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treated to dinners, presented with the richest offerings that vorites of the bank have so contrived to have half the propcan be bestowed upon him, and he is looked up to with as erty of the rest of the community transferred to them, it much reverence as the feudal lords were formerly by their becomes a matter of inquiry whether it be most to their inenslaved vassals. A feverish excitement seizes upon the terest to commence another operation by "expanding" whole community; a spirit of speculation is engendered ; again, or to stop payment and blow up, leaving their credand many look upon the industrious pursuit of any me itors to seek their remedy out of an empty corporation. If chanical business as too dull and slow to occupy their time they coinmence business again, new life is infused into the and attention. It is time now, however, to trace the ac- community ; business again becomes brisk, in the same tion of the stockholders who have purchased up the pro. way, until the proper time for any other curtailment arducts. In the course of a short time after they are through rives, when the same scenes of distress and panic, sacrifice with their purchases, the products must be in demand, of property, and ruin, are acted over again. Thus, by althere being none to be bought; and, as the volume of cir- ternate contractions and expansions which this bank is en. culating medium has increased from ten to thirty thousand abled to make, and from which its officers and stockholders dollars, by the infusion of twenty thousand dollars of the derive their profits, this little community is kept in a conissues of the bank, and no increase of the quantity of val- tinual fever, first of speculation, then the dubious and ue, as certainly as water will flow down hill, or as any restless state between hope and despair, and, finally, the cause will produce its plainest and most obvious effect, ruin of many; and the few who manage its concerns are (the money having depreciated in real value, though nom- daily growing rich, and become the lords and disposers of inally the same,) property must appreciate or rise in price, the property of others, while their more industrious neigh. compared with that money. At this stage they sell, which bors are their slaves. This epitome may be somewhat they are enabled to do at two or three dollars, what they overdrawn in its details; but let him who doubts the truth purchased at one dollar, until they have disposed of all on of the representation, in the general outlines, as containhand, having made a splendid profit by the operation; and ing a fair picture of our banking systems, read the history whatever they have cleared in profit, the loss to the same of this country during the years 1818, 1819, and 1820. amount is a tax upon the rest of the society. They are Let him trace the wild schemes of speculation and extravnow ready to commence the operation of “contraction." agance which prevailed for the few years previous, immeThe borrowers are called upon for a per centage, perhaps diately on the heels of the litters of banks chartered by the twenty-five per cent. at every sixty days; and, as the cir- Middle States from 1814 till 1817, the charter of the culation is decreased at every payment, being withdrawn United States Bank in 1816, and the extension of the for the purpose of paying the bank, every instalment be same mania for bank facilities that extended shortly afcomes the more difficult to obtain. If only one borrow- terwards to the West; let him look at the scenes of er were called upon, it would not make any material differ- distress, failures, bankruptcies, which followed in 1819 ence, as his payments would have but little effect upon the ) and 1820; the stop laws, stay laws, replevin laws, and a general mass of circulation ; but as all are called upon at host of legislative expedients to which the Legislatures the same time, the volume of circulating medium is rapid were driven to save the people from absolute and immedily decreasing, money becoming more scarce, and the ate ruin, while bank directors and stockholders were riotmeans of obtaining it lessening. A great change takes ing in luxury and rolling in wealth, and the laboring classplace in the appearance and prospects of this little commu es driven to poor-houses, or sentenced to penitentiaries ; nity; a general gloom has spread over the whole face of the similar scenes that were acted over again in 1826, and the country. Those who have borrowed direct all their again in 1833-34, when the United States Bank sought to energies in seeking for means to make payment; those obtain a continuance of its lordly power through the ruins who have kept their money during the season of apparent of the people, and curtailed its discounts at the rate of prosperity now hold it more closely, expecting to wring $2,000,000 per month for that purpose; then say if the the most they can from their more improvident though representation is much overdrawn. perhaps not less worthy and industrious neighbors. In The objections to the banking institutions of the United stead of being engaged in producing something by useful States arise chiefly from their being corporations without inemployment, many feel obliged to spend their time in dividual responsibility, and their being clothed with the seeking to relieve themselves from threatening distress. power of making a paper money circulating medium-in The president and officers of the bank appear now in a other words, of controlling and regulating the currency. very different character than before, in the prosperous sea Corporations of any sort are opposed to the general lib
Instead of the great bestowers of smiles and favors, erties and equal rights of the citizens. They are protected, they are now looked upon as having the power to admin- generally, by express prohibitions to individuals engaging in ister destruction, and they are cringed to for mercy. the same objects for which they are created. In England they Some foreign war, or other distant calamity, is sagely as are regarded as favorable to liberty, because their charters signed as the direful cause, in order to appease the minds are so much power withdrawn from the sovereignty, which, of the people, and divert them from the inquiry into the according to the theory of that Government, is vested in real cause of this unsuspected course. In the general con the Crown. In this country, whose theory places the sorfusion and distress, reaching even those who had nothing ereign power in the people, they are unfavorable to liberty, to do in producing it, some are insolvent, and others real for the same reason that they withdraw a portion of the ize out of their losses a handsome profit. Those who sovereign power from the people. They are only liable in have thus transferred to them the products of the labors of their corporate capacity, being subject to nothing but a corothers indulge in extravagance, luxury, and idleness; porate responsibility, which may very often be no responsiand those who have lost their property by its sacrifice bility at all. What is still worse, however, there is little probably seek relief from the sting of their misfortunes in or no moral responsibility, particularly where there is a the indulgence of other vices, and society thus loses the powerful motive of interest involved. It is well known benefit of the industry of both classes. If the forty bors that men will do many things, when associated in a cor: rowers and the ten stockholders be thus withdrawn from poration, at which they would shudder even to think of as useful industry and productive employment, one half of the individuals; and no description of corporations has been so society have the other half thrown upon their support, conspicuous for the manifestation of moral defections as either as lords and noblemen, or as paupers and convicts. banking companies. The whole history of corporations is This shaving operation may require a year for its perform- full of examples, proving triumphantly the truth of this ance. At the end of that time, when the managers and fa- | position. We select one, as given by Mr, Gouge, extract
ed from a report made to the Senate of the State of Massa- sin more easily in their individual character. How many chusetts, in January, 1830, as follows: “ The Sutton instances have come within our knowledge of mobs, upon Bank was incorporated the 11th March, 1828. The act the failure of a bank, whose officers were the occupants of incorporation provides that the capital stock of said cor of spacious houses, living in the height of splendor and poration shall consist of one hundred thousand dollars in luxury, while their creditors were beggared for the want of gold and silver, to be divided into shares of one hundred their honest dues, in which it was difficult to determine dollars each, which shall be paid in the manner following, which to condemn most—the charter-protected villany of viz: one half part thereof on or before the 1st day of Octo- the one, or the misdirected violence of the other! Scenes ber (then) next, and the remaining part thereof on or be- of that kind have been very frequent, and furnish strong fore the 1st day of March, in the year of our Lord one evidence of the corrupting and pernicious tendency of money thousand eight hundred and twenty-nine.' And it further corporations. Incorporated companies will get up claims provides that no moneys shall be loaned or discounts of which most individuals would be ashamed, and often, made, nor shall any bills or promissory notes be made or through the influence they can bring to their aid, bear down issued from the said bank, until the capital subscribed and the rights of an honest individual who cannot compete actually paid in, and existing in gold and silver in said with them for power. They often set themselves boldly in vaults, shall amount to fifty thousand dollars ; nor until array against the Government which gave them birth, and the said capital stock actually in said vaults shall have sometimes have gone so far as even to claim their privileges been inspected and examined by three commissioners, to as vested rights, that the power which gave them could not be appointed by the Governor for that purpose, whose duty take away. The only sort of justification for the creation it shall be, at the expense of the said corporation, to ex of such institutions is the accomplishment of some great amine the money actually existing in said vaults; and to purpose of general utility, beyond the reach of individual ascertain, by the oaths of the directors of the said bapk, or means and enterprise. Lord Coke says, “ the granting of a majority of them, that the said capital stock hath been exclusive privileges cannot be justified, except on a case bona fide paid in by the stockholders of said bank, and to- being made out of urgens necessitas et evidens utilitas.” wards the payment of their respective shares, and not in- A corporation for the purpose of building a bridge, a turntended for any other purpose ; and that it is intended there pike, à railroad, or a canal, which may produce a work to remain as a part of said capital.
highly beneficial to the public, may be regarded of that “On the 26th day of September, 1828, the Governor, description; and it is only on the principle of necessity, in compliance with an application for that purpose, made being beyond the power of individual enterprise, and not by a committee of the subscribers for stock in said Sutton furnishing sufficient interest for the investment of private Bank, appointed commissioners to examine the moneys ac- capital, and the benefits they confer on the community at tually existing in the vaults of said bank, as is provided in large, that they can be justified. But what justification the second section of their act of incorporation. On the can be found for the incorporation of banking companies 27th day of September, 1828, the Sutton Bank borrowed, in necessity arising from the object being beyond the acon a deposite of fifty-one thousand dollars in the bills of complishment of individual means? What is more simple the City Bank, the sum of fifty thousand dollars in specie and easy than the loaning of money? Ten men, each for one day only. This same specie was examined by the owning $1,000, can as easily loan it as ten men united commissioners, and the following certificates made out, viz: in a corporation owning $10,000 can loan that sum. In
«« We, the subscribers, commissioners appointed for that the loan of money there is no great undivided purpose to purpose, have this day been shown, and have examined, be accomplished, as in the construction of a bridge or a fifty thousand dollars in specie in the vaults of the Sutton canal; nor is there the production of any thing by labor. Bank, which was paid in by the stockholders at their first It is a single, plain, simple operation, which can be exinstalment, agreeably to their act of incorporation, passed tended by every single capitalist just to the amount of the 11th day of March, 1828.
money he has to spare; and neither necessity nor public JONATHAN LELAND,
policy requires the incorporation of a company for the AMASA ROBERTS.
purpose. SAMUEL WOOD.
Banking incorporations, therefore, not effecting any SEPTEMBER, 27, 1828.'
great public purpose, which may not be accomplished by "Boston, September 27, 1828.
individual energy, are inimical to the principles of republi"SUFFOLK, $8 :
can government; but, further, as manufacturers of paper “ Then personally appeared Hezekiah Howe, Jonas L. money, authorized to denominate as worth so much, and
representing so much value, that which intrinsically is Sibby, Joshua W. Leland, and Thomas Harbach, being a
worth nothing, they invade one of the high and most immajority of directors of Sutton Bank, and made oath that fifty thousand dollars in specie, by them shown in their portant prerogatives of sovereignty, which, as we have alvaults, was the first instalment paid by the stockholders ready seen, cannot be exercised, even by the supreme power of their bank towards the payment of their respective shares, its citizens, and perpetrating great injustice. If the Gov.
of any Government, without inflicting a deep injury upon and not for any other purpose, and that it is intended there
ernment itself, administered by those who are immediately in to remain a part of said capital. Before me, ELIPHALET WILLIAMS, J. P.'
responsible to the people, whose interests are identified
with the people, cannot exert the power of increasing and "The bills and specie were then re-exchanged, this decreasing the quantity of the circulating
medium, thus dewhole business accomplished within an hour, and all of it preciating its value, without inflicting mischief upon the done within the walls of the City Bank in the city of community, how incomparably more mischievous and deBoston."
structive to the principles of justice and equality of rights! We have no doubt those were all men who claimed a fair what madness! to surrender this power into the hands of standing in society, and any one of whom would have trem- corporations, whose interests are directly at war with those bled to commit so shameful an act in their individual capacity, of the rest of the citizens! It is the advantage of stockand without the shield of corporate investiture. What would holders in those institutions to obtain twice, thrice, or produce a horrible compunction and terror on the mind of quadruple interest on their capital, whether real or fictione man sits easy when it is divided among all the mem- tious. Is it not opposed to the interest of the community to bers of a corporation ; but, becoming familiar to corruption pay it? Are not their interests then set in direct conflict? in a corporate capacity, men may, and very probably do, I An individual who owns money can only obtain interest,
generally six per cent., on what he actually has. Banks, ture are deceptive. If they actually draw interest on this however, are enabled to obtain usurious interest on their amount, they draw from the people $755,544 per annum actual capital, whether it consists of specie, the notes of more than would be drawn by private persons lending bona other banks-two or three dollars of which are really worth fide capital of the same amount as the nominal capital of but one in specie-or the stock notes of subscribers, which the banks. are worth nothing at all. A bank with a capital of $100,000 “Supposing the sums paid in each year, since the pasis authorized to issue its notes to twice the amount of its sage of the bank act in 1814, to equal that paid in 1829, capital. It issues its notes to the amount of $200,000, and the total amount paid by the people in sixteen years, over receives interest, or rather discount, on that sum. Its cap- and above 6 per cent on the loanable capital of the banks, ital and credit, or faith, that it can redeem and pay two is $12,088,704. A direct tax of half the amount for the dollars with one, are thus combined together in a tangible support of Government would have produced a rebellion." forrn in the shape of bank notes, and it receives at the rate “The Bank of the United States had on the 1st of Noof 6 4-10 per cent on the whole. Now, what is the dif.vember, 1829, a nominal capital of $34,996, 270. Of this ference between receiving $12 80 per hundred, or calling amount, $11,717,071 were invested in public stocks, and one hundred dollars two-one capital, the other faith—and $3,876,404 in real estate, leaving it $19,402,795 of nomreceiving $6 40 on each? The usury on the part of the inal capital for its proper business of accommodating borbank is the same in both cases. It is true there is this dif rowers and dealers in bills of exchange. On this amount ference in the operation : in paying double interest on the of bona fide capital, lent at six per cent., private persons real sum, the borrower pays the whole of it; in the other would draw a revenue of $1,164,167. But the bank, case, calling it $200, although it really represents but one, with this annount of nominal capital, discounts notes and it falls upon the whole community, and operates as a tax bills of exchange to the amount of $40,017,445, from upon all; and is, therefore, not only usurious but unjust, which it derives an annual revenue of $2,561,114, or affecting those who have no participation in the transac- $1,396,947 more per annum than would be received by tion.
private capitalists;" nearly $40,000,000 in thirty years. The banks take the promissory notes of individuals at They may well afford to pay a bonus of two, three, or four $6 40 per hundred per annum interest, paid in advance, millions, for the privilege of taxing the people nearly forty and give their own promissory notes in exchange, each millions. In this estimate Mr. Gouge does not include hundred of which only represents fifty dollars of their own " what is paid to the bank on the rate of exchange, capital, the other fifty being credit, without interest; in though he supposes this must amount to hundreds of effect receiving interest on the debts which they owe. Mr. thousands. Jefferson, in a letter to John N. Eppes, in 1813, says: But this is far from being all the tax drawn from the peo“At the time we were funding our national debt, we heard ple by the banks. It has already been shown that, by inmuch about a public debt being a public blessing ;' that fusing their nominal paper money into the mass of circulathe stock representing it was a creation of active capital for tion, they depreciate the value of the whole mass, just in the aliment of commerce, manufactures, and agriculture, proportion to the amount of paper issued, compared with This paradox was well adapted to the minds of believers the specie. Though the delusion which is ingeniously kept in dreams, and the gulls of that age entered bona fide into up of its “convertibility” into specie, (convertible, truly, it. But the art and mystery of banks is a wonderful im- if not more than one third be demanded,) and being called provement on that. It is established on the principle that by the same name, it is palmed off as the representative of private debts are a public blessing.'
And to specie, although, in reality, three dollars only truly reprefill up the measure of blessing, instead of paying, they re sent one; the whole volume, including the specie, is depreceive an interest on what they owe from those to whom ciated, and the prices of all commodities raised. Foreign they owe; for all the notes or evidences of what they owe, products and manufactured articles flow into the country, which we see in circulation, have been lent to somebody and are sold at the high artificial prices, which must be paid on an interest, which is levied again on us through the for in specie. There is then a double operation : the specie medium of commerce."
is driven out of the country to pay for foreign products The tax levied upon the people for the support of banks, and manufactures; foreign producers and manufacturers by their privilege of taking bank interest on twice or three come in competition with those of our own country; and, times the amount of capital they have, is very clearly and to counteract the effect of this, the manufacturers here handsomely exemplified by Mr. Gouge, in his valuable claim a protection from foreign manufacturers by the impo. Treatise on the American Banking System, at page 24, sition of duties on foreign imports. These duties are paid pamphlet edition. He says, “the thirty-one chartered by the consumers here; that is, the people pay one tax for banks of Pennsylvania had, in 1829, according to the the benefit of manufacturers, for the privilege of paying statement of Mr. Gallatin, a nominal capital of $12,032,000. another tax to the banks. Both taxes would be avoided, $1,310,000 of this amount were invested in real estate, if the currency of the country were not depreciated by the and $4,620,000 in stocks of various descriptions, leaving infusion of bank paper. the banks $6,102,000 to employ in discounting notes. We have the authority of Adam Smith, (who has been From the $5,930,000 invested in stocks and real estate, it often quoted as favorable to banks, as he was, but not to is to be presumed they derive as much advantage as private the extent for which he is generally claimed as an advocate,) persons derive from similar investments.
With the re
that bank paper drives the precious metals from the counmaining $6,102,000 they discount notes to the amount of try. He says, in book 2, chapter 2, “Let us suppose, $17,526,000. On this amount they draw interest at 6 for example, that the whole circulating medium of some 4-10 per cent. ; for the usage of the banks is to charge particular country amounted, at a particular time, to one sixty-four days' interest for sixty-three days, and to take million sterling, that sum being then sufficient for circulathe interest in advance.
ting the whole annual produce of their land and labor. “The revenue which private capitalists would derive Let us suppose, too, that, some time thereafter, different from lending $6, 102,000, at the legal rate of 6 per cent., banks, or bankers, issue promissory notes, payable to the would be $366,120 per annum. The revenue which the bearer, to the extent of one million, reserving in their difbanks derive from the management of this amount is ferent coffers two hundred thousand pounds to answer oc$1,121,664. If the banks cannot, by the use of a nomi- casional demands. There would remain, therefore, in cirnal capital of $6,102,000, draw interest from the people culation, eight hundred thousand pounds in gold and silver, on the sum of $17,526,000, their returns to the Legisla-) and a million of bank notes, or eighteen hundred thousand
pounds of paper and money together. But the annual returned to the Senate, he says: “I cannot divest myself produce of the land and labor of the country had before re of the fear that, if it should become a law, it would tend quired one million to circulate and distribute it to its proper only to enrich the wealthy and the speculator, while it consumers, and that annual produce cannot be immediate- would, in various forms, heap burdens on the poor and ly augmented by those operations of banking. One mil- industrious.” In the same message he says: “On the lion, therefore, will be sufficient to circulate it after them. ground of principle, generally, I may confidently say that The goods to be bought and sold being precisely the same industry is the only permanent source of wealth.
It seas before, the same quantity of money will be sufficient for cures subsistence, and advances our interests by slow yet buying and selling them. The channel of circulation, if I sure and regular gains, and is the best preservative of may be allowed such an expression, will remain precisely morals. Not so speculation, (which this bill seems to inthe same as before. One million we have supposed suffi- vite :) it has the direct contrary effect: depending on no cient to fill that channel. Whatever, therefore, is poured fixed principles, it opens a field for the exercise of ingenuinto it beyond this sum, cannot run in it, but must over- ity, ever on the alert to take advantage of the unwary in How. One million eight hundred thousand pounds are accidental variations of the times. The success of the poured into it. Eight hundred thousand pounds, therefore, speculator by profession tempts the farmer or mechanic to must overflow; that sum being over and above what can be forsake his accustomed honest pursuits, Launched on the employed in the circulation of the country. But although wild sea of speculation, ever exposed to deviations from this suin cannot be employed at home, it is too valuable to rectitude, his moral principles become weakened, and be allowed to lie idle. It will therefore be sent abroad, eventually all sense of commutative justice is destroyed.” in order to seek that profitable employment which it can The last bill passed by two thirds of both Houses, and not find at home. But the paper cannot go abroad, be- became a law against the veto of the Governor; and it was cause at a distance from the banks which issue it, and from found that it led to all the extravagant speculations and the country in which payment of it can be exacted by law, pernicious consequences which he had predicted. It was it will not be received in common payments. Gold and in view, no doubt, of their tendency to luxury, extravasilver, therefore, to the amount of eight hundred thousand gance and inequalities, that Mr. Jefferson, in his letter to pounds, will be sent abroad, and the channel of home cir- the publisher of Destutt Tracy's Treatise on Political culation will remain filled with a million of paper, in- Economy, returning the translation to him, and speaking stead of the million of those metals which filled' it before." of the merits of the work, says: “By diffusing sound prinThat the issues of bank paper produce the necessity, or the ciples of political economy, it will protect the public indussupposed necessity, for imposing duties upon foreign im- try from the parasite institutions now consuming it, and ports, by raising the nominal prices, and turning the bal- lead us to that just and regular distribution of the public ance of trade against us, is equally susceptible of demon- burdens from which we have sometimes strayed." stration.
The wealth of a country consists in its industry and Among the numerous evil tendencies of bank issues, that means of promoting and stimulating individual enterprise. of promoting extravagant gambling speculations is not the Speculators produce nothing; they are the drones of the least. Mr. Raymond, in his Elements of Political Econo- bee-hive, which live and fatten upon the labor of others. my, vol. 2, page 146, says, with much truth: “None of Every citizen, therefore, who is invited by artificial laws to the great and substantial departments of industry can be withdraw from the walks of industry, is one member lost prosecuted with money borrowed at bank interest." Again, to the great wealth and happiness producing family, and at page 147: “Speculation is the only business that can imposes an additional burden upon those who remain, bebe followed with money loaned of banks; and hence we sides lessening their motive to active industry. When a always find that speculation is most rife when banks are large portion of society are induced into speculation instead most abundant, and when they deal out their notes the most of working, their aid is not only lost in the support of the profusely.” Again, speaking of bank loans, and speaking Government, so as to increase the burden upon others by of a borrower at bank, he says: “He must employ it in that loss, but the rest of the community are obliged to some adventurous speculation, which, if successful, will support them, and make fortunes for them besides. They enable him to pay the interest and leave him a profit; but are thus a charge upon community, instead of contributing which, if unsuccessful, may bring him to ruin. Hence, their proportion to sustain the burden. wherever banks have been established in the interior of the One of the most extensive evils arising from the banking country, and the farmers and planters have become the system is the fluctuation in all branches of business conseprincipal customers of the bank, they have generally been quent upon the expansions and contractions of bank issues. ruined. This ever has and ever will be the case, so long The manufacture of paper money being regulated entirely as the rate of rent is lower than the rate of interest; and by those whose sole object is their owu interest, and who rent in all countries is always two or three per cent. lower are under no political responsibility, and, as we have seen, than interest.” When prices rise, which, as we have al- very little, if any, moral control, is liable to enlarge or ready attempted to show, is inevitable on the increase of contract, just as that interest, opposed to the general inthe quantity of money, without an increase at the same terest, may dictate. The banking institutions of this countime of value, a spirit
, a fever for speculation, is created. try are peculiarly unfortunate to the public in their power Men become dissatisfied with the gains arising from regular to produce fluctuations from their expansions and contracand steady habits of industry, and indulge in dreams of tions of issues. They have no individual responsibility. splendid fortunes to be amassed in an easier way, by draw- A bank here may be incorporated of the most wealthy ing from the industry of others, in speculation.
citizens as stockholders, and yet there is nothing liable but Simon Snyder, Governor of the State of Pennsylvania, their stock, which is often a very doubtful security. In in his message of March, 1813, returning to the Senate of this respect they differ from the banks in Scotland, the that State a bill, with his objections, very justly observes: stockholders of which are under an unlimited responsibility;
The establishment of twenty.five new banks, dispersed that is, each stockholder is liable in his whole estate for the all over the State, with a capital of $9,525,000, would, by redemption of their paper, just as the several members of a the readiness to give credit, invite to visionary speculations, partnership firm. The stockholders, under such responsidivert men from useful pursuits, damp the ardor of indus- bility, will, of course, be cautious not to permit a greater trious enterprise, and consequently demoralize the commu amount of paper to be issued than can certainly be redeemnity.” In his message the next year, accompanied with ed without risk of their private fortunes. This is a great his objections to another bill of the same nature, which he security, and operates as a powerful check--a check act
ing upon motives of private interest against excessive is From what has preceded, it will be seen that the object
of your committee has been to prove that the banking sysThe banks in this country are permitted to manufacture tem in this country is subject to many and grave objections, paper for the small circulation. There are none of the arising mainly from the banking institutions being incorStates which limit the banks in their issues to a larger porated bodies, with exclusive privileges, and under a limminimum than $5, and many of them authorize those of as ited responsibility-little better than none; and their being low a denomination as $1. In some of the States, then, authorized to issue bank paper to supply even the small cirthe banks are permitted to furnish the entire circulation culation, to the amount of twice, thrice, or quadruple, their above the denomination of $1, which is nearly the same, specie capital; thus invading the high sovereign power of in effect, as supplying the entire circulation. Supplying regulating the measure of value, which is only safely inof the small circulation has a most powerful influence upon trusted to the Government, administered by those who are the business of the mass of community. If our banking responsible to the people. Who would be willing to ininstitutions were linnited, in all the States, to the issues trust in the hands of an irresponsible corporation the powof notes of $100, or $50, or even $20, we should soon see a er of adulterating the coin with alloy, as might best suit great change in the health of the currency. A large por- their interests, and withdrawing that alloy in the same way? tion of the dealings of our society is below either of those And what difference is there between adulterating the coin sums; and, although we should have bank notes above at their pleasure, and decreasing and enhancing the value them, specie would of course flow in to supply the place of the mass of circulation, by withdrawing and issuing bank of the small notes below. It is believed that half the deal notes as they please? What farmer would not be startled ings of the community are below $50. The Bank of at a proposition to intrust corporations with the power of England, although incorporated in 1694, had never issued regulating the weights and measures of commodities in any notes of less denomination than £20 (nearly $100) which he dealt, so as to measure his wheat with a large until 1759; and its whole issues up until 1780, at any bushel measure when they wished to buy, and a small one one time, were no more than six or seven millions of when they wished to sell; to measure his butter with 8 pounds. Until after that time, no great fluctuations or large pound weight when they wished to purchase, and a consequent bankruptcies were experienced. Soon after- small one when they wished to dispose of the same article? wards, when it began the issues of £1 notes, and extend- And what difference is there between controlling the meased its issues, embarrassment and fluctuations took place. ure of value and that of weight or measure ?
Who The first which we have seen noticed by political writers would be willing that the power of levying taxes for the is that in 1783 ; then followed by that of 1793, 1797, support of Government should be delegated to corporations, 1816, 1819, and 1825; all which have become cele- whose proceedings were only known to a few wbo managed brated in the history of the politics of that country; and, them? And yet we submit to their power of imposing in every instance, as proved by Tooke, Mushet, Par taxes much heavier, to support themselves, and grow rich nell, and others, it was preceded first by an extravagant at the expense of the people. The regulating and controlexpansion, and next by a contraction of the issues of the ling the currency is as necessarily an act of the Governbank. In 1797, the Bank of England suspended specie ment as any other act of sovereignty, and should be exerpayments, and so continued to refuse the redemption of its cised by the same authority. notes with specie until 1822, when it resumed them under Mr. Tookc, in his Treatise on Currency, page 125, justan act of Parliament of 1819. In 1829, it ceased to issue ly remarks: “Next to the administration of the State, thero notes of a less denomination than £5, (about $24,) and is no administration of any officer so immediately and exhas so continued since. In this respect, the Bank of Eng. tensively affecting the interests of the community as that land is not so objectionable as our banking institutions, which is intrusted to the persons (the bank directors) who and its issues are not so subject to fluctuations as ours, nor are invested with the privilege of issuing paper money; and so injurious to small dealers, constituting the great mass of who, by the manner in which they exercise that privilege, society. It is worthy of remark too, that, owing to the have it in their power to produce great changes in the propstate of society there, $24 is a much larger sum, compared erty and condition of every individual in the kingdom. with other commodities and labor, than here. The Bank No man, or set of men, ought, in my opinion, to be inof England is the only banking institution within sixty- trusted with that privilege.” It was in view, no doubt, of five miles of London. Beyond that distance from London, the exercise of this high prerogative of sovereign power by there are a great number of joint stock companies, which the banks here, that Mr. Jefferson, and other enlightened issue notes and are controlled by the Bank of England. patriots, spoke in such strong terms against the system, as
Your committee had intended, under this branch of in- being an aristocracy of a dangerous tendency and characquiry, to present in some detail a history of banking in the ter. Mr. Jefferson, in a letter to John N. Eppes, (4th rol. several States, with a view of showing that, in proportion Mem. 201,) says: “Private forfunes, in the present state to the extent of the issues of bank paper beyond their spe- of our circulation, are at the mercy of those self-created cie capital was the rise in prices; that this was necessarily money-lenders, and are prostrated by the floods of nominal followed by a contraction of issues, and in that proportion money with which their avarice deluges us." Again, on was the fall of the prices of all other commodities. We another occasion, he says: "The bank mania is one of are not without abundant historical facts on this subject, to the most threatening of ihese imitations (of England;} it be derived from our periodicals and public journals. The is raising up a moneyed aristocracy in our country, which history of our political economy will show, very conclusive- has already set the Government at defiance; and although ly, that every instance of great rise in prices followed ex forced to yield a little on the first essay of their strength, cessive bank issues and speculation, and over-trading the their principles are unyielded and unyielding. They have consequence; that in proportion to the suddenness and ra taken deep root in that class from which our legislators are pidity of the rise from the expansions of bank issues was drawn; and the sop of Cerberus, from fable, has become the consequent contraction of discounts and the fall of pri- history. Their principles take hold of the good, their pelf
But they feared that their remarks had already ex of the bad; and thus those whom the constitution has placed tended in length beyond any interest they could give to the as guards to its portals are sophisticated or suborned from subject, and therefore have omitted it, believing it to be their duties. That paper money has some advantages must more important to present principles in a brief form than to be admitted, but its abuses are also inveterate ; and that it, burden their report with details of facts and figures, which by breaking up the measure of value, makes a lottery of all might weary rather than elicit any interest.
private property, cannot be denied."