ingly condemned both what they had done and left undone, and saw no help or safety but in a metallic currency. In this place it will be sufficient to extract merely what is simplest and most intelligible from the lengthy speeches and writings of the period. Among the arguments in favor of founding and supporting a national bank, it was affirmed that, "in a great commercial country, the general medium of payment cannot, without a foolish extravagance, consist solely of costly metals. By the introduction of bank-notes, specie capital is for the most part dispensed with, circulation and transmission are facilitated, credit is raised, and means are procured for obviating the want of money and for setting on foot the greatest undertakings. It is only by means of a great and powerful national bank that the numerous smaller banks can be kept in order; besides which, it provides the government with the cheapest and best opportunity of collecting its revenues, making its disbursements, and securely depositing its funds."-When, in the year 1811, the charter of the old bank expired, Congress refused to renew it, chiefly because seven tenths of the stocks belonged to the then detested English. And yet, notwithstanding this excitement and passion, the resolution was carried only by a majority of a single vote. But the embarrassments which at once arose in the currency, soon showed that such a bank is both useful in peace and necessary in war. It was re-established by a considerable majority as a national bank, although opposed by the banks in the individual states. But this very opposition (which on the part of the careless and dishonest arose from a dread of supervision) gave added proof of the necessity and utility of a general control and powerful curb on their proceedings. The individual banks must adopt the wiser course of the national bank; or, if they continue in a wrong one, they are discarded and deserted by it. With such a rapidly increasing population, with the pressing necessities of new settlers and new states for capital, and with the impossibility of procuring it all in specie,-these defects can alone be obviated, and progress in all directions facilitated, by means of a judicious bank system. To this it was replied: The Constitution of the United States prescribes with great wisdom, that specie alone can form a legal currency. Its letter has indeed been adhered to, but not its spirit; for when the bank was started, it was said: " Paper convertible at pleasure into specie is not injurious, but useful; non-convertible paper will never be taken, so that it cannot properly be said to have any existence." These hopes however have proved utterly fallacious. A bank, unless it enjoys undue advantages, cannot even make * Register, 1830. Appendix, p. 104; 1831, p. 47. as much money and pay as large a rate of interest as a private individual, so long as it loans its capital only.* Its real profit does not begin until it loans its credit, and thus goes beyond its capital. When this profit arises, temptations, dangers, and abuses increase. The principles and proceedings of the lauded national bank were by no means as wise as its defenders assert. On the contrary, as early as 1817, it had entered into such venturous speculations, that its paper fell from 156 to 90; when the directors were changed, and a better line of conduct prescribed. Yet it was equally unable afterwards as before to keep the smaller banks and their host of officers and shareholders in order, and was itself sustained by the power and the enormous profits of its monopoly. It runs counter to both the spirit and letter of the Constitution, to grant monopolies of such a kind, to transfer the profitable use of many millions of the public money to a bank interestfree, and thus make an immense donation to the stockholders.‡ Such a centralization of money transactions is injurious; the power of irresponsible officers, chosen not by the people, but by the government and the stockholders, is unrepublican; the facilities presented for getting into debt are ill advised'; the treating of private debtors more severely than the banks is unjust; and the participation of the government in all these things is at least improper. It is said that in times of difficulty the government receives assistance from the bank. It can however just as easily refuse to furnish any assistance; and if, for instance, it should be displeased at a war, it could throw the greatest obstacles in the way, and presume to play a great political part. It adds to the riches of the rich, and seconds the selfishness of the powerful; but helps the poor to nothing whatever. In a word, the bank is neither constitutional, nor necessary, nor useful. It has never been able to compel the resumption of specie payments;|| but by sudden expansions and contractions, it has led to inordinate speculations, created panic and embarrassment in order to promote its own designs, sought to seduce and control the press, interfered with politics, and has never fulfilled the great and too sanguine expectations formed with regard to it. Such a compact financial power, having the control of so great a capital, and uniting in itself such vast means of influence, might under certain unavoidable circumstances become master even of the political power of the people. Instead of calling forth the manly virtues which confer dignity on human nature, this bank and *Raguet on Currency, p. 84. † Perkins, p. 143. Calhoun's Speeches, p. 289. Register, 1832, appendix, p. 73. Rayner, p. 384. Jackson's Message, 1833. Register, 1831, p. 42; 1832, p. 1222. paper nuisance nourishes an insatiable passion for voluptuous enjoyments and for becoming suddenly rich without labor. In place of republican simplicity and frugality, there arises a sickly tendency to effeminate degeneracy; while instead of the political equality for which America contends, there is reared a system of exclusive privileges by means of party legislation. The bank system allots the honors and rewards of the community in a very undue proportion, and has a most unfavorable bearing on the moral and intellectual development of man.* It leads to the decay of scientific pursuits; it diverts from literature, philosophy, and statesmanship, and from the great and more useful pursuits of business and industry. The rising generation cannot but feel its deadening influence, and will no longer be pressed forward by generous ardor to mount up the rugged steep of science as the road to honor and distinction; when perhaps the highest point they could attain, in what was once the most honorable and influential of all the learned professions, would be the place of attorney to a bank.† Such are the main principles and assertions of both parties. Let us be permitted to examine them more closely, and to add something of our own. In no state worthy of the name does the individual citizen stand wholly alone; each one requires the aid of others, and extends the same to others. This reciprocal action increases, as civilization and industry increase. The principal means of promoting this industry lies in the excess of what is produced over and above what is consumed, that is to say in capital. To set this in motion, to bring it speedily and in the right place to a proper and profitable use, is one of the most important tasks of commerce. The owners of capital are willing to share or loan it, only on two conditions: namely that the borrower be something or have something; the former gives him personal, the latter real credit. who lends or borrows where both conditions are wanting, incurs danger and loss, is deceived and defrauded. Every country, every individual requires credit; but should obtain it only when it is deserved credit founded on nothing, is swindling and fraud. It is commendable and useful for individuals and corporations to inform themselves where capital may be had to loan, and also to what persons it may be intrusted with safety. In this manner arose establishments for loaning on credit, associations for borrowing on joint-liabilities, registries of mortgages, and similar *Calhoun's Speeches, p. 282. He †The most erroneous principles and the worst management were exhibited in the principal bank when transferred to Philadelphia under another name. It had at last only one dollar in cash for 23 dollars of debt; it loaned to ten persons $3,692,000, and to newspaper editors $170,000. Similar scandalous accounts of the banks in Illinois are to be found in Hunt's Merchants' Magazine, September, 1844, p. 240. We useful and perfectly safe institutions. These set capital in motion and bring it to the right place; but they have only a very remote similarity to banks. Although every one not wholly ignorant of the subject can point out the difference between banks of circulation, discount, and deposit, the term bank is too often used in such a vague and general sense, that confusion and strife are almost unavoidable.-Banks, says one, are necessary for the benefit of borrowers and debtors. They are needed for the advantage of lenders and creditors, exclaims another. require them, says the East, because we have a large commerce. We want them, says the West, because as yet we have no commerce. They are founded for the poor, because their money (the paper-money) is cheap; gold and silver are money for rich people only. This last assertion, utterly erroneous as it is, points to the true gist of the dispute, namely the question respecting the comparative worth of a paper and a metallic currency, and the relation they bear to each other. "We must cease," exclaims Henry Clay, "to be a commercial people, we must separate, divorce ourselves from the commercial world, and throw ourselves back for centuries, if we restrict our business to the exclusive use of specie."*-But who requires this? Who requires that bills of exchange, checks, drafts, letters of credit, and a thousand other modern auxiliaries of commerce, should cease? In truth all the objections apply only to the nature, quantity, advantages, and disadvantages of paper-money. Many still assert that in the United States there is no papermoney at all; because, according to the letter of the law, specie alone is made a legal tender. But the force of circumstances renders this letter of not the slightest effect; in practice both. creditors and debtors, buyers and sellers, do incomparably more business with paper than with gold and silver. Nay Webster himself says: "That bank-notes have become money in fact, that they answer the uses of money, that in many respects the law treats them as money, is certain."+ As soon as men recognize the truthful maxim, that “labor alone begets prosperity," the defence of paper-money becomes exceedingly difficult. For if (as the most cautious require) there should lie as much specie in the vaults as there are notes issued, the banking business would produce no gain; on the other hand, as soon as the notes issued exceed this measure, they are mere paper without a sufficient pledge for their redemption, and the quantity of the circulating medium is increased without a natural foundation and beyond the natural proportion. It is true *Speeches, ii. 325. ↑ Webster's Speeches, iii. 329. North Amer. Review, xxxii. 29. Gallatin on Currency, p. 6. Webster, ii. 312. there is recommended a reasonable expansion of the currency, an expansion of credit in the shape of capital; but to these indefinite, obscure expressions a closer examination opposes great doubts. Credit in fact produces no capital, but only sets the existing values in better and quicker circulation. If it exceed or forestall these, it rests on nothing, and least of all on creative labor. The evil consequences are then unavoidable which the American banking system exhibits, and which men of the most different views and positions equally deplore. "A disordered currency," says Webster, " is one of the greatest of political evils. It undermines the virtues necessary for the support of the social system, and encourages propensities destructive of its happiness. It wars against industry, frugality, and economy; and it fosters the evil spirits of extravagance and speculation. Of all the contrivances for cheating the laboring classes of mankind, none has been more effectual than that which deludes them with paper-money. This is the most effectual of inventions to fertilize the rich man's field by the sweat of the poor man's brow. Ordinary tyranny, oppression, excessive taxation, these bear lightly on the happiness of the mass of the community, compared with fraudulent currencies and the robberies committed by depreciated paper. Our own history has recorded for our instruction enough, and more than enough, of the demoralizing tendency, the injustice, and the intolerable oppression, on the virtuous and well disposed, of a degraded paper currency, authorized by law, or in any way countenanced by government."* It will suffice to state a few facts in confirmation of these just complaints. In the years 1812 to 1814, most of the banks stopped payment; between 1811 and 1830 one hundred and sixtyfive of them became entirely bankrupt or contracted their business.† In the year 1787 there were 3 banks; in 1839 there were 850, and together with the branches, about 1000. Of these 498 continued specie payments, 56 stopped altogether, 48 afterwards resumed payments, 60 partially stopped specie payments, 343 wholly 66 66 66 In With these were connected in New York between January and July about 1000 bankruptcies. The entire capital of a bank in Illinois consisted in the plates for striking off the notes. another branch bank two dollars only were paid in, which were kept as curiosities.‡ * Webster, ii. 81. † Hinton, ii. 477. Calhoun's Speeches, p. 143. American Almanac, xi. 245; xii. 137. The numbers do not exactly agree. Hunt's Merchants' Magazine, 1844. September, p. 240. |