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Letters from the Bank of the United States, and Branches, to the Treasury.
Bank of the United States,
SIR: I am honored with your letter of the 26th ult., enclosing your circular to the State Banks, and, having exhibited them to the board of directors, no unnecessary time will elapse in communicating the views you have required upon the subjects, submitted in your letter of the 29th, and those of subsequent dates upon the same topic. Your judgment, and liberality, will justly appreciate the difficulties in which these subjects involve the decision of the board, at a period when even the punctual payment of the second instalment of the capital of the bank is yet problematical, in consequence of the act of incorporation having failed to provide the necessary means to ensure punctuality, and while the premium demanded for specie, and the interest on the amount of the instalments, furnish stronger motives to delinquency than any hope of dividends from the bank, during the first year, does to observe punctuality. It is the ardent desire of the board to test the capacity of the bank, by the strictest scrutiny, in order, if possible, to fulfil the wishes of the Government, and supercede the necessity of issuing Government paper, of any description, which would, at best, prove an indifferent palliative. It would really appear, sir, that the State Banks, instead of putting their shoulders to the wheel, indulge the most extravagant expectations of relief from the operations of this bank, and calculate upon replenishing their vaults, by transferring to us their debtors; and, by this ingenious kind of transmutation, convert their paper into solid coin, without the expense, or inconvenience, attending the ordinary process. You observe, that an order will immediately issue, directing the revenue bonds, now in the State Banks, to be deposited in the Bank of the United States, for collection; and that like orders will be given, when the branch banks shall go into operation, in the principal commercial cities. I have the satisfaction to inform you, that the offices of discount and deposite, at Baltimore, and New York, are prepared now to receive them, and the office in Boston, will be prepared on the 15th inst. It is understood by the bank, that, until the 20th February, the revenue will be collected in the paper of the State Banks of the respective districts, as heretofore, and passed to the credit of the Trea
sury, as a special deposite, liable to be drawn for, and paid in like currency, and that all bonds, lodged for collection at the bank, and its branches, and falling due before that day, will fall within this rule. It will be satifactory to the bank, to ascertain explicitly, whether this understanding is, in all respects, correct. It will, also, be desirable to ascertain, whether it will be compatible with the views, and convenience of the Treasury, that the bank should employ a portion of the revenue, so collected, in the operation of reducing the exchange between Baltimore, Philadelphia, and New York, in order to facilitate the resumption of specie payments; or, whether the Bank would be liable to be called upon to replace the balances, at those respective places, as they may have stood prior to the operation. It is believed that much good would be effected, by this application of the public moneys, and, as I took occasion to observe in a former letter, profit is not the object of the bank in making this suggestion. I am, with the highest respect, Sir, your obedient servant, W. JONES, President.
Bank of the United States, Jan. 4, 1817.
SIR: I have the honor to transmit herewith a receipt of the Cashier of the State Bank, Boston, dated the 31st ultimo, for five hundred thousand dollars, which he has placed to the credit of the Treasurer of the United States in that bank, it being the amount of the loan made to the United States by contract, dated the 28th December last. I am, with great respect, Sir, your obedient servant, JONA. SMITH, Cashier.
Hon. W. H. CRAwfond,
Bank of the United States, Jan. 9, 1817.
SIR: I am aware of the importance and intricacy of the questions you have submitted to the consideration of the Board of Directors, and of the extreme difficulty of correcting the evils created by the spurious currency, which has driven from circulation the lawful money of the United States.
I apprehend there is no other instance of equal forbearance on th part of any Government; and the circumstances are the more extraordinary, from the well-known fact, that the principal banks, whose paper is thus degraded, are not only solvent, but rich in surplus funds and resources, abundantly sufficient to relieve them from the reproach of delinquency, and of a violation of the rights of property, to an extent which has levied upon every citizen, whose
business is not strictly local, a contribution in the way of discount
dity of the avaricious, we may justly extend our estimate of the aggregate amount. There can be no doubt of the disposition and ability of many of the state banks to resume specie payments; but others less prepared may be indebted to them, and as the paper of the debtor banks, which may not resume specie payments simultaneously with those to whom they are indebted, would be useless for any other purpose than that of deriving an interest on the amount in the same interdicted medium, it may in some degree retard the specie operations of those who even now may be prepared in other respects. It is, however, the obvious interest of the latter, to extend to the former every reasonable facility and accommodation, in order to convert their useless paper balances into an efficient medium; and therefore, that which at present retards the specie operations of some, may ultimately produce the co-operation of all, who mean to sustain the credit upon a solid basis. The direction of the Bank of the United States, aware that public confidence has been too violently assailed to be restored by those means, which, in ordinary times, would have preserved it inviolate, has taken prompt and efficient measures to procure and import a large amount in specie from Europe; and all the banks in this city, availing themselves of the favorable occasion, solicited and obtained aparticipation, in the intended importation, which, on that account, will be largely augmented. This auspicious indication on the part of those banks, gave great satisfaction to the Bank of the United States, and inspired a hope that they had perceived their true interest, and would resume specie payments on or before the 20th February next; whether we are to realize or abandon this hope, is yet uncertain; the present aspect however, is very unfavorable. With the disposition evinced by the Government, felt by the banks, and unequivocally expressed by the community; certain it is, the state banks would derive more support from these sources at that period, than after their paper has been discredited, and many millions drawn from their vaults, and put into circulation. It is not to be credited, that the judicious and respectable men who govern many of those institutions, can lose sight of these obvious inducements, or of the pernicious consequences which must flow from a fatal determination to continue a fallacious and ruinous system, which reason cannot tolerate, nor justice endure. If, however, the banks shall determine to reject the Treasury proposition, contained in your circular of the – ultimo, it is manifest, that no inducement which the Government can offer, will avail. If the state banks expect that the Bank of the United States, with but a portion of its capital at command, in the midst of base currency, and a false system of credit, will launch out its intrinsic means, in order to enable the doubtful debtors of these institutions to pay what it may not be prudent to coerce, nothing can be more fallacious. The Bank of the United States has a high and responsible duty to werform, and it will not disappoint the redsonable expectations of the public. It is surrounded with difficulties, and must be governed by prudence. It will be just and liberal, but will not jeopardize its credit, in order to acquire popularity, or silence clamor. Its first objects will be te facilitate the collection and transmission of the public revenue, the equalization of domestic exchanges, and the accommodation of those who owe to the revenue, and cannot derive the lawful currency from other sources, to discharge their obligations. As its resources increase, and the currency of the country improves, its operations will expand, and embrace all who are entitled to credit; but it can never countenance the paper system, by accrediting a false medium, and involving the interest and fate of a great institution, in the common wreck of credit which a perseverance in that system must produce. The enclosed resolution of the Board of Directors, which has been adopted, as soon as the circumstances of the bank, the magnitude and importance of the objects upon which they were called to decide, would admit, will supersede further detail, and, I trust, satisfactory to the Government. I have the honor to be, very respectfully, Sir, your obedient servant, W. JONES, Pres’t. The Hon. W. H. Chawroad.
Extract from the Minutes of the Board of Directors of the Bank of the United States, January 9th, 1817.
Bank United States, January 9th, 1817.
“Resolved, That the President of this bank, in answering the questions submitted by the Secretary of the Treasury, in relation to the means for supplying a national currency, adequate to the wants of the community in the principal commercial cities, for the payments on account of the revenue, arising from imports, from the 20th February, to the 1st July next, in the event of the state banks refusing to pay specie for their notes, on the day first mentioned, be authorized to represent the views and decision of this board, in the following terms:
“1st, That, in the opinion of this board, the issuing of Government paper for that purpose, in either of the modes suggested in the letter of the Secretary, would fail to produce the beneficial results to be derived from a currency, convertible on demand into specie, which, in consequence of this quality, inspires confidence, and continues in circulation, subserviug all the purposes of commerce and revenue, as effectually as the solid coin which it represents; while the former being limited to the single operation of paying the revenue, would be useful only for that object, and return to the Treasury, as soon as issued; that it would impede the progressive issues of the