DEC. 19, 1836.]

Treasury Circular.

away to the debtor States, who, in turn, cannot use it, either to pay old engagements or to contract new. By this unnatural process the specie of New York and the other commercial cities is piled up in the Western States; not circulated, not used, but held as a defence against the Treasury; and while the West cannot use it, the East is suffering for the want of it. The result is, that the commercial intercourse between the West and the Atlantic is almost wholly suspended, and the few operations which are made are burdened with the most extravagant expense. In November, 1836, the interest of money has risen to twenty-four per cent.; merchants are struggling to preserve their credit by ruinous sacrifices; and it costs five or six times as much to transmit funds from the West and Southwest, as it did in November, 1835, or '34, or '32. Thus, while the exchanges with all the world are in our favor, while Europe is alarmed, and the Bank of England itself uneasy at the quantity of specie we possess, we are suffering, because, from mere mismanagement, the whole ballast of the currency is shifted from one side of the vessel to the other." *

*

"In the absence of good reasons for these measures, and as a pretext for them, it is said that the country has overtraded, that the banks have over-issued, and that the purchasers of public lands have been very extravagant. I am not struck by the truth or the propriety of these complaints."

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[SENATE.

He

the conduct of the banks acting with politicians and with the Bank of the United States. The general prosperity of the country is great; but there are places, Philadelphia, New York, and some others, where the withdrawal of money under the deposite act has occasioned a pressure, and where the policy to create distress, and to throw it upon the Treasury order, is seconded by the ability to accomplish what is desired. This is about the true state of the question; and evidence will be at hand to show it. Mr. B. said it would be remembered that, when this resolution was called up a few days ago, he had specified his intention to obtain from the Treasury Department the comparative returns of many banks, both in the new States, where there were public lands, and in the Atlantic States, where there were none; and, by looking into their condition before the Treasury order was issued, and since that order had gone into full operation, he would be able to see in what manner the banks had been affected by it. He had now obtained those returns. They, of course, were limited to the deposite banks; but being scattered over every State in the West, from the lakes to the Gulf of Mexico, and throughout the Atlantic States from Maine to Georgia, the result which they would present could not be otherwise than a fair index to the general condition of the whole country. had looked carefully over these returns, covering as they did eight large folio pages, and the result indicated not only a good condition, but an improved condition; not only an ability to aid the community, but aid actually given. Mr. B. then went over the returns, one by one, taking for his points of comparison the months of July and November; that is to say, the month before the order went into operation, and the latest month at which the banks had been heard from since. He examined them under the three beads of 1. Loans; 2. Specie on hand; and, 3. Circulation; and the general results were, that the loans in November were larger than in July; the *specie greater in November than in July; the circulation in many instances not diminished, in some increased; and in most instances the specie on hand and the circulation brought to a nearer proportion to each other; insomuch that banks which had eight, ten, or twelve dollars of paper out for one dollar of silver in their vaults in July, were now brought to the safer proportion of three or four to one in November. This was proof that the banks were not crippled. It was proof that they were not denying accommodations. The proof was complete, as far as it went, and it went all over the Union, that these banks were not injured by the Treasury order, but were benefited by it; it was proof that they were not only able and willing to assist the community, but actually had assisted them.

"Now the fact is, that, at this moment, the exchanges are all in favor of this country; that is, you can buy a bill of exchange on a foreign country cheaper than you can send specie to that country. Accordingly, much specie has come in-none goes out; this, too, at a moment when the exchange for the last crop is exhausted, and that of the new crop has not yet come into the market; and when we are on the point of sending to Europe the produce of the country, to the amount of eighty or one hundred millions of dollars. How, then, has the country overtraded? Exchange with all the world is in favor of New York." "The people of the United States, through their rep. resentatives, rechartered that institution. But the Executive, discontented with its independence, rejected the act of Congress, and the favorite topic of declamation was, that the States would make banks, and that these banks could create a better system of currency and exchanges. The States accordingly made banks; and then followed idle parades about the loans of these banks, and their large dealings in exchange. And what is the consequence? The Bank of the United States has not ceased to exist more than seven months, and already the whole currency and exchanges are running into inextricable confusion, and the industry of the country is burdened with extravagant charges on all the commer

cial intercourse of the Union."

"In the mean time, all forbearance and calmness should be maintained. There is great reason for anxiety-none whatever for alarm; and with mutual confidence and courage, the country may yet be able to defend itself against the Government. In that struggle my own poor efforts shall not be wanting, I go for the country, whoever rules it. I go for the country, best loved when worst governed-and it will afford me far more gratification to assist in repairing wrongs, than to triumph over those who inflict them."

Here (said Mr. B.) is a woful picture of distress, drawn in the same colors in which the same pictures were drawn in 1833. But is it a true picture? and, if it is true, what has caused it? To these questions the answers are plain: first, that the picture is not true, except in places where the Bank of the United States and its affiliated banks have power to make it so; and, secondly, that whatever real distress is felt in some places, is occasioned by the deposite act of the last session, and VOL. XIII.-3

On the other hand, there might be banks which were not assisting the community, and which were accom plishing a pecuniary and political object at the same time, by shutting their doors upon borrowers, and throwing them into the hands of money dealers at three per cent. discount per month. This was said to be the case in Philadelphia; that Philadelphia which was the seat of the new United States Bank, with her capital of thirtyfive millions, which one short year ago was to make money so plenty in that State, and to reduce interest to 5 per cent. per annum. Three per cent. discount, equal to 4 per cent. interest, is now the rate of usury which prevails around her! And she can make it 6 or 12 per cent. per month whenever she pleases. Where banks have monopolized the currency, and become the dispensers of money, they can make interest, or usury, what they please. They have only to stop discounts, and throw the borrowers into the hands of usurers. Pretexts will never be wanting. Any thing that happens, or does not happen, will do; the removal of the depos

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Treasury Circular.

ites-the issuance of the Treasury order-or the last year's snow. One thing is as good as another; for the banks themselves are the sole judges of their own reasons, decide without argument, and without appeal, and act upon the decision without mercy and without re

morse.

This is now going on in some of the principal cities, where the deposite act, creating a real pressure, gives to the Bank of the United States and its affiliated institutions the power to do great mischief. Of this power they avail themselves; but their sphere of action is limited, not general. Their victims are individuals, and not the Union. They destroy individuals, or, at most, isolated communities. At the most, they only do a Goliad business-kill their prisoners; that is to say, the debtors; a pen-full, or a pail-full, at a time. The debtor part of the community, where the powers of the Bank of the United States and its associates predominate, suffer severely and cruelly; but the remoter parts of the Union are safe. The Briærian arms of the monster no longer reach to the extremities of the Union. It can no longer strike down exchanges, sink the price of produce and property, and demolish merchants and traders in the towns and cities of the South and West. The tragedy of 1833, now pe forming on the local theatres of some of the Atlantic cities, cannot be again extended to the country towns and remote States.

Mr. B. remarked upon the statements in Mr. Biddle's letter; he chose to refer to that letter as being the revealed source of this proceeding against President Jackson, and the fountain from which all the arguments of the opposition are drawn; he remarked upon the statements in it, that it was the great transfer of specie to the West which occasioned distress in the East; that much specie had gone to the West, and that none had been exported. Mr. B. said he had prepared himself with facts to reply to these two assertions. In the first place, a Treasury return which he held in his hand, showed that no more than $1,463,656 in specie had been received at all the land offices under the Treasury order, and a like return showed that $312,811 in gold, and $4,123,004 in silver, had been exported from the United States this year. Here then was an export of specie to foreign countries of three times the amount of that which went into the land offices; yet the public are to be told by the president of the bank bearing the name of the United States, that no specie had been exported!

[DEC. 19, 1836.

refused a dollar of it to her creditors there! and that a bank holding $300,000 of her notes, had to send them, and did send them, to Philadelphia to be cashed, at great expense, and, what was more material, at great loss of time, when the city was otherwise pressed for specie by the double cause of demands to supply the Western land purchasers, and failure to receive the accustomed supplies from Mexico, on account of the Texian war. Here, then, was $300,000 more taken out of circulation by the Bank of the United States in one month, than all the land offices received in four months; and if the fact was true, as related to him, the evidence was clear and incontestable that this bank was itself making the scarcity and pressure which it has been falsely throwing upon the Treasury order, and upon President Jackson. Mr. B. asked no one to condemn the bank unheard upon this statement; but he also asked that no one would refuse to have it inquired into by a committee.

The real cause of the pecuniary pressure and derangement of the exchanges experienced in some of the large cities, exclusive of that created by some of the banks, was the deposite act of the last session. That act causes thirty odd millions of dollars, about fifteen millions of which is money appropriated to useful and essential objects, to be suddenly withdrawn from the vortex of business, and transferred to places where it must stagnate for some time before it can come again into active employment. Aware of this, and sensible that the public eye was fixed upon this act as the real source of a bona. fide distress, the attempt is made to turn off the effect from the act itself, to the mode of its execution. It is not the transfer of these thirty millions, they say, which has done the mischief, but the manner of making the transfer! This (said Mr. B.) is a repetition of the old song about the removal of the deposites. It was not the removal, but the manner of the removal, which had done all the mischief in 1833. And when pressed to explain what was this mystical manner of acting which was so magically calamitous, the solution was in the destruction of confidence. This was the solution then; it is the solution now; for the president of the Bank of the United States expressly declares that the instant recision of the Treasury order would restore confidence in twentyfour hours, and relief in as many days. This was the declaration during the whole panic of 1833; and its meaning then and now is the same: that the Bank of the It is in this way that the public is deceived, and that United States and its affiliated institutions would cease the Treasury order is made the pack-horse, to be loaded scourging the country the instant that Congress would with every thing that can be heaped upon it. The ex- grant its president the victory and triumph which he port of four and a half millions of specie to foreign coun- demands over President Jackson! The six months' cry tries is called nothing-is said to be none-while one and of the session of 1833-34 was, that the restoration of a half millions, gone into our land offices, has overset the deposites, or the recharter of the bank, would rethe national ship, and deranged the business of a conti- lieve the distress in twenty-four hours, and that nothing - nent! One million and a half out of seventy-five mil. else ever could relieve it. Now it happens that the test lions has gone into the land offices. Who would feel it? of time, and the letter of the president of the Bank of How could it disturb the business of the country? And, the United States, has shown that this cry of six months' especially, how could one million and a half, by going duration was entirely erroneous; for the distress did into the interior of our country, do all this mischief, cease, and unbounded prosperity has ensued; while the when four and a half millions, by going to foreign coun- only condition on which this was to take place has never tries, is not felt or known? But there was another ope- happened; the deposites are not restored; the bank is ration in specie of which Mr. B. bad been informed, and not rechartered; the distress did cease; unexampled which he should bring under the inquiries of a commit- prosperity has ensued, which is attempted to be intertee, if he should be so fortunate as to be allowed one,rupted again by those who interrupted it then. and which he mentioned now, not as evidence to con- Mr. B. said the deposite act was the offspring of the vince the Senate, but as a ground for demanding a com- land bill, and became the substitute for it. That bill mittee. His information was this: that in the month of had passed the Senate before the deposite bill was September last, the merchants and bankers of New Or-brought in, and, so far as the Senate was concerned, had leans became suddenly surprised at the mysterious scarcity of specie. It had vanished as if by magic. A meeting was held to know what had become of it; and it was ascertained that the Bank of the United States had collected and boxed up $1,800,000 in that city, and

made a previous disposition of the same money. That bill was carried through the Senate by the votes of those who are considered as the tutelary deities of the mer chants and bankers on this floor; yet the disposition which it proposed to make of what was called the pro

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Treasury Circular.

prove its general prosperity; lie referred to the high prices paid for every thing to prove that money was not scarce, except to those whose engagemnets compelled them to repair to the banks; he referred to the rates of exchanges in the South and West to prove that the exchanges of the country were good wherever they were beyond the reach of the Bank of the United States; and be stated the contents of letters in his possession from presidents and cashiers of banks in Ohio, Mississippi, and Louisiana, to show that there was but one objection to the Treasury order, and that was, that it had not been issued early enough!

[DEC. 19, 1836.

stock, and under circumstances which exposed the motives of some of those who participated in the passage of the act to distrust.

"The facts that the value of the stock was greatly enhanced by the creation of the bank; that it was well understood that such would be the case, and that some of the advocates of the measure were largely benefited by it, belong to the history of the times, and are well calcu ated to diminish the respect which might otherwise have been due to the action of the Congress which created the institution.

"Such was the orgin of a national bank currency, and such the beginning of those difficulties which now appear in the excessive issues of the banks incorporated by the various States."

"On the establishment of a national bank, it became Having vindicated the Treasury order from the charges the interest of the creditors that gold should be superscof illegality and unconstitutionality, and shown that it hadded by the paper of the bank as a general currency. A not been ruinous to the country, Mr. B. said he would value was soon attached to the gold coins, which made proceed to show the reasons for which it had issued, and their exportation to foreign countries, as a mercantile the benefits which had resulted from it. President Jack-commodity, more profitable than their retention and use son, it was known, in the exercise of his high constitu- at home as money. It followed as a matter of course, if tional duty to see the laws of the country faithfully exe- not designed by those who established the bank, that the cuted, had directed the issuing of this order. He stood bank became, in effect, a substitute for the mint of the before the country as its responsible author. As such he United States. had been denounced. As such he was charged with violating the laws and constitution, and destroying the pros perity of the country. As such he is calumniated in the Philadelphia letter, which calls this order "the revenge of the President upon Congress for passing the distribution bill." As such, another condemnation, for the gratification of discomfited politicians and a dethroned national bank president-another victory in the Senate chamber for those who have been defeated at the polls-is now sought against him in this attempt to rescind that order. Under such circumstances, it is not only right that he should find defenders, but that he should be heard also in his own defence. Mr. B. would therefore refer to the annual message delivered at the opening of this session of Congress, and point the attention of the Senate and the country to the whole of that profoundly wise, transcendently patriotic, and paternally beneficent, part of the message which relates to the general currency and to the national domain.

Extracts from the President's Message.

"I beg leave to call your attention to another subject intimately associated with the preceding one-the currency of the country.

"It is apparent, from the whole context of the constitution as well as the history of the times which gave birth to it, that it was the purpose of the convention to establish a currency consisting of the precious metals. These, from their peculiar properties, which rendered them the standard of value in all other countries, were adopted in this, as well to establish its commercial standard, in reference to foreign countries, by a permanent rule, as to exclude the use of a mutable medium of exchange, such as of certain agricultural commodities, recognised by the statutes of some States as a tender for debts, or the still more pernicious expedient of a paper currency. The last, from the experience of the evils of the issues of paper during the Revolution, had become so justly obnoxious as not only to suggest the clause in the constitution forbidding the emission of bills of credit by the States, but also to produce that vote in the convention which negatived the proposition to grant power to Congress to charter corporations; a proposition well understood at the time as intended to authorize the establishment of a national bank, which was to issue a currency of bank notes, on a capital to be created to some extent out of Government stocks. Although this proposition was refused by a direct vote of the convention, the object was afterwards in effect obtained by its ingenious advocates, through a strained construction of the constitution. The debts of the Revolution were funded, at prices which formed no equivalent compared with the nominal amount of the

"The effects of an extension of bank credits and over-issues of bank paper have been strikingly illustra ted in the sales of the public lands. From the returns made by the various registers and receivers in the early part of last summer, it was perceived that the receipts arising from the sales of the pubiic lands were increasing to an unprecedented amount. In effect, however, these receipts amounted to nothing more than credits in banks. The banks lent out their notes to speculators; they were paid to the receivers, and immedi ately returned to the banks, to be lent out again and again, being mere instruments to transfer to speculators the most valuable public land, and pay the Government by a credit on the books of the banks. Those credits on the books of some of the Western banks, usually called deposites, were already greatly beyond their immediate means of payment, and were rapidly increasing. Indeed, each speculation furnished means for another; for no sooner had one individual or company paid in their notes, than they were immediately lent to another for a like purpose, and the banks were extending their business and their issues so largely as to alarm considerate men, and render it doubtful whether bank credits, if permitted to accumulate, would ultimately be of the least value to the Government. The spirit of expansion and speculation was not confined to the deposite banks, but pervaded the whole multitude of banks throughout the Union, and was giving rise to new institutions to aggravate the evil.

"The safety of the public funds, and the interests of the people, generally, required that these operations should be checked, and it became the duty of every branch of the General and State Government to adopt all legitimate and proper means to procure that salutary effect. Under this view of my duty, I directed the issuing of the order which will be laid before you by the Secretary of the Treasury, requiring payment for the public lands sold to be made in specie, with an excep tion until the fifteenth of the present month in favor of actual settlers. This measure has produced many salutary consequences. It checked the career of the Western banks, and gave them additional strength in anticipation of the pressure which has since pervaded our Eastern as well as the European commercial cities. By preventing the extension of the credit system, it measurably cut off the means of speculation, and retarded its progress in monopolizing the most valuable of the public lands. It has tended to save the new States

from a non-resident proprietorship, one of the greatest obstacles to the advancement of a new country, and the prosperity of an old one. It has tended to keep open the public lands for entry by emigrants, at Government prices, instead of their being compelled to purchase of speculators at double or triple prices, and it is conveying into the interior large sums of silver and gold, there to enter permanently into the currency of the country, and place it on a firmer foundation. It is confidently believed that the country will find in the motives which induced that order, and the happy consequences which will have ensued, much to commend and nothing to condemn."

[SENATE.

the most fallacious hope of an easier payment of debts and a lighter burden of taxation. It is easy for a portion of the people to imagine that Government may properly continue to receive depreciated paper because they have received it, and because it is more convenient to obtain than other paper or specie. But on these subjects it is that Government ought to exercise its own peculiar wisdom and caution. It is supposed to possess, on subjects of this nature, somewhat more of foresight than has fallen to the lot of individuals. It is bound to foresee the evil before every man feels it, and to take all measures to guard against it, although they may be measures attended with some difficulty, and not without some temporary inconvenience. The only power which the Government possesses of restraining the issues of the State banks is to refuse their notes in the receipts of the Treasury. This power it can exercise now, or at least can provide now for exercising it in reasonable time, because the currency of some parts of the country is yet sound, and the evil is not yet universal. But I have expressed my belief on more than one occasion, and I now repeat the opinion, that it was the duty of the Secretary of the Treasury, on the return of peace, to have returned to the legal and proper mode of collecting the revenue. This Government has a right, in all cases, to protect its own revenues, and to guard them against bad and depreciated paper. As to the opinion advanced by some that the object of the resolution cannot in any way be answered; that the revenues cannot be collected otherwise than they now are, in the paper of any and every banking association that chooses to issue paper, it cannot for a moment be admitted. The thing then is to be done; at any rate it is to be attempted. That it will be accomplished by the Treasury Department, without the interference of Congress, I have no belief. If from that source no reformation came when reformation was easy, it is not now to be expected. The great object is that our legal currency is to be preserved, and that we are not to embark on the ocean of paper money. I cannot say, indeed, that this resolution will certainly effect the desired end. It may fail. Its success, as is obvious, must essentially depend on the course pursued by the Treasury Department."

Mr. B. said it would be observed by the Senate that the reasons for issuing the Treasury order are introduced by the President under the head of "currency," and not under the head of "public lands;" and that, in his whole manner of treating it, the currency is the object, and the lands the incident. The regulation of the currency is the great object; and as the lands, and not the custom-house, was the exciting cause of the swollen, bloated, and diseased state of the currency, the remedy was directed to the lands, and not to the customs. All this is visible in the passages read. It is also visible in the original Treasury order itself, where the discouragement of the ruinous extension of bank issues, the preservation of the soundness of the currency, and the safety of the Federal revenue, are distinctly and prominently set forth among the high inducements to its issue. Very rightly, then, did the Senator from Massachusetts [Mr. WEBSTER] express himself on Thursday last, in the few remarks which he then made; very rightly did he declare this to be a currency question, and not a land question! a financial measure of the greatest moment and extent, affecting every interest and the whole Union! and rightly did he claim for it that high consideration which is due to a measure, not of sectional, but of national concern. The gentleman is right. The Treasury order is a regulation of the national currency, issued under the constitutional obligation of the President to preserve and protect the currency of the Federal Government, and exercised according to the manner pointed out by the author of the joint resolution of 1816, and according to the manner, though not to the same degree, that the Mr. B. would add nothing by commentary to the powregulation of the currency was effected by the Bank of er or appositeness of these quotations. They were up the United States during the whole period of its exist- to the exigencies of the present occasion, fitted it as if ence. The constitution recognises nothing for money made to order, and superseded the necessity of argubut gold and silver. The President is the sworn pro- ment or illustration. One thing ought to be well obtector, defender, and preserver of that constitution. To served, that this speech, going the whole length, not onpermit any part of its guarantees to be subverted and de-ly of justifying the present Treasury order, but blaming stroyed, is a dereliction of duty, or a defect of vigilance in him. The joint resolution of 1816 does not grant, but recognises and enforces, his constitutional duties and powers over the preservation of the constitutional currency. The author of that resolution, in the speech from which I have read extracts a speech abounding with just sentiments-recognises all this authority, and proclaims all this duty of the President as attributes of the Executive Government, existing anteriorly to his resolution; a measure only rendered necessary because these powers and duties had been neglected. Listen to him: "There are some political evils which are seen as soon as they are dangerous, and which alarm at once as well the people as the Government. Wars and invasions, therefore, are not always the most certain destroyers of national prosperity. They come in no questionable shape. They announce their own approach, and the general safety is preserved by the general alarm. Not so with the evils of a debased coin, a depreciated paper currency, and a depressed and falling public credit. Not so with the plausible and insidious mischiefs of a paper money system. These insinuate themselves in the shape of facilities, accommodation, and relief. They hold out

the Treasury Department in 1816 for not having done the like, and expressing the fear that it might not do it in time to come, was delivered on the 26th day of April, 1816, four days before the passage of the joint resolution of that year! consequently, and as the whole speech proves, all the powers and duties claimed in that speech for the Treasury Department, and the Executive Government, over the regulation of the currency, the restoration of the constitutional money, and the exclusion of State bank paper from revenue payments, were independent of that resolution! were founded-1st, upon the constitution; 2d, the act of 1789, that the customs should be paid in gold and silver coin only; 3d, the act of May 10th, 1800—— the fundamental act for the general sale of the public lands-and directing that all purchasers should make payment for the same in specie, or in evidences of the public debt of the United States! These were the foundations of the gentleman's argument; these the laws the violation of which he had in his eye; these the ground of his complaint against the existing administration; these the future ark of his financial hope. These are the laws, faithful expositors of the constitution, in aid of which, and to compel the speedy execution of which, the joint