered them as fair business transactions, or I should not have consented to them. At the request of the committee, 1 will explain the rea- sons of that opinion.
" If in making loans every transaction was perfectlly safe, and every borrower perfectly good, banking would be an easy office; but as men generally borrow to employ the funds, in some profitable pursuit, subject, of course, to vicissitudes, all that can be expected in making loans is a fair and reasonable caution as to the situation and prospects of the borrower. Tried by these, the only test, I think the loans in question are unexcep- tionable. The first was done by a board of directors, consisting, besides the presiding officer, of six gentle- men, Mr. Lippincott, Mr. Fisher, Mr. Bohlen, Mr. Neff, Mr. Platt, and Mr. Willing, merchants and men of busi- ness, with no partialities, towards the applicants, with whom none of them had the least acquaintance. The ground of their judgment may be thus stated. In ma- king ordinary loans, the board judge by the general standing of parties without any examination of their af. fairs. But in this case the parties began by an exposi- tion of their whole situation. This was forwarded by Walter Bowne, Esq. the Mayor of the city of New York, where the applicant resided, who, in addition to his being personally known and respected by all the members, had been one of the oldest directors of the Bank of the United States, and for many years sat at the board around which the directors were then assem- bled. In this letter he says, "I cheerfully forward 'the papers' and I see no reason against this application be- ing treatod as a fair business transaction." IIe does not expressly say it ought to be granted, because he trans- mits at the same time, some of the materials on which the directors were to form their own judgment, to which others were added by Mr. Webb. But when an old director of the bank, forwards " cheerfully" an ap- plication to his ancient colleagues, which he says should be treated as "a fair business transaction," it implies certainly no responsibility-but it may be well regard- ed as a declaration, that were he still a member of the board, he would sanction it. Under these auspices the board proceeded to consider it.
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