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. XII, Part 113

Author: Hazard, Samuel, 1784-1870
Publication date: 1828
Publisher: Philadelphia : Printed by W.F. Geddes ;
Number of Pages: 438

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. XII > Part 113

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Here then the President begins in 1829, when the Bank had nearly seven years to run, by telling Con- gress that to avoid precipitancy he could not too soon present the subject of the re-charter to their considera- tion. The next year, when the Bank had nearly six years to run, he repeated to Congress that the import- ance of the subject of the re-charter required that he should again call the attention of Congress to it. The next year when the Bank had five years to run, he re-

All these assertions it is proposed briefly to disprove. | iterated to Congress that he thought the attention of

1833.]

DEPOSITS-BANK OF THE UNITED STATES.

397

Congress should be seasonably directed to this import- ant subject-and then when Congress at his request proceeded to consider it and renewed the charter, he sent it back with a declaration, that as the charter had yet four years to run, there was no necessity for being in haste about it.

And now in the face of all these testimonials of his urging Congress, year after year, to decide the question, as they decided against him, he asserts that the Bank must have brought it before Congress to defeat his elec. tion.

His second proof is scarcely less extraordinary. He says that in order to carry the election against him "al- though the charter was approaching its termination, and the Bank was aware that it was the intention of the Government to use the public deposit as fast as it accru- ed in the payment of the public debt, yet did it extend its loans from January 1831, to May 1832, from $ 12, 402,- 304 24 to $70,428,070 72, being an increase of $28,025,766 48 in sixteen months. It is confidently believed that the leading object of this immense exten- sion of its loans was to bring as large a portion of the people as possible under its power and influence."

The errors here are as follows:

1st. That the fact in regard to the increase of the Loans is mis-stated-and that the motives of them are wholly perverted.

The truth is, that the loans at the periods mentioned stood thus:

January, 1831. May, 1832. Loans to Individuals $33,575,403 43 $47,375,078 20 Loan to Government

8,674,681 06

Domestic Bills 10,456,653 90 23,052,972 52

$52,706,738 39 $70,428,050 72

52,706,738 39

$17,721,312 33

Baring, Brs. & Co. Cr. 2,387,331 19 Dr. 1,878, 122,29

From this it is manifest that between those two periods the Bank had received from Government the reimburse- ment of $8,674,681 06

It had drawn for its foreign funds $2,387,331 19

And drawn on its fo- reign correspond-

ents for an addi- tional sum of

1,878,122 29

Making a total of

4,265,453 48

Thus furnishing additional means of dis- counting to the amount of $12,940,134 54

Yet its actual loans-its actual discounts were increased only 5,124,893 71

The Domestic Bills of Exchange purchased for the transferring of the funds of the Government or of indi- viduals, make a separate and independent business, de- pendant on the demand for the interior commerce of the country. But taking the increase of those bills into consideration, it will be seen that the increase of loans is

$5,124,893 71 And the increase of Bills of Exchange 12,596,318 62

Making a total increase of

$17,721,212 33

instead of 23 millions as asserted by the signer of the paper. That is to say, in the year 1831, there being a most active foreign and interior trade, requiring unu- sual facilities for its operations, the Bank having re- ceived from the Government the reimbursement of its loan to Government, amounting to more than eight millions; and having called in its funds in Europe, and employed its credit there to the amount of four millions,

possessing thus additional means of loaning, to the amount of nearly thirteen millions, actually increased its loans to the amount of seventeen millions, making in fact a mere increase of its investments not equal to five millions, of which increase the new Branch Bank of Natchez, established within that period, alone contri- buted nearly three millions.

There are several circumstances which make this mis-statement peculiarly improper. He reproaches the Bank with this increase, although "the Bank was aware of the intention of the Government to use the public deposit as fast as it accrued, in the payment of the pub- lic debt." Now the fact is, that this public deposit was used as we have just seen, in paying off the public debt owned by the Bank itself-so that instead of in- creasing its loans in such a way as to interfere with the payment of the public debt to others, this very public debt was actually paid to the Bank itself, and furnished the very means of increasing the loans.

What makes it still worse is, that this very public debt was in fact paid to the Bank on the solicitation of the Treasury itself, before the Bank was bound to re- ceive it. On the 29th day of September, 1831, the Secretary wrote to the President of the Bank:

"The offer made by you this day, on behalf' of the Bank of the United States, for the immediate re-im- bursement at par of the following stocks received by that institution is accepted, viz :

91,188 92 of 4} per cents of 26th May, 1924. 3,260,475 99 of 43 per cents of 24th May, 1824.

$3,351,664 91

"The department fully appreciates the disposition which the Board of Directors have manifested by this arrangement, to co-operate in the accomplishment of its desire for the discharge of the public debt as early as the means of the Treasury will permit."

It has been thus seen, first, that the actual amount of increased investment was less by ten millions than is here asserted-second, that the public debt which the Bank is charged with not preparing to pay, was actual- ly paid to the Bank itself, and not merely paid to the Bank, but paid before it was due, in order to accom- modate the Government. In regard to this increase, too, the points of comparison are wholly fallacious. From the nature of the business of the country, the loans are necessarily larger in May than January, be- cause the southern crop, with all its business, enlarges the Spring operations of the Bank-and no more just result can be had by comparing May and January, than by comparing the thermometers of the two seasons. The true comparisons must be between January and January, or between May and May. Now the fact is, that the increase from May to May of the successive years is comparatively small. The loans at these suc- cessive periods were as follows:

To Individuals.

To Government.

Total.

May, 1827 33,118,707 46

17,764,359 05 50,883,066 51

66 1828 37,353,717 92 17,474,111 43 54,827,829 35

1829 42,894,587 90 15,007,472 13157,902,060 03

66 1830,43,206,694 12 | 10,892,530 90|54,099,225 02

1831 53,582,067 75

5,674,681 06 59,256,748 81.

66 1832 70,428,070 72

paid off.

70,428,070 72

1833 64,519,900 73

64,519,900 73

Nov.1833|57,210, 604 38|

57,210,604 38

From which it appears that this enlargement was gradual-that it occured when the wants of the coun- try required the aid of this expansive power, so valua- ble in the Institution, and that the increase has subsid. ed when no longer required.

Supposing all this, however, to have been exactly as it has been stated, that is, supposing this increase of

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DEPOSITS-BANK OF THE UNITED STATES.

[DECEMBER

loans to have been twenty-eight millions, what does it prove? Why that the Bank enlarged its business to meet the commercial wants of the country, and when those wants were supplied, the business of the Bank of course subsided. But the President can ascribe this increase to no other cause than his own election. Ac- cordingly, he says that the Bank, in January, 1831, began to prepare for his election, which was to take place nearly two years afterwards, by lending 28 mil- lions. It is somewhat hostile to this theory, that this whole increase had reached its height in May, 1832. Now, in December, 1831, the Secretary of the Trea- sury, with the full approbation of the President, had spoken in the most favorable terms of the Bank, and he did not sign his veto message against it until July, 1832, up to which period, it was doubtful whether he would veto it, and of course it was unknown whether the Bank would have the least reason to be opposed to his election-and these whole 28 millions might have been uselessly lavished: so that the Bank increased its loans while it had no interest in his election, and did not increase them when he supposes it had. Truly this mode of "bringing as large a portion of the people under its power and influence," seems singularly ill- timed.

3d. In recurrence to his own election, he next pro- ceeds to declare that "whatever may be the opinion of others, the President considers his re-election as a de- cision of the people against the Bank." Now, it is dif- ficult for any one to believe this, since it is notorious that many of the most decided friends of the Bank were his zealous supporters. Thus Pennsylvania was the most efficient of them all; yet that same Pennsyl- vania, with extraordinary unanimity, in February, 1831, passed the following resolution :

"That the Constitution of the United States authori- zes, and near half a century's experience sanctions, a Bank of the United States, as necessary and proper to regulate the value of money, and prevent paper cur- rency of unequal and depreciated value."

And again, with equal unanimity in February, 1832, the following:

"That the Senators from this State in the Congress of the United States be instructed, and the Representa- tives requested; to use their exertions to obtain a re- newal of the charter of the Bank of the United States during the present session of Congress, with such alter- ations (if any be necessary) as may secure the rights of the States. "

Such a belief, moreover, is opposed by his own de- claration in the Veto Message, that "a new Congress, elected in the midst of such discussion, and furnishing an equal representation of the people according to the last census, will bear to the Capitol the verdict of public opinion, and I doubt not, bring this question to a satis- factory result."

Now, tbat Congress to which he referred the decision of the question had not yet assembled. In some parts of the country, the members had not been even elected at the time of signing this manifesto; and yet, he now asserts, that he "considers it as conclusively settled that the charter of the Bank of the United States will not be renewed, and he has no reasonable ground to believe that any substitute will be established. Being bound to regulate his course by the laws as they exist, and not to anticipate the interference of the Legislative power for the purpose of framing new systems, it is pro- per for him seasonably to consider the means by which the services rendered by the Bank of the United States, are to be performed after its charter shall expire." This seems to involve an inconsistency. There was a Congress about to meet in ninety days, to which very Congress he had referred the question of the Bank. There was a new Congress to meet in December, 1835, before the expiration of the charter. Yet does he now declare that. since the people elected him and he was opposed to the Bank, he revokes all he said about the | sciousness that it is going on."

Congress of 1833, disregards the Congress of 1835, and chooses to consider it settled without any "interference of the Legislative power."

The next head of complaint is the postponement of a portion of the three per cents. by the Government in April, 1832; and of another portion by the Bank in De- cember, 1832. Nów, it is very remarkable that both these subjects were fully examined-the first by the Committee of Investigation of 1832, and the second by the Committee of Ways and Means of 1833-and both reports are in decided contradiction to the assertions of the President. For instance, he complains of the first postponement, which he imputes to the Bank, whereas the Committee of Investigation themselves de- clare, "they are fully of opinion that the Bank neither sought for nor requested a postponement of the pay- ment by the Government." He complains of the se- cond postponement, yet the Committee of Ways and Means report, that the nominal postponement had, in fact, closed the payment sooner than if no postpone- ment had been made; and that "this question seems no longer to present any important or practical object of inquiry, or to call for or admit of any action of Con- gress upon it."

This would seem to be perfectly satisfactory; yet, lest the revival of these charges may mislead the un- suspecting, it may be well to refute them again, as they have been often refuted before; and the first of the postponement in October. He says of it.

"Conscious that at the end of that quarter the Bank would not be able to pay over the deposits, and that further indulgence was not to be expected of the Go- vernment, an agent was despatched to England secret- ly, to negociate with the holders of the public debt in Europe, and induce them by the offer of an equal or higher interest than that paid by the Government, to hold back their claims for one year, during which the Bank expected thus to retain the use of $5,000,000 of public money, which the Government should set apart for the payment of that debt. The agent made an ar- rangement on terms, in part, which were in direct vio- lation of the charter of the Bank; and when some inci- dents connected with this secret negociation accident- ally came to the knowledge of the public and the Go- vernment, then and not before so much of it as was palpably in violation of the charter was disavowed!"

If there be any one matter in regard to which the Bank is more beneficial than any other matter, it is precisely this agency in paying off the public debt; and if there be any cases in the course of that agency more useful than any other cases, they are precisely these two cases which are here made the subjects of reproach.

The whole collection of the revenue is based on the system, that funds are never accumulated in the Trea- sury for a long period, but are principally lent out to the community, and only called for as they are needed for the public service. Whenever, therefore, large payments are made by the Government, as it is neces- sary to withdraw from the use of the community consi- derable sums, this process requires some delicacy in recalling from distant parts of the United States as much as may answer the immediate exigency, yet not enough to press disadvantageously on the community. This is the especial function of the Bank. How well it has succeeded may be inferred from the testimonials of the successive secretaries of the Treasury. Thus, Mr. Rush, in his Treasury Report of the 13th of Decem- ber, 1828, says:

"In this manner, heavy payments of the debt are in effect, made gradually, instead of the whole mass being thrown at once upon the money market, which might produce injurious shocks. So prudently in this and other respects does the Bank aid the operation of pay- ing off the debt, that the community hardly has a con-

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DEPOSITS-BANK OF THE UNITED STATES.

399

And Mr. Ingham, in like manner, on the 11 th of Ju- ly, 1829, says:

"I take the occasion to express the great satisfac- tion of the Treasury Department at the manner in which the President and Directors of the parent Bank have discharged their trusts in all their immediate rela- tions to the Government, so far as their transactions have come under my notice, and especially in the facili- ties afforded in transferring the funds of the Govern- ment, and in the preparation for the heavy payment of the public debt, on the first instant, which has been ef- fected by means of the prudent arrangements of your Board, at a time of severe depression on all the produc- tive employments of the country, without causing any sensible additions to the pressure, or even visible effect upon the ordinary operations of the State Banks."

Finally, the President himself, in his Message to Congress of December, 1829, says:

"It was apprehended that the withdrawal of so large a sum from the Banks in which it was deposited, at a time of unusual pressure on the money market, might cause much injury to the interests dependant on Bank accommodations, But this evil was wholly avert- ed by an early anticipation of it at the Treasury, aided by the judicious arrangements of the officers of the Bank of the United States."

It had thus become the habitual policy of the Bank at the approach of any large payment, to begin its pre- parations for a long period in advance, so as to collect its resources gradually, and to distribute its disburse- ments over as wide a sphere as possible.

In the year 1832, the country was heavily indebted to Europe for the large importations of the year 1831; and it was particularly desirable to give to the commu- nity leisure to pay that debt out of their annual earnings, and to prevent any addition to the foreign demand in 1832. Now there were more than twenty-five millions and a half of the principal and interest of that debt payable in the year 1832-from Dec. 31, 1831, to Jan. 1, 1833-of which more than fifteen millions were to be paid in nine months, and between eight and nine of it to foreigners. The Bank was fully prepared to make the first payment on the 1st of October, 1832. The State Banks of Philadelphia, New

York, and Boston, owed to this Bank, Its specie at these places alone was 3,200,000 Its funds in Europe were 2,982,000

$2,280,000

Making of cash in hand, or its equivalents, $8,462,000 With an open credit in Europe, on which to draw, for

2,500,000

Besides not less than twenty millions of debts, to be used for this purpose-while the whole public debt to be paid on the first of October, was $8,634,988 37.

In this state, the Bank, had it considered only its own interest, would have been perfectly passive, since it was perfectly at ease. But it had other and higher interests to consult. From the communication with the Treasury in July, it was probable that the funds of the Government might be insufficient to pay the debt advertised to be paid-and that even if these funds were adequate, the operation would exhaust all the means of the Government, and require that the community should repay the whole amount of the pub- lic funds distributed among them. It was further man- ifest that the ability of the Government to meet its en- gagements, depended entirely on the punctual pay- ment of the revenue in the commercial cities, from Ju- ly to January, which was estimated at about twelve millions of dollars.

can be no doubt it would have prostrated all commer- cial credit, and seriously endangered the public reven- ue, as in New York and Philadelphia alone, the demand on account of the foreign three per cents was about five millions.

The Bank, therefore, made an arrangement with the foreign owners of this stock, to the amount of $4, 175,- 373 92 to leave their money in the country for another year, the Bank assuming to pay the interest instead of the Government. Having settled this, the Bank re- sumed its usual facilities of business to the community. Of the whole four millions postponed, the interest on them has ceased, and at this moment the only certifi- cates not yet actually returned, are those in the name of two persons, amounting to $42,375 94, and it is re- markable, that while of the whole amount of $4,175,- 373 92 purchased and postponed, there remain unpaid only two owners, holding $42,375 94; the amount of the unpostponed threes still outstanding is five or ten times as much. So that in fact, as was anticipated in the report of the Committee of Ways and Means, the postponement has actually hastened its payment.

All these things were fully explained by the Commit- tee of Ways and Means, to whom that part of the Pre- sident's message was referred, and that Committee accordingly reported as follows :-

"The arrangement made by the Bank for a tempo- rary postponement, with the consent of the holders of the payment of five millions of the three per cent. debt, being now substantially closed by the surrender to the Government, of the certificates of stock, except for a small amount, and the whole debt itself, as far as re- spects the Government, at an earlier period than it is probable it would otherwise have been, this question seems no longer to present any important or practical object of inquiry, or to call for, or admit any action of Congress upon it."

This ought to be satisfactory, yet is the subject now revived with the addition of two distinct errors in point of fact. The first is that the Bank "was conscious that at the end of the quarter it would not be able to pay over the deposits"- whereas the state of the Bank, as above explained, proved its entire ability to make this payment, and that its interposition was exclusively dic- tated by the desire to avert an additional trouble at a season of pestilence. The second is, that the part of the arrangement made with the agent of the Bank was not disavowed until "some incidents connected witlı this secret negotiation, accidentally came to the know- ledge of the public and the Government." The fact is, that as soon as that part of the arrangement which seemed to conflict with the charter, was received, the determination was made to decline executing it before any publication of any sort was seen or known in regard to it.

The evidence of this is so clear and so short, that it deserves to be cited as an example of the general inac- curacy of this manifesto. The Committee of Exchange, in their report to Congress of January 29, 1833, de- clare as follows:

" But when the contract itself reached the Bank, on the 12th of October, and it appeared from the commu- nication of Messrs. Baring, Brothers & Co., that the stock was to be purchased on account of the Bank, they were immediately instructed, on the 15th of October, that the Bank had no authority to become owners of the stock," &c. &c.

When two of the members of that Committee were examined on oath before the Cominittee of Ways and Means, they confirmed the statement as follows:

Question. Had the President or Exchange Commit- tee, any intention to disavow General Cadwalader's au- thority to make the contract he did, until after the ap- pearance in the New York papers of the 11th or 12th October last, of the circular of the Barings to the fo- reign holders of the U. S. 3 per cent. stocks, announc-

That resource was threatened with the greatest dan- ger by the appearance of the Cholera, which had al- ready begun its ravages in New York and Philadelphia, with every indication of pervading the whole country. Had it continued as it began, and all the appearances in July warranted tbe belief of its continuance, there /ing to them, that they had the authority of the Bank to

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DEPOSITS-BANK OF THE UNITED STATES.

[D & CEMBER

purchase or negotiate a postponement of the stocks held by them.

Answer of Mr. Manuel Eyre. I can say yes positive- ly. I recollect it perfectly well. When I first read this letter, I said it was not proper, and disavowed it.

Answer of Mr. Matthew L. Bevan. I never did see myself, the notice referred to in the New York papers, but well recollect the moment the letter was received giving information of the proceedings in relation to that negociation, the President of the Bank, with the appro- bation of the Exchange Committee, immediately wrote, disavowing the nature of that arrangement, it having been made under a misapprehension."

The complaint in regard to the postponement by the Government in April, 1832, is of the same character. He says, that "after this negotiation had commenced, the Secretary of the Treasury informed the Bank that it was his intention to pay off one-half of the three per cents on the first of the succeeding July, which amount- ed to about $6,500,000. The President of the Bank, although the Committee of Investigation was then look- ing into its affairs at Philadelphia, came immediately to Washington, and upon representing that the Bank was desirous of accomodating the importing merchants at New York, (which it failed to do) and undertaking to pay the interest itself, procured the consent of the Sec- retary, after consultation with the President, to post- pone the payment until the succeeding first of Octo- ber."

The impression here intended to be conveyed is, that the President of the Bank, in order to relieve the Insti- tution from a demand which it could not sustain, asked an indulgence which was conceded by the Government. Now the truth is, that the Government wished to make the postponement, but could not do it without the aid of the Bank. Mr. M'Duffie, Chairman of the Commit- tee of Ways and Means, and Mr. Cambreleng, Chairman of the Committee of Commerce, who were then mem- bers of the Committee of Investigation at Philadelphia, wrote letters to the Secretary of the Treasury dissuad- ing the Government from making the payment. The only difficulty in doing it was, that the Commissioners of the Sinking Fund had no authority to postpone the payment, as they would be obliged to pay the quarter's interest during the three month's delay-and this dif- ficulty was removed by the President of the Bank, who agreed to pay the interest as the money would remain in the hands of the Bank. The letters just mentioned were accordingly submitted to the President, who never saw the Secretary of the Treasury on the subject, as that gentleman was sick, and who himself decided on the postponement after seeing the recommendation of Mr. M'Duffie and Mr. Cambreleng. Much stress is also laid on the visit of the President of the Bank to Wash- ington, while the Committee of Investigation were in Philadelphia. The truth was, the letter of the acting Secretary was received so immediately before the pe- riod fixed for issuing the notice of payment, that if any thing were to be done at all, it was to be done only by personal communication with the Secretary, as there was no time for correspondence. The gentlemen of the Committee were aware of his going, and two of its members wrote letters to promote his object. Be- sides, his leaving the Committee of Investigation in full possession of the Bank and all its papers, so far from being a subject of reproach or suspicion, is the surest mark of his entire reliance that there was nothing in the concerns of the Bank which they might not exam- ine at leisure during his absence,and was the best proof of his confidence in them as well as himself. The whole subject was before the Committee of Investiga- tion of 1832, and that Committee acknowledged, as will be seen from the following extract from their re- port, that this postponement was not the work of the Bank. The Committee say-

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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. XII, Part 113

Author: Hazard, Samuel, 1784-1870 Publication date: 1828 Publisher: Philadelphia : Printed by W.F. Geddes ; Number of Pages: 438

Author: Hazard, Samuel, 1784-1870
Publication date: 1828
Publisher: Philadelphia : Printed by W.F. Geddes ;
Number of Pages: 438