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COMHITTEE PRINT

FEDERAL BANKING LAWS
AND REPORTS
A compilation of major Federal
banking documents

1780-1912

COMMITTEE ON
BANKING AND CURRENCY
UNITED STATES SENATE
50th Anniversary
1913-1963

MARCH 15, 1963

Printed for the use of the Committee on Banking and Currency

U.S. GOVERNMENT PRINTING OFFICE
92180

°

WASHINGTON : 1963

For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington 25, D.C. - Price $1.75




COMMITTEE ON BANKING AND CURRENCY
A. WILLIS ROBERTSON, Virginia, Chairman
JOHN SPARKMAN, Alabama
WALLACE F. BENNETT, Utah
PAUL H. DOUGLAS, Illinois
JOHN G. TOWER, Texas
JOSEPH S. CLARK, Pennsylvania
JACOB K. JAVITS, New York
WILLIAM PROXMIRE, Wisconsin
MILWARD L. SIMPSON, Wyoming
HARRISON A. WILLIAMS, JR., New Jersey
PETER H. DOMINICK, Colorado
EDMUND S. MUSKIE, Maine
EDWARD V. LONG, Missouri
MAURINE B. NEUBERGER, Oregon
THOMAS J. McINTYRE, New Hampshire




MATTHEW HALE, Chief of Staff

FOREWORD
This volume brings together a number of major Federal banking
statutes enacted from 1780 to 1912. It includes, among others, the
ordinance of the Bank of North America (1781), the charters of the
First and the Second Bank of the United States (1791 and 1816), the
texts of the acts of 1863 and 1864, and the Aldrich-Vreeland Act of
1908.
In addition, the volume contains related major legislative and executive reports made during the time these banking laws were under
consideration. It includes such items as the report of Alexander
Hamilton on a national bank, excerpts from reports of the Comptroller of the Currency and the Secretary of the Treasury, messages of
Presidents of the United States, reports of committees of the United
States Senate and House of Representatives, and the report of the
National Monetary Commission in 1912.
The publication was prepared in connection with the observance of
the 50th anniversary of the U.S. Senate Committee on Banking and
Currency, established March 15, 1913. The contents range over significant banking laws and reports which helped to set the background
against which the Senate Banking and Currency Committee was
created in order to consider the proposed Federal Reserve Act of 1913.
The contents also include material pertaining to the National Currency Act of 1863, the 100th anniversary of which is being celebrated
thisvear.
These laws and reports were chosen with a view to their importance
to the historical development of banking in the United States. They
were also selected with a view to their relevance to issues still under
debate today. Limitations of space have permitted the inclusion only
of selected major laws and reports, which are illustrative rather than
exhaustive in coverage. The compilation was made by Robert Moore
Fisher, formerly of the committee staff.
The National Archives and the Library of Congress have been very
helpful in supplying material for the volume.
In addition to the sources given in the text, other material on banking statutes and reports may be found in such sources as Laws of the
United States Concerning Money, Banking, and Loam, 1778-1909,
compiled by A. T. Huntington and Robert J. Mawhinney for the National Monetary Commission (S. Doc. 580, 61st Cong., 2d sess., 1910);
Federal Reserve Act, 1913; McFadden Act, 1927; Banking Act of
1933; Banking Act of 1935; Bank Holding Company Act, 1956, a onevolume compilation of the House Committee on Banking and Currency (1958); and Federal Reserve Act of 1913, With Amendments
and Laws Relating to Banking, compiled by Gilman G. Udell, Superintendent of Document Room, House of Representatives, Washington 25, D.C. (1958).
A. WILLIS ROBERTSON, Chairman.
MARCH 15,1963.
m






CONTENTS
Page

Foreword
1780-81—Proceedings in Congress on Bank of North America
1790—Report of Secretary of Treasury (Hamilton), on a national bank...
1791—Opinions on constitutionality of a national bank:
Edmund Randolph (Nos. 1 and 2)
Thomas Jefferson
Alexander Hamilton
Act to incorporate subscribers to Bank of United States (Feb. 25,
1791, 1 Stat. 191)
Facsimile of signatures of act of February 25, 1791
1809—Report of Secretary of Treasury (Gallatin), on renewal of charter of
Bank of United States
1810—Report of House committee, on renewal of charter of Bank of
United States
1811—Report of Secretary of Treasury (Gallatin), on Bank of United
States
Report of Secretary of Treasury (Gallatin), on renewal of.charter of
Bank of United States
Report of Senate committee, on renewal of charter of Bank of United
States
Report of House committee, on renewal of charter of Bank of United
States
..„-_
1814—Report of Secretary of Treasury (Dallas), on public credit; excerpts.
Report of Secretary of Treasury (Dallas), on Treasury notes; excerpts
~.~
1815—Veto message, James Madison, on Bank of United States, with text
of the bill
Seventh annual message, James Madison; excerpt
Annual report, Secretary of Treasury (Dallas); excerpt
Report of Secretary of Treasury (Dallas), on national bank.
1816—Act to incorporate subscribers to Bank of United States (Apr. 10,
1816, 3 Stat. 266)
Facsimile of signatures of act of April 10, 1816
1829—First annual message, Andrew Jackson; excerpt
1830—Report of Senate Committee on Finance, on national currency
Report of House Committee of Ways and Means, on Presidential
message about Bank of United States; excerpt
Second annual message, Andrew Jackson; excerpt
1831—Third annual message, Andrew Jackson; excerpt
Annual report, Secretary of Treasury (McLane); excerpts
1832—Report of House Committee of Ways and Means, on renewal of
charter of Bank of United States; excerpts
Bill to renew charter of Bank of United States
Facsimile of signatures of bill
Veto message, Andrew Jackson, on bill to renew charter of Bank of
United States
Facsimile of signature of veto message of 1832
Fourth annual message, Andrew Jackson; excerpt
1833—Andrew Jackson, on removal of the public deposits
Report of Secretary of Treasury (Taney), on removal of public deposits; excerpt
Fifth annual message, Andrew Jackson; excerpt
1834—Sixth annual message, Andrew Jackson; excerpt
Annual report, Secretary of Treasury (Woodbury); excerpts
1835—Seventh annual message, Andrew Jackson; excerpt
Annual report, Secretary of Treasury (Woodbury); excerpt
1836—Act to regulate deposits of public money (June 23,1836, 5 Stat. 52).
1861—Annual report, Secretary of Treasury (Chase); excerpt
.
v



n1
1
7

32
39
42
66
73
74
79
80
86
89
90
91
96
99
112
112
117
127
143
144
144
154
187
188
188
193
210
213
214
229
230
230
243
264
266
270
274
279
283
289

VI

CONTENTS
Page

1862—Annual report, Secretary of Treasury (Chase); excerpt
1863—Special message, Abraham Lincoln, on financing the war
Act to provide a national currency (The National Currency Act)
(Feb. 25, 1863, 12 Stat. 665)
Annual report, Comptroller of Currency (McCulloch)
Facsimile of signatures of act of February 25, 1863
Third annual message, Abraham Lincoln, excerpt
Annual report, Secretary of Treasury (Chase); excerpts
1864—Act to provide a national currency (The National Bank Act) (June
3, 1864, 13 Stat. 99)
Annual report, Comptroller of Currency (McCulloch)
Fourth annual message, Abraham Lincoln; excerpt
_
1865—Act of March 3; excerpts (act taxing State bank notes) (Mar. 3,
1865, 13 Stat. 469)
— —
1873—Annual report, Comptroller of Currency (Knox); excerpts
Annual report, Secretary of Treasury (Richardson); excerpt
1876—Annual report, Comptroller of Currency (Knox); excerpt
1884—Annual report, Comptroller of Currency (Cannon); excerpts
1887—Act of March 3 (act on central reserve and reserve cities) (Mar. 3,
1887, 24 Stat. 559)
1891—Annual report, Comptroller of Currency (Lacey); excerpt
1893—Annual report, Comptroller of Currency (Eckels); excerpts
1907—Annual report, Comptroller of Currency (Ridgely); excerpt
Annua 1 report, Secretary of Treasury (Cortelyou); excerpt
1908—Act to amend national banking laws (the Aldrich-Vreeland Act)
(May 27, 1908, 35 Stat. 546)
Facsimile of signatures of act of May 30, 1908
1909—Annual report, Secretary of Treasury (MacVeagh); excerpt
1910—Annual report, Secretary of Treasury (MacVeagh); excerpt
1911—Annual report, Secretary of Treasury (MacVeagh); excerpt
1912—Report of National Monetary Commission
Monetary Commission's draft bill
Annual report, Secretary of Treasury (MacVeagh); excerpt
Annual reports, Comptroller of Currency, banking statistics, 1774-1912. _




292
305
307
332
333
345
345
348
375
387
388
390
405
411
422
441
442
447
453
464
465
475
476
477
478
482
503
520
524

FEDERAL BANKING LAWS AND REPORTS, 1780-1912
Proceedings in Congress on Bank of North America
[Source: Gaillard Hunt, Journals of the Continental Congress, 1774-1789, Vol. 17,
pp. 542, 548-550, 585; Vol. 20, pp. 519, 545-548; Vol. 21, pp. 1185-1190]
I N CONGRESS, Jwie ?A, 1780.
*
*
*
*
*
*
*
A letter, of this day, from the Board of War, was read, informing,
"that a number of patriotic persons have formed a plan for the
establishment of a bank, whose object is the public service; that the
directors have applied to that Board to represent to Congress the
desire of the company, that a committee of this body may be appointed
to confer with the inspectors and directors on the subject to morrow
morning: Whereupon,
Ordered, That a committee of three be appointed for the purpose
above mentioned:
The members chosen, Mr. [Oliver] Ellsworth, Mr. [James] Duane,
and Mr. [John Morin] Scott.
*
*
*
*
*
*
*
I N CONGRESS, June 22,1780.
*
*
*
*
*
*
*
The committee, appointed to confer with the inspectors and directors of the proposed bank brought in a report, which Avas read

That the gentlemen appointed te con-for with the committee; eemmimicatcd to themftpktft 4ev the establishment e lftbank Jeg the sole
purpoGG &4 furnishing ft**4 transporting eft tfee creditft**4feytfee
exertions ef the subscribers, thi*eo millions ef rations a**4 three
jiiiiini liLi jiogoiiciiQ.9 o i iiini i o r iiic uoo ©T LIIC mmV •

That tke committco wero m $±e sa44 conforenco mformed
SHbnoribcrs stand already engaged te support the sft44 bank te
amount ef two hundred *H*4 Gcvcnty-fi¥e thouoand pounds; -Pcnny
• limit a ui l one \ ^ a net t n a u tiiero i s n o ciou oti TJUTJ I'IICIL GIICIT. iLii LIICL

ae wiiifeeneecgoary te its oredit ftftd the object ei its cotablioh
railfeecheerfullyyQuboeribcd.
ly

" ntitj tnis iiucrai OIIOP ftt ft conj uncturo wiieji til1© ciiorLO of
X

states have »et produced GufReiont supplico is equally seasonable
praioQworthy.
T-hft^ fts tbe oubscribors mean »et te domro te thcmGclvco the least
private- gain from their patriotic exortiono, so & is tke opinion e£
tlie eommittGc, that they ought tefeefully 1
indemnified against
iem OF expense with w-hioh it saftyfeeattended.
1

In the original journals, this passage was crossed out.




2

FEDERAL BANKING LAWS AND REPORTS

The committee also laid before Congress the plan of the bank, communicated to them at the said conference, which being read, Congress
thereupon came to the following resolutions:
Whereas a number of the patriotic citizens of Pennsylvania, have
communicated to Congress a liberal offer, on their own credit and by
their own exertions, to supply and transport three million of rations
and 300 hogsheads of rum for the use of the army, and have established
a bank for the sole purpose of obtaining and transporting the said
supplies, with greater facility and despatch; and whereas on the one
hand the associators, animated to this laudable exertion by a desire
to relieve the public necessities, mean not to derive from it the least
pecuniary advantage, so on the other it is just and reasonable that they
should be fully reimbursed and indemnified: therefore,
Resolved, unanimously, That Congress entertain a high sense of
the liberal offer of the said associators to raise and transport the before
mentioned supplies for the army, and do accept the same as a distinguished proof of their patriotism.
Resolved, That the faith of the United States be, and the same
hereby is pledged to the subscribers to the said bank, for their effectual
reimbursement and indemnity in the premises.
Resolved, That the Board of Treasury be directed to deposit in the
said bank, bills of exchange in favor of the directors thereof, on the
ministers of these United States, in Europe, or any of them, and in
such sums as shall be thought convenient, but not to exceed in the
whole one hundred and fifty thousand pounds sterling; that the said
bills are to be considered not only as a support of the credit of the
said bank, but as an indemnity to the subscribers for all deficiencies
of losses and expences which they may sustain on account of their
said engagements, and which shall not, within six months from the
date hereof, be made good to them out of the public treasury; and in
case of failure, such a proportion of the said bills as shall be requisite
to make good the said deficiency, shall be negotiated for that purpose by the said directors, and the residue thereof returned into the
treasury.
Resolved, That upon representation made that the bank stands in
need of occasional assistance, Congress will advance as much of their
current money as can be spared from other services.
Resolved, That a standing committee of Congress be appointed to
confer with the officers of the said bank, as occasion may require:
The members chosen, Mr. [Oliver] Ellsworth, Mr. [James] Duane,
and Mr. [ John Morin] Scott.
I N CONGRESS, June 30, 1780.
*
*
*
*
*
*
*
Ordered, That two members be added to the committee, appointed
to confer with the directors and inspectors of the proposed bank, in
the room of Mr. [James] Duane and Mr. [Oliver] Ellsworth, who
are absent:
The members chosen, Mr. [Robert R.] Livingston and Mr.
[Samuel] Adams.




FEDERAL BANKING LAWS AND REPORTS

3

I N CONGRESS, May 21,1781.
*
*
*
*
*
*
*
A letter, of 17th, from General Washington; and
One, of 17th, from R. Morris, enclosing a plan of a bank, were read:
Ordered, That Wednesday next be assigned for considering the
enclosed plan.
*
*
*
*
*
*
*
I N CONGRESS, May 26,1781.
*
*
*
*
*
*
*
The report of the committee [consisting of Mr. Witherspoon, Mr.
Sullivan, Mr. M. Smith, Mr. Clymer] on the letter from Mr. R. Morris
[with the plan of a bank] was taken into consideration;x Whereupon,
The Committee to whom was referred the letter from Mr. R. Morris
of the 17 May 1781 together with a plan for establishing a National
Bank, beg leave to Report,
*The plan, in the writing of Robert Morris, is in the Papers of the Continental Congress* as follows:
Plan for establishing a national oanTc in the United States of North America.
I. That a subscription be opened for four hundred thousand dollars, in shares of four
hundred dollars each, to be paid in gold or silver.
II. That the subscriptions be paid into the hands of George Clymer and John Nixon,
esqrs. or their agents.
III. That every subscriber of less than five shares, pay the whole sura on the day
of his subscription.
IV. That every subscriber of five shares, or upwards, pay one-half the sum on the
day of his subscription, and the other half within three months of that day.
V. That every holder of a share shall be entitled to vote by himself, his agent, or
proxy properly appointed, at all elections for Directors, and that he have as many votes
as he holds shares; and that every subscriber may sell or transfer his share or shares
at his pleasure, the transfer being made in the bank books, in presence and with the
approbation of the proprietor, or his lawful attorney, the purchaser then to become
entitled to the right of voting, &e.
VI. That there be twelve Directors chosen from among those entitled to vote, who,
at their first meeting, shall choose one as President.
VII. That there be a meeting of the Directors quarterly, for the purpose of regulating
the affairs of the Bank; any seven of the Directors to make a Board, and that the Board
have power to adjourn from time to time.
VIII. That the Board of Directors determine the manner of doing business, and the
rules and forms to be pursued, appoint the various officers which they may find necessary, and dispose of the money and credit of the Bank for the interest and benefit of
the proprietors, and make, from time to time, such dividends, out of the profits, as
they may think proper.
IX. That the Board be empowered, from time to time, to open new subscriptions, for
the purpose of Increasing the capital of the Bank, on such terms and conditions as they
shall think proper.
X. That the Board shall at every quarterly meeting, choose two Directors to inspect
and control the business of the Bank for the ensuing three months.
XI. That the Inspectors so chosen, shall on the evening of every day, Sundays excepted, deliver to the Superintendent of the Finances of America, a state of the cash
account and of the notes issued and received.
That the bank notes, payable on demand, shall by law be made receivable in the duties
and taxes of every State in the Union, and from the respective states by the treasury of
the United States as specie.
XII. That the Superintendent of the Finances of America shall have a right, at all
times, to examine intp the affairs of the Bank, and for that purpose shall have access
to all the books and papers.
XIII. That any Director or officer of the Bank, who shall convert any of the property,
monies or credits thereof to his own use, or shall any other way be guilty of fraud or
embeazlemeut, shall forfeit all his share or stock to the company.
XIV. That laws shall be passed making it felony without benefit of clergy, to commit
such fraud or embezzlement.
XV. That the subscribers shall be incorporated under the name of the President,
Directors and Company of the Bank of North America.
XVI. That none of the Directors shall be entitled to any pecuniary advantage for
his attendance on the duties of bis office as Director* or as President or Inspector, unless
an alteration In tills respect, shall hereafter be made, by the consent of a majority of
the stock-holders at a general election.
XVII. That as soon as the subscription shall be filled, George Clyjner and John Nixon,
esqrs. shall publish a list of the names and sums respectively subscribed, with the places
of abode of the subscribers, and appoint a day for the choice of Directors, to whom,
when chosen, they shall deliver over the money by them received.




4

FEDERAL BANKING LAWS AND REPORTS

That they approve the said plan and are of opinion that when
carried into Execution, it will promote the Interest of the Subscribers,
facilitate the commercial intercourse of Individuals, and be highly
convenient and advantageous to Government.
Your Committee therefore submit the following resolutions:
Resolved, That Congress do approve of the plan for establishing a
national bank in these United States, submitted to their consideration
by Mr. K. Morris, the 17 day of May, 1781; and that they will promote
and support the same by such ways and means, from time to time, as
may appear necessary for the institution and consistent with the public good:
That the subscribers to the said bank shall be incorporated agreeably to the principles and terms of the plan, under the name of The
President, Directors and company of the bank of North-America, so
soon as the subscription shall be filled, the directors and president
chosen, and application for that purpose made to Congress by the
president and directors elected.
On the question to agree to this paragraph, the yeas and nays being
required by Mr. T[homas] Smith,
Virginia,
New Hampshire,
Mr. Jones,
Mr. Sullivan,
Madison,
Livermore,
Bland,
Massachusetts,
M. Smith,
Mr. Lovell,
North Carolina,
Ward,

Mr. Sharpe,
Johnston,

Rhode Island,

Mr. Varnum,
Connecticut,

Mr. Huntington,
New Jersey,
Mr. Witherspoon,
Houston,
Pennsylvania,
Mr. Clymer,
T. Smith,
Maryland,
Mr. Jenifer,
Carroll,

ay}*

South Carolina,

ay}*

ay

W

ayj
ay
no

y

Mr. Mathews,
Bee,
Motte,

Georgia,

Mr. Walton,
Few,
Howly,

[Asterisk (*) denotes an X mark in the journals.]

So it was resolved in the affirmative.
Resolved, That it be recommended to the several states by proper
laws for that purpose, to provide that no other bank or bankers shall
be established or permitted within the said states respectively during
the war.
Resolved, That the notes hereafter to be issued by the said bank,
payable on demand, shall be receivable in payment of all taxes, duties
and debts due, or that may become due or payable to the United States:
Resolved, That Congress will recommend to the several legislatures
to pass laws, making it felony without benefit of clergy, for any
person to counterfeit bank notes, or to pass such notes, knowing
them to be counterfeit; also making it felony without benefit of clergy,




FEDERAL BANKING LAWS AND REPORTS

5

for any president, inspector, director, officer or servant of the bank,
to convert any of the property, money or credit of the said bank to
his own use, or in any other way to be guilty of fraud or embezzlement as an officer or servant of the bank.
*
*
*
*
*
*
*
I N CONGRESS, December 29,1781.
*

*

*

*

*

•

*

An ordinance for incorporating the subscribers to the national
bank, was read a first time:
The Committee appointed to confer with the Bank upon the act
of incorporation proposed by them to Congress.
Report,
That it does not seem probable, that an Act of incorporation could
be obtained from the Legislature of Pennsylvania before the middle
of next March.
That in the Meantime, the finances of the United States must suffer
considerably without the aid of the Bank.
That the Bank cannot operate without an act of incorporation from
Congress itself.
The Committee therefore—
Report the following act of incorporation (here read the act, and
let a question be taken upon reading it a second time on Monday
next) and the Committee beg leave to sit again.
Ordered, That Monday next be assigned for a second reading.
*
*
*
*
*
*
*
I N CONGRESS. December 31, 1781.

The ordinance for incorporating the subscribers to the Bank of
North America, was read a second time, and ordered to be read a
third time at two o'clock.
*
*
*
*
*
*
*
The ordinance being read a third time, was agreed to as follows:
An ordinance to incorporate the subscribers to the Bank of North
America.
Whereas Congress on the 26th day of May last did, from a conviction of the support which the finances of the United States would
receive from the establishment of a national bank, approve a plan
for such an institution submitted to their consideration by Robert
Morris, esq. and now lodged among the archives of Congress, and
did engage to promote the same by the most effectual means; and
whereas, the subscription thereto is now filled from an expectation of
a charter of incorporation from Congress, the directors and president
are chosen, and application hath been made to Congress by the said
president and directors for an act of incorporation: and whereas, the
exigencies of the United States render it indispensably necessary that
such an act be immediately passed:
Be it therefore ordained, and it is hereby ordained, by the United
States in Congress assembled, that those who are, and those who shall
become subscribers to the said bank be, and forever after shall be, a
corporation and body politio to all intents and purposes, by the name
and stile of "The President, Directors and Company of the Bank of
North America."



6

FEDERAL BANKING LAWS AND REPORTS

And be it further ordained, that the said corporation are hereby
declared and made able and capable in law, to have, purchase, receive,
possess, enjoy, and retain lands, rents, tenements, hereditaments,
goods, chattels and effects, of what kind, nature or quality soever, to
the amount of ten millions of Spanish silver milled dollars and no
more; and also to sell, grant? demise, alien, or dispose of the same
lands, rents, tenements, hereditaments, goods, chattels and effects.
And be it further ordained, that the said corporation be, and shall
be forever hereafter, able and capable in law, to sue and be sued,
plead and be impleaded, answer and be answered unto, defend, and
be defended, in courts of record or any other place whatsoever; and
to do and execute all and singular other matters and things that to
them shall or may appertain to do.
And be it further ordained, that for the well governing of the said
corporation and the ordering of their affairs, they shall have such
officers as they shall hereafter direct or appoint: Provided nevertheless, that twelve directors, one of whom shall be the president of the
corporation, be of the number of their officers.
And be it further ordained, that Thomas Willing be the present president, and that the said Thomas Willing, and Thomas Fitzsimmons,
John Maxwell Nesbit, James Wilson, Henry Hill, Samuel Osgood,
Cadwallader Morris, Andrew Caldwell, Samuel Inglis, Samuel Meredith, William Bingham, Timothy Matlack, be the present directors of
the said corporation; and shall so continue until another president
and other directors shall be chosen according to the laws and regulations of the said corporation.
And be it further ordained, that the president and directors of the
said corporation, shall be capable of exercising such power for the
well governing and ordering of the affairs of the said corporation, and
of holding such occasional meetings for that purpose, as shall be
described, fixed and determined by the laws, regulations and ordinances of the said corporation.
And be it further ordained, that the said corporation may make,
ordain, establish, and put in execution such laws, ordinances and
regulations as shall seem necessary and convenient to the government
cf the said corporation.
Provided always, that nothing herein before contained, shall be
construed to authorize the said corporation, to exercise any powers
in any of the United States, repugnant to the laws or constitution of
such State.
And be it further ordained, that the said corporation shall have
full power and authority, to make, have and use, a common seal,
with such device and inscription as they shall think proper, and the
same to break, alter and renew at their pleasure.
And be it further ordained, that this ordinance shall be construed,
and taken most favorably and beneficially for the said corporation.
Done in Congress &c. &c.
Resolved, That it be recommended to the legislature of each State,
to p*ass such laws as they may judge necessary, for giving the foregoing ordinance its full operation, agreeably to the true intent and
meaning thereof, and according to the recommendations contained
in the resolutions of the 26th day of May last. [Editor's note: See
pp. 3,19, 412.]



Report of Secretary of Treasury (Alexander Hamilton), on a
National Bank
COMMUNICATED TO THE HOUSE OF REPRESENTATIVES, DEC. 14, 1 7 9 0 .

First Congress, 3d Session
[Source: American State Papers, Finance, vol, 1, pp. 67-76]
TREASURY DEPARTMENT, December 13th^ 1790.
In obedience to the order of the House of Representatives, of the ninth
day of August last, requiring the Secretary of the Treasury to prepare and report, on this day, such further provision as may, in his
opinion, be necessary for establishing the public credit, the said Secretary further respectfully reports:
That, from a conviction (as suggested in his report herewith presented) that a National Bank is an institution of primary importance
to the prosperous administration of the finances, and would be of the
greatest utility in the operations connected with the support of the
public credit, his attention has been drawn to devising the plan of
such an institution, upon a scale which will entitle it to the confidence,
and be likely to render it equal to the exigencies of the public.
Previously to entering upon the detail of this plan, he entreats the
indulgence of the House towards some preliminary reflections naturally arising out of the subject, which he hopes will be deemed neither
useless nor out of place. Public opinion being the ultimate arbiter of
every measure of government, it can scarcely appear improper, in
deference to that, to accompany the origination of any new proposition with explanations, which the superior information of those to
whom it is immediately addressed, would render superfluous.
It is a fact, well understood, that public banks have found admission and patronage among the principal and most enlightened commercial nations. They have successively obtained in Italy, Germany,
Holland, England, and France, as well as in the United States. And
it is a circumstance which cannot but have considerable weight, in a
candid estimate of their tendency, that, after an experience of centuries, there exists not a question about their utility m the countries
in which they have been so long established. Theorists and men of
business unite in the acknowledgement of it.
Trade and industry, -wherever they have been tried, have been indebted to them for important aid. And government has been repeatedly iinder the greatest obligations to them in dangerous and distressing emergencies. That of the United States, as well in some of
the most critical conjunctures of the late war, as since the peace, has
received assistance from those established among us, with which it
could not have dispensed.



7

8

FEDERAL BANKING LAWS AND REPORTS

With this twofold evidence before us, it might be expected that there
would be a perfect union of opinions in their favor. Yet doubts have
been entertained; jealousies and prejudices have circulated; and,
though the experiment is every day dissipating them, within the
spheres in which effects are best known, yet there are still persons by
whom they have not been entirely renounced. To give a full and accurate view of the subject, would be to make a treatise of a report; but
there are certain aspects in which it may be cursorily exhibited, which
may perhaps conduce to a just impression of its merits. These will involve a comparison of the advantages, with the disadvantages, real or
supposed, of such institutions.
The following are among the principal advantages of a Bank:
First, The augmentation of the active or productive capital of a
country. Gold and silver, when they are employed merely as the instruments of exchange and alienation, have been not improperly denominated dead stock; but when deposited in banks, to become the
basis of a paper circulation, which takes their character and place,
as the signs of representatives of value, they then acquire life, or in
other words, an active and productive quality. This idea, which appears rather subtile and abstract, in a general form, may be made
obvious and palpable, by entering into a few particulars. It is evident, for instance, that the money which a merchant keeps in his
chest, waiting for a favorable opportunity to employ it, produces
nothing till that opportunity arrives. But if, instead of locking it
up in this manner, he either deposits it in a bank or invests it in the stock
of a bank, it yields a profit during the interval, in which he partakes, or
not, according to the choice he may have made of being a depositor
or a proprietor; and when any advantageous speculation offers, in
order to be able to embrace it, he has only to withdraw his money, if
a depositor, or, if a proprietor, to obtain a loan from the bank, or to
dispose of his stock—an alternative seldom or never attended with
difficulty, when the affairs of the institution are in a prosperous
train. His money, thus deposited or invested, is a fund upon which
himself and others can. borrow to a much larger amount. It is a
well established fact, that banks in good credit, can circulate a far
greater sum than the actual quantum of their capital in gold and silver. The extent of the possible excess seems indeterminate; though
it has been conjecturally stated at the proportions of two and three to
one. This faculty is produced in various ways. 1st A great proportion of the notes which are issued, and pass current as cash, are
indefinitely suspended in circulation, from the confidence which each
holder has, that he can, at any moment, turn them into gold and
silver. Zdly. Every loan which a bank makes, is, in its first shape,
a credit given to the borrower on its books, the amount of which it
stands ready to pay, either in its own notes, or in gold or silver, at
his option. But, in a great number of cases, no actual payment is
made in either. The borrower, frequently, by a check or order, transfers his credit to some other person, to whom he has a payment to
make; who, in his turn, is as often content with a similar credit, because he is satisfied that he can, whenever he pleases, either convert
it into cash, or pass it to some other hand, as an equivalent for it
And in this manner the credit keeps circulating, performing in every
stage the office of money, till it is extinguished by a discount with



FEDERAL BANKING LAWS AND REPORTS

9

some person who has a payment to make to the bank, to an equal or
greater amount. Thus large sums are lent and paid, frequently
through a variety of hands, without the intervention of a single
piece of coin. Zdly. There is always a large quantity of gold and
silver in the repositories of the bank, besides its own stock, which is
placed there, with a view partly to its safe keeping, and partly to
the accommodation of an institution, which is itself a source of general
accommodation. These deposites are of immense consequence in the
operations of a bank. Though liable to be redrawn at any moment,
experience proves, that the money so much oftener changes proprietors than place, and that what is drawn out is generally so speedily
replaced, as to authorize the counting upon the sums deposited, as an
effective fund, which, concurring with the stock of the bank, enables
it to extend its loans, and to answer all the demands for coin, whether
in consequence of those loans, or arising from the occasional return
of its notes.
These different circumstances explain the manner in which the
ability of a bank to circulate a greater sum than its actual capital in
coin is acquired. This, however, must be gradual, and must be preceded by a firm establishment of confidence—a confidence which may
be bestowed on the most rational grounds, since the excess in question
will always be bottomed on good security of one kind or another.
This, every well conducted bank carefully requires, before it will consent to advance either its money or its credit, and where there is an
auxiliary capital, (as will be the case in the plan hereafter submitted)
which, together with the capital in coin, define the boundary that shall
not be exceeded by the engagements of the bank, the security may, consistently with all the maxims of a reasonable circumspection, be regarded as complete.
The same circumstances illustrate the truth of the position, that it
is one of the properties of banks to increase the active capital of a
country. This, in other words, is the sum of them: the money of one
individual, while he is waiting for an opportunity to employ it, by
being either deposited in the bank for safe keeping, or invested in its
stock, is in a condition to administer to the wants of others, without
being put out of his own reach when occasion presents. This yields
an extra profit, arising from what is paid for the use of his money by
others, when he could not himself make use of it, and keeps the nioney
itself in a state of incessant activity. In the almost infinite vicissitudes
and competitions of mercantile enterprise, there never can be danger
of an intermission of demand, or that the money will remain for a
moment idle in the vaults of the bank. This additional employment
given to money, and the faculty of a bank to lend and circulate a
greater sum than the amount of its stock in coin, are, to all the purposes
of trade and industry, an absolute increase of capital. Purchases and
undertakings, in general, can be carried on by any given sum of bank
paper or credit, as effectually as by an equal sum of gold and silver.
And thus, by contributing to*enlarge the mass of industrious and commercial enterprise, banks become nurseries of national wealth—a consequence as satisfactorily verified by experience, as it is clearly deducible in theory.




10

FEDERAL BANKING LAWS AND REPORTS

Secondly. Greater facility to the Government, in obtaining pecuniary aids, especially in sudden emergencies. This is another, and an
undisputed advantage of public banks—one which, as already remarked, has been realized in signal instances among ourselves, lhe
reason is obvious; the capitals of a great number of individuals are,
by this operation, collected to a point, and placed under one direction.
The mass formed by this union, is, in a certain sense, magnified by the
credit attached to it; and while this mass is always ready, and can at
once be put in motion, in aid of the Government, the interest of the
bank to afford that aid, independent of regard to the public safety and
welfare, is a sure pledge for its disposition to go as far in its compliances as can in prudence be desired. There is, in the nature of
things, as will be more particularly noticed in another place, an intimate connexion of interest between the Government and the bank of a
nation.
Thirdly. The facilitating of the payment of taxes. This advantage
is produced in two ways* Those who are in a situation to have access
to the bank, pan have the assistance of loans, to answer, with punctuality, the public calls upon them. This accommodation has been sensibly
felt in the payment of the duties heretofore laid by those who reside
where establishments of this nature exist. This, however, though an
extensive, is not an universal benefit. The other way in which the
effect here contemplated is produced, and in which the benefit is general, is the increasing of the quantity of circulating medium, and the
quickening of circulation. The manner in which the first happens,
has already been traced. The last may require some illustration.
When payments are to be made between different places, having an in-'
tercourse of business with each other, if there happen to be no private
bills at market, and there are no bank notes which have a currency
in both, the consequence is, that coin must be remitted. This is attended with trouble, delay, expense, and risk. If, on the contrary,
there are bank notes current in both places, the transmission of these
by the post, or any other speedy or convenient conveyance, answers
the purpose; and these again, in the alternations of demand, are frequently returned, very soon after, to the place from whence they were
first sent: whence the transportation and re-transportation of the
metals are obviated, and a more convenient and more expeditious
medium of payment is substituted. Xor is this all; the metals, instead
of being suspended from their usual functions during this process of
vibration from place to place, continue in activity, and administer
still to the^ ordinary circulation, which, of course, Is prevented from
suffering either diminution or stagnation. These circumstances are
additional causes of what, in a practical sense, or to the purposes of
business, may be called greater plenty of money. And it is evident,
that whatever enhances the quantity of circulating money, adds to the
ease with which every industrious member of the community may
acquire that portion of it of which he stands in need, and enables him
the better to pay his taxes, as well as to supply his other wants. Even
where the circulation of the bank paper is not general, it must still
have the same effect, though in a less degree. For, whatever furnishes
additional supplies to the channels of circulation, in one quarter, naturally contributes to keep the streams fuller elsewhere. This last view
of the subject serves both to illustrate the position that banks tend to



FEDERAL BANKING LAWS AND REPORTS

11

facilitate the payment of taxes, and to exemplify their utility to business of every kind in which money is an agent.
It would be to intrude too much on the patience of the House, to
prolong the details of the advantages of banks; especially, as all those
which might still be particularized, are readily to be inferred as consequences from those which have been enumerated. Their disadvantages, real or supposed, are now to be reviewed. The most serious
of the charges which have been brought against them, are,
That they serve to increase usury;
That they tend to prevent other kinds of lending;
That they furnish temptations to overtrading;
That they afford aid to ignorant adventurers, who disturb the natural and beneficial course of trade;
That they give to bankrupt and fraudulent traders, a fictitious
credit, which enables them to maintain false appearances, and to
extend their impositions; and, lastly,
That they have a tendency to banish gold and silver from the
country.
There is great reason to believe, that, on a close and candid survey,
it will be discovered that these charges are either destitute of foundation, .or that, as far as the evils they suggest have been found to exist,
they have proceeded from other, or partial, or temporary causes, are
not inherent in the nature and permanent tendency of such institutions, or are more than counterbalanced by opposite advantages. This
survey shall be had, in the order in which the charges have been stated.
The first of them, is—
That banks serve to increase usury.
It is a truth, which ou^ht not to be denied, that the method of conducting business, which is essential to bank operations, has, among
us, in particular instances, given occasion to usurious transactions.
The punctuality in payments, which they necessarily exact, has sometimes obliged those who have adventured beyond both their capital
and their credit, to procure money at any price, and, consequently, to
resort to userers for aid.
But experience and practice gradually bring a cure to this evil. A
general habit of punctuality among traders, is the natural consequence
of the necessity of observing it with the bank—a circumstance which,
itself, more than compensates for any occasional ill which may have
sprung from that necessity, in the particular under consideration. As
far, therefore, as traders depend on each ner for pecuniary supplies,
(hey can calculate their expectations with greater certainty; and are
in proportionably less danger of disappointments, which might compel them to have recourse to so pernicious an expedient as that of
borrowing at usury; the mischiefs of which, after a few examples,
naturally inspire great care, in all but men of desperate circumstances,
to avoid the possibility of being subjected to them. One, and not the
least of these evils, incident to the use of that expedient, if the fact be
known, or even strongly suspected, is loss of credit with the bank itself.
The directors of a bank, too, though, in order to extend its business
and its popularity, in the infancy of an institution, they may be
tempted to go further in accommodation than the strict rules of prudence will vrarrant, grow more circumspect, of course, as its affairs
become better established, and as evils of too great facility are experi92180 0—63

Q




12

FEDERAL BANKING LAWS AND REPORTS

mentally demonstrated. They become more attentive to the situation
and conduct of those with whom they deal; they observe more narrowly their operations and pursuits; they economise the credit they
give to those of suspicious solidity; they refuse it to those whose
career is more manifestly hazardous. In a word, in the course of
practice, from the very nature of things, the interest will make it the
policy of a bank to succor the wary and industrious; to discredit the
rush and unthrifty; to discountenance both usurious lenders and usurious borrowers.
There is a leading view, in which the tendency of banks Avill be seen
to be to abridge, rather than to promote usury. This relates to their
property of increasing the quantity and quickening the circulation of
money. If it be evident, that usury will prevail or diminish, according to the proportion which the demand for borrowing bears to the
quantity of money at market to be lent; whatever has the property
just mentioned, whether it be in the shape of paper or coin, by contributing to render the supply more equal to the demand, must tend
to counteract the progress of usury.
But bank lending, it is pretended, is an impediment to other kinds
of lending; which, oy confining the resource of borrowing to a particular class, leaves the rest of the community more destitute, and, therefore, more exposed to the extortions of usurers. As the profits of bank
stock exceed the legal rate of interest, the possessors of money, it is
urged, prefer investing it in that article, to lending it at this rate; to
which, there are the additional motives of a more prompt command
of the capital, and of more frequent and exact returns, without trouble
or perplexity in the collection. This constitutes the second charge
winch has been enumerated.
The fact on which this charge rests, is not to be admitted without
several qualifications; particularly in reference to the state of things
in this country.
First. The great bulk of the stock of a bank will consist of the funds
of men in trade, among ourselves, and moneyed foreigners; the former
of whom could not spare their capitals out of their reach, to be invested in loans for long periods, on mortgages or personal security;
and the latter of whom would not be willing to be subjected to the
casualties, delays, and embarrassments, of such a disposition of their
money in a distant country.
Secondly. There will always be a considerable proportion of those
who are properly the money lenders of a country, who, from that spirit
of caution which usually characterises this description of men, will
incline rather to vest their funds in mortgages on real estate, than in
the stock of a bank, which they are apt to consider as a more precarious security.
These considerations serve, in a material degree, to narrow the foundation of the objection, as to the point of fact. But there is a more
satisfactory answer to it. The effect supposed, as far as it has existence, is temporary. The reverse of it takes place in the general and
permanent operation of the thing.
The capital of every public bank, will, of course, be restricted within
a certain defined limit. It is the province of legislative prudence so
to adjust this limit, that, while it will not be too contracted for the
demand which the course of business may create, and for the security



FEDERAL BANKING LAWS AND REPORTS

13

which the public ought to have for the solidity of the paper which may
be issued by the bank, it wTill still be within the compass of the pecuniary resources of the community; so that there may be an easy practicability of completing the subscriptions to it. When this is once
done, the supposed effect, of necessity, ceases. There is then no longer
room for the investment of any additional capital. Stock may, indeed,
change hands, by one person selling and another buying; but the money
which the buyer takes out of the common mass to purchase the stock,
the seller receives and restores to it. Hence, the future surplusses
which may accumulate must take their natural course, and lending at
interest must go on as if there were no such institution.
It must, indeed, flow in a more copious stream. The bank furnishes
an extraordinary supply for borrowers, within its immediate sphere.
A larger supply consequently remains for borrowers elsewhere. In
proportion as the circulation of the bank is extended, there is an
augmentation of the aggregate mass of money for answering the aggregate mass of demand. Hence greater facility in obtaining it for
every purpose.
It ought not to escape without a remark, that, as far as the citizens
of other countries become adventurers in the bank, there is a positive
increase of the gold and silver of the country. It is true, that, from
this, a half yearly rent is drawn back, accruing from the dividends
upon the stock. But as this rent arises from the employment of the
capital by our own citizens, it is probable that it is more than replaced
by the profits of that employment. It is also likely that a part of it is,
m the course of trade, converted into the products of our country :
and it may even prove an incentive, in some cases, to emigration to a
country in which the character of citizen is as easy to be acquired as
it is estimable and important. This view of the subject furnishes
an answer to an objection which has been deduced from the circumstance here taken notice of, namely, the income resulting to foreigners
from the part of the stock owned by them, wThich has been represented
as tending to drain the country of its specie. In this objection, the
original investment of the capital, and the constant use of it afterwards, seem both to have been overlooked.
That banks furnish temptations to overtrading, is the third of the
enumerated objections. This must mean, that, by affording additional
aids to mercantile enterprise, they induce the merchant sometimes to
adventure beyond the prudent or salutary point, But the very statement of the thing shows that the subject of the charge is an occasional
ill, incident to a general good. Credit of every kind (as a species ot
which only, can bank lending have the effect supposed), must be, in
different degrees, chargeable with the same inconvenience. It is even
applicable to gold and silver, when they abound in circulation. But
would it be wise, on this account, to decry the precious metals, to root
out credit, or to prescribe the means of that enterprise which is the
m
* ^ spring of trade, and a principal source of national wealth, be> it now and then runs into excesses, of which overtrading is one;
v voc

;

«-

JLII every case, uie evil JS LU ue m j i n y n ^ ^ ^** — &-y- 7

the present case, such a comparison will issue in this, that the new
and increased energies derived to commercial enterprise, from the aid



14

FEDERAL BANKING LAWS AND REPORTS

of banks, are a source of general profit and advantage, which greatly
outweigh the partial ills the overtrading of a few individuals, at particular times, or of numbers in particular conjunctures.
The fourth and fifth charges may be considered together. These relate to the aid which is sometimes afforded by banks to unskilful adventurers and fraudulent traders. These charges, also, have some
degree of foundation, though far less than has been pretended; and
they add to the instances of partial ills, connected with more extensive
and overbalancing benefits.
The practice of giving fictitious credit to improper persons, is one of
those evils which experience, guided by interest, speedily corrects. The
bank itself is in so much jeopardy of being a sufferer by it, that it has
the strongest of all inducements to be on its guard. It may not only
be injured immediately, by the delinquencies of the persons to whom
such credit is given, but eventually by the incapacities of others, whom
their impositions or failures may have ruined.
Nor is there much danger of a bank's being betrayed into this error
from want of information. The directors themselves, being, for the
most part, selected from the class of traders, are to be expected to possess, individually, an accurate knowledge of the characters and situations of those who come within that description. And they have, in
addition to this, the course of dealing of the persons themselves with
the bank, to assist their judgment, which is, in most cases, a good index
of the state in which those persons are. The artifices and shifts, which
those in desperate or declining circumstances are obliged to employ, to
keep up the countenance w^hich the rules of the bank require, and the
train of their connexions, are so many prognostics, not difficult to be
interpreted, of the fate which awaits them. Hence, it not unfrequently
happens, that banks are the first to discover the unsoundness of such
characters, and, by withholding credit, to announce to the public that
they are not entitled to it.
If banks, in spiteof every precaution, are sometimes betrayed into
giving a false credit to the persons described, they more frequently
enable honest and industrious men, of small, or, perhaps, of no capital,
to undertake and prosecute business with advantage to themselves and
to the community; and assist merchants, of both capital and credit,
who meet with fortuitous and unforeseen shocks, which might, without
such helps, prove fatal to them and to others, to make head against
their misfortunes, and finally to retrieve their affairs—circumstances
which form no inconsiderable encomium on the utility of banks.
But the last and heaviest charge is still to be examined: this is, that
banks tend to banish the gold and silver of the country.
The force of this objection rests upon their being an engine of paper
credit, which, by furnishing a substitute for the metals, is supposed to
promote their exportation. It is an objection, which, if it has any
foundation, lies not against banks peculiarly, but against every species
J
of paper credit.
The most common answer given to it is, that the thing supposed is of
little or no consequence; that it is immaterial what serves the purpose
ot money, whether paper, or gold and silver; that the effect of both
upon industry is the same; and that the intrinsic wealth of a nation
is to be measured, not by the abundance of the precious metals contained in it, but by the quantity of the productions of its labor and
industry.



FEDERAL BANKING LAWS AND REPORTS

15

This answer is not destitute of solidity, though not entirely satisfactory. It is certain, that the vivification of industry, by a full circulation, with the aid of a proper and well regulated paper credit, may
more than compensate for the loss of a part of the gold and silver of a
nation, if the consequence of avoiding that loss should be a scanty or
defective circulation.
But the positive and permanent increase or decrease of the precious
metals in a country, can hardly ever be a matter of indifference. As
the commodity taken in lieu of every other, it is a species of the most
effective wealth; and as the money of the world, it is of great concern
to the State, that it possess a sufficiency of it to face any demands
which the protection of its external interests may create.
The objection seems to admit of another and a more conclusive
answer, which controverts the fact itself. A nation that has no mines
of its own, must derive the precious metals from others; generally
speaking, in exchange for the products of its labor and industry. The
quantity it will possess, will, therefore, in the ordinary course of things,
be regulated by the favorable or unfavorable balance of its trade; that
is, by the proportion between its abilities to supply foreigners, and its
wants of them; between the amount of its exportations and that of its
importations. Hence, the state of its agriculture and manufactures,
the quantity and quality of its labor and industry, must, in the main,
influence and determine the increase or decrease of its gold and silver.
If this be true, the inference seems to be, that well constituted banks
favor the increase of the precious metals. It has been shewn that they
augment, in different ways, the active capital of a country. This it is
which generates employment; which animates and expands labor and
industry. Every addition which is made to it, by contributing to put
in motion a greater quantity of both, tends to create a greater quantity
of the products of both; and, by furnishing more materials for exportation, conduces to a favorable balance of trade, and, consequently,
to the introduction and increase of gold and silver.
This conclusion appears to be drawn from solid premises. There
are, however, objections to be made to it.
It may be said, that, as bank paper affords a substitute for specie, it
serves to counteract that rigorous necessity for the metals, as a medium
of circulation, which, in the case of a wrong balance, might restrain,
in some degree, their exportation; and it may be added, that, from the
same cause, in the same case, it would retard those economical and
parsimonious reforms in the manner of living, which the scarcity of
money is calculated to produce, and which might be necessary to rectify
such wrong balance.
There is, perhaps, some truth in both these observations; but they
appear to be of a nature rather to form exceptions to the generality
of the conclusion, than to overthrow it. The state of things in which
the absolute exigencies of circulation can be supposed to resist, with
any effect, the urgent demands for specie which a wronpj balance of
trade may occasion, presents an extreme case. And a situation in which
a too expensive manner of living of a community, compared with its
means, can stand in need of a corrective, from distress or necessity, is
one which, perhaps, rarely results but from extraordinary and adventitious causes: such, for example, as a national revolution; which unsettles all the established habits of the people, and inflames the appe


16

FEDERAL BANKING LAWS AND REPORTS

tile for extravagance, by the illusion of an ideal wealth, engendered by
the continual multiplication of a depreciating currency, or some similar cause. There is a good reason to believe, that, where the laws are
wise and well executed, and the inviolability of property and contracts
maintained, the economy of a people will, in the general course ct
Uiings, correspond with its means.
The support of industry is, probably, in every case, of more consequence towards correcting a wrong balance of trade, than any practicable retrenchments in the expenses of families or individuals; ana
the stagnation of it would be likely to have more effect in prolonging,
than any such savings in shortening, its continuance. That stagnation
is a natural consequence of an inadequate medium, which, without the
aid of bank circulation, would, in the cases supposed, be severely feltIt also deserves notice, that, as the circulation is always in a compound ratio to the fund upon which it depends, and to the demand tor
it, and as that fund is itself affected by the exportation of the metals,
there is no danger of its being overstocked, as in the case of paper
issued at the pleasure of the Government, or of its preventing the
consequences of any unfavorable balance from being sufficiently ielt
to produce the reforms alluded to, as far as circumstances may require
and admit.
Nothing can be more fallible than the comparisons which have been
made between different countries, to illustrate the truth of the position under consideration. The comparative quantity of gold and silver
in different countries, depends upon an infinite variety of facts and
combinations, all of which ought to be known, in order to judge
whether the existence or non-existence of paper currencies has any
share in the relative proportions they contain. The mass and value
of the productions of the labor and industry of each, compared with
its wants; the nature of its establishments abroad; the kind of wars
in which it usually engaged; the relations it bears to the countries
which are the original possessors of those metals; the privileges it
enjoys in their trade; these, and a number of other circumstances, are
all to be taken into the account, and render the investigation too complex to justify any reliance on the vague and general surmises which
have been hitherto hazarded on the point.
In the foregoing discussion, the objection has been considered as
applying to the permanent expulsion and diminution of the metals.
Their temporary exportation, for particular purposes, has not been
contemplated. This, it must be confessed, is facilitated by banks,
from the faculty they possess of supplying their place. But their
utility is in nothing more conspicuous than in these very cases. They
enable the Government to pay its foreign debts, and to answer any
exigencies which the external concerns of the community may have produced. They enable the merchant to support his credit (on which the
prosperity of trade depends) when special circumstances prevent
remittances in other modes. They enable him also to prosecute enterprises which ultimately tend to an augmentation of the species of
wealth in question. It is evident that gold and silver may often be
employed in procuring commodities abroad, which, in a circuitous
commerce, replace the original fund, with considerable addition. But
it is not to be inferred, from this facility given to temporary exportation, that banks, which are so friendly to trade and industry, are, in
their general tendency, inimical to the increase of the precious metals.



FEDERAL BANKING LAWS AND REPORTS

17

These several views of the subject appear sufficient to impress a full
conviction of the utility of banks, and to demonstrate that they are
of great importance, not only in relation to the administration of
the finances, but in the general system of the political economy.
The judgment of many concerning them, has, no doubt, been perplexed, by the misinterpretation of appearances which were to be
ascribed to other causes. The general devastation of personal property, occasioned by the late war, naturally produced, on the one hand,
a great demand for money, and, on the other, a great deficiency of it to
answer the demand. Some injudicious laws, which grew out of the
public distresses, by impairing confidence, and causing a part of the
inadequate sum in the country to be locked up, aggravated the evil.
The dissipated habits contracted by many individuals during the war,
which, after the peace, plunged them into expenses beyond their
incomes; the number of adventurers without capital, and, in many
instances, without information, who at that epoch rushed into trade,
and were obliged to make any sacrifices to support a transient credit;
the employment of considerable sums in speculations upon the public
debt, which, from its unsettled state, was incapable of becoming itself
a substitute: all these circumstances concurring, necessarily led to
usurious borrowing, produced most of the inconveniences, and were the
true causes of most of the appearances, which, where banks were established, have been by some erroneously placed to their account—a mistake which they might easily have avoided by turning their eyes
towards places where there were none, and where, nevertheless, the
same evils would have been perceived to exist, even in a greater degree
than where those institutions had obtained.
These evils have either ceased, or been greatly mitigated. Their
more complete extinction may be looked for from that additional
security to property which the constitution of the United States
happily gives; (a circumstance of prodigious moment in the scale,
both of public and private prosperity) from the attraction of foreign
capital, under the auspices of thafsecurity, to be employed upon objects, and in enterprises for which the state of this country opens a
wide and inviting field; from the consistency and stability which the
public debt is fast acquiring, as well in the public opinion at home
and abroad, as, in fact, from the augmentation of capital which that
circumstance and the quarter-yearly payment of interest will afford;
and from the el1
more copious circulation which will be likely to be
cre te(i b a
ri
y Y constituted national bank.
The establishment of banks in this country seems to be recommended by reasons of a peculiar nature. Previously to the Revolution, circulation was in a great measure carried on by paper emitted
y the several local governments. In Pennsylvania alone, the quantity of it was near a million and a half of dollars. This auxiliary
^ay be said to be now at an end. And it is generally supposed that
tnere has been, for some time past, a deficiency of circulating medium.
Wow far that deficiency is to be considered as real or imaginary, is
ftot susceptible of demonstration; but there are circumstances and
appearances, which, in relation to the country at large, countenance
tiie supposition of its reality.
A lie circumstances are, besides the fact just mentioned respecting
Paper emissions, the vast tracts of waste land, and the little advanced



18

FEDERAL BANKING LAWS AND KEPORTS

state of manufactures. The progressive settlement of the former,
while it promises ample retribution, in the generation of future resources, diminishes or obstructs, in the mean time, the active wealth
of the country. It not only draws off a part of the circulating money,
and places it in a more passive state, but it diverts, into its own channels, a portion of that species of labor and industry which would
otherwise be employed in fiirnisliing materials for foreign trade, and
which, by contributing to a favorable balance, would assist the introduction of specie. In the early periods of new settlements, the settlers
not only furnish no surplus for exportation, but they consume a part
of that which is produced by the labor of others. The same thing is
a cause that manufactures do not advance, or advance slowly. And
notwithstanding some hypotheses to the contrary, there are many
things to induce a suspicion, that the precious metals will not abound
in any country which has not mines, or variety of manufactures. They
have been sometimes acquired by the sword; but the modern system
of war has expelled this resource, and it is one upon which it is to be
hoped the United States will never be inclined to rely.
The appearances alluded to, are, greater prevalency of direct barter,
in the more interior districts of the country, which, however, has been
for some time past gradually lessening; and greater difficulty, generally, in the advantageous alienation of improved real estate; which,
also, has of late diminished, but is still seriously felt in different parts
of the Union. The difficulty of getting money, which has been a general complaint, is not added to the number; because it is the complaint
of all times, and one in which imagination must ever have too great
scope to permit an appeal to it.
If the supposition of such a deficiency be in any degree founded,
and some aid to circulation be desirable, it remains to inquire what
ought to be the nature of that aid.
The emitting of paper money by the authority of Government is
wisely prohibited to the individual States, by the national constitution ; and the spirit of that prohibition ought not to be disregarded
by the Government of the United States. Though paper emissions,
under a general authority, might have some advantages not applicable,
and be free from some disadvantages which are applicable to the
like emissions by the States, separately, vet they are of a nature so
liable to abuse—and, it may even be affirmed, so certain of being
abused—that the wisdom of the Government will be shown in never
trusting itself with the use of so seducing and dangerous an expedient.
In times of tranquility, it might have no ill consequence; it might
even perhaps be managed in aVay to be productive of good: but, in
great and trying emergencies, there is almost a moral certainty of
its becoming mischievous. The stamping of paper is an operation
so much easier than the laying of taxes, that a government, in the
practice of paper emissions, would rarely fail, in any such emergencyto indulge itself too far in the employment of that resource, to avoid,
as much as possible, one less auspicious to present popularity. If it
should not even be carried so far as to be rendered an absolute bubble,
it would at least be likely to be extended to a degree which would
occasion an inflated and artificial state of things, incompatible with
the regular and prosperous course of the political economy.




FEDERAL BANKING LAWS AND REPORTS

19

Among other material differences between a paper currency, issued
by the mere authority of Government, and one issued by a bank,
payable in coin, is this: That, in the first case, there is no standard to
which an appeal can be made, as to the quantity which will only
satisfy, or which will surcharge the circulation; in the last, that standard results from the demand. If more should be issued than is
necessary, it will return upon the bank. Its emissions, as elsewhere
intimated, must always be in a compound ratio to the fund and the
demand: whence it is evident, that there is a limitation in the nature
of the thing; while the discretion of the Government is the only
measure of the extent of the emissions, by its own authority.
This consideration further illustrates the danger of emissions of
that sort, and the preference which is due to bank paper.
The payment of the interest of the public debt, at thirteen different
places, is a weighty reason, peculiar to our immediate situation, for
desiring a bank circulation. "Without a paper, in general currency,
equivalent to gold and silver, a considerable proportion of the specie
of the country must always be suspended from circulation, and left
to accumulate, preparatory to each day of payment; and as often
as one approaches, there must in several cases be an actual transportation of the metals, at both expense and risk, from their natural and
proper reservoirs, to distant places. This necessity will be felt very
injuriously to the trade of some of the States; and will embarrass,
not a little, the operations of the treasury in those States. It will
jilso obstruct those negotiations, between different parts of the Union,
by the instrumentality of treasury bills, which have already afforded
valuable accommodations to trade in general.
Assuming it, then, as a consequence, from what has been said, that
a National Bank is a desirable institution, two inquiries emerge: Is
there no such institution, already in being', which has a claim to that
character, and which supersedes the propriety or necessity of another?
-tf there be none, what are the principles upon which one ought to
be established?
There are at present three banks in the United States: that of North
America, established in the city of Philadelphia; that of New York,
established in the city of New York; that of Massachusetts, established
jn the town of Boston. Of these three, the first is the only one which
gas at any time had a direct relation to the Government of the United
states.
The Bank of North America originated in a resolution of Congress
°i the 26th of May, 1781, founded upon a proposition of the Superintendent of Finance, which was afterwards carried into execution by an
finance of the 31st of December following, entitled "An ordinance
to incorporate the subscribers to the Bank of North America."
Ane aid afforded to the United States by this institution, during
n
i If r en J a i n i n S Period of the war, was of essential consequence; and
t^ °
Awards them since the peace, has not weakened its title to
/^.Patronage and favor. So far, its pretensions to the character in
i
s e
T arae r e a Pd c t a ble; but there are circumstances which militate
wtkiM » n considerations which indicate the propriety of an
stablishment on different principles.
sin a cllrect<>rs of this bank, on behalf of their constituents, have
ice
°cepted, and acted under, a new charter, from the State of



20

FEDERAL BANKING LAWS AND REPORTS

Pennsylvania, materially variant from their original one, and whicl
so narrows the- foundation of the institution, as to render it an incompetent basis for the extensive purposes of a national bank.
The limit assigned by the ordinance of Congress to the stock of the
bank, is ten millions of dollars. The last charter of Pennsylvania
confines it to two millions. Questions naturally arise, whether there
be not a direct repugnancy between two charters so differently circumstanced? and whether the acceptance of the one, is not to b
e
deemed a virtual surrender of the other? But, perhaps it is neither
advisable nor necessary to attempt a solution of them.
There is nothing in the acts of Congress which imply an exciusm
right in the institution to which they relate, except during the tern
of the war. There is, therefore, nothing, if the public good require it
which prevents the establishment of another. It may, however, be m
cidentally remarked, that, in the general opinion of the citizens o'
the United States, the Bank of North America has taken the statio:
of a bank of Pennsylvania only. This is a strong argument for a ne^
institution, or for a renovation of the old, to restore it to the situation
in which it originally stood in the view of the United States.
But, though the ordinance of Congress contains no grant of es
elusive privileges, there may be room to allege, that the Governmeji
of the United States ought not, in point of candor and equity, to estaj
lish any rival or interfering institution, in prejudice of the one alread;
established; especially as this has, from services rendered, well founde
claims to protection and regard.
The justice of such an observation ought, within proper bounds, t
be admitted. A new establishment of the sort ought not to be mad
without cogent and sincere reasons of public good. And, in tb
manner of doing it, every facility should be given to a consolidate
of the old with the new, upon terms not injurious to the parties cor
cerned. But there is no ground to maintain that, in a case in whK]
the Government has made no condition restricting its authority,
ought voluntarily to restrict it, through regard to the interests of
particular institution, when those of the State dictate a differed
course; especially, too, after such circumstances have intervened, &
characterize the actual situation of the Bank of North America.
The inducements to a new disposition of the thing are now to be C T
O
sidered. The first of them which occurs is, the, at least, ambiguot
situation in which the Bank of North America has placed itself, K
the acceptance of its last charter. If this has rendered it the mer
bank of a particular State, liable to dissolution at the expiration c
fourteen years, to which term the act of that State has restricted it
duration, it would be neither fit nor expedient to accept it as £
equivalent for a bank of the United States.
The restriction of its capital, also, which, according to the satf
supposition, cannot be extended l>eyond two millions of dollar*
is a conclusive reason for a different establishment. So small a cap'
tal promises neither the requisite aid to Government, nor the rtf
uisite security to the community. It may answer very well tr
purposes of local accommodation, but is an inadequate foundation fr
a circulation co-extensive with the United States, embracing the who*
of their revenues, and affecting every individual into whose hands tb
paper may come.



FEDERAL BANKING LAWS A>TO REPORTS

21

And, inadequate as such a capital would be to the essential ends of a
National Bank, it is liable to being rendered still more so, by that
principle of the constitution of the Bank of North America, contained
equally in its old and in its new charter, which leaves the increase of
the actual capital at any time (now far short of the allowed extent) to
the discretion of the directors or stockholders. It is naturally to be
expected, that the allurements of an advanced price of stock, and of
large dividends, may disincline those who are interested to an extension of capital, from which they will be apt to fear a diminution of
profits. And for this circumstance, the interest and accommodation
of the public, (as well individually as collectively) are made more
subordinate to the interest, real or imagined, of the stockholders, than
they ought to be. It is true, that, unless the latter be consulted, there
can be no bank, (in the sense at least in which institutions of this
kind, worthy of confidence, can be established in this country.) But,
it does not follow that this is alone to be consulted, or that it even
ought to be paramount. Public utility is more truly the object of pubhe banks than private profit. And it is the business of Government
to constitute them on such principles, that, while the latter will result
in a sufficient degree to afford competent motives to engage in them,
the former be not made subservient to it. To effect this, a principal
object of attention ought to be to give free scope to the creation of an
ample capital, and with this view, fixing the bounds which are
deemed safe and convenient, to leave no discretion either to stop
short of them, or to overpass them. The want of this precaution in
the establishment of the Bank of North America, is a further and an
important reason for desiring one differently constituted.
There may be room at first sight for a supposition, that, as the
profits of a bank will bear a proportion to the extent of its operations,
and as for this reason the interest of the stockholders will not be
aisadvantageously affected by any necessary augmentations of capital, there is no cause to apprehend that they will be indisposed to such
augmentations. But most men, in matters of this nature, prefer the
certainties they enjoy, to probabilities depending on untried experiments, especially^ when these promise rather that they will not be
injured, than that they will be benefitted.
* rom the influence of this principle, and a desire of enhancing its
profits, the directors of a bank will be more apt to overstrain its
faculties, in an attempt to face the additional demands which the
course of business may create, than to set on foot new subscriptions,
which may hazard a diminution of the profits, and even a temporary
reduction of the price of stock.
Banks are among the best expedients for lowering the rate of interest in a country; but, to have this effect, their capitals must be completely equal to all the demands of business, and such as will tend to
remove the idea, that the accommodations they afford are in any degree favors—an idea very apt to accompany the parsimonious dispensation of contracted funds. In this, as in every other case, the
plenty of the commodity ought to beget a moderation of the price.
Ine want of a principle of rotation in the constitution of the Bank
or JNorth America is another argument for a variation of the establishment^ Scarcely one of the reasons which militate against this prinC1
ple in the constitution of a country, is applicable to that of a bank;



22

FEDERAL BANKING LAWS AND REPORTS

while there are strong reasons in favor of it, in relation to the one,
which do not apply to the other. The knowledge to be derived from
experience is the only circumstance common to both, which pleads
against rotation in the directing officers of a bank.
But the objects of the Government of a nation, and those of the
government of a bank, are so widely different, as greatly to Aveaken
the force of that consideration in reference to the latter. Almost
every important case of legislation requires, towards a right decision,
a general and accurate acquaintance with the affairs of the State, and
habits of thinking seldom acquired but from a familiarity with public
concerns. The administration of a bank, on the contrary, is regulated by a few simple fixed maxims, the application of which is
not difficult to any man of judgment, especially if instructed in the
principles of trade. It is, in general, a constant succession of the same
details.
But, though this be the case, the idea of the advantages of experience is not to be slighted. Room ought to be left for the regular transmission of official information; and, for this purpose, the head of the
direction ought to be excepted from the principle of rotation. With
this exception, and with the aid of the information of the subordinate
officers, there can be no danger of any ill effects from want of experience or knowledge; especially as the periodical exclusion ought
not to reach the whole of the directors at one time.
The argument in favor of the principle of rotation is this: that,
by lessening the danger of combinations among the directory to make
the institution subservient to party views, or to the accommodation,
preferably, of any particular set of men, it will render the public
confidence more firm, stable, and unqualified.
When it is considered that the directors of a bank are not elected
by the great body of the community, in which a diversity of views will
naturally prevail at different conjunctures, but by a small and select
class of men, among whom it is far more easy to cultivate a steady
adherence to the same persons and objects, and that those directors
have it in their power so immediately to conciliate, by obliging the
most influential of this class, it is easy to perceive that, without the
principleof rotation, changes in that body can rarely happen, but as
a concession which tney may themselves think it expedient to make to
public opinion.
The continual administration of an institution of this kind, by the
same persons, will never fail, with or without cause, from their conduct, to excite distrust and discontent. The necessary secrecy of their
transactions gives unlimited scope to imagination to infer that something is or may be wrong. And this inevitable mystery is a solid
reason for inserting in the constitution of a bank the necessity of fl
change of men. As neither the mass of the parties interested, nor the
public in general, can be permitted to be witnesses of the interior
management of the directors, it is reasonable that both should have
that check upon their conduct, and that security against the prevalent
of a partial or pernicious system, which will be produced by the certainty of periodical changes. Such, too, is the delicacy of the credit
of a bank, that every thing which can fortify confidence and rep#
suspicion, without injuring its operations, ought carefully to be sougW
after in its formation.



FEDERAL BANKING LAWS AND REPORTS

23

A further consideration in favor of a change, is the improper rule
by which the right of voting for directors is regulated m the plan
upon which the Bank of North America was originally conftituted,
namely, a vote for each share, and the want of a rule in the last charter;
unless the silence of it, on that point, may signify that every stockholder is to have an equal and a single vote; which would be a rule in
a different extreme, not less erroneous. It is of importance that a rule
should be established on this head, as it is one of those things which
ought not to be left to discretion; and it is, consequently, of equal
importance that the rule should be a proper one.
A vote for each share renders a combination between a few principal
stockholders, to monopolize the power and benefits of the bank, too
easy. An equal vote to each stockholder, however great or small his
interest in the institution, allows not that degree of weight to large
stockholders which it is reasonable they should have, and which, perhaps, their security and that of the bank require. A prudent mean is
to be preferred. A conviction of this has produced a by-law of the
corporation of the Bank of North America, which evidently aims at
such a mean. But a reflection arises here, that a like majority with
that which enacted this law, may, at any moment, repeal it.
The last inducement which shall be mentioned, is the want of precautions" to guard against a foreign influence insinuating itself into
the direction of the bank. It seems scarcely reconcilable with a due
caution, to permit that any but citizens should be eligible, as directors
of a national bank, or that non-resident foreigners should be able to
influence the appointment of directors by the votes of their proxies.
In the event however, of an incorporation of the Bank of North
America in the plan, it may be necessary to qualify this principle, so
as to leave the right of foreigners, who now hold shares of its stock,
unimpaired; but without the power of transmitting the privilege in
question to foreign alliances.
It is to be considered that such a bank is not a mere matter of private
property, but a political machine, of the greatest importance to the
otate.
There are other variations from the constitution of the Bank of
^orth America, not of inconsiderable moment, which appear desirable,
out which are not of magnitude enough to claim a preliminary discussion. These will be seen in the plan which will be submitted m
tne sequel.
If the objections which have been stated to the constitution of the
tfank of North America are admitted to be well founded, they will,
nevertheless, not derogate from the merit of the main design, or of
tne services which that bank has rendered, or of the benefits which it
nas produced. The creation of such an institution, at the time it took
Place, was a measure dictated by wisdom. Its utility has been amply
evinced by its fruits; American independence owes much to i t And
it is very conceivable, that reasons of the moment may have rendered
u
}ose features in it inexpedient, which a revision, with a permanent
Vl6
^ suggests as desirable.
. . .
±ne order of the subject leads next to an inquiry into the principles
upon which a national bank ought to be organized.
,
-Uie situation of the United States naturally inspires a wish that the
x
°rm of the institution could admit of a plurality of branches. But



24

FEDERAL BANKING LAWS AND REPORTS

various considerations discourage from pursuing this idea. The complexity of such a plan would be apt to inspire doubts, which might
deter from adventuring in it. And the practicability of a safe and
orderly administration, though not to be abandoned as desperate,
cannot be made so manifest in perspective, as to promise the removal
of those doubts, or to justify the Government in adopting the idea as
an original experiment. The most that would seem advisable, on this
point, is to insert a provision which may lead to it hereafter, if experience shall more clearly demonstrate its utility, and satisfy those who
may have the direction, that it may be adopted with safety. It is
certain that it would have some advantages, bothpeculiar and important. Besides more general accommodations, it would lessen the
danger of a run upon the bank.
The argument against it is, that each branch must be under a distinct, though subordinate direction, to which a considerable latitude
of discretion must, of necessity, be intrusted. And, as the property
of the whole institution would be liable for the engagements of each
part, that and its credit would be at stake, upon the prudence of the
directors of every part. The mismanagement of either branch might
hazard serious disorder in the whole.
Another wish, dictated by the particular situation of the country, is,
that the bank could be so constituted as to be made an immediate
instrument of loans to the proprietors of land; but this wish also yields
to the difficulty of accomplishing it. Land is, alone, an unfit fund for
a bank circulation. If the notes issued upon it were not to be payable
in coin, on demand, or at a short date, this would amount to nothing
more than a repetition of the paper emissions, which are now exploded
by the general voice. If the notes are to be payable in coin, the lana
must first be converted into it by sale, or mortgage. The difficulty of
effecting the latter, is the very thing which begets the desire of finding
another resource; and the former would not be practicable on a sudden
emergency, but with sacrifices which would make the cure worse than
the disease. Neither is the idea of constituting the fund partly of
coin and partly of land, free from impediments. These two specie?
of property do not, for the most part, unite in the same hands. Will
the moneyed man consent to enter into a partnership with the landholder, by which the Tatter will share in the profits ivhlch will he made
by the money of the former? The money, it is evident, will be the
agent or efficient cause of the profits—the land can only be regarded
as an additional security. It is not difficult to foresee, that an unionon such terms, will not readily be formed. If the landholders are t*
procure the money by sale or mortgage of a part of their lands, thj*
they can as well do when the stock consists wholly of money, as if 1
were to be compounded of money and-land.
To procure for the landholders the assistance of loans, is the great
desideratum. Supposing other difficulties surmounted, and a fund
created, composed partly of coin and partly of land, yet the benefit
contemplated could only then be obtained by the bank's advancing
them its notes for the whole, or part, of the value of the lands they had
subscribed to the stock. If this advance was small, the relief aimed aj
would not be given; if it was large, the quantity of notes issued woufc
be a cause of distmst; nnd, if received at all, they would be likely t*
return speedily upon the bank for payment; which, after exhausting



FEDERAL BANKING LAWS AND REPORTS

25

its coin, might be under a necessity of turning its lands into money, at
any price that could be obtained for them, to the irreparable prejudice
of the proprietors.
Considerations of public advantage suggest a further wish, which
is—that the bank could be established upon principles, that would
cause the profits of it to redound to the immediate benefit of the State.
This is contemplated by many who speak of a national bank, but the
idea seems liable to insuperable objections. To attach full confidence
to an institution of this nature, it appears to be an essential ingredient
in its structure, that it shall be under a private not a public direction—
under the guidance of individual interest, not of public policy; which
would be supposed to be, and, in. certain emergencies, under a feeble
or too sanguine administration, would really he, liable to being too
much influenced by public necessity.^ The suspicion of this would,
most probably, be a canker that would continually corrode the vitals
of the credit of the bank, and would be most likely to prove fatal in
those situations in which the public good would require that they
should be most sound and vigorous. It would, indeed, be little less
than a miracle, should the credit of the bank be at the disposal of the
Government, if, in a long series of time, there was not experienced a
calamitous abuse of it. It is true, that it would be the real interest
of the Government not to abuse it; its genuine policy to husband and
cherish it with the most guarded circumspection, as an inestimable
treasure. But what government ever uniformly consulted its true
interests in opposition to the temptations of momentary exigencies?
What nation was ever blessed with a constant succession of upright
and wise administrators ?
The keen, steady, and, as it were, magnetic sense of their own interest as proprietors, in the directors of a bank, pointing invariably to
its true pole—the prosperity of the institution—is the only security
nat can always be relied upon for a careful and prudent administra*fi°!V J t *S) therefore, the only basis on which an enlightened, unqual^ed, and permanent confidence can be expected to be erected and
Maintained.
The precedents of the banks established in several cities of Europe,
Amsterdam, Hamburgh, and others, may seem to militate against this
position. Without a precise knowledge of all the peculiarities of their
^spective constitutions it is difficult to pronounce how far this may
- constitutions,
the case. That of Amsterdam, however, which we best know, is
Her under a municipal than a governmental direction. Particular
magistrates of the city, not officers of the republic, have the management of it. i t i s a i s o a bank of deposite, not of loan, or circulation;
consequently, less liable to abuse, as well as less useful. Its general
" u n ln J es | rconsists ain receiving money for safe keeping, which if not
ri,; b l? w iBt lul ti n a cre
certain time, becomes a part of its stock, and lrreS T u e -ein
difc is given for it on the books of the bank,
TU e' *- S transferable, answers all the purposes of money.
m
* h directors being magistrates of the city, and the stockholders in
ts most
52? • '
influential citizens, it is evident that the principle of
V'vViVnterest must be prevalent in the management of the bank,
nr n •P ils "really evident, that, from the nature of its operations, that
•i v? I e lt s l lee s s essential to it than to an institution constituted with
W
5 l accommodation of the public and individuals, by direct
io
ans and a paper circulation.



26

FEDERAL BANKING LAWS AND REPORTS

As the institution, if rightly constituted, must depend for its renovation, from time to time, on the pleasure of the Government, it will not
be likely to feel a disposition to render itself, by its conduct, unworthy
of public patronage. The Government, too, in the administration oi
its finances, has it in its power to reciprocate benefits to the bank, of
not less importance than those which the bank affords to the Government, and which, besides, are never unattended with an immediate
and adequate compensation. Independent of these more particular
considerations, the natural weight and influence of a good government
will always go far towards procuring a compliance with its desires;
and, as the directors will usually be composed of some of the most
discreet, respectable, and well informed citizens, it can hardly ever be
difficult to make them sensible of the force of the inducements which
ought to stimulate their exertions.
It will not follow, from what has been said, that the State may not
be the holder of a part of the stock of a bank, and consequently a
sharer in the profits of it. It will only follow that it ought not to
desire any participation in the direction of it, and, therefore, ought
not to own the whole or a principal part of the stock: for, if the mass
of the property should belong to the public, and if the direction of ij
should be in private hands, this would be to commit the interests o*
the State to persons not interested, or not enough interested in their
proper management.
There is one thin^, however, which the Government owes to itself
and to the community—at least, to all that part of it who are not
stockholders—which is, to reserve to itself a right of ascertaining, a£
often as may be necessary, the state of the bank; excluding, however,
all pretension to control. This right forms an article in the primitive
constitution of the Bank of North America; and its propriety stands
upon the clearest reasons. If the paper of a bank is to be permitted
to insinuate itself into all the revenues and receipts of a country; if 1
*
is even to be tolerated as the substitute for gold and silver in all the
transactions of business; it becomes, in either view, a national concern
of the first magnitude. As such, the ordinary rules of prudence require that the Government should possess the means of ascertainingwhenever it thinks fit, that so delicate a trust is executed with fidelity
and care. A right of this nature is not only desirable, as it respect?
the Government, but it ought to be equally so to all those concerned
in the institution, as an additional title to public and private confidence, and as a thing which can only be formidable to practices that
imply mismanagement. The presumption must always be, that th*
characters who would be intrusted with the exercise of this right, on
behalf of the Government, will not be deficient in the discretion w h i d
it may require; at least, the admitting of this presumption cannot ^
deemed too great a return of confidence for that very large portion
of it which the Government is required to place in the bank.
Abandoning, therefore, ideas which, however agreeable or desirable, are neither practicable nor safe, the following plan, for the con*
stitution of a National Bank, is respectfully submitted to the consid'
eration of the House.



FEDERAL BANKING LAWS AND REPORTS

27

1. The capital stock of the bank shall not exceed ten millions of
dollars, divided into twenty-five thousand shares, each share being
four hundred dollars; to raise which sum, subscriptions shall be
opened on the first Monday of April next, and shall continue open
until the whole shall be subscribed. Bodies politic as well as individuals may subscribe.
2. The amount of each share shall be payable, one-fourth in gold
and silver coin, and three-fourths in that part of the public debt,
which, according to the loan proposed by the act making provision
for the debt of the United States, shall l>ear an accruing interest, at
the time of payment, of six per centum per annum.
3. The respective sums subscribed shall be payable in four equal
parts, as well specie as debt, in succession, and at the distance of six
calendar months from each other; the first payment to be made at the
time of subscription. If there shall be a failure in any subsequent
payment, the party failing shall lose the benefit of any dividend
which may have accrued prior to the time for making such payment,
and during the delay of the same.
4. The subcribers to the bank, and their successors, shall be incorporated, and shall so continue until the final redemption of that part
of its stock which shall consist of the public debt.
5. The capacity of the corporation to hold real and personal estate,
shall be limited to fifteen millions of dollars, including the amount
of its capital, or original stock. The lands and tenements which it
shall be permitted to hold, shall be only such as shall be requisite for
the immediate accommodation of the institution, and such as shall
have been bona fide mortgaged to it by way of security, or conveyed
to it in satisfaction of debts previously contracted, in the usual course
of its dealings, or purchased at sales upon judgments which shall have
been obtained for such debts.
6. The totality of the debts of the company, whether by bond, bill,
note, or other contract, (credits for deposites excepted) shall never
exceed the amount of its capital stock. In case of excess, the directors,
under whose administration it shall happen, shall be liable for it m
their private or separate capacities. Those who may have dissented
may excuse themselves from this responsibility, by immediately giving
notice of the fact, and their dissent, to the President of the United
states, and to the stockholders, at a general meeting, to be called by
the President of the bank, at their request.
7. The company may sell or demise its lands and tenements, or
^ay sell the whole, or any part of the public debt, whereof its stock
shall consist; but shall trade in nothing except bills of exchange,
gold and silver bullion, or in the sale of goods pledged for money lent;
nor shall take more than at the rate of six per centum per annum, upon
its8loans or discounts.
, «
n - No loan shall be made by the bank for the use, or on account, ot
the Government of the United States, or of either of them, to an
amount exceeding fifty thousand dollars, or of any foreign prince or
state, unless previously authorized by a law of the United btates.
9
- The stock of the bank shall be transferable, according to such
rules as shall be instituted by the company in that behalf.
„ 10. The affairs of the bank shall be under the management of twentynve directors, one of whom shall be the President; and there shall be,
92180 0—63

3




28

FEDERAL BANKING LAWS Ax\D REPORTS

on the first Monday of January, in each year, a choice of directors,
by a plurality of suffrages of the stockholders, to serve for a year.
The directors, at their first meeting after each election, shall choose
one of their number as President.
11. The number of votes to which each stockholder shall be entitled,
shall be according to the number of shares he shall hold, in the proportions following, that is to say: For one share, and not more than
two shares, one vote; for every two shares above two, and not exceeddiiff ten, one vote; for every four shares above ten, and not exceeding
thirty, one vote; for every six shares above thirty, and not exceeding
sixty, one vote; for every eight shares above sixty, and not exceeding one hundred, one vote; and for every ten shares above one hundred,
one vote; but no person, co-partnership, or body politic, shall be entitled to a greater number than thirty votes. And, after the first election, no share or shares shall confer a right of suffrage, which shall
not have been holden three calendar months previous to the day of
election. Stockholders actually resident within the United States,
and none other, may vote in the elections by proxy.
12. Not more than three-fourths of the directors in office, exclusive
of the President, shall be eligible for the next succeeding year. But
the director who shall be President at the time of an election, may
always be re-elected.
13. None but a stockholder, being a citizen of the United States,
shall be eligible as a director.
14. Any number of stockholders, not less than sixty, who, together,
shall be proprietors of two hundred shares, or upwards, shall have
power, at any time, to call a general meeting of the stockholders, for
purposes relative to the institution; giving at least six weeks notice,
m two public gazettes, of the place where the bank is kept, and specifying, in such notice, the object of the meeting.
15. In case of the death, resignation, absence from the United
States, or removal, of a director, by the stockholders, his place may be
filled by a new choice for the remainder of the year.
16. No director shall be entitled to any emolument, unless the same
shall have been allowed by the stockholders at a, general meeting.
1 he stockholders shall make such compensation to the President, for
ins extraordinary attendance at the bank, as shall appear to them
r r
reasonable.
17. Not less than seven directors shall constitute a board for the
transaction of business.
18. Every cashier or treasurer, before he enters on the duties of his
office shall be required to give bond, with two or more sureties, to
the satisfaction of the directors, in a sum not less than twenty thousand
dollars, with condition for his good behavior
19 Half-yearly dividends shall be made" of so much of the profits
of the bank, as shall appear to the directors advisable. And, once

E r^j£?* ^




£* d ?* ch ? n l sha11 lay Wtore the stockholders,

FEDERAL BANKING LAWS AND REPORTS

29

20. The bills and notes of the bank, originally made payable, or
which shall have become payable, on demand, in gold and silver coin,
shall be receivable in all payments to the United States.
21. The officer at the head of the Treasury Department of the
United States shall be furnished, from time to time, as often as he
may require, not exceeding once a week, with statements of the
amount of the capital stock of the bank, and of the debts due to the
same, of the moneys deposited therein, of the notes in circulation, and
of the cash in hand; and shall have a right to inspect such general
accounts in the books of the bank as shall relate to the said statements;
provided that this shall not be construed to imply a right of inspecting
the account of any private individual or individuals, with the bank.
22. No similar institution shall be established by any future act of
the United States, during the continuance of the one hereby proposed
to be established.
S3. It shall be lawful for the directors of the bank to establish offices
wheresoever they shall think fit, within the United States, for the
purposes of discount and deposite, only, and upon the same terms, and
in the same manner, as shall be practised at the bank, and to cominit
the management of the said offices, and the making of the said discounts, either to agents specially appointed by them, or to such persons
as may be chosen by the stockholders residing at the place where any
such office shall be, under such agreements, and subject to such regulations, as they shall deem proper, not being contrary to law, or to the
constitution of the bank.
. 24. And lastly, the President of the United States shall be authorized to cause a subscription to be made to the stock of the said company, on behalf of the United States, to an ajnount not exceeding
two millions of dollars, to be paid out of the moneys which shall be
borrowed by virtue of either of the acts, the one, entitled "An act
making provision for the debt of the United States;" and the other,
entitled "An act making provision for the reduction of the public
debt;" borrowing of the bank an equal sum, to be applied to the purposes for which the said moneys shall have been procured, reimburseable in ten years, by equal annual instalments; or at any time sooner, or
m any greater proportions, that the Government may think fit.
The reasons for the several provisions contained in the foregoing
plan, have been so far anticipated, and will, for the most part, be so
readily suggested by the nature of those provisions, thait any comments which need further be made, will be both few and concise.
The combination of a portion of the public debt, in the formation
of the capital^ is the principal thing of which an explanation is requisite. The chief object of this is to enable the creation of a capital
sufficiently large to be the basis of an extensive circulation, and an
adequate security for it. As has been elsewhere remarked, the original
plan of the Bank of North America contemplated a capital of ten
millions of dollars, which is certainly not too broad a foundation for
the extensive operations to which a national bank is destined. But
to collect such a sum in this country, in gold and silver, into one depository, m a y 5 without hesitation, be pronounced impracticable,
ttence the necessitv of an auxiliary, which the public debt at once
presents.



30

FEDERAL BANKING LAWS AND REPORTS

This part of the fund will be always ready to come in aid of the
specie; it will more and more command a ready sale; and can, therefore, expeditiously be turned into coin, if an exigency of the bank
should at any time require it. This quality of prompt convertibility
into coin, renders it an equivalent for that necessary agent of bank
circulation, and distinguishes it from a fund in land, of which the sale
would generally be far less compendious, and at great disadvantage.
The quarter-yearly receipts of interest will also be an actual addition
to the specie fund, during the intervals between them and the halfyearly dividends of profits. The objection to combining land with
specie, resulting from their not being generally in possession of the
same persons, does not apply to the debt, which will always be found
in considerable quantity among the moneyed and trading people.
The debt composing part of the capital, besides its collateral effect in
enabling the bank to extend its operations, and consequently to enlarge
its profits, will produce a direct annual revenue of six per centum from
the Government, which will enter into the half-yearly dividends received by the stockholders.
When the present price of the public debt is considered, and the
effect which its conversion into bank stock, incorporated with a specie
fund, would, in all probability, have to accelerate its rise to the proper
point, it will easily be discovered that the operation presents, in its
outset, a very considerable advantage to those who may become subscribers; and from the influence which that rise would have on the
general mass of the debt, a proportional benefit to all the public
creditors, and, in a sense which has been -more than once adverted to,
to the community at large.
There is an important fact, which exemplifies the fitness of the
public debt for a bank fund, and which may serve to remove doubts
in some minds on this point: it is this, that the Bank of England, in
its first erection, rested wholly on that foundation. The subscribers
to a loan to Government of one million two hundred thousand pounds
sterling, were incorporated as a bank, of which the debt, created by
the loan and the interest upon it, were the sole fund. The subsequent
augmentations of it capital, which now amounts to between eleven
and twelve millions of pounds sterling, have been of the same nature.
The confining of the right of the bank to contract debts to the
amount of its capital, is an important precaution, which is not to be
found in the constitution of the Bank of North America, and which,
while the fund consists wholly of coin, would be a restriction attended
with inconveniences, but would be free from any, if the composition
of it should be such as it is now proposed. The restriction exists in the
establishment of the Bank of England, and, as a source of security,
is worthy of imitation.v The consequence of exceeding the limit, there,
is, that each stockholder is liable for the excess, in proportion to his
interest in the bank. When it is considered that the directors owe their
appointments to the choice of the stockholders, a responsibility of this
kind, on the part of the latter, does not appear unreasonable; but, on
the other hand, it may be deemed a hardship upon those who may have
dissented from the choice. And there are many among us, whom it
might perhaps discourage from becoming concerned in the institution. These reasons have induced the placing of the responsibility
upon the directors by whom the limit prescribed should be transgressed.



FEDERAL BANKING LAWS AND REPORTS

31

The interdiction of loans on account of the United States, or of any
particular State, beyond the moderate sum specified, or of any foreign
Power, will serve as a barrier to Executive encroachments, and to combinations inauspicious to the safety, or contrary to the policy of the
Union.
The limitation of the rate of interest is dictated by the consideration, that different rates prevail in different parts of the Union; and
as the operations of the bank may extend through the whole, some rule
seems to be necessary. There is room for a question, whether the limitation ought not rather to be to five than to six per cent., as proposed.
It may, with safety, be taken for granted, that the former rate would
yield an ample dividend, perhaps as much as the latter, by the extension which it would give to business. The natural effect of low interest is to increase trade and industry; because undertakings of every
kind can be prosecuted with greater advantage. This is a truth generally admitted; but it is1 requisite to have analyzed the subject in all
its relations, to be able to form a just conception of the extent of that
effect. Such an analysis cannot but satisfy an intelligent mind, that
the difference of one per cent, in the rate at which money may be had,
is often capable of making an essential change for the better in the
situation of any country or place.
Every thing, therefore, which tends to lower the rate of interest, is
peculiarly worthy of the cares of legislators. And through laws,
which violently sink the legal rate of interest greatly below the market
level, are not to be commended, because they are not calculated to
answer their aim, yet, whatever has a tendency to effect a reduction,
without violence to the natural course of things, ought to be attended
to and pursued. Banks are among the means most proper to accomplish this end; and the moderation of the rate at which their discounts are made, is a material ingredient towards it; with which their
own interest, viewed on an enlarged and permanent scale, does not
appear to clash.
But, as the most obvious ideas are apt to have greater force than
those which depend on complex and remote combinations, there would
be danger that the persons whose funds must constitute the stock of
the bank, would be diffident of the sufficiency of the profits to be
expected, if the rate of loans and discounts were to be placed below
the point to which they have been accustomed, and might, on this
account, be indisposed to embarking in the plan. There is, it is true,
one reflection, which, in regard to men, actively engaged in trade, ought
to be a security against this danger; it is this: That the accommodations which they might derive in the way of their business, at a low
rate, would more than indemnify them for any difference in the
dividend, supposing even that some diminution of it were to be the
consequence. But, upon the whole, the hazard of contrary reasoning
among the mass of moneyed men, is a powerful argument against the
experiment. The institutions of the kind already existing, add to the
difficulty of making it. Mature reflection and a large capital, may,
of
themselves, l. ead to the desired end.
A he last thing which requires any explanatory remark, is, the
authority proposed to be given to the President, to subscribe the
amount of two millions of dollars on account of the public. The
mam design of this is, to enlarge the specie fund of the bank, and



32

FEDERAL BANKING LAWS AND REPORTS

to enable it to give a more early extension to its operations. Though it
is proposed to borrow with one hand what is lent with the other,
yet the disbursement of what is borrowed, v^iil be progressive, and
bank notes may be thrown into circulation, instead of the gold and
silver. Besides, there is to be an annual reimbursement of a part of
the sum borrowed, which will finally operate as an actual investment
of so much specie. In addition to the inducements to this measure,
which- results from the general interest of the Government to enlarge
the sphere of the utility of the bank, there is this more particular
consideration, to wit: That, as far as the dividend on the stock shall
exceed the interest paid on the loan, there is a positive profit.
The Secretary begs leave to conclude with this general observation:
That, if the Bank of North America shall come forward with any
propositions which have for their objects, the engrafting upon that
institution, the characteristics which shall appear to the Legislature
necessary to the due extent and safety of a National Bank, there are,
in his judgment, weighty inducements to giving every reasonable facility to the measure. Not only the pretensions of that institution,
from its original relation to the Government of the United States,
and from the services it has rendered, are such as to claim a disposition
favorable to it, if those who are interested in it are willing, on their
part, to place it on a footing satisfactory to the Government, and
ecjual to the purposes of a bank of the United States, but its co-operation would materially accelerate the accomplishment of the great
object, and the collision, which might otherwise arise, might, in a
variety of ways, prove equally disagreeable and injurious. The incorporation or union here contemplated, may be effected in different
modes, under the auspices of an act of the United States, if it shall
be desired by the Bank of North America, upon terms which shall
appear expedient to the Government.
All which is humbly submitted.
ALEXANDER HAMILTON, Secretary of the Treasury.
Opinion on Constitutionality of a National Bank
EDMUND RANDOLPH, ATTORNEY GENERAL, TO PRESIDENT WASHINGTON

[Source: Letter book copy, papers of George Washington, Library of Congress]

No. 1
The Attorney General of the United States in obedience to the
order of the President of the United States, has had under consideration the Bill, entitled "An A ~t to incorporate the subscribers to the
Bank of the United States," and reports on it, in point of constitutionality as follows:
It must be acknowledged, that, if any part of the bill does either
encounter the Constitution, or is not warranted by it, the clause of
incorporation is the only one.
The legal properties of this Corporation would be,
1st. To have succession until the 4th of March 1811.




FEDERAL BANKING LAWS AND REPORTS

33

2d. To purchase, receive, & retain, real and personal property
to an amount not exceeding, fifteen millions of Dollars, including the
Capital stock :
3d. To sell & dispose of the property.
4. To sue & be sued.
5. To have a Common seal; and
6. To make by-Laws, and do all Acts, appertaining to the Corporation, under certain restrictions prescribed in the Act.
These properties with different modifications in some instances,
belong to all Corporations: their importance strikes the eye.
That the power of creating Corporations is not expressly given to
Congress, is obvious.
If it can be exercised by them, it must be ;
1st. because the nature of the Federal government implies it; or
2d. because it is involved in some of the specified powers of Legislation : or
3. because it is necessary and proper to carry into execution some
of the specified powers;
1. To be implied in the nature of the Federal government would
beget a doctrine so indefinite, as to grasp every power.
Governments, having no written constitution, may perhaps claim a
latitude of power, not always easy to be determined. Those, which
have written constitutions, are circumscribed by a just interpretation
of the words contained in them—nay farther; a legislature instituted
even by a written constitution, but without a special demarkation of
powers, may perhaps be presumed to be left at large, as to all authority, which is communicable by the people, and does not affect any of
those paramount rights, which a free people cannot be supposed to
confide even to their representatives. Essentially otherwise is the condition of a legislature, whose powers are described. An example of
the former is in the State Legislatures; of die latter, in the Legislature
of the federal government, the characteristic of which has been confessedrsby Congress in the twelfth amendment, to be, that it claims no
P
°m^ which are not delegated to it.
This last observation straitens the federal powers, and opposes an
opinion, not unpatronized, that Congress may exercise all authority, to
^nich the States are individually incompetent.
If any subject of government, from which the states are not excluded by the Constitution, be beyond their jurisdiction within thenown limits, let it be shewn: it cannot be easily conceived.
But what, if such a subject should really exist? Is the argument
less conclusive to say, that the States must retain it, because it is not
given to the federal government, than that the latter although
nmitted in itself possesses it, because it is not within the verge of a
state constitution ? While, on the one hand, it ought not to be denied
that the federal government superintends the general welfare of the
ptates, it ought not to be forgotten, on the other, that it superintends
it according to the dictates of the constitut ion.
I he opinion, above alluded to, can have only one other object;
namely, that every institution, to which a single State can give efficacy,
0I
"y within its own boundaries, devolves on Congress. But the extravagance of such a position is manifested by a single circumstance,
Uuit the cutting of canals thro? two or more States, at the will of
Congress, is one of its least consequences.



34

FEDERAL BANKING LAWS AND REPORTS

2. We ask then, in the second place, whether upon any principle of
fair construction, the specified powers of legislation involve the power
of granting charters of incorporation ? We say charters of incorporation, without confining the question to the Bank; because the admission of it in that instance, is an admission of it in every other, in
which Congress may think the use of it equally expedient.
There is a real difference between the rule of interpretation, applied
to a law and a constitution. The one comprises a summary of matter,
for the detail of which numberless laws will be necessary; the other
is the very detail. The one is therefore to be construed with a discreet
liberality; the other with a closer adherence to the literal meaning.
But when we compare the modes of construing a State, and the
federal, constitution, we are admonished to be stricter with regard
to the latter, because there is a greater danger of error in defining
partial than general poAvers.
The rule therefore for interpreting the specified powers seems to
be, that, as each of them includes those details which properly constitute the whole of the subject, to which the power relates, the
details themselves must be fixed by reasoning. And the appeal may
on this occasion be made to common sense & common language.
Those powers, then, which bear any analogy^ to that of incorporation,
shall be examined separately in their constituent parts; and afterwards in those traits, which are urged to have the strongest resemblance to the favorite power.
1. Congress have power to lay & collect taxes &c.—the heads of
this power are,
1. to ascertain the subject of taxation &c.
2. to declare the quantum of taxation &c.
3. to prescribe the mode of collection; &
4. to ordain the manner of accounting for the Taxes &c:
2dly. Congress have also power to borrow money on the credit of the
United States-—the heads of this power are,
1. to stipulate a sum to be lent
2. to stipulate an interest, or no interest to be paid, &
3. to stipulate the time & manner of repayment, unless the Loan
be placed on an irredeemable fund.
3. Congress have also power to regulate commerce with foreign
nations, among the several States, and with the Indian tribes.
The heads of this power with respect to foreign nations, are,
1. to prohibit them or their commodities from our ports.
2. to impose duties on them, where none existed before, or to increase existing duties on them.
3. to subject them to any species of custom house regulations: or
4. to grant them any exemptions or privileges which policy
may suggest.
The heads of this power with respect to the several States, arc
little more, than to establish the forms of commercial intercourse
between them, & to keep the prohibitions, which the constitution
imposes on that intercourse, undiminished in their operation: that is,
to prevent taxes on imports or exports; preferences to one port over
another by any regulation of commerce or revenue; and duties upon
the entering or clearing of the vessels of one State in the ports of
another.



FEDERAL BANKING LAWS AND REPORTS

35

The heads of this power with respect to the Indian Tribes are
1. to prohibit the Indians from coming into, or trading within,
the United States.
2. to admit them with or without restrictions.
3. to prohibit citizens of the United States from trading with
them; or
4. to permit with or without restrictions.
4. Congress have also power to dispose of, & make all needful rules
and regulations, respecting the territory or other property belonging
to the United States: the heads of this power are,
1. to exert an ownership over the territory of the United States,
which may be properly called the property of the United States,
as is the western Territory; and to institute a government therein;
or
2. to exert an ownership over the other property of the United
States.
This property may signify,
1. Personal property of the United States howsoever acquired;
or
2. real property, not aptly denominated territory, acquired by
cession or otherwise.
It cannot signify,
1. Debts due from the United States.
2. Nor money, arising from the sources of revenue, pointed out
in the Constitution. The disposal and regulation of money is the
final cause for raising it by taxes &c.
5. The preamble to the Constitution has also been relied on, as a
source of power.
\ To this it will be here remarked, once for all, that the preamble,
if it be operative is a full constitution of itself; and the body of the
Constitution is useless; but that it is declarative only of the views
of the convention, which they supposed would be best fulfilled by
the powers.delineated; and that such is the legitimate nature of
preambles.
With this analysis of the foregoing specified powers, compare each
of the corporate powers: and where is the similitude ? I t lies, say the
advocates of the Bill; in the power to lay & collect taxes &c.; because it facilitates the payment of them:—in that of borrowing money;
because it creates an ability to lend: in that of regulating commerce;
because it increases the medium of circulation; and thus encourages
activity & industry.—In that of disposing and regulating property;
because the contributions, and the interest of the United States in
the Bank, are property of the United States.—Of each of these reasons
so
^ t h i n g will be said in their order.
ihe incorporation of a Bank can facilitate the payment of taxes,
only by creating a faculty to pay, or by supplying a deficient medium,
or by rendering the transportation of money to the Seat of government more convenient. But to lay and collect taxes is in fact to demand & receive a public Debt, resting the mode of procuring the
money on the resources of the debtors; and as to its transportation,
surely there are many other vehicles besides bank-bills.
Io borrow money presupposes the accumulation of a fund to be
^nt; and is secondary to the creation of an ability to lend.
By regulating commerce, in order to increase the medium^ of circulation cannot be intended any of the commercial powers, designated



36

FEDERAL BANKING LAWS AND REPORTS

above; these being very remote from the incorporation of a bank.
Nor can it be imagined, that it is intended to reach the emission of
paper money. What construction remains, by which to regulate commerce can increase the medium? Only the emission of coin, which is
licenced in terms by another clause.
To dispose of, or to regulate property, even bank stock itself, is
utterly distinct from the incorporation of a bank; for the contributions on which the bank-stock arises, go upon the principle, that a bank
already exists; how else can contributions be made to it?
But, in truth, the serious alarm is in the concentered force of these
sentiments. If the laying and collecting of taxes brings with it every
thing, which, in the opinion of Congress, may facilitate the payment
of taxes: if to borrow money sets political speculation loose, to conceive what may create an ability to lend: if to regulate commerce, is
to range in the boundless mazes of projects for the apparently best
scheme to invite from abroad, or to diffuse at home the precious metals:
if to dispose of, or to regulate property of the United States, is to incorporate a bank, that stock may be subscribed to it by them; it may
without exaggeration be affirmed, that a similar construction on every
specified federal power will stretch the arm of Congress into the
whole circle of State Legislation.
The general qualities of the federal government, independent of
the Constitution, and the specified powers, being thus insufficient to
uphold the incorporation of a bank; we come to the last enquiry, which
has been already anticipated, whether it be sanctified by the power
to make all Laws which shall be necessary and proper for carrying
into execution the powers, vested by the Constitution. To be necessary is to be incidental, or in other words may be denominated the
natural means of executing a power.
The phrase, "and proper," if it has any meaning, does not enlarge
the powers of Congress, but rather restricts them. For no power is to
be assumed under the general clause, but such as is not only necessary
but proper, or perhaps expedient also: but, as the friends to the bill
ought not to claim any advantage from this clause, so ought not the
enemies to it, to quote the clause as having a restrictive effect: both
ought to consider it, as among the surplusage, which as often proceeds from inattention, as caution.
However, let it be propounded as an eternal question to those, who
build new powers on this clause, whether the latitude of construction which they arrogate, will not terminate in an unlimitted power
in Congress?
In every aspect therefore under which the attorney general can
view the act, so far as it incorporates the bank, he is bound to declare
his opinion to be against its constitutionality.
(Signed) EDM. EANDOLPH,
February l%th, 1791.
No. 2.
The attorney general, holding it to be his duty to address to the
President of the United States, as the grounds of an official opinion,
™
no arguments, the truth of which he does not acknowledge; has reved
serve for this paper several topics, which have more or less influenced




FEDERAL BANKING LAWS AND REPORTS

37

the friends & enemies of the bank-bill; and which ought therefore
to be communicated to the President.
1. The enemies of the bill have contended, that a rule of construction, adverse to the power of incorporation, springs out of the constitution, itself; that after the grant of certain powers to Congress, the
Constitution, as if cautious, against usurpation, specially grants several other powers, more akin to those before given, than the incorporation of a bank is to any of those, from which it is deduced.
This position they say, has been exemplified in four instances:
1. A Power is given to regulate commerce; and yet is added a
power to establish uniform krws on the subject of Bankruptcies
throughout the United States: to fix the standard of weights <c
f
measures; and to establish post offices and post roads.
2. A Power is given to coin money; and yet is added a power
to regulate the value thereof and of foreign coin; and to provide
for the punishment of conterfeiting the current coin of the United
States.
3. A Power is given to declare war; & yet is added a powTer to
grant letters of marque and reprisal: to make rules concerning
captures on land & water; to raise & support armies; to provide &
maintain a Navy; and to make rules for the government & regulation of the Land & naval forces.
4. A Power is given to provide for calling forth the militia, to
execute the Laws of the Union; and yet is added a power to call
them forth to suppress insurrections.
Whosoever will attentively inspect the Constitution, will readily
perceive the force of what is expressed in the letter of the convention; "That the Constitution was the result of a spirit of amity, and
mutual deference & concessi6n." To argue, then, from its Style or
arrangement, as being logically exact, is perhaps a scheme of reasoning not absolutely precise.
But if the Constitution were ever so perfect, considered even as a
composition, the difficulties, which the above Doctrine has started may
be solved by the following remarks.
These similar powers, on which stress is laid, are either incidental,
or substantive, that is, independent powers.
If they be incidental powers, and the conclusion be, that because
some incidental powers are expressed, no others are admissible; it
would not only be contrary to the common forms of construction,
but would reduce the present Congress to the feebleness of the old one,
which could exercise no powers, not expressly delegated. So that
the advocates for the power of incorporation on the principle of
mcidentality to some specified power, would, notwithstanding this
supposed rule of interpretation, be as much at liberty to insist on its
being an incidental power as ever.
If these similar powers be substantive and independant (as on many
occasions they are, that is, as they can be conceived to be capable of
being used, independently of what is called the principal power) it
ought not to be inferred, that they were inserted for any other purpose,
than to bestow an independent power, where it would not otherwise
have existed.
The only remaining signification, which the Doctrine now controverted can have, is, that the incorporation of a bank being more



38

FEDERAL BANKING LAWS AND REPORTS

wide from a connection with the specified powers of legislation, than
the additional ones were from the principal powers, to which they
were supposed to belong; the power of incorporation being omitted,
or rather not specially mentioned, cannot be assumed. Even this
answer is not adequate to those, who derive the power of incorporation
from thb nature of the federal government.
t
Hence the rule contended for by the enemies of the bill is defective
every way. It would be still more so with respect to those (if any such
there be), who construe the words, "necessary and proper" so as to
embrace every expedient power.
2. An appeal has been also made by the enemies of the bill, to
what passed in the federal convention on this subject. But ought
not the Constitution to be decided on by the import of its own expressions? What may not be the consequence, if an almost unknown history should govern the construction?
3. The opinions too of several respectable characters have been
cited, as delivered in the State conventions. As these have no authoritative influence; so ought it to be remembered, that observations
were uttered by the advocates of the Constitution, before its adoption,
to which they will not, and in many cases, ought not to adhere.
4. On the other hand the friends to the bill have relied on the
Congressional Acts as to Westpoint, the Government of the Western Territory, and the power of removal from office, given to the
President.
The two first are within express powers, as will occur, by adverting to the power to exercise authority over places purchased for
forts &c; and to the power to dispose of, and make needful rules and
regulations respecting the property of the United States: the last is a
point with a great weight of reason on each side. If it be founded on
the general nature of executive authority, the power is probably not
tenable, without resorting to the Doctrines of the friends to the Bill.
But it appears to be a power not specially given to any person (except on an impeachment) and may therefore incidentally belong to
Congress to confer on the President: however if this step be an error,
it is never too late to correct it.
5. It has been also pretended, that even the infirm old Congress
incorporated a bank; and can a less power be presumed to be vested
in the federal government, which has been formed to remedy their
weakness? This argument is so indefinite; the time of the incorporation was so pressing and the States had such an unlimitted command over Congress and their acts, that the public acquiescence ought
not to be the basis of such a power under the present circumstances.
6. Congress it is farther said, may provide for the general welfare,
and this includes the power of incorporation: but they are to provide
for the general welfare in laying & collecting taxes. Is the incorporation of a bank a tax bill ? The meaning of the power taken together, seems to be, that Congress may lay taxes for the purpose of
expending money for the public welfare, even to subscribe it to a
bank. But is this like the creation of bank? It implies that a bank
has been already created.
7. It has been also asserted, that Congress have an exclusive legislation at the seat of government. This will not be true, until they
go to the place of the permanent residence.



FEDERAL BANKING LAWS AND REPORTS

39

The attorney general has not collected any other information upon
this subject; altho' more may perhaps have been said by the partizans
for & against the Bank than is here noticed.
(Signed) EDM. RANDOLPH,
Feby. 12th, 1791.
Opinion on Constitutionality of a National Bank
THOMAS JEFFERSON, SECRETARY OF STATE, TO PRESIDENT WASHINGTON

[Source: Paul Leicester Ford, The Writings of Thomas Jefferson,
Vol. 5, pp. 284-289]

February15,1791.
The bill for establishing a National Bank undertakes among other
things:—
1. To form the subscribers into a corporation.
2. To enable them in their corporate capacities to receive grants of
land; and so far is against the laws of Mortmain}
3. To make alien subscribers capable of holding lands; and so far
is against the laws of Alienage.
4. To transmit these lands, on the death of a proprietor, to a certain line of successors; and so far changes the course of Descents.
5. To put the lands out of the reach of forfeiture or escheat; and so
far is against the laws of Forfeiture and Escheat.
6. To transmit personal chattels to successors in a certain line; and
so far is against the laws of Distribution.
7. To give them the sole and exclusive right of banking under the
national authority; and so far is against the laws of Monopoly.
8. To communicate to them a power to make laws paramount to the
laws of the States: for so they must be construed, to protect the institution from the control of the State legislatures; and so, probably,
they will be construed.
I consider the foundation of the Constitution as laid on this ground:
That "all powers not delegated to the United States, by the Constitution, nor prohibited by it to the States, are reserved to the States or
to the people." [Xllth amendment.] To take a single step beyond
the boundaries thus specially drawn around the powers of Congress,
is to take possession of a boundless field of power, no longer susceptible
°f any definition.
rhe incorporation of a bank, and the powers assumed by this bill,
have not, in my opinion, been delegated to the United States, by the
Constitution.
I- They are not among the powers specially enumerated: for these
are: 1st. A power to lay taxes for the purpose of paying the debts of
the United States; but no debt is paid by this bill, nor any tax laid.
Were it a bill to raise money, its origination in the Senate would condemn it by the Constitution.
2d. "To borrow money." But this bill neither borrows money nor
ensures the borrowing it. The proprietors of the bank will be just as
i ttsi SlV 1 1 ? ? 1 t h e Constitution controls the laws of Mortmain so far as'to permit ^ K r e s s
f
R . o hold land for certain purposes, yet not so far as to permit them to communicate
a similar right to other corporate bodies.—T. J.




40

FEDERAL BANKING LAWS AND REPORTS

free as any other money holders, to lend or not to lend their money to
the public. The operation proposed in the bill, first, to lend them two
millions, and then to borrow them back again, cannot change the
nature of the latter act, which will still be a payment, and not a loan,
call it by what name you please.
3. To "regulate commerce with foreign nations, and among the
States, and with the Indian tribes." To erect a bank, and to regulate
commerce, are very different acts. He who erects a bank, creates a
subject of commerce in its bills; so does he who makes a bushel of
wheat, or digs a dollar out of the mines; yet neither of these persons
regiilates commerce thereby. To make a thing which may be bought
and sold, is not to prescribe regulations for buying and selling. Besides, if this was an exercise of the power of regulating commerce, it
would be void, as extending as much to the internal commerce of every
State, as to its external. For the power given to Congress by the
Constitution does not extend to the internal regulation of the commerce of a State, (that is to say of the commerce between citizen and
citizen,) which remain exclusively with its own legislature; but to its
external commerce only, that is to say, its commerce with another
State, or with foreign nations, or with the Indian tribes. Accordingly
the bill does not propose the measure as a regulation of trade, but as
"productive of considerable advantages to trade." Still less are these
powers covered by any other of the special enumerations.
II. Nor are they within either of the general phrases, which are the
two following:—
1. To lay taxes to provide for the general welfare of the United
States, that is to say, "to lay taxes for the purpose of providing for the
general welfare." For the laying of taxes is the power, and the general welfare the purpose for which the power is to be exercised. They
are not to lay taxes ad libitum for any purpose they please; but only
to pay the debts or provide for the IO elfare of the Union. In like
manner, they are not to do anything they please to provide for the
general welfare, but only to lay taxes for that purpose. To consider
the latter phrase, not as describing the purpose of the first, but as
giving a distinct and independent power to do any act they please,
which might be for the good of the Union, would render all the
preceding and subsequent enumerations of power completely useless.
It would reduce the whole instrument to a single phrase, that of
instituting a Congress with power to do whatever would be for the
good of the United States; and, as they would be the sole iudges of the
good or evil, it would be also a power to do whatever evil they please.
It is an established rule of construction where a phrase will bear
either of two meanings, to give it that which will allow some meaning
to the other parts of the instrument, and not that which would render
all the others useless. Certainly no such universal power was meant
to be given them. It was intended to lace them up straitly within the
enumerated powers, and those without which, as means, these powers
could not be carried into effect. It is known that the very power nptf
proposed as a means was rejected as an end by the Convention which
formed the Constitution. A proposition was made to them to authorize
Congress to open canals, and an amendatory one to empower them to
incorporate. But the whole was rejected, and one of the reasons for
rejection urged in debate was, that then they would have a power to



FEDERAL BANKING LAWS AND REPORTS

41

erect a bank, which would render the great cities, where there were
prejudices and jealousies on the subject, adverse to the reception of the
Constitution.
2. The second general phrase is, "to make all lawTs necessary and
proper for carrying into execution the enumerated powers." But they
can all be carried into execution without a bank. A bank therefore is
not necessary, and consequently not authorized by this phrase.
It has been urged that a bank will give great facility or convenience
in the collection of taxes. Suppose this were true: yet the Constitution allows only the means which are "necessary" not those which are
merely "convenient" for effecting the enumerated powers. If such
a latitude of construction be allowed to this phrase as to give any nonenumerated power, it will go to every one, for there is not one which
ingenuity may not torture into a convenience in some instance or other,
to some one of so long a list of enumerated powers. It would swallow
up all the delegated powers, and reduce the whole to one power, as
before observed. Therefore it was that the Constitution restrained
them to the necessary means, that is to say, to those means without
which the grant of power would be nugatory.
But let us examine this convenience and see what it is. The report on
this subject, page 3, states the only general convenience to be, the preventing the transportation and re-transportation of money between
the States and the treasury, (for I pass over the increase of circulating
medium, ascribed to it as a want, and which, according to my ideas of
paper money, is clearly a demerit.) Every State will have to pay a
sum of tax money into the treasury; and the treasury will have to pay,
m every State, a part of the interest on the public debt, and salaries to
the officers of government resident in that State. In most of the States
there will still be a surplus of tax money to come up to the seat of government for the officers residing there. The payments of interest and
salary in each State may be made by treasury orders on the State collector. This will take up the greater part of the money he has collected
in his State, and consequently prevent the great mass of it from being
drawn out of the State. If there be a balance of commerce in favor of
that State against the one in which the government resides, the surplus
of taxes will be remitted by the bills of exchange drawn for that commercial balance. And so it must be if there was a bank. But if there be
no balance of commerce, either direct or circuitous, all the banks in
the worldWld not brin^ up the surplus of taxes but in the form o±
money. Treasury orders then, and bills of exchange may prevent the
displacement of the main muss of the money collected, without the aid
oi any bank; and where these fail, it cannot be prevented even with
that aid.
Perhaps, indeed, bank bills may be a more convenient vehicle than
treasury orders. But a little difference in the degree of cmwetuence,
ymnot consitute the necessity which the constitution makes the ground
tor assuming any non-enumerated power.
besides; the existing banks will, without a doubt, enter into arrangements for lending their agency, and the more favorable, as there will
{* a competition among them for it; whereas the bill delivers us up
bound to the national bank, who are free to refuse all arrangement, but
°n their own terms, and the public not free, on such refusal, to employ
any other bank. That of Philadelphia, I believe, now does this busi


42

FEDERAL BANKING LAWS AND REPORTS

ness, by their post-notes, which, by an arrangement with the treasury,
are paid by any State collector to whom they are presented. ^ This expedient alone suffices to prevent the existence of that necessity which
may justify the assumption of a non-enumerated power as a means for
carrying into effect an enumerated one. The thing may be done, and
has been done, and well done, without this assumption; therefore, it
does not stand on that degree of necessity which can honestly justify it.
It may be said that a bank whose bills would have a currency all
over the States, would be more convenient than one whose currency is
limited to a single State. So it would be still more convenient that
there should be a bank, whose bills should have a currency all over the
world. But it does not follow from this superior conveniency, that
there exists anywhere a power to establish such a bank; or that the
world may not go on very well without it.
Can it be thought that the Constitution intended that for a^ shade
or two of convenience, more or less, Congress should be authorised to
break down the most ancient and fundamental laws of the several
States; such as those against Mortmain, the laws of Alienage, the rules
of descent, the acts of distributions, the laws of escheat and forfeiture,
the laws of monopoly? Nothing but a necessity T invincible by any
other means, can justify such a prostitution of law s, which constitute
the pillars of our whole system of jurisprudence. Will Congress be
too straight-laced to carry the constitution into honest effect, unless
they may pass over the foundation-laws of the State government for
the slightest convenience of theirs ?
The negative of the President is the shield provided by the constitution to protect against the invasions of the legislature: 1. The
right of the Executive. 2. Of the Judiciary. 3. Of the States and
State legislatures. The present is the case of a right remaining exclusively with the States, and consequently one of those intended by
the Constitution to be placed under its protection.
9 It must be added, however, that unless the President's mind on a
view of everything which is urged for and against this bill, is tolerably
clear that it is unauthorised by the Constitution; if the pro and the
con hang so even as to balance his judgment, a just respect for the
wisdom of the legislature would naturally decide the balance in
favor of their opinion. It is chiefly for cases where they are clearly
misled by error, ambition, or interest, that the Constitution has placed
a check in the negative of the President.
Opinion on Constitutionality of a National Bank
ALEXANDER HAMILTON, SECRETARY OF TREASURY, TO PRESIDENT
WASHINGTON

[Source: John C. Hamilton, The Works of Alexander Hamilton,
Vol. 4, pp. 104-138]

February <B3d, 179L

The Secretary of the lYeasury having perused with attention the
papers containing the opinions of the Secretary of State and Attorney-General, concerning the constitutionality of the bill for establishing a National Bank, proceeds, according to the order of the Presi


FEDERAL BANKING LAWS AND REPORTS

43

dent, to submit the reasons which have induced him to entertain a
different opinion.
It will naturally have been anticipated, that in performing this
task, he would feel uncommon solicitude. Personal considerations
alone, arising from the reflection that the measure originated with
him, would be sufficient to produce it. The sense which he has manifested of the great importance of such an institution to the successful
administration of the department under his particular care, and an
expectation of serious ill consequences to result from a failure of the
measure, do not permit him to be without anxiety on public accounts.
But the chief solicitude arises from a firm persuasion, that principles
of construction like those espoused by the Secretary of State and Attorney-General, would be fatal to the just and indispensable authority
of the United States.
In entering upon the argument, it ought to be premised that
the objections of the Secretary of State and Attorney-General are
founded on a general denial of the authority of the United States
to erect corporations. The latter, indeed, expressly admits, that if
there be any thing in the bill which is not warranted by the Constitution, it is the clause of incorporation.
Now it appears to the Secretary of the Treasury that this general
principle is inherent in the very definition of government, and essential
to every step of the progress to be made by that of the United States,
namely: That every power vested in a government is in its nature
sovereign, and includes, by force of the term, a right to employ all
the means requisite and fairly applicable to the attainment of the ends
of such power, and which are not precluded by restrictions and exceptions specified in the Constitution, or not immoral, or not contrary
to the.essential ends of political society.
This principle, in its application to government in general, would
be admitted as an axiom; and it will be incumbent upon those who may
incline to deny it, to prove a distinction, and to show that a rule which,
m the general system of things, is essential to the preservation of the
soaal order, is inapplicable to the United States.
I he circumstance that the powers of sovereignty are in this country
divided between the National and State governments, does not afford
Jne distinction required. It does not follow from this, that each of
™ portion of powers delegated to the o^e or to the other, is not
sovereign with regard to its power objects. It will only follow from
Uj that each has sovereign power as to certain things, and not as to
otter things. To deny that the government of the United States has
sovereign power, as to its declared purposes and trusts, because its
Power does not extend to all cases, would be equally to deny that the
&tate governments have sovereign power in any case, because their
Power does not extend to every case. The tenth section of the first
article of the Constitution exhibits a long list of very important
y n n ? s which they may not do. And thus the United States would
wnish o rthe singular spectacle of a political society without sover?
ft
of a people governed, without government
AT it would be necessary to bring proof to a proposition so clear,
*s that which affirms that the powers of the federal government, as to
** °°Wtx, were sovereign, there is a clause of its Constitution which
ould be decisive. It is that which declares that the Constitution, and
92180 0—63

1




44

FEDERAL BANKING LAWS AND REPORTS

the laws of the United States made in pursuance of it, and all treaties
made, or which shall be made under their authority, shall be the
supreme law of the land* The power which can create the supreme
law of the land in any case, is doubtless sovereign as to such case.
This general and indisputable principle puts at once an end to the
abstract question, whether the United States have power to erect a
corporation; that is to say, to give a legal or artificial capacity to one
or more persons, distinct from the natural. For it is unquestionably
incident to sovereign power to erect corporations, and consequently
to that of the United States, in relation to the objects intrusted to the
management of the government. The difference is this: where the
authority of the government is general, it can create corporations in
all cases; where it is confined to certain branches of legislation, it can
create corporations only in those cases.
Here then, as far as concerns the reasonings of the Secretary of
State and the Attorney-General, the affirmative of the constitutionality of the bill might be permitted to rest. It will occur to the President, that the principle here advanced has been untouched by either
of them.
For a more complete elucidation of the point, nevertheless, the arguments which they had used against the power of the government to
erect corporations, however foreign they are to the great and fundamental rule which has been stated, shall be particularly examined.
And after showing that they do not tend to impair its force, it shall
also be shown that the power of incorporation, incident to the government in certain cases, does fairly extend to the particular case which
is the object of the bill.
The first of these arguments is, that the foundation of the Constitution is laid on this ground: "That all powers not delegated to the
United States by the Constitution, nor prohibited to it by the States,
are reserved for the States, or to the people." Whence it is meant to be
inferred, that Congress can in no case exercise any power not included
in those not enumerated in the Constitution. And it is affirmed, that
the power of erecting a corporation is not included in any of the
enumerated powers.
The main proposition here laid down, in its true signification is not
to be questioned. It is nothing more than a consequence of this republican maxim, that all government is a delegation of power. But how
much is delegated in each case, is a question of fact, to be made out by
fair reasoning and construction, upon the particular provisions of the
Constitution, taking as guides the general principles and general end?
of governments.
It is not denied that there are implied, as well as express powers, and
that the former are as effectually delegated as the latter. And for the
sake of accuracy it shall be mentioned, that there is another class
of powers, which may be properly denominated resulting powersIt will not be doubted, that if the United States should make a
conquest of any of the territories of its neighbors, they would possess
sovereign jurisdiction over the conquered territory. * This would be
rather a result, from the whole mass of the powers of the government,
and from the nature of political society, than a consequence of either
of the powers specially enumerated.




FEDERAL BANKING LAWS AND REPORTS

45

But be this as it may, it furnishes a striking illustration of the
general doctrine contended for; it shows an extensive case, in which a
power of erecting corporations is either implied in, or would result
from, some or all of the powers vested in the national government.
The jurisdiction acquired over such conquered country would certainly
be competent to an^ species of legislation.
To return:—It is conceded that implied powers are to be considered as delegated equally with express ones. Then it follows,
that as a power of erecting a corporation may as well be implied as
any other thing, it may as well be employed as an instrument or mean
of carrying into execution any of the specified powers, as any other
i?istrument or mean whatever. The only question must be, in this,
as in every other case, whether the mean to be employed, or in this
instance, the corporation to be erected, has a natural relation to any
of the acknowledged objects or lawful ends of the government. Thus
a corporation may not be erected by Congress for superintending the
police of the city of Philadelphia, because they are not authorized to
regulate the police of that city. But one may be erected in relation to
to the collection of taxes, or to the trade with foreign countries, or
to the trade between the States, or with the Indian tribes; because it
is the province of the federal government to regulate those objects, and
because it is incident to a general sovereign or legislative power to
regulate a thing, to employ all the means which relate to its regulation
to the best and greatest advantage.
A strange fallacy seems to have crept into the manner of thinking
and reasoning upon the subject. Imagination appears to have been
unusually busy concerning it. An incorporation seems to have been
regarded as some great independent substantive thing; as a political
e
na of peculiar magnitude and moment; whereas it is truly to be
considered as a quality, capacity, or mean to an end. Thus a mercantlle c
?mpany i s formed, with a certain capital, for the purpose of
carrying on a particular branch of business. Here the business to be
Prosecuted t ise the end. The association, in order to form the requisite
C
^fti! ' i s h P r i o r y mean. Suppose that an incorporation were
aaded to this, it would only be to add a new quality to that association,
*> give it an artificial capacity, by which it would be enabled to
pr
2f^cute the business with more safety and convenience.
Ina
!j the importance of the power of incorporation has been exaga
gerated, leadingr i to erroneous conclusion, will further appear from
t n i ! ^ t o i t s o £in. The Roman law is the source of it, according
o which a voluntary association of individuals, at any time, or for
y purpose, was capable of producing it. In England, whence our

yond the reach of all those very important portions of sovereign
mn * Ve&islative as well as executive, which belongs to the govern^ n t ofUthe tUnited dStates?
, .
h
ill fi °m ega n sh i s m o e of reasoning respecting the right of employing
r < u i s t e o the execution of the specified powers of the
PL
S°vernm ea+nSl- t^quisite tto the execution of the speci
? l !
p
are to h 'm l *s objected, that none but necessary and proper means
o ed
means are ^0 ? y ; and the Secretary of State maintains, that no
t
b considered as necessary but those without which the
i d d
b t th
ih
h i h th
be



46

FEDERAL BANKING LAWS AND REPORTS

grant of the power would be nugatory. Nay, so far does he go in his
restrictive interpretation of the word, as even to make the case of
necessity which shall warrant the constitutional exercise of the power
to depend on casual and temporary circumstances; an idea which alone
refutes the construction. The expediency of exercising a particular
power, at a particular time, must, indeed? depend on circumstances;
but the constitutional right of exercising it must be uniform and invariable, the same to-day as to-morrow.
All the arguments, therefore, against the constitutionality of the
bill derived from the accidental existence of certain State banks,—
institutions which happen to exist to-day, and, for aught that concerns
the government of the United States, may disappear to-morrow —
must not only be rejected as fallacious, but must be viewed as demonstrative that there is a radical source of error in the reasoning.
It is essential to the being of the national government, that so
erroneous a conception of the meaning of the word necessary should be
exploded.
It is certain, that neither the grammatical nor popular sense of the
term requires that construction. According to both, necessary often
means no more than needful, requisite* incidental, useful, or conducive to. It is a common mode of expression to say, that it is necessary for a government or a person to do this or that thing, when nothing more is intended or understood, than that the interests of the
government or person require, or will be promoted by, the doing o
f
this or that thing. The imagination can be at no loss for exemplifications of the use of the word in this sense. And it is the true one in
which it is to be understood as used in the Constitution. The whole
turn of the clause containing it indicates, that it was the intent of the
Convention, by that clause, to give a liberal latitude to the exercise o
f
the specified powers. The expression have peculiar comprehensiveness. They are, "to make all law& necessary and proper for cwn^yi^i
into execution the foregoing powers, and all other powers vested by
the Constitution in the government of the United States, or in any
department or officer thereof."
To understand the word as the Secretary of State does, would be
to depart from its obvious and popular sense, and to give it a restrictive operation, an idea never before entertained. It would be to give
it the same force as if the word absolutely or indispensably had been
prefixed to it.
Such a construction would beget endless uncertainty and embarrassment. The cases must be palpable and extreme, in which is could be
pronounced, with certainty, that a measure was absolutely necessary?
or one, without which, the exercise of a given power would be nuga'
nug
tory. Th
f
f
t hih
ld
There are few measures of any government which would stand
so severe a test. To insist upon it, would be to make the criterion ot
the exercise of any implied power, a case of extreme necessity; which
ny m p e d
necessity;
rul
th
l i
f th b d
f nstituis rather a rule to justify the overleaping of the bounds of constitutional authority, than to govern the ordinary exercise of it.
It may be truly said of every government, as well as of that of the
United States, that it has only a right to pass such laws as are necessary and proper to accomplish the object intrusted to it. For no government has a right to do merely what it pleases. Hence, by a process
of reasoning similar to that of the Secretary of State, it might be



FEDERAL BANKING LAWS AND REPORTS

47

proved that neither of the State governments has a right to incorporate a bank. It might be shown that all the public business of the
state could be performed without a bank, and infering thence that it
was unnecessary, it might be argued that it could not be done, because
it is against the rule which has been just mentioned. A like mode of
reasoning would prove that there was no power to incorporate the
inhabitants of a town, with a view to a more perfect police. For it
is certain that an incorporation may be dispensed with, though it is
better to have one. It is to be remembered that there is no express
power in any State constitution to erect corporations.
The degree in which a measure is necessary, can never be a test of
the legal right to adopt it; that must be a matter of opinion, and can
only be a test of expediency. The relation between the measure and
the end; between the nature of the mean employed towards the execution of a power, and the object of that power, must be the criterion of
constitutionality, not the more or less of necessity or utility.
The practice of the government is against the rule of construction
advocated by the Secretary of State. Of this, the Act concerning
light-houses, beacons, buoys, and public piers, is a decisive example.
1ms, doubtless, must be referred to the powers of regulating trade,
and is fairly relative to it. But it cannot be affirmed that the exercise
of that power in this instance was strictly necessary, or that the power
itself would be nugatory, without that of regulating establishments
of this nature.
This restrictive interpretation of the word necessary is also contrary
|o this sound maxim of construction; namely, that the powers conlamed in a constitution of government, especially those which concern
[ne general administration of the affairs of a country, its finances,
g
? ? d f ? & -> ought to be construed liberally i advancement
l in
dt
?+i?' defence &c
°j the public good. This rule does not depend on the particular form
or a government, or on the particular demarkation of the boundaries
°i its powers, but on the nature and objects of government itself. The
means by which national exigencies are to be provided for, national
"conveniences obviated, national prosperity promoted, are of such
^nnite variety, extent, and complexity, that there must of necessity
tW mei latl tude c eof discretion in the selection and application of
JJ3? g Jihns- H e n > consequently, the necessity and propriety of exliK i e authorities intrusted to a government on principles of
llb
^al construction.
L A £ torne y-General admits the ride, but takes a distinction bee an
olTu ? \ t a tconst d t h e Federal Constitution. The latter, he thinks,
iifZ
*
™ed with greater strictness, because there is more
son f/f? e r r o r i n ^ n i n g partial than general powers. But the rean of the rule forbids such a distinction. This reason is, the variety
and *J a } o fm o r ueb cl ir ci t iexigencies, a far greater proportion of which,
P
cal
admSJ a. fe?
Wnd, are objects of National than of State
admSJ S.t rfett l o n
Stratlon
a
a
T
dan
f
f
supposable
- The greater danger of error, as far as it is supposable,
mavT r ude
ial
caution in practice, but it cannot be a
W P . ntial reason for c
n t i interpretation.
i t i
to i s h clause of the Constitution immediately under
the d
l
we «ff. * a n ' h admitted by the Attorney-General, that no restrw"To £ CceS8ar ascribed to it. He defines the word necessary thus:
**
natuwi m e a n y i s t o be incidental, and may be denominated the
2?
m
s of executing a power."



48

FEDERAL BANKING LAWS AND REPORTS

But while on the one hand the construction of the Secretary of State
is deemed inadmissible, it will not be contended, on the other, that the
clause in question gives any new or independent power. But it gives
an explicit sanction to the doctrine of implied pothers, and is equivalent
to an admission of the proposition that the government, as to its specified powers and objects, has plenary and sovereign authority, in some
cases paramount to the States; in others, co-ordinate with it. For
such is the plain import of the declaration, that it may pass all laws
necessary and proper to cany into execution those powers.
It is no valid objection to the doctrine to say, that it is calculated
to extend the power of the general government throughout the entire
sphere of State legislation. The same thing has been said, and may
be said, with regard to every exercise of power by implication or
consti'iictton.

The moment the literal meaning is departed from, there is a chance
of error and abuse. And yet an adherence to the letter of its powers
would at once arrest the motions of government. It is notonly
agreed, on all hands, that the exercise of constructive powers is indispensable, but every act which has been passed is more or less an
exemplification of it. One has been already mentioned—that relating
to light-houses, &c.—that which declares the power of the President
to remove officers at pleasure, acknowledges the same truth in another
and a signal instance.
The truth is, that difficulties on this point are inherent in the nature
of the Federal Constitution; they result inevitably from a division of
the legislative power. The consequence of this division is, that there
will bo cases clearly within the power of the national government;
others, clearly without its powers; and a third class, which will leave
room for controversy and difference of opinion, and concerning which
a reasonable latitude of judgment must be allowed.
But the doctrine which is contended for is not chargeable with the
consequences imputed to it. It does not affirm that the national government is sovereign in all respects, but that it is sovereign to a certain
extent; that is, to the extent of the objects of its specified powers.
It leaves, therefore, a criterion of what is constitutional, and of what
is not so. This criterion is the end, to which the measure relates as
a mean. If the end be clearly comprehended within any of the specified powers, and if the measure have an obvious relation to that end)
and is not forbidden by any particular provision of the Constitution?
it may safely be deemed to come within the compass of the nation^
authority. There is also this further criterion, which may materially
assist the decision: Does the proposed measure abridge a pre-existing
right of any State or of any individual? If it does not, there is a
strong presumption in favor of its constitutionality, and slighter relations to any declared object of the Constitution may be permitted to
turn the scale.
The general objections, which are to be inferred from the reasoning*
of the Secretary of State and Attorney-General, to the doctrine wlnjj11
has been advanced, have been stated, and it is hoped satisfactorily
answered. Those of a more particular nature will now be examii}e<Jt
The Secretary of State introduces his opinion with an observation
that the proposed incorporation undertakes to create certain capac1"
ties, properties, or attributes, which are against the laws of alienage



FEDERAL BANKING LAWS AND REPORTS

49

descents, escheat, and forfeiture, distribution and monopoly, and to
confer a power to make laws paramount to those of the States. And
nothing, says he, in another place, but necessity, invincible by other
mam, can justify such a prostration of laws, which constitute the
pillars of our whole system of jurisprudence, and are the foundation
laws of the State governments. If these are truly the foundation laws
of the several States, then have most of them subverted their own
foundations. For there is scarcely one of them which has not, since
the establishment of its particular constitution, made material alterations in some of those branches of its jurisprudence, especially the law
of descents. But it is not conceived how any thing can be called the
fundamental law of a State government which is not established in its
constitution, unalterable by the ordinary legislature. And, with regard to the question of necessity, it has been shown that this can only
constitute a question of expediency, not of right.
To erect a corporation, is to substitute a legal or artificial to a natural
person, and where a number are concerned, to give them individuality.
To that legal or artificial person, once created, the common IawT of
every State, of itself, annexes all those incidents and attributes which
are represented as a prostration of the main pillars of their jurisprudence.
, It is certainly not accurate to say, that the erection of a corporation
js against those different heads of the State laws; because it is rather
to create a kind of person or entity, to which they are inapplicable,
ami to which the general rule of those laws assign a different regimen.
Ine laws of alienage cannot apply to an artificial person, because it
can have no country; those of descent cannot apply to it, because it
can have no heirs; those of escheat are foreign from it, for the same
._., ^i4U Xlf ^ BU1Ui Lllttl/ L11O CAC1Vylov, VA _ r
— prey i n g the rule by which foreigners shall be naturalized, is against
»e law of alienage, while it is, in fact, only to put them in a situation
l
° cease to be the subject of that law. To do a thing which is against
£ I Vy? d oe rsomething which it forbids, or which is a violation ot it.
W ? A- lt w r e e v e n t o be admitted that the erection of a corporation
e
i?'l iJ* a l tn oation of the stated laws, in the enumerated particulars,
d
t it! i ?f t htel ™ g towards proving that the measure was unconstiaml . I a n government of the United States can do no act which
forT *? iteration of a State law, all its powers are nugatory;
new law is an alteration, in some way or other, of an
TliaJ.

W4Cl

^WAWWWI o r statute.

_

a,

,

hal i a r e I a w s concerning bankruptcy in some States. Some States
JllJf regulating the values of foreign coins. Congress are eme Stablish
fte i S ^ States a n d
o
uniform laws concerning bankruptcy throughout
*J£
*e ltller> f
to regulate the values of foreign coins The
o
alteS?
,
these powers by Congress, necessarily involves an
-----^,, a of those States.
a
"aportl- proer y Person, by the common law of each btate, may
er
'> P Wn t P ty to foreign countries, at pleasure. But Congress,
•
P o S a *f of theopower of regulating trade, may prohibit tin ex*SuTil a w c o m m d i t i e s ; in doing which, they would alter the
°
On
of each State, in abridgment of individual right.



50

FEDERAL BANKING LAWS AND REPORTS

It can therefore never be good reasoning to say this or that act is
unconstitutional, because it alters this or that law ot a btate. it
must be shown that the act which makes the alteration is unconstitutional on other accounts; not because it makes the alteration.
There are two points in the suggestions of the Secretary of btate,
which have been noted, that are peculiarly incorrect. One is, that the
proposed incorporation is against the laws of monopoly, because it
stipulates an exclusive right of banking under the national authority;
the other, that it gives power to the institution to make laws paramount to those of the States.
But with regard to the first point: The bill neither prohibits any
State from erecting as many banks as they please, nor any number
of individuals from associating to carry on the business, and consequently, is free from the charge of establishing a monopoly; for
monopoly implies a legal' impediment to the carrying on of the trade
by others than those to whom it is granted.
And with regard to the second point, there is still less foundation.
The by-laws of such an institution as a bank can operate only on its
own members—can only concern the disposition of its own property,
and must essentially resemble the rules of a private mercantile partnership. They are expressly not to be contrary to law; and law must
here mean the law of a State, as well as of the United States. There
never can be a doubt, that a law of a corporation, if contrary to a
law of a State, must be overruled as void, unless the law of the
State is contrary to that of the United States, and then the question
will not be between the law of the State and that of the corporation,
but between the law of the State and that of the United States.
Another argument made use of by the Secretary of State is, the
rejection of a proposition by the Convention to empower Congress
to make corporations, either generally, or for some special purpose.
What was the precise nature or extent of this proposition, or what
the reasons for refusing it, is not ascertained by any authentic document, or even by accurate recollection. As far as any such document
exists, it specifies only canals. If this was the amount of it, it would
at most, only prove that it was thought inexpedient to give a power to
incorporate for the purpose of opening canals, for which purpose a
special power would have been necessary, except with regard to the
western territory, there being nothing in any part of the Constitution
respecting the regulation of canals. It must be confessed, however,
that very different accounts are given of the import of the proposition, and of the motives for rejecting i t Some affirm, that it "*a?
confined to the opening of canals and obstruction in rivers; other*
that it embraced banks; and others, that it extended to the power oi
incorporating generally. Some, again, allege, that it was disagreed to
because it was thought improper to vest in Congress a power O
T
erecting corporations. Others, because it was thought unnecessary t*
ol
specify the power, and inexpedient to furnish an additional topic r
objection to the Constitution. In this state of the matter, no inft
ence whatever can be drawn from it.
But whatever may have been the nature of the proposition, °*
the reasons for rejecting it, includes nothing in respect to the laments of the question. The Secretary of State will not deny, th*whatever may have been the intention of the framers of a constitution



FEDERAL BANKING LAWS AND REPORTS

51

or of a law, that intention is to be sought for in this instrument itself,
according to the usual and established rules of construction. Nothing
is more common than for laws to express and effect more or less than
was intended. If, then, a power to erect a corporation in any case
be deducible, by fair inference, from the whole or any part of the
numerous provisions of the Constitution of the United States, arguments drawn from extrinsic circumstances regarding the intention of
the Convention must be rejected.
Most of the arguments of the Secretary of State, which have not
been considered in the foregoing remarks, are of a nature rather to
apply to the expediency than to the constitutionality of the bill.
They will, however, be noticed in the discussions which will be necessary in reference to the particular heads of the powers of the government which are involved in the question.
Those of the Attorney-General will now properly come under view.
His first objection is, that the power of incorporation is not expressly given to Congress. This shall be conceded, but in the sense
only, that it is not declared in express terms that Congress may erect
a corporation. But this cannot mean, that there are not certain
express poioers which necessarily include it. For instance, Congress
have express power to exercise exclusive legislation, in all cases whatsoever, over such district (not exceeding ten miles square) as may,
by cession of particular States and the acceptance of Congress, become
the seat of the government of the United States; and to exercise like
authority over all places purchased, by consent of the legislature of
the State in which the same shall be, for the erection of forts, arsenals,
dock-yards, and other needful buildings. Here, then, is express
power to exercise exclusive legislation, in all cases ivhatsoever, over
certain places; that is, to do, in respect to those places, all that any
government whatsoever may do. For language does not afford a more
complete designation of sovereign power than in those comprehensive
ten
*s. It is, i n other words, a power to pass all laws whatsoever, and,
consequently, to pass laws for erecting corporations, as well as tor
jny other purpose which is the proper object of law in a free governSurely it can never be believed that Congress, with exclusive powers
%tep*\«tion in all cases whatsoever, cannot erect a corporation
Cl™ ^ e district which shall become the seat of government, for the
Jt er regulation of its police. And yet there is an unqualified denial
0
the power to erect corporations in every case, on the part both ol
J Secretaryoo f t h a t oandr of thes Attorney-General; the fonner, inState w e i n t h e e
S Speaks f
P
emphatical terms: That it is a
9nt remaining exclusively with the States.
*
,
pa
A, far, then, as there is an express power to do any particular act of
is
to
2[f*'!onon> ^
i an express one t erect a corporation in the case
t
described. But, accurately speaking, no particular powei is
^
a n fJuit

im ;ed

^

™ « V^erat

one.

Thus the power to l a y ,

on0a lgaltonof rum is only a particular implied in the general
/ a? in i
taxes, duties,
servf/° e x P l aandn collect sense it may be imposts, and excises This
*hat
n ess
y said that Congress have not
an I ° p
t
k
ti
express power to make corporations.
.
,
J hV s m a y not be an improper place to take notice of an argument
l
* was used in debate in the House of Representatives. It was



52

FEDERAL BANKING LAWS AND REPORTS

there argued, that if the Constitution intended to confer so important
a power as that of erecting corporations, it would have been express}
mentioned. But the case which has been noticed is clearly one m
which such a power exists, and yet without any specification or express grant of it, further than as every particular implied m a general
power can be said to be so granted.
,
But the argument itself is founded upon an exaggerated ana erroneous conception of the nature of the power. It has been shewn
that it is not of so transcendent a kind as the reasoning supposes, ana
that, viewed in a just light, it is a mean, which ought to have been
left to implication, rather than an end, which ought to have been
expressly granted.
.
. ,
Having observed that the power of erecting corporations is n»
expressly granted to Congress, the Attorney-General proceeds thus:
"If it can be exercised by them, it must be—
"1. Because the nature"of the federal government implies i t
**2. Because it is involved in some of the specified powers of legislation.
"3. Because it is necessary and proper to carry into execution son
of the specified powers."
,
To be implied in the nature of the federal government, says ltf?
would beget a doctrine so indefinite as to grasp at every power.
This proposition, it ought to be remarked, is not precisely, or even
substantially, that which has been relied upon. The proposition
relied upon is, that the specified powers of Congress are in their natiu*
sovereign. That it is incident to sovereign power to erect corporations, and that therefore Congress have a right, within the sphere aiw
in relation to the objects of their power, to erect corporations*
shall, however, be supposed that the Attorney-General would consider the two propositions in the same light, and that the objection
made to the one would be made to the other.
To this objection an answer has been already given. ^ *s f*
that the. doctrine is stated with this express qualification, that tn«
right to erect corporations does only extend to case* and objects witWj
the sphere of the specified powers of the government. A genew
legislative authority implies a power to erect corporations in all ca&&A particular legislative power implies authority to erect corporations in relation to cases arising under that power only. Hence titf
affirming that, as incident to sovereign power, Congress may erect
a corporation in relation to the collection of their taxes, is no m°re
than to affirm that they may do whatever else they please,—than tne
saying that they have a power to regulate trade, would be to affirm
that they have a power to regulate religion; or than the maiutainifle
that they have sovereign power as to taxation, would be to maintain
that they have sovereign power as to every thing else.
I he Attorney-General undertakes in tte next place to show, th&
tlw power of erecting corporations is not involved in any of ellt#
tli*
specified powers of legislation confided to the national goverro» 5
In order to this, he has attempted an enumeration of the particular :
which he supposes to be comprehended under the several heads qt
the pacer* to lay and collect taxes, &c; to borrow money on the credit
of the I anted States; to regulate commerce with Sovereign nations1
between the States, and with the Indian tribes; to dispose of ^



FEDERAL BANKING LAWS A)\D REPORTS

53

make all needful rules and regulations respecting the territory or
other property belonging to the United States. The design of which
enumeration is to show, what is included under those different heads
of power, and negatively, that the power of erecting corporations is
not included.
The truth of this inference or conclusion must depend on the
accuracy of the enumeration. If it can be shown that the enumeration is defective, the inference is destroyed. To do this will be attended with no difficulty.
The heads of the power to lay and collect taxes are stated to be:
1. To stipulate the sum to be lent.
2. An interest or no interest to be paid.
3. The time and manner of repaying, unless the loan be placed
on an irredeemable fund.
This enumeration is liable to a variety of objections. I t omits
m thefirstplace, the pledging or mortgaging of a fund for the security
0
I ? lone y lent, an usual, and in most crises an essential ingredient
The idea of a stipulation of an interest or no interest^ is too confined.
It should rather have been said, to stipulate the consideration of the
'oan. Individuals often borrow on considerations other than the
Payment of interest, so may governments, and so they often find it
necessary to do. Every one recollects the lottery tickets and other
flouoeurs often given in Great Britain as collateral inducements to
ine lending of money to the government. There are also frequently
collateral conditions, which the enumeration does not contemplate.
^ery contract which has been made for moneys borrowed in Holland,
mauces stipulations that the sum due shall be free from taxes, and
worn sequestration in time of war, and mortgages all the land and
Property of the United States for the reimbursement.
u is also known that a lottery is a common expedient for borrowing
head ' WlUCh c e r t a i n l y d o e s n o t f a l 1 ™<ler either of the enumerated
The heads of the power to regulate commerce with foreign nations,
'^stated to be:
• To prohibit them or their commodities from our ports.
reV° ^ P 0 8 6 d u t i e s o n them, where none existed before, or to inf%e^tmg duties on them,
uties them.
b t them
subject th to any species of custom-house regulation.
4gest° g F a n t them a n y e x e m P t i o n s o r Privileges which policy may

i

d e r a t i o n is far more exceptionable than either of the

Ztu- O m i t s eveTV th™ff that relates to the citizens' vessels, or
* r ? f t h e United States.
1 O?fie m Sv eP al P a We omissions occur at once:
oni t h X1Sts a tr a11 prohibit the exportation of commodities, which
.P°^ to
d S !
times, but which in time of war it would be
^ercise, particularly with relation to naval and warlike

and m-f1 -,he sP ° w ear u to prescribe rules concerning the characteristics
o
°f J K Tb y citf
American bottom; how she shall be navigated,
3 of « owei>
izens or foreigners, or by a proportion of each.
•W th
tL P
of regulating the manner of contracting with sea' e police of ships on their voyages, &c, of which the Act for



54

FEDERAL BANKING LAWS AND REPORTS

the government and regulation of seamen, in the merchants' service,
is a specimen.
. .
.n
,i
That the three preceding articles are omissions, will not w
doubted—there is a long list of items in addition, which admit ot
little, if any question, of which a few samples shall be given.
,
1. The granting of bounties to certain kinds of vessels, and certaiii
species of merchandise of this nature, is the allowance on dried ana
pickled fish and salted provisions.
,.
2. The prescribing of rules concerning the inspection ot commodities to be exported. Though the States individually are competent
to this regulation, yet there is no reason, in point of authority at least,
why a general system might not be adopted by the United States.
3. The regulation of policies of insurance; of salvage upon gooafound at sea, and the disposition of such goods.
4. The regulation of pilots.
•
5. The regulation of bills of exchange drawn by a merchant oi
one State upon a merchant of another State. This last rather belong
to the regulation of trade between the States, but is equally omitted »•
the specification under that head.
,
The last enumeration relates to the power to dispose of, and matt
all needful rules and regulations respecting the territory Or otnet
property belonging to the United States.
The heads of this power are said to be:
1. To exert an ownership over the territory of the United gtateN
which may be properly called the property of the United StatCM
as in the western territory, and to institute a government therein*®
2. To exert an ownership over the other property of the Uniteu
States.
The idea of exerting an ownership over the territory or other property of the United States, is particularly indefinite and vague. *
does not at all satisfy the conception of what must have been intend*
by a power to make, all needful rules and regulations, nor would tliei*
have been any use for a special clause, which authorized nothing moreFor the right of exerting an ownership is implied in the very delation of p p y
property. It is admitted, that in regard to the western territory, something more is intended; even the institution of a gover^
d;
n eis
g
it
thi
men, that is, the creation of a body politic, or corporation of the higy "
f bd
lii
i
f th h i g
nature; one which, in its maturity, will be able itself to create other
corporations. Why, then, does not the same clause authorize tn
erection of a corporation, in respect to the regulation or disposal o1
any other of the property of the United States?
This idea will be enlarged upon in another place.
J
Hence it appears, that the enumerations which have been attempt
by the Attorney-General, are so imperfect, as to authorize no con;
elusion whatever; they therefore have no tendency to disprove tn&
y
p ,
ey
each and every of the powers, to which they relate, includes that oj
erecting corporations, which they certainly do, as the
reting o r o r t i n
h i h th
til
d
h
bsequen
illustrat ions will more and more evince.
*
It is presumed to have been satisfactorily shown in the course < !
>
the preceding observations:
,
1. That the power of the government, as to the objects intrusts
to its management, is, in its nature, sovereign.




FEDERAL BAJSTKING LAWS AND REPORTS

55

2. That the right of erecting corporations is one inherent in, and
inseparable from, the idea of sovereign power.
3. That the position, that the government of the United States
can exercise no power but such as is delegated to it by its Constitution, does not militate against this principle.
4. That the word necessary, in the general clause, can have no
restrictive operation derogating from the force of this principle; indeed, that the degree in which a measure is or is not necessary^ cannot be a test of constitutional right, but of expediency only.
5. That the power to erect corporations is not to be considered
as an independent or substantative power, but as an incidental and
auxiliary one, and was therefore more properly left to implication,
than expressly granted.
6. That the principle in question does not extend the power of the
government beyond the prescribed limits, because it only affirms
a power to incorporate for purposes within the sphere of the specified
powers.
. And lastly, that the right to exercise such a power in certain cases
is unequivocally granted in the most positive and comprehensive
terms. To all which it only remains to be added, that such a power
jws actually been exercised in two very eminent instances; namely,
w Hie erection of two governments; one northwest of the River Ohio,
and the other southwest—the last independent of any antecedent compact. And these result in a full and complete demonstration, that the
secretary of State and Attorney-General are mistaken when they
deny generally the power of the national government to erect
corporations.
It shall now be endeavored to be shown that there is a power to
erect one of the kind proposed by the bill. This will be done by tracing
< naturals ands eobvious relation between the institution of a bank and
i
• H l 3 e l t o f v e r a l of the enumerated powers of the government;
m
''«* uy showing that, politically speaking, it is necessary to the effecTriefieCUtlOn o f o n e o r m o r e o f t u o s e powers.
n Ule
course of this investigation, various instances will be stated,
lllustration
of a right to erect corporations under those
s
• ome preliminary observations may be proper.
the i p r o P° s e c i bank is to consist of an association of persons, for
essJ?«rn08? o f C1«ating a joint capital, to be employed chiefly and

m«vII yrcise loans?n

So far the b e c t is not onlvIawful) but f 1
c

° i

- - ! * \e

T|.p p; . o f Nofw aY o r k
right which the law allows to every individual,
e
sucl.
> which is not incorporated, is an example ot
? I f ° ciat ion. The bill proposes in addition, that the governV ' n e a joint proprietor in this undertaking, and that it
mi e
cf . - 1trlts tv0e n u e sof and company, payable shalldemand, to be re, the bills ; the stipulates that it on not g
p
rev
"- n, t 0 t}™* w ll "ch are to be alloweditto this not grant to any
»thers * t l n s ienues; and stipulates that shall company, privit}s incontrovertiblyb within dthe compass of the discreh
l l
t thi ompany to any
•ion of H
g
g
te ineJ 0 1 etr n m e n t . The only question is, whether it has a right
government.
t aconi? 0 !-^ ^hthis company, in order to enable it the m
i? ! 1 i
i
d t
bl
to
more effectually
c
ToV* W h seuncdhs awrih i]lth a r e ' " themselves lawful.
institut;
? > it remains to show the relation of such an
LI
°n to one or more of the specified powers of the government.



56

FEDERAL BANKING LAWS AND REPORTS

Accordingly it is affirmed that it has a relation, more or less direct, to
the power of collecting taxes, to that of borrowing money, to that o
f
regulating trade between the States, and to those of raising and maintainingfleetsand armies. To the two former the relation may be said to
be immediate; and in the last place it will be argued, that it is clearly
within the provision which authorizes the making of all needful rum
and regulations concerning the property of the United States, as the
same has been practised upon by the government.
A bank relates to the collection of taxes in two w w n y a y ^
increasing the quantity of circulating medium and quickening circulation, which facilitates the means of paying directly, by creating a
convenient species of medium in which they are to be paid.
To designate or appoint the money or thing in which taxes are to b
e
paid, is not only a proper, but a necessary exercise of the power o
f
collecting them. Accordingly Congress, in the law concerning the
collection of the duties on imposts and tonnage, have provided that
they shall be paid in gold and silver. But while it was an indispensable
part of the work to say in what they should be paid, the choice of the
specific thing was mere matter of discretion. The payment might have
been required in the commodities themselves. Taxes in kind, however
ill-judged, are not without precedents, even in the United States; or it
might have been in the paper money of the several States, or in the
bills of the Bank of North America, New York and Massachusetts,
all or either of them; or it might have been in bills issued under the
authority of the United States.
No part of this can, it is presumed, be disputed. The appointment
then, of the money or thing in which the taxes are to be paid, is aj
incident to the power of collection. And among the expedients which
may be adopted, is that of bills issued under the authority of the
United States.
Now the manner of issuing these bills is again matter of discretionThe government might doubtless proceed in the following manner:
It- might provide that they should be issued under the direction ot
certain officers, payable on demand; and, in order to support th#r
credit, and give them a ready circulation, it might, besides givin?
them a currency in its taxes, set apart, out of any moneys in its treasury, a given sum, and appropriate it, under the direction of those
officers, as a fund for answering the bills, as presented for paymentThe constitutionality of all this would not admit of a question
and yet it would amount to the institution of a bank, with a view to
the more convenient collection of taxes. For the simplest and mo?*
precise idea of a bank is, a deposit of coin, or other property, as a fmi«
for circulating a credit upon it, which is to answer the purpose o
f
money. That such an arrangement would be equivalent to the estal>;
hshment of a bank, would become obvious, if the place where the fuwj
to be set apart was kept should be made a receptacle of the moneys of
all other persons who should incline to deposit them there for safekeeping; and would become still more so, if the officers charged ^vith
the direction of the fund were authorized to make discounts at th«
usual rate of interest, upon good security. To deny the power of th*




FEDERAL BACKING LAWS AXD REPORTS

57

government to add these ingredients to the plan, would be to refine
away all government.
A further process will still more clearly illustrate the point. Suppose, when the species of bank which has'been described was about to
be instituted, it was to be urged that, in order to secure to it a due
degree of confidence, the fund ought not only to be set apart and
appropriated generally, but ought to be specifically vested in the
officers who were to have the direction of it, and in their successors
in office, to the end that it might acquire the character of private property, incapable of being resumed without a violation of the sanctions
by which the rights of property are protected, and occasioning more
serious and general alarm—the apprehension of which might operate
as a check upon the government. Such a proposition might be opposed
by arguments against the expediency of it, or the solidity of the reason
assigned for it, but it is not conceivable what could be urged against
its constitutionality; and yet such a disposition of the thing would
amount to the erection of a corporation; for the true definition of a
corporation seems to be this: It is a legal person, or a person created
by act of law, consisting of one or more natural persons authorized
1 hold property, or a franchise in succession, in a legal, as contradis0
tinguished from natural, capacity.
|^t the illustration proceed a step further. Suppose a bank of the
nature which has d
been described, with or without incorporation, had
tl 7 Vis.tltut^> a n that experience had evinced, as it probably would,
nat, being wholly under a public direction, it possessed not the confidence requisite to the credit of the bills. Suppose, also, that, by some
1 H K°a vaedrv e r s e conjunctures which occasionally attend nations, there
1 Deen Se
y great drain of the specie of the country, so as not only
t
o cause general uce in for want of an adequate medium of circuladistress
defi'l ft0 PF°dl l e > ub consequence of that circumstance, considerable
sm t
font • £?
P lic revenues. Suppose, also, that there was no
<"K institutedf e s t anyt State; in such a posture of things, would it not
in t h a t h e
ni
bv fir wl ? ? o u l ( '
incorporation of a bank like that proposed
collar D l V t a x e s a nmeasure immediately relative to the effectual
l be a d
^ e
.'
completely within the province of the sov» T?* P rovi( iing, by all laws necessary and proper, for that

ssnT -i ^therefore constitutional, whichthi*not WOuld render that
¥ ** Said ' that such a state of is ngS so now, the answer
iq

a
one
d y f ecl° l l d lrcumifc doubtless is, must still be that which has been
i
fh "~^ e i t h e r a
stances may affect the expediency of the measl r T ° aan dni r e c t r e<M oto nor diminish its constitutionality.
cause if it n u s u a a n . l a t i n to the power of borrowing money, be"Uheoht ?l n o f^ d in sudden emergencies an essential, instrument
.
A n J S S rea loans to government.
^n to mat ^, re( tened with a war; large sums are wanted on a sudbut
he
it rennf eS , . meuio o b tpreparations. Taxes are laid for the purpose,
l site
^spensabl T4? h e tr e b e a i n t1h e benefit of them. Anticipation is int
I lis f r o m a V ?^ the supply can at once be had. If
individuals must be sought. The progress of
to
° slow for the exigency; in some situations they are not




58

FEDERAL BANKING LAWS AND REPORTS

practicable at all. Frequently, when they are, it is of great; conseiuenco to be able to anticipate the product of them by advance from
11

The essentiality of such an institution as an instrument of loans, is
exemplified at this very moment. An Indian expedition is to be prosecuted. The only fund, out of which the money can arise, consistently
with the public engagements, is a tax, which only begins to be collect^
in July next. The preparations, however, are instantly to be made
Tlw money must, therefore, be borrowed—and of whom could it oe
borrowed if there were no public banks ?
It happens that tliere are institutions of this kind, but if there were
none, it would be indispensable to create one.
Let it then be supposed that the necessity existed, (as but tor a
casualty would be the case,) that proposals were made for obtaining
a loan; that a number of individuals came forward and said, we are
willing to accommodate the government with the money; with what
we have in hand, and the credit we can raise upon it, we doubt not
of being able to furnish the sum required; but in order to this, it is
indispensable that we should be incorporated as a bank. ^ This is
essential towards putting it in our power to do what is desired, ana
we are obliged on that account to make it the consideration or condition of the loan.
Can it be believed that a compliance with this proposition would be
unconstitutional? Does not this alone evince the contrary ? It is a
necessary part of a power to borrow, to be able to stipulate the consideration or conditions of a loan. It is evident, as has been remarked
elsewhere, that this is not confined to the mere stipulation of a franeh w . If it may, and it is not perceived why it may not, then the grajrt
of a corporate capacity may be stipulated as a consideration of tte
loan. Tliere seems to be nothing unfit or foreign from the nature ol
the thing in giving individuality, or a corporate capacity to a niunbtf
of persons, who are willing to lend a sum of money to the government,
the better to enable them to do it, and make them an ordinary instrument, of loans in future emergencies of the state. But the more genoral view of the subject is still more satisfactory. The legislative
power of borrowing money, and of making all laws necessary and
proper for carrying into execution that power, seems obviously competent to the appointment of the organ, through which the abilities
and wills of individuals may be most efficaciously exerted for tW
accommodation of the government by loans.
Tho Attorney-General opposes to this reasoning the following f*
wn-ation:—'Borrowing money presupposes the accumulation of J
iunci to be lent, and is secondary to the creation of an ability to lend1 his is plausible m theory, but is not true in fact. In a great number
of cases a previous accumulation of a fund equal to the whole sum
required dors not exist. And nothing more can be actually presuf
posed, than that there exists resources, which, put into activity to
the greatest advantage by the nature of the operation with the government, will be equal to the effect desired to be produced. All t*




FEDERAL BANKING LAWS AND REPORTS

59

provisions and operations of government must be presumed to contemplate as they really are.
The institution of a bank has also a natural relation to the regulation of trade between the States, in so far as it is conducive to the
creation of a convenient medium of exchange between them, and to
the keeping up a full circulation, by preventing the frequent displacement of the metals in reciprocal remittances. Money is the very
hinge on which commerce turns. And this does not merely mean
£old and silver; many other things have served the purpose, with
different degrees of utility. Paper has been extensively employed.
It cannot, therefore, be admitted, with the Attorney-General, that
the regulation of trade between the States, as it concerns the medium
or circulation and exchange, ought to be considered as confined to
com. It is even supposable that the whole, or the greatest part, of
the com of the country might be carried out of it.
Ihe Secretary of State objects to the relation here insisted upon,
by the following mode of reasoning:—To erect a bank,7 says he, and
Jo regulate commerce, are very different acts. He w ho creates a
tonk, creates a subject of commerce; so does he who makes a bushel
ot wheat
? or digs a dollar out of the mines; yet neither of these persons regulate commerce thereby. To make a thing which may be
oought and sold, is not to prescribe regulations for luying and sellThis making the regulation of commerce to consist in prescribing
T f °r ouying and selling—this, indeed, is a species of regulation of
/ 7'7 bllt is one whih f l l more aptly within th province of the
- but is one which falls
tl
ithi the province of the
^Pisdictions than within that of the general government, whose
tho^P, m i l S t b e presumed to have been intended to be directed to
g^eral r political arrangements concerning trade on which its
a
^
\ m t e e s t s de Pend, rather than to the details of buying and
the 1. T t^ e^Ugn l ty d such only are the regulations to be found in
,
e
to tlIIA ? p h s e oi i mv States, whose objects are to give encouragement
own
and m t aIc t n
merchants, and to advance our navigation
of O 0 ™er e ures. a nAnd it is in reference to these general relations
at
culat^ ° i' ta h con
establishment which furnishes facilities to cirbere^i
venient medium of exchange and alienation, is to
Thf I aS a f i l i a t i o n of trade.
o
of comm ^lfc w f Sl tda t e f a t h e r argues, that if this was a regulation
comme^*? &Veryo uState b e v o i d » toa sitsextending as mtwh to the internal
commew* 7 n o t e x t e <**
external But what regulation of
What in! n ? e d u t i e s u d nto the internal commerce of every State*
n
tions W
P ° imported articles, amounting to prohibit!
a
*e intPrA f° o f?di n y b°imties upon domestic manufactures, affecting
ai>
e allTK
.ff©rent classes of citizens, in different ways? What
ovisi
towewwr P? d°ns in the Coasting Act which relate to the trade
htionof I dr i eet baent w district of the same State? In short, what reguof each L^ Q W l l a t the States but must affect the internal trade
een
every p ^ '
can operate upon the whole but must extend to
t




60

FEDERAL BANKING LAWS ANT* BEPORTS

this very moment, ™ ,

.

j.

^

i.-

measures to be pursued f or the protection of our trontiers.
It now remains to show, that the incorporation of a bank is witmn
the operation of the provision which authorizes Congress to mate an
needful rules and regulations concerning the property of the umtea
States. But it is previously necessary to advert to a distinction wnicn
has been taken by the Attorney-General.
He admits that the word property may signify personal property,
however acquired, and yet asserts that it cannot signify money arising
from the sources of revenue pointed out in the Constitution, because,
says he, "the disposal and regulation of money is the final cause tor
raising it by taxes."
_ .,
But it would be more accurate to say that the object to wluca
money is intended to be applied is the final cause for raising it,
than that the disposal and regulation of it is such.
The support of government—the support of troops for the common defence—the payment of the public debt, are the true final
causes for raising money. The disposition and regulation of it,
when raised, are the steps by which it is applied to the ends for
which it was raised, not the ends themselves Hence, therefore, the
money to be raised by taxes, as well as any other personal property,
must be supposed to come within the meaning, as they certainly do
within the letter, of authority to make all needful rules and regulations concerning the property of the United States.
A case will make this plainer. Suppose the public debt discharged,
and the funds now pledged for it liberated. In some instances it
would be found expedient to repeal the taxes; in others, the repeal
might injure our own industry, our agriculture and manufactures.
In "these cases they would, of course, be retained. Here, then, would
be moneys arising from the authorized sources of revenue, which
would not fall within the rule by which the Attorney-General endeavors to except them from other personal property, and from the
operation of the clause in question. The moneys being in the coffers
of government, what is to hinder such a disposition to be made 01
them as is contemplated in the bill; or what an incorporation of the
parties concerned, under the clause which has been cited?
It is admitted, that with regard to the western territory they give
a power to erect a corporation—that is, to institute a government;
and by what rule of construction can it be maintained, that the same
words in a constitution of government will not have the same effect
when applied to one species of property as to another, as far as the
subject is capable of it?—Or that a legislative power to make all
needful rules and regulations, or to pass all laws necessary and
proper, concerning the public property, which is admitted to authorize an incorporation in one case, will not authorize it in another ?-^
will justify the institution of a government over the western territory, and will not justify the incorporation of a bank for the more




FEDERAL BANKING LAWS AND REPORTS

61

useful management of the moneys of the United States? If it will do
the last, as well as the first, then, under this provision alone, the bill
is constitutional, because it contemplates that the United States
shall be joint proprietors of the stock of the bank.
There is an observation of the Secretary of State to this effect,
which may require notice in this place:—Congress, says he, are not
to lay taxes ad libitum* for any purpose they please, but only to
pay the debts or provide for the welfare of the Union. Certainly
no inference can be drawn from this against the power of applying their money for the institution of a bank. It is true that they
cannot without*breach of trust lay taxes for any other purpose than
the general welfare; but so neither can any other government. The
welfare of the community is the only legitimate end for which money
can be raised on the community. Congress can be considered as
under only one restriction which does not apply to other governments,—they cannot rightfully apply the money they raise to any
purpose merely or purely local. But, with this exception, they have
as large a discretion in relation to the application of money as any
legislature whatever. The constitutional test of a right application
must always be, whether it be for a purpose of general or local nature.
If the former, there can be no want of constitutional power. The
quality of the object, as how far it will really promote or not the
welfare of the Union, must be matter of conscientious discretion,
and the arguments for or against a measure in this light must be
arguments concerning expediency or inexpediency, not constitutional
right. Whatever relates to the general order of the finances, to the
general interests of trade, &c, being general objects, are constitutional
ones for the application of money.
A bank, then, whose bills are to circulate in all the revenues of
the country, is evidently a general object, and, for that very reason,
a constitutional one, as far as regards the appropriation of money
to it. Whether it will really be a beneficial one or not, is worthy of
careful examination, but is no more a constitutional point, in the particular referred to, than the question, whether the western lands shall
be sold for twenty or thirty cents per acre.
A hope is entertained that it has, by this time, been made to appear,
to the satisfaction of the President, that a bank has a natural relation
to the power of collecting taxes—to that of regulating trade—to that
°f providing for the common defence—and that, as the bill under
consideration contemplates the government in the light of a joint
Proprietor of the stock of the bank, it brings the case within the provision of the clause of the Constitution which immediately respects
the property of the United States.
Under a conviction that such a relation subsists, the Secretary of the
I reasury, with all deference, conceives, that it will result as a necessary
consequence from the position, that all the specified powers of government are sovereign, as to the proper objects; that the incorporation
of
a bank is a constitutional measure; and that the objections taken
to the bill, in this respect, are ill-founded.




62

FEDERAL BANKING LAWS AND REPORTS

But, from an earnest desire to give the utmost possible satisfaction
to the mind of the President, on so delicate and important a subject,
the Secretary of the Treasury will ask his indulgence, while he gives
some additional illustrations of cases in which a power of erecting
corporations may be exercised, under some of those heads of the specified powers of the government, which are alleged to include the right
of incorporating a bank.
1. It does not appear susceptible of a doubt, that if Congress had
thought proper to provide, in the collection laws, that the bonds to be
given for the duties should be given to the collector of the district,
A or B, as the case might require, to enure to him and his successors in
office, in trust for the United States, that it would have been consistent
with the Constitution to make such an arrangement; and yet this, it is
conceived, would amount to an incorporation.
2. It is not an unusual expedient of taxation to form particular
branches of revenue—that is, to mortgage or sell the product of them
for certain definite sums, leaving the collection to the parties to whom
they are mortgaged or sold. There are even examples of this in the
United States. Suppose that there was any particular branch of
revenue which it was manifestly expedient to place on this footing,
and there were a number of persons willing to engage with the government, xipon condition that they should be incorporated, and the sums
vested in them, as well for their greater safety, as for the more convenient recovery and management of the taxes. Is it supposable that
there could be any constitutional obstacle to the measure ? It is presumed that there could be none. It is certainly a mode of collection
which it would be in the discretion of the government to adopt, though
the circumstances must be very extraordinary that would induce the
Secretary to think it expedient.
3. Suppose a new and unexplored branch of trade should present
itself, with some foreign country. Suppose it was manifest, that to
undertake it with advantage required an union of the capitals of a
number of individuals, and that those individuals would not be disposed to embark without an incorporation, as well to obviate that consequence of a private partnership which makes every individual liable
in his whole estate for the debts of the company, to their utmost extent, as for the more convenient management of the business—what
reason can there be to doubt that the national government would have
a constitutional right to institute and incorporate such a company?
None. They possess a general authority to regulate trade with foreign
countries. This is a mean, which has been practised to that end, by all
the principal commercial nations, who have trading companies to this
day, which have subsisted for centuries. Why may not the United
States, constitutionally^ employ the means usuai in other countries, for
attaining the ends intrusted to them ?
A power to make all needful rules and regulations concerning territory, has been construed to mean a power to erect a government. A
power to regulate trade, is a power to make all needful rules and regu-




FEDERAL BANKING LAWS AND REPORTS

63

lations concerning trade. Why may it not, then, include that of erecting a trading company, as well as, in other cases, to erect a government?
It is remarkable that the State conventions, who had proposed
amendments in relation to this point, have most, if not all of them,
expressed themselves nearly thus: Congress shall not grant monopolies,
nor erect any company with exclusive advantages of commerce! Thus,
at the same time, expressing their sense, that the power to erect trading companies or corporations was inherent in Congress, and objecting to it no further than as to the grant of exclusive privileges.
The Secretary entertains all the doubts which prevail concerning
the utility of such companies, but he cannot fashion to his own mind
a reason, to induce a doubt, that there is a constitutional authority in
the United States to establish them. If such a reason were demanded,
none could be given, unless it were this: That Congress cannot erect
a corporation. Which would be no better than to say, they cannot
do it, because they cannot do it—first presuming an inability, without
reason, and then assigning that inability as the cause of itself. Illustrations of this kind might be multiplied without end. They shall,
however, be pursued no further.
There is a sort of evidence on this point, arising from an aggregate view of the Constitution, which is of no inconsiderable weight:
the very general power of laying and collecting taxes, and appropriating their proceeds—that of borrowing money indefinitely—that of
coming money, and regulating foreign coins—that of making all
needful rules and regulations respecting the property of the United
states. These powers combined, as well as the reason and nature of
the thing, speak strongly this language: that it is the manifest design and scope of the Constitution to vest in Congress all the powers
requisite to the effectual administration of the finances of the United
states. As far as concerns this object, there appears to be no parsimony of power.
To suppose, then, that the government is precluded from the employment of so usual and so important an instrument for the administration of its finances as that of a bank, is to suppose what does not
coincide with the general tenor and complexion of the Constitution,
and what is not agreeable to impressions that any new spectator would
entertain concerning it.
kittle less than a prohibitory clause can destroy the strong presumptions whi^ result from the general aspect of the government.
Nothing but demonstration should exclude the idea that the power
exists.
In all questions of this nature, the practice of mankind ought to
Have great weight against the theories of individuals.
A he fact, for instance, that all the principal commercial nations
]i
ave made use of trading corporations or companies, for the purpose




64

FEDERAL BANKING LAWS AND REPORTS

of external commerce, is a satisfactory proof that the establishment
of them is an incident to the regulation of the commerce.
This other fact, that banks are an usual engine in the administration
of national finances, and an ordinary and the most effectual instrument of loan, and one which, in this country, has been found essential,
pleads strongly against the supposition that a government, clothed
with most of the most important prerogatives of sovereignty in relation to'its revenues, its debts, its credits, its defence, its trade, its intercourse with foreign nations, is forbidden to make use of that instrument as an appendage to its own authority.
It has been stated as an auxiliary test of constitutional authority to
try whether it abridges any pre-existing right of any State, or any
individual. The proposed investigation will stand the most severe
examination on this point. Each State may still erect as many banks
as it pleases. Every individual may still carry on the banking business
to any extent he pleases.
Another criterion may be this: whether the institution or thing has
a more direct relation, as to its uses, to the objects of the reserved
powers of the State governments than to those of the powers delegated
by the United States. This rule, indeed, is less precise than the
former; but it may still serve as some guide. Surely a bank has more
reference to the objects intrusted to the national government than to
those left to the care of the State governments. The common defence is
decisive in this comparison.
It is presumed that nothing of consequence in the observations of the
Secretary of State, and Attorney General, has been left unnoticed.
There are, indeed, a variety of observations of the Secretary of
State designed to show that the utilities ascribed to a bank, in relation
to the collection of taxes, and to trade, could be obtained without it;
to analyze which, would prolong the discussion beyond all bounds.
It shall be forborne for two reasons. First, because the report concerning the bank, may speak for itself in this respect; and secondly,
because all those observations are grounded on the erroneous idea that
the qwmtum of necessity or utility is the test of a constitutional exercise of power.




FEDERAL BANKING LAWS AND REPORTS

65

One or two remarks only shall be made. One is, that he has taken
no notice of a very essential advantage to trade in general, which is
mentioned in the report, as peculiar to the existence of a bank circulation, equal in the public estimation to gold and silver. It is this that
renders it unnecessary to lock up the money of the country, to accumulate for months successively, in order to the periodical payment of
interest. The other is this: that his arguments to show that treasury
orders and bills of exchange, from the course of trade, will prevent
any considerable displacement of the metals, are founded on a particular view of the subject. A case will prove this. The sums collected in a State may be small in comparison with the debt due to it;
the balance of its trade, direct and circuitous with the seat of government, may be even, or nearly so; here, then, without bank bills, which
m that State answer the purpose of coin, there must be a displacement
of the coin, in proportion to the difference between the sum collected
in the State, and that to be paid in it. With bank bills, no such
displacement would take place, or as far as it did, it would be gradual
and insensible. In many other ways also, would there be at least a
temporary and inconvenient displacement of the coin, even where the
C0U e
rf of trade would eventually return it to its proper channels.
The difference of the two situations in point of convenience to the
treasury, can only be appreciated by one, who experiences the embarrassments of making provision for the payment of the interest on
a stock, continually changing place in thirteen different places.
One thing which has been omitted, just occurs, although it is not
ry material to the main argument. The Secretary o State affirms
of
y
l
t l t
t t l
t th
that the bill only contemplates a repayment, not a loan, to the government. But, here he is certainly mistaken. It is true the government
invests in the stock of the bank a sum equal to that which it receives
on loan. But let it be remembered, that it does not, therefore, cease
l
° be a proprietor of the stock, which would be the case, if the money
received back were in the nature of a payment. It remains a proprietor still, and will share in the profit or loss of the institution,
according as the dividend is more or less than the interest it is to pay
^ t the sum borrowed. Hence that sum is manifestly, and in the
strictest sense, a loan.




66

FEDERAL BANKING LAWS AND REPORTS

Act of February 25, 17911
[1 Statutes at Large 191, First Congress, Chapter 10, 1st Session,
Approved, February 25,1791, by George Washington]
AN ACT TO INCORPORATE THE SUBSCRIBERS TO THE BANK OF
THE UNITED STATES.

Preamble.

Establishment
of a Bank of
the U. States,
and amount
and division
of its stock,
and time of
subscribing.

Biy \rhom to
be subscribed.

Proportions of
poid and sliver
and the public
debt to be
subscribed,
and

when to be
paid.

Subscribers to
be a body
Politic.
By wlmt name
and how long
to continue.

WHEREAS it is conceived that the establishment of a
bank for the United States, upon a foundation sufficiently
extensive to answer the purposes intended thereby, ana
at the same time upon the principles which afford adequate security for an upright and prudent administration
thereof, will be very conducive to the successful conducting of the national finances; will tend to give facility to
the obtaining of loans, for the use of the government, m
sudden emergencies; and will be productive of considerable advantages to trade and industry in general: Therefore,
,
SECTION 1. Be it enacted by the Senate and House of
Representatives of the United States of America in Congress assembled, That a bank of the United States shall
be established; the capital stock whereof shall not exceed
ten millions of dollars, divided into twenty-five thousand shares, each share being four hundred dollars; and
that subscriptions, towards constituting the said stock?
shall, on the first Monday of April next, be opened at the
city of Philadelphia, under the superintendence of such
persons, not less than three, as shall be appointed for thats
purpose by the President of the United States (who j
hereby empowered to appoint the said persons accordingly) ; which subscriptions shall continue open, until the
whole of the said stock shall have been subscribed.
SEC. 2. And be it further enacted, That it shall be lawful for any person, co-partnership, or body politic, to
subscribe for such or so many shares, as he, she, or they
shall think fit, not exceeding one thousand, except as
shall be hereafter directed relatively to the United States;
and that the sums, respectively subscribed, except on behalf of the United States, shall be payable one fourth *n
gold and silver, and three fourths in that part of the
public debt, which, according to the loan proposed in the
fourth and fifteenth sections of the act, entitled "An ac
making provision for the debt of the United States," shall
bear an accruing interest, at the time of payment, of si*
per centum per annum, and shall also be payable in four
equal parts, in the aforesaid ratio of specie to debt, at
the distance of six calendar months from each other; the
first whereof shall be paid at the time of subscription.
SKC, 3. And be it further enacted, That all those, who
shall become subscribers to the said bank, their successors and assigns, shall be, and are hereby created and
made a corporation ami body politic, by the name afld
style of The President, Directors and Company, of the
Bank of the United States; and shall so continue, lint*1

1
Editor's note : See p. 413.



67

FEDERAL BANKING LAWS AND REPORTS

the fourth day of March, one thousand eight hundred and
eleven: And by that name, shall be, and are hereby made
able and capable in law, to have, purchase, receive, possess, enjoy, and retain to them and their successors, lands,
rents, tenements, hereditaments, goods, chattels and effects of what kind, nature or quality soever, to an
amount, not exceeding in the whole fifteen millions of
dollars, including the amount of the capital stock aforesaid; and the same to sell, grant, demise, aliene or dispose of; to sue and be sued, plead and be impleaded,
answer and be answered, defend and be defended, in
courts of record, or any other place whatsoever: And also
to make, have, and use a common seal, and the same to
break, alter and renew, at their pleasure; and also to
ordain, establish, and put in execution, such by-laws,
ordinances and regulations, as shall seem necessary and
convenient for the government of the said corporation,
not being contrary to law, or to the constitution thereof
(for which purpose, general meetings of the stockholders
shall and may be called by the directors, and in the manner herein after specified), and generally to do and execute all and singular acts, matters and things, which to
them it shall or may appertain to do; subject nevertheless to the rules, regulations, restrictions, limitations and
provisions herein after prescribed and declared.
MC. 4. And be it further enacted, That, for the well
ordering of the affairs of the said corporation, there shall
be twenty-five directors; of whom there shall be an election on the first Monday of January in each year, by the
stockholders or proprietors of the capital stock of t\\^
said corporation,w and by plurality of the votes actually
an<
no
*?V? an<^ *hose w n o shall be duly chosen at any election,
be capable of serving as d i t
directors, b v i r t e of such
by virtue
choice, until the end or expiration of the Monday of JanuaryA n c l ensuing the time of such election, and no longnext t l l e s a i d
•
.
directors, at their first meeting after
t i o n slia11
(lent
'
choose one of their number as PresiSKC 5. Provided always, and be it further enacted,
jtnat? a s so °n as the sum of four hundred thousand dol< rs, m g o ] c l a n d g i ] v e ^ g h a U h a y e b e e n a c t u a i i y received
acc un
° * of the subscriptions to the said stock, notice
t]
iven
mil A c e t lhb es £m e s> ab1 1 the persons under whose supery
e a
tinKr aZettes r i n t h
have been made, in at least two
thft -f e r s o n P ^d in the city of Philadelphia; and
P
s shall t th
ti
i like manner
tann7 * •
P
y,
t
for t e m £ leny tdoa v hs e f re oemt the time of such notification,
be h ? i e ? gs u c ht e l e c tl c ion of directors; and it shall
and til
ion to be then and there made;
be H 1 fipersons» w h ° shall then and there be chosen, shall
y
vir ue * directors, and shall be capable of serving, by
*
oi such choice, until the end or expiration of the



Powers.

Limitation of
stock.

To have a seal,
and establish
by-laws.

Number, and
time of electing directors.

And of a
president.
Proviso.

When $400,000
in sold or
silver shall be
subscribed,
notice be
given, &c.

How directors
shall be
chosen, and
time of service.

68

FEDERAL BANKING LAWS AND REPORTS

Monday in January next ensuing the time of making the
same, and shall forthwith thereafter commence the operations of the said bank, at the said city of Philadelphia.
Aiid provided further, That, in case it should at any time
happen, that an election of directors should not be made
upon any day when pursuant to this act it ought to
have been made, the said corporation shall not, for that
cause, be deemed to be dissolved; but it shall be lawtui,
on any other day, to hold and make an election or directors in such manner as shall have been regulated by the
laws and ordinances of the said corporation. And provided lastly, That, in case of the death, resignation, abVacancies
sence from the United States, or removal of a director
filled up.
by the stockholders, his place may be filled up, by a new
choice, for the remainder of the year.
Directors to
SEC. 6. And he it further enacted, That the directors
appoint
officers, &c.
for the time being shall have power to appoint such officers, clerks, and servants under them, as shall be necessary for executing the business of the said corporation,
and to allow them such compensation, for their services
respectively, as shall be reasonable; and shall be capable
ofr exercising such other powers and authorities, for the
w ell governing and ordering of the affairs of the saw
corporation, as shall be described, fixed, and determined
by the laws, regulations, and ordinances of the same.
Articles of
SEC. 7. And be it further enacted, That the following
constitution.
rules, restrictions, limitations and provisions, shall forin
and be fundamental articles of the constitution of the
said corporation, viz,
.
Stockholders
I. The number of votes to which each stockholder shah
how to vote,
in what probe entitled, shall be according to the number of shares
portion to sum
he shall hold, in the proportions following: That is to
subscribed,
and
say, for one share, and not more than two shares, one
vote: for every two shares above two, and not exceeding
ten, one vote: for every four shares above ten, and not
exceeding thirty, one vote: for every six shares above
thirty, and not exceeding sixty, one vote: for every eigW
shares above sixty, and not exceeding one hundred, one
vote: and for every ten shares above one hundred, one
vote:—But no person, co-partnership, or body politic
shall be entitled to a greater number than thirty votes.
And after the first election, no share or shares shall confer
a right of suffrage, which shall not have been holden
three calendar months previous to the day of electionin certain
cases may vote Stockholders actually resident within the United States,
by proxy.
and none other, may vote in elections by proxy.
Number af
II. Not more than three fourths of the directors 1]1
electors eligible
for ensuing
office, exclusive of the president, shall be eligible for tU«
year, and
next succeeding year: but the director, who shall t>e
president at the time of an election, may always be r6'
elected.
who, as direcIII. None but a stockholder, being a citizen of the
tors.
United States, shall be eligible as a director.



FEDERAL BANKING LAWS AND REPORTS

69

IV. No director shall be entitled to any emolument,
unless the same shall have been allowed by the stockholders at a general meeting. The stockholders shall
make such compensation to the president, for his extra
ordinary attendance at the bank, as shall appear to them
reasonable.
V. Not less than seven directors shall constitute a board
for the transaction of business, of whom, the president
shall always be one, except in case of sickness, or necessary absence; in which case his place may be supplied
by any other director, whom he, by writing under his
hand, shall nominate for the purpose.
Number of
t
VI. Any number of stockholders, not less than sixty, stockholders
who, together, shall be proprietors of two hundred shares ^p^JJS*
or upwards, shall have power at any time to call a general &c.
meeting of the stockholders, for purposes relative to the
institution, giving at least ten weeks notice, in two public gazettes of the place where the bank is kept, and specifying, in such notice, the object or objects of such "meeting.
VII. Every cashier or treasurer, before he enters the S ^ t
duties of his office, shall be required to give bond, with give bond,
two or more sureties, to the satisfaction of the directors,
MI a sum not less than fifty thousand dollars, with condition for his good behaviour.
. #
. VIII. The lands, tenements and hereditaments which JJ^SS?
Jt shall be lawful for the said corporation to hold, shall
be only such as shall be requisite for its immediate accommodation in relation to the convenient transacting
of its business, and such as shall have been lona-fidemortgaged to it by way of security, or conveyed to it in satisfaction of debts previously contracted in the course of
its dealings, or purchased at sales upon judgments which
shall have been obtained for such debts.
w
debts
IX. The total amount of the debts, which the said cor- the/shnii at
poration shall at any time owe, whether by bond, bill, any time owe.
n
ote; or other contract, shall not exceed the sum of ten
pillions of dollars, over and above the monies then actually deposited in the bank for safe keeping, unless the
contracting of any greater debt shall have been previousse of ^
V authorized by a law of the United States. In case of cesSt directors
excess, the directors, under whose administration it shall J ^ ^ & S
na
ppen, shall be liable for the same, in their natural and ties and
Private capacities; and an action of debt may, in such
c
ase, be brought against them, or any^ of them, their or
an
y of their heirs, executors or administrators, in any
court of record of the United States, or of either of them,
jy any creditor or creditors of the said corporation, and
^ay be prosecuted to judgment and execution; any conW.ion, covenant, or agreement to the contrary notwithstanding. But this shall not be construed to exempt the
corpo
jamo corporation, or the lands, tenements, goods or chate l s ff
the same, from being also liable for and chargeable



70
Exception in
favour of absentees at time
of excess.

Corporation
may sell public
debt and part
of its stock, but
not purchase,
&c.

and take not
more than 6 per
cent, per an.

How and for
what objects to
make loans.

And bills, &c.
shall

be assignable

and

bills to be obligatory.

FEDERAL BANKING LAWS AND REPORTS

with the said excess. Such of the said directors, who may
have been absent when the said excess was contracted or
created, or who may have dissented from the resolution
or act whereby the same was so contracted or created,
may respectively exonerate themselves from being so
liable, by forthwith giving notice of the fact, and of their
absence or dissent, to the President of the United States,
and to the stockholders, at a general meeting, which they
shall have power to call for that purpose.
X. The said corporation may sell any part of the public debt whereof its stock shall be composed, but shall not
be at liberty to purchase any public debt whatsoever; nor
shall directly or indirectly deal or trade in any thing,
except bills of exchange, gold or silver bullion, or in the
sale of goods really and truly pledged for money lent
and not redeemed in due time; or of goods which shall
be the produce of its lands. Neither shall the said corporation take more than at the rate of six per centum
per annum, for or upon its loans or discounts.
XL No loan shall be made by the said corporation, for
the use or on account of the government of the United
States, to an amount exceeding one hundred thousand
dollars, or of any particular state, to an amount exceeding fifty thousand dollars, or of any foreign prince or
state, unless previously authorized by a law of the United
States.
XII. The stock of the said corporation shall be assignable and transferable, according to such rules as shall
be instituted in that behalf, by the laws and ordinances
of the same.
XIII. The bills obligatory and of credit, under the seal
of the said corporation, which shall be made to any person or persons, shall be assignable by indorsement thereupon, under the hand or hands of such person or persons,
and of his, her, or their assignee or assignees, and so as
absolutely to transfer and vest the property thereof in
each and every assignee or assignees successively, and to
enable such assignee or assignees to bring and maintain
an action thereupon in his, her, or their own name or
names. And bill or notes, which may be issued by order
of the said corporation, signed by the president, and
countersigned by the principal cashier or treasurer thereof, promising the payment of money to any person or pef'
sons, his, her, or their order, or to bearer, though not under the seal of the said corporation, shall be binding and
obligatory upon the same, in the like manner, and " ih
Wt
the like force and effect, as upon any private person <?r
persons, if issued by him or them, in his, her, or their
private or natural capacity or capacities; and shall be
assignable and negotiable, in like manner, as if they were
so issued by such private person or persons—that is to
say, those which shall be payable to any person or persons,
his, her, or their order, shall be assignable by indorsement, in like manner, and with the like effect, as foreig11




FEDERAL BANKING LAWS AND REPORTS

71

bills of exchange now are; and those which are payable
to bearer, shall be negotiable and assignable by delivery
only.
XIV. Half yearly dividends shall be made of so much
of the profits of the bank, as shall appear to the directors
advisable; and once in every three years, the directors
shall lay before the stockholders, at a general meeting,
for their information, an exact and particular statement
of the debts, which shall have remained unpaid after the
expiration of the original credit, for a period of treble
the term of that credit; and of the surplus of profit, if
any, after deducting losses and dividends. If there shall
be a failure in the payment of any part of any sum, subscribed by any person, co-partnership, or body politic, the
party failing shall lose the benefit of any dividend, which
may have accrued, prior to the time for making such payment, and S a e the delay of the same.
during
fwr *' ^ ^ ^ * aw *u ll * o r ^ i e directors aforesaid, to offlceg may
*' ^ ^ ^ * *
* ^ di
establish offices wheresoever they shall think fit, within be established
the United States, for the purposes of discount and de- S£S£S5?S2posit only, and upon the same terms, and in the same coufand demanner, as shall be practised at the bank; and to commit posit 0Dly'
tn
? management of the said offices, and the making of the
Sa
!? !s.counts> to such persons, under such agreements,
and subject to such regulations as they shall deem proper;
ba k g c o n t r a r y to law, or to the constitution of the
XVI. The officer at the head of the treasury department of the United States, shall be furnished, from time { S f f i
w tune, ias stat as he may require, not exceeding once statements
>
often
fn? ' ^ t h ements of the amount of the capital stock
or the said corporation, and of the debts due to the same;
oi tne monies deposited therein; of the notes in circulation, and of1 then cash in hand; and shall have a right to
*?5i U 8relate g et 0e r a l accounts in the books of the bank,
ii *?
f private
thi I 11 n o t b e const r said statements. Provided, That nature,
the
thft
. ued to imply a right of inspecting
th b * * ^ ° f a n y P r * v a t e individual or individuals with

coSS ?: Afld

be U

fwMer enacted, That if the said

^poration, so ra 1 any apersona d e ipersons for or to the use
or n
1
eonH Samer> s h mer d e l o r t r
buying or selling any
a e
wmti. r ^ t h e <*andise, or commodities whatsoever,
'
son ? / p e r s o n s P r o v i s ions of this act, all and every perso dpi' ng Or t r a?d iby whom any order or direction for
everv !! erson a n d n g shall have been given, and all and
as rl P.
persons who shall have been concerned
the vni S Or fa ? lei n t s therein, shall forefeit and lose treble
iH •n°w h ti c le1 sg°c0( is, wares, merchandises, and comu h
one I; u' \ n w h i c l 1 s u c h dealing and trade shall have been;
Tl ^ r e t0 the the usethe the informer, and ther
o f to Use of of United StateS t0 be e
informer
other
halfTil

lr^

costs of suit.




»

"

72
How money
can be advanced or lent.

Bills or nojtes
made receivable
by U. States.

Subscriptions
made by United
States, how to
be paid, &c.

No other bank
to be established.

FEDERAL BANKING LAWS AND REPORTS

SEC. 9. And be it further enacted, That if the said
corporation shall advance or lend any sum, for the use
or on account of the government of the United States, to
an amount exceeding one hundred thousand dollars: or
of any particular state to an amount exceeding fifty
thousand dollars; or of any foreign prince or State,
(unless previously authorized thereto by a law of the
United States,) all and every person and persons, by and
with whose order, agreement, consent, approbation, or
connivance, such unlawful advance or loan shall have
been made, upon conviction thereof, shall forfeit and pay,
for every such offence, treble the value or amount of the
sum or sums which shall have been so unlawfully advanced or lent; one fifth thereof to the use of the informer, and the residue thereof to the use of the United
States; to be disposed of by law and not otherwise.
SEC. 10. And be it further enacted, That the bills or
notes of the said corporation, originally made payable, or
which shall have become payable on demand, in gold and
silver coin, shall be receivable in all payments to the
United States.
SEC. 11. And be it further enacted. That it shall be
lawful for the President of the United States, at any time
or times, within eighteen months after the first day oi
April next, to cause a subscription to be made to the stock
of the said corporation, as part of the aforesaid capital
stock of ten millions of dollars, on behalf of the United
States, to an amount not exceeding two millions of dollars ; to be paid out of the monies which shall be borrowed
by virtue of either of the acts, the one entitled "An act
making provision for the debt of the United States;
and the other entitled "An act making provision for the
reduction of the public debt;" borrowing of the bank an
equal sum, to be applied to the purposes, for which the
said monies shall have been procured; reimbursable m
ten years, by equal annual instalments; or at any time
sooner, or in any greater proportions, that the government may think fit.
SEC. 12. And be it further enacted, That no other
bank shall be established by any future law of the United
States, during the continuance of the corporation hereby
created; for which the faith of the United States is hereby pledged.
APPROVED, February 25,1791.




FEDERAL BANKING LAWS AND REPORTS




^i*,/. -/ /^>

^

73

Report of Secretary of Treasury (Albert Gallatin), on Renewal
of Charter of Bank of United States
COMMUNICATED TO THE SENATE, MARCH 3 , 1809.

Tenth Congress, 2d Session
[Source: American State Papers, Finance, Vol. 2, pp. 351-353]

The Secretary of the Treasury, to whom was referred the memorial
of the stockholders of the Bank of the United States, praying
for a renewal of their charter, which will expire on the 14th day
of March, 1811, respectfully submits the following report:
The Bank of the United States was incorporated by act of March
2d, 1791, with a capital of ten millions of dollars, divided into 25,000
shares of 400 dollars each. Two millions of dollars were subscribed
by the United States, and paid in ten equal annual instalments. Of
the eight millions of dollars subscribed oy individuals, two millions
were paid in specie and six millions in six per cent, stock of the United
States. Two thousand four hundred and ninety-three of the shares
belonging to Government were sold in the years 1796 and 1797, at an
advance of 25 per cent.; two hundred and eighty-seven were sold in the
year 1797, at an advance of 20 per cent., and the other two thousand
two hundred and twenty shares in the year 1802, at an advance of
45 per cent.; making together, exclusively of the dividends, a profit
of 671,860 dollars to the United States. The greater part of the six
per cent, stock, originally paid by the stockholders, has since been sold
by the bank: a portion has been redeemed by Government, by the
operation of the annual reimbursement, and the bank retains, at present, only a sum of 2,231,598 dollars, in six per cent, stock.
About eighteen thousand shares of the bank stock are held by persons residing abroad, who are, by the charter, excluded from the right
of voting. The stockholders resident within the United States, and
who have the exclusive control over the institution, hold only seven
thousand shares, or little more than one-fourth part of its capital'
They appoint annually twenty-five directors of the bank itself, which
is established at Philadelphia; and those directors have the entire management of the discounts and other transactions of the institution in
that city, and the general superintendence and appointment of the
directors and cashiers of the offices of discount and deposite, established in other places. There are ut present eight of those offices, viz:
at Boston, New York, Baltimore, Norfolk, Charleston, Savanna!1?
the city of Washington, and New Orleans. The two last were established at the request of the Secretary of the Treasury.
The profits of a bank arise from the interest received on the loa]lS
made, either to Government or to individuals; and they exceed sis
per cent., or the rate of interest at which the loans are made, because
11
every bank lends, not only the whole of its capital, but, also, a portiov
of the moneys deposited for safe keeping in its vaults, either by G° *
74



FEDERAL BANKING LAWS AND REPORTS

75

ernment or by individuals. For every sum of money thus deposited,
ihe party making that deposite either receives the amount m bank
notes, or obtains a credit on the books of the bank. In either case he
has the same right, at any time, to withdraw his deposite; in the first
case, on presentation and surrender of the bank notes; in the other
case, by drawing on the bank for the amount. Bank notes and credits
on the books of the bank, arise, therefore, equally from deposites, although the credits alone are, in common parlance, called deposites;
and the aggregate of those credits, and of the bank notes issued, constitutes the circulating medium substituted by the banking operations
to money; for payments from one individual to another are equally
made by drafts on the bank, or by the delivery of bank notes. Experience has taught the directors what portion of the money thus
deposited they may lend, or, in other words, how far they may, with
safety, extend their discounts beyond the capital of the bank, and
what amount of specie it is necessary they should keep in their vaults.
The profits, and, therefore, the dividends of a bank, will increase in
proportion as the directors will increase loans of the moneys deposited,
and suffer the amount of specie on hand to diminish. Moderate
dividends, when not produced by some particular cause, which checks
the circulation of bank paper, are the best evidence of the safety of
the institution, and,of the wisdom of its direction.
The annexed table of all the dividends made by the Bank of the
united States, since its establishment, shows that they have, on an
average, been at the rate of 8% (precisely 8!%4) per cent, a year, and
proves, that the bank has not, in any considerable degree, used the
public deposites for the purpose of extending its discounts.
*rom what has been premised, it appears that the property of a
bank m full operation consists of three general items, viz: 1st. outstanding debts, consisting principally of the notes payable at sixty
a
ays, which have been discounted at the bank; 2dly, specie in the
faults; 3dly, buildings necessary for the institution. On the other
"and, the bank owes, 1st. to the stockholders, the amount of the capital
stock originally subscribed, payable only in case of the dissolution
01
the institution; 2dly, to Government or individuals, the whole
amount of moneys deposited, payable on demand, and including both
™e credits on the bank books, commonly called deposites, and the bank
cV>i !!1 circ ulation. The account is balanced by the amount of un^victed profits and accruing discounts, which constitute the fund for
raying current expenses/for paying subsequent dividends, and for
enng contingent losses.
, TT . .
Y le following statement of the situation of the Bank of the United
^ ates, including its branches, exhibits the true amount of public stock,
jjmchL is still held by the institution, of the cost of its buildings, and
'ots of ground, and of the undivided surplus or contingent fund, suosequent to the dividend made in January last. But the amount of
° a n s to individuals, or discounts, of specie in the vaults, and of
jnoneys deposited, including both the credits on the bank books, comcalled deposites, and the bank notes in circulation, is taken on
iiun: and,and far as relates, on the credit side of the account, to
so
o n lmnd
>h > o n the d ^ i t side, to deposites, is several millions
ars less t
™ it happens to be at this moment; both having been
d much beyond the average by the embargo, and by the unusually
02180 0—63—G




76

FEDERAL BANKING LAWS AND REPORTS

large balance in the treasury, which is principally deposited in the
bank. Some minor items, arising from accidental circumstances, are
omitted, for the sake of perspicuity.
Cr.
I. Debts due to the bank, viz:
1. Six per cent stock of the United States, being the residue of that part of the original
subscription paid in public stocks, which is
still held by the bank
$2,230,000
2. L6ans to individuals, consisting chiefly of
discounted notes, payable at sixty days, and,
in some instances, of bonds and mortgages
taken in order to secure doubtful debts
15, 000,000
3. Due by banks incorporated by the States—
800,000
II. Specie in the vaults
III. Cost of lots of ground and buildings erected
Total credits
Dr.
I. Capital stock of the bank, payable to the stockholders, whenever the institution may be dissolved
II. Moneys deposited, viz:
1. Credits on the bank books,
commonly called deposites,
including the deposites both
by Government and by individuals
$8,500,000
2. Bank notes in circulation
4,500,000

$18,030,000
5,000,000
480,000
$23,510,000

$10,000,000

13,000,000

Total debtor

23, 000,000

Balance, being the amount of undivided profits, commonly called
the "contingent fund," and applicable to cover losses which may
arise from bad debts or other contingencies, and to extra divi-

dends

__—_-_

A
A

$510000

It sufficiently appears, from that general view, that the affairs of
the Bank of the United States, considered as a moneyed institution,
have been wisely and skilfully managed.
The advantages derived by Government from the bank, are nearly
of the same nature with those obtained by individuals, who transact
business with similar institutions, and may be reduced to the following heads:
1. Safe-heeving of the public moneys.—This applies not only to
moneys already in the treasury, but, also, to those in the hands of the
principal collectors, of the commissioners of loans, and of several other
officers, and affords one of the best securities against delinquencies.
2. Transmission of public moneys.—As the collectors will always,
in various quarters of the extensive territory of the Union, either
exceed or fall short of the expenditures in the same places, a perpetual
transmission of money, or purchases of remittances at the risk ana
expense of the United States, would become necessary, in order to
meet those demands; but this is done by the bank, at its own risk ana
expense, for every place where one of its branches is established,
which embraces all payments of any importance.




FEDERAL BANKING LAWS AND REPORTS

77

3. Collection of the revenue,—The punctuality of payments introduced by the banking system, and the facilities afforded by the bank
to the importers indebted for revenue bonds, are amongst the causes
which have enabled the United States to collect, with so great facility,
and with so few losses, the large revenue derived from the impost.
4. Loans *~A\t\\owg\\ the prosperity of past years has enabled Government, during the present administration, to meet all the public
demands without recurring to loans, the bank had, heretofore, been
eminently useful in making the advances, which, under different circumstances, were necessary. There was a time, when, exclusively of
the six per cent., stock held by the institution, as part of the original
subscription, the loans obtained by Government from the bank,
amounted to 6,200,000 dollars. And a similar disposition has been
repeatedly evinced, whenever the aspect of public affairs has rendered
it proper to ascertain whether new loans might, if wanted, be
obtained.
The numerous banks now established, under the authority of the
several States, might, it is true, afford considerable assistance to
Government in its fiscal operations. There is none, however, which
could effect the transmission of public moneys with the same facility,
and to the same extent, as the Bank of the United States is enabled
to do, through its several branches. The superior capital of that institution offers, also, a greater security against any possible losses,
and greater resources in relation to loans. Nor is it eligible, that the
General Government should, in respect to its own operations, be
entirely dependent on institutions over which it has no control whatever. A National Bank, deriving its charter from the National Legislature, will, at all times, and under every emergency, feel stronger
inducements, both from interest and from a sense of duty, to afford
Tif ^ n * o n ey ery assistance within its power.
Ihe strongest objection against the renewal of the charter seems to
anse from the great portion of the bank stock held by foreigners—
not on account of any influence it gives them over the institution,
since they have no vote—but of the high rate of interest payable by
America to foreign countries, on the portion thus held. If the charter
7 O nOt r e n e w e d ) the principal of that portion, amounting to about
/JA)0,000 dollars, must, at once, be remitted abroad; but, if the charter
1S
y per
y ,
^newed, dividends, equal to an interest of a
about Sy2 p cent, a year,
niust be annually remitted in the same manner. The renewal of the
ll
id i h
Th
l f
charter will, in that respect, operate, in a national point of view, as a
iomgn loan, bearing an interest of 8V2 per cent, a year.
. A hat inconvenience might, perhaps, l>e removed, by a modification
jnthe charter, providing for the repayment 'of that portion of the
Principal by a new subscription to the same amount, in favor of citizens; but it does not, at all events, appear sufficient to outweigh the
manifest public advantages derived from a renewal of the charter.
^ *ne conditions in favor of the public, on which this should be
granted, t are othe next subject of consideration,
nf fi n e P r f i t annually derived by the stockholders, from a renewal
°r the charter, is equal to the difference between the annual dividends
*ne the market rate of interest. Supposing this to continue at six
<*
P r cent, during the period granted by the extension of the charter,
a
ncl the dividends to be on an average at the rate of 8i/2 per cent.,



78

FEDERAL BANKING LAWS AND REPORTS

that profit will be 2% per cent, a year. If the charter be extended
twenty years, the value of the privilege will be equal to an annuity of
2i/2 per cent, on the capital, that is to say, 250,000 dollars, for twenty
years; and such annuity being payable semi-annually, is worth almost
2,890,000 dollars. This, however, would be much more than any bank
would give for a charter, as it would leave it nothing but the right of
dividing at the rate of six percent, a year, which the stockholders have
without a charter. It is believed, that they would not be willing to
give even half that sum for the extension; and that about 1,250,000
dollars may be considered as the maximum, which could be obtained, 11
it was thought eligible to sell the renewal of the charter for a fixed
sum of money.
m
It is, however, presumed, that the decision on the conditions, which
may be annexed to an extension of the charter, will be directed by
considerations of a much greater importance than the payment of
such sum into the treasury. The object will, undoubtedly, be to give
to the institution all the public utility of which it is susceptible, and
to derive from it permanent and solid advantages, rather than mere
temporary aid. Under these impressions, the following suggestions
are respectfully submitted:
I. That the bank should pay interest to the United States, on the
public deposits, whenever they shall exceed a certain sum, which
might perhaps be fixed at about three millions of dollars.
II. That the bank should be bound, whenever required, to lend to the
United States a sum not exceeding three-fifths of its capital, at a
rate of interest not exceeding six per cent.; the amount of such loan
or loans to be paid by the bank in instalments, not exceeding a certain sum, monthly, and to be reimbursed at the pleasure of the
Government.
III. That the capital stock of the bank should be increased to thirty
millions of dollars, in the following manner, viz:
1. Five millions of dollars to be subscribed by citizens of the United
States, under such regulations as would make an equitable apportionment amongst the several States and territories.
, .
2. Fifteen millions to be subscribed by such States as may desire it,
and under such equitable apportionment amongst the several States
as may be provided by law,; and a branch to be established in each subscribing State, if applied for by the State.
3. The payments, either by individuals or States, to be either in
specie or in public stock of the United States, at such rates as may be
provided by law.
4. The subscribing States to pay their subscription in ten annu?1
instalments, or sooner if it suits their convenience, but to receive dividends in proportion only to the amount of subscription actually paid;
and their shares of bank stock not to be transferable.
IV. That some share should be given in the direction to the General and State Governments, the General Government appointing
a few directors in the general direction, and the Government 01
each subscribing State appointing a few directors in the direction
of the branch established in such State.
The result of that plan would be, 1st., that the United States, receiving an interest on the public deposites, might, without inconvenience, accumulate, during years of peace and prosperity, a treasure



79

FEDERAL BANKING LAWS AND REPORTS

sufficient to meet periods of war and calamity, and, thereby, avoid the
necessity of adding, by increased taxes, to the distresses of such
periods. Secondly, that they might rely on a loan of eighteen millions
of dollars, on any sudden emergency. Thirdly, that the payment
of the greater part of the proposed increase of capital, being made in
ten annual instalments, that increase would be gradual, and not more
rapid than may be required by the progressive state of the country.
Fourthly, that the bank itself would form an additional bond of common interest and union, amongst the several States.
All which is respectfully submitted.
ALBERT GALLATIN.
TREASURY DEPARTMENT, March 2d, 1809.
Dividends on Vnitea States ' Bank Stock.
I
No.

Rate per
cent.

1.
2.
3.
4.
e
5.
6.

July,
January,
July,
January,

7.

July,

Q

o.
y.

i f\

10.
ii.
10
lo.
10

1 J

14.
1«;.
lo
1A
lo.

If
17.

July,

1792
1793
tt
1794
tt

January,

1795

January,

1796

January,
July,
January,
July,
January,
July,
January,

1797

July,

July,

a

n

n

1798
ti
1799
a

1800
n

4
4
4
4
4
4
4
4
4
5
4
4
4
4
4

Rate per
cent.

No.

18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.

January,
July,
January,
July,
January,
July,
January,
July,
January,
July,
January,
July,
January,
July,
January,
July,
January,

1801
n

6
4

1802
1803
a

1804
tt
1805
tt
1806
n

1807
ft
1808
tt
1809

4H
4}£
4

4
4
4
4
4
6
4
4
4
4

e

Port of House Committee, on Renewal of Charter of Bank of
United States
NICATED TO THE HOUSE OF REPRESENTATIVES, FEBRUARY 19, 1810.

Eleventh Congress, 2d Session
[Source: American State Papers, Finance, Vol. 2, p. 406]
1

tion°^° i t E R Y > f r o m t h e committee to whom was referred the petist
folW
°ckholders of the Bank of the United States, made the
blowing report:
at
> m proceeding to the consideration of the said petition, your
tarv * ? i nTsrter u c ted their chairman to address a letter to the Secreob/ ° •
asury, requesting him to furnish such information or
nervations as he might think proper, in relation to the subject matter
> as connected with the financial and commercial interests of the




80

FEDERAL BANKING LAWS AND REPORTS

United States. In reply to which, the Secretary, by his letter to the
chairman, referred your committee to his former report on the said
subject, made to the Senate of the United States, in obedience to. the
order of that House.
Your committee have been attended by agents of the petitioners,
who, in addition to the matters contained in the petition, have suggested to your committee that the object of the petitioners was to obtain
the renewal of the charter in its present form; that, for this renewal,
the bank is willing to make compensation, either by loans, at a rate of
interest, or by a sum of money to be agreed upon, or by an increase of
the capital stock, by a number of shares to be taken and subscribed for
by the United States, to an amount adequate to the compensation to be
agreed upon for such renewal.
These agents also suggested, that they were fully authorized and
empowered to offer and conclude the terms, specifically connected with
those propositions.
Your committee not feeling themselves authorized to enter into such
terms, and judging that the extent of those propositions wotild better
apply to the details of a bill, than to the adoption of a principle to be
first settled by the House, have, therefore, foreborne to inquire into the
extent of the propositions, and, without expressing an approbation or
rejection of these offers, or giving an opinion as to the plan and reasoning of the Secretary of the Treasury, your committee, in order that
the opinion of the House on this great national question may be^ declared previous to entering into the details connected with the subject,
recommend the following resolution:
Resolved, That it is proper to make provision for continuing the
establishment of the bank of the United States, with offices of discount
and deposite, under the regulations necessary for the beneficial admW'
istration of the national finances, during siich time, and on such conditions, as may be defined by law.
Report of Secretary of Treasury (Albert Gallatin), on Bank of
United States
COMMUNICATED TO THE HOUSE OF REPRESENTATIVES, JANUARY 2 4,

Eleventh Congress, 3d Session
[Source: American State Papers, Finance, Vol. 2, pp. 468-470]

The Secretary of the Treasury, in obedience to the resolution of the
House of Representatives, of the 16th instant, respectfully submits
the following report:
The Secretary of the Treasury is directed, by the resolution aforesaid, to lay before the House—
1. A list of the directors of the Bank of the United States, and of i*s
several branches.




FEDERAL BANKING LAWS AND REPOHTS

81

2. A statement of the stock held by foreigners, and in what countries; and of the stock held by citizens, and in what States and
Territories.
3. The amount of specie, according to the last returns, in the vaults
of the bank; distinguishing the part which belongs to the bank, the
portion belonging to individuals, and to the United States.
It is enacted, by the sixteenth provision of the seventh section of the
act to incorporate the subscribers to the Bank of the United States,
that "The officer at the head of the Treasury Department of the United
States shall be furnished, from time to time, as often as he may require,
not exceeding once a week, with statements of the amount of the capital
stock of the said corporation, and of the debts due to the same; of the
moneys deposited therein; of the notes in circulation, and of the cash
^ k ' anc^ s n a ^ have a right to inspect such general accounts in
the books of the bank as shall relate to the said statements: Provided,
Inat this shall not be construed to imply a right of inspecting the
account of any private individual or individuals with the bank."
iNo other but general statements, such as are enumerated in that
clause of the act, can be required by the Secretary of the Treasury, or
nave been furnished by the bank. And these include neither the names
of the directors nor the names or place of residence of the stockholders.
. On the subject of directors, no statement whatever is ever made; and
^ l n i 1 0 1 1 t o t h e c a P i t a l stock, its gross amount, and the portion
allotted to each branch, are the only particulars which can be required,
°r are exhibited in the statements transmitted to this office. It was
ascertained, some years ago, from an authentic source, that near three° * °/ the stock (about 1,800 shares) were held by foreigners;
ana sthe efact though not officially communicated to this department,
as t a t d
in the report respecting the bank, made to the Senate,, on
tT
p t respecting the a n , ma
^ c °nd day of March, 1809. No subsequent or other information
day of M h 1809 N
b t
th iformation
^ n , o b t a i n e d on that subject; and, with very few exceptions, the
wmes of the directors and stockholders, either abroad or in the United
ouuas, are unknown to the Secretary.
i i
npp T S p e c 0e t hne lthe vaults of the bank and its branches amounted,
t
W a T * ! *y s e aak? n returns, to 5,009,567 dollars; the whole of which
i
A ? i u e P t h a t g , the property of the bank, and, together with
to
o n c i din
•
body* constituted the fund from which its own
V
. S both bank notes and deposites, must be paid. The
^ t d by the Treasury into the bank and its branches,
A' y the last return of the Treasurer, dated 21st instant, and
he
DoSf!?-m »t h erewith transmitted, to 1,930,000 dollars; and that deinrtiTf ° r b a n k s > to 875,462 dollars; making, together, the balance
Posit! K a S ^ rvye o n t h a f c day> 2,805,462 dollars. The total amount of defiant *y G o rament, by other banks, and by individuals, into the
ceivad retu rns U n i t e d States and its branches, appears, by the last re\ e
B3 h . >t rto be 8,464,770 dollars. And the statements B, B2, and
an
ceiv^ wV. s office
smitted, and extracted from the latest returns rehl
Z i • o f t h e from the bank and from the Treasurer, exhibit a
raoS D ?
w
situation of the bank, and of all the objects ema
y the third part of the resolution of the House.




82

FEDERAL BANKING LAWS AND REPORTS

It appears from these, that the debts due by the bank, and payable
on demand, including both every species of deposites and bank notes,
amount to
..
$13,673,369
And that the resources of the bank to meet those demands, consist of the following items, viz:
1. Specie, bank notes of other banks, and balance due in
account by other banks, payable to the bank on demand
(including also 25,804 dollars in funded debt and
drafts on collectors, which may be considered as
specie,)
6, 322,857
2. Loan to the United States, payable on giving three
months' notice
2,750,000
3. Notes discounted at sixty days, and due by individuals
(including 31,242 dollars overdrawn in Charleston)
14,609,537
Making an aggregate of

23,682,394

The act to incorporate the subscribers to the Bank of the United
States does not, itself, expire by any positive clause of limitation: but
presumed
7
by Government or by the bank, whereby the debts due to and from the
corporation, may be collected after that day. So far as relates to the
treasury deposites, no inconvenience can arise, as, in any event, the
loan obtained from the institution is a sufficient pledge for their payment. But a doubt may arise, from the manner in which the act is
expressed, whether, under the 10th section, the bank notes still in circulation will not continue to be receivable in all payments to the United
States. The propriety of some provision which may remove any doubt
on the subject, or otherwise prevent the inconvenience resulting from
that construction of the act, is respectfully suggested.
All which is respectfully submitted.
ALBERT GALLATIN.
TREASURY DEPARTMENT,




Janvm^y 23,1811.

FEDERAL BANKING LAWS AND REPORTS

83

A
Cash in the different Banks and offices of Discount and Deposite
Bank of the United States
Columbia
Alexandria
Newport
Pittsburg
Roger Williams
Pennsylvania
Manhattan
__
Saco
Maine
_
_
Marietta
___
Kentucky
Office of discount and deposite,
Washington^
_
. __
Norfolk
_
__
Boston..
_
_
7J
New York
__ ~~Y
_
Baltimore
* _ _ __"" S__'_ _
*
Charleston
_ __
__
„
Savannah
"
~_ __V
New Orleans
_________
_

$392,909.24
115,192. 92
61, 917.90
35, 788.55
137, 442.11
53, 882. 79
92, 628.17
188,670. 32
28,528.94
50,747.58
19,601.62
91,061.53
101,895.55
16,483.76
341,054.47
625,417.09
199,201.28
36,645.03
49,691.63
166 7 0 1 5 5
»
2, 805, 462. 03

TREASURY OF THE UNITED STATES, January 21, 1811.

THOMAS T. TUCKER, Treasurer.
ALBERT GALLATIN, Esq., Secretary of the Treasury.




B.
Statement of the funds of the Bank of the United States, as exhibited by the latest bank returns received by the Secretary of the Treasury.
Bills and notes
discounted.
Bank United States, Jan. 15, 18 ii,
Branch at Boston,
5, *
New York,
12, *
Baltimore,
12, '
Washington,
12, '
Norfolk,
5, *
Charleston, Dec. 29, 18 [0,
Savannah,
29, '
New Orleans,
8, '
Dollars,
(a.) Viz: Loan to the United States,.
Funded debt,

Due by banks.

$4, 981, 373. 00
1, 138, 923 59
3, 919, 628 98
1, 108, 542 36
412, 161 60
713, 724 40
935, 713 92
768,681 97
599, 544 44

$79, 177. 00
61, 000 00
76, 420 00
330, 454 54
146, 376 86
3, 300 34
186, 000 00

14, 578, 294 26

894, 144 77

11, 416 03

Notes of other
banks.

Specie.

Sundries.

(a.) $2, 764, 338. 00
(&.)
466 01

71
84
60
00
00
00

$1, 407, 373. 00
474, 497 38
571, 520 42
604, 398 46
297, 615 83
307, 596 40
459, 181 62
602, 879 41
284, 504 58

393,341 15

5, 009, 567 10

$137, 570. 00
45, 610 00
86t 292
16, 465
28,362
24, 000
21, 225
33, 815

$2, 750, 000
14, 338

Q

(b.)
(c.)

11,000 00
31, 242 48
02

2, 807, 046 49

$2, 764, 338

The last item (funded debt) stands on the treasury books at $23,066.23. Whence the difference arises is not known.
(b.) Treasury drafts, not yet collected,
(c.) Amount overdrawn by the late commissioner of loans, at Charleston.




w

3

B 2.
Statement of the debts due by the Bank of the United States, as exhibited in the latest bank returns, and the latest return of the Treasurer of the
United States, received by the Secretary of the Treasury.
DEPOSITES BY

(a). Treasury
U. States.

Bank United States, Jan. 15, 181 I,
Branch at Boston,
5, '
New York,
12, <
Baltimore,
12, (
Washington,
12, '
Norfolk,
5, '
Charleston,
Dec. 29, 181LO,
Savannah,
29, *
New Orleans,
8, '
Dollars,

Dollars.
$392, 909
341, 054
625,417
199, 201
101, 895
16,483
36,645
49,691
166,701

24
47
09
28
55
76
03
63
55

1,929,999 60

Banks.

BANK NOTES.

Individuals.

Issued.

On hand.

Dollars.
Dollars.
140, 765 00 (6).2, 560,864 25
825,000 11
241, 000 00
878,451 11
29,860 00
84, 057 38
215,991 23
539, 993 04
6,731 78
112, 303 28
491, 678 93
196, 854 86
211,219 87

Dollars.
1, 687, 893
435, 680
1, 254, 530
371, 865
297, 860
283, 900
802, 735
825, 950
192, 140

Dollars.
126, 060 00
259, 248 39
176, 540 00
210, 822 56
36, 414 83
77, 232 00
12, 500 00
216, 610 00

5,900,422 83

6, 152, 553

1, 115, 427 78

634, 348 01

In circulation.

Dollars.
1, 561, 833
176,431
1, 077, 990
161, 042
261,445
206, 668
790, 235
609, 340
192, 140

W

00
61
00
44
17
00
00
00
00

5, 037, 125 22

o
C
O

(a.) Taken from the Treasurer's cash return, of the 21st January, 1811.
(&.) Including $291,751 25, belonging to the War and Navy Departments, and the Sinking Fund.




00

86

FEDERAL BANKING LAWS AND REPORTS
B3
.
General state of the Bank of the United States, and Us

Discounts
Loan to the United States
Funded debt
Overdrawn by the late commissioner of loans,
Charleston
Treasury drafts not yet collected

Branches
$14, 578, 294.20

$2, 750, 000. 00
14, 338. 00
31, 242.48
11,466. 01
2, 807,046.49

Due by other banks in account
Notes of other banks on hand

894,144. 77
393,341.15
1, 287, 485.02
5,009, 567.10
500,652/T7
$24,183, 046, &

Specie
Real estate
Capital stock
Notes in circulation
Deposites by Government
Banks
Individuals

$10, 000,000.00
$5, 037,125. 22
$1, 929, 999. 60
634, 348. 01
5,900,422. 83
8, 464, 770. 44

Balance of outstanding drafts on bank and
branches

171,473.17
!
Undivided surplus, applicable to last dividend, and to cover
losses on buildings and debts

c,3
13, 673, 368.83

509,677.71
$24,183,046.5*

Report of Secretary of Treasury (Albert Gallatin), on Renewal
of Charter of Bank of United States
COMMUNICATED TO THE SENATE, FEBRUARY 5, 1 8 1 1 .
Eleventh Congress, 3d Session
[Source: American State Papers, Finance, Vol. 2, p. 481]

TREASURY DEPARTMENT,

January 30, 1811-

,
Have already, in a report to the Senate, of 2d March, 1809, expressea
my opinion in favor of a renewal of the charter of the Bank ol! the
United States, an opinion which remains unchanged, I can only add fl
few explanatory remarks in answer to the inquiries of the committee,
as stated in your letter of yesterday.
The banking system is now firmly established; and, in its ramifications, extends to every part of the United States. Under that system, the assistance of banks appears to me necessary for the punctua
collection of the revenue, and for the safe keeping and transmission
of public moneys. That the punctuality of payments is principally
due to banks, is a fact generally acknowledged. It is, to a certain
degree, enforced by the refusal of credit at the custom house, so lpn?
as a former revenue bond, actually due, remains unpaid. But I thm*,
nevertheless, that, in order to ensure that precision m the collection, ° n
which depends a corresponding discharge of the public engagements,
SIR:




FEDERAL BANKING LAWS AND REPORTS

87

it would, if no use was made of banks, be found necessary to abolish,
altogether, the credit now given on the payment of duties—a measure
which would affect the commercial capital, and fall heavily on the
consumers. That the public moneys are safer by being weekly deposited in banks, instead of accumulating in the hands of collectors,
is self-evident. And their transmission, whenever this may be wanted,
for the purpose of making payments in other places than those of collection, cannot, with any convenience, be effected, on a large scale, in
an extensive country, except through the medium of banks, or of
persons acting as bankers.
TTV16 question, therefore, is, whether a bank, incorporated by the
^ff u
' o r a n u m ^ > e r o f banks, incorporated by the several
Mates, be most convenient for those purposes.
State banks may be used, and must, in case of a non-renewal of the
l ar ^ F ' u USec* ky the treasury. Preparatory arrangements have
already been made to that effect; and it is believed that the ordinary
ousiness will be transacted, through their medium, with less convenience, and, in some respects, with perhaps less safety than at
present, but without any insuperable difficulty. The difference, with
ffPect *° safety, results from the organization of the Bank of the
united btates, by which it is responsible for the money deposited in
emnl ^ S bvi11nchees, whilst each of the State banks, which may be
™
Th it O k bo f tresponsible only for the sums in its own hands,
he
collI V A
United States is now answerable for the moneys
uiiected at New Orleans, and deposited there in its branch—a security
Stnf vT l o s t u n d e r a different arrangement. Nor will the United
°l over the ma
l k aVie a n y o t h e r c o n t r ° l over the manner in which the business
y k* conducted, than what may result from the power
T
k
f
h
g the public deposites; and they will lose that which a
r a de
nnwglV S O v e r t Pendence f one the General Government for a charter,
•' °
I
in* i? a c c o m mi e B a n k o t h United States. The facility of obtainsam
odations as may, at times be wanted, will, for the
u_; re ^on, be lessened, and the national power will,, to that extent,
; ^ ,
d, and the nationa p
*™P™ It may be d d d that,
of *™P™. It may b added, t h t even for the ordinary business
for the ordinary business
m«t K I l n ? a n d transmitting public moneys, the use of a State bank
bv m o r b l d d e n by the State; and that loans to the United States are,
^State t h e c h a r t e r s > forbidden, , without a special permission from
tate
As CCri not perceived, on the other hand, that a single advantage
it is
tnft * *? to the public from the change, no reason presents itself, on
t0 n f ound of expediency, why an untried system should be substituted
with Uli r w h i c h t h e treasury business has so long been conducted
onlv r f v
^ u r i t y to the United States, and great convenience not
natnw?. e officers, but also to all those who had payments of a public
R t o m a kneoo r teo me c e i v e .
r
,
u . A.
miHo a g i .l n s t t s e necessary to advert to the particular ob]ections
Pron }t
the present charter, as these may easily be obviated by
oth£ a lr<e rsa taions. B aWhat has been called a National Bank, or, m
nk
one nT° ? ' n e w
of the United States, instead of the existing
ma
> y be obtained by such alterations. The capital may be ex-




88

FEDERAL BANKING LAWS AND REPORTS

tended, and more equally distributed; new stockholders may be substituted to the foreigners, as had been suggested in the report of 2d
March, 1809; and any other modifications which may be thought expedient may be introduced, without interrupting the operations of the
institution now in force, and without disturbing all the commercial
concerns of the country.
If, indeed, the Bank of the United States could be removed without
affecting either its numerous debtors, the other moneyed institutions,
or the circulation of the country, the ordinary fiscal operations of Government would not be materially deranged, and might be carried on
by means of another general bank, or of State banks. But the transition will be attended with much individual, and probably with no
inconsiderable public injury. It is impossible that an institution
which circulates thirteen millions of dollars, and to whom the merchants owe fourteen, should terminate its operations, particularly
in the present unfavorable state of the American commerce, and after
the ffreat losses lately experienced abroad, without giving a serious
shock to commercial, banking, and national credit. It is not intended
to overrate the extent of an evil which there are no certain data to
appreciate. And, without expatiating on the fatal and unavoidable
effects on individuals; without dwelling on the inconvenience of
repaying, at this time, to Europe, a capital of seven millions; and without adverting to other possible dangers, of a more general nature, it
appears sufficient to state that the same body of men who owe fourteen
millions of dollars to the bank, owe, also, ten or twelve to the United
States, on which the receipts into the treasury, for this year, altogether depend; and that exclusively of absolute failures, it is improbable that both debts can be punctually paid at the same time. Nor
must it be forgotten that the approaching non-importation will considerably lessen the efficiency of the provision, by which subsequent
credits are refused to importers who have not discharged former
reveime bonds. Upon the whole, a perfect conviction is felt that, in
the critical situation of the country, new evils ought not to be superadded, and a perilous experiment be attempted, unless required by an
imperious necessity.
In these hasty remarks, I have not adverted to the question of constitutionality, which is not a subject of discussion for the Secretary
of the Treasury. Permit me, however, for my own sake, simply to
state, that the bank charter having, for a number of years, been acted
upon, or acquiesced in, as if constitutional, by all the constituted authorities of the nation, and thinking, myself, the use of banks to be
at present necessary for the exercise of the legitimate powers of the
General Government, the continuation of a bank of the United States
has not, in the view which I have been able to take of the subject,
appeared to me to be unconstitutional.
I have the honor to be, respectfully, sir, your obedient servant,
ALBERT GALLATIX.

Hon. WILLIAM H. CRAWFORD, Olwirnwn in Senate.




FEDERAL BANKING LAWS AND REPORTS

89

Report of Senate Committee, on Renewal of Charter of Bank of

United States
COMMUNICATED TO THE SENATE, MARCH 2, 1 8 1 1 .

Eleventh Congress, 3d Session
[Source: American State Papers, Finance, Vol. 2, pp. 486-487]

Mr. CLAY, from the committee to whom was referred the memorial of
the stockholders of the Bank of the United States, praying that an
act of Congress might be passed, to continue the corporate powers
of the Bank, for a further period, to enable it to settle such of its
concerns as may be depending on the 3d of March, 1811, respectfully offered, for the consideration of the Senate, the following
report:
That your committee have duly weighed the contents of the memorial, and deliberately attended to such explanations of the views of the
memorialists, as they have thought proper to present through their
apnts. That, holding the opinion (as a majority of the committee do)
that the constitution did not authorize Congress originally to grant
tlie
barter, it follows, as a necessary consequence of that opinion, that
? ^ t e n s i o n °f it, even under the restrictions contemplated by the
stockholders,uismequally repugnant to the constitution. But, if it were
V i! 2 t o s r °unt this fundamental objection, and if that rule
whichr forbids, nduring the same session of the Senate, the re-agitation
°t n P o P o s ^i° once decided, were disregarded, your committee would
still eX1StenCe fto hfind any sufficient rreasons for prolonging the politibe at a loss t e cor
°
Poration, f o t n e Purpose of winding up its
tfcAs \resP^.cts t h e body itself, it is believed that the existing laws,
"irough the instrumentality of a trust properly constituted, afford as
«&ple means as a qualified continuance of the charter would, for the
of
\ttt1 ^1On But i t sS a ^ounts, and the collection and final distribution of
W f S c o m m i.'t en o u I d any inconvenience be experienced on this subt
th Q
*
. e are persuaded it will be very partial, and such as
» totateauthorities, upon proper application, would not fail to proe
;i
Je a competent remedy for And,
' r a t l o n t o t h e community, if the corporation, stripped of its
ing powers, were to fulfill bona fide the duty of closing its affairs,
gpers,
closg
,
ommittee cannot see that any material advantage would be de.uurcommittee ocannot see that any material advantage would be deiM* ^ 1 l i l s t n the contrary, if it should not so act, but should avail
iM* ^ 1 ll si l s t '' o n the contrary, if it should not so act, but should a
h
artJ • h s t ^ P o r a r
artJ S • n l ff t^Porary prolongation, i in order to effect a more durable
l t i
i rder to effect a more durable
scoSS1e° ° U s c h a r t e r > ft m i g h t > i n t s operations, become a serious

S

rI° Ur c o m m i t tee are happy to say, that they learn, from a satirfac™ 1 " ^ nthat othe aapprehensions which were indulged, as to the dis^ f r m non-renewal of the charter, are far from being
Philadelphia, to which their information has been con-




90

FEDERAL BANKING LAWS AND REPORTS

fined. It was long since obvious, that the vacuum, in the circulation
of the country, which was to be produced by the withdrawal of the
paper of the Bank of the United States, would be filled by paper
issuing from other banks. This operation is now actually going on;
the paper of the Bank of the United States is rapidly returning, and
that of other banks is taking its place. Their ability to enlarge their
accommodations is proportionately enhanced; and when it shall be
farther increased by a removal, into their vaults, of those deposites,
which are in possession of the Bank of the United States, the injurious
effects of a dissolution of the corporation will be found to consist in
an accelerated disclosure of the actual condition of those, who have
been supported by the credit of others, but whose insolvent, or tottering situation, known to the Bank, has been concealed from the public
at large.
Your committee beg leave to present the following resolution:
Resolved, That the prayer of the memorialists ought not to be
granted.
Report of House Committee, on Renewal of Charter of Bank of
United States
COMMUNICATED TO THE HOUSE OP REPRESENTATIVES, MAKCH 2, 1811.

Eleventh Congress, 3d Session
[Source: American State Papers, Finance, Vol. 2, p. 487]

Mr. P. B. PORTER, from the committee to whom was referred the
memorial of the stockholders of the Bank of the United States*
made the following report:
That they have carefully examined the various matters set forth
in the said memorial, and attentively listened to the representations
of the gentlemen who have appeared in behalf of the said petitioners.
The object of the memorialists is to obtain an extension of their
corporate powers, beyond the period limited for the expiration of
their charter, so as to enable them to prosecute for their debts, and
to arrange, liquidate, and close, the various concerns of the companyThe committee are of opinion that a law of Congress, granting the
powers prayed for, would facilitate the final adjustment of the affairs
of the bank, although they do not think such a law indispensable to
that object. But, believing, as your committee do, that, m granting
the original charter to the stockholders, Congress transcended the
legitimate powers of the constitution, the same objection now presents
itself to the extension of any of their corporate capacities.
If the committee had time to go into the investigation, and to
present to the House the various reasons which have conduced to th lS
opinion, it would be more than useless, to divert its attention from the
important concerns of the nation, at this late period of the session,
to a subject which, but a few days since, was so fully and elaborately
discussed. They, therefore, beg leave to recommend the following
resolution:
Resolved, That the prayer of the memorialists ought not to be
granted.




FEDERAL BANKING LAWS AND REPORTS

91

Report of Secretary of Treasury (Alexander J. Dallas), on Public
Credit
COMMUNICATED TO THE HOUSE OF REPRESENTATIVES, OCTOBER 1 8 , 1 8 1 4 .

Thirteenth Congress, 3d Session
[Source: American State Papers, Finance, Vol. 2, pp. 866-869]
TREASURY DEPARTMENT,

October 17,1814.

SIR:

I have the honor to acknowledge the receipt of your letter, dated
the 14th inst.; and, aware of the necessity for an early interposition
of Congress on the subject to which it relates, I proceed, at the moment
of entering upon the duties of office, to offer to the consideration of
the Committee of Ways and Means, an answer on the several points of
their inquiry.
Contemplating the present state of the finances, it is obvious, that a
deficiency in the revenue, and a depreciation in the public credit, exist,
from causes which cannot in any degree be ascribed, either to the want
of resources, or to the want of integrity in the nation. Different minds
will conceive different opinions in relation to some of those causes; but
Jt \vill be agreed on all sides, that the most operative have been the
inadequacy of our system of taxation to form a foundation for public
credit; and the absence even from that system of the means which are
Rest adapted to anticipate, collect, and distribute the public revenue.
lhe wealth of the nation, in the value and products of its soil, in all
Jne acquisitions of personal property, and in all the varieties of industr
y> remains almost untouched by the hand of Government; for, the
national faith, and not the national wealth, has hitherto been the prinCi
Pal instrument of finance. It was reasonable, however, to expect,
jnat a period must occur in the course of a protracted war, when connaence m the accumulating public engagements could only be secured
»y an active demonstration, both of the capacity and the disposition to
err orm t ] l e m J n t h e p r e s e n t g t a t e o f t h e t r e a sury, therefore, it is a
J^st consolationt h e reflect, that a prompt and resolute application of
to
arv u lirces o f
country will effectually relieve from every pecunil
.v embarrassment,a ando vindicate the fiscal honor of the Government,
cini i W 0 u l d b e v i n t attempt to disguise, and it would be perniex£S • P a l l i a t e t]l e difficulties which are now to be overcome. The
/•agenciesn of f the Government require a supply of treasure for the
even5? • W e° e t h e War> be y° n <l « n y amount which it would be politic,
r
T n sr
> «?
Practicable, to raise by an immediate and constant imcon,!T £ lteu x e sr-t i T h e r e must, therefore, be a resort to credit, for a
iunnf
P° °n of the supply. But the public credit is at this
term a S °SdefPlre ssed,u that no hope of adequate succor, on moderate
last i ° n a e y r . e s t P ° n it- Hence, it becomes the object first and
of ti n e.J.eryn practical scheme of finance, to re-animate the confidence
Publi ° a e s ' nan( *nto rimpress on the mind of every man, who, for the
U
aconv' ^°of t th' r e d e s services, furnishes supplies, or advances money,
ment il°* n o t et opunctuality as well as of the security of the Governb e re ar
credit I • ?
g ded, indeed, as the case of preserving a
inff / o^uch has never been impaired, but rather as the case of rescub
m re
proach a credit over which doubt and apprehension (not
°2180O—63

7




92

FEDERAL BANKING LAWS AND REPORTS

the less injurious, perhaps, because they are visionary) have cast an
inauspicious shade. In the former case, the ordinary means of raising and appropriating the revenue, will always be sufficient; but in the
latter case, no exertion can be competent to attain the object, which
does not quiet, in every mind, every fear of future loss or disappointment, in consequence of trusting to the pledges of the public faith.
The condition of the circulating medium of the country, presents another copious source of mischief and embarrassment. The recent
exportations of specie have considerably diminished the fund of gold
and silver coin; and another considerable portion of that fund has
been drawn, by the timid and the wary, from the use of the community, into the private coffers of individuals. On the other hand, the
multiplication of banks in the several States has so increased the quantity of paper currency, that it would be difficult to calculate ita
amount; and still more difficult to ascertain its value, with reference
to the capital on which it has been issued. But the benefit of even
this paper currency is in a great measure lost, as the suspension of
payments in specie, at most of the banks, has suddenly broken the
chain of accommodation that previously extended the credit and the
circulation of the notes which were emitted in one State into every
State of the Union. It may, in general, be affirmed, therefore, that
there exists, at this time, no adequate circulating medium, common
to the citizens of the United States. The moneyed transactions of
private life are at a stand; and the fiscal operations of the Government, labor with extreme inconvenience. I t is impossible that such a
state of things should be long endured; but, let it be fairly added,
that, with legislative aid, it is not necessary that the endurance should
be long. Under favorable circumstances, and to a limited extent,
an emission of treasury notes would, probably, afford relief; but
treasury notes are an expensive and precarious substitute, either for
coin or for bank notes, charged as they are with a growing interest,
productive of no countervailing profit or emolument, and exposed to
every breath of popular prejudice or alarm. The establishment of a
national institution, operating upon credit combined with capital,
and regulated by prudence and good faith, is, after all, the only efficient remedy for the disordered condition of our circulating medium.
While accomplishing the object, too, there will be found, under the
auspices of such an institution, a safe depository for the public treasure, and a constant auxiliary to the public credit. But whether the
issues of a paper currency proceed from the national treasury, or from
a national bank, the acceptance of the paper in a course of payments
and receipts must be forever optional with the citizens. The extremity of that day cannot be anticipated, when any honest and enlightened statesman will again venture upon the desperate expedient
of a tender law.
From this painful, but necessary development of existing evils, ^e
pass, with hope and confidence, to a more specific consideration
of the measures from which relief may be certainly and speedily
derived. Remembering always that the objects of the Government
are to place the public credit upon a solid and durable foundation;
to provide a revenue commensurate with the demands of a war expenditure i and to remove from the treasury an immediate pressure,
the following propositions are submitted to the committee, with every
sentiment of deference and respect.



FEDERAL BANKING LAWS AND REPORTS

93

PROPOSITIONS

I. It is proposed, that, during the war, and until the claims contemplated by the proposition are completely satisfied, or extinct, there
shall be annually raised by taxes, duties, imposts, and excises, a fund
for these purposes: * * *
*
*
*
*
*
*
*
II. It is proposed, that, during the war, and until the claims contemplated by the preceding proposition are completely satisfied, or
other adequate funds shall be provided and substituted by law, there
shall be annually raised, by the means here specified, the following
sums: * * *
*
*
*
*
*
*
*
III. It is proposed that a national bank shall be incorporated for a
term of twenty years, to be established at Philadelphia, with a power
to erect offices of discount and deposite elsewhere, upon the following
principles:
1. That the capital of the bank shall be fifty millions of dollars,
jo be divided into 100,000 shares of 500 dollars each. Three-fifths of
Jhe 6
capital, being 60,000 shares, amounting to 30,000,000 of dollars,
Jim Ascribed by corporations, companies or individuals: and twontths of the capital, being 40,000 shares, amounting to 20,000,000 of
i 3t0 b e Ascribed by the United States.
«• lnat the subscriptions of corporations, companies, and individuals, shall be paid for in the following manner.
One-fifth part, or $6,000,000, in gold or silver coin.
Four-fifth parts, or 24,000,000, in gold or silver coin, or in six
per cent, stock issued since the declaration of war, and treasury notes, in the proportion of one-fifth in treasury notes,
o T 1 an( * three-fifths in six per cent stock.
m mt
Tini i ii , the subscriptions of corporations, companies, and individJia
«, shall be paid at the following periods:
20 dollars on each share, to be paid at the time
of subscribing, in gold or silver coin
1,200,000
40 dollars on each share, to be paid in goldor
silver coin, one month after the subscription
2,400, 000
40 dollars on each share, in two months after
the subscription, in gold or silver coin
2,400,000
100 dollars
specie, 6,000,000
100 dollars on each share, in gold or silver coin,
or in six per cent, stock, or in treasury
notes, according to the preceding apportionment, to be paid at the time of subscribing
_1
6,000,000
1^0 dollars on each share, to be paid in like manner, in two months after subscribing
9,000,000
*50 dollars on each share, to be paid in like manner, in three months after subscribing— 9, 000,000
500 dollars



$30,000,000

94

FEDERAL BANKING LAWS AND REPORTS

4. That the subscription of the United States shall be paid in six
per cent, stock, at the same periods, and in the same proportions, as
the payments of private subscriptions, in stock and treasury notes.
5. That the United States may substitute six per cent, stock, for the
amount of the treasury notes subscribed by corporations, companies,
and individuals, as the notes respectively become due and payable.
6. That the bank shall loan to the United States $30,000,000, at an
interest of six per cent, at such periods, and in such sums, as shall be
found mutually convenient.
7. That no part of the public stock, constituting a portion of the
capital of the bank, shall be sold during the war, nor at any subsequent
time, for less than par; nor at any time to an amount exceeding one
moiety, without the consent of Congress.
8. That provision shall be made for protecting the bank notes from
forgery; for limiting the issue of bank notes; and for receiving them
in all payments to the United States.
9. That the capital of the bank, its notes, deposites, dividends, or
profits (its real estate only excepted) shall not be subject to taxation
by the United States, or by any individual State.
10. That no other bank shall be established by Congress, during the
term for which the national bank is incorporated.
11. That the national bank shall be governed by fifteen directors,
being resident citizens of the United States and stockholders. The
President of the United States shall annually name five directors, and
designate one of the five to be the president of the bank. The other
directors shall be annually chosen by the qualified stockholders, in
person or by proxy, if resident within the United States, voting upon
a scale graduated according to the number of shares which they
respectively hold. The cashier and other officers of the bank to be
appointed as is usual in similar institutions.
12. That the directors of the national bank shall appoint seven
persons, one of whom to preside, as the managers of each office oi
discount and deposite, and one person to be the cashier.
13. That the general powers, privileges, and regulations of the bank,
shall be the same as are usual in similar institutions; but with this
special provision, that the general accounts shall be subject to the
inspection of the Secretary of the Treasury.
*
*
*
*
*
*
*
It is proper to accompany these propositions with a few explanatory
remarks.
*
*
*
*
*
*
*
3. In making a proposition for the establishment of a national bank?
I cannot be insensible to the high authority of the names which have
appeared in opposition to that measure upon constitutional grounds.
It would be presumptuous to conjecture that the sentiments which
actuated the opposition have passed away; and yet it would be denying
to experience a great practical advantage, were we to suppose that a
difference of times and circumstances would not produce a corresponding difference in the opinions of the wisest, as well as of the purest
men. But, in the present case, a charge of private opinion is not
material to the success of the proposition for establishing a national




FEDERAL BANKING LAWS AND REPORTS

95

bank. In the administration of human affairs, there must be a period
when discussion shall cease and decision shall become absolute. A
diversity of opinion may honorably survive the contest; but, upon the
genuine principles of a representative government, the opinion of the
majority can alone be carried into action. The judge, who dissents
from the majority of the bench, changes not his opinion, but performs
his duty, when he enforces the judgment of the court, although it is
contrary to his own convictions. An oath to support the constitution
and the laws, is not, therefore, an oath to support them under all
circumstances, according to the opinion of the individual who takes it,
but it is, emphatically, an oath to support them according to the interpretation of the legitimate authorities. For the erroneous decisions of
a court of law, there is the redress of a censorial, as well as of an
appellate jurisdiction. Over an act, founded upon an exposition of
the constitution, made by the legislative department of the Government, but alleged to be incorrect, we have seen the judicial department
exercise a remedial power. And even if all the departments, legislative, executive, and judicial, should concur in the exercise of a power,
which is either thought to transcend the constitutional trust, or to
operate injuriously upon the community, the case is still within the
reach of a competent control, though the medium of an amendment
to the constitution, upon the proposition, not only of Congress, but of
the several States. When, therefore, we have marked the existence
of a national bank for a period of twenty years, with all the sanctions
of the legislative, executive, and judicial authorities; when we have
seen the dissolution of one institution, and heard a loud and continued
call for the establishment of another; when, under these circumstances,
neither Congress nor the several States have resorted to the power of
amendment; can it be deemed a violation of the right of private
opinion, to consider the constitutionality of a national bank, as a
question forever settled and at rest ?
tfut, after all, I should not merit the confidence, which it will be my
ambition to acquire, if I were to suppress the declaration of an opinion,
™at, in these times, the establishment of a national bank will not only
oe useful in promoting the general welfare, but that it is necessary and
proper for carrying into execution some of the most important powers
constitutionally vested in the Government.
upon cthe principles and regulations of the national bank, it may
e
K ?}f ft to remark, that they will be best unfolded in the form of
*i<y T ^ 1 s l m 1 1 b e immediately prepared. A compound capital is
t ggested, with a design equally to accommodate the subscribers, and
o aid the general measures for the revival of public credit; but the
S,0^1*10118 °f specie and stock may be varied, if the scarcity of coin
w«mm render it expedient; yet not in so great a degree as to prevent
4 l ear]
y commencement of the money operations of the institution.
T

*

*

servant™ t h e h ° n o r

*

to

T

J W

**'

•

v e r y res

Pectfu11^'

*
sir

'

*
your most

•
obedient

A. J. DALLAS.

' - EPPES, Esq. Chairman of the Committee of Ways amd Meam.




96

FEDERAL BANKING LAWS AND REPORTS

Report of Secretary of Treasury (Alexander J. Dallas),
on Treasury Notes
COMMTTNICATED TO THE HOUSE OF REPRESENTATIVES, NOVEMBER 28, 1814.
Thirteenth Congress, 3d Session
[Source: American State Papers, Finance, Vol. 2, pp. 872-873]
TREASURY DEPARTMENT, November

27,IBlk*

SIR:

I have the honor to acknowledge the receipt of your letter, requesting, for a committee of the House of Representatives, an opinion upon
the following inquiries:
1. The effect which a considerable issue of treasury notes, with the
quality of being receivable in subscriptions to a national bank, will
have upon the credit of the Government; and particularly, upon the
prospects of a loan for 1815.
2. The practicability of getting forty-four millions of treasury notes,
forming, with six millions of specie, the capital for a national bank,
into circulation, without depreciation.
The inquiries of the committee, cannot be satsif actorily answered,
in the abstract, but must be considered, in connexion with the state
of our finances, and the state of the public credit.
When I arrived at Washington, the treasury was suffering under
every kind of embarrassment. The demands upon it were great in
amount; while the means to satisfy them, were, comparatively small,
precarious in the collection, and difficult in the application. The
demands consisted of dividends upon old and new funded debt, of
treasury notes, and of legislative appropriations for the army, the
navy, and the current service; all urgent, and important. The means
consisted, first, of the fragment of an authority to borrow money, when
nobody was disposed to lend, and to issue treasury notes, which none
but necessitous creditors, or contractors, in distress, or commissaries,
quartermasters, and navy agents, acting, as it were, officially, seemed
willing to accept: 2d. Of the amount of bank credits, scattered
throughout the United States, and principally in the southern and
western banks, which had been rendered, in a great degree, useless, by
the stoppage of payments in specie, and the consequent impracticability of transferring the public funds from one place, to meet the
public engagements in another place: 3d. Of the current supply of
money from the import, from internal duties, and from the sales of
public lands; which ceased to be a foundation of any rational estimate,
or reserve, to provide even for the dividends on the funded debt, when
it was found that the treasury notes (only requiring, indeed, a cash
payment at the distance of a year), to whomsoever they were issued
at the treasury, and almost as soon as they were issued, reached the
hands of the collectors, in payment of debts, duties, and taxes; thus
disappointing and defeating the only remaining expectations of pr° ductive revenue.
Under those circumstances, (which I had the honor to communicate
to the Committee of Ways and Means,) it became the duty of this
department, to endeavor to remove the immediate pressure from the
treasury; to endeavor to restore the public credit; and to endeavor to




FEDERAL BANKING LAWS AND REPORTS

97

provide for the expenses of the ensuing year. The only measures that
occurred to my mind, for the accomplishment of such an important
object, have been presented to the view of Congress. The act, authorising the receipt of treasury notes in payment of subscriptions to a
public loan, was passed, I fear, too late to answer the purpose for
which it was designed. It promises, at this time, little relief, either
as an instrument to raise money, or to absorb the claims for treasury
notes, which are daily becoming due. From this cause, and other
obvious causes, the dividend on the funded debt, has not been punctually paid; a large amount of treasury notes, has already been dishonored; and the hope of preventing further injury, and reproach, in
transacting business with the treasury, is too visionary to afford a
moment's consolation.
The actual condition of the treasury, thus described, will serve to
indicate the state of the public credit. Public credit depends, essentially upon public opinion. The usual test of public credit is, indeed,
the value of public debt. The faculty of borrowing money, is not a test
of public credit; for a faithless Government, like a desperate individual, has only to increase the premium, according to the exigency, in
order to secure a loan. Thus, public opinion, manifested in every
iorm, and in every direction, hardly permits us, at the present juncture, to speak of the existence of public credit; and yet, it is not impossible, that the Government, in the resources of its patronage, and its
pledges, might find the means of tempting the rich, and the avaricious,
to supply its immediate wants. But, when the wants of to-day are
supplied, what is the new expedient, that supply the wants of tomorrow? If it is now a charter of incorporation, it may then be a
grant of land; but, after all, the immeasurable tracts of the western
wild, would be exhausted m successive efforts to obtain pecuniary aids,
stll l
h
l
h foundations of
the measures,
, which it has been my duty to suggest, I have endeavored to
introduce a permanent plan for reviving the public credit; of which
™ facility of borrowing money, in anticipation of settled and productive revenues, is only an incident, although it is an incident as durable
a
? the plan itself. The outline seemed to embrace whatever was requiSlte
> to leave no doubt upon the power and the disposition of Government, m relation to its pecuniary engagements, to diminish, and not
t0
^gment the amount of public debts, in the hands of individuals,
ami to create general confidence, rather by the manner of treating the
ciauns of the present class of creditors, than by the manner of conciliating the favor of a new class,
cill fi
explanatory remarks, sir, I proceed to answer, specin' ^ y h e questions which you have proposed:
t],
^ °* opinion, that considerable issues of treasury notes, with
will*! t y °* b e i u £ receivable in subscriptions to a national bank,
i u l l a v e an injurious effect upon the credit of the Government; and,
1
PL U P O U t h te w i U c o n f of a loan for 1815.
Prospects
:
n e w r *ltors o v e r t l l er, gratuitously, an advantage upon a class of
e
on I * - >
present creditors of the Government, standing
a footing of at least equal merit.




98

FEDERAL BANKING LAWS AND REPORTS

Because, it will excite general dissatisfaction among the present
holders of the public debt; and, generally, distrust among the capitalists, who are accustomed to advance their money to the Government.
Because, a quality of subscribing to the national bank, attached to
treasury notes, exclusively, will tend to depreciate the value of all
public debt, not possessing that quality; and whatever depreciates the
value of the public debt in this way, must necessarily impair the public
credit.
Because, the specie capital of the citizens of the United States, so
far as it may be deemed applicable to investments in the public stocks,
has already in a great measure, been so vested; the holders of the present debt, will be unable to become subscribers to the bank, (if that
object should, eventually, prove desirable) without selling their stock
at a depreciated rate, in order to procure the whole amount of their
subscriptions in treasury notes; and a general depression in the value
of the public debt, will inevitably ensue.
Because, the very proposition of making a considerable issue of
treasury notes, even with the quality of being subscribed to a national
bank, can only be regarded as an experiment, on which it seems dangerous to rely; the treasury notes, must be purchased at par, with
money; a new set of creditors are to be created; it may, or it may not,
be deemed an object of speculation, by the money holders, to subscribe to the bank; the result of the experiment cannot be ascertained,
until it will be too late to provide a remedy, in the case of failure;
while the predit of the Government will be affected, by every circumstance which keeps the efficacy of its fiscal operations in suspense or
doubt.
Because, the prospect of a loan, for the year 1815, without the aid of
a bank, is faint and unpromising; except, perhaps, so far as the pledge
of a specific tax may succeed; and then, it must be recollected, that a
considerable supply of money will be required for the prosecution of
the war, beyond the whole amount of the taxes to be levied.
Because, if the loan for the year 1815 be made to depend upon the
sue
issue of treasury notes, subscribable to the national bank, it will?
probably fail, for the reasons which have already been suggested; and,
if the loan be independent of that operation, a considerable issue of
treasury notes, for the purpose of creating a bank capital^ must, it is
believed, deprive the Government of every chance of raising money,
in anv other manner.
2. 1 am of opinion, that it will be extremely difficult, if not impracticable, to get forty-four millions of treasury notes, (forming, with six
millions of specie, the capital of a national bank,) into circulation,
with or without depreciation.
Because, if the subscription to the bank becomes an object of speculation, the treasury notes will probably be purchased at the treasury,
and at the loan offices, and never pass into circulation at all.
Because, whatever portion of the treasury notes might pass into circulation, would be speedily withdrawn, by the speculators in the subscription to the bank, after arts had been employed to depreciate their
value.
Because, it is not believed, that, in the present state of the public
credit, forty-four millions of treasury notes, can be sent into circulation. The only difference between the treasury notes now issued, and



FEDERAL BANKING LAWS AND REPORTS

99

dishonored, and those proposed to be issued, consists in the subscribable quality; but reasons have already been assigned for an opinion,
that this difference does not afford such confidence in the experiment,
as seems requisite to justify a reliance upon it, for accomplishing some
of the most interesting objects of the Government.
I must beg you, sir, to pardon the haste, with which I have written
these general answers to your inquiries. But, knowing the importance
of time, and feeling a desire to avoid every appearance of contributing
to the loss of a moment, I have chosen rather to rest upon the intelligence and candor of the committee, than to enter upon a more labored
investigation of the subject referred to me.
I have the honor to be, very respectfully, your obedient
servant,
A. J. DALLAS.
WILLIAM LOWNDES, ESQ.

Veto Message—James Madison, on Bank of United States
COMMUNICATED TO THE SENATE, JANUARY 3 0 , 1815.

Thirteenth Congress, 3d Session
[Source: American State Papers, Finance, Vol. 2, pp. 891-895]
T
o the Seriate of the United States:
Haying bestowed on the bill, entitled "An act to incorporate the
subscribers to the Bank of the United States of America," that full
jj°nsi<kration which is due to the great importance of the subject, and
dictated by the respect which I feel for the two Houses of Congress, I
™ constrained by a deep and solemn conviction that the bill ought not
™ become a law, to return it to the Senate, in Avhich it originated, with
my-objections to the same.
Waiving the question of the constitutional authority of the legislat e to establish an incorporated bank, as being precluded, in my
r g m r * } - ' »y repeated recognitions, under varied circumstances, of
* / * ™ i t y of such an institution, in acts of the legislative, executive,
in diff
branches of the Government, accompanied by indications,
thp I e n t m ° d e s , of a concurrence of the general will of the nation,
DoL pr °S ose(i b a n k d ° e s not appear to be calculated to answer the purofTf ° \ r e . v i v i n g the public credit, of providing a national medium
Den* KI on> a n d o f aiding the treasury, by facilitating the mdisL a ° l e anticipations of the revenue, and by affording to the public
eaurable loans.
stock 1 i a p i t a l o f t h e b a n k i s t o b e compounded of specie, of public
ProrwU '
treasury notes convertible into stock, with a certain
n of each
Th,
' °* which every subscriber is to furnish himself.
besuffi- m ° U n t ° f t h e s t o c k t o b e subscribed, will not, it is believed,
orlasH n i t o P r o d u c e , in favor of the public credit, any considerable
d e p r " £j ^ v a t i o n of the market price, whilst this may be occasionally
y t h e b a n k itself
allowed
> i f J t should carry into the market the
to
Pr p0r tion
f its
Prooii ° °
capital, consisting of public stock, in order
s ecie
s i W
P > which it may find its account in procuring, with some
<* on that part of its capital.




100

FEDERAL BANKING LAWS AND REPORTS

Nor will any adequate advantage arise to the public credit from the
subscription of treasury notes. The actual issue of these notes nearly
equals, at present, and will soon exceed, the amount to be subscribed to
the bank. The direct effect of this operation is simply to convert
fifteen millions of treasury notes into fifteen millions of six per cent,
stock, with the collateral effect of promoting an additional demand for
treasury notes beyond what might otherwise be negotiable.
Public credit might, indeed, be expected to derive advantage from
the establishment of a national bank, without regard to the formation
of its capital, if the full aid and co-operation of the institution were
secured to the Government during the war, and during the period of
its fiscal embarrassments. But, the bank proposed will be free from
all legal obligation to co-operate with the public measures; and, whatever might be the patriotic disposition of its directors, to contribute to
the removal of those embarrassments, and to invigorate the prosecution of the war, fidelity to the pecuniary general interest of the institution, according to their estimate of it, might oblige them to decline a connexion of their operations with those of the national
treasury, during the continuance of the war, and the difficulties incident to it. Temporary sacrifices of interest, though overbalanced by
the future and permanent profits of the charter, not being requirable
of right in behalf of the public, might not be gratuitously made; and
the bank would reap the full benefit of the grant whilst the public
would lose the equivalent expected from it. For it must be kept in
vieWj that the sole inducement to such a grant, on the part of the
public, would be the prospect of substantial aids to its pecuniary
means, at the present crisis, and during the sequel of the war. It is
evident that the stock of the bank will, on the return of peace, if not
sooner, rise in the market to a value, which, if the bank were established in a period of peace, would authorize, and obtain for the public,
a bonus to a very large amount. In lieu of such a bonus, the Government is fairly entitled to, and ought not to relinquish or risk, the
needful services of the bank, under the pressing circumstances of war.
2. The bank, as proposed to be constituted, cannot be relied on, during the war, to provide a circulating medium, nor to furnish loans, or
anticipations ox the public revenue.
Without a medium, the taxes cannot be collected, and, in the absence
of specie, the medium understood to be the best substitute, is that of
notes issued by a national bank. The proposed bank will commence
and conduct its operations, under an obligation to pay its notes in
specie, or be subject to the loss of its charter. Without such an 'obligation, the notes of the bank, though not exchangeable for specie, y&
resting on good pledges, and performing the uses of specie, in the payment of taxes, and in other public transactions, would, as experience
has assertained, qualify the bank to supply at once a circulating
medium, and pecimary aids to the Government. Under the fetters
imposed by the bill, it is manifest, that, during the actual state pi
things, and probably during the war, the periocf particularly requiring such a medium, and such a resource for loans and advances to tne
Government, notes, for which the bank would be compilable to give
specie in exchange, could not be kept in circulation. The most the
bank could effect, and the most it could be expected to aim at, would
be to keep the institution alive, by limited and local transactions,



FEDERAL BANKING LAWS AND REPORTS

101

which, with the interest on the public stock in the bank, might yield
a dividend sufficient for the purpose, until a change from war to peace
should enable it, by a flow of specie into its vaults, and a removal of
the external demand for it, to derive its contemplated emoluments from
a safe and full extension of its operations.
On the whole, when it is considered that the proposed establishment,
will enjoy a monopoly of the profits of a national bank, for a period of
twenty years; that the monopolized profits will be continually growing, with the progress of the national population and wealth; that the
nation will, duringthe same period, be dependent on the notes of the
bank for that species of circulating medium, whenever the precious
metals may be wanted, and at all times for so much thereof as may be
an eligible substitute for a specie medium; and that the extensive employment of the notes in collection of the augmented taxes will,
moreover, enable the bank greatly to extend its profitable issues of
them, without the expense of specie capital to support their circulation; it is as reasonable, as it is requisite, that the Government, in return for these extraordinary concessions to the bank, should have a
greater security for attaining the public objects of the institution,
tnan is presented in the bill, and particularly for every practicable
accomodation, both in the temporary advances necessary to anticipate
taxes, and in those more durable loans which are equally necessary to
dimmish the resort to taxes.
^ ^charging this painful duty of stating objections to a measure,
Jjttich has undergone the deliberations, and received the sanction of
tne two Houses of the national Legislature, I console myself with the
reflection, that, if they have not the weight which I attach to them,
tneyc can be constitutionally overruled; and, with a confidence that,
na
°ntrary event, the wisdom of Congress will hasten to substitute
a more
commensurate and certain provision for the public exigencies.
JAMES MADISON.
w
W ASHIKGTON, January 30,1815.
ACT TO INCORPORATE THE STJBSCRIBEKS TO THE BANK OF THE UNITED
STATES OF AMERICA.1

Xhtt ^tmcted
h the Senate and House of Representatives of the
Unit 2 a es °?fAmerica in Congress assembled, That a Bank of the
wKn ibtf^s o America shall be established, the capital stock of
thoii 8S ^ l b e etsh iolft y n millions of dollars, divided into three hundred
tionT ? i -l rr t y ' m i ol i e hundred dollars each share; and that subscnpl
can5,w i slia11 b e ° n s of dollars, towards constituting the said
atVl! / ii '
opened, on the last Monday of February next,
Kew T a w m « P l a c e s > v i z : a t Portland, in Maine, Portsmouth, m
T pshire
HavPTT ^ Y o>k Windsor, in Vermont, Boston, Providence, New
r
BalHm
> N e w Brunswick, in New Jersey, Philadelphia,
h e cit of
S a v W ^ r x i n ^ n Washington, Richmond, Raleigh, Charleston,
o
n
cotht ? ^ e a ^ d N' e iw Kentucky, d e r t l i e
Nashville, in Tennessee, Chillifollowm e r s ' n
Orleans, im
superintendence of the
lr
"•' ^J? °ns, as commissioners to receive the same: at Portland,
^ob, Isaac Isley, Joshua Wingate, junior; at Portsmouth,
1

_: Test of the bill vetoed by President Madison, American State Papers,




102

FEDERAL BANKING LAWS AND REPORTS

John Goddard, Nathaniel A. Haven, Henry S. Langdon; at Windsor,
Elias Lyman, William Leveret, Eleazer May; at Boston, Israel Thorndike, Thomas H. Perkins, William Gray, Aaron Hill, Samuel Brown;
at Providence, Seth Wheaton, Ebenezer K. Dexter, Henry Smith; at
New Haven, Abraham Bishop? William W. Woolsey, Henry Jones; at
New York, Eobert Troup, William Paulding, junior, Robert Lenox,
John Jacob Astor, Samuel Tooker, Isaac Bronson, Henry A. Coster;
at New Brunswick, James Vanderpool, John Bray, Peter Gordon; at
Philadelphia, Jared Ingersoll, Thomas M. Willing, Stephen Girard,
Chandler Price, Anthony Taylor, John Sergeant, Caldwallader
Evans; at Baltimore, James A. Buchanan, Henry Pay son, William
Wilson; at the city of Washington, John Mason, Robert Brent, John
P. Van Ness; at Richmond, Benjamin Hatcher, John Brockenborough,
John Preston; at Raleigh, Sherwood Hay wood, Beverly Daniel, William Peace; at Charleston, John C. Faber, Thomas Jones, Stephen
Elliot, Charles B. Cochran, Thomas Blackwood; at Savannah, John
Bolton, Charles Harris, James Johnson; at Lexington, in Kentucky,
Charles Wilkins, Lewis Sanders, John H. Morton; at Nashville, Robert Weakly, Felix Grundy, John R. Bedford; at Chillicothe, Samuel
Finley, Thomas James, William M'Farland; at New Orleans, Dominick A. Hall, Benjamin Morgan, Paul Lanuse, Thomas L. Harman,
and William Flood: which subscriptions shall continue open every
day, from the time of opening the same, from ten o'clock in the forenoon, until four o'clock in the afternoon, until the Saturday following,
at four o'clock in the afternoon, when the same shall be closed; and
immediately thereafter, the commissioners, or any two of them, at
the respective places aforesaid, shall cause two transcripts or fair
copies of such subscriptions to be made, one of which they shall send to
the Secretary of the Treasury, one they shall retain, and the original
shall, within three days from the closing of the same, be by the said
commissioners transmitted to the said commissioners at Philadelphia,
or to one of them: and on the receipt thereof, the said commissioners at Philadelphia, or any three of them, shall immediately thereafter convene and proceed to take an account of the
said subscriptions; and if more than the amount of thirty millions of dollars shall have been subscribed, then the said last
mentioned commissioners shall apportion the same among the
several subscribers, according to their several and respective subscriptions: Provided, however. That such commissioners shall? by
such apportionment, allow and apportion to each subscriber at least
one share; and, in case the aggregate amount of the said subscriptions
shall exceed thirty millions of dollars, the said commissioners, after
having apportioned the same as aforesaid, shall cause lists of the said
apportioned subscriptions to be made out, including in each list the
apportioned subscription for the place where the original subscript!011
was made, one of which lists shall be transmitted to the commissioners,
or to one of the commissioners, under whose superintendence such subscriptions were originally made, that the subscribers may ascertain
from them the number of shares apportioned to such subscribers, respectively; and, if the amount of thirty millions of dollars shall not
be subscribed during the period aforesaid, at all the places aforesaid,
the subscription to complete the said sum shall afterwards be and remain open at Philadelphia, under the superintendence of the said




FEDERAL BANKING LAWS AND REPORTS

103

commissioners appointed at the place and the subscription may be
then made by any corporation, copartnership, or person, for any number of shares not exceeding the amount required to complete the said
sum of thirty millions of dollars. And, in case of the death, or refusal
to serve, of any of the commissioners aforesaid, it shall be lawful for
the President of the United States to supply the vacancy or vacancies
thus created, by appointing some suitable person or persons.
SEC. 2. Aiid he it further enacted, That it shall be lawful for any
person, copartnership, or body politic, to subscribe for so many shares
of the said capital stock of the said bank, as he, she, or thejr, shall
thinkfit,not exceeding three thousand shares, except as is hereinafter
provided for the subscription on behalf of the United States, and the
sums respectively subscribed, except on behalf of the United States,
as is hereinafter provided, shall be payable in the manner following;
that is to say: five millions of dollars thereof in gold or silver coin of
the United States, or of foreign coin at the value heretofore established by the act of Congress, entitled "An act regulating the currency
of foreign coins," passed the tenth day of April, one thousand eight
hundred and six; ten millions of dollars thereof in gold or silver coin,
as aforesaid, or in the public debt of the United States, contracted by
virtue of the act of Congress, entitled "An act authorizing the loan for
a sum not exceeding eleven millions of dollars," passed the fourteenth
day of March, one thousand eight hundred and twelve, or contracted,
°r to be contracted, by virtue of any subsequent act and acts of Congress heretofore passed, authorizing a loan or loans; and fifteen millions of dollars thereof in gold or silver coin, or in treasury notes,
issued under the act of Congress, entitled "An act to authorize the
issuing of treasury notes," passed the thirtieth day of June, one thousand eight hundred and twelve, or issued, or to be issued, under the
authority of any subsequent act or acts of congress, authorizing, or
£Aich shall authorize, treasury notes to be issued, previously to the
«nal closing of the subscriptions to the said bank. And the said payment shall be made and completed in the sums and at the times herein? Iter declared, that is to say: at the time of subscribing there shall
De
paid six dollars and sixty-six cents and two-thirds of a cent on each
jnare,a m goldt or silver coin; twenty dollars in the treasury notes aforei*fi n d t h i r een dollars thirty-three cents and one-third of a cent
"Jtne public debt of the United States, contracted, or to be contracted,
^atoresaid; at the expiration of four calendar mo
^ o r e sibi i d ; at the expiration of four calendar months after the time
a
f th
dll
tl\t\™ *g
there shall be paid the further sum of three dollars
"•ty-three cents and one-third of a cent on each share, in gold or
m e r c o m . t e n d o l ] a r g i n t h e t r e a s u r y n o t e s aforesaid; and six dollars
TT*;fsixcents and two-thirds of a cent in the public debt of the
t e
or*- • naot f ss'i xcontracted or to be contracted as aforesaid; at the
s f f i ° a i d t h e calendar months, from the time of subscribing, there
o2 lv? dPo f a c e n t further sum of three dollars thirty-three cents and
on
t W rea
each share, in gold or silver com; ten dollars in
th ;A S sury e notes aforesaid: and six dollars sixty-six cents and twof a c nt in
the public debt of the United States, contracted, or
to K! ° ltracted
C
s
monfi °i m t h> t a m eaforesaid; at the expiration of eight calendar
of
suin AI*I r e e d o l le i
subscribing, there shall be paid the further
or *n
ars thirty-three cents and one-third of a cent, m gold
1Ver
coin; ten dollars in the treasury notes aforesaid; and six



104

FEDERAL BANKING LAWS AND REPORTS

dollars sixty-six cents and two-thirds of a cent in the public debt of
the United States, contracted, or to be contracted, as aforesaid. And
the subscriptions in public stock and treasury notes, as aforesaid, shall
be taken and credited for the principal and so much of the interest
thereof, respectively, as shall have accrued on the day of subscribing
the same. And, at the time of subscribing to the capital stock of the
said bank, as aforesaid, each and everjr subscriber shall deliver to
the commissioners at the place of subscribing, as well the specie amount
of their subscriptions, respectively, as the certificates of stock for the
stock proportion of their subscriptions, respectively, together with a
power of attorney authorizing the said commissioners, or a majority
of them, to transfer the said stock, in due form of law, to "The President, Directors, and Company, of the said Bank of the United States
of America," as soon as the said bank shall be organized; and also,
treasury notes for the proportion of the subscriptions, respectively,
payable in treasury notes as aforesaid: Provided, always, That if, in
consequence of the apportionment of shares in the said bank among
the subscribers, in the case and in the manner hereinbefore prescribed,
any subscriber shall have delivered to the commissioners, at the time
of subscribing, a greater amount of specie, stock, and treasury notes,
than shall be necessary to complete the payments for the snare or
shares to such subscriber, apportioned as aforesaid, the commissioners
shall only retain so much of the said money, stock, and treasury notes,
as shall be necessary to complete such payments, and shall forthwith
return, on application for the same, the surplus thereof to the subscriber lawfully entitled thereto. And the commissioners respectively
shall deposite the gold and silver, certificates of stock, and treasury
notes, by them respectively received, as aforesaid, from the subscribers
to the said bank, in some place of secure and safe keeping, so that the
same may and shall be specifically delivered and transferred^ as the
same were by them respectively received, to the said president, directors
and company, of the said Bank of the United States of America, or to
their order, as soon as shall be required after the organization of the
said bank.
SEO. 3. And be it fwrther enacted, That the United States may, at
any^ time before the expiration of this act, in pursuance of any law
which may be passed by Congress for that purpose, cause to be subscribed, for the use of the United States, to said bank, fifty thousand
additional shares, to be paid in public stock, bearing an interest of
four per cent, per annum, redeemable in any sums, and at any periods,
which the Government may deem fit.
SEC. 4. And be it further enacted, That whenever and as often as
any of the treasury notes, subscribed as aforesaid, to the said capital
stock of the said bank, shall be due and payable, it shall be lawful for
the Secretary of the Treasury (and he is hereby authorized and required) to pay and redeem the same, principal and interest, by causing certificates of public stock for an equal amount, bearing an interest of six per cent, per annum, and redeemable in any sums, and at
any periods, which the Government may deem fit, to be prepared and
made in the usual form, and the same to be delivered to the president
and directors of the said bank, in satisfaction and discharge of " ^
treasury notes.




FEDERAL BANKING LAWS AND KEPORTS

105

SEC. 5. And be it further enacted, That the subscribers to the said
Bank of the United States of America, their successors and assigns,
shall be, and are hereby created, a corporation and body politic, by the
name and style of "The President, Directors, and Company, of the
Bank of the United States of America," and shall so continue until
the third day of March, in the year one thousand eight hundred and
thirty-five; and by that name shall be, and are hereby made, able and
capable in law, to have, purchase, receive, possess, enjoy, and retain, to
them and their successors, lands, rents, tenements, hereditaments,
goods, chattels, and effects, of whatsoever kind, nature, and quality, to
an amount not exceeding in the whole thirty-five millions of dollars,
mipieaaea, answer and be answered, deiend and be detenctea, m
courts and places whatsoever; and also to make, have, and use,
a common seal, and the same to break, alter, and renew, at their pleasure; and, also, to ordain, establish, and put in execution, such by*aws and ordinances, and regulations, as they shall deem necessary
?nd convenient, for the Government of the said corporation, not being t0 d a n d thee constitution and laws of the United States; and gencontrary to e x c u t e a i l
vl
°
and singular the acts, matters, and things,
winch to them shall or may appertain to do; subject, nevertheless, to
«£ rules, regulations, restrictions, limitations, and provisions, hereinafter prescribedbe U declared.
and
t h * * • An^
farther enacted, That, for the management of
ie attains of the esaid corporation, there shall be twenty-five direcS i J r J U * > l e c t ed at the banking house in Philadelphia, on the
*
onday of January, in each year, by the stockholders or propriethe capital stock of the said corporation, and by a plurality of
? then ande sthered actually given, according to the scale of voting
lift I P r c r i b e - And the directors, so duly chosen, shall be
serving by virtue of such choice, until the end or expiraot the first Monday in January next ensuing the time of such
l°n, and no longer: Provided, alioays, That the first election and
mtment of directors shall be at the time, and for the period,
jmafter declared.
iHin" £nd ie U further enacted, That, as soon as the sum of twelve
"ions of dollars in sold and silver coin, and in the public debt and
suW^- notes >o st h a 1s1a ik' avo b e e n actually received on account of the
a W ? J o nns tt h e h e a r t do fcapital stock, (exclusively of the subscription
the
given K « e ei P
United States) notice thereof shall be
shall V 6 i e e P m^aone aunder whose superintendence the subscriptions
>
s t
d
Pers rT?' * n
Philadelphia, in at least two public newspa*adp • i t h eIns e iadd l o f t l l e P l a c e s w h e r e subscriptions shall have been
a
nor ^
Persons shall, at the same time, and in like manthe'd 2- y a t i m e a n d P lac A witliin the said city of Philadelphia, at
tion i STance of at least twenty days from the time of such notificashall i^ r 1 P roceedfo
ing to the election of directors as aforesaid; and it
tho iJS w f uv ll l ^h asuche electionn d t h e r ethen s eand athere made. And
to be c h o n s
be the fi st dlrect ° s 1 1 b t h e n a
j
?
aforesaid, shall
presirW
<>i-s, and shall proceed to elect one of their number
ie s a i d
m» bv v'
corporation, and they shall be capable of ser\^y Vlrt
'
ue of such choice, until the end and expiration of the first



106

FEDERAL BANKING LAWS AND REPORTS

Monday of January next ensuing the time of making the same, and
shall forthwith, thereafter, commence the operations of the said bank,
at the said city of Philadelphia: Provided, always, That in case it
should at any time happen, that at an election of directors and president of the said corporation should not be made upon any day when,
in pursuance of this act, they ought to be made, the said corporation
shall not for that cause be deemed to be dissolved; but it shall be lawful on any other day to hold and make an election of directors and
president of the said corporation, (as the case may be) in such manner as shall have been regulated by the by-laws and ordinances of the
said corporation; and, until such election be so made, the directors and
president, for the time being, shall continue in office: And provided,
also, That, in case of the death, resignation, or removal, of the president of the said corporation, the directors shall proceed to elect another president: And provided, also, That in case of the death, resignation, or absence from the United States, or removal of a director from
office, the vacancy shall be supplied by the stockholders.
SEC. 8. And he it further enacted, That the directors, for the time
being, shall have power to appoint such officers, clerks, and servants,
under them, as shall be necessary for executing the business of the
said corporation, and to allow them such compensation for their services, respectively, as shall be reasonable; and shall be capable of
exercising such other powers and authorities for the well governing
and ordering of the affairs of the said corporation, as shall be pre'
scribed,fixed,and determined, by the laws, regulations, and ordinances,
of the same.
SEC. 9. And be it further enacted, That the following rules, restrictions, limitations, and provisions, shall form and be fundamental
articles of the constitution of the said corporation, to wit:
1. The number of votes to which the stockholders shall be entitled,
in voting for directors, shall be according to the number of shares
he, she, or they, respectively, shall hold, in the proportions following,
that is to say: for one share, and not more than two shares, one vote:
for every two shares above two, and not exceeding ten, one vote; for
every four shares above ten, and not exceeding thirty, one vote; for
every six shares above thirty, and not exceeding sixty, one vote; for
every eight shares above sixty, and not exceeding one hundred, one
vote; and for every ten shares above one hundred, one vote. But no
person, copartnership, or body politic, shall be entitled to a greater
number than thirty votes; and after the first election, no share or
shares shall confer a right of voting, which shall not have been holden
three calendar months previous to the day of election. And stockholders actually resident within the United States, and none other,
may vote in election by proxy.
2. Xot more than three-fourths of the directors in office, at the time
of an annual election, shall be elected for the next succeeding yeM
and no person shall be a director more than three out of four years!
but the director who shall be the president at the time of an election,
may always be re-elected.
3. None but a resident citizen of the United States, and holding at
the time of his election not less than ten shares, bona fide in his oxvn
right, shall be a director; and if any director shail cease to be a stockholder to that amount, he shall cease to be a director.



FEDERAL BANKING LAWS AND EEPORTS

107

4. No director shall be entitled to any emolument. The stockholders may make such compensation to the president, for his extraordinary attendance at the bank, as shall appear to them reasonable.
5. Not less than seven directors shall constitute a board for the
transaction of business, of whom the president shall always be one,
except in case of sickness or necessary absence, in which case his place
may be supplied by any other director whom he, by writing, under
Jus hand, shall depute for the purpose. And the director so deputed,
niay do and transact all the necessary business belonging to the office
of a president of the said corporation, during the continuance of the
sickness or necessary absence of the president.
hW n u m b e r . o f stockholders, not less than sixty, who, together,
snail be proprietors of one thousand shares or upwards, shall have
power at any time to call a general meeting of the stockholders, for
purposes relative to the institution, giving at least ten weeks' notice
m two public newspapers of the place where the bank is seated, and
specifying in such notice the object or objects of such a meeting,
i. ^ v e i 7 cashier or treasurer, before he enters upon the duties of
nft?
'- S 5 a 1 1 b e r e ( l u i r e d to give bond, with two or more sureties,
^ ^/^isfaction of the directors, in a sum not less than fifty thouwna dollars, with a condition for his good behavior, and the faithful
P
™ n a f * of his duties to the corporation.
i
T s ' t e n e m e n t s > and hereditaments, which it shall be law-

* S ? sl d . c o r P°r a t i o n

to hold

> s.ha11 be onlv

such as sha11 be

^ inunediate accommodation in relation to the convenm o r t l T t m - g of its business, and such as shall have been bona fide
t0
of dJ5
- ^ ^ W a ^ °^ secu . r i t y? o r conveyed to it in satisfaction
Pre i0Usly c n t r a c t e d
chaqpH f y
°
in the course of its dealings, or purUP n
such debt S
° Judgments wllich sha11 h a v e been o b t a i n e d f o r
anv'f^6 t o t a l a m o u n t of debts which the said corporation shall at
abovp1?^ °lel w h e t l ^ r by bond, bill, note, or other contract, over and
notp
A £ o r d e b t s d u e f o r m °ney deposited in the bank, shall
e thesum of
of ai
thirty millions of dollars, unless the contracting
Of y y Plater debt shall "have been previously authorized by a law
minicf f-1
States. In case of excess, the directors under whose adnatuS A i t . s h a 1 1 l^PPen, shall be liable for the same, in their
eaSe vL h p i > l v a t e capacities, and an action of debt may, in such
heirs 1 u & h t against them, or any of them, their or any of their
United Q?T O r s ' o r administrators, in any court of record of the
s
»'d c
•' o r e i t h e r o f them, by any creditor or creditors of the
a
iy con?v a t l ° n ' a n d m f t y b e prosecuted to judgment and execution,
% R I i"5 c o v e n a n t , or agreement, to the contrary notwithstandpornOif? t l l l s Provision shall not be construed to exempt the said
P
p
nOif?• 1011 ths i o n
from i1011 ' i or t h e lft nds, tenements, goods, or chattels, of h same,
hif the
of the f \? r S 0 l i a b l e f o r ' a n d chargeable with, the said excess. Such
e
r
r*
who may
*ascor* ^ l l ^^ c t os s who may have been absent when the said excess
absen
t d
tj
l
h
d i t d f
th
l
on or i ° I O r>c r eta]t e d ? o r ^Tlio may have dissented from the resolul > yt ^
PX
tively PX Weih e tree thym ]s^ l same was so contracted or created, may respecsame was so contracted
e t
llo
ti4 of°fi i ^ t h e e v ^ s from being so liable, by forthwith giving
(
he Unit A Q
' a n d o f t h e i r absence or dissent, to the President of
ates a n d t o tlie
ftevshvn u
'
stockholders, at a general meeting, which
k au have
Power to call for that purpose.

4 °




l

108

FEDERAL BANKING LAWS AND REPORTS

10. The said corporation shall not, directly or indirectly, deal or
trade in any thing except bills of exchange, gold or silver bullion, or
in the sale of goods really and truly pledged for money lent, and not
redeemed in due time, or goods which shall be the proceeds of its
lands. It shall not be at liberty to purchase any public debt whatsoever ; nor shall it take more than at the rate of six per cent, per annum
for or upon its loans or discounts.
11. The said corporation shall not, in any one year, sell any portion
of the public debt constituting a part of its capital stock aforesaid,
to an amount exceeding five millions of dollars, without the consent
of Congress.
12. No loan shall be made by the said corporation, for the use, or on
account, of the Government of the United States, to an amount exceeding five hundred thousand dollars; or of any particular State, to an
amount exceeding fifty thousand dollars; or to any foreign Prince or
State, unless previously authorized by a law of the United States.
13. The stock of the said corporation shall be assignable and transferable according to such rules as shall be instituted in that behalf,
by the laws and ordinances of the same.
14. The bills obligatory and of credit, under the seal of the said
corporation, which shall be made to any person or persons, shall be
assignable by endorsement thereupon, under the hand or hands of
such person or persons, and his, her, or their executors or administrators, and of his, her, or their assignee or assignees, and the executors
or administrators of such assignee or assignees, and so as absolutely to
transfer and vest the property thereof in each and every assignee or
assignees successively, and to enable such assignee or assignees, and his,
her, or their executors or administrators, to maintain an action thereupon in his, her, or their own name or names. And the bills or notes
which may be issued by order of the said corporation, signed by the
president, and countersigned by the principal cashier or treasurer
thereof, promising the payment of money to any person or persons, his,
her, or their order, or to bWer, although not under the seal of the said
corporation, shall be binding and obligatory upon the same, in the like
manner, and with the like force and effect, as upon any private person
or persons, if issued by him, her, or them, in his, her, or their private
or natural capacity or capacities, and shall be assignable and negotiable in like manner as if they were so issued by such private person or
persons; that is to say: those which shall be payable to any person or
persons, his, her, or their order, shall be assignable by endorsement, i»
like manner, and with the like effect, as foreign bills of exchange no*
are; and those which are payable to bearer, shall be assignable and
negotiable by delivery only.
15. Half yearly dividends shall be made of so much of the profits
of the bank as shall appear to the directors advisable; and once at
#
every three years, the directors shall lay before the stockholders,
a general meeting, for their information, an exact and partially
statement of the debts which shall have remained unpaid after tn«
expiration of the original credit, for a period of treble the term of that
credit, and of the surplus of profits, if any, after deducting losses ana
dividends. If there shall be a failure in the payment of any part o
x
any sum subscribed by any person, copartnership, or body polity
the party failing shall lose the benefit of any dividend which ma)



FEDERAL BANKING LAWS AND REPORTS

109

have accrued prior to the time for making such payment, and during
the delay of the same.
16. The directors of said corporation shall be bound to establish a
competent office of discount and deposite in the District of Columbia,
whenever any law of the United States shall require such establishment; and it shall be lawful for the said directors to establish offices
wheresoever they shall think fit, within the United States or the territories thereof, for the purposes of discount, deposite, and distribution ; or for the purposes of deposite and distribution only; and upon
the same terms, and in the same manner, as shall be practised at the
bank; and to commit the management of the said offices, and the business thereof respectively, to such persons, and under such regulations,
as they shall deem proper, not being contrary to law or to the constitution of the bank. Or, instead of establishing such offices, it shall
be lawful for the directors of the said corporation, from time to time,
to employ any other bank or banks, at any place or places that they
may deem safe and proper, to manage and transact the business proposed as aforesaid to be managed and transacted by such offices, under
such agreements, and subject to such regulations, as they shall deem
just and proper. But the managers or directors of every office of discount, deposite, and distribution, established as aforesaid, shall be
annually t appointed bya thei zdirectors of the bank, to serve one year;
TfK0 - h e m s h a 1 1 ** c i t e n o f t h e United States, and shall hold,
«the time of his appointment, not less than five shares in the said
j>ank, bona fide in his own right; and if he shall cease to be a stockholder to that amount, he shall cease to be a manager or director of
t amount, he shall cease to be a m a n g
such office of discout deposite, and distribution; and not more than
d d i t i b t i n and not more than
such office of discount, d i t
™ree-fourths of the said managers or directors in office at the time
•°r a n annual appointment, shall be re-appointed for the next succeedV year; nor shall any person be a manager or director for more
&
™n three out of four years; but the president may be always resaid corporation, all offices of discount, deposite, and disluh A i. - a n d o f deposite and distribution only, which shall be estab*nea by the said directors as aforesaid, and all banks by the said
^rectorsVe Upon
employed in lieu of such officers as aforesaid, shall be bound
hav! C r I ' r m adeposite, the treasury notes of the United States which
tha TT •? V
y b e hereafter, issued by virtue of any law or laws of
ton
j States; but it shall be optional with the said corporation
denV%>m d ti s c h arge the checks or drafts of the persons making such
1
r
siW •m o rr eians u h y notes, for the amount thereof, either in gold or
t e
bank* v° i' s a
notes of the bank, or in treasury notes. And all
aforS % i a11i d dir ectors employed as aforesaid, in lieu of the offices
cuktp n' n o t e s ^o f ^h t h e r bound to receive on deposite, and to cirr
t
the Z'
e said corporation, on the same terms, and m
ceiveS a n d5 flanner ^ as the notes of the said banks respectively are refor t?
circulated; and, from time to time, issue and exchange
convT *• noort et sh eo fn ot hees saidh ecorporation, other notes of the said
t
of t
not** \ ??>
said banks respectively, or treasury
O
The\X>'A a COr p t i o i l o f t h e persons applying for such issue or exchange,
of A\T*
poration shall, at all times, distribute among the offices
• bC°™t, deposite, and distribution, and of deposite and distnbuand at all the banks employed in lieu of such offices as afore


110

FEDERAL BANKING LAWS AND REPORTS

said, a sufficient sum, in the various denominations of the notes of the
said corporation, and in the treasury notes which it may receive upon
deposite from the Government, to answer the demand therefor, and
to establish a sufficient circulating medium throughout the United
States and the territories thereof.
.
18. The officer at the head of the Treasury Department of the United
States shall be furnished, from time to time, as often as he may require, not exceeding once a week, with statements of the amount of
capital stock of the said corporation, and of the debts due to the same;
of the moneys deposited therein; of the notes in circulation; and of
the cash in hand; and shall have a right to inspect such general accounts in the books of the bank as shall relate to the said statement:
Provided, That this shall not be construed to imp>ly a right of inspecting the account of any private individual or individuals with the
bank.
SEO. 10. And be it further enacted. That if the said corporation, or
any person or persons for or to the use of the same, shall deal or trade
in buying or selling any goods, wares, merchandise, or commodities
whatsoever, contrary to the provisions of this act, all and every person
and persons by whom any order or direction for so dealing or trading
shall have been given, and all and every person and persons who
shall have been concerned as parties or agents therein, shall forfeit
and lose treble the value of the goods, wares, merchandises, and commodities, in which such dealing and trade shall have been; one-half
thereof to the use of the informer and the other half thereof to the
use of the United States, to be recovered in any action of law, with
costs of suit.
SEC. 11. And be it further enacted, That if the said corporation shall
advance or lend any sum of money, for the use or on account of the
Government of the United States, to an amount exceeding three hundred thousand dollars; or of any particular State, to an amount exceeding fifty thousand dollars; or of any foreign Prince or State,
(unless previously authorized thereto by a law of the United States)
all and every person and persons, by and with whose order, agreement,
consent, approbation, and connivance, such unlawful advance or loan
shall have been made, upon conviction thereof, shall forfeit and pay?
for every such offence, treble the value or amount of the sum or sums
which shall have been so unlawfully advanced or lent; one-fifth
thereof to the use of the informer, and the other half thereof to the
of the United States.
SEC. 12. And be it further enacted, That the bills or notes of the
said corporation, originally made payable, or which shall have become
payable, on demand, shall be receivable in all payments to the United
States, until otherwise directed by act of Congress.
SEC. 13. And be it further enacted, That if the subscriptions and
payments to the said bank shall not be made and completed, so as to
enable the same to commence its operations, or if the said bank shall
not commence its operations on or before the first day of March, one
thousand eight hundred and sixteen, then, and in that case, this act
shall be null and void.




FEDERAL BANKING LAWS AND REPORTS

111

SEC. 14. And ie it fwrther enacted^ That it shall at all times be
lawful for a committee of either House of Congress, appointed for
that purpose, to inspect the books, and to examine into the proceedings,
of the corporation hereby created, and to report whether the provisions of this charter have been by the same violated or not; and whenever aiw committee as aforesaid, shall find and report, or the President
of the United States shall have reason to believe, that the charter has
been violated, it may be lawful for Congress to direct, or the President to order, a scire facias to be sued out of the circuit court of the
district of Pennsylvania, in the name of the United States, (which
shall be executed upon the president of the corporation, for the time
being, at least fifteen days before the commencement of the term of
said court,) calling on the said corporation to show cause wherefore
the charter hereby granted shall not be declared forfeited; and it
shall be lawful for the said court, upon the return of the said scire
i a c i a °

f r t

~ ~ ' — - —

--*•--

*-**•

j

'•»

* *•>

••••

. i .

! - - i - i ?

i

»J»—-i

°r fact which may be joined between the United States and the
corporation aforesaid shall be t i d b jur
And it shall be lawful
q
p
e corporation as it may deem necessary for the ascertainment of
n d t e final
T i ? ° u t r O v e r t ? d f a c t s 5 a maythhdeem necessary of the court aforesaid,
judgment
d
fil
d
snail be examinable in the supreme jcourt of the United States, by
aminable
nt of e
d
d
di
h
error, and may b there reversed or affirmed, according to the
be
usages of law.
thiQ 1 5 ' And ie ^ furtJier
enacted^ That, during the continuance of
thA & \?
whenever required by the Secretary of the Treasury,
ie .said corporation shall do and perform the several and respective
anv
Commissioners of Loans, for the several States, or of
tem>0Ile u r m o r e ?* them, at the times, in the manner, and upon the
SP I « P r e s c r i b e d by the Secretary of the Treasury.
c
b
taSf ; * : A*id ie it further enacted. That no other bank shall be esancf I }xJ a n y f u t u r e l a w o f ^ e United States, during the contiimUnitAri Q c o r P o r a t i o n hereby created; for which the faith of the
existin v S 1S hereby pledged: Provided, Congress may renew
the<Wfi a £ t e r s f o r b a n k s i n the District of Columbia, not increasing
o
and ma
to anvT I • e o ff '' a n d m a y S r a n tt charters, if they deem it expedient,
to anvT nI m
•
y S r a n charters, if they deem it e x p ,
k
n k m g associations now in operation
re
renew ? £
operation, in the said District, and
stan<L V S a m e ' n o t C r e a s i n g the capital thereof. And notwithc r e a t ?S the expiration of the term for which the corporation is
ity £7?? s h a 1 1 b e lawful to use the corporate name, style, and capacof t b nff 6- p u r P ° S e o f suits, for the final settlement and liquidation
disporif- lTS£ a n d . accounts of the corporation, and for the sale and
thei
other nn
? e s t a t e ' r e a l J personal, and mixed, but not for any
p Se o r
W ^ >
^ n any other manner whatsoever: nor for a period
years
r °
> a f t e r t h e expiration of the said term of
^ion
•/ the House of Representatives.
' the Senate, pro tempore.




112

FEDERAL BANKING LAWS AND REPORTS

Seventh Annual Message—James Madison
Fourteenth Congress, 1st Session
DECEMBER 5, 1 8 1 5 .

[Source: James D. Richardson, A Compilation of the Messages and Papers of the
Presidents, Vol. 1, pp. 550-551]
*
*
*
*
*
*
*

The arrangements of the finances with a view to the receipts and expenditures of a permanent peace establishment will necessarily enter
into the deliberations of Congress during the present session. It is
true that the improved condition of the public revenue will not only
afford the means of maintaining the faith of the Government with its
creditors inviolate, and of prosecuting successfully the measures of
the most liberal policy, but will also justify an immediate alleviation of the burdens imposed by the necessities of the war. It is, however, essential to every modification of the finances that the benefits of
an uniform national currency should be restored to the community.
The absence of the precious metals will, it is believed, be a temporary
evil, but until they can again be rendered the general medium of exchange it devolves on the wisdom of Congress to provide a substitute
which shall equally engage the confidence and accommodate the wants
of the citizens throughout the Union. If the operation of the State
banks can not produce this result, the probable operation of a national
bank will merit consideration; and if neither of these expedients be
deemed effectual it may become necessary to ascertain the terms upon
which the notes of the Government (no longer required as an instrument of credit) shall be issued upon motives of general policy as a
common medium of circulation.

Annual Report, Secretary of Treasury (Alexander J. Dallas)
Fourteenth Congress, 1st Session
COMMUNICATED TO THE SENATE, DECEMBER 8, 1 8 1 5 .

*

[Source: American State Papers, Finance, Vol. 3, pp. 17-19]
*
*
*
*
*
*

3. Proposition relating to the national circulating mediv/m*
The delicacy of this subject is only equalled by its importance. In
presenting it, therefore, to the consideration of Congress, there is occasion for an implicit reliance upon the legislative indulgence.
By the constitution of the United States Congress is expressly
vested with the power to coin money, to regulate the value of y®
domestic and foreign coins in circulation, and, as a necessary i m1^ ^
tion from positive provisions, to emit bills of credit, while it is deck ®**
by the same instrument that "no State shall coin money, or emit bills of
credit." Under this constitutional authority the money of the Unit**1
States has been established, by law, consisting of coins made with gold,
silver, or copper. All foreign gold and silver coins, at specified rateSi
were placed, in the first instance, upon the same footing with the coins



FEDERAL BANKING LAWS AND REPORTS

113

of the United States, but they ceased (with the exception of Spanish
milled dollars, and pails of such dollars) to be a legal tender for the
payment of debts and demands, in the year 1809.
The constitutional authority to emit bills of credit has also been
exercised in a qualified and limited manner. During the existence of
the Bank of the United States the bills or notes of the corporation
were declared, by law, to be receivable in all payments to the United
States; and the Treasury notes, which have been since issued for the
services of the late war, have been endowed with the same quality.
But Congress has never recognised, by law, the notes of any other
corporation; nor has it ever authorized an issue of bills of credit to
serve as a legal currency. The acceptance of the notes of banks, which
are not established by the federal authority, in payments to the
United States, has been properly left to the vigilance and discretion
of the Executive department; while the circulation of the Treasury
notes, employed either to borrow money, or to discharge debts, depends entirely (as it ought to depend) upon the option of the lenders
and creditors to receive them.
The constitutional and legal foundation of the monetary system
ot the United States is thus distinctly seen, and the power of the
federal Government to institute and regulate it, whether the circulatesmedium consist of coin or of bills of credit, must, in its general
policy, as well as in the terms of its investment, be deemed an exclusive power. I t is true that a system depending upon the agency of
™ precious metals will be affected by the various circumstances which
dimmish their quantity, or deteriorate their quality. The coin of a
state sometimes vanishes under the influence of political alarms;
sometimes in consequence of the explosion of mercantile speculations,
ana sometimes by the drain of an unfavorable course of trade. But
wnenever the emergency occurs that demands a change of system it
^ms necessarily to follow that the authority, which was alone compn
to establish the national coin, is alone competent to create a
1
1 substitute. It has happened, however, that the coin of the
States has ceased to be the circulating medium of exchange,
ub stit
t
1 M
,
1
; j _ J "U,» 4-1,
«nJ-ii-mn1
a fh t h:a7 n""o sctnU^J-ii.-i- has hitherto been provided by the« national
. ute 1
nt
y- During the last year the principal banks, established
S01 T a n d
i 3 0 ^ s t of New England, resolved that they would no longer
twnfi ? 1IX Payment of their notes, or of the drafts of their cusmenf *??e mon . e y received upon deposite. In this act the Govern(j;at °* tJ ? United t Stateso had no participation, and yet the lmmenatiL T t h it sh e atc w a s t supersede the only legal currency of the
> ac
of nWlv y
. ' although no State can constitutionally emit bills
ie
<ut, corporations, erected by the several States, have been ento circulate a paper medium, subject to many of the practical
rm
^iices of the prohibited bills of credit.
t intended, upon this occasion, to condemn, generally, the
n
I^UHPK
°.f s P ec ie payments; for appearances indicated an apCnsis which
of n l p ^ y l f i 'l h a d n owould probably have imposed it as a measure
fi
t been
ut tli A '
adopted as a measure of precaution.
c
on<W o > n f er w h ich originally induced, and perhaps justified, the
suspensi. t the banks, has passed away, and the continuance of the
°n of specie payments must be ascribed to a new series of
~ public credit and resources are no longer impaired by
T

v




114

FEDERAL BANKING LAWS AND REPORTS

the doubts and agitations excited during the war by the practises of
an enemy, or by the inroads of an illicit commerce: yet the resumption
of specie payments is still prevented, either by the reduced state of
the national stock of the precious metals, or by the apprehension of
a further reduction to meet the balances of foreign trade, or by the
redundant issues of bank paper. The probable direction and duration of these latter causes constitute, therefore, the existing subject
for deliberation. While they continue to operate, singly or combined,
the authority of the States individually, or the agency of the btate
institutions, cannot afford a remedy commensurate with the evil;
and a recurrence to the national authority is indispensable for the
restoration of a national currency.
. .
In the selection of the means for the accomplishment of this important object, it may be asked, 1st. Whether it be practicable to
renew the circulation of the gold and silver coins? 2d. Whether
the State banks can be successfully employed to furnish a uniform
currency? 3dly. Whether a national bank can be employed more
advantageously than the State banks for the same purpose? and,
4thly. Whether the Government can itself supply, and maintain a
paper medium of exchange, of permanent and uniform value, throughout the United States ?
1. As the United States do not possess mines of gold or silver the
supply of those metals must, in a time of scarcity, be derived from
foreign commerce. If the balance of foreign commerce be unfavorable
the supply will not be obtained incidentally, as in the case of the returns for a surplus of American exports, but must be the subject of a
direct purchase. The purchase of bullion is, however, a common operation of commerce, and depends, like other operations, upon the inducements to import the article.
The inducements to import bullion arise, as in other cases, from its
being cheap abroad, or from its being dear at home. Notwithstanding
the commotions in South America, as well as in Europe, there is no
reason to believe that the quantity of the precious metals is now (more
than at any former period) insufficient for the demand throughout the
commercial and civilized world. The price may be higher in some
countries than in others; and it may be different in the same country*
at different times; but, generally, the European stock of gold and silver
has been abundant, even during the protracted war, which has aflncte(l
the nations of Europe.
The purchase of bullion in foreign markets, upon reasonable terms,
is, then, deemed practicable; nor can its importation into the Unites
States fail eventually to be profitable. The actual price of gold ana
silver in the American market would in itself afford, for some time, a
w
ample premium, although the fall in the price must, of course, be proportionate to the increase of the quantity. But it is within the scope
of a wise policy to create additional demands for coin, and, in tnw
way, to multiply the inducements to import and retain the metals oi
which it is composed. For instance, the excessive issue of bank paper
has usurped the place of the national money; and, under such circumstances, gold and silver will always continue to be treated as an art^ie
of merchandise; but it is hoped that the issue of bank paper will w
soon reduced to its just share m the circulating medium of the country»
and, consequently, that the coin of the United States will resume its



FEDERAL BANKING LAWS AND REPORTS

115

legitimate capacity and character. Again, the Treasury, yielding, from
necessity, to the general impulse, has hitherto consented to receive
bank paper in the payment of duties and taxes; but the period approaches when it will probably become a duty to exact the payment
either in Treasury notes, or in gold or silver coin, the lawful money of
the United States. Again, the institutions which shall be deemed
proper, in order to remove existing inconveniences, and to restore the
national currency, may be so organized, as to engage the interest and
enterprise of individuals in providing the means to establish them.
And,finally,such regulations may be imposed upon the exportation
of gold and silver, as will serve in future to fix and retain the quantity
required for domestic uses.
But it is further believed that the national stock of the precious
metals is not so reduced, as to render the operation of reinstating
their agency in the national currency either difficult or protracted.
1 he quantity actually possessed by the country is considerable; and
the resuscitation of the public confidence in bank paper, or in other
substitutes for coin, seems alone to be wanting to render it equal to
the accustomed contribution for a circulating medium. In other countries, as well as in the United States, the effect of an excessive issue of
paper money, to banish the precious metals, has been seen; and, under
circumstances much more disadvantageous than the present, the effect
or public confidence in national institutions, to recall the precious
metals to their uses in exchange, has also been experienced.
iliVen, however, if it were practicable, it has sometimes been questioned whether it would be politic again to employ gold and silver for
™ purposes of a national currency. It was long and universally supPosed that, to maintain a paper medium without depreciation, the cerjamty of being able to convert it into coin was indispensable; nor can
™ experiment which has given rise to a contrary doctrine be deemed
complete or conclusive. But whatever may be the issue of that experiment elsewhere, a difference in the structure of the Government, in
HI Physical, as well as the political, situation of the country, and in
hn7'aifli0US de P ar tnients of industry, seem to deprive it of any lmporwi influence, as a precedent for the imitation of the United States.
. «i otteringe these general remarks to the consideration of Congress it
n nd
an3 'livie rt e c o mds tcoa ncontvey an opinion that the circulation of the gold
veni
, e r a d u a a once be renewed. Upon motives of public conW , S r n&St h o l attainment of that object is alone contemplated;
?
atW i i°
^ h respectful, solicitude is felt that the measures
e
2d n J 1 t h e r vlegislature should invariably tend to its attainment.
banL cAl u n • s i c es rendered to the Government by some of the State
n
them are a c t£ a tthe late war, and of the liberality by which some of
quj,l aU e x u l ied in their intercourse with the Treasury, justice retest^] o P c i * acknowledgment. It is a fact, however, inconcessfiifly p rm v e d > tha t- those institutions cannot, at this time, be sueure Of ne aP%edt to furnish a uniform national currency. The faile
stated ° A\ n ot tt h mrP t o associate them with that view has already been
e
notes f
attempt, by their agency in circulating Treasury
tiallv *,? o v e r ? o m e the inequalities of the exchange, has only been partail ;V lHccessful.a And a plan recentlv proposed, with the design to curt i l n f*f® o f b nk notes, to fix the public confidence in the admims°r the affairs of the banks, and to give to each bank a legitimate



116

FEDERAL BANKING LAWS AND REPORTS

share in the circulation, is not likely to receive the general sanction
of the banks. The truth is, that the charter restrictions of some of the
banks, the mutual relation and dependence of the banks of the same
State, and even of the banks of different States, and the duty which
the directors of each bank conceive they owe to their immediate constituents, upon points of security or emolument, interpose an insuperable obstacle to any voluntary arrangement, upon national considerations alone, for the establishment of a national medium through the
agency of the State banks. It is, nevertheless, with the State banks
that the measures for restoring the national currency of gold and silver must originate; for, until their issues of paper be reduced, their
specie capitals be reinstated, and their specie operations be commenced,
there will be neither room, nor employment, nor safety, for the introduction of the precious metals. The policy and the interest of the
State banks must, therefore, be engaged in the great fiscal work, by
all the means which the Treasury can employ, or the legislative wisdom
shall provide.
3d. The establishment of a national bank is regarded as the best, and,
perhaps, the only adequate resource to relieve the country and the
Government from the present embarrassments. Authorized to issue
notes, which will be received in all payments to the United States, the
circulation of its issues will be co-extensive with the Union, and there
will existm constant demand, bearing a just proportion to the annual
amount of the duties and taxes to be collected, independent of the general circulation for commercial and social purposes. A national bank
will, therefore, possess the means and the opportunity of supplying11
circulating medium of equal use and value in every State, and in every
district of every State. Established by the authority of the Government of the United States, accredited by the Government to the whole
amount of its notes in circulation, and entrusted as the depository o
f
the Government with all the accumulations of the public treasure, the
national bank, independent of its immediate capital, will enjoy every
recommendation which can merit and secure the confidence of the
public. Organized upon principles of responsibility, but of independence, the national bank will be retained within its legitimate
sphere of action, without just apprehension from the misconduct of its
directors, or from the encroachments of the Government. Eminent in
its resources, and in its example, the national bank will conciliate, aid.
ami lead, the btate banks in all that is necessary for the restoration o
f
credit, public and private. And acting upon a compound capital, part*
Jy of stock, and partly of gold and silver, the national bank will be the
ready instrument to enhance the value of the public securities, and to
restore the currency of the national coin.
4th. The power of the Government to supplv and maintain a paj*r
medium of exchange will not be questioned; but, for the introduction
ot that medium, there must be an adequate motive. The sole motive for
issuing Treasury notes has, hitherto, been to raise money in anticipation of the revenue. The revenue, however, will probably become,*
I eirC0Uri?fi K P a r 1 , 816 ' a n d C 0 1 l t » ^ afterwards, sufficient to d*
charge all the debts and to defray all the expenses of the Governing
and, consequently, there will exist no motive to issue the paper of tW
Government as an instrument of credit.




FEDERAL BANKING LAWS AND REPORTS

117

It will not be deemed an adequate object for an issue of the paper of
the Government, merely that it may be exchanged for the paper of the
banks, since the Treasury will be abundantly supplied with bank paper
by the collection of the revenue; and the Government cannot be expected to render itself a general debtor, in order to become the special
creditor of the State banks.
The co-operation of the Government with the national bank, in the
introduction of a national currency, may, however, be advantageously
employed by issues of Treasury notes, so long as they shall be required for the public service.
Upon the whole, the state of the national currency, and other important considerations connected with the operations of the Treasury,
render it a duty respectfully to propose—
, That a national bank be established at the city of Philadelphia, having power to erect branches elsewhere, and that the capital of the bank
(being of a competent amount) consist of three-fourths of the public
stock, and one-fourth of gold and silver.
*
*
*
*
*
*
*
TREASURY DEPARTMENT, December 6,1815.
Report of Secretary of Treasury (Alexander J. Dallas),
on National Bank
COJIirUNICATED TO THE HOUSE OF REPRESENTATIVES, JANUARY 8, 181G.

Fourteenth Congress, 1st Session
[Source: American State Papers, Finance, Vol. 3, pp. 57-61]
g

TREASURY DEPARTMENT, December 24,

t
ftp oXQ^sVe nh e h . o n o r
e
1 ln ta t

to

1815.

acknowledge the receipt of your letter, dated

p r*
> informing me "that the committee on so much of the
resident s message as relates to the national currency had determined
w a national bank is the most certain means of restoring to the
n
0f 7° ^specie circulation," and had directed you to obtain the opinion
'I™ department on the following points:
M rni a m o u i *t and composition of the capital of the bank.
S" i r government of the bank.
X Tk p r i v i l e £ e s ? n d duties of the bank.
5th Ti e or &uaniza tion and operation of the bank.
6rtT -rT n s t o b e required for the charter of the bank.
miint • • m e a s ures which may aid the bank in commencing and
If ?n*lits m u operations in specie.
a 1!« ° f? n kc lhl a satisfaction to find that the policy of establishing
s
deck m t h i.s
•
received the sanction of the committee and the
Pamr' exaj
aspect, renders it unnecessary to enter into a comfor til a t t a i nnination of the superior advantages of such an institution
Wt '
n«mt o f the objects contemplated by the Legislature.
]oi^ ri f lg ',ht ll lereftore, to the outline of a national bank? which is subt s le ter
^ as the result of an attentive consideration beupon the subjects of your inquiry, I proceed, with deference



118

FEDERAL BANKING LAWS AND REPORTS

and respect, to offer some explanation of the principles upon which the
system is founded.
I. It is proposed that, under a charter for twenty years, the capital
of the national bank shall amount to $35,000,000; that Congress shall
retain the power to raise it to $50,000,000, and that it shall consist
three-quarters of public stock, and one-quarter of gold and silver.
1st. With respect to the cmunmt of the capital. The services to be
performed by the capital of the bank are important, various, and extensive. They will be required through a period almost as long as is
usually assigned to a generation. They will be required for the accommodation of the Government, in the collection and distribution of its
revenue, as well as for the uses of commerce, agriculture, manufactures, and the arts, throughout the Union. They will be required to
restore and maintain the national currency; and, in short, they will
be required, under every change of circumstances, in a season oi war,
as well as in the season of peace, for the circulation of the national
wealth, which augments with a rapidity beyond the reach of ordinary
calculation.
In the performance of these national services the local and incidental
co-operation of the State banks may undoubtedly be expected; but it
is the object of the present measure to create an independent, though
not a discordant, institution; and while the Government is granting a
monopoly for twenty years, it would seem to be improvident and
dangerous to rely upon gratuitous or casual aids for the enjoyment of
those benefits, which can be effectually secured by positive stipulation.
Nor is it believed that any public inconvenience can possibly arise
from the proposed amount of the capital of the bank with its augmentable quality. The amount may, indeed, be a clog upon the profits
of the institution, but it can never be employed for any injurious purpose, (not even for the purpose of discount accommodation beyond the
fair demand,) without an abuse of trust, which cannot, in candor,
be anticipated, or which, if anticipated, may be made an object of
penal responsibility.
The competition which exists at present among the State banks will,
it is true, be extended to the national bank; but competition does not
imply hostility. The commercial interests and the personal associations of the stockholders will generally be the same in the State banks
and in the national bank. The directors of both institutions w 1
naturally be taken from the same class of citizens. And experience
has shown not only the policy, but the existence of those sympathies
by which the intercourse of a national bank and the State banks has
been, and always ought to be, regulated, for their common credit and
security. At the present crisis it will be peculiarly incumbent up011
the national bank, as well as the Treasury, to conciliate the State banks:
to confide to them, liberally, a participation in the deposits of publC
revenue, and to encourage them in every reasonable effort to resume the
payment of their notes in coin. But, independent of these considerations, it is to be recollected that when portions of the capital of the
national bank shall be transferred to its branches, the amount invested
m each branch will not, probably, exceed the amount of the capital oi
any of the principal State banks, and will certainly be less than the
amount of the combined capital of the State banks, operating in anv oi
the principal commercial cities. The whole number of the banking



FEDERAL BANKING LAWS AND REPORTS

119

establishments in the United States may be stated at two hundred and
sixty, and the aggregate amount of their capitals may be estimated
at $85,000,000; but the services of the national bank are also required
in every State and Territory, and the capital proposed is $35,000,000,
of which only one-fourth part will consist of gold and silver.
2d. With respect to the composition of the capital of the bank.
There does not prevail much diversity of opinion upon the proposition
to form a compound capital for the national bank, partly of public
stock, and partly of coin. The proportions now suggested appear also
to be free from any important objections. Under all the regulations
of the charter, it is believed that the amount of gold and silver required
will afford an adequate supply for commencing and continuing the
payments of the bank in current coin; while the power which the
bank will possess, to convert its stock portion of capital into bullion
or coin, from time to time, is calculated to provide for any probable
augmentation of the demand. This object being sufficiently secured
the capital of the bank is next to be employed, in perfect consistency
with the general interests and safety of the institution, to raise the
value of the public securities, by withdrawing almost one-fifth of
tne amount from the ordinary stock market. Nor will the bank be
allowed to expose the public to the danger of a depreciation, by returning any part of the stock to the market, until it has been offered, at
the current price, to the commissioners of the sinking fund; and it is
not an inconsiderable advantage, in the growing state of the public
revenue, that the stock subscribed to the capital of the bank will
become redeemable at the pleasure of the Government.
-Lne subscription to the capital of the bank is opened to every species
w 'el i T 1 StockT r e T h e estil *iate that the revenues of 1816 and 1817
the
Tu ?
*sury to discharge the whole of the Treasury note
?eot, furnishes the only reason for omitting to authorize a subscription
* that species of debt. Thus,
^ne old and new six per cent, stocks are receivable at par.
A lie seven per cent, stock, upon a valuation referring to the 30th of
oe
Ptember, 1816, is receivable at 1065%00 dollars per cent.
me three per cent, stock, which can only be redeemed for its nomi*i or certificate value, may be estimated, under all circumstances, to
^vortn about sixty-two per cent, when the six per cent, stock is at
linn
-as ifc i s desi ™ble to accomplish the redemption of this stock
1
ratA s t tal 0 nle e hterms, it is made receivable at sixty-five per cent., the
b d
hoM r n ?
y t h e Government, and in part accepted by the stocke
X sml the year 1807.
to oh e ntsht a ltmtenn t s afor paying the subscriptions it is only necessary
a
comm e Cen ent o f e tyh e r e regulated by a desire to reconcile an early
cultipll" J CUI>
operations of the bank with the existing diffiIn on 6 \ t l l e mo rency, and with the convenience of the subscribers.
GOVP
. . des proposed for discharging the subscription of the
en
ifc i s
medin W h^'c h cai Particularly contemplated to aid the bank with a
in coijf l
*not fail to alleviate the first pressure for payments




120

FEDERAL BANKING LAWS AND REPORTS

whom shall be chosen as president of the bank by the board of directors ; that the resident stockholders shall elect twenty of the directors
of the national bank, who shall be resident citizens of the United
States, and that the national bank shall appoint the directors of each
branch, (being resident citizens of the United States,) one of whom
shall be designated by the Secretary of the Treasury, with the approbation of the President of the United States, to be president of thft
branch bank.
The1 participation of the President and Senate of the United States
in the appointment of directors appears to be the only feature in the
proposition for the government of the national bank which requires
an explanatory remark.
Upon general principles, wherever a pecuniary interest is to be
effected by the operations of a public institution a representative authority ought to be recognized. The United States will be the proprietors of one-fifth of the capital of the bank, and in that proportion,
upon general principles, they should be represented in the direction.
But an apprehension has sometimes been expressed, lest the power
of the Government thus inserted into the administration of the affairs
of the bank should be employed eventually to alienate the funds, and
to destroy the credit of the institution. Whatever may have been the
fate of banks in other countries, subject to forms of government essentially different, there can be no reasonable cause for apprehension
here. Independent of the obvious improbability of the attempt, the
Government of the United States cannot, by any legislative or executive act, impair the rights, or multiply the obligations of a corporation constitutionally established, as long as the independence
and integrity of the judicial power shall be maintained. Whatever
accommodation the Treasury may have occasion to ask from the.
bank, can only be asked under the license of a law; and whatever
accommodation shall be obtained must be obtained from the voluntary assent of the directors, acting under the responsibility of their
trust.
Nor can it be doubted that the Department of the Government,
which is invested with the power of appointment to all the important
offices of the State, is a proper Department to exercise the power of
appointment in relation to a national trust of incalculable magnitude'
The national bank ought not to be regarded simply as a commercial
bank. It will not operate upon the funds of the stockholders alone,
but much more upon the funds of the nation. Its conduct, good °*
bad, will not affect the corporate credit and resources alone, but
much more the credit and resources of the Government. Infine,ht
H
is not an institution created for the purposes of commerce and pr°
alone, but much more for the purposes of national policy, as an auslhary in the exercise of some of the highest powers of the Government. Under such circumstances the public interests cannot be too
cautiously guarded, and the guards proposed can never be injurious
to the commercial interests of the institution. The right to insp^1
the general accounts of the bank may be employed to detect the ev*
of a mal-administration, but an interior agency in the direction oi " s
affairs will best serve to prevent them.




FEDERAL BANKING LAWS AND REPORTS

121

III. It is proposed that, in addition to the usual privileges of a
corporation, the notes of the national bank shall be received in all
payments to the United States, unless Congress shall hereafter otherwise provide by law; and that, in addition to the duties usually required from a corporation of this description, the national bank
shall be employed to receive, transfer, and distribute, the public
revenue, under the directions of the proper Department.
The reservation of a legislative power on the subject of accepting
the notes of the national bank in payments to the Government, is the
only new stipulation in the present proposition. It is designed not
merely as one of the securities for the general conduct of the bank,
but as the means of preserving entire the sovereign authority of Congress relative to the coin and currency of the United States. Kecent
occurrences inculcate the expediency of such a reservation, but it may
be confidently hoped that an occasion to enforce it will never arise*
It is not proposed to stipulate that the bank shall in any case be
bound to make loans to the Government; but, in that respect, whenever a loan is authorized by law, the Government will act upon the
ordinary footing of an applicant for pecuniary accommodation.
IV• It is proposed that the organization of the national bank shall
te effected with as little delay as possible; and that its operations shall
commence and continue upon the basis of payments in the current coin
of the United States, with a qualified power under the authority of the
^ernment to suspend such payments.
Ine proposition now submitted necessarily implies an opinion that
lt
is practicable to commence the operations of the national bank
?pon a circulation of gold and silver coin; and, in support of the opinlo
n, afewremarks are respectfully offered to the consideration of the
committee:
1. The actual receipts of the bank, at the opening of the subscrip2 ? ^ l U a m °unt to the sum of $8,400,000; of which the sum of $1,^0,000 will consist of gold and silver, and the sum of $7,000,000 will
consist of public stock convertible by sale into gold and silver. But
ir actu al receipts of the bank, at the expiration of six months from
Uje opening of the subscription will amount to the sum of $16,800,000;
e
2 S 7 * t h 000sum of $2,800,000 will be in gold and silver, and the sum
sil ' S?'t h e w iuU d**l li n Public stock convertible by sale into gold and
f
t
tli U r e v e n u n a n us possessed by the bank, the accumulations of
\
e
c7 S v
d the deposits of individuals being added, there
<ui be little doubt, from past experience and observation in reference
» similar establishments, that a sufficient foundation will exist for a
ciml c * an . d Judicious issue of bank notes payable on demand in the
? ° i n ; unless, contrary to all probability, public confidence
H ulL e withheld from the institution, or sinister combinations
d
i
f an un
f a ° \Y formed to d f
defeat its operations, or th d d
the demands of an un*vorabie balance of trade should press upon its metallic resources.
tf- A*e publicf confidence cannot be withheld from the institution,
e
t
soil, ° ? ct h s o a n h e n a t i o n will be intimately connected with the ree b k
Mvm ?* o t h e - The notes of the bank are accredited in every
t
K
Government, and must become familiar in every
negotiation.n Unless, therefore, a state of things exist in
m
{?°i lm udsst i l v e r o ly can command the public confidence,^ naank
J*e s
command it. But the expression of the public sentiao
not, even at this period, leave the question exposed to dif


122

FEDERAL BANKING LAWS AND REPORTS

ficulty and doubt; it is well known that the wealth of opulent and commercial nations requires for its circulation something more than a
medium composed of the precious metals. The incompetency of the
existing paper substitutes to furnish a national currency is also well
known. Hence, throughout the United States, the public hope seems
to rest, at this crisis, upon the establishment of a national bank; and
every citizen, upon private or upon patriotic motives, will be prepared
to support the institution.
3. Sinister combinations to defeat the operations of a national bank,
ought not to be presumed, and need not be feared. It is true that the
influence of the State banks is extensively diffused; but the State banks,
and the patrons of the State banks, partake of the existing evils; they
must be conscious of the inadequacy of State institutions to restore and
maintain the national currency; they will perceive that there is sufficient space in the commercial sphere for the movement of the State
banks and the national bank; and, upon the whole, they will be ready
to act upon the impulse of a common duty, and a common interest.
If, however, most unexpectedly, a different course should be pursued
the concurring powTers of the national treasury and the national bank
will be sufficient to avert the danger.
4. The demand of an unfavorable balance of trade appears to be
much overrated. It is not practicable, at this time, to ascertain either
the value of the goods imported since the peace, or the value of the
property employed to pay for them. But when it is considered that a
great proportion of the importations arose from investments of American funds previously in Europe; that a great proportion of the price
has been paid by American exports; that a great proportion has been
paid by remittances in American stocks; and that a great proportion
remains upon credit to be paid by gradual remittances of goods, as well
as in coin; it cannot be justly concluded, that the balance of trade has
hitherto materially affected the national stock of the precious metals.
So far as a,n opportunity has occurred for observation, the demand for
gold and silver to export appears rather to have arisen from the expectation of obtaining a higher price in a part of Europe, and from the
revival of commerce with the countries beyond the Cape of Good Hope,
than from any necessity to provide for the payment of the recent importations of goods into the United States. The former of these causes
will probably soon cease to operate, and the operation of the latter
may, if necessary, be restrained by law.
The proposition now under consideration further provides for »
suspension of the bank payments in coin upon any future emergencyThis is merely a matter of precaution; but, if the emergency should
arise, it must be agreed on all hands that the power of suspension ought
rather to be confided to the Government than to the directors of the
institution.
V. It is proposed that a bonus be paid to the Government by the subscribers to the national bank, in consideration of the emoluments to be
derived from an exclusive charter, during a period of twenty years.
Independent of the bonus here proposed to be exacted, there are undoubtedly many public advantages to be drawn from the establishment of the national bank; but these are generally of an incidental
kind, and (as in the case of the deposits and distribution of the reve*
nue) may be regarded in the light of equivalents, not for the monopoly



FEDERAL. BANKING LAWS AND REPORTS

123

of the charter, but for the reciprocal advantages of a fiscal connexion
with the public Treasury.
The amount of the bonus should be in proportion to the value of the
charter grant; or, in other words, to the net profits which the subscribers will probably make, in consequence of their incorporation. The
average rate of the dividends of the State banks, before the suspension
of payments in coin, was about eight per cent, per annum. It appears
by a report from this Department to the House of Representatives, dated the 3d of April, 1810, that the annual dividends of the late bank of
the United States, averaged, throughout the duration of its charter,
the rate of 8*%6 per cent. But under all the circumstances which
will attend the establishment and operations of the proposed national
bank, its enlarged capital, and the extended field of competition, it is
not deemed reasonable, for the present purpose, to rate the annual dividends of the institution higher than 7 per cent, upon its capital of
$35,000,000.
Allowing, therefore, two, three, and four years for the payment of
the bonus, a sum of $1,500,000 would amount to about four per cent,
upon the capital of the bank, and would constitute a just equivalent
for the benefits of its charter.
VI. It is proposed that the measures, suggested by^ the following
considerations, be adopted to aid the national bank in commencing
and maintaining its operations upon the basis of payments in the current coin.
1. To restore the national currency of gold and silver it is essential
Jnat the quantity of bank paper in circulation should be reduced; but
™is effort alone will be sufficient to effect the object. By reducing the
amount of bank paper its value must be proportionally increased;
anc
l as soon as the amount shall be contracted to the limits of a just
Proportion in the circulating medium of the country, the consequent
revival of the uses for coin, in the business of exchange, will insure
" s nC f t h e S t a t e binn kabundance. The policy, the interest, and the
^-appearance a s w i l 1
ri°t Ti°
stimulate them to undertake and prose^|e this salutary work. But it will be proper to apprize them that,
«ter a specified day, the notes of such banks as have not resumed
i neir payments in the current coin will not be received in payments,
r ^ ° ^ Government or to the national bank.
Avil rem res umption of payments in current coin at the State banks
ove every obstacle to the commencement of similar payments
lt A
kit J h a wle vnea l bank. The difficulty of commencing payments in com
? to
tLm £ nr, i to be considered as equal to the difficulty of resuming
reoTi" * l •s i sastu °nal bank, free from all engagements, will be able to
t
e
th? T
s of paper with a view to the danger, as well as to
« aemand that may be found to exist. But in addition to the
ft ;; Ue I 8 esks that by the charter, it will also be proper to apprize the
granted
MH! i*lb a' n k t >e after the commencement of the operations of the
is* i* ,
' h notes of such banks as do not agree to receive, re. « > and circulate the notes of that institution, shall not be received
«
Wmens either to the Government or to the national bank.
DerfAiy P°tssi bility that the national currency of coin may not be
th/n
^ s °red at the time of organizing the bank, has induced
the P^P^tion that the payment of the Government subscription to
^capital shall be made in Treasury notes, which will be receivable
dU
Payments to the Government, and to the national bank, but
92

1«O 0 - 6 3
ft



124

FEDERAL BANKING LAWS AND REPORTS

which will not be demandable in coin. The principle of this proposition might, perhaps, be usefully extended to authorize the national
bank to issue notes of a similar character, for a limited period; and
it will be proper further to apprise the State banks that the notes of
such banks as do not agree to receive, re-issue, and circulate these
Treasury notes, or national bank notes, shall not be received in payments, either to the Government or to the national bank.
I have the honor, very respectfully, sir, to be your most obedient
servant,
A. J. DALLAS.
The Hon. JOHN C. CALHOUN, Chairman of the Committee on the
National Currency.
OUTLINE OF A PLAN FOR THE NATIONAL BANK

I. The charter of the hank.
1. To continue 21 years.
2. To be exclusive.
II. The capital of the hank*
1. To be $35,000,000—at present.
2. To be augmentable by Congress to $50,000,000, and the additonal
sum to be distributed among the several States.
3. To be divided into 350,000 shares of 100 dollars each, on the
capital of $35,000,000, and to be subscribed,
By the United States, one-fifth, or 70,000 shares,
By corporations and individuals, four-fifths, or 280,000 shares,

$7,000,000
28, O O J
O ^W
$35,000,000

4. To be compounded of public debt and of gold and silver; as to
the subscriptions of corporations and individuals, in the proportions—
Of funded debt, three-fourths, equal to
$21'?**!'25
Of gold and silver, one-fourth, equal to

7,(XXM*^
$28,000,000

The subscriptions of 6 per cent, stock to be at par.
The subscriptions of 3 per cent, stock to be at 65 per cent.
The subscriptions of 7 per cent, stock to be at 10651/10n P e r
5. The subscriptions in public debt may be discharged at pleasure
by the Government at the rate at which it is subscribed.
,
6. The subscriptions of corporations or individuals to be payable by
instalments—
(1.) Specie, at subscribing,
On each share, $5,
At 6 months,
5,
At 12 months, 5f
At 18 months, 10,
(2.)

Public debt, at subscribing,
Each share, $25,
At 6 months, 25,
At 12 months, 25,




I
II

_
Zl

I

^
$1,400, O
W
0
M 4 000' ^
l*
'^
2,800,0^
^
7,000,OW
" 7,000,00°
7,000,000
$28,000, 000

FEDERAL BANKING LAWS AND REPORTS

125

7. The subscription of the United States to be paid in instalments
not extending beyond a period of seven years; the first instalments to
be paid at the time of subscribing, and the payments to be made at the
pleasure of the Government, either
In gold and silver, or
In 6 per cent, stock, redeemable at the pleasure of the Government, or
In Treasury notes not fundable nor bearing interest, nor payable at a particular time, but receivable in all payments to the
Government, and also in all payments to the bank, with a right on
the part of the bank to re-issue the Treasury notes so paid, from
time to time, until they are discharged by payments to the Government.
8. The bank shall be at liberty to sell the stock portion of its capital
to an amount not exceeding —
in any one year; but, if the sales are
intended to be effected in the United States, notice thereof shall be
given to the Secretary of the Treasury that the Commissioners of the
sinking Fund may, if they please, become the purchasers, at the market price, not exceeding par.
HI. The Govermnent of the bank.
1. The bank shall be established at Philadelphia, with power to erect
branches, or to employ State banks as branches elsewhere.
2. There shall be twenty-five directors for the bank at Philadelphia,
and thirteen directors for each of the branches where branches are
er Ct witlx
o ^'
^ u s u a l description and number of officers.
o. e Senate
The President of the United States, with the advice and consent
°IS} .
> shall annually appoint five of the directors of the bank
at
Philadelphia.
4. The qualified stockholders shall annually elect twenty of the
TnCti?rs o f t h e b a n k a t Philadelphia; but a portion of the directors
snail be changed at every annual election upon the principle of rota5. The directors of the bank at Philadelphia shall annually, at their
nrst meeting after their election, choose one of the five directors apPouited tbye then President and Senate of the United States, to be presih ba k
*v\,
? and the president of the bank shall always be ree l
» if re-appointed.
„
e
tv
^rectors of the bank at Philadelphia shall annually appoint
fflirteen directors for each of the branches where branches are erected,
< a shall transmit a list of the persons appointed to the Secretary of
m
l
ne Treasury.
p f • The Secretary of the Treasury, with the approbation of the
2 T n t o f the United States, shall annually designate, from the list
branh n c h d i r e c t o r s > t h e P^son to be the president of the respective
ranh
of2iAone bufc resident citizens of the United States shall be directors
01
the bank, or its branches.




126

FEDERAL BANKING LAWS AND REPORTS

9. The stockholders may vote for directors in person or by proxy;
but no stockholder, who is not resident within the United States at the
time of election, shall vote by proxy; nor shall any one person vote
as proxy a greater number of votes than he would be entitled to vote in
his own right, according to a scale of voting to be graduated by the
number of shares which the voters respectively hold.
10. The bank and its several branches, or the State banks employed
as branches, shall furnish the officer at the head of the Treasury Department with statements of their officers, in such form and at such
period as shall be required.
IV. The privileges and duties of the bank.
1. The bank shall enjoy the usual privileges, and be subject to the
usual restrictions of a body corporate and politic, instituted for such
purposes, and the forgery of its notes shall be made penal.
2. The notes of the bank shall be receivable in all payments to the
United States, unless Congress shall hereafter otherwise provide by
law.
3. The bank and its branches, and State banks employed as branches,
shall give the necessary aid and facility to the Treasury for transferring the public funds from place to place, and for making payments
to the public creditors, without charging commissions, or claiming
allowances on account of differences of exchange, &c.
V. The organization and operation of the bank.
1. Subscriptions to be opened with as little delay as possible, and at
as few places as shall be deemed just and convenient. The commissioners may be named in the act or be appointed by the President.
2. The bank to be organized and commence its operations in specie as
soon as the sum of $1,400,000 has been actually received from tne subscriptions in gold and silver.
3. The bank shall not at any time suspend its specie payments, unless
the same shall be previously authorized by Congress, if in session, or
by the President of the United States if Congress be not in session. In
the latter case the suspension shall continue for six weeks after the
meeting of Congress, and no longer, unless authorized by law.
VI. The bonus for the charter of the bank
The subscribers to the bank shall pay a premium to the Government
for its charter. Estimating the profits of the bank from the probable
advance m the value of its stock, and the result of its business when in
full operation at 7 per cent., a bonus of $1,500,000 payable in equal
instalments of two, three, and four years, after the bank commences
its operations, might, under all circumstances, be considered as about
4 per cent upon its capital, and would constitute a reasonable premium.




FEDERAL BANKING LAWS AND REPORTS

127

Act of April 10, 18161
[3 Statutes at Large 266, Fourteenth Congress, Chapter 44, 1st
Session, Approved April 10,1816, by James Madison]
AN ACT TO INCORPORATE THE SUBSCRIBERS TO THE BANK OF
THE UNITED STATES

Be it enacted by the Senate and House of Representatives of the United States of America, in Congress assembled, That a bank of the United States of America
shall be established, with a capital of thirty-five millions A bank of the
dollars, divided into three hundred and fifty thousand wfth a capitaT
shares, of one hundred dollars each share. Seventy thou- § * £ ? 0 0
sand shares, amounting to the sum of seven millions of
dollars, part of the capital of the said bank, shall be subscribed and paid for by the United States, in the manner
hereinafter specified; and two hundred and eighty thousand shares, amounting to the sum of twenty-eight millions of dollars, shall be subscribed and paid for by individuals, companies, or corporations, in the manner hereinafter specified.
SEC. 2. And be it further enacted, That subscriptions
for the sum of twenty-eight millions of dollars, toward
constituting the capital of the said bank, shall be opened
on the first Monday in July next, at the following places:
that is to say, at Portland, in the District of Maine; at
rortsmouth, in the state of New Hampshire; at Boston, g j ^ ^
lr
Lthe s t a te of Massachusetts; at Providence, in the state subscriptions,
or Khode Island; at Middletown, in the state of Connecti^ 5 at Burlington, in the state of Vermont; at New
*ork, in the state of New York; at New Brunswick, in
tne state of New Jersey; at Philadelphia, in the state of
Pennsylvania; at Wilmington, in the state of Delaware;
J; Baltimore, in the state of Maryland; at Kichmond, in
jne state of Virginia; at Lexington, in the state of Ken?fcky; at Cincinnati, in the state of Ohio; at Ealeigh,
«* the state of North Carolina; at Nashville, in the state
°.r Tennessee; t at Charleston, in the state of South Caro{JJrtlat A tue^oufs a » i n the state of Georgia; at New Orleans,
tric tf ? a
Lp^siana; and at Washington, in the disn
°J Columbia. And the said subscriptions shall be
a? ini-i U n d e r . t h e superintendence of five commissioners
^ ^niladelphia, and of three commissioners at each of
^ ^ l
aforesaid, to be appointed by the Presiited States, h
J«it of the United Stat who is hereby authorized to
dav * m appointments, and shall continue open every
h
™ r *ten ™e c time of opening the same, between the
tU V
o'clock in the forenoon and four o'clock in
° l o c k in the forenoon and four o
c a^nioon, for the term of twenty days, exclusive of
th I S)) w hh e n t h e s a m e s*1^1 *» closed, and i m y
thp 1 I 611 t h e n t h e s a m e s*1^1 *» closed, and immediately
f th
t th
r^r* ?
commissioners, or any two of them, at the
elective places aforesaid, shall cause two transcripte
^pies of such subscriptions to be made, one of which



128
Places, &c.
for receiving
subscriptions,

Regulations
concerning subscriptions and
payments on
them, &c.

FEDERAL BANKING LAWS AND REPORTS

they shall send to the Secretary of the Treasury, one
they shall retain, and the original they shall transmit,
within seven days from the closing of the subscriptions
as aforesaid, to the commissioners at Philadelphia aforesaid. And on the receipt of the said original subscriptions, or of either of the said copies thereof, if the original be lost, mislaid, or detained, the commissioners at
Philadelphia aforesaid, or a majority of them, shall immediately thereafter convene, and proceed to take an account of the said subscriptions. And if more than the
amount of twenty-eight millions of dollars shall have
been subscribed, then the said last mentioned commissioners shall deduct the amount of such excess from the
largest subscriptions, in such manner as that no subscription shall be reduced in amount, while any one remains larger: Provided, That if the subscriptions taken
at either of the places aforesaid shall not exceed three
thousand shares, there shall be no reduction of such subscriptions, nor shall, in any case, the subscriptions taken
at either of the places aforesaid be reduced below that
amount. And in case the aggregate amount of the said
subscriptions shall exceed twenty-eight millions of dollars, the said last mentioned commissioners, after having
apportioned the same as aforesaid, shall cause lists of the
said apportioned subscriptions, to be made out, including
in each list the apportioned subscription for the place
where the original subscription was made, one of which
lists they shall transmit to the commissioners or one of
them, under whose superintendence such subscriptions
were originally made, that the subscribers may thereby
ascertain the number of shares to them respectively apportioned as aforesaid. And in case the aggregate
amount of the said subscriptions made during the period
aforesaid, at all the places aforesaid, shall not amount
to twenty-eight millions of dollars, the subscriptions to
complete the said sum shall be and remain open at Philadelphia aforesaid, under the superintendence of the commissioners appointed for that place; and the subscriptions may be then made by any individual, company, ?r
corporation, for any number of shares, not exceeding, m
the whole, the amount required to complete the said sum
of twenty-eight millions of dollars.
SEC. 3. And be it further enacted, That it shall be lawful for any individual, company, corporation, or state,
when the subscriptions shall be opened as herein beio^
directed, to subscribe for any number of shares of the
capital of the said bank, not exceeding three thousand
shares, and the sums so subscribed shall be payable, ana
paid, in the manner following; that is to say, seven mil;
lion dollars thereof in gold or silver coin of the Unites
States, or in gold coin of Spain, or the dominions oi
Spain, at the rate of one hundred cents f6r every twentyeight grains and sixty hundredths of a grain of the ac-




FEDERAL BANKING LAWS AND REPORTS

tual weight thereof, or in other foreign gold or silver
coin at the several rates prescribed by the first section
of an act regulating the currency of foreign coins in the
United States, passed tenth day of April, one thousand
eight hundred and six, and twenty-one millions of dollars thereof in like gold or silver coin, or in the funded
debt of the United States contracted at the time of the
subscriptions respectively. And the payments made in
the funded debt of the United States, shall be paid and
received at the following rates: that is to say, the funded
debt bearing an interest of six per centum per annum, at
the nominal or par value thereof; the funded debt bearing an interest of three per centum per annum, at
the rate of sixty-five dollars for every sum of one
hundred dollars of the nominal amount thereof; and the
funded debt bearing an interest of seven per centum
per annum, at the rate of one hundred and six dollars
andfifty-onecents, for every sum of one hundred dollars
of the nominal amount thereof; together with the
amount of the interest accrued on the said several denominations of funded debt, to be computed and allowed to the time of subscribing the same to the capital
of the said bank as aforesaid. And the payments of the
said subscriptions shall be made and completed by the
subscribers, respectively, at the times and in the manner following; that is to say, at the time of subscribing
there shall be paid five dollars on each share, in gold or
silver coin as aforesaid, and twenty-five dollars more in
com as aforesaid, or in funded debt as aforesaid; at the
expiration of six calendar months after the time of subscribing, there shall be paid the further sum of ten dol! ars o n each share, in gold or silver coin as aforesaid, and
T ent 7" five dollars more in coin as aforesaid, or in fundw debt as aforesaid; at the expiration of twelve calendar months from the time of subscribing, there shall be
Paicl the Q
further sum of ten dollars on each share, in gold
. S l v e r oin as aforesaid, and twenty-five dollars more,
coin as aforesaid, or in funded debt as aforesaid.
J[ -C And ^e il farther enacted, That at the time of
^oscnbmg to the capital of the said bank as aforesaid
lc|
gj i and every subscriber shall deliver to the coiranisners, at the place of subscribing, as well the amount
tneir subscriptions respectively in coin as aforesaid,
'* tJie tlOnS o f t l l e of re
certificates
funded debt, for the funded debt
witi a p o w e r of i r spective subscriptions, together
sin*
. attorney, authorizing the said commisU
in d G l °rrm om al3° r itt o otfI i them, to transfer the said stock
y
f aw
Pari •
" e president, directors, and com\^h °* the bank of the United States," as soon as the
.*«* bank shall be organized. Provided always, That if,
e
canTf q , ulein cS a ?df bt h e kapportionment of the shares in the
t e
i
an amon tIie
and +i
g
subscribers, in the case,
u ln
the manner, hereinbefore provided, any subscriber



129

130

Reasonable
compensation
to the commissioners.
The United
States may
redeem the
funded debt,
&c. and the
bank may sell
for gold and1
silver, &c.

The Secretary
of the Treasury
to subscribe on
behalf of the
United States,
&c.

FEDERAL BANKING LAWS AND REPORTS

shall have delivered to the commissioners, at the time of
subscribing, a greater amount of gold or silver coin and
funded debt than shall be necessary to complete the payments for the share or shares to such subscribers, apportioned as aforesaid, the commissioners shall only retain
so much of the said gold or silver coin, and funded debt,
as shall be necessary to complete such payments, and
shall, forthwith, return the surplus thereof, on application for the same, to the subscribers lawfully entitled
thereto. And the commissioners, respectively, shall deposit the gold and silver coin, and certificates of public
debt by them respectively received as aforesaid from the
subscribers to the capital of the said bank, in some place
of secure and safe keeping, so that the same may and
shall be specifically delivered and transferred, as the
same were by them respectively received, to the president,
directors, and company, of the bank of the United States,
or to their order, as soon as shall be required after the
organization of the said bank. And the said commissioners appointed to superintend the subscriptions to the
capital of the said bank as aforesaid, shall receive a
reasonable compensation for their services respectively,
and shall be allowed all reasonable charges and expenses
incurred in the execution of their trust, to be paid by the
president, directors, and company, of the bank, out of the
funds thereof.
SEC. 5. And be it further enacted. That it shall be lawful for the United States to pay and redeem the funded
debt subscribed to the capital of the said bank at the
rates aforesaid, in such sums, and at such times, as shall
be deemed expedient, any thing in any act or acts of Congress to the contrary thereof notwithstanding. And it
shall also be lawful for the president, directors, and company, of the said bank, to sell and transfer for gold and
silver coin, or bullion, the funded debt subscribed to the
capital of the said bank as aforesaid: Provided always*
That they shall not sell more thereof than the sum of t*o
millions of dollars in any one year; nor sell an^ pa-1*
thereof at any time within the United States, without
previously giving notice of their intention to the Secretary of the Treasury, and offering the same to the United
States for the period of fifteen days, at least, at the current price, not exceeding the rates aforesaid.
SEC. 6. And be it further enacted, That at the opening
of subscription to the capital stock of the said bank, the
becretary of the Treasury shall subscribe, or cause to be
subscribed, on behalf of the United States, the said number of seventy thousand shares, amounting to seven millions of dollars as aforesaid, to be paid in gold or silver
coin, or in stock of the United States, bearing interest a
the rate of five per centum per annum; and if payment
thereof, or of any part thereof, be made in public stocK,
bearing interest as aforesaid, the said interest shall be




FEDERAL BANKING LAWS AND REPORTS

131

payable quarterly, to commence from the? time of making
such payment on account of said subscription, and the
principal of the said stock shall be redeemable in any
.sums, and at any periods, which the government shall
deem fit. And the Secretary of the Treasury shall cause
the certificates of such public stock to be prepared, and
made in the usual form, and shall pay and deliver the
same to the president, directors, and company, of the said
hank on the first day of January, one thousand eight
hundred and seventeen, which said stock it shall be lawful for the said president, directors, and company, to sell
and transfer for gold and silver coin or bullion at their
discretion: Provided, They shall not sell more than two
millions of dollars thereof in any one year.
SEC. 7.< And be it further enacted, That the subscribers ^htehSetankbers
to the said bank of the United States of America, their incorporated,
successors and assigns, shall be, and are hereby, created c'
a corporation and body politic, by the name and style of
The president, directors, and company, of the bank of
the United States," and shall so continue until the third
day of March, in the year one thousand eight hundred
and thirty-six, and by that name shall be, and are hereby,
made able and capable, in law, to have, purchase, receive,
possess, enjoy, and retain, to them and their successors,
tonds, rents, tenements, hereditaments, goods, chattels
and m 0imt n of whatsover kind, nature, and quality, to
effects, ot
a
£^ 1
. exceeding, in the whole, fifty-five millions
°* dollars, including the amount of the capital stock
aforesaid; and the same to sell, grant, demise, alien or
dispose of; to sue and be sued, plead and be impleaded,
answer and be answered, defend and be defended, in all
state courts having competent jurisdiction, and in any
ei
mut court of the United States: and also to make,
ay
e, and use, a common seal, and the same to break,
' ef'a!lfl renew, at their pleasure: and also to ordain,
establish, and put in execution, such by-laws, and ordiances^and regulations, as they shall deem necessary and
imf ieiVent f or the government of the said corporation,
lot being contrary to the Constitution thereof, or to the
TTnite
cut °ii
<* States; and generally to do and exeto tli lt SllilU o r m a the acts, matters, and things, which
• sin £ufor
thpl
y appertain to do; subject, nevernnd t0- * lle n i l e s ? re g lll *itions, restrictions, limitations,
g Provisions, hereinafter prescribed and declared.
And be it further enacted, That for the man- Twenty-five
of the affairs of the said corporation, there shall
^e%U^a
y-nve directors,fiveof whom, being stockholders, by the re8i "
Jj^f
e
dent &c
' "
Unit ° annually appointed by the President of the
Sennt states, rbey t and withe the w l l 0 m slla11 consent of the
advice and b e
nOt m o
lmn tnre of
of nn n e S t a t e a n d
residents
eleotAri °
'
twenty of whom shall be annually
on the f
banking house in the city of Philadelphia,
n
nrst Monday of January, in each year, by the



132

Regulations
concerning tile
direction of the
bank, &c.

Manner and
time of the
banks going
Into operation,
Ac.

FEDERAL BANKING LAWS AND REPORTS

qualified stockholders of the capital of the said bank,
other than the United States, and by a plurality of votes
then and there actually given, according to the scale of
voting hereinafter prescribed: Provided always, That no
person, being a director in the bank of the United States,
or any of its branches, shall be a director of any other
bank; and should any such director act as a director in
any other bank, it shall forthwith vacate his appointment in the direction of the bank of the United States.
And the directors, so duly appointed and elected, shall be
capable of serving, by virture of such appointment and
choice, from the first Monday in the month of January of
each year, until the end and expiration of the first Monday in the month of January of the year next ensuing the
time of each annual election to be held by the stockholders as aforesaid. And the board of directors annually, at the first meeting after their election in each and
every year, shall proceed to elect one of the directors
to be president of the corporation, who shall hold the said
office during the same period for which the directors are
appointed and elected as aforesaid: Provided also, That
the first appointment and election of the directors and
president of the said bank shall be at the time and for
the period hereinafter declared: And provided also, That
in case it should at any time happen that an appointment
or election of directors, or an election of the president of
the said bank, should not be so made as to take effect
on any day when, in pursuance of this act, they ought
to take effect, the said corporation shall not, for that
cause, be deemed to be dissolved; but it shall be lawful
at any other time to make such appointments, and to hold
such elections, (as the case may be,) and the manner of
holding the elections shall be regulated by the by-laws
and ordinances of the said corporation: and until sucn
appointments or elections be made, the directors ana
president of the said bank for the time being, shall continue in office: And provided also, That in case of tne
death, resignation, or removal of the president of tne
said corporation, the directors shall proceed to elect another president from the directors as aforesaid: and uj
case of the death, resignation, or absence, from the United
States, or removal of a director from office, the vacancy
shall be supplied by the President of the United States,
or by the stockholders, as the case may be. But the Pres1'
dent of the United States alone shall have power to remove any of the directors appointed by him as afore'
said.
SEC. 9. And be it further enacted, That as soon as the
sum of eight millions four hundred thousand dollars i»
old and silver coin, and in the public debt, shall have
een actually received on account of the subscriptions t
the capital of the said bank (exclusively'of the subscription aforesaid, on the part of the United States) notice

f




FEDERAL BANKING LAWS AND REPORTS

133

thereof shall be given by the persons under whose superintendence the subscriptions shall have been made at the
city of Philadelphia, in at least two newspapers printed
in each of the places, (if so many be printed in such places
respectively,) where subscriptions shall have been made,
and the said persons shall, at the same time, and in like
manner, notify a time and place within the said city of
Philadelphia, at the distance of at least thirty days from
the time of such notification, for proceeding to the election of twenty directors as aforesaid, and it shall be lawful for such election to be then and there made. And the
President of the United States is hereby authorized, during the present session of Congress, to nominate, and, by
and with the advice and consent of the Senate, to appoint,
five directors of the said bank, though not stockholders,
anything in the provisions of this act to the contrary notwithstanding; and the persons who shall be elected and
appointed as aforesaid, shall be the first directors of the
said bank, and shall proceed to elect one of the directors
to be President of the said bank; and the directors and
president of the said bank so appointed and elected as
aforesaid, shall be capable of serving in .their respective
omce, by virtue thereof, until the end and expiration of
ne first Monday of the month of January next ensuing
A*1A a PP° i n t m e n ts and elections; and they shall then
and thenceforth commence, and continue the operations
or the said bank, at the city of Philadelphia.
OEO. 10. And be it further enacted, That the directors,
T
°r the time being shall have power to appoint such officers, clerks, and servants, under them as shall be necessary Servant* &c.
ior executing the business of the said corporation, and to
«»ow them such compensation for their services, respec"vely, as shall be reasonable; and shall be capable of
exercising such other powers and authorities for the well
governing and ordering of the officers of the said corporaion, as shall be prescribed, fixed, and determined, by the
aws, regulations, and ordinances, of the same.
ml
— ^ he {t furfher enacted, That the following
restrictions
an 11
> limitations, and provisions, shall form Kuies concern* a be fundamental articles of the constitution of the
A part of the
^Corporation, to wit:
u
be ei f 11 \m™obtei rn ? f f ™tes to which the stockholders shall
o
thft H i ' f vs h a n gs her directors, shall be according to f
D det
holdr +i ° r o o r t? > she> o r they> respectively, shall alonedeligible a
1U
i
sharft A n o t mP r e °nsn following, that is to say; for one
P o
two <£ a b o v e twot l i aa n td wn0o s n a r es, one vote; for every
t
fopetp I )Ur s n a r e s >b
exceeding ten, one vote; stockholders,
a
one vnt i e v e r s i x °ve ten, and not exceeding thirty,
<*edin •
y
shares above thirty, and not ex- directors
sixtv g *lmy> eonee cvote; for every eight shares above
other than
every T sT*r e x c e i ing one hundred, one vote; and for tlon,president.
the
ha
Seven direcPerson
s above one hundred, one vote; but no tors, Including
n>
^'Partnership, or body politic, shall be entitled the president,



134
may constitute
a board.
How his place
is supplied In
case of absence
or sickness.
General meetings of the
stockholders—
how to be
called.
Cashier to
give bonds and
security.

Limitation
concerning, and
a description of
the real estate
which may be
held by the
corporation.

FEDERAL BANKING LAWS AND REPORTS

to a greater number than thirty votes; and after the
first election, no share or shares shall confer a right of
voting, which shall not have been holden three calendar
months previous to the day of election. And stockholders
actually resident within the United States, and none
other, may vote in elections by proxy.
Second. Not more than three-fourths of the directors
elected by the stockholders, and not more than four-fifths
of the directors appointed by the President of the United
States, who shall be in office at the time of an annual election, shall be elected or appointed for the next succeeding
year; and no director shall hold his office more than three
years out of four in succession; but the director who shall
be the president at the time of an election may always be
re-appointed, or re-elected, as the case may be.
Third. None but a stockholder, resident citizen of the
United States, shall be a director; nor shall a director be
entitled to any emoluments; but the directors may make
such compensation to the president for his extraordinary
attendance at the bank, as shall appeal to them reasonable.
Fourth. Not less than seven directors shall constitute
a board for the transaction of business, of whom the
president shall always be one, except in case of sickness
or necessary absence: in which case his place may be
supplied by any other director, whom he, by writing,
under his hand, shall depute for that purpose. And the
director so deputed may do and transact all the necessary
business, belonging to the office of the president of the
said corporation, during the continuance of the sickness
or necessary absence of the president.
Fifth. A number of stockholders, not less than sixty,
who, together, shall be proprietors of one thousand
shares or upwards, shall have power at any time to call
a general meeting of the stockholders, for purposes relative to the institution, giving at least ten weeks' notice
in two public newspapers of the place where the bank
is seated, and specifying in such notice the object or
objects of such meeting.
Sixth. Each cashier or treasurer, before he enters upon
the duties of his office, shall be required to give bond,
with two or more sureties, to the satisfaction of the directors, in a sum not less than fifty thousand dollars*
with a condition for his good behaviour, and the faith'
f ul performance of his duties to the corporation.
Seventh. The lands, tenements, and hereditaments,
which it shall be lawful for the said corporation to hold,
shall be only such as shall be requisite for its immediate
accommodation in relation to the convenient transacting
of its business, and such as shall have been bona ft?
mortgaged to it by way of security, or conveyed to it &
satisfaction of debts previously contracted in the course
of
_ }te dea Jjngs, or purchased at sales, upon judgments
which shall have been obtained for such debts.




FEDERAL BANKING LAWS AND REPORTS

135

Eighth. The total amount of debts which the said cor- S5*imilm g*
i'

i

n

,

,•

1

1

1

1

1

1

»n

poration shall at any time owe, whether by bond, bill,
note, or other contract, over and above the debt or debts
due for money deposited in the bank, shall not exceed the
sum of thirty-five millions of dollars, unless the contracting of any greater debt shall have been previously authorized by Taw of the United States. In case of excess,
the directors under whose administration it shall happen,
shall be liable for the same in their natural and private
capacities: and an action of debt may in such case be
brought against them, or any of them, their or any of
their heirs, executors, or administrators, in any court of
record of the United States, or either of them, by any
creditor or creditors of the said corporation, and may be
prosecuted to judgment and execution, any condition,
covenant, or agreement to the contrary notwithstanding.
But this provision shall not be construed to exempt the
said corporation or the lands, tenements, goods, or chattels
of the same from being also liable for, and chargeable
with, the said excess.
Such of the said directors, who may have been absent
when the said excess was contracted or created, or who
jnay have dissented from the resolution or act whereby
the same was so contracted or created, may respectively
exonerate themselves from being so liable, by forthwith
giving notice of the fact, and of their absence or dissent,
o the President of the United States, and to the stockholders, at a general meeting, which they shall have power
to call for that purpose.
Ninth. The said corporation shall
or indirectly, deal or trade in any thing not, directly of exdirectly, deal or trade in any thing except bills of exexcept bills
change, gold or silver bullion, or in the sale of goods
h
really and truly pledged for money lent and not redeemed
ln
due time, or goods which shall be the proceeds of its
HKfS* J * s h a 1 1 n o t *** a t l i b e r t y t o purchase any public
a
|ot whatsoever, nor shall it take more than at the rate
°t six per centum per annum for or upon its loans or

debta which the

corporation
time contract,
Remedy
J^towimde?"
whose adnrfnexwsstf debt
|ted.becre"

JbSStorai«senting
exem ted
P -

maf transact

Tenth. No loan shall be made by the said corporation,
Sfnf U s e o r o n a c c °unt of the government of the United - a T e ^he u.s.
? ? i » t o ai * amount exceeding five hundred thousand or particular
i n * ! ? ° r ° f a n v Particular state, to an amount exceed- S^ftSeifbi
g nfty thousand dollars, or of any foreign prince or
Stat Ul S P r e v i o u s l y authorized by a law of the United
h
T h e s ock
3leVe??k-i " T h e s tt o c k o f tthe s said corporation shall b
of h e a i d corporation shall be
and
i •
transferable, according to such rules as
be instituted in that behalf, by the laws and ordina
^esofthesame.
JiWelft,h- T h e b i l l s , obligatory and of credit, under the
Perl? t h e s a i d corporation, which shall be made to any ^Sc
W n ° r P e r s o n ^ shall be assignable by endorsement able
™ l p o n > under the hand or hands of such person or ^ y anVo?ie
and his, her, or their executors or adminis- credit, under



136

FEDERAL BANKING LAWS AND REPORTS

trators, and his, her or their assignee or assignees, and
so as absolutely to transfer and vest the property thereof in each and every assignee or assignees successively,
and to enable such assignee or assignees, and his, her
or their executors or administrators, to maintain an action thereupon in his, her, or their own name or names:
Provided, That said corporation shall not make any bill
obligatory, or of credit, or other obligation under its
seal for the payment of a sum less than five thousand
dollars. And the bills or notes which may be issued by
order of the said corporation, signed bj the president,
and countersigned by the principal cashier or treasurer
thereof, promising the payment of money to any person or persons, his, her or their order, or to bearer, although not under the seal of the said corporation, shall
be binding and obligatory upon the same, in like manner, and with like force and effect, as upon any private
person or persons, if issued by him, her or them, in his,
her or their private or natural capacity or capacities,
and shall be assignable and negotiable in like manner
as if they were so issued by such private person or persons ; that is to say, those which shall be payable to any
person or persons, his, her or their order, shall be assignable by endorsement, in like manner, and with the
like effect as foreign bills of exchange now are; and
those which are payable to bearer shall be assignable
and negotiable by delivery only: Provided, That all bills
or notes, so to be issued by said corporation, shall be
made payable on demand, other than bills or notes for
the payment of a sum not less than one hundred dollars
each, and payable to the order of some person or persons, which bills or notes it shall be lawful for said corporation to make payable at any time not exceeding sixty
days from the date thereof.
Thirteenth. Half yearly dividends shall be made of
so much of the profits of the bank as shall appear to
the directors advisable; and once in every three years
the directors shall lay before the stockholders, at a general meeting, for their information, an exact and particular statement of the debts which shall have remained
unpaid after the expiration of the original credit, for
a period of treble the term of that credit, and of the surplus of the profits, if any, after deducting losses and
dividends. If there shall be a failure in the payment of
any part of any sum subscribed to the capital oi the said
bank, by any person, co-partnership or body politic, the
party failing shall lose the benefit of any dividend which
may have accrued prior to the time 'for making such
payment, and during the delay of the same.




the seal of the
corporation;

Proviso.

Proviso.

Half yearly
dividends to w
made.
.
A statement
of the affairs oi
the company w
be laid before
the stockholders.
Delinquent
subscribers to
lose the benefit
of dividends-

FEDERAL BANKING LAWS AND REPORTS

137

Offices to be
Fourteenth. The directors of the said corporation shall established in
the District of
establish a competent office of discount and deposit in the Columbia and
District of Columbia, whenever any law of the United the several
states when
States shall require such an establishment; also one such authorized and
office of discount and deposit in any state in which two required by
thousand shares shall have been subscribed or may be law.
held, whenever, upon application of the legislature of
such state, Congress may, by law, require the same:
Provided^ the directors aforesaid shall not be bound toProviso.
establish such office before the whole of the capital of the
bank shall have been paid up. And it shall be lawful for
the directors of the said corporation to establish offices
of discount and deposit, wheresoever they shall think fit,
within the United States or the territories thereof, and to
commit the management of the said offices, and the business thereof, respectively to such persons, and under such
regulations as they shall deem proper, not being contrary
to law or the constitution of the bank. Or instead of
establishing such offices, it shall be lawful for the directors of the said corporation, from time to time, to employ
any other bank or banks, to be first approved by the Secretary of the Treasury, at any place or places that they
jnay deem safe and proper, to manage and transact the
business proposed as aforesaid, other than for the purposes of discount, to be managed and transacted by such
offices, under such agreements, and subject to such regulations, as they shall deem just and proper. Not more
than thirteen nor less than seven managers or directors
of every office established as aforesaid, shall be annually
appointed by the directors of the bank, to serve one year;
they shall choose a president from their own number;
each of them shall be a citizen of the United States, and
a resident of the state, territory or district, wherein such
omce is established; and not more than three-fourths of
the said managers or directors, in office at the time of an
annual appointment, shall be re-appointed for the next
succeeding year; and no director shall hold his office more
tnan three years out of four, in succession; but the presidentmay be always re-appointed.
Secretary of
fifteenth. The'officer at the head of the Treasury De- the Treasury
authorized to
partment of the United States shall be furnished, from call upon the
Um
* to time, as often as he may require, not exceeding: bank for a not
statement,
once a week, with statements of the amount of the capital exceeding a
weekly one, of
JJOCK of the said corporation and of the debts due to the its concerns.
-vine; of the moneys deposited therein; of the notes in
ir
cu ation, any of the specie in hand; and shall have
'- Nffht to sinspect such general accounts in the books of
e 111 a
-r r * shall relate to the said statement: Provided, Proviso.
Anattlus shall not be construed to imply a right of inv?5° I1g t l l e account of any private individual or indiVl
<*uals with the bank.




138
No stockholder
but a citizen
of the United
States may
vote in choice
of directors.
No smaller
notes than
five dollars to
be Issued.
Penalties for
dealing in a
way or in
articles interdicted.

Penalties for
making unlawful loans to the
United States
or particular
states or to
foreign
governments.

Notes of the
bank, unless
specially prohibited by law,
receivable in
payments of
all dues to
United States.
The bank to
give the necessary facilities
without any
charge, for
transferring
the funds of
the United
States to
different
Quarters.

FEDERAL BANKING LAWS AND REPORTS

Sixteenth, No stockholder, unless he be a citizen of the
United States, shall vote in the choice of directors.
Seventeenth. No note shall be issued of less amount
than five dollars.
SEC. 12. And be it further enacted, That if the said
corporation, or any person or persons, for or to the use
of the same, shall deal or trade in buying or selling goods,
wares, merchandise, or commodities whatsoever, contrary to the provisions of this act, all and every person
and persons by whom any order or direction for so dealing or trading shall have been given; and all and every
person and persons who shall have been concerned as
parties or agents therein, shall forfeit and lose treble
the value of the goods, wares, merchandise and commodities in which such dealing and trade shall have been, one
half thereof to the use of the informer, and other half
thereof, to the use of the United States, to be recovered
in any action of law with costs of suit.
SEC. 13. And be it further enacted, That if the said
corporation shall advance or lend any sum of money for
the use or on account of the government of the United
States, to an amount exceeding five hundred thousand
dollars; or of any particular state, to an amount exceeding fifty thousand dollars; or of any foreign prince or
state, (unless previously authorized thereto by a law of
the United States,) all and every person and persons, by
and with whose order, agreement, consent, approbation
and connivance, such unlawful advance or loan shall
have been made, upon conviction thereof shall forfeit
and pay, for every such offence; treble the value or
amount of the sum or sums which have been so unlawfully advanced or lent; one fifth thereof to the use
of the informer, and the residue thereof to the use of the
United States.
SEC. 14. And be it further enacted, That the bills or
notes of the said corporation originally made payable, or
which shall have become payable on demand, shall be
receivable in all payments to the United States, unless
otherwise directed by act of Congress.
.
SEC. 15. And be it further enacted, That during the
continuance of this act, and whenever required by tne
Secretary of the Treasury, the said corporation shall
give the necessary facilities for transferring the pu»lic
funds from place to place, within the United States, or
the territories thereof, and for distributing the samemin
payment of the public creditors, without charging c° *
missions or claiming allowance on account of differtnC?
of exchange, and shall also do and perform the several
and respective duties of the commissioners of loans tor
the several states, or of any one or more of them, i
ever required by law.




FEDERAL BANKING LAWS AND REPORTS

139

SEC. 16. And be it further enacted, That the deposits fheep^1btflcof
of the money of the United States, in places in which the moneys to be
said bank and branches thereof may be established, shall Sanko? i£e
be made in said bank or branches thereof, unless the Sec- tK "SloCto
retary of the Treasury shall at any time otherwise order be laid before
and direct; in which case the Secretary of the Treasury thenlecrltary
shall immediately lay before Congress, if in session, and Sry^oMtTnot
if not, immediately after the commencement of the next being done,
session, the reasons of such order or direction.
SEC. 17. And he it further enacted, That the said cor- ^ft^ggp11
poration shall not at any time suspend or refuse payment From suspende
in gold and silver, of any of its notes, bills or obligations }J*nJ£S£e # *
nor of any moneys received upon deposit in said bank, ^ a r |^? e
or m any of its offices of discount and deposit. And ii with thei paythe said corporation shall at any time refuse or neglect 5tnat°5i2eIIter"
to pay on demand any bill, note or obligation issued by ^ u ° n \ 1 p er per
the corporation, according to the contract, promise or un- annum,
dertaking therein expressed; or shall neglect or refuse
to pay on demand any moneys received in said bank, or
in any of its offices aforesaid, on deposit, to the person or
persons entitled to receive the same, then, and in every
such case, the holder of any such note, bill, or obligation,
or the person or persons entitled to demand and receive
such moneys as aforesaid, shall respectively be entitled
to receive and recover interest on the said bills, notes,
obligations or moneys, until the same shall be fully
paid and satisfied, at the rate of twelve per centum per
annum from the time of such demand as aforesaid; Pro- Proviso.
Wed, That Congress may at any time hereafter enact
laws enforcing and regulating the recovery of the amount
°f the notes, bills, obligations or other ciebts, of which
payment shall have been refused as aforesaid, with the
rate of interest above mentioned, vesting jurisdiction for
that purpose in any courts, either of law or equity, of the
courts of the United States, or territories thereof, or of
the several states, as they may deem expedient.
,
exp
ofic-18. And be it further enacted, That if any person M J c 5 £
snail falsely make, forge or counterfeit, or cause or pro- terfeiflng, &c.
cu
re to be falsely made, forged or counterfeited, or willjpgyr aid or assist in falsely making, forging or countermting any bill or note in imitation of or purporting to
J* a bill cormnote issued by order of the president, direcA * i a n d o P a n y of the said bank, or any order or check
on the said sbanka lor corporation, or ajiy cashier thereof;
nif } l f a l ^ y t er, or cause or procure to be falsely
£U1 o r n or willingly aid or assist in falsely altering any
tered,
"
°te issued by order of the president, directors and
company o f the said bank, or any order or check on the
^•icl bank or corporation, or any cashier thereof; or shall
R^, utter or publish, or attempt to pass, utter or pub" s n as true, any false, forged or counterfeited bill or
rpor in to
2 u ident,l :directors**>a bin or note issued b ysaid ebank, or
S
? r d r of the
and company of the
02180 0—63

10




140

Proviso.

For engraving
after the
similtude of
the plates used
for the bank,
any plates, &c.

Punishment.

FEDERAL BANKING LAWS AND REPORTS

any false, forged or counterfeited order or check upon
the said bank or corporation, or any cashier thereof,
knowing the same to be falsely forged or counterfeited;
or shall pass, utter or publish, or attempt to pass, utter
or publish as true, any falsely altered bill or note issued
by order of the president, directors, and company of the
said bank, or any falsely altered order or check on the
said bank or corporation, or any cashier thereof, knowing the same to be falsely altered with intention to defraud the said corporation or any other body politic or
person; or shall sell, utter or deliver, or cause to be sold,
uttered or delivered, any forged or counterfeit note or
bill in imitation, or purporting to be a bill or note issued by order of the president and directors of the said
bank, Knowing the same to be false, forged, or counterfeited ; every such person shall be deemed and adjudged
guilty of felony, and being thereof convicted by due
course of law, shall be sentenced to be imprisoned and
kept to hard labour for not less than three years, nor
more than ten years, or shall be imprisoned not exceeding ten years, and fined not exceeding five thousand dollars. Provided, That nothing herein contained shall be
construed to deprive the courts of the individual states,
of a jurisdiction under the laws of the several states,
over any offence declared punishable by this act.
SEC. 19. And he it further enacted, That if any person
shall make or engrave, or cause, or procure to be made or
engraved, or shall have in his custody or possession, any
metallic plate, engraved after the similitude of any plate
from which any notes or bills, issued by the said corporation, shall have been printed, with intent to use such
plate, or to cause, or suffer the same to be used in forging
or counterfeiting any of the notes or bills issued by the
said corporation; or shall have in his custody or possession, any blank note or notes, bill or bills, engraved ana
printed after the similitude of any notes or bills issued
by said corporation, with intent to use such blanks, or
cause, or suffer the same to be used in forging or counterfeiting any of the notes or bills issued by the said corporation; or shall have in his custody or possession, anJ
paper adapted to the making of bank notes or bills, ana
similar to the paper upon which any notes or bills of tn&
said corporation shall have been issued, with intent to use
such paper, or cause, or suffer the same to be used in
forging or counterfeiting any of the notes or bills issuert
by the said corporation, every such person, being ^ e r e T
convicted, by due course of law, shall be sentenced to W
imprisoned, and kept to hard labour, for a term not exceeding five years, or shall be imprisoned for a term pot
exceeding five years, and fined m a sum not exceeding
one thousand dollars.




FEDERAL BANKING LAWS AND REPORTS

141

SEO. 20. And be it further enacted, That in considera- Bonus to be
paid to the
tion of the exclusive privileges and benefits conferred by United States
for this
this act, upon the said bank, the president, directors, and charter.
company thereof, shall pay to the United States, out of
the corporate funds thereof, the sum of one million and
five hundred thousand dollars, in three equal payments;
that is to say: five hundred thousand dollars at the expiration of two years; five hundred thousand dollars at
the expiration of three years; and five hundred thousand
dollars at the expiration of four years after the said bank
shall be organized, and commence its operations in the
manner herein before provided.
Congress to
SEC. 21. And be it further enacted, That no other bank establish no
other bank
shall be established by any future law of the United except in the
States during the continuance of the corporation hereby District of
created, for which the faith of the United States is here- Columbia.
by pledged. Provided, Congress may renew existing
charters for banks in the District of Columbia, not increasing the capital thereof, and may also establish any
other bank or banks in said district, with capitals not
exceeding, in the whole, six millions dollars, if they shall
deem it expedient. And, notwithstanding the expiration
°h u term ^ o r w k* c h t*16 s^d corporation is created, it
shall be lawful to use the corporate name, style, and ca- Authority to
use the name
pacity, for the purpose of suits for the final settlement of the corporation, Ac, for
ana liquidation of the affairs and accounts of the cor- two years after
poration, and for the sale and disposition of their estate, the charter
shall expire.
real, personal, and mixed: but not for any other purpose,
or m any other manner whatsoever, nor for a period exceeding two years after the expiration of the said term of
incorporation.
Limitation of
SEC. 22. And be it further enacted, That if the sub- time prescribed
for the bank's
reptions and payments to said bank shall not be made going into
m co
mpleted so as to enable the same to commence its operation.
operations, or if the said bank shall not commence its operations on nori abefore the first Monday in April next,
s
in?* i ' * 1 t0ln t ht sc at h e 'r eCongress may, at any time, withe after
nMU d ?
> declare, by law, this act
Committees

of
tf m E°L23* And ie tt further enacted, That it shall, at all of either house
Congress
"™s be lawful, for a committee of either house of Con- may inspect
the books, &c.
^ s , appointed for tlmt purpose, to inspect the books, of the bank.
her D cre
K° famine into the proceedings of the corporation For what
- £ ated, and. to report whether the provisions of purpose.
cnarter have been, by the same, violated or not; and
r
er any committee, as aforesaid, shall find and
or the President of the United States shall have
u ^° Relieve that the charter has been violated, it
m
ay be lawful ac asCongress to direct, or the President to
for
l
thft £ a ^C r e * ^ t° B sued o u t °f ^ e circuit court of
©
Stat ^w t ? f Pennsylvania, in the name of the United
tliT ' ( Wch shall be executed upon the president of
e
corporation for the time being, at least fifteen days



142

Proviso.

FEDERAL BANKING LAWS AND REPORTS
before the commencement of the term of said court,)
calling on the said corporation to show cause wherefore
the charter hereby granted, shall not be declared forfeited; and it shall be lawful for the said court, upon
the return of the said scire facias, to examine into the
truth of the alleged violation, and if such violation be
made appear, then to pronounce and adjudge that the
s a i(j charter is forfeited and annulled. Provided, however. Every issue of fact which may be joined between
the United States and the corporation aforesaid, shall be
tried by a jury. And it shall be lawful for the court
aforesaid to require the production of such of the books
of the corporation as it may deem necessary for the ascertainment of the controverted facts: and the final judgment of the court aforesaid, shaill be examinable in the
Supreme Court of the United States, by writ of error,
and may be there reversed or affirmed, according to the
usages of law.
APPROVED, April 10,1816.




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CO

First Annual Message—Andrew Jackson
Twenty-First Congress, 1st Session
DECEMBER 8, 1829.
[Source: James D. Richardson, A Compilation of the Messages and Papers of
the Presidents, Vol. 2, p. 1025]
*
*
*
*
*
*
*

The charter of the Bank of the United States expires in 1836, and
its stockholders will most probably apply for a renewal of their privileges. In order to avoid the evils resulting from precipitancy in a
measure involving such important principles and such deep pecuniary
interests, I feel that I can not, in justice to the parties interested, too
soon present it to the deliberate consideration of the Legislature "and
the people. Both the constitutionality and the expediency of the law
creating this bank are well questioned by a large portion of our fellowcitizens, and it must be admitted by all that it has failed in the great
end of establishing a uniform and sound currency.
Under these circumstances, if such an institution is deemed essential
to the fiscal operations of the Government, I submit to the wisdom oi
the Legislature whether a national one, founded upon the credit of the
Government and its revenues, might not be devised which would avoid
all constitutional difficulties and at the same time secure all the advantages to the Government and country that were expected to result
from the present bank.

Report of Senate Committee on Finance, on National Currency
[Sen. Doc. 104, Twenty-First Congress, 1st Session]
IN SENATE OF THE UNITED STATES
MARCH 29, 1830.
Read, and ordered to be printed

Mr. SMITH, of Maryland, made the following
EEPOET:
The Committee on Finance, to which was referred a resolution of tU
30th December, 1829, directing the Oommittee to inquire into the expediency of establishing an uniform National Currency for ttte
United States, and to report thereon to the Senate, report:
That nothing short of the imperative order of the Senate could
induce the committee to enter on a subject so surrounded with dim-




FEDERAL BANKING LAWS AND REPORTS

145

culty. They undertake it with diffidence and a distrust of their capacty to elucidate a subject that has engaged many nations, and the pens
of the ablest writers, without, as yet, coming to any definite conclusion. It still remains to be determined, What is the soundest and most
uniform currency ? One nation assumes one system, another a different plan. In one nation, a plan is devised, and succeeds for a time
by prudent and restrictive emissions. Elated with success, larger
and more extensive emissions are risqued; a rapid nominal rise of all
property takes place; the people are not aware that such nominal rise
is the effect of depreciation; the bubble bursts, and ruin to the unsuspecting, is the consequence. All history shows such a result in several
nations, and particularly in that of the United States. The committee, engaged on a variety of subjects, cannot devote so much time on
the resolution as the mover must believe would be necessary to develop
fully the question before them, to wit: A sound and uniform National
Currency. Presuming, from the tenor of the resolution, that the
uniform National Currency proposed, must be prepared by the National Government, circulated under its authority, and maintained by
its credit, the committee have complied with the instruction of the
Senate, by endeavoring to devise some plan, through which the agency
°l t ^ l e Government, in such a measure, could be safe, or useful; but,
after giving to it all the consideration they could bestow, their reflections have resulted in a belief that any such measure must resolve
itself, at last, into a mere system of paper money, issued by the Government. The resort to the issue of a paper money has been often the
desperate expedient of the wants of a nation. It has then found its
justification only in the necessity which created it: yet such are its
inevitable evils, that every prudent Government has, the moment its
pressing exigencies permitted, returned to the only safe basis of a
circulating medium, the precious metals, and the private credits attached to the use of them. Such were the expedients of the Governttient of the United States during its two wars; such its immediate
abandonment of them at the return of peace. But, in the present
condition of the Treasury of the United States, with a revenue far
teycmd its wants, with a debt almost nominal, and hastening to its
entire extinguishment, such a measure is not needed by the interests
<* the Government, nor is there the slightest indication of its being
demanded by the wants of the country. Of such an issue of paper
JfJ^^y, the Executive at Washington would be the natural fountain.
Ane agents of the Executive, the natural channels. The individuals,
and corporations, and States, who borrowed it, must become debtors
o the Government; and the inevitable consequence would be, the
creation of a moneyed engine of direct dependence on the officers of
JjWermnent, at variance with the whole scheme of our institutions.
A
ne limit to which this currency should be issued, the persons to whom
^ would be lent, the securities taken for its repayment, the places
wn
ere it should be redeemed, involve great complication and great




146

FEDERAL BANKING LAWS AND REPORTS

hazard, regarding it merely in a financial point of view, while, on
more enlarged considerations of political expediency, the objections
to it are. in the opinion of the committee, insuperable and fatal.
Believing such a scheme to be impracticable, the committee were consoled with the reflection that it is unnecessary, as they are satisfied that
the country is in the enjoyment of an uniform National currency, not
only sound and uniform in itself, and perfectly adapted to all the
purposes of the Government and the community, but more sound and
uniform than that possessed by any other country. The importance
of this truth will justify the committee in stating some details to
establish it.
The currency of the United States, the only legal currency, is gold
and silver. All debts to the Government, and all debts to individuals,
being received in that medium, and in no other. As, however, the
amount of coin requisite for these purposes would be unmanageable
and inconvenient, the United States, like other commercial countries,
have adopted the system of making credit supply many of the cases of
coin; and numerous banking companies have been established, issuing
notes, promising to pay on demand, gold and silver. The Government
of the United States has established one of a similar character; and
for the convenience of the community, the public revenue is collected
in gold and silver, the notes of the Bank of the United States, and
the notes of such solvent State banks, as the Bank of the United States
and its branches will receive as cash.
The currency, therefore, of the United States, in its relation to the
Government of the United States, consists of gold and silver, and of
notes equivalent to gold and silver. And the inquiry which naturally
presents itself, is, whether this mixed mass of currency is sound and
uniform for all the practical purposes of the Government, and the
trade of the Union. That it is so, will appear from the following
li
facts:
1st. The Government receives its revenue from—
343 Custom Houses,
42 Land Offices,
8,004 Post Offices,
134 Receivers of Internal Eevenue,
37 Marshals,
33 Clerks of Courts.
These, with other receiving officers, which need not be specified,
compose an aggregate of more than 9,000 persons, dispersed through
the whole of the Union, who collect the public revenue. From these
persons, the Government has, for the ten years preceding the 1st of
January, 1830, received, $230,068,855.17. This sum has been collected
in every section of this widely extended country. It has been disbursed at other points, many thousand miles distant from the pl^es
where it was collected; and yet it has been so collected and distributed,
without the loss, as far as the committee can learn, of a single dollar?




FEDERAL BANKING LAWS AND REPORTS

147

and without the expense of a single dollar to the Government. That
a currency, by which the Government has been thus enabled to collect
and transfer such an amount of revenue to pay its army and navy, and
all its expenses, and the national debt, is unsafe and unsound, cannot
readily be believed: for there can be no surer test of its sufficiency,
than the simple fact that every dollar, received in the form of a bank
note, in the remotest parts of the interior, is, without charge, converted
into a silver dollar, at every one of the vast number of places where
the service of the Government requires its disbursement. The Secretary of the Treasury, in his report of the 6th of December, 1828, declares that, during the four years preceding, the receipts of the Government had amounted to more than ninety-seven millions of dollars,
and that "all payments on account of the public debt, whether for interest or principal; all on account of pensions; all for the civil list; for
the army; for the navy; or for whatever purpose wanted, in any part
of the Union, have been punctually met." The same officer states, that
'it is the preservation of a good currency that can alone impart stability to property, and prevent those fluctuations in its value, hurtful
alike to individuals, and to national wealth." This advantage, the
Bank has secured to the community, by confining within prudent limits
its issues of paper, &c. &c.
, 2d. If this currency is thus sound and uniform for the Government,
rt is not less so to the community.
The basis of all good currency, should be the precious metals, gold
and silver; and in a mixed currency of paper circulating with gold or
s
uver, and convertible into it, the great object to be attained is, that the
Paper should always be equal to gold or silver; that is, it should always
oe exchangeable for gold or silver. Such a currency is perfect,
uniting the convenience of a portable material with the safety of a
metallic medium. Now it cannot be doubted, that throughout this
^nole country, the circulating bank notes are equal to specie, and convertible into specie. There may be, and probably are, exceptions;
Realise among banks, as among men, there are some who make a show
I1 unre ^li t lstrength.i e But it is a fact, so familiar to the experience of
ihH 1 C ? e n i n t l community, as to be undeniable, that, in all
^Atlantic and commercial cities, and generally speaking, throughout
«KS whole country, the notes of the State banks are equal to gold or
fcuver. The committee do not mean to say that there may not be
mu
£y banks, or that insolvencies do not occasionally occur among
t?°
£y anks, or that insolvencies do not occasionally occu
g
J
J«*n; b t
ii
t
«*n; buto as a k e bank whkh desires to maintain it character, must
every
its h t
y t m
t)J a e n t f t l l e settlements with the Bank of the United States, as
t)! ? ?
Government, or be immediately discredited, and must
uerefore keep it notes equal' to gold or silver, there can be little
l' t
ld
iler
its t
anger to the community, while the issues of the banks are restrained
17°^ running to excess, by the salutary control of the Bank of the
vritl The
?i btates > whose own circulation is extremely moderate, compared
u
amount of its capital. Accordingly, the fact is, that the




148

FEDERAL BANKING LAWS AND REPORTS

general credit of the banks is good, and that their paper is always convertible into gold or silver, and for all local purposes forms a local
currency equivalent to gold and silver. There is, however, superadded
to this currency, a general currency more known, more trusted, and
more valuable than the local currency, which is employed in the exchanges between different parts of the country. These are the notes
of the national bank. These notes are receivable for the Government,
by the 9,000 receivers, scattered throughout every part of the country.
They are in fact, in the course of business, paid in gold or silver,
though they are not legally, or necessarily so paid, by the branches of
the bank in every section of the Union. In all commercial places they
are received, in all transactions, without any reduction in value, and
never, under any circumstances, does the paper, from the remotest
branches, vary beyond a quarter of one per cent, in its actual exchange
for silver. Here, then, is a currency as safe as silver; more convenient,
and more valuable than silver, which, through the whole Western and
Southern, and interior parts of the Union, is eagerly sought in exchange for silver; which in those sections, often bears a premium paid
in silver; which is throughout the Union equal to silver in payment
to the Government and payments to individuals in business; and with
which, whether silver is needed in any part of the country, will command it, without the charge of the slightest fraction of a per centage.
By means of this currency, funds are transmitted at an expense less
than in any other country. In no other country can a merchant do
what every citizen of the United States can do—deposite, for instance,
his silver at St. Louis or Nashville, or New Orleans, and receive notes,
which he can carry with him 1,000 or 1,500 miles, to the Atlantic cities,
and there receive for them an equivalent amount of silver, without any
expense whatever; and in no possible event, an expense beyond a
quarter of one per cent. If, however, a citizen does not wish to incur
the anxiety of carrying these notes with him, or to run the hazard of
the mail, he may, instead of them, receive a draft, payable to himseli
or his agent alone, so as to ensure the receipt of an equal amount, at an
expense of not one-half, and often not one-fourth, of the actual cost of
carrying the silver. The owner of funds, for instance, at St. Louis or
Nashville, can transfer them to Philadelphia for one-half per cent.;
from New Orleans, generally, without any charge at all—at most,
one-half per cent.; from Mobile, from par to one-half per cent.; from
Savannah, at one-half per cent.; and from Charleston, at from par to
one-quarter percent.
This seems to present a state of currency approaching as near to
perfection as could be desired: for here is a currency issued at twenty-s
four different parts of the Union, obtainable by any citizen who h&
money or credit. When in his possession, it is equivalent to silver m
all his dealings with all the 9000 agents of the Government, through-




FEDERAL BANKING LAWS AND REPORTS

149

out the Union. In all his dealings with the interior, it is better than
silver; in all his dealings with the commercial cities, equal to silver;
and if, for any purpose, he desires the silver with which he bought it,
it is at his disposal, almost universally, without any diminution, and
never more than a diminution of one quarter per cent. It is not easy
to imagine, it is scarcely necessary to desire, any currency better than
this. t
It is not among its least advantages, that it bears a proper relation
to the real business and exchanges of the country; being issued only
to those whose credit entitles them to it, increasing with the wants of
the active operations of society, and diminishing, as these subside, into
comparative inactivity. While it is the radical vice of all Government paper to be issued without regard to the business of the community, and to be governed wholly by considerations of convenience
to the Government.
After escaping so recently from the degradation of a depreciated
paper currency, the committee would abstain from every thing which
might, however remotely, revive it. The period is not remote when, in
the language of the late Secretary of the Treasury, the country was
oppressed by a "currency without any basis of coin, or other effective
check, and of no value, as a medium of remittance or exchange, beyond
the jurisdiction of the State whence it had been issued—a currency
that not unfrequently imposed upon the Treasury the necessity of
meeting, by extravagant premiums, the mere act of transferring the
revenue, collected at one point, to defray unavoidable expense at another." It is still within the recollection of the Senate, when, at the
seat of Government itself, specie could only be had at 20 or 22 per cent.
m e
*change for the bank paper promises to pay specie; that for bank
notes of Baltimore, 2 per cent, were paid; for those of Philadelphia,
b to 7 per cent.; for those of New York, 15 to 16 per cent.; and for those
oi Boston, 20 to 22 per cent.: ruinous inequalities, which have now
happily disappeared.
aci. The soundness of the currency may be further illustrated by
Tr^
condition of the foreign exchanges.
Exchange on England is, at the present moment, more than 1 per
cent, under par; that is more than one per cent, in favor of the United
states. This being the real fact, disguised by the common forms of
quoting exchange on England at between 8 and 9 per cent, premium.
it would lead the committee too far from its present purpose to exp i n that the original estimate of the American dollar, as being worth
iour shillings and sixpense, and that, therefore, the English pound
sterling is worth $4 44, is wholly erroneous, and occasions a constant
"^apprehension of the real state of our intercourse with Great Brit*m- The Spanish dollar has not, for a century, been worth four and
• expense: the American dollar never was; and whatever artificial value




150

FEDERAL BANKING LAWS AND REPORTS

we may assign to our coins, is wholly unavailing to them in the crucibles of London or Paris. According to the latest accounts from London, at the close of December last, the Spanish dollar, instead of being
worth four shillings and sixpence, or 54 pence, was worth only 49^
pence the American dollar at least one-fourth per cent, less; so that,
to produce one hundred times four and sixpence it would be necessary
to send to England, not 100 dollars, but 109*46 Spanish dollars, or
109% of the United States' dollar. If to this be added the expenses
and charges of sending the money and converting it into English gold,
it will cost 111; so that 111 is, at this moment, the real par of exchange
between the United States and England. If, therefore, a bill at sight
can be procured for less than this sum, or a bill at sixty days for one
per cent, less, say .110 per cent, it is cheaper than sending silver; that
is to say: he who has silver to send to England can purchase a bill on
London for a greater amount than he would get if he shipped the silver itself, and of course exchange would be in favor of the United
States against England. Now, such bills can be bought at a less rate,
by more than one per cent, in every city in the United States.
This fact is conclusive as to the state of the currency. If the bank
notes of the country were not equal to specie, specie would be at a
premium, which it no where is at present. If the currency were
unsounded, more must be paid of that currency in order to produce
an equal amount of coin in another country, where these bank notes
do not circulate. But if, as is the case at present, the bank notes are
convertible into specie; if you can buy with bank notes as much as
you can buy with silver; and if, in the transactions of the country
abroad, the merchants, who, if the notes were not equal to coin, would
go to the bank and ship the coin, can pay as much debt in foreign
countries with the notes as by sending the coin; there seems nothing
wanting to complete the evidence of the soundness and uniformity of
the currency.
On the whole, the committee are of opinion that the present state
of the currency is safe for the community and eminently useful to
the Government; that, for some years past, it has been improving by
the infusion into the circulating medium of a larger portion of coin,
and the substitution of the paper of more solvent banks in lieu of those
of inferior credit; and that, if left to the progress of existing la^s
and institutions, the partial inconveniences, which still remain, of the
paper currency of the last war, will be wholly and insensibly remedied.
Under these circumstances, they deem it prudent to abstain from all
legislation; to abide by the practical good which the country enjoys,
and to put nothing to hazard by doubtful experiments.




FEDERAL BANKING LAWS AND REPORTS

151

The committee submit, for the information of the Senate, certain
questions propounded to the President of the Bank of the United
States, together with his answers thereto, and a document furnished
by that officer, showing the rates of exchange at which drafts are
drawn by the Bank of the United States and its offices of discount
and deposite; and ask to be discharged from the further consideration
of the subject.
QUESTIONS SUBMITTED TO THE PRESIDENT OF THE BANK OP THE IT. STATES,
WITH HIS ANSWERS.

Question 1. When the Bank went into operation, was not Philadelphia paper ten per cent, worse than Boston, and that much better
than Baltimore?
Answer. Philadelphia paper ivas 17 per cent, worse than Boston
paper—9 to 9y2 worse than New York paper—4% better than Baltimore.
Q. 2. Were not the State Banks indebted to the Government in
large sums, which they could not have paid in sound currency? If
so, to what amount ? And did not the Bank in many instances assume
those debts, and pay them in sound currency, (if so, to what amount?)
and indulge those Banks until it was convenient for them to pay?
and did not the Bank lose money by such indulgence ?
A. In the years 1817 and 1818, the Government transferred to the
bank at Philadelphia, from the State institutions, $7,472,419 87, which
jvas cashed, and $3,336,691 67 of special deposite, to be collected by
the bank, making $10,809,111 54. The loss sustained by the bank, I
5S!!not estimate. I should willingly compromise for a loss of only
Q* 3. Has the bank at any time oppressed any of the State banks?
A. Never. There are very few banks which might not have been
destroyed by an exertion of the power of the bank. None have ever
°een injured. Many have been saved. And more have been, and are
constantly relieved, when it is found that they are solvent, but are
su e
« ™g, under temporary difficulty.
y. 4. When a State bank becomes indebted to the bank to an improper extent, what course do you pursue ? Do you let them go beyond
T 1 T£ a m o u n t >o ai?d what is that amount %
6
b
to t 6 P m ^s h a i eec tt ihse tor k e e P t h e State banks within proper limits;
i
thi
P
business according to their means. For
l
J ? purpose they are called upon to settle; never forced to pay specie,
it ° a ^ * °:voide(i> hut navmp.nf, tnl^n
or
suff can be avoided, b «t payment is taken in their bills of exchange, oi
ofdI iff
occasionally until the bank can turn round; no amount
banV h fix6(*' because the principle we wish to establish is, that every
a* should always be ready to provide for its notes.




152

FEDERAL BANKING LAWS AND REPORTS

Q. 5. If you give drafts on any of the branches, or from one branch
on another, or on the mother bank, what is the commission charged?
A. The charge for drafts is less than the transportation of specie.
I send a detailed statement on this point.
Q. 6. Do you, and at every branch, pay specie on demand? Has
there ever been a refusal ?
A. Never.
Q. 7. Can you state whether specie is more or less abundant in
the United States at present, than at any former period ?
A. At the present moment, I think, specie is more abundant than
usual. It comes in as usual. And the state of the exchanges with
Europe is such that it is cheaper to buy bills, than to ship coin. The
bank had, on the first instant, $7,608,000, which is more than it has had
for nine years past.
Q. 8. When the debt is annually paid off to foreigners, do they remit in specie or bills of exchange? Do you supply the means in either
way?
A. When foreigners are paid off, a part is remitted in other stocks,
a part goes in bills, a considerable portion of which are bills of the
bank. Specie is never resorted to unless the bill market is so high as
to make tha,t mode of remittance cheaper.
Q. 9. Since you commenced the purchase and sale of bills of exchange, has the rate varied; if so, to what extent?
A. The operations of the bank in exchanges has had the effect of
preventing the great fluctuations to which they were previously liable.
Q. 10. What is the reason that exchange on England continues
above what was formerly considered the par, that is, the dollar valued
at 45. 6rf. sterling? Is it that the intrinsic value of the dollar has been
found to be less than 4s. 6rf ? If so, what is that intrinsic value ?
A. The reason is, that we choose to call our dollar 4s. 6rf. when it
never has been worth four and sixpence, and of course when it goes
abroad, it is estimated not by the name we give it, but according to its
real value.




RATES of BXOHANQE at which Drafts are drawn by the Banks of the United States and its Offices of Discount and Deposite.

l

On

i
Bk. U. S f e s .
ParaH
ParaK ParaK ParaJi
OffloePortland
Portsmouth
Boston
Providence
Hartford
New York
Par
Par
Baltimore
Waahingt'n Par
Par
Par
Par
Richmond
E»aroV4 P
ParoH ParaHNorfolk
ParoH
ParaH ParaH
ParaH
Fayettav'le
Charleston ParaK ParaK
ParaK ParaK
Savannah
Mobile
PaTQ\4
ParaU
N. Orleans
ParaH ParaVj
Parail
St. Louis
Nashville
araU
Parltf
ParaH
Louisville
Lexington
Cincinnati
Pittsburg
ParoVi ParaVj
ParaH
Buffalo
Parail P a H




p

p

"f

"f

Par

Par

Par
Par

Par
Par
Par

Par

Par

Hal
ParaH
Parala
ParaK
ParaV^
Par.*
ParaVi
PaH

Par
PaT

ParaK ParaK

Par
Par
Par
ParaH ParaH
ParaH ParaH

Par

Par

Par

Par

Par

ParaH ParaH

Hal
Par

ParaK ParaK ParaK ParaK ParaK

Par

Par

ParaK ParaK ParaK

Par
ParaH
ParaH
ParaH
Para>
ParoH Paral ParaH ParaH ParaV£ ParaH
1
ParaH
ParaH ParaH ParaH H
ParaH PawH
H
PawH ParaH ParaH ParaH
ParaH ParaH Para
ParaH
ParaH
p
^
H
H
ParaH
ParaK
ParaH
Par
Par
H a l Par
ParaH
Par

154

FEDERAL BANKING LAWS AND REPORTS

Report of House Committee of Ways and Means, on Presidential
Message About Bank of United States
[House Report 358, Twenty-First Congress, 1st Session, Pages 1-31]
BANK OP THE UNITED STATES.

APRIL 13,1830.

Read, and laid upon the table.

from the Committee of Ways and Means, to which the
subject had been referred, made the following

MR. MCDUFFIE,

REPORT:
The Committee of Ways and Means, to whom was referred so much of
the Message of the President ae relates to the Bank of the United
States, beg leave to report:
That they have bestowed upon the subject all the attention demanded by its intrinsic importance, and now respectfully submit the
result of their deliberations to the consideration of the House. There
are few subjects, having reference to the policy of an established government, so vitally connected with the health of the body politic, or m
which the pecuniary interests of society are so extensively and deeply
involved. No one of the attributes of sovereignty carries with it a
more solemn responsibility, or calls in requisition a higher degree of
wisdom, than the power of regulating the common currency, and thus
fixing the general standard of value for a great commercial community, composed of confederated States.
Such being, in the opinion of the committee, the high and delicate
trust exclusively committed to Congress by the Federal Constitution,
they have proceeded to discharge the duty assigned to them with a
corresponding sense of its magnitude and difficulty.
. .
The most simple and obvious analysis of the subject, as it *s
presented by the message of the President, exhibits the following questions for the decision of the National Legislature:
1. Has Congress the constitutional power to incorporate a bank,
such as that of the United States ?
2. Is it expedient to establish and maintain such an institution?
3. Is it expedient to establish "a National Bank, founded upon tue
credit of the Government and its revenues ?"
t
I. If the concurrence of all the departments of the Government, »l
an< d
different period of our history, under every administration, * j£e
ing the ascendency of both the great political parties, into which ; n
country was divided, soon after the adoption of the present Constitution, shall be regarded as having the authority ascribed to such sanctions by the common consent of all well regulated communities, tn
constitutional power of Congress to incorporate a bank? may ^
assumed as a postulate no longer open to controversy. In little m



FEDERAL BANKING LAWS AND REPORTS

155

than two years after the Government went into operation, and at a
period when most of the distinguished members of the Federal Convention were either in the Executive or Legislative councils, the act,
incorporating the first bank of the United States, passed both branches
°| Congress by large majorities, and received the deliberate sanction
of President Washington, who had then recently presided over the deliberations of the Convention. The constitutional power of Congress
ll P t ^ t l i e - act ° f i n c o r P o r a t j o n ) w a s thoroughly investigated, both in
the Executive Cabinet and in Congress, under circumstances, in all
respects, propitious to a dispassionate decision. There was, at that
time, no organization of political parties, and the question was therefore, decided by those, who, from their knowledge and experience, were
peculiarly qualified to decide correctly; and who were entirely free
from the influence of that party excitement and prejudice, which
would justly impair, in the estimation of posterity, the authority of
a legislative interpretation o the costitutional char
of the constitutional charter. No p
persons
p
can be more competent to give a just c s t r t i o n t the Constitution
be more competent to give just construction to th Constitution,
can
p
gy
g ;
than thosen whom a m op e
had a principal agency in framing it; and no adminisn Ca c
r
V ^ n Can c ^
perfect exemption from all those influences
ft
ti f
l
which, sometimes, pervert the judgments, even of the most wise and
patriotic, than that of the Father of his Country, during the first term
of his service.
Such were the circumstances, under which all the branches of the
National Legislature solemnly determined that the power of creating
a JNational Bank was vested in Congress by the Constitution. The
bank thus created, continued its operations for twenty years—the
period lva ewhich its charter was granted—during which time, public
for
j?^ ^ c r e dit were raised, from a prostrate, to a very elevated
condition, and the finances of the nation were placed upon the most
solid foundation.
When the charter expired, in 1811, Congress refused to renew it,
principally owing, as the committee believes to the then existing state
or political parties. Soon after the bank was chartered, the two great
parties that have since divided the country, began to assume an orfhi? e e uexisv e C a b i n Mr. Jefferson and Mr. Madison, the former in
*ence.
ti
t^X
e t , and the'latter in Congress, had been opposed
lishment
g ,
establishment of the bank, on constitu
constitutional grounds, and
ueing placed at the head of the party most unfavorable to the exlaced t th h d f h
fbl
t th
ension of the powers of the Government, by implication, the bank
prhicM C a m e t 0 b e r e S a r d e d a s ' i n s o m e d e g r e e » t h e t e s t o f P o l i t i c a l
er
son came into power, upon the strong tide of a great
revolution, the odium of the Alien and Sedition laws was,
communicated to the Bank of the United States; and, alft^»
Of ff at **e tgave his official sanction to an act, creating a new branch
i u
cm l i nts m tg tion,t s at New etOrleans, t and to sanother to punish the
c W r c a m e o f i bills > y > w h e n h e q u e t i o n o f renewing the
\j\1 i
before Congress, it was discussed as a party question.
1[ Wa ilia^n' 1 s o m e o f t h e m o s t distinguished republicans, including
ftp n l h > then Secretary of the Treasury, and Mr. Crawford,
*i a member of the Senate, were decidedly in favor of the renewal,
gaming the measure by able arguments, the votes in both branches
s were distinctly marked as party votes. At no time, since
02180 0-63

,11




156

FEDERAL BANKING LAWS AND REPORTS

the commencement of the Government, has there existed a more violent party excitement, than that which marked the period under review. It was the period of the embargo, non-intercourse, and other
commercial restrictions; when the undiscriminating opposition of the
leaders of the federal party to the measures adopted by the administration, to vindicate our rights against British aggression, had caused
the great majority of the American people to view these leaders as
the apologists of a nation, already regarded in the light of a public
enemy. When to these circumstances we add, that the stock of the
bank was principally held by British subjects, and Americans of the
unpopular party, the House will readily perceive how great were the
national and party prejudices, which must have been arrayed against
the proposition to renew its charter. It was stated by Mr. Clav, in a
speech delivered in the Senate, that seven-tenths of the stock belonged
to British subjects, and that certain English noblemen, and a late
Lord Chancellor, were among the very largest of the stockholders.
With all these difficulties to encounter, the proposition for renewing
the charter was lost only by the casting vote of the President of the
Senate, and by a majority of a single vote in the House of Representatives.
In less than three years after the expiration of the charter—the
war with Great Britain having taken place in the mean time—the
circulating medium became so disordered, the public finances so deranged, and the public credit so impaired, that the enlightened patriot, Mr. Dallas, who then presided over the Treasury Department,
with the sanction of Mr. Madison, and, as it is believed, every member of the cabinet, recommended to Congress the establishment of a
National Bank, as the only measure by which the public credit could
be revived, and the fiscal resources of the Government redeemed from
a ruinous, and otherwise incurable embarrassment: and, such had
been the impressive lesson taught by a very brief, but fatal experience, that the very institution, which had been so recently denounced,
and rejected by the republican party, being now recommended by a
republican administration, was carried through both branches oi
Congress, as a republican measure, by an overwhelming majority oi
the republican party. It is true that Mr. Madison did not approve
and sign the bill which passed the two Houses, because it was not sucn
a bill as had been recommended by the Secretary of the Treasury?
and because the bank it proposed*to create, was not calculated, *n
the opinion of the President, to relieve the necessities of the country. But he premised his objections to the measure, by "waiving the
question of the constitutional authority of the Legislature to establish an incorporated bank, as being precluded, in his opinion, by repeated recognitions, under varied circumstances, of the validity ot
such an institution in acts of the Legislative, Executive, and Judicial branches of the Government, accompanied by indications, in diiferent modes, of a concurrence of the general will of the nation.
Another bill was immediately introduced, and would, in all probability, have become a law, had not the news of peace, by doing away
the pressure of the emergency, induced Congress to suspend further
proceedings on the subject, until the ensuing session. A t the commencement of that session, Mr. Madison invited the attention of Congress to the subject, and Mr. Dallas again urged the necessity ot



FEDERAL BANKING LAWS AND REPORTS

157

establishing a bank, to restore the currency, and facilitate the collection
and disbursement of the public revenue; and so deep and solemn was the conviction upon the minds of the public functionaries,
that such an institution was the only practicable means of restoring
the circulating medium to a state of soundness, that, notwithstanding the decided opposition of all the State banks and their debtors,
and, indeed, the whole debtor class of the community, the act, incorporating the present Bank of the United States, was passed by considerable majorities in both branches of Congress, and approved byMr. Madison.
This brief history of the former and present bank, forcibly suggests
a few practical reflections. It is to be remarked, in the first place,
that, since the adoption of the Constitution, a bank has existed under
the authority of the Federal Government, for thirty-three out of forty
years; during which time, public and private credit have been maintained at an elevation fully equal to what has existed in any nation
in the world: whereas, in the two short intervals, during which no
national bank existed, public and private credit were greatly impaired,
and, in the latter instance, the fiscal operations of the Government
^vere almost entirely arrested. In the second place, it is worthy of
special notice, that, in both the instances in which Congress has created
a bank, it has been done under circumstances calculated to give the
highest authority to the decision. The first instance, as has been already remarked, was in the primitive days of the republic, when the
patriots of the Revolution, and the sages of the Federal Convention,
^ere the leading members both of the Executive and Legislative count s ; and when General Washington, who, at the head of her armies,
naci conducted his country to independence, and, as the head of the
Convention, had presided over those deliberations which resulted in
™ establishment of the present Constitution, was the acknowledged
president of a people, undistracted by party divisions. The second
instance was under circumstances of a very different but equally decisive character. We find the very party which had so recently debated the proposition to renew the charter of the old bank, severely
scnooled both by adversity and experience, magnanimously sacrificing
™ pride of consistency, and the prejudices of party, at the shrine of
patriotism.a l eIt may be said without disparagement, that an assembly
of1 ti T»r t n ^ an<* purer patriotism has never existed since the days
V tne Revolution, than the Congress by which the present bank was
ncorporated.a t If ever a political party existed, of which it might be
hp S a i &. t h "all the ends they aimed at were their country's," it was
trv ! ? p u b l ihc at n eP a ^ e r i lofo fthatwar w a Theyi nhad just conducted the couny
day. e
hwi
? e l h v a P. s a
> g ^
defence of her rights and
end / p a r't y es t r i, t m £ their views far above the narrow and miserable
of th P p l e I t fe,a ssoughts only t tonadvance l the epermanent thappiness
e
W
to thi g r e a e d t h a t t iey stablished h e
nt ba k ° '
'
Pres
som^ ^ V l ^ it will be no less instructive than curious, to notice
to t L a t lil ocn lt a n £ e s ™de in the opinions of prominent men, yielding
of
opnon ? f t I iy b a n experience. Mr. Madison, who was the leading
k
the h i °e a t e ed i n 181 created in 1791, recommended and sanctioned
renew l 7 t l l e
^? and Mr. Clay, who strenuously opposed the
tio*^
b a r t e r in 1811, as strenuously supported the proposi10
Srant the charter in 1816.



158

FEDERAL BANKING LAWS AND REPORTS

That may be said of the bank charter, which can be said of few
contested questions of constitutional power. Both the great political
parties that have so long divided the country, have solemnly pronounced it to be constitutional, and there are but very few of the
prominent men of either party, who do not stand committed in its
favor. When, to this imposing array of authorities, the committee
add the solemn and unanimous decision of the Supreme Court, in a case
which fully and distinctly submitted the constitutional question to
their cognizance, may they not ask, in the language of Mr. Dallas, "can
it be deemed a violation, of the right of private opinion to consider
the constitutionality of a national bank as a question forever settled
and at rest?"
And here the committee beg to be distinctly understood, as utterly
disclaiming the idea of ascribing to the decision of any or of all tlie
departments of the Government, upon a great constitutional question,
the binding authority which belongs to judicial precedents, in cases of
mere private right, depending upon the construction of the ordinary
acts of the Legislature. No length of prescription, or concurrence or
authority, can consecrate the usurpation of powers subversive of public liberty, and destructive of public happiness. But, where the power
exercised is clearly conducive to the public welfare, and its constitutionality is merely doubtful, it would seem to be one of the most obvious dictates of practical wisdom, to regard the decision of those ^no
had the best means of ascertaining the intention of the Constitution,
and who were actuated by the most undoubted purity and disinterestedness of motive, as of sufficient authority at least to overrule theoretical objections and silence individual scruples.
.
,
The committee will now submit a few remarks, with the design or
shewing, that, viewing the constitutionality of the bank as an original
question, the arguments in its favor are at least as strong as those
against it.
The earliest, and the principal objection urged against the constitutionality of a national bank, was, that Congress had not the power
to create corporations. That Congress has a distinct and substantive power to create corporations, without reference to the objects
entrusted to its jurisdiction, is a proposition which never has been
maintained, within the knowledge of the committee; but, that any ot
the powers expressly conferred upon Congress, is subject to the n o tation, that it shall not be carried into effect by the agency of a
corporation, is a proposition which cannot be maintained, in the
opinion of the committee.
If Congress, under the authority to pass all laws, necessary and
proper for carrying into effect the powers vested in all or any tot
the departments of the Government, may rightfully pass a law inflicting the punishment of death, without any other authority, it 1S
difficult to conceive why it may not pass a law, under the same
authority, for the more humble purpose of creating a corporation.
The power of creating a corporation, is one of the lowest attributes,
or, more properly speaking, incidents, of sovereign power. The
chartering of a bank, for example, does not authorize the corporate11
to do any thing, which the individuals composing it might not d°
without the charter. It is the right of every individual of the Union
to give credit to whom he chooses, and to obtain credit where he can



FEDERAL BANKING LAWS AND REPORTS

159

get it. It is not the policy of any commercial country to restrict the
free circulation of credit, whether in the form of promissory notes,
bills of exchange, or bank notes. The charter of the Bank of the
United States, therefore, merely enables the corporation to do, in an
artificial capacity, and with more convenience, what it would be lawful
for the individual corporators to do without incorporation. Mr,
Girard established a hank in Philadelphia without a charter, which
was in very high credit within the sphere of its circulation; and it
cannot be doubted, that he might have formed a banking co-partnership with the principal capitalists in the other commercial cities of
the Union, of which the bills would have had a general credit in every
part of the country, particularly if the Federal Government had provided that these bills should be received in discharge of its dues. The
only material particular in which the charter of the Bank of the
United States confers a privilege upon the corporation, apparently
inconsistent with the State laws, is, the exemption of the individual
property of the corporators from responsibility for the debts of the
corporation. But, if the community deal with the bank, knowing
that the capital subscribed is alone liable for its debts, no one can complain either of imposition or injury; and, in point of fact, no one
ever has complained on that score, or ever will. The real complaint
against the bank, is not that it has not a sufficient basis for its credit,
but that its credit is too extensive. The objection lies, therefore, not
gainst the artificial character communicated to the stockholders by
the charter, but against the pecuniary operations of the bank itself.
J>ow, these operations consist in the use of its own capital—a faculty
?u ?? r e l v derived from the Government, but, in the exercise of which,
the Government imposes many useful restrictions for the benefit of
itself and of the community.
Ahe committee havepresented this brief analysis of a bank corpora|!°n> *fth the view of showing that there is nothing in the nature of
"to thing, which renders it unfit to be an instrument in the hands of a
government, admitted to be sovereign in its appropriate sphere, for
carrying into effect powers expressly delegated.
T • f 1 J° W r e m ? i n s f ° r the committee to show that the Bank of the
T
^ited States is a "necessary and proper," or, in other words, a natural
anct appropriate means, of executing the powers vested in the Federal
government. In the discussion of 1791, and also in that before the
nn£reme Court, fthe powers of raising, collecting, and disbursing the
in<\ ar e 7 e n u e > o borrowing money on the credit of the United States,
in
c]l ? y & the public debt, were those which were supposed most
a
to f -rt0aC e rtrhye wei t h t h e m t h e incidental right of incorporating a bank,
t t
o> +• S a r e s operations. There can be no doubt, that these fiscal
rP
C
?£
neatly facilitated by a bank, and it is confidently befrom V « n ° p e r s ? n h a s Presided twelve months over the Treasury,
conol • t h a t s u c h a n
organization to the present time, without coming to the
finan l* ' t l m e o f eace institution is exceedingly useful to the public
thisn/ W n , t h e
P > but indispensable in time of war. But as
famiV
^ s t i o n has been fully unfolded in former discussions,,
famiV
tll ll e ^ s t i o n has been fully un
e
H
th
itt
ill
dt
in the rela
tion * v i t House, the committee will proceed to examine the relaPowen, # \ t h e B a n k o f t h e United States bears to another of the
• h e Fe<*eral Government, but slightly adverted to in former
ions of the subject.




160

FEDERAL BANKING LAWS AND REPORTS

The power to "coin money and fix the value thereof," is expressly
and exclusively vested in Congress. This grant was evidently intended to invest Congress with the power of regulating the circulating
medium. "Coin" was regarded, at the period of framing the Constitution, as synonymous with "currency," as it was then generally believed that bank notes could only be maintained in circulation by being the true representative of the precious metals. The word "coin,"
therefore, must be regarded as a particular term, standing as the representative of a general idea. No principle of sound construction "Wil
justify a rigid adherence to the letter, in opposition to the plain intention of the clause. If, for example, the gold bars of Ricardo should
be substituted for our present coins, by the general consent of the commercial world, could it be maintained that Congress would not have
the power to make such money, and fix its value, because it is not
"coined?" This would be sacrificing sense to sound, and substance to
mere form. This clause of the Constitution is analogous to that which
gives Congress the power "to establish post roads." Giving to the
word "establish" its restricted interpretation, as being equivalent to
"fix," or "prescribe," can it be doubted that Congress has the power
to establish a canal? or a river, as a post route, as well as a road.
Roads were the ordinary channels of conveyance, and the term was,
therefore, used as synonymous with "routes," whatever might be the
channel of transportation, and, in like manner, "coin," being the ordinary and most known form of a circulating medium, that term was
used as synonymous with currency.
An argument in favor of the view just taken, may be fairly deduced
from the fact, that the States are expressly prohibited from "coining
money, or emitting bills of credit," and from "making any thing but
gold and silver a lawful tender in payment of debts." This strongly
confirms the idea, that the subject of regulating the circulating medium, whether consisting of coin or paper, was, at the same time that
it was taken from the control of the States, vested in the only depository in which it could be placed, consistently with the obvious design
of having a common measure of value throughout the Union.
But, even if it should be conceded, that the grant of power to "coin
money and fix the value thereof" does not, in its terms, give Congress
the power of regulating any other than the "coined" currency ox the
Union, may not the power of regulating any substituted currency, and
especially one which is the professed representative of coin, be fairly
claimed as an incidental power—as an essential means of carrying inwj
effect the plain intention of the Constitution, in clothing Congress with
the principal power ? This power was granted in the same clause with
that to regulate weights and measures, and for similar reasons. The
one was designed to ensure a uniform measure of value, as the other
was designed to ensure a uniform measure of quantity. The former
is decidedly the more important, and belong essentially to the General
Government, according to every just conception of our system. A
currency of uniform value is essential to what every one will admit to
be of cardinal importance: the equal action of our revenue system*
upon the different parts of the Union. The state of things which existed when the Bunk was incorporated, furnished a most pregnant
commentary on this clause of the Constitution. The currency of the
country consisted of the paper of local banks, variously depreciated.



FEDERAL BANKING LAWS AND REPORTS

161

At one of the principal sea-ports the local currency was 20 per cent,
below par. Now it was in vain for Congress to regulate the value of
coin, when the actual currency, professing to be its equivalent, bore
no fixed relation to it. This great and essential power of fixing the
standard of value, was, in point of fact, taken from Congress, and
exercised by some hundreds of irresponsible banking corporations,
with the strongest human motives to abuse it, because their enormous
profits resulted from the abuse. The power of laying and collecting
imposts and excises, is expressly subject to the condition that they
'shall be uniform throughout the United States;" and it is also pronded, that "no preference shall be given, by any regulation of commerce, or revenue, to the ports of one State over those of another."
Aow, when it is known that the circulating medium of Baltimore was
w per cent, below the value of the circulating medium of Boston, is it
not apparent that an impost duty, though nominally uniform, would,
m effect, make a discrimination in favor of Baltimore, proportioned
to the depreciation of the local currency? Congress, therefore, not
°nly had the power, but, as it seems to the committee, were under the
most solemn const:' itional obligations to restore the disorded cura c y ; and the Bank of the United States was not only an appropriate
means for the accomplishment of that end, but, in the opinion of the
committee, the only safe and effectual means that could have been used,
inis view of the subject is in full accordance with the opinion of Mr.
jHadison, as expressed in his message of December, 1816. "But, says
ne
> for the interest of the community at large, as well as for the purPoses of the Treasury, it is essential that the nation should possess a
currency of equal value, credit, and use, wherever it may circulate.
ne
i n s t i t u t i o n has entrusted Congress, exclusively, with the power
f
01
creating and regulating a currency of that description, and the
measures which were taken, during the last Session, in execution of
"je power, give every promise of success. The Bank of the United
states, under auspices the most favorable, cannot fail to be an imporCai
*t auxiliary."
Such are the authorities and such the arguments which have brought
:"? ^ m i t t e e to the conclusion, that the power to incorporate a bank
in l e i n t a l t o t h e powers of collecting and disbursing the public revethl' o ™ r o ^ i n g money on the credit of the United States; of paying
^public debt; and, above all, of fixing and regulating the standard
nionf • ' a n d t h e r e b y ensuring, at least so far as the medium of payT 1 ^ o n c e n ^ d , the uniformity and equality of taxation,
T
of f i v n e x t question p r o p o s e d for consideration, is the expediency
in an
enrf I
$
incorporated bank, with a view to promote the great
Q
s already indicated. I n discussing the constitutionality of such a
b*;* r ' i s o m e o f t l i e considerations which render it inexpedient, have
dev l g y u n : ? o l ded. But these require a more full and complete
eiopment, while others remain to be presented.
tlinf ?i USt b e a s s u i *ied as the basis of all sound reasoning on this subject,
e istence
cW
/
of a paper currency, issued by banks deriving their
fffeqQ T m t h e S t a t e Governments, cannot be prohibited by Conwov
. d e e d > bank credit and bank paper are so extensively mter* i J f l ^ t h the commercial operations of society, that, even if Cone
Profl
i n s t i t u t i o n a l power, it would be utterly impossible to
aUce
so entire a change in the monetary system of the country, as



162

FEDERAL BANKING LAWS AND REPORTS

to abolish the agency of banks of discount, without involving the community in all the distressing embarrassments usually attendant on
great political revolutions, subverting the titles to private property.
The sudden withdrawal of some hundred millions of bank credit, would
be equivalent, in its effects, to the arbitrary and despotic transfer of the
property of one portion of the community to another, to the extent,
probably, of half that amount. Whatever, therefore, may be the advantages of a purely metallic currency, and whatever the objections to
a circulating medium partly composed of bank paper, the committee
consider that they are precluded, by the existing state of things, from
instituting a comparison between them, with a view to any practical
result.
If they were not thus precluded, and it were submitted to them as
an original question, whether the acknowledged and manifold facilities of bank credit and bank paper, are not more than counterbalanced
by the distressing vicissitudes in trade incident to their use, they are by
no means prepared to say, that they would not give a decided preference to the more costly and cumbersome medium.
But the question really presented for their determination, is not between a metallic and a paper currency, but between a paper currency
of uniform value, and subject to the control of the only power competent to its regulation, and a paper currency of varying and fluctuating value, and subject to no common or adequate control whatever.
On this question it would seem that there could scarcely exist a difference of opinion; and that this is substantially the question involved in
considering the expediency of a national bank, will satisfactorily appear by a comparison of the state of the currency previous to the
establishment of the present bank, and its condition for the last ten
years.
Soon after the expiration of the charter of the first Bank of the
United States, an immense number of local banks sprung up under the
pecuniary exigencies produced by the withdrawal of so large an
amount of bank credit, as necessarily resulted from the winding up
of its concerns—an amount falling very little short of fifteen millions
of dollars. These banks being entirely free from the salutary control
which the Bank of the United States had recently exercised over the
local institutions, commenced that system of imprudent trading and
excessive issues, which speedily involved the country in all the embarrassments of a disordered currency. The extraordinary stimulus
of a heavy war expenditure, derived principally from loans, and a
corresponding multiplication of local banks, chartered by the double
score in some of the States, hastened the catastrophe which must have
occurred, at no distant period, without these extraordinary causes.
The last year of the war presented the singular and melancholy
spectacle of a nation abounding in resources, a people abounding ij1
self-devoting patriotism, and a Government reduced to the very brink
of avowed bankruptcy, solely for the want of a national institution,
which, at the same time that it would have facilitated the Government
loans and other Treasury operations, would have furnished a circulating medium of general credit in every part of the Union. In this view
of the subject, the committee are fully sustained by the opinion of Mr-




FEDERAL BANKING LAWS AND REPORTS

163

Dallas, then Secretary of the Treasury, and by the concurring and
almost unanimous opinion of all parties in Congress: for, whatever
diversity of opinion prevailed, as to the proper basis and organization
of a bank, almost every one agreed that a national bank, of some sort,
was indispensably necessary to rescue the country from the greatest of
financial calamities.
The committee will now present a brief exposition of the state of
currency at the close of the war, of the injury which resulted from it,
as well to the Government as to the community, and their reasons for
believing that it could not have been restored to a sound condition,
and cannot now be preserved in that condition, without the agency of
such an institution as the Bank of the United States.
The price current appended to this report will exhibit a scale of
depreciation in the local currency, ranging through various degrees
to twenty? and even to twenty-five per cent. Among the principal
pastern cities, Washington and Baltimore were the points at which
the depreciation was greatest The paper of the banks in these places,
^as from 20 to 22 per cent, below par. At Philadelphia the depreciation was considerably less, though even there it was from 17 to 18 per
cent. In New York and Charleston, it was from 7 to 10 per cent,
tfut in the interior of the country, where banks were established, the
depreciation was even greater than at Washington and Baltimore.
. n t l l e Western part of Pennsylvania, and particularly at Pittsburg,
u was 25 per cent. These statements, however, of the relative depreciation of bank paper at various places, as compared with specie,
give a very inadequate idea of the enormous evils inflicted upon the
community, by the excessive issues of bank paper. No proposition is
°etter established than that the value of money, whether it consists
°l ?P ecie or paper, is depreciated in exact proportion to the increase
°* its quantity, s iany given state of the demand for it. If, for exin
S
' e b a n ^ ' n 1S.16> doubled the quantity of the circulating
eciium t by their excessive issues, they produced a general degradan of
. nee dentire emass of the currency, including gold and silver,
t0 th
£*? i
redundancy of the issues, and wholly independent oi thewrelative depreciation of bank paper at different places, as
?mpared i t h specie. The nominal money price of every article was
f ^ ^ one a t i o n o f t l a e cent, higher than it would have been, but
hundred per
is f u • p l i c
quantity of the circulating medium. Money
™ £ more nor less than the measure by which the relative value
articles of merchandise is ascertained. If, when the circulating
** is fifty millions, an article should cost one dollar, it would
*
cost two, if, without any increase of the uses of a circulating
its quantity should be increased to one hundred millions.
n
se in the price of commodities, or depreciation in the value of
% as compared with them, would not be owing to the want of
HI the bank bills, of which the currency happened to be comanrt
^ould exist, though these bills were of undoubted credit,
n
resiil?°* Vertibleoim t toh e P ^ e a t t h e pleasure of the holder, and would
s
S mp
fr
to »T l u n d 7
redundancy of their quantity. I t is important
bant
erstanding of the subject, that the relative depreciation of
1K
paper at different places, as compared with specie, should not




164

FEDERAL BANKING LAWS AND REPORTS

be confounded with the general depreciation of the entire mass of
the circulating medium, including specie. Though closely allied, both
in their causes and effects, they deserve to be separately considered.
The evils resulting from the relative depreciation of bank paper at
different places, are more easily traced to their causes, more palpable
in their nature, and consequently more generally understood by the
community. Though much less ruinous than the evils resulting from
the general depreciation of the whole currency, they are yet of sufficient
magnitude to demand a full exposition.
A very serious evil, already hinted at, which grew out of the relative
depreciation of bank paper, at the different points of importation,
was its inevitable tendency to draw all the importations of foreign
merchandise to the cities where the depreciation was greatest, and
divert them from those where the currency was comparatively sound.
If the Bank of the United States had not been established, and the
Government had been left without any alternative but to receive the
depreciated local currency, it is difficult to imagine the extent to
which the evasion of the revenue laws would have been carried. Every
State would have had an interest to encourage the excessive issues of
its banks, and increase the degradation of its currency, with a view
to attract foreign commerce. Even in the condition which the currency had reached in 1816, Boston, and New York, and Charleston,
would have found it advantageous to derive their supplies of foreign
merchandise through Baltimore; and commerce would undoubtedly
have taken that direction had not the currency been corrected. 1°
avoid this injurious diversion of foreign imports, Massachusetts, ana
KTew York, and South Carolina, would have been driven, by all motives
of self defence and self interest, to degrade their respective currencies
at least to a par with the currency of Baltimore; and thus a rivalry in
the career of depreciation would have sprung up, to which no limit can
be assigned. As the tendency of this state of things would have been
to cause the largest portion of the revenue to be collected at a few
places, and in the most depreciated of the local currency, it would
have followed that a very small part of that revenue would have been
disbursed at the points where it was collected. The Government would
consequently have been compelled to sustain a heavy loss upon the
transfer of its funds to the points of expenditure. The annual loss
which would have resulted from these causes alone, cannot be estimated
at a less sum than two millions of dollars.
. .
But the principal loss which resulted from the relative depreciation
of bank paper at different places, and its want of general credit, w*
that sustained by the community in the great operations of commercial
exchange. The extent of these operations annually, may be safely
estimated at sixty millions of dollars. Upon this sum the loss sustained
by the merchants, and planters, and farmers, and manufacturers? *a5
not probably less than an average of ten per cent, being the e x c e f .£
the rate of exchange beyond its natural rate in a sound state of t»e
currency, and beyond the rate to which it has been actually educed
by the operations of the Bank of the United States. It will be
perceived, that an annual tax of six millions of dollars was levied
the industrious and productive classes, by the large moneyed cap^jjjj7
in our commercial cities, who were engaged in the business of Wyj
kerage. A variously depreciated currency, and a fluctuating state



FEDERAL BANKING LAWS AND REPORTS

165

the exchanges, open a wide and abundant harvest to the money brokers; and it is not, therefore, surprising, that they should be opposed
to an institution, which, at the same time that it has relieved the community from the enormous tax just stated, has deprived them of the
enormous profits which they derived from speculating in the business
of exchange. In addition to the losses sustained by the community,
in the great operations of exchange, extensive losses were suffered
throughout the interior of the country, in all the smaller operations of
trade, as well as by the failure of the numerous paper banks, puffed
into a factitious credit by fraudulent artifices, and haying no substantial basis of capital to ensure the redemption of their bills.
But no adequate conception can be formed of the evils of a depreciated currency, without looking beyond the relative depreciation,
at different places, to the general depreciation of the entire mass. It
appears from the report of Mr. Crawford, the Secretary of the Treasury in 1820, that during the general suspension of specie payments,
by the local banks, in the years 1815 and 1816, the circulating medium
< i the United States had reached the aggregate amount of one hun>
dred and ten millions of dollars, and that, in the year 1819, it had been
reduced to forty-five millions of dollars, being a reduction of fifty-nine
per cent, in the short period of four years. The committee are inclined to the opinion, that the severe and distressing operation of
restoring a vicious currency to a sound state, by the calling in of bank
paper, and the curtailment of bank discounts, had carried the reduction of the currency, in 1819, to a point somewhat lower than was
consistent with the just requirements of the community for a circulatJ
ng medium, and that the bank discounts have been gradually enlarged
smce that time, so as to satisfy those requirements. It will be assumed,
therefore, that the circulating medium of the United States has been
ntty-nve millions of dollars for the last ten years, taking the average.
*iven upon this assumption it will follow, that the national currency
nas been one hundred per cent, more valuable for the last ten years,
tnan it was in 1816. In other words, two dollars would purchase no
more of any commodity in 1816, than one dollar has been capable of
Purchasing at any time since 1819. It is obvious, therefore, that the
appreciation of the paper of particular banks, at any particular time,
as compared with specie, furnishes no criterion by which to ascertain
P A I 8 6 1 ^ 1 depreciation of the whole currency, including specie, as
compared with the value of that currency at a different period. A
b
I>ecie dollar in 1816, would purchase no more than half as much as a
PaPer dollar will purchase at present.
. .
rpffJ m g endeavored to explain, thus briefly, the general depreciation
^uiting from a redundant currency, the committee will now proceed
£ P° lnt out some of the injurious consequences which have resulted
° m ™°se great changes in the standard of value, which have been
^avoidably produced by the correction of the redundancy.
n m dmd
.
u a l who borrowed a sum of money in 1816, and paid it m
, aevidently returned to the lender double the value received from
lftift n d °.ne w h o P a id a debt in 1820, which he had contracted m
thni' £S? levi dently t h e s a m e
paid double the value he had stipulated to pay,
flurt ; onm i n a l l y
amount in money. It is in this way that
T ? s in the quantity and value of the currency interfere, in the
unjust and injurious manner, between debtor and creditor.



166

FEDERAL BANKING LAWS AND REPORTS

And when banks have the power of suspending specie payments,
and of arbitrarily contracting and expanding their issues, without
any general control, they exercise a more dangerous and despotic
power over the property of the community, than was ever exercised by
the most absolute government. In such a state of things, every man
in the community holds his property at the mercy of money making
corporations, which have a decided interest to abuse their power.
By a course of liberal discounts and excessive issues for a few years,
followed by a sudden calling in of their debts and contraction of their
issues, they would have the power of transferring the property of
their debtors to themselves, almost without limit. Debts contracted
when their discounts were liberal, and the currency of course depreciated, would be collected when their discounts were almost suspended, and the currency of course unnaturally appreciated; and in
this way the property of the community might pass under the hammer, from its rightful owners to the banks, for less than one half its
intrinsic value. If the committee have not greatly mistaken the matter, there is more of history than of speculation in what they have
here presented to the consideration of the House.
It is impossible to form any thing like an accurate estimate of the
injuries and losses sustained by the community, in various ways, by
the disorders and fluctuations of the currency, in the period which
intervened between the expiration of the old bank charter, and the
establishment of the present bank. But some tolerable notion may be
formed of the losses sustained by the Government, in its fiscal operations, during the war.
The committee have given this part of the subject an attentive and
careful examination, and they cannot estimate the pecuniary losses
of the Government, sustained exclusively for the want of a sound
currency, and an efficient system of finance, at a sum less than forty-six
millions of dollars. If they shall make this apparent, the House will
have something like a standard for estimating the individual losses
of the community.
The Government borrowed, during the short period of the ^ar,
eighty millions of dollars, at an average discount of fifteen per cent.,
giving certificates of stock, amounting to eighty millions of dollars,
in exchange for sixty-eight millions of dollars, in such bank paper
as could be obtained. In this statement, Treasury notes are considered as stock, at twenty per cent, discount. Upon the very face of
the transaction, therefore, there was a loss of twelve millions of dollars, which would, in all probability, have been saved, if the Treasury
had been aided by such an institution as the Bank of the United States.
But the sum of sixty-eight millions of dollars, received by the Government, was m a depreciated currency, not more than half as valuable as that in which the stock given in exchange for it, has been
and will be redeemed. Here, then, is another loss of thirty-*?1"

this great pecuniary loss m less than three years of war, amounting
annually to more than the current expenses of the Government in W*
^ T A \
I S - W O r t h w h i l e t 0 in< l uire > w h ° were the persons i*>
profited to this enormous amount by the derangement of the cur


FEDERAL BANKING LAWS AND REPORTS

167

rency? It will be found that the whole benefit of this speculation
upon the necessities of the Government was realized by stockjobbers
and money brokers, the very same class of persons who profited so
largely by the business of commercial exchanges, in consequence of
the disorders of the currency, and who have the same interest in
the recurrence of those disorders as lawyers have in litigation, or
physicians in the diseases of the human frame. Having presented
these general views of the evils which existed previous to the establishment of the Bank of the United States, it remains for the committee to inquire how far this institution has effected a remedy of
those evils.
t The first great question which arises under this branch of the inquiry
is, whether or no the bank has corrected the disorders of the circulating medium, by providing a paper currency, convertible into
specie at the pleasure of the holder, and of equal value with specie at
all points of the Union ?
The Chief Magistrate, in that part of his first message which relates to the Bank of the United States, expresses the opinion, that
it has failed in the great end of establishing a uniform and sound
currency." After giving to this opinion all the consideration to
which it is so justly entitled, from the eminent station and high character of the citizen by whom it is entertained, the committee are constrained to express their respectful but decided dissent from it. It
js true, that the bank does not, in all cases, redeem the bills issued
by any one of its branches, indiscriminately at all the other tranches;
and it is in reference to this fact, as the committee persume, that the
j/^clent expresses the opinion that the institution has failed to estabush a uniform and sound currency."
It is confidently believed, that no one of the persons who were principally instrumental in establishing the bank, ever entertained an idea
tnat it would attempt t ed
it bills at any of its offices other than
cery
s no such requirement, and it would
e
ghly
inexpedient if it had, to say nothing of its obvious injustice. The
inevitable effect of such a requirement, would have been to compel the
oank to perform the whole of the commercial exchanges of the country,
^ithout any compensation. It would not be more unjust to require a
Koad Company to transport all the productions of the country
^ u t compensation. No institution could stand such an operation;
dn */ 7 a s t h ? ^judicious attempt of the first direction of the bank to
° it, that principally contributed to the embarrassments of 1819. A
^mmittee was appointed by the House of Representatives, m that
of f£ 1°olnve ?tigate the management of the bank; and in the report
til T? c m m i ttee, as well as in the discussions to which it gave rise in
' * fouse, this attempt of the direction to redeem the bills of the
J>utution,e sindiscriminately, at all its branches, was indicated as one
in f£8 °? u s o f t h e existing embarrassment. No one who participated
ifck'ii • t e ' P r e t e n d ed to allege that the bank was bound to redeem
^ iiis indiscriminately, or that it was expedient that it should do so.
inately,
epede
n? inosty that m one did was t apologise for the unwise attempt,
any
did,
to ologise
nat recle e t r ? ains for the committee to show that this indiscrimiJ
xZ
emability of the bills of all the branches of the bank, is not
cessary to "the establishment of a uniform and sound currency."



168

FEDERAL BANKING LAWS AND REPORTS

Human wisdom has never effected, in any other country, a nearer
approach to uniformity in the currency, than that which is made by
the use of the precious metals. If, therefore, it can be shown that
the bills of the United States' Bank, are of equal value with silver at
all points of the Union, it would seem that the proposition is clearly
made out; that the bank has accomplished "the great end of establishing a uniform and sound currency." It is not denied that the bills
of the mother bank, and of all its branches, are invariably and promptly redeemed in specie, whenever presented at the offices by which they
have been respectively issued, and at which, upon their face, thev purport to be payable. Nor is it denied that the bills of the bank, and
of all the branches, are equal to specie in their respective spheres of
circulation. Bills, for example, issued by the mother bank, are admittedto be equal to silver in Pennsylvania, and all those parts of
the adjacent States of which Philadelphia is the market. But it is
contended that these bills, not being redeemable at Charleston and
New Orleans, are not of equal value with silver to the merchant who
wishes to purchase cotton with them, in those cities. Now, if the
Philadelphia merchant had silver, instead of bank bills, he certainly
could not effect his purchases with it in Charleston or New Orleans,
without having the silver conveyed to those places; and it is equally
certain that he could not have it conveyed there, without paying for
its transportation and insurance. These expenses constitute the natural rate of exchange between those cities, and indicate the exact
sum which the merchant would give as a premium for a bill of exchange, to avoid the trouble and. delay of transporting his specie. It
is obvious, therefore, that, even for tnese distant operations of commerce, silver would be no more valuable than the bills of the bant*
for these would purchase a bill of exchange on either of the cities
mentioned, precisely as well as silver. If the operation should be reversed, and the planter of Louisiana or South Carolina should desire
to place his funds in Philadelphia with a view to purchase merchandise, he would find the bills of the branch bank in either of those
States, entirely equivalent to silver in effecting his object. Eren»
therefore, if the bank had not reduced the rate of the exchanges, it
iht b
fl
d
l
might be safely asserted, that its bills would be of equal value tn
silver at every point in the Union, and for every purpose, whether
local or general.
But it is impossible to exhibit any thing like a just view of the
beneficial operations of the bank, without adverting to the great reduction it has effected, and the steadiness it has superinduced, in the rate
of the commercial exchanges of the country. Though this branch 01
the business of the bank has been the subject of more complaint, perhaps, than any other, the committee have no hesitation in saying? ij
has been productive of the most signal benefits to the community, ana
deserves the highest commendation. It has been already stated that
it has saved the community from the immense losses resulting fro**1 *
high and fluctuating state of the exchanges. It now remains to show
its effect in equalizing the currency. In this respect, it has a
productive of results more salutary than were anticipated by the
sanguine advocates of the policy of establishing the bank. It
actually furnished a circulating mediim, more uniform than • >
*
This proposition is susceptible of the clearest demonstration,
whole circulating medium were specie, a planter of Louisiana.



FEDERAL BANKING LAWS AND REPORTS

169

should desire to purchase merchandise in Philadelphia, would be
obliged to pay one per cent, either for a bill of exchange on this latter
place, or for the transportation and insurance of his specie. His specie
at New Orleans, where he had no present use for it, would be worth
one per cent, less to him than it would be in Philadelphia, where he
had a demand for it. But, by the aid of the Bank of the United
States, one half of the expense of transporting specie is now saved to
him. The bank, for one half of one per cent, will give him a draught
upon the mother bank at Philadelphia, with which he can draw
either the bills of that bank, or specie, at his pleasure. In like manner,
the bank and its branches will give draughts from any point of the
Union to any other where offices exist, at a per centage greatly less
than it would cost to transport specie, and in many instances at par.
If the merchant or planter, however, does not choose to purchase a
draught from the bank, but prefers transmitting the bills of the office
where he resides to any distant point, for commercial purposes, although these bills are not strictly redeemable at the point to which
they are transmitted, yet, as they are receivable in payment of all dues
to the Government, persons will be generally found willing to take
them at par; and if they should not, the bank will receive them frequently at par, and always at a discount much less than would pay
the expense of transporting specie. The fact that the bills of the bank
and its branches are indiscrimately receivable at the customhouses
and land offices, in payment of duties, and for the public lands, has an
eflect m giving uniformity to the value of these bills, which merits a
more full and distinct explanation.
J or all the purposes of the revenue, it gives to the national currency
tnat perfect uniformity, that ideal perfection, to which a currency of
gold and silver, in so extensive a country, could have no pretensions.
A
bill issued at Missouri is of equal value with specie at Boston, in
Payment of duties; and the same is true of all other places, however
distant, where the bank issues bills, and the Government collects its
f W h e n
that the bank performs,
wl' l w f W h e n itf is> moreover, considered, t
p
,
ost scrupulous punctuality, the stipulation to transfer the
t l i t the stipulation to transfer the
7™ the most scrupul
of
unds the Government to any pont where they may be wanted, free
ex
pnse, it must be apparent that the committee are correct, to the
^ry letter, in stating that the bank has furnished, both to the Governnt St to the people, a cwrreiwy of absolutely uniform valus in all
and
> I™* aU the purposes of paying the public contributions, and
umng the public revenue. And when it is recollected that the
dn°ll ernment a n n u ally collects and disburses more than 23 millions of
collars,
familiar with the subject will at once
uouars6 those bills w h i cat aall o f i l i
who are ht rll f
ith
at
e
vast
>
absolutely uniform value for this
com ° peratlon > m u s t be very nearly so for all the purposes of general
in tl£On ti^hofe, c ithen, it may be confidently asserted, that no country
Unif iTc t a t ehs a s aan r c u l ating medium of greater uniformity than the
£ranP i e x t e ; t l l ds a
that no country of any thing like the same geon
StatP D t l i e S c o r a currency at all comparable to that of the United
menf *
.
^ oi uniformity. The committee have seen the stateof Eiiro ea n in t^lligent traveller, who has visited almost every part
part^ P > exhibiting thee great variations of the currency in different
Bank * Q s a m e e m P ^ r o r kingdom. In Russia, the bills of the
°* St. Petersburgh have a very limited circulation. At Riga,



170

FEDERAL BANKING LAWS AND REPORTS

and throughout Courland, Livonia, and all the Southern parts of the
empire, the currency is exclusively of silver coins. In Denmark, the
notes of the Bank of Copenhagen are current only in Zealand, the
others islands, and Jutland, but will not pass at all in Sleswic and
Holstein, which constitute the best portion of the kingdom. Since the
Congress of Vienna, Germany is divided into thirty-nine separate
States, each having a distinct currency, though represented in the
Diet at Frankfort. Out of the territory in which these several currencies are issued, they are mere articles of merchandise; which circumstance has given rise in every town to a numerous and distinct class
of tradesmen, called money changers. How far these separate and
unconnected currencies have a tendency to embarrass commerce, may
be inferred from the fact, that a traveller going from St. Petersburgh
to Calais will lose upon the unavoidable changes of money an average
of six per cent. In France, the bills of the bank are of such large
denominations as to be adapted only to the greater operations of commerce, and are principally confined to the bankers and extensive
traders in Paris. The general currency is silver; and, to avoid the
trouble of carrying this to distant parts of the kingdom, gold pieces,
or bills of exchange, which are preferable, are purchased at a premium
of from one and a half to four per cent. After this brief review of
the currencies of Europe, the committee will barely state, as a conclusive vindication of our currency from the imputation of unsoundness, that there is no point in the Union, at which a bill of the United
States' Bank, issued at the opposite extremity of the country, is at a
discount of more than one-fourth of one per cent.
In confirmation of the views here presented, as to the comparative
uniformity of the currency furnished by the bank, and, also, as to the
obligation of the bank to redeem its bills, indiscriminately, at all the
offices, the committee will present a few brief extracts from the speech
of a statesman, whose opinions have every title to authority on these
important subjects. Mr. Lowndes, in discussing the question, how
far the bank had performed the great duty for which it was created,
used the following decided language in 1819, when the currency had
not reached the point of uniformity it has now attained by half of one
per cent.
"The great object of the Government in chartering the bank, was to
provide a currency which should have that degree of stability and
uniformity in its value which is required by the interests both of our
commerce and revenue. A currency, equally valuable at every plw*
and every time, cannot be provided by human wisdom. The nearest
approach to this object has been generally supposed to be afforded by
the employment of gold and silver as the measures of value. The
14th Congress did not aim at ideal perfection; they wished to combine
with the conveniencies of bank circulation an uniformity of value
equal to that which was possessed by the precious metals; and the
means which they employed to secure this uniformity were simple ana
effectual, by enjoining, under a heavy penalty, the payment of all its
notes in com, upon demand. In the report, indeed, the notes of the
national bank are said to be now 'on the same footing with those of
local banks.' Of the footing on which local bank notes stood, he
should speak hereafter; but the price current upon his table informed
him, that the greatest discount on branch notes of the United States



FEDERAL BANKING LAWS AND REPORTS

171

was three-fourths of one per cent. This was a value much more uniform than that which coin could be expected to have in so extensive a
country. He had been lately looking into a book on political economy, which had been published here, with high, and, in respect to its
clearness and precision, with just commendations—the work of Mr.
Tracy. He inferred from one of his chapters, that the difference of
exchange between Marseilles and Paris was often from two to three
percent. If, with all the facilities afforded by the internal improvements in which France is so rich, with a currency consisting almost
exclusively of gold and silver, the variation in the value of money is
three times greater in her territory than on our continent* can it be
said, that, in this respect, the bank has not fulfilled the objects of its
institution ? ^ Before its establishment, the value of bank notes, even in
the commercial States, had varied twenty per cent from each other;
and, as none of them bore a fixed proportion to the precious metals,
or to any natural standard, it was impossible to assign any limit to
their depreciation. You have required that the currency furnished by
™ national bank should be every where convertible into silver, and
|t is so. You have expected that it should be as uniform as coin, and
W ? ° r e S °' ^ e w o u ^ n o t detain the committee by reading a paper,
^mch he had prepared with that intention, containing the state of ex™nge, since the establishment of the bank, with England, France,
ana Holland: for he found himself occupying much more of their time
[nan he had expected. But he believed that any member, who should
turn his attention to the subject, would remark its steadiness during
fat ^ n ? d - He thought himself -justified in drawing from this fact
a
^elusion highly favorable to the bank."
in
^ierence to the great depreciation of the paper of the local
*1™ previous to the establishment of that of the United States, he
l Ile i n t e r e s t s or duty of the Government of the United States
that this currency should be received by it ? Some dissatisfac^ wasr ?expressed obecause the branch notes of the United States'
p e ds c ecause
f
W
fmm W e n caett cau d ri e n t ^ t of three-fourths of one per cent. He read
H
d
it < a p e d t h a tr notes the hstatewofr the market for bank notes, by which
m
vari § T m a d i.s c o u > w i c h e e insisted to be in very good credit,
n
t wn fl°
t of two and a half to one of seven, fifteen,
. « ty-nve,eand even thirty per cent. Was our revenue to be received
enot s?
l)en^ l n t h e d iHow were they to be employed? They might be exDn r ? ot e v e i s t r i c t in which they were issued. But was the exe
C
*
7 district to be exactly limited to its revenue? What
*«une ot the rUnion if it were so? He spoke of the thing, and not
Ou
strovi??' V l o l e nUnion might dissolve in imbecility as well as be dey
S
ce. l
Did not union iimply, that the resources of one
h
l d f t h df nce
em lo ed f o r t h e defence
anoth % ~~~' "" " "XA " a i t s m e n ' m i g h t
P y
f the
at e <f^i
Government were willing to bear the loss of a deprecithe p ns *? n tel9 una l i ncurrency, it must neglect the plainest principle of
doin
mu*M n reme0
g so--equality of taxation. The committee
Banl I w a sftiber, that before the establishment of the National
the
that f , er
V
unequal value of currency in the different States,
otW ^ chants paid duties, varying fifteen per cent, from each
er
> on the same articles. 5 "

T

9 1 0 O-63^-i
28




172

FEDERAL BANKING LAWS AND REPORTS

On the question, whether the bank was bound to redeem, indiscriminately, the bills of all its branches, he said:
"He should not argue that the bank was not bound to pay its notes,
indiscriminately, at all its offices. He believed that nobody now contended that it was." * * * "It was no unfair account of the practical
operation of the system of which he was speaking, to say that it gave
to the branches where the exchange was unfavorable, the entire disposition of the specie of those branches where the exchange was
favorable. Upwards of six millions of specie have been sent to the
branch of New York, besides the amount which has been paid by the
subscribers of the bank there; but, in issuing notes which the bank of
New York has been obliged to redeem, every branch throughout the
country has drawn upon a fund, with whose condition at the time it
could not be acquainted." * * *
* * * "Such a system might be expected to produce inconvenient
changes in the distribution of bank capital, an extreme facility of
obtaining loans at one time, "and unexpected contractions of discount
at another." * * * * "Whenever the state of exchange is unfavorable,
whenever the just principles of banking require a reduction of discounts, then, under this system of indiscriminate payment of its notes,
the bank has nothing to fear from a draught of specie, and is encouraged to lend to every applicant. Wherever the exchange is favorable, and on the sound principles of banking, an enlarged accommodation might be given to the community—there the flow of notes
from every State whose exchange is unfavorable, contracts or suspends
all the operations of the bank. vThus, wherever discounts should be
enlarged, the tendency of this system is to reduce them, and to enlarge
them wherever they should be reduced."
Independently of the gross injustice of requiring the bank to perform all the exchanges of this extensive confederacy without any compensation, these enlightened views show most conclusively its inexpediency and injustice, as it regards the different sections of tne
Union. It would inevitably render those parts of the Union where
the bank issues were prudent and moderate, tributary to those where
the issues were injudicious and excessive. In this way, the very inequality in the currency, which the bank was designed to correct,
would be perpetuated by the vain attempt to make it perform impossibilities. The power of annihilating space, of transporting monej or
any other article to the most distant points, without the loss of time
or the application of labor, belongs to no human institution.
But the salutary agency of the Bank of the United States, m turmshmg a sound and uniform currency, is not confined to that port?011
of the currency which consists of its own bills. One of the most important purposes which the bank was designed to accomplish, a»
which, it is confidently believed, no other human agency could M
effected, under our federative system of Government, was the ^ ;
ment of specie payments on the part of numerous local banks, dern i f
their charters from the several States, and whose paper, irredeem^'
m specie, and illimitable in its quantity, constituted the almost en"
currency of the country. Amidst a combination of the greatest w»
cutties, the bank has almost completely succeeded in the perform,
of this arduous, delicate, and painful duty. With exceptions, too *
considerable to merit notice, all the State banks in the Union n*
resumed specie payments. Their bills, in the respective sphere



FEDERAL BANKING LAWS AND REPORTS

173

their circulation, are of equal value with gold and silver; while, for all
the operations of commerce, beyond that sphere, the bills or the checks
of the Bank of the United States are even more valuable than specie.
And even in the very few instances in which the paper of State banks
is depreciated, those banks are winding up their concerns; and it may
be safely said, that no citizen of the "union is under the necessity of
taking depreciated paper, because a sound currency cannot be obtained.
North Carolina is oelieved to be the only State where paper of the
local banks is irredeemable in specie, and consequently depreciated.
Even there, the depreciation is only one or two per cent., and what is
more important, the paper of the Bank of the United States can be
obtained by all those who desire it, and have an equivalent to give
for it.
The committee are aware, that the opinion is entertained by some,
that the local banks would, at some time or other, either voluntarily,
or by the coercion of the State Legislatures, have resumed specie payments. In the very nature of things this would seem to be an impossibility. It must be remembered that no banks ever made such
large dividends as were realized by the local institutions, during the
suspension of specie payments. A rich and abundant harvest of
profit was opened to them, which the resumption of specie payments
must inevitably blast. While permitted to give their own notes, bearmg no interest, and not redeemable in specie, in exchange for better
Jjtos bearing interest, it is obvious, that the more paper they issued,
the higher would be their profits. The most powerful motive that can
operate upon moneyed corporations, would have existed, to prevent
the State banks from putting an end to the very state of things, from
ich their excessive profits proceeded. Their very nature must have
changed, therefore, before they could have been induced to cooperate, voluntarily, in the restoration of the currency. It is quite

greatest depreciation, arid to lighten the relative burthens of federal
taxation, would naturally produce, among the States, a rivalry in
uie business of excessive bank issues. But there remains to be stated,
infaUSe' *°f m o r e & e n e r a l operation, which would have prevented the
T?°u l t l O n o f t h e S t a t e Legislatures to correct those issues.
banks were, directly and indirectly, the creditors of the whole
.
nity. and th resumption of specie payments necessarily ind the
ti
f
i
t
generalo d u
curtailment of discounts, and withdrawal of credit,
WOuld
r
enti
P
ce a general and distressing pressure upon the
s
Don 1 *• ° f d e b ttol ir e - These constituted the largest portion of the
a11
and h i • °*
States where specie payments were suspended,
onin 1 •m issues excessive. Those, therefore, who controlled public
t
great * W elriee i States, where the depreciation of the local paper was
nt e
delet * S tlleree rorsted in the perpetuation of the evil. Deep and
Statp ?I! i'r
f ^ as the disease evidently was, in many of the
the
Legislatures could not have been expected to apply a
remeT
been -fi° out t h e a ias the compulsion of specie payments would have
Pain;ful
it is V /v
d of the Bank of the United States. And here
the looi t y o f s P e c i a l remark, that, while that bank has compelled
°°al banks to resume specie payments, it has most materially



174

FEDERAL BANKING LAWS AND REPORTS

contributed, by its direct aid and liberal arrangements, to enable them
to do so, and that with the least possible embarrassment to themselves
and distress to the community. If the State Legislatures had been
ever so anxious to compel the banks to resume specie payments, and
the banks ever so willing to make the effort, the committee are decidedly of the opinion that they could not have done it, unaided by the
Bank of the United States, without producing a degree of distress
incomparably greater than has been actually experienced. They will
conclude their remarks on this branch of the subject by the obvious
reflection, that, if Congress, at the close of the war, had left it to
the States to restore the disordered currency, this important function of sovereignty would have been left with those from whom the
Constitution has expressly taken it, and by whom it could not be
beneficially or effectually exercised. But another idea, of considerable plausibility, is not without its advocates. It is said that this
Government, by making the resumption and continuance of specie
payments the condition upon which the State banks should receive
the Government deposites, might have restored the currency to a
state of uniformity. Without stopping to give their reasons for
believing that specie payments could not have been restored in this
way, and that, even if they could, a uniform currency of general
credit, throughout the Union, would not have been provided, the
committee will proceed to give their reasons for thinking that such
a connexion between the Federal Government and the State banks
would be exceedingly dangerous to the purity of both. While there
is a National Bank, bound by its charter to perform certain stipulated
duties, and entitled to receive the Government deposites as a compensation, fixed by the law creating the charter, and only to be forfeited
by the failure to perform those duties, there is nothing in the connexion at all inconsistent with the independence of the bank, and the
purity of the Government. The country has a deep interest that the
bank should maintain specie payments, and the Government an additional interest that it should keep the public funds safely, and transfer
them, free of expense, wherever they may be wanted. The Government, therefore, has no power over the bank, but the salutary p°yer
ot eniorcmg a compliance with the terms of is charter. Every thing
is hxed by the law, and nothing left to arbitrary discretion. It IS
true that the Secretary of the Treasury, with the sanction of Congress,
would have the power to prevent the bank from using its power unjustly and oppressively, and to punish any attempt, on the part of
the Directors, to bring the pecuniary influence of the institution to
bear upon the politics of the country, by withdrawing the Governmen
deposites from the offending branches. But this power would not
be lightly exercised by the Treasury, as its exercise would necessary
be subject to be reviewed by Congress. It is, in its nature, a salute
d by deped
corrective creating no undue Congress. It is, in its tnature, bank
th
f th
corrective, creating no undue dependence on the part of the bank
X T 7 e s t a t e of things would be widely different, if there was no
Rational Bank, and it was left to the discretion of the Secretary of the
Treasury to select the local banks in which the Government deposit s
should be made. All the State banks would, in that case, be competitors for the favor of the Treasury; and no one, who will duly f1'
sider the nature of this sort of patronage, can fail to perceive, that,
m the hands of an ambitious man, not possessed of perfect purity bllC
af
unbending integrity, it would be imminently dangerous to the p*



FEDERAL BANKING LAWS AND REPORTS

175

liberty. The State banks would enter the lists of political controversy, with a view to obtain this patronage; and very little sagacity
is required to foresee, that, if there should ever happen to be an administration disposed to use its patronge to perpetuate its power, the
public funds would be put in jeopardy by being deposited in banks
unworthy of confidence, and the most extensive corruption brought
to bear upon the elections throughout the Unbn. A state of things
more adverse to the purity of the Government—a power more liable to
be abused—can scarcely be imagined. If five millions of dollars were
annually placed in the hands of the Secretary of the Treasury, to be
distributed at his discretion, for the purposes of internal improvement, it would not invest him with a more dangerous and corrupting
power.
In connexion with this branch of the subject, the committee will
briefly examine the grounds of a complaint, sometimes made against
the Bank of the United States. It is alleged that this bank, availing
itself of the government deposites, consisting in some places principally of local paper, makes heavy and oppressive draughts on the
local banks for specie, and thus compels them to curtail their discounts, to the great injury of the community. In the first place, it
is to be remarked, that one of the highest duties of the bank—the
great object for which it was established—was to prevent the excessive issues of local paper; and this duty can only be performed,
by enforcing upon the State banks the payment of specie for any excess in their issues. But the committee are induced to believe, that
tms complaint is principally owing, so far as it now exists, to the fact,
tnat the operations of the Federal Treasury are mistaken for the
operations of the bank, because the bank is the agent by whom those
operations are performed. This institution receives the Government
jteposites in h the paper of the local banks, certainly in no spirit of
TT-l s Ito t o s e banks. On the contrary, it tends to give them credit,
?nct designed to have that effect. But the Bank of the United States
is not only bound to pay in specie, or its own bills, what it receives
ior the Government in local paper, but to transfer the funds to any
iVk! t h e Union where they may be required for disbursement. Let
« oe assumed, that the Government collects annually, at the CustomrT T* m 9 h a r l e s t ° n , one million of dollars in local bank notes,, and
T
,
b
«usburses in S t h Carolina only one hundred thousand, it would rel
l
h d d t h d it ould re
«usburses in i South Ch e i
% A *>°m t h s ' fchat t Government would have nine hundred thou7'dollars of local bank paper deposited in the Charleston branch,
w
w i u t oe tbr a n k f e r<>uld be bound by its charter, and for the national
ans
wn u '
perhaps to Washington or Norfolk. As this paper
tliAk 1 } o twaonusl w e r the purposes of the Government at those places,
d
tW -i
be3 of course, compelled to provide specie, or bills
it i*«! command specie at those places. It is obvious, then, that
^s the inequality in the collection and disbursement of the revenue,
uat produces the evil in question. If all the revenue collected in
n S S t o n w e r e disbursed in the State, no draughts would be made
f P°n the local banks for specie. The Bank of the United States, so
erLfiiOmi tbi e i n g justly obnoxious to any compliant on this score, has
ml y m t gatede the action of the Treasury upon the local banks, by
mpr °t l l e l i b ral arrangements which its large capital and nuin wV J-anches have enabled it to make with them. The degree
w
nich that institution has reduced the rate of exchange, may



176

FEDERAL BANKING LAWS AND REPORTS

be fairly assumed as that in which it has mitigated the action of the
Treasury upon the State banks. If, for example, there existed no
national bank, and the deposites of the revenue collected in Charleston were made in one of the local banks, what would be the effect of
transferring, annually, nine hundred thousand dollars to Washington
or Norfolk? The local banks, having no branches at either of those
places, instead of transmitting draughts, as is now generally done,
would be compelled to transmit specie. The bank in which the Government deposites were made, would consequently be under the necessity of demanding specie from all the other banks, in a manner, and to
an extent, much more oppressive than any thing that can be imputed to the Bank of the United States. If, to avoid these specie
draughts, the local banks should purchase bills on Washington or
Norfolk, they would probably cost five or six per cent, even in a
tolerable state of the currency, which would be a loss to the banks almost to the full extent of the premium.
Although the expediency of renewing the charter of the present
bank is not a question now submitted for the decision of Congress, the
committee consider it so far involved in the matter referred to them,
as to render it their duty to present some considerations bearing on
that question, in addition to what they have said on the general expediency of maintaining such an institution. If a national bank,
similar to the present, be a necessary and proper agent for the accomplishment of the great purposes heretofore indicated, the only remaining question would seem to be, whether the charter of the present
stockholders should be renewed, or a new set of stockholders incorporated.
In considering this question, Congress will, of course, be governed
in some degree, by the terms on which the present stockholders will
agree to accept a renewal of their charter. But, as the committee hare
satisfactory reasons for believing that terms eminently advantageous
to the Government can be obtained, they will proceed to some other
inquiries. What, then, would be the effect of refusing to renew the
present charter? And, in the first place, what are the inducements
for pursuing that course ?
It is sometimes alleged that the present stockholders are large capitalists, and, as the stock of the bank is some 20 per cent, above par?
that a renewal of the charter would be equivalent to a grant to them 01
20 per cent, upon their capital. It is true that a small proporti°n
of the capital of the company belongs to very wealthy men. gonje"
thing more than two millions of that owned in the United QfftteS
belongs to persons holding upwards of one hundred thousand
each. It is also true that foreigners own seven millions, o r o
of the capital. But, on the other hand, it is to be remarked
the Government, in trust for the people of the United States,
seven millions; that persons owning less than five thousand o
each, hold four millions six hundred and eighty-two thousand;
that persons owing between five and ten thousand dollars each,
upwards of three millions. It is also worthy of remark, that a verv
considerable portion of the stock—very nearly six millions—is heia
by trustees and guardians, for the use of females and orphan children,
and charitable and other institutions. Of the twenty-eight mil lmn
of the stock which is owned by individuals, only three millions
hundred and fifty-three thousand is now held by the original



FEDERAL BANKING LAWS AND REPORTS

177

scribers. A^ ^ e r e s t n a s ^ e e n purchased at the market prices—a large
portion of it, probably, when those prices were higher than at present.
Most of the investments made by wills, and deeds, and decrees in
equity, for the use of females and minors, are believed to have been
made when the stock was greatly above par. From this brief analysis,
it Trill appear that there is nothing in the character or situation of the
stockholders, which should make it desirable to deprive them of the
advantage which they have fairly gained, by an application of their
capital to purposes highly beneficial, as the committee have attempted
to show to the Government and people of the United States. If
foreigners own seven millions of the stock of the bank, our own government owns as much; if wealthy men own more than two millions,
men in moderate circumstances own between seven and eight millions;
and widows, orphans, and institutions devoted to charitable and other
purposes, own nearly six millions.
But the objection that the stock is owned by men of large capital
would apply with equal, if not greater force, to any bank that could
to organized. In the very nature of things, men who have large surplus capitals are the principal subscribers at the first organization
of a bank. Fanners and planters, merchants and manufacturers, having an active employment for their capitals, do not choose to be the
nrst adventurers in a bank project. Accordingly, when the present
tank went into operation, it is believed that most of the capital was
owned by large capitalists, and under a much more unequal distribution than exists at present. The large amount of stock now held in
trust for females and minors, has been principally, if not entirely,
purchased since the bank went into operation; and the same remark
}s generally applicable to the stock in the hands of small holders. It
js only when the character of a bank is fully established, and when
^ stock assumes a steady value, that these descriptions of persons
tt&ke investments in it.
It is morally certain, therefore, that, if another distinct institution
J^re created, on the expiration of the present charter, there would
jI(* a much greater portion of its capital subscribed by men of large
Jrtunes, than is now owned by persons of this description, of the stock
f? th e United States' Bank. Indeed, it might be confidently predicted,
<£at the large capitalists who now hold stock in that bank, would,
«-om their local position and other advantages, be the first to forestall
jae subscriptions to the new bank, while the small stockholders, scat^rea over the country, would be probably excluded, and the females
p a minors, and others interested in trust investments made by decrees
n equity, would be almost necessarily excluded as the sanction of a
£>urt could scarcely be obtained, after the passage of the new act of
^corporation, in time to authorize a subscription.
. Ao destroy the existing bank, therefore, after it has rendered such
P a l services to the country, merely with a view to incorporate an3 r \ ^lsdom a a s an act rather of cruelty and caprice, than of justice
o u i be
+
» it regards the present stockholders. I t is no light mate
w i tod denrpmo+n t4-1*« property of individuals, honestly obtained, and
i y pe rme c i a t e h e ** ^-4.,* « * ; n ^ ; ^ ^ ^ n l c VinnoeflTr nHfaiTIP/1 and
doll
P%ed, to the extent of five million six hundred thousand
lioJ!V8* a n d t h e property of the Government, to the extent of one milon
tour hundred thousand dollars, purely for the sake of change. It




178

FEDERAL BANKING LAWS AND REPORTS

would indicate a fondness for experiment, which a wise Government
will not indulge upon slight considerations.
But the great injury which would result from the refusal of Congress
to renew the charter of the present bank, would, beyond all question,
be that which would result to the community at large. It would be
difficult to estimate the extent of the distress which would naturally
and necessarily result from the sudden withdrawal of more than forty
millions of credit, which the community now enjoys from the bank.
But this would not be the full extent of the operation. The Bank of
the United States, in winding up its concerns, would not only withdraw its own paper from circulation, and call in its debts, but would
unavoidably make such heavy draughts on the local institutions for
specie, as very greatly to curtail their discounts. The pressure upon
the active^ industrious, and enterprising classes, who depend most
on the facilities of bank credit, would be tremendous. A vast amount
of property would change hands at half its value, passing under the
hammer, from the merchants, manufacturers, and farmers, to the large
moneyed capitalists, who always stand ready to avail themselves of
the pecuniary embarrassments of the community. The large stockholders of the present bank, the very persons whose present lawful
gains it would be the object of some to cut off, having a large surplus
money capital thrown upon their hands, would be the very first to
speculate upon the distresses of the community, and build up princely
fortunes upon the ruins of the industrious active classes. On the other
hand, the females and minors, and persons in modern circumstances,
who hold stock in the institution, would sustain an injury, in no degree
mitigated by the general distress of the community.
A very grave and solemn question will be presented to Congress,
when they come to decide upon the expediency of renewing the charter
of the present bank. That institution has succeeded in carrying the
country through the painful process necessary to cure a deep-seated

ueume wnemer it is tne part ot wisdom to expose the country w degree of suffering almost equal to that which it has already suffered,
for the purpose of bringing back that very derangement of the currency, which has been remedied by a process, as necessary as it *»s
distressing.
If the Bank of the United States were destroyed, and the local institutions left without its restraining influence, the currency would almost certainly relapse into a state of unsoundness. The very pressure
which the present bank, in winding up its concerns, would make up?n
the local institutions, would compel them either to curtail their discounts when most needed, or to suspend specie payments. It is not dir
hcult to predict which of these alternatives they would adopt, u i ^ 1
the circumstances in which they would be placed. The imperious
wants of a suffering community would call for discounts, in lanpwP8
which could not be disregarded. The public necessities would demand, and public opinion would sanction, the suspension, or at Wsl
an evasion, of specie payments.
,
But, even if this desperate resort could be avoided in a period ot
peace and general prosperity, neither reason nor experience will per


FEDERAL BANKING LAWS AND REPORTS

179

mit us to doubt, that a state of war would speedily bring about all the
evils which so fatally affected the credit of the Government and the
national currency, during the late war with Great Britain. We should
be again driven to the same miserable round of financial expedients,
which, in little more than two years, brought a wealthy community
e e
fw? f c t 0e r^n m Vn tr yc okrinkt e l a adeclared national bankruptcy, and placed
of t
m le
T?°^
?
P
y
the mercy of speculating stockjobbers.
, e ne Committee feel warranted, by the past experience of the country,
1 press in J t a s
£ f
. ^
^ e i r deliberate opinion, that, in a period of war,
tiiefinancialresources of the country could not be drawn into efficient
operation without the aid of a national bank, and that the local banks
would certainly resort to a suspension of specie payments. The maxim
is eminently true in modern times, that money is the sinew of military
power. In this view of the subject, it does appear to the committee,
tnat no one of the institutions of the country, not excepting the army
f *TA* ^ ° f m ° r e v i t a l i m P o r t a nce than a national bank. It has this
decided advantage over the army and navy: while they are of scarcely
any value except in war, the bank is not less useful than either of them
hi Wari-ii 1S a l s o e m i n e n t l y useful in peace. It has another advantage, still greater. If, like the army or navy, it should cost the nation
minions eannually to usustain it, the expediency of the expenditure
i f f £ d o u b t e d - B t , when it actually saves to the Government
*na to the country, as the committee have heretofore attempted to show,
arm m i j , o n s an nually than are expended in supporting both the
a
nd navy, it would seem that, if there was any one measure of
mi TWK™ u pp o n w n } c n a ]j t h e political parties of the country

^»J__ 1_ i 1 ? P
.A A ~
•
•
1P _
I*
* _ _. _ _ y
icfi? ? * brought to unite, by the impressive lessons of experience, it
s
of
V™ maintaining a national bank.
!? . e ,*° t n e persons, who, for the last ten years, have been conadmmi
form V V
s t r a t i o n of the bank, to state, that they have perd
man
&licate and difficult trust committed to them, in such a
aS at
esame
win h-l '
^
^ m e > t o a ccomplish the great national ends for
WaS e s t a b l i s h e d
stockV. l/|
.
5 an <i promote the permanent interest of the
w tn
As f
Ff> ^ the least practicable pressure upon the local banks,
inqui a S i c o m niittee are enabled to form an opinion, from careful
these f • • n ^ ^ a s ^ e ? n l*k era l and indulgent in its dealings with
mosf l n • l - o n s ? a n d with scarcely an exception, now stands in the
them f^ • r e l a t i o n t 0 t h e m - Some of those institutions have borne
Iti h c l l s i n . t e r ? s t ed and unequivocal testimony in favor of the bank,
StriOt J u s t i c e a l s o t o
bank
remark, that the direction of the mother
p
gg
the n ^ Pre a n s( i *"? fhave c abstained,, with scrupulous care,, from bringing
n e a r i? l u e n e o f
nfluenc
f ^ e bank to bear upjon political questions,
t o£ e r a n ( i i n
£
b k t b
n litical questions
Gse ected
men i
'
? ^ o r the direction of the various brandies, business
t0 ^ j n o Ava y connected with party politics. The committee advert
its com a r t , o f . * e c °nduct of ^the directors, not only with a view to
atlon
decided
> b u t f o r t h e purpose of expressing their strong and
con
tion ^" n ^ctjon that the usefulness and stability of such an institute the i m a t e r * a lly depend upon a steady and undeviating adherence
all part
^ ^ excluding party politics and political partizans from
brand i P a t * o n * n its management. I t is gratifying to conclude this
Under th vF sub J e . ct » b y stating, that the affairs of the present bank,
and the' 6
^ c i e n t , and faithful guidance of its two last presidents
l r ass
<>ciates, have been brought from a state of great em


IJ.

180

FEDERAL BANKING LAWS AND REPORTS

barrassment into a condition of the highest prosperity. Having succeeded in restoring the paper of the local banks to a sound state, its
resources are now such as to justify the directors in extending the issue
and circulation of its paper so as to satisfy the wants of the com*
munity, both as it regards bank accommodations and a circulating
medium. Upon the soundest principles of banking, the very ample
resources of the institution would justify the directors in granting
accommodations to a much greater extent than they have yet done;
and though they have increased the circulation of their paper from
four and a half to fourteen millions, since January, 1823, they are
ready and willing to increase it still further, by discounting bills of
exchange and other business paper. It is believed that the discounts
and issues of the institution are now actually limited by the want of
applications resting upon these the only substantial and safe foundations of bank credit and circulation.
III. Having said thus much on the constitutionality and expediency
of an incorporated National Bank, the only question which remains
to be examined by the committee is, the expediency of establishing
"a National Bank founded upon the credit of the Government and its
revenues."
It is presumed to have been the intention of the President, in suggesting the inquiry as to a bank founded upon the credit and revenues
of the Government, to be understood as having allusion to a bank of
discount and deposite. Such a bank, it is taken for granted, would
have branches established in various parts of the Union, similar to
those now established by the Bank of the United States, and coextensive with them. The great object of furnishing a national currency, could not be accomplished, with an approach to uniformity,
without the agency of such branches; and another object, second only
in importance to the one just stated, the extension of the commercial
facilities of bank accommodations to the different parts of the Union,
could not be at all effected without such agency. If there should be
simply a great central bank established at the seat of Government,
without branches to connect its operations with the various points
of the commerce of the Union, the promise to pay specie for its notes,
whenever presented, would be almost purely nominal. Of what con*
sequence would it be to a merchant or planter of Louisiana, or a
manufacturer or farmer of Maine, that he could obtain specie tor
bills of the national bank, on presenting them at the City of Wi?11ie
"
ington—a place wholly unconnected either with Louisiana or SIa»
by any sort of commercial intercourse, and where, consequently, these
bills would never come in the regular course of trcide? A promise to
pay specie at a place so remote from the place of circulation, and ^here
the bills would never come but at a great expense, and for the so*
purpose of being presented for payment, would neither give credw
to the notes, nor operate as an effective check upon excessive issues.
Whatever credit such notes might have, at a distance from the ph*
of issue, would not be because they were redeemable at the pleasu*
of the holder—for such would not be the fact: but principally became
of the ultimate responsibility of the Government, and of their being
receivable m payment of all dues to the Treasury They would rest,
therefore, upon almost precisely the same basis of credit as the p*Pej
mon^y of our Revolution, the assignats of Revolutionary France, *flS
the Treasury notes of the late war. These were receivable in <* '



FEDERAL BANKING LAWS AND REPORTS

181

charge of debts due to the Treasury, and the Government was of
course ultimately responsible for their payment; yet the two former
depreciated almost to nothing, and the latter, though bearing interest,
sunk to 20 per cent, below par. But the notes of a central Government Bank, without branches, would be subject to depreciation from
a cause which constitutes a conclusive objection to such an institution.
There would be nothing to limit excessive issues hut the discretion and
pruderwe of the Government or of the direction. Human wisdom has
never devised any adequate security against the excessive issues, and,
consequently, the depreciation of bank paper, but its actual, and easy,
and prompt convertibility into specie at the pleasure of the holder.
Experience has shown that, where the paper of a bank is, by any
means, habitually circulated at places remote from the point where
it is issued, and not connected with it by a regular commercial intercourse, there will not exist that easy and prompt convertibility which
is so essential to the credit of bank paper. When bank bills are connned to their appropriate sphere of circulation, a redundant issue is
certainly and immediately followed by a run upon the bank for specie.
1 his timely admonition is as useful to the bank as it is to the community : for it enables the directors to avoid, with unfailing certainty,
an excess equally injurious to both, and which no human sagacity
could anticipate or prevent, by calculation merely. Whatever, therefore, m a system of bank circulation, prevents the reflux of redundant
issues, necessarily destroys the only adequate security against these
injurious and ruinous excesses.
tfut a Government Bank, without branches, would be obnoxious to
another objection, which could not be obviated. Its loans would be
conhned toe the District s a Columbia; or, if extended to the various
of
w u ° x^ o s e^ n * o n —to y nothing of the inconvenience to which it
wiJ ? p
those at a distance who obtained accommodations^-they
*ouid be unavoidably granted without any knowledge of the circumtances of the persons upon whose credit the Government would depend for re-payment. It would, in fact, be, for all useful purposes, a
me
* District Bank,
sirm ^ e V l e w s o f t h e subject have brought the committee to the conclu|°n, that, if a Government Bank should be established, it would have
^eastmasc ] l r e abranches as the Bank of the United States and probmany
'firm a u r eS i s t taenr number. Few administrations would have the
s
anv
application to establish a branch, coming from
D a r t e r of
I'
the Union, however injudicious the location might be,

i T r e c t Princil

V
e
^
SOme i d e a m a
y
made to the

f

d bkig

Union where its o
onl^u
to formed of the very great addition which
estahr if
Patronage of the Executive Government by the
Biii1?^Inent o f s u c n a k anlj: ^ ^ e one under consideration.
Poinf
Patronage resulting from the appointment—the annual apinsWfi n tn^° fa n tdh e s e agents, great as it would doubtless be, would be
result * tt l l e hapless, when compared with that which would
amnn V°? a t l e a dispensation of bank accommodations to the standing
tivelv i? m k s frs t Rity millions of dollars! The mind almost instincPurif / e G o v e the contemplation of an idea so ominous to the
om
Wf o *wh
^
mment and the liberties of the people. No governt
'
ich the committee have any knowledge, except, perhaps, the



182

FEDERAL BANKING LAWS AND REPORTS

despotism of Russia, was ever invested with a patronage at once so
prodigious in its influence and so dangerous in its character. In the
most desperate financial extremities, no other European government
has ever ventured upon an experiment so perilous. If the whole patronage of the English monarchy were concentrated in the hands of the
American Executive, it may be well doubted whether the public liberty would be so much endangered by it as it would by this vast pecuniary machine, which would place in the hands of every administration fifty millions of dollars, as a fund for rewarding political
partizans.
Without assuming that a corrupt use would be made of this new
species of government patronage, a very slight acquaintance with the
practice of all political parties, whatever may be their professions,
will be sufficient to satisfy any reflecting mind that all the evil consequences of corruption would flow from its exercise. Have not our political contests too frequently degenerated into a selfish scramble for
the offices of the country ? Are there not those who sincerely and honestly believe that these offices are legitimate objects of political warfare, and the rightful reward of the victorious party ? And, disinterested and patriotic as the great body of every political party is admitted to be, the fact is no less true than it is lamentable, that the most
devoted and active partizans are very often mere soldiers of fortune,
who watch the political signs, and enlist, at the eleventh hour, under
the banners of the party most likely to prove successful. Such being,
more or less, the composition of all political parties, what would be
the probable use made of fifty millions of bank patronage, by a political party which conscientiously held the doctrine that all the offices
in the gift of the Executive should be divided among the partizans
of a successful political leader? Would not the same principle he
even more applicable to bank loans? and would not the Treasury.of
the United States, under the sanctifying influence of party delusion
and party infatuation, be literally plundered, by mercenary retainers,
bankrupts in fortune,^id adventurers in politics?
Even if the administration should be ever so much disposed to restrain the abuse of this patronage, it would be utterly impracticable w
exercise any efficient control over the great number of bank directors
who would be scattered over the Union, and who, upon all the known
principles of human nature, it may be confidently predicted, wouW
principally consist of busy and officious political partizans.
buch would be the depositaries—acting, not under the public eye,
but under d l s p protecting mystery of a sort of concealment and secrecy
the e n s a b l e i n
TTir,in
i n k i n g operations—to whom not only t&e
whole Treasury of the Union would be confided, to be squandered,
perhaps, in profligate favoritism, but the tremendous power of putt?*
the whole property of the nation under mortgage, for the redemption
of the bills issued at their discretion. To Siy nothing of the utter
insecurity of the public revenues under such a system, a new spec**
of legislative power, unknown to the Constitution, would be committed
to these irresponsible bank directors, of which no human sagacity can
predict the consequences.
A just analysis of the operation of granting loans by this Government bank,, in exchange for the notes of private individuals, W} sh<£
echange
W}
that it involves the e x e i
th
f
f
exercise, on the part of the directors, of the t*o
told power of appropriating the public revenue in the most danger©^



FEDERAL BANKING LAWS AND REPORTS

183

of all forms—discretionary loans—and of pledging the responsibility
of the Government, to an unlimited extent, for the payment of the
debts at the same time created against it. These are among the highest
functions of legislative power, and have been expressly and exclusively
vested in Congress. Unless, therefore, it be assumed, that Congress
may rightfully transfer the powers with which it is invested to these
bank directors, it will be difficult to find any warrant, either in the
letter or spirit of the Constitution, for the creation of this tremendous
engine of pecuniary influence. It may, indeed, be doubted, whether
all the branches of the legislative authority united, have any constitutional power to lend the public revenue, either to individuals,
corporations, or States, without reference to the objects to which it
shall be applied. But, whatever may be the power of Congress on this
subject, it appears to the committee to be inexpedient, in every view
of the question, that the Government should be converted into a great
money lender. There is no species of trade in which it would be wise
for the Government to embark; but of all the variety of pursuits known
to individual enterprise, that of lending money by the Government to
the citizens of the country, would be fraught with the most pernicious
consequences*
In the first place, it is a business to which, in the very nature of
tnings, no Government is adapted, and, least of all, a popular Government There is no employment of capital that requires a more vigilant and skilful superintendence. Nothing but the ever active motive
ot individual interest can supply the watchfulness necessary to secure
a
banking institution against the grossest frauds and impositions. In
pecuniaryntransactions, few men are to be found who will serve others,
firifr!eS l v °l v i n g the exercise of discretionary power, with the same
that they would serve themselves; and, when we consider the
n w ; , ™ both *
. . f .-.!•_.
__J political attachment,
wvn£ motives, i__^ of private friendship and _ ^ i ^ : _ i att
^nich would operate on the directors of a Government bank, to bestow
7s tav £rs without impartiality or prudence, it requires but little sagacJ to foresee that enormous losses would be annually sustained by the
mso vencyr of the Government debtors.
urv Un o v e tnhi e uar have found it expedient to place the public Treas^
nents
in fK e i r c e m & <iianship of a high and confidential officer, aided,
cow 1 ™ cks ent of a rigid responsibility, by a system of checks and
in o if " • > operating upon all the subordinate officers concerned
tern x? tm £ a n d disbursing the public revenue. Such is our own sysW - h? discrh a t a r e is vested in the chief officer of the Treasury, much
etion
t
lar A? I
.
subordinate, in the appropriation of a single dolW * c onse
Public money. "No money can be drawn from the Treasury
*iL ma n , rovi
quence of appropriations made by law." How far these
be L ? Pe d b
<ient safeguards, and this constitutional barrier, would
t
cred'f
7 Pacing not only the public revenue, but the public
Part* * L*116 d i s P o s a l of some hundreds of bank directors in various
SOIL
Union, is a very grave question for the consideration of the
e
large ma*T e x P e r i e n c e has demonstrated the great danger of having
^eeP conv '1 n oef ct o ? lsl n u n i t y rindebted to the Government. I t was a
^
rn of
£ s a l e h ^n d a n &? t h a t induced Congress to abolish the
lt
en
,l e d t s i y the tdisposition of the public lands. Congress
o
offhl e s e
* e ^ o th® p r ^ s ^ S importunities of the purtl
lands, by granting them not only repeated indul


184

FEDERAL BANKING LAWS AND REPORTS

gencies, but by remitting some millions of the debt. What, then, would
be the situation of the Government, with a debt of fifty millions diffused throughout the coimtry, and due to it from the most active,
enterprising, and influential classes of the community? Nothing that
has not happened can be more certain, than that every unfavorable
vicissitude in trade, every period of commercial distress and embarrassment, would give rise to importunate and clamorous calls for indulgence, and for an injudicious extention of discounts, which no
administration would have the firmness to resist. Every one who has
witnessed the urgency and unanimity with which the representatives
of the States indebted for public lands have pressed the claims of their
citizens for indulgence and remisson, must be satisfied, that, if the
citizens of all the States should become indebted much more largely
for bank loans, the Government would have scarcely any faculty of
resistance, when appeals for indulgence should come from all quarters
of the Union, sustained by the strong plea of public distress and
embarrassment.
The policy of extending indulgence to the public debtors, and of
granting more liberal loans to the community, would, in the natural
course of things, become the favorite theme of those who aspired to
popular favor. Political parties would come to be divided upon the
question of observing towards the public debtors a strict banking
policy, indispensable to the maintenance of specie payments, on the
one hand, or a liberal Government policy, necessarily involving a suspension of specie payments, on the other. And when it is considered
that the whole class of debtors, always the most numerous and active
portion of the community, would be naturally in favor of increasing
bank issues, and extending bank indulgences, it can scarcely be doubted
that specie payments would be supended in the first great pecuniary
exigency, growing out of embarrassments in our commerce, or deficiencies in our revenue.
The Government, therefore, which is under the most sacred obligations to constrain all the banks to maintain specie payments, with
a view to the uniformity and soundness of the currency, would, by
its own example, perpetuate the great national evil of a fluctuating
and depreciated circulating medium.
These evils, which would be so highly probable in time of peace,
would be almost certain in the event of war. The temptation to supply the Federal Treasury by the easy process of bank issues, rather
than resort to the unpopular process of internal taxation, would be
too fascinating to be resisted. We should thus experience, what every
nation has experienced in like circumstances, the manifold evils of a
mere paper currency, having no relation to any standard of intru^
value. In these views the committee are fully sustained by tw
2rn? 1 ??i. of i Mr ' ^ ^ n d e s j expressed in 1819. These are his words*
That the destruction of the [United States] Bank would be followed
by the establishment of paper money, he firmly believed; he inign*
almost say, he knew. It was an extremity from which the House
would recoil, if now proposed; but if the resolution on the tab»
were passed, it would very soon be proposed. The subject was too
large for an incidental discussion. Gentlemen thought the amount 01
b-overnment paper might be limited, and depreciation prevented, DJ
the rate of interest which should be exacted. Inadequate every *rhere»
the security was particularly ineffectual in the United States."



FEDERAL BANKING LAWS AND REPORTS

185

But the inevitable tendency of a Government bank to involve the
country in a paper system, is not, in the opinion of the committee,
the greatest objection to it. The powerful, and, in the hands of a bad
administration, the irresistible and corrupting influence which it
would exercise over the elections of the country, constitutes an objection more imposing than all others united. No matter by what
means an administration might get into power, with such a tremendous engine in their hands, it would be almost impossible to displace
them without some miraculous interposition of Providence.
Deeply impressed with the conviction that the weak point of a free
Government is the absorbing tendency of Executive patronage, and
sincerely believing that the proposed bank would invest that branch
of the Government with a weight of moneyed influence more dangerous
in its character, and more powerful in its operation, than the entire
mass of its present patronage, the committee have felt that they were
imperiously called upon, by the highest considerations of public duty,
to express the views they have presented, with a frankness and freedom
demanded by the occasion. It is, at the same time, due to their own
feelings, that they should state unequivocally their conviction, that
tile suggestion of the Chief Magistrate, which they have thus freely
examined, proceeded from motives of the most disinterested patriotism,
and was exclusively designed to promote the welfare of the country.
1
nis is not the mere formal and heartless homage, sometimes offered
up to official station, either from courtesy or interest, but a tribute
*nich is eminently due, and cheerfully rendered, to the exalted character of the distinguished individual on whom it is bestowed.
E
of a letter from an intelligent merchant in Charleston, South
na, to the Chairman of the Committee of Ways andMeans, iling the exchange operations of the Bank of tk<e United States.
This0 effect of diminishing the vast difference of exchange between
s
U Vaac7 u n t P oients of the country, was evidently produced by the bank.
a a
t\T Y g s produced by this institution, in the intercourse be*een the Western and Atlantic States, can be duly appreciated only
y one whoe sees,apassing before him, the actual operation of the system
n g lt
anrf i i a a c c u m h s c r e a t ed. For example: Lexington, in Kentucky,
ton!A • e d f r o m t h e sa llarge surplus of funds to her credit in Charlesulates a e o f
totl f v
horses, hogs, and other live stock, driven
uiat as well as to other Southern markets by her citizens. Philadell 1T debte
bant f ! &cda n d Charleston for exchange remitted, dividends on
to L e x i n
hL*
W ."
g t o n is indebted to Philadelphia for merJ" a w s o n
Without the transportation of a single piece of coin, Lex1
,
Charleston, and remits the check to Philadelphia in
en
th eof t h r e e debt there; which operation adjusts the balance beher
« d points of the triangle almost
or
e
trouhl « e ll d s upointsi lof i thebtriangle d almost without expense an
l
i
b i
f
th p
than an
cli f
insH? f• h a
facilities be obtained from any other than
W *
ving branches in different parts of the Union, acting as
c o W*
m
m one concem
L l bk
ht
iht b thi
illm
? ? Local banks, whatever might be their
688 c o u l d
ext Ji^? *
not accommodate in the same manner and to a like

2 j J -

* * * * * *

Bank 6f u e - 0Untin £ oi f b i l I sr eoant t h e l o w t e r m s established by the Branch
ac
ticulnrl •n e nphl a n ec' i.n s a S
^nefit to the agricultural interest, part0 ston V
. £ ^ e price of cotton and rice; and were the bank
°P Us operations, there is no saying how far these staples would



186

FEDERAL BANKING LAWS AND REPORTS

be depressed. The private dealers in exchange would take the place
of the bank in that business, and their profits on bills would be taken
out of the pockets of the planters, as the merchants would always regulate the price they would give for an agricultural production, by the
high or low rate at which they could negotiate their bills. On account
of its connexion with all parts of the Union, the bank affords this important advantage to the public; it is always a purchaser and always a
seller of exchange at fixed and low rates, and thus prevents extortion
by private dealers." * * * * * * "Before this bank went into operation,
exchange was from 8 to 10 per cent, either for or against Charleston,
which was a loss to the planter to that amount on all the produce of
Georgia and South Carolina, and indeed you might say, all the produce
of the Southern and Western States." *****
"If the Bank of the United States were destroyed, the local banks
would again issue their paper to an excessive amount; and while a few
adventurous speculators would be much benefitted by such an issue,
the honest and unsuspecting citizens of our country would, finally,
be the losers. If we look back to what took place in New York, Pennsylvania, the Western States, and even in our own State, we shall see
the grossest impositions committed by banks, commencing with a few
thousand dollars in specie, buying up newspapers to puff them as specie-paying banks, in order to delude the public, and, after getting their
bills in circulation, blowing up, and leaving the unsuspecting planter
and farmer victims of a fraud, by which they were deprived of the
hard earnings of years of honest industry. But, sir, I believe the bank
owes a great deal of the opposition which exists, and has existed, to
the fact that it has put down these fraudulent institutions, got up yS
combinations and conspiracies of speculators; and who, after receiving large dividends, managed to destroy the credit of their own paper,
and, by the agency of brokers, bought "it up at half its nominal value.
Since I last wrote you, I had a conversation with a gentleman in
the confidence of some of the moneyed men of the North, and he says
they are determined to break up the United States' Bank, to enable
them to use their money to advantage; as that institution gives so many
facilities to the community, as to deprive them of their former
profits." * * *
"There is another consideration: the distress would be immense,
which a refusal to renew the charter would produce among those wfto
are indebted to the institution: for I find that to this branch, tne
planters owe upwards of a million of dollars; and I have no hesitation
in saying, as safe a debt as is owing to any bank in the Union. But n
the bank should wind up its affairs, these planters could not get crecm
from other institutions; and as the bank can sue in the United States
Court, where judgment is obtained almost at once, property vom*»
greatly depressed, and moneyed men would buy it up for half its
value Throughout the Union, all classes would suffer, except those
who should hold up their money to go into the brokerage business, £
buy property at a sacrifice. If I were sure the bank would not W
rechartered, I would convert my property into money, with a view i°
dealing in exchange. I could make a vast fortune by it."
*
*
*
*
*
*
*




FEDERAL BANKING LAWS AND REPORTS

187

Second Annual Message—Andrew Jackson
Twenty-First Congress, 2d Session
DECEMBER 6, 1830.
[Source: James D. Richardson, A Compilation of the Messages and Papers of
the Presidents, Vol. 2, pp. 1091-1092]
*
*
*
*
*
*
*

The importance of the principles involved in the inquiry whether
it will be proper to recharter the Bank of the United States requires
that I should again call the attention of Congress to the subject.
Nothing has occurred to lessen in any degree the dangers which many
of our citizens apprehend from that institution as at present organized.
In the spirit of improvement and compromise which distinguishes our
country and its institutions it becomes us to inquire whether it be not
possible to secure the advantages afforded by the present bank through
the agency of a Bank of the United States so modified in its principles
and structure as to obviate constitutional and other objections.
It is thought practicable to organize such a bank with the necessary
officers as a branch of the Treasury Department, based on the public
and individual deposits, without power to make loans or purchase
property, which shall remit the funds of the Government, and the
expense of which may be paid, if thought advisable, by allowing its
officers to sell bills of exchange to private individuals at a moderate
premium. Not being a corporate body, having no stockholders, debtors, or property, and but few officers, it would not be obnoxious to
The
constitutional objections which are urged against the present bank;
and having no means to operate on the hopes, fears, or interests of
Ja
rge masses of the community, it would be shorn of the influence
jHiich makes that bank formidable. The States would be strengthened
oy having in their hands the means of furnishing the local paper
currency through their own banks, while the Bank of the United
states, though issuing no paper, would check the issues of the State
anks by taking their notes in deposit and for exchange only so long
2 +? COntm H e t o b e redeemed with specie. In times of public emergency the capacities of such an institution might be enlarged by legislat e provisions.
• nese suggestions are made not so much as a recommendation as with
1
*+ iew of calling the attention of Congress to the possible modifications
ra
system which can not continue to exist in its present form without
<*asioila] collisions with the local authorities and perpetual apprehenns an
d discontent on the part of the States and the people.

02180 0-63

-:

•is




188

FEDERAL BANKING LAWS AXH REPORTS

Third Annual Message—Andrew Jackson
Twenty-Second Congress, 1st Session
DECEMBER 6, 1831.
[Source: James D. Richardson, a Compilation of the Messages and Papers of
the Presidents, Vol. 2, p. 1121]
*

*

*

*

*

•

*

Entertaining the opinions heretofore expressed in relation to the
Bank of the United States as at present organized, I felt it my duty
in my former messages frankly to disclose them, in order that the
attention of the Legislature and people should be seasonably directed
to that important subject, and that it might be considered and finally
disposed of in a manner best calculated to promote the ends of the
Constitution and subserve the public interests. Having thus conscientiously discharged a constitutional duty, I deem it proper on this
occasion, without a more particular reference to the views of the subject then expressed, to leave it for the present to the investigation
of an enlightened people and their representatives.

Annual Report, Secretary of Treasury (Louis McLane)
Twenty-Second Congress, 1st Session
DECEMBER 7, 1831.
*

[Source: House Doc. 3P 22d Congress, 1st Session, pp. 7-10,18-191
*
*
*
*
*
•

It will be thus perceived that the Government has the means, if
properly employed, of reimbursing the whole of the public debt, by
purchase or otherwise, on or before the 3d of March, 1833.
The moral influence which such an example would necessarily produce throughout the world, in removing apprehension, and inspiring
new confidence in our free institutions, cannot be questioned. Seventeen years ago, the country emerged from an expensive war, encumbered with a debt of more than one hundred and twenty-seven millions,
and in a comparatively defenceless state. In this short period it has
promptly repealed all the direct and internal taxes which were imposed during the war, relying mainly upon revenue derived from
imports and sales of the public domain. From these sources, besides
providing for the general expenditure, the frontier has been extensively fortified, the naval and maritime resources strengthened, ana
part of the debt of gratitude to the survivors of the revolutionary
war discharged. We have, moreover, contributed a large share to tnc
general improvement, added to the extent of the Union by the p^chase of the valuable territory of Florida, and finally acquired tne
means of extinguishing the heavy debt incurred in sustaining the late
war, and all that remained of the debt of the revolution.
The anxious hope with which the people have looked forward w
this period, not less than the present state of the public mind, and tne
real interests of the community at large, recommend the prompt app11*
cation of these means to that great object, if it can be done consistently
with a proper regard for other important considerations.
,
Of these means, as has already been shown, the shares owned by tfj6

Government in the Bank of the United States are an indispensaW


FEDERAL BANKING LAWS AND REPORTS

189

part; and for the reimbursement of the debt within the period contemplated, it will be necessary to effect a sale of them for a sum not less
than eight millions of dollars.
The stock created by the United States for their subscription to the
Bank haying been actually paid previously to the 1st of July last, their
interest in that institution has ceased to be nominal merely, and the
shares form a part of the fiscal resources applicable to the public
demands.
The objects connected with the early reimbursement of the public
debt are more important than the interest of the Government as a mere
stockholder; and it is therefore respectfully recommended to Congress
to authorize the sale of those shares for a sum not less than $8,000,000.
A sale of so large an amount in the public market could not be expected to produce more than the par value, and, if attempted under
circumstances calculated to shake public confidence in the stability of
the institution, would, in all probability, prove wholly abortive. For
these reasons, it is deemed advisable to effect a sale to the Bank itself—
a measure believed to be practicable on terms satisfactory both to the
United States and that institution.
. In submitting this proposition to the wisdom of Congress, it is not
intended that its adoption should be founded on any pledge for the
renewal of the charter of the Bank. Considering, however, the connexion of the proposition with the Bank, and viewing the whole subject as a necessary part of the plans for the improvement and management of the revenue, and for the support of public credit, the undersigned feels it his duty to accompany it with a frank expression of his
opinions.
The act of Congress to establish the Treasury Department makes it
the duty of the Secretary of the Treasury to digest and prepare plans
for the support of public credit, and for the improvement and management of the revenue. The duties enjoined, as well by this act as by the
^bsequent one of the 10th of May, 1800, requiring the Secretary ' to
rll
gest, prepare, and lay before Congress, at the commencement of
tn
.ery session, a report on the subject of finance, containing estimates
?* the public revenue and public expenditures, and plans for improv^g or increasing the revenues from time to time, for the purpose of
information to Congress, in adopting modes for raising the
rcionev , ,u^ s:i^ e A
g ;
p
^ i. t
, ^. B___i_i/
JU,—o » have been supposed
to in 1 r ^ O t m e*° lmeet ethe public expenditures," have been supposed
re
t]
ment Wt f ?
y } application of the resources of the Governjng j t ' g u ™e whole subject of the currency, and the means of preservmei™ ^ rsupposition, the first Secretary of the Treasury, in his
natioi i e paosr t s a n January and December, 1790, recommended a
°t
and offi
k a t e" t institution of primary importance to the finances,
Port of pU ^ ec C1 s utility in the operations connected with the supConpr 83 i o w 'edit"; and various communications since made to
by oflf
^nt the same views were entertained of their duties
0
e
Thft 6 r S r7' 1mh a v e s u c c e e ded him in the Department.
r
P
or anc
etarv ? f
of the duties thus enjoined b^ law upon the Secdepart ne
Treasury implies, however, no commitment of any other
ne
U ?*' °^ * Government, each being left free to act according
f mode pointed out by the Constitution.
whi r ! ! o r t a n t charge confided to the Treasury Department, and
'en the operations of the Government essentially depend, in the



190

FEDERAL BANKING LAWS AND REPORTS

improvement and management of the revenue and the support of
public credit, and of transferring the public funds to all parts of the
United States, imperiously requires from the Government all the
facilities which it may constitutionally provide for those objects, and
especially for regulating and preserving a sound currency.
As early as May, 1781, the Congress of the United States, convened under the articles of confederation, approved the plan of a
national bank submitted to their consideration by Mr. Morris, then
superintendent of the finances, and, on the 31st of December, of the
same year, "from a conviction of the support which thefinancesof
the United States would receive from the establishment of a national
bank," passed an ordinance, incorporating such an institution, under
the named and style of "The President, Directors, and Company of
the Bank of North America." The aid afforded by that institution was
acknowledged to have been of essential consequence during the remaining period of the war, and its utility subsequent to the peace
of little less importance.
The authority of the present Government to create an institution
for the same purposes cannot be less clear. It has, moreover, the
sanction of the executive, legislative, and judicial authorities, and a
majority of the people of the United States, from the organzation of
the Government to the present time. If public opinion cannot be
considered the infallible expounder, it is among the soundest commentators of the Constitution. It is undoubtedly the wisest guide and
only effective check to those to whom the administration of the Constitution is confided; and it is believed, that, in free and enlightened
States, the harmony not less than the welfare of the community is
best promoted by receiving as settled those great questions of public
policy in which the constituted authorities have long concurred, and
in which they have been sustained by the unequivocal expression of
the will of the people.
The indispensable necessity of such an institution for thefiscaloperations of the Government m all its departments, for the regulation
and preservation of a sound currency, for the aid of commercial
transactions generally, and even for the safety and utility of the local
banks, is not doubted, and, as is believed, has been shown in the past
experience of the Government, and in the general accommodation and
operations of the present bank.
The present institution may indeed be considered as peculiarly the
offspring of that necessity, springing from the inconveniences which
followed the loss of the first Bank of the United States, and the evils
and distresses incident to the excessive, and, in some instances, fraudulent issues of the local banks during the war. The propriety of continuing it, is to be considered not more in reference to the expediency
of banking generally, than in regard to the actual state of things, and
to the multiplicity of State banks already in existence, and which can
neither be displaced, nor in other manner controlled in their issues °x
paper by the General Government. This is an evil not to be sub]
to; and the remedy at present applied, while it preserves a
currency for the country at Iarg9, promotes the real interests
local banks, by giving soundness to their paper.




FEDERAL BANKING LAWS AND REPORTS

191

ment would thus obtain the benefit of individual sagacity in the general management of the Bank, and, by means of its deposites and
share in the direction, possess the necessary power for the prevention
of abuse.
It is not intended to assert that the Bank of the United States, as at
present organized, is perfect^ or that the essential objects of such an
institution might not be attained by means of an entirely new one,
organized upon proper principles, and with salutary limitations. It
must be admitted, however, that the good management of the present
bank, the accommodation it has given the Government, and the practical benefits it has rendered the community, whether it may or may not
nave accomplished all that was expected from it, and the advantages of
its present condition, are circumstances in its favor, entitled to great
weight, and give it strong claims upon the consideration of Congress
m any future legislation upon the subject.
To these may be added the knowledge the present bank has acquired
of the business and wants of the various portions of this extensive
country, which, being the result of time and experience, is an advantage it must necessarily posess over any new institution.
it is to be observed, moreover, that the facilities of capital actually
anorded by the present institution to the agricultural, commercial,
and manufacturing industry of all parts of the Union, could not be
withdrawn, even by transferring them to another institution, without
a severe shock to each of those interests, and to the relations of society
generally.
To similar considerations, it may be presumed, is to be traced the
uniform policy of the several States of the Union, of rechartering
tneir local institutions with such modifications as experience may
S! ^ a t e d ? m preference to creating new ones.
onould any objection be felt or entertained on the score of monopoly, it might be obviated by placing, through the means of a sufncient premium, the present institution upon the footing of a :new
°ne, and guarding its future operations by such judicious checks and
nutations as experience may have shown to be necessary.
-Uiese considerations, and others which will be adverted to in a
^sequent part of this report, the experience of the Department in
ue trying periods of its history, and the convictions of his own judgth U COnc urringi nwith those of the eminent men who have preceded
igned
its
evn r
administration, induce him to recommend the
win n c y o f Rechartering the present bank at the proper time, and
in such modifications, as, without impairing its usefulness to the
to fi e nai m e n t a n 4 t n e community, may be calculated to recommend it
tA*i PPr°bation of the Executive * and, what is vitally important,
SI6 °?2f***ce o f the people.
shn i o rCongress deem it expedient to authorize the sale of the bank
a sum n
hi,»
,»
°°t less than eight millions of dollars, the reimt less than eight m
of h
e
f t h e u b l i c d e b t o n o r b e f o r e t hh 3 ddo f f M h 1 8 3 3
ba <?]*'
P
i '
y
b
? e'n t l
nuft
r y anticipated; and from that period the amount of revea
Pphcable to that object will be no longer required.
*
*
*
*
*
*
*
thi t I l e a<*]ustment suggested to Congress by the views hazarded in
able 1iep<?rt b e m a n y wise entitled to their respect, it is not unreasont0
hope that the various topics of national concern at present



192

FEDERAL BANKING LAWS AND REPORTS

engaging the attention of the people may facilitate rather than embarrass the task. The interests of agriculture, commerce, and manufactures, and the final disposition of the public lands, are the prominent, and necessary, and immediate objects of public policy. As incident, however, and indeed necessary? to the security and prosperity
of these great interests, the preservation of a sound currency cannot
escape attention. On the soundness and steadiness of this indispensable medium of exchange depend the value and stability of every
description of property, not less than the activity of every branch
of business; and it is not to be doubted that the commercial and
manufacturing industry would be most severely and immediately affected by any derangement of this spring of their prosperity.
The measures of the Central Government in respect to the tariff, to
objects of public improvement, to the public lands, and to the Bank
of the United States, are the sources of the existing solicitude throughout the country. For the permanent adjustment of all, in a manner to
promote the harmony of all parts of the Union, and elevate the moral
character of the country, the wisdom and patriotism of the Government and of the people can alone be looked to.
Independently of the considerations connected with the currency,
the interests both of the Government and individuals involved in the
Bank of the United States make the stability of that institution an
object of great importance. No reason is perceived why this great
interest should not be equally considered in the scheme of deference,
and concession, and compromise, which the public safety, not less than
the national prosperity, so urgently recommends. While conflicting
interests and opinions on other subjects are invited to meet on middle
ground, and, on the altar of common good, each to offer something
for the preservation of concord and union throughout this favored
land, the advocates and opposers of the existing system for regulating
the currency may also be expected to join in the same patriotic
sacrifice.
It is not perceived that any other satisfactory basis for a scheme of
general adjustment can be devised, than that which shall pay a just
regard to the interests of all, and observe a proper deference to the
public will. On this ground mainly, one portion of the agricultural
interest has been invited, to accommodate opinions conscientiously
formed and ardently advocated to opposite opinions more successfully
maintained by other and more powerful interests. The invitation
could not be more appropriately recommended, than by affording1*11
example in other cases founded upon the same principle. Acquiescence in the public will is not less the duty of Government than of tne
people themselves. The utmost respect is felt for an independent
exercise of conscientious opinions; but, in a country like ours, thoug11
a sense of duty authorizes all fair attempts to convince the public
mind, it equally dictates a ready acquiescence by all in the public
will finally expressed.




FEDERAL BANKING LAWS AND REPORTS

193

Report of House Committee of Ways and Means, on Renewal of
Charter of Bank of United States
[House Report 283, Twenty-second Congress, 1st Session, Pages 1-4, 4&-6O3
RENEW CHARTER BANK UNITED STATES.

FEBRUARY 9,

1832.

VIEWS OF THE MAJORITY.

Mr. MCDUFFIE, from the Committee of Ways and Means, to which
the subject had been referred, made the following
REPORT:
The Committee of Ways and Means, in obedience to the orders of the
Bouse, have had under consideration the memorial of the President, Directors, and Company of the Bank of the United States,
and also swndry memorials from other sources, relative to the renewal of the charter of the said bank, and hereivith report a bill
for the renewal of the said charter, with certain modifications.
The committee will not now go into the consideration of the constitutional power of Congress to incorporate the Bank of the United
states, nor of the expediency of maintaining such an institution, with
a Iew
^
to preserve a sound and uniform currency, and to facilitate
a
na equalize the fiscal operations of the Government. For the exposition of their views on these interesting and important questions,
and of the great public benefits which have resulted from the operanons ofexc bank, in regulating and reducing the rates of the comthe
A \ h hanges of the country, they ask leave to refer to the report
,
™a.e 1830the Committee of Ways and Means, on the 13th day of
J
K?1* s e v e 5 which they adopt as a part of this report.
r
cA
^l memorials, presented by sundry citizens of the United
?tates> Playing Congress to grant them and their associates a charter
ft* ? ne*W banlr > with privileges similar to those now enjoyed by the
£?«« of the United States, have been duly considered by the comttee. They can perceive no adequate motive, however, for creating
*ernew bank, instead of continuing the present; but, on the contrary,
y strong objections against adopting such a course. The only muucejjientg which can justify Congress in establishing any bank, are
exclusively of a public nature. T h e interest of the stockholders,
lo
ugu necessarily involved as an incident, is quite a subordinate




194

FEDERAL BANKING LAWS AND REPORTS

consideration. The maintenance of a uniform currency, and the
facilities afforded for collecting, transferring, and disbursing the
public revenue, are the great and paramount objects to be accomplished by such an institution; and to sacrifice these to the imaginary
claims of persons who may desire to speculate in the stock of a new
institution, would be perverting high public trust to mere individual
purppses.
With the intimate knowledge of the pecuniary wants and resources
of the several portions of the Union, which it must have acquired by
the experience of sixteen years, the present institution is doubtless
better qualified than any new corporation could be, to fulfil the great
public ends of such an establishment. In the unquestionable ability
with which its affairs have been administered for the last ten years,
and in the fidelity with which it has discharged all its duties to the
Government and to the country, we have an assurance of future usefulness, which the applicants for a new bank certainly could not
furnish. On the contrary, some of the new schemes brought forward in the memorials referred to the committee, are so utterly extravagant as to furnish just cause of alarm to all reflecting men. The
present bank, though it has dealt largely in public securities, .and, for
several years past, held large amounts of Government stock, has, notwithstanding, found it difficult to find employment for a capital of
thirty-five millions, in the safe and legitimate business of banking;
yet we have applications to incorporate a banking company with &
capital of fifty millions. The present bank has not realized more
than five per cent, on its comparatively small capital; yet some 01
the projectors of new banking schemes propose to give a bonus of one
million of dollars a year to the General and State Governments, for
the privilege of banking on a capital of fifty millions; and expositions
have been presented to the public, holding out the idea that such a
bank might keep in circulation one hundred millions of its paper, and
grant loans to the enormous extent of two hundred millions! In tlie
opinion of the committee, such projects as these can only proceed from
a spirit of bold and hazardous speculation, and from those who are
entirely unacquainted with the practical operations of banking; ana
nothing in the shape of a pecuniary bonus could justify Congress in
making the dangerous experiment of committing to such hands tne
great duties of maintaining a sound currency, and of keeping ln
safety, and transferring without delay or expense, the revenues of this
extensive confederacy.
An opinion has been sometimes expressed, as plausible perhaps as
it is delusive, that all the people of the United States are entitled to
the option of subscribing for the stock of a Bank of the United States,
and that, consequently, it would be an unjust preference to renew tne
charter of the present company. If a new bank were created, it is
almost certain that the stock would go into fewer and less meritorious
hands than that of the present bank, and the rest of the people of tne
United btates would have still greater cause to complain of their exclusion, if, when the institution acquired the public confidence, its stoCK
should be considerably above par. Men of accumulated capital, no*
engaged in business, and stockjobbers, are invariably the first subscribers for the stock of a new bank; and it is impossible to conceive an)
substantial reason why the present stockholders, who have done so
much for the country, should be superseded, at the hazard of g?



FEDERAL BANKING LAWS AND REPORTS

195

public detriment, merely to gratify the speculating views of a still
smaller number of persons, principally large moneyed capitalists and
dealers in public stocks. It should be recollected, too, that a considerable portion of those who hold stock in the present bank are widows
and orphans, who probably paid very nearly the present market price
for the stock; and it is certain that, in the scramble for new subscriptions, most of those would be excluded by the classes of persons to
which the committee have just alluded. For a more full explanation
of their views on this point, they will refer the House to the report,
already noticed, of a former Committee of Ways and Means.
It remains for the committee to give a brief explanation of the modifications they have proposed of the existing charter. The reservation
of the power of revoking it, at any time after ten years, upon giving
three years' notice of such intention, will create a responsibility in the
Dank, which may be extremely salutary, without creating too great a
dependence upon Congress. The change proposed in the form of the
p
g
g pp
?nU{!l i
d
i
hi h
i h
f
~?nU{!'ls in some degree connected with this change in the tenure of
tne charter, and is recommended by other considerations. An annual
sum, paid in the shape of interest on the Government deposites, will
nave the recommendation of making the amount of the bonus depend
upon the extent of the benefit which the bank may derive from the
public revenues, at the same time that it renders the Government an
important service by the safe custody of these revenues. The authority given to the President of the United States to appoint one of the
uirect
f
h
iil
ith

Th
if- • a t m a y c r e e P i n t o t l i e direction of the several branches.
ne prohibition against issuing draughts or checks for twenty dollars,
tin ^ s m a l l e r SUm> wi H exclude from common circulation a descrip°n ot paper, of which considerable complaint has been made in some
Huarters of the Union. This, however, has rendered it indispensably
ecessary to authorize other officers, as well as the President and
^asnier, toesign and countersign tbills for circulation. If this provision
h
talrp Um ^ d '< t 1 ? w hb?l ll e t i m e o f h e President and Cashier would be
p m
firn, r nS ^Sm™? i s , to the entire exclusion of the more important
woiili° °^ a d i n istration and superintendence; and yet these officers
no
TV Xpe^have the physical ability to execute the necessary signatures.
y
thpv1 6 n O t a oafb lprohibiting the issue of any notes at branches where
to nV } t l P y t a t e » i s too obvious to require comment. It is essential
D if i^?* i e ^ e b a nks against ruinous draughts for specie on the
n
P** °f the rBanko of the United States.
ovis
orin?eS? P harterl nasf,f oin addition to those which are contained m the
r
reaniri >
?
d all the safeguards which can be reasonably
i
mad ? l ° r tdheeb tP u b l e cb security. The monthly statements which are
the 1 ? m• c i r c l as d V y the bank, of the moneys deposited therein, of
1
tarv T f l
^ tion, and the specie in hand; the right of the Secrethe n UDllc d J r e a ? u r y t o i n s P e c t the books of the bank, and to withdraw
M•
of <^C0In eposites, subject to the approbation of Congress; the right
^ittee of either house of Congress to inspect the books and
exa ^. e t h e
itg jT? n proceedings of the bank;" its obligation to pay specie for
"the? t i° d e m a n d ? under a heavy penalty; and the provision that
wtal amount of the debts which the said corporation shall at any



196

FEDERAL BANKING LAWS AND REPORTS

time owe, over and above the debts due for money deposited, shall not
exceed the amount of its capital;"—all these guards against imprudent and excessive issues, with the constant supervision of the Government directors, furnish ample guarantees for the faithful performance of its duties to the public, and undoubted securities to the holders
of its notes, not only that they will be ultimately, but promptly, paid.
A BILL TO RENEW AND MODIFY THE CHARTER OF THE BANK OF THE UNITED
STATES

Be it enacted by the Senate and House of Representatives tff the
United States of America in Congress assembled, That the act, entitled
"an act to incorporate the subscribers to the Bank of the United States,"
approved the tenth day of April, one thousand eight hundred and sixteen, shall be continued in force for the period of twenty years from
the third day of March, one thousand eight hundred and thirty-six,
and that the power shall be reserved to Congress to repeal this act at
any time after ten years from the third of March, one thousand eijrht
hundred and thirty-six, upon giving three years' notice of such intended repeal to the President and Directors of the said bank.
SEC. 2. And be it further enacted, That the President of the United
States, after the third day of March, one thousand eight hundred and
thirty-six, shall appoint one of the directors of each of the branches
of the said bank, in the same manner as he now appoints a portion of
the directors of the mother bank, and with the same limitations, as to
their eligibility and term of service.
SEC. 3. And be it further enacted, That any officers of the mother
bank, who may be selected by the Board of Directors, and designated
to the Secretary of the Treasury of the United States, shall be authorized to sign and countersign notes, which shall be binding and obligatory on the said corporation, in like manner as if the same were signed
and countersigned by the President and principal Cashier or Treasurer.
SEC. 4. And be it further enacted, That the said bank is hereby prohibited from issuing any notes which are not, upon the face of them,
declared to be payable at the office from which they may be issued; and,
also, from drawing any draughts, or checks, for twenty dollars, or
any smaller sum.
SEC. 5. And be it further enacted, That it shall be the duty of the

stock held by each stockholder; and nothing contained in the charter
of said bank, or in this act, shall be deemed to restrain the several
btates from taxing the real estate of the said bank situated therein,
respectively, or the nroprietary interest of their respective citizens in
the stock of the said bank, to the same extent that they may tax other
real estate within their jurisdiction, and like interests in the stock oi
other corporations, or money lent at interest.
SEC. 6. And be it further enacted, That, in consideration of the exclusive privileges and benefits conferred by this act upon the saw
bank the President, Directors, and Company thereof, shall paT.^
the United States, out of the corporate funds thereof, on the thiru
day of March, one thousand eight hundred and thirty-seven, and on



FEDERAL BANKING LAWS AND REPORTS

197

the same day of each year thereafter, during the continuance of the
charter, an interest at the rate of
per centum upon the deposites,
from time to time, to the credit of the Treasurer of the United States
in the said bank, and its branches, during the preceding year.
SEC. 7. And be it further enacted, That, after the third day of March
one thousand eight hundred and thirty-six, the said bank shall not
establish any additional branch thereof, without the consent of Congress.

V I E W S O F T H E MINORITY.
The undersigned, differing from the majority of the Committee of
Ways and j\I*>am* in their report of a hill to renew the charter of
ithe Bank of the United States, ask leave to submit the views
which they entertain upon a subject of so much importance to the
general interests of the American people.
The question of establishing a National Bank has been, from the
commencement of the Government down to the present time, deemed,
by many of the wisest and best of men. an unconstitutional exercise of
power, and of extremely doubtful policy.
N e cannot concede the principle that the constitution of the country
should change with the change of political parties, when clearly understood; nor be broken down by the array of legal decisions, a n d t h e
names of great men, whose opinion may vary, from time to time,
^cording to circumstances. I t was designed for a far nobler purpose—a safeguard and guarantee of rights on the part of the weak,
gainst the oppressions of the strong.
1 | n this point of view, we have looked upon it as an instrument of
ff. * j P ° w e r s only, conferring nothing more than what is expressly
M anted upon its face, or clearly necessary to carry into effect any one
or
the specified powers. According to this rule, which, it is believed,
™ Parties concur in admitting to be the true one of construction, we
T?°fle * ? t e s t t h e establishment of a National Bank.
e n
7 s o o n after the Government went into operation, the question
,!•:?? UP f o r decision, and may be said to have formed the first line of
^unction between the two great political parties at that day. usually
•^nominated federal and republican. And, although President
Sht ? t ° n s i " n e c I the first bill chartering the Bank of the United
Was un
if- n i
d e r such circumstances as by no means to claim for
ear
*2
authority, settling the constitutional difficulty,
wit
subject had been debated in both Houses of Congress, it
so H f m a t t e r o f ffrave deliberation with the then cabinet; so much
menf 11 P r e s i d e n t was brought to pause: and not till the last moed b 7 the
offioini
^
constitution for the approval, did he give it his
s
eainli j}P c t l o n ' It is well known, at that day, that his cabinet was
ormn • . V l c l e d upon the question—Mr. Jefferson and Mr. Randolph
Knov n g lt u £ o n constitutional grounds, and Mr. Hamilton and Mr.
siffnii S u J? p o r t i n & the power. In this state of things do we find him
to thl8 i d a r t e r , which perhaps he should have done, according
sn
mind
£gested by Mr. Jefferson, "that unless the President's
u
> °n a view of every thing which is urged for and against this



198

FEDERAL BANKING LAWS AND REPORTS

bill, is tolerably clear that it is unauthorized by the constitution; if
the pro and con hang so even as to balance his judgment; a just respect
for the wisdom of the legislature would naturally decide the balance
in favor of their opinion* It is chiefly for cases where they are clearly
misled by error, ambition, or interest, that the constitution has placed
a check in the negative of the President." The opinion of Mr. Jefferson upon this leading measure of the then dominant party in Congress,
expresses so fully our views on the constitutional point, that it is
herewith appended, and made a part of this report. In confirmation of the principles therein contained, and which we believe governed the republican party in those times, who awfully feared that
construction and implication would do away the restraints which the
constitution had imposed upon Congress, (and, there is too much
reason to think, has of late been the case,) we see Mr. Madison then
standing by the side of Mr. Jefferson, the foremost and boldest in
debate in the House of Representatives, denouncing the incorporation
of the bank, in the following strong, emphatic terms: "That it was
condemned by the silence of the constitution, condemned by the rule
of interpretation arising out of the constitution; condemned by its
tendency to destroy the main characteristic of the constitution; condemned by the exposition of the friends of the constitution, whilst
depending before the public; condemned by the apparent intention of
the parties which ratified the constitution; condemned by the explanatory amendments proposed by Congress themselves, to the constitution; and he hoped it would receive its final condemnation by the vote
of the House."
If it be claimed for the decision of this question at that day, that it
was made by the patriots of the revolution, and the sages of the federal
convention, with Washington at their head, something is also due to
the opinion of those, who, differing from them, were equally patriots
of the revolution, and members of the federal convention; the latter
believing that the constitution was a grant of specific powers, saw at
once this fatal admission, depending upon construction altogether,
would lead to others still more dangerous, and finally end in consolidation, or a government unlimited as the Parliament of Great Britain.
The tendency seemed to be, to give that form and structure to tne
federal Government in a course of legislation, which had failed to oe
adopted in convention, and this they most fearfully apprehended
not without cause, for we find the alien and sedition laws were afterwards passed, deriving their existence from the same power of imp*1'
cation, so justly condemned by the American people as acts of usurpation, as to have resulted in the election of Mr. Jefferson. Fortunatei)
for the country, these were acts affecting the rights of person an«
the liberty of speech and of the press, in which were seen more clear)
the injustice and oppression than the bank charter, which indirectly
operated upon them to an injurious extent, under the specious pretence
of dispensing benefits.
Accordingly, in 1811, when the bank came forward for a renew
of its charter, the same party which brought Mr. Jefferson into toe
administration, and continued Mr. Madison, was found opposing «*
application upon the very same grounds taken in 1791, which results
m its rejection.
The war immediately following, the Government was enabled>
prosecute it to a successful issue without the aid of the bank, under tiw



FEDERAL BANKING LAWS AND REPORTS

199

most disadvantageous circumstances, being illy prepared for such a
contest, and against the united strength of the opposition, who had recently been defeated in this, their most favorite measure. That a bank
would have added facilities to the Government in carrying on the operations of the war, may be granted, without giving any weight to the
argument in the absence of a power authorizing its establishment. It
is believed, however, like the rest of the banks, it would have been compelled to have suspended specie payments; and been found inadequate
towards reducing the rate of exchange, or correcting the then depreciated state of the currency. If after so short a period, when going
into operation in the year 1818, with eight millions and. upwards of
Government deposites, the bank was almost reduced to the necessity of
stopping specie payments; how can it be expected to stand the shock
of a general depreciation of currency, which a state of war must always bring upon the country ? The nation itself, with all its resources,
was unable to escape the calamity, and its credit was reduced much
lower than many of these local institutions.
Such appears to have been the history of the bank up to the period
of 1816, when it was last chartered, and the particular circumstances of
the times operating upon it whenever brought to the consideration of
Congress; and although the Supreme Court of the United States has
since decided in favor of its constitutionality, it is an authority resting
entirely upon the principles of 1791, which first brought it into existence, but afterwards repudiated; and is, therefore, entitled to that
height alone which reason and argument can furnish. We are not responsible for the change of opinion in men upon questions of great po™_cal importance, leaving the decision at all times to their conscience
and their country. But we do not recognise any precedent, either legislative or judicial, as settling what we conceive to be a fundamental
principle, nowhere found in the constitution itself, nor fairly deducible
trom it by any legitimate rule of interpretation.
U is a fact worthy of remark, that at every period when the question
arose for chartering a Bank of the United States, it was after the
country had experienced all the evils of a depreciated currency, and
^as just returning to a wholesome circulation. The continental paper
«w>ney brought into existence the North American Bank; the funding
system ai the assumption act, that of the first Bank of the United
and
JJlates> *d the depreciated paper money at the close of the late war,
Represent institution.
^ c a u s e s will always produce like effects; and what has occurred
n f 7 Bank of England may be considered as applicable to any Bank
^ tue United States, under similar circumstances. In 1797, a run
*s made upon the Bank of England. It applied to Government,
s greatest creditor, for relief. Mr. Pitt had no money, but gave an
WIQ ex f s t n c t i l ? g the bank from paying its notes in gold. This order
of s tended six months after a general peace, and continued a quarter
°I ar century afterwards.
ene
thp ° m? a ned £h e ™l derangementh of ethee d i t o f t h e medium, during
circulating
t
sunw!' ex ed ? l o w s t a t e t 0 w h i c t h c r
Government had
of ft o creta ient was again resorted to, upon the recommendation
P
fe
whipf !? ry of the Treasury, of establishing a national bank,
bv Ml' M a P assin & both branches of the Legislature, was returned
*T
X)LT an , dison, with his objections. It was renewed in 1816, after
P ace
' <* received his sanction.



200

FEDERAL BANKING LAWS AND REPORTS

The condition of the currency at that time, and the great losses
sustained by the Treasury in the collection of the revenue, it is believed, induced many to surrender up opinions previously entertained
in regard to the establishment of a national bank, to the supposed
necessity of the case, and public opinion. The danger was, however,
over, and these evils would have been corrected in a short time by
commerce and internal trade resuming their accustomed channels.
The great credit that is attributed to the United States' Bank in causing specie payments to be restored by the local institutions, is by no
means merited to the extent generally claimed for it. The arrangement of the banks in the several States of the Union, with this view,
at a stated period shortly after peace, together with the compulsory
process of some of the States, aided by the joint resolution of the two
Houses of Congress instructing the Secretary of the Treasury to receive only the notes of specie-paying banks for all debts to the Government, brought about this result even before the United States BanK
was fairly in operation. This, it is at all times competent for the officer
of the Treasury to do, by refusing, in the collection of the revenue, the
notes of all banks failing to pay specie; which wTould prove as salutary
a check against excessive issues as any supposed agency of the ban*?
and is the only rightful control which the Government should exercise
over such local institutions of the States. To say that you can, by the
application of a principle in this way, restrain their power, is to say
that you can destroy them altogether. We have seen the President 01
the Bank, upon the interrogatory put to him, "Has the bank, at any
time, oppressed any of the State banks?" after answering negatively,
affirming the fact, that "there are very few banks which might not
have been destroyed by an exertion of the power of the bank?
We do not mean to go into all the reasoning, which, at different
times and in different places, has been employed to disprove arguments founded on implication in favor of the constitutionality of tne
bank. This has been so often done, and is so well understood, that
it will be merely sufficient to state the positions, and leave the deductions to be drawn out by the investigating mind.
It is admitted by all parties, that the constitution is not only a
grant of enumerated, but limited powers, to a certain extent; tna
nothing is conferred, but what is expressly given, or clearly necessaO
to the execution o a given power. With this view, a to satisi)
of a given power. With this view, and
th
tifii
h
d that ll po*e
those who opposed the ratification upon the ground t h t all po*e
would be assumed, unless further restrained, was the tenth amendment adopted, which declares, "the powers not delegated to the Unite
States by the constitution, nor prohibited by it to the States, »r
reserved to the States respectively, or to the people."
.... ci
It is not pretended by any one to affirm that there is a distinc»
substantive power in the constitution to create a corporation, or
establish a bank with corporate powers; yet it is claimed as .one
the necessary means to effectuate a given purpose in the constituti°*j
We are naturally led to inquire, in the first place, what is the em
be accomplished, in order to determine whether the means are appr




FEDERAL BANKING LAWS AND REPORTS

201

priate? It is said you have the power to raise and collect taxes; to
borrow money; to regulate commerce; to declare war; to coin money,
and regulate the value thereof. We admit that these are all specific
grants of power, but should like to know upon which of them it is
intended, at this time, to locate the bank? It was very happily and
forcibly said by a Senator, in debate upon this question in 1811, (Mr.
Clay,) that "this vagrant power to erect a hank, after having wandered
throughout the whole constitution in quest of some congenital spot
to fasten upon, has been at length located by the gentleman from
Georgia, (Mr. Crawford) on that provision to lay and collect taxes."
It cannot be necessary now to raise money by taxation; nor to borrow, having more than we could wish; nor to regulate commerce, which
if left to individual enterprise, will regulate itself without any such
agency, under the rules which have been prescribed by law; nor to declare war and raise armies; and we humbly conceive, it is not necessary
to the power to coin money, and regulate the value thereof. The question to be determined by every rational mind, is, whether the bank can
be considered, in the common acceptation of the words, "necessaryj and
proper," as an adjunct to carry into effect any of the above objects.
Not that it is more convenient, more useful, or more needful than another which is ordinarily adopted. A corporation is said to be one of
the lowest attributes appertaining to sovereignty, and classed among
the incidents of a power. We think it of a much higher order, originating from the very Source of sovereignty itself, and must be considered
as a distinct, substantive power, and not one of the attributes belonging
to every power. It resides in the King of England, although not exclusively. The sovereignty here belongs to the people, except that
portion of it which they have transferred to the Federal Government.
Corporations are viewed with distrust by all governments, and properly denominated in law, as bodies without souls. They are invested
Wltn
exclusive privileges beyond the rest of society, permitted to hold
property in mortmain, and may be so constituted as to change the
course of descents in the several States, so far as their corporate char*
acter
[s concerned; and so protected with the panoply of the legislature
and the judiciary, that their rights are held inviolable, and not to be
reached by law without their consent. It is all this, and even more;
and yet we are told that it is the mere incident—the necessary mean
to carry into effect one of the principal powers.
fet us trace the extent to which this doctrine leads, and see if it be
not subversive of every limitation placed upon Congress by the grant
°f delegated powers.
x ou have the power to regulate commerce. According to the opinion
or some, that authorizes you to protect manufacturers: the best mean,
ynat is, the necessary and proper mean, is an act of incorporation,
. erefore, }*> i s constitutional to protect manufactures by an act of
^.corporation; and every such company now in the United States may,
Mt
& equal propriety, apply to Congress for an act of incorporation,




202

FEDERAL BANKING LAWS AND REPORTS

as the stockholders of the bank, who, to a certain extent, are nothing but
traders and dealers in paper money independent of the fiscal operations
of the Government. Again: it may be considered, in the wisdom of
our legislation, that Congress has power to colonize the free people
of color: certainly the most necessary, the most convenient, and proper
way, would be to incorporate at once the Colonization Society, and
vest your funds there, which could be better managed for the purpose.
What is there to prevent Congress from incorporating every internal
improvement company, and becoming part stock owner, holding out,
as it does, a more convenient, responsible, and economical mean in the
disbursement of public moneys, than any which has heretofore been
used ? Why, nothing, but to raise this power from an incident, where
it has been placed by the Supreme Court in the decision of the bank,
in the case of McCulloch against the State of Maryland, and consider
it as a principal which there is strong reason to believe was intended
by the framers of the constitution excluding it from the instrument.
Even as a mean, we think it a strained construction to erect a corporation, to execute any one of the enumerated powers which can be carried
on without it, though perhaps not quite so well.
It is laid down in the report of the Committee of Ways and Means
upon this subject made in 1830, that, "if Congress, under the authority
to pass all laws necessary and proper for carrying into effect the
powers vested in all or any of the departments of the Government, may
rightfully pass a law inflicting the punishment of death, without any
other authority, it is difficult to conceive why it may not pass a la^
under the same authority, for the more humble purpose of creatin? a
corporation." Now let us see how the parallel runs: In the first place
there should be a fitness, a due relationship, between the power ana
the incident to justify it. It has been likened to the power "to establish
post offices and post roads," by which you undertake to pass a law
punishing, with death or imprisonment, the robbing or stopping ol
the United States' mail. Every one must see that your law establishing
post offices and post roads would fail to be executed without a po^ r
to punish for its violatiori; and no one has ever denied but what it was a
necessary and proper mean to execute the end. But not so to collect
and disburse the revenue, to borrow money, &c, because all these can
be done through the simple agency of your Treasury Department
without the aid of the bank. But is the creation of this corporation a
"more humble purpose" than the law to protect the Post Office Department from robbers and assassins; which, if it is not stained with as
much blood, is marked with as cruel imprisonment against the coun|el:
teiting of its notes, and, in our opinion, illegal orders, otherwise called
drafts; and this brings us to ask, where is the power obtained to
punish for counterfeiting the notes of the Bank of the United States.
i W ,, mark the difference between the "more humble purpose'' w
purpose''
erence
more
creatig th corporation, and the incidental power of punishment imti
ht
im
creating this
der the post office law. The power to punish is derived incident*"}




FEDERAL BANKING LAWS AND REPORTS

203

from the right to establish the office or road. The power to create the
corporation is said to be incidental to some other power, and then the
power to punish is incident to that; so, we have the incident of an incident to a power, carrying with it the right of punishing with death
or imprisonment. So far, then, from being the less, it becomes the
greater power, and makes the less equal the greater.
Under the law establishing the North American Bank, no power
was attempted to be exercised providing against counterfeiting its
notes or seal, deeming it unauthorized by the articles of confederation.
Wefindin the constitution the power given "to coin money, and regulate the value thereof:" it was not even left to implication, as it might
have been fairly done, to provide against counterfeiting and debasing
the same. But, from the great necessity of the case, and out of abundant caution, knowing that the power did not exist during the confederation, did the convention insert the clause also, "to provide for the
punishment of counterfeiting the securities and current coin of the
United States." A bank note is neither a Government security, nor
current coin; and, therefore, without this provision of the constitution,
it is the creature of the corporation itself, and must, therefore, look to
that for protection. To give protection, it should be shown to be a
principal, substantive power m the constitution; which cannot be
done, as it is nowhere among the enumerated articles.
These views are applicable to every branch of the subject depending
upon construction and implication; and it is, therefore, deemed unnecessary to press them further. It is, however, a little strange to
think, that, after ransacking all the powers of the constitution, under
which to locate this incident, as it is called, it is at last found to reside
under the power "to coin money, and regulate the value thereof."
Aow, what is the plain meaning of all this? Has not this power
executed itself, long since, without the aid of a bank or corporation?
Jior is either necessary for the purpose. Coin is a term known all over
tlie world, as applicable to metallic substances as money, in contradistinction of paper. "Who ever heard of a mint coining paper? It
1S
a generic term, of which there are different species, and paper is
y\ the representative of money. It is capable of division and subdivision into aliquot parts; and the proper business of regulation is,
»> say of what each part shall consist. This has been the interpretation
<
o t tlle
clause, under consideration, from the foundation of the Government down to the present time, and the necessary laws made in
Pursuance thereof. A committee of this House has been raised, the
P^sent session, to regulate the value of "coin;" and, I am sure, they do
n
°t mean to do so by a bank charter, or an act of incorporation: for,
™se are the measures the Committee of Ways and Means have to
insider, which are separate and distinct from the regulation of the
irrent coin. The incident here, then, does not follow the principal,
foi \ A S t a t e s a r e authorized to establish banks, and issue paper
iwicied on a specie basis, and thereby vitiate the circulating medium,

92180 O—63



204

FEDERAL BANKING LAWS AND REPORTS

by stopping payment, or over issues, it does not follow that you have
the right to control them, by substituting the same currency, which
is liable to the same consequences. Your power, under the constitution,
must be perfect; and if it be the State banks you design to reach in
this way, which supposes an incompetency in the respective Legislatures to govern them, you can march directly up to the object, and
suppress them altogether. But it is not the paper currency which
Congress is entrusted with the power of regulating; and here lies the
error of the argument, in supposing a case which does not exist.
It is the duty of Congress to collect the revenue, and this is the
appropriate power, if any were to be found, to which this subject
refers itself, depending, as it does, upon implication. And if so, it
should have been confined to that object, and that alone. But it is
something more. It is a thing capable of being seen and felt; a body
of individuals invested with all the powers and privileges of an exclusive trading company dealing in paper, which it would be in the
power of any one of the States to suppress in an individual or private
company, without such authority. It is, moreover, capable of holding
real estate to a large amount within the States, which the constitution
expressly confines to special cases, and has done business, as appears
by the last returns, to an amount upwards of one hundred and twentyseven millions of dollars, while it is alone responsible for its debts m
its corporate capacity. It is, therefore, too great a power to rest upon
construction and implication merely.
,,
That the bank adds facilities to trade and commerce generally,
and, to a certain extent, regulates the course of exchange, will not
be questioned; but does that justify Congress in erecting a brokers
shop to do what is the business of individual enterprise, and the
natural channel of trade itself ?
,,
So a commercial company would be very convenient, nay, nseju,
for all these purposes; and it would be just as much within tne
competency of Congress to establish one in the city of New IOTK,
Boston, or Philadelphia, to trade to the East Indies, or anywhere
else, under the idea of facilitating commerce and regulating exchanges,
as to establish ,a bank. Other illustrations might be furnished, w«
it necessary, going to show the danger of this power of implication*
when carried beyond its natural legitimate sphere, which may be use
to raise up an independent power, and thus do away all the limitations and restraints imposed upon Congress by the constitution; &"
so we think of the bank incorporation.
. .
It would seem to be a safe rule of constructing the constitution
that, in all doubtful cases, where the power is not expressed, n
clearly necessary to execute the purpose, it is better to refrain tna
exercise it. If we had no other lights but reason to guide us m tn
instance, the previous decisions of Congress and the judiciary y<Jiu
be entitled to that weight which they deserve as authority for settn;,
a constitutional question founded upon opinion merely. But w e




FEDERAL BANKING LAWS AND REPORTS

205

we have the best evidence the nature of the case admits of, the journals
of the federal convention which adopted the constitution, and since
published, we do not feel ourselves at liberty to reject it, and range
at large again over the wide field of speculative opinion to find out
what they meant.
Among various propositions submitted to the convention in a resolution, some of which were adopted, there is one to grant charters of
incorporation generally. It has been argued from this, that although
they did not choose to grant the power generally, it does not follow
that they were unwilling for it to be used as a means in executing any
one of the specified powers. It seems that they were unwilling to grant
it, either for general or special purposes. For, it farther appears, that
it was proposed to grant charters of incorporation in cases where the
public good may require them, and the authority of a single state may
be incompetent, whicha they edid not choose to incorporate into the conS 1
i ^°- n * ^ a n ^' ^ o r m o m n t ? t>e supposed that they designedly excluded it from among the enumerated powers, with a view that it might
be impliedly exercised ? This would be to accuse them of a species of
fraud, of imposition upon the people, which we are not willing to
believe.. The true secret how it came to be left out, is disclosed in Mr.
Jefferson's memoirs, by a note made of the transactions in the conven™?n upon the evidence of two of its members, which is as follows:
Baldwin mentions at table the following fact: When the bank bill
^as under discussion in the House of Representatives, Judge Wilson
came m and was standing by Baldwin. Baldwin reminded him of the
following fact, which passed in the grand convention. Among the
enumerated powers given to Congress, was one to erect corporations.
11
was, on debate, struck out. Several particular powers were then
proposed. Among others, Robert Morris proposed to give Congress a
power to establish a national bank. Gouverneur Morris opposed it,
^serving that it was extremely doubtful whether the constitution they
}Tere Naming could ever be passed at all by the people of America;
tnat to give it its best chance, however, they should make it as palatable
^possible, and put nothing into it not very essential, which might
aise up enemies; that his colleague (Robert Morris) well knew that
m* ,rwas> i n t h e i r State, (Pennsylvania,) the very watchword of
1 arty; that a lank had been the great bone of contention between the
lin * paibee o f t h e S t a t e > f r o m t h e establishment of their constitution—
t ies
***?£ *i erected, put down, and erected again, as either party preonaerated; that, therefore, to insert this power, would instantly enist against the whole instrument the whole of the anti-bank party m
ennsylvania. Whereupon it was rejected, as was every other special
r
v^?O >S except that of giving copyrights to authors, and patents to m«._• F >' the general a
power of incorporating being whittled down to
to Q f nt h e W i l s o . n ^ e e d to the fact." This, it should seem, ought
'
<W i
question, whether an incorporation be a general or mciQe
*ital power.




206

FEDERAL BANKING LAWS AND REPORTS

AVe propose now to submit some other views against the expediency
of renewing the present charter of the Bank of the United States, in
addition to what has been already said connected with the other branch
of the subject. The arguments relied upon in its favor, seem to be
chiefly those regarding the fiscal operations of the Government, the
rate of exchange, and the uniformity of currency.
Although these considerations may have had their influence in the
original creation of the charter, the reason, in a great measure, having
ceased which brought it into existence, does away the necessity of its
continuance. There are, however, other paramount considerations,
growing out of the corruptions and influences which the bank might
exert, not only upon the head, but every department of the Government, executive, legislative, and judicial, calculated to destroy the
purity, virtue, and independence of our political institutions, that far
outweigh, in our estimation, any supposed benefits conferred by it upon
either the Government or the people. "We are not going into a view of
the principles of banking to prove what is well settled in political economy, that every paper dollar in circulation takes the place of a silver
one. It is an evil existing in every State of this Union, which you proposed to cure, not be restraining, but increasing the issues to a tenfold
degree. It is, to be sure, a prohibition against the extension of the
paper of the State banks, which you come into the market to supply?
not with any additional specie capital, but with a currency of the same
character and denomination, deriving its superiority from the value
imparted to it by legislation, of being made receivable in all debts to
the Government of the United States. The banks of the several States
paying specie, it is true, are upon the same footing, in this respect
But suppose, from any unforeseen circumstances, such, for instance,
as a run upon the bank for specie, which it would be unable to meet,
as happened to the Bank of England in 1797, and it became necessary
to stop payment; how would the case then stand? Why, these notes

lire to save the bank, upon the maxim that "necessitas habet non
legem."
So far as the fiscal operations of the Government are concerned,
which now consist chiefly in transferring its funds from one pan °x
the country to the other, a bank, with a capital of thirty-five milli
of dollars, can scarcely be necessary, after the payment of the
debt, when the expenditures of the Government will not require
than eleven millions of dollars. It is believed the Secretary of
Treasury will find no difficulty in managing its concerns through
agency of the State banks, upon nearly as favorable terms as it




FEDERAL BANKING LAWS AND REPORTS

207

does through the United States' Bank, and less injuriously upon
different parts of the country. There could always be found some one,
if not all, of good credit to entitle it to the confidence of the department for the purpose; and, if not, it would be his business to make
them so, under the resolution of 1816, by rejecting their notes. To
this it is objected, that you place the execution of your laws into the
power of agents not created by you, and therefore irresponsible. They
would be responsible to you in the same way that they are responsible
to every body else, in the payment of their debts; and it is supposing
a want of confidence in the States who created them, that they would
Jiot do their duty in compelling them to pay specie for their notes.
They, on the other hand, Avith equal propriety, might distrust you in
the performance of your duty, in this respect, as it regards the Bank
of the United States. In reasoning from the condition of the local
banks in 1816, and the supposed agency of the United States' Bank in
reducing the depreciated circulating medium from one hundred and
ten millions of dollars to forty-five millions, within four years, is
claiming too much; and such a state of things cannot be expected
again to happen without the like causes, when the United States'
Bank would be found in the same, if not a worse, situation. The losses
therefore consequent upon that period, should not be considered as
applicable to the present peaceful times.
•The city of New York collects much the greater part of the revenue
arising from imports, and a draft upon that place would always command a premium in the south and west, where the course of exchange
js usually against them; and, in this way, the holder would profit by
»ne rate of exchange, whereas he is now driven to the necessity of
purchasing of the bank a domestic bill for the purpose, which forms
so very profitable a part of its business, being $16,691,129 34, as
appears by the report of the last year's monthly returns of its condition. At what price these bills are obtained, is best known to those
*no have been compelled to deal in them. They would likewise be
relieved from that constant drain of specie which is constantly going
on through the branches, which are but conduits to the mother bank
» collecting it for transportation. If the withdrawal of specie from
n
tlle c
°nimunity, and supplying its place with paper, be the uniform
<urrewy which the bank Avas intended to produce, then has it most
na
Ppuy effected the purpose. The circumstance of the notes being
receivable in payment to the Government, has given them a univers i t y of character, and a circulation so far removed from the place
*nere issued, that they do not return for payment; and this operal ^ ' j t 1 S found,e can hbe carried on with perfect safety in the south
n? Jt i west > w h r e t e excessive issue of paper appears. The notes
<* the local banks would be confined within a small compass, and,
^nstantly coming back upon them for payment, would always keep a
constant supply of specie in circulation. It is a little curious to see the
systematic course of trade in specie carried on of late years by the




208

FEDERAL BANKING LAWS AND REPORTS

bank through its branches, exclusively, to the south and west. That,
while the specie on hand has remained about stationary, the issues of
notes have considerably increased; and the annexed table of the returns, for the month of December last, will show the condition of those
branches, and their ability to take up their notes. Since the 1st of
July, 1827, when, in order to evade the provisions of the charter requiring the notes and hills of the hank made payable on demand tobe
signed by the President, and countersigned by the principal cashier
or treasurer, (which Congress refused to amend, so as to authorize
it to be done by an agent or agents,) it appears, that branch drafts,
as they are called, but, in our opinion, nothing but common orders, m
violation of the charter, have been issued, principally at those branches,
to the amount of 7,096,765 dollars, of which there is supposed to be in
circulation 5,020,000 dollars. During the same period, specie to the
very large amount of 8,317,790 51 has been drawn from the same
branches to the parent bank. These drafts or orders, instead of finding
their way to the mother bank, where they purport to be payable, remain in the country where issued, and circulate as paper in place of the
specie thus withdrawn. They are receivable in all payments to the
Government, but not of individuals, unless as a matter of favor; they
are neither bilh nor notes made payable on demand, such as the charter
describes as a circulating medium, wanting the most important essentials, the signatures of the President and Cashier; and, therefore, are
properly receivable nowhere.
The bank, then, to be entitled to our favor, should show, by its conduct, and the management of its affairs, that it is worthy to deserve it.
It may have been faithful to the interests of the stockholders, but it
should also appear that its poAver has not been used to the oppression
of the community, nor for any improper purpose. Before, therefore,
we could give it our sanction, were it deemed constitutional and expedient, it should undergo the severest scrutiny by an investigating
committee, with power to send for persons and papers.
We have seen it at the period when the President, in the discharge of
his official duties, thought proper to call the attention of Congressi to
the subject, instead of taking heed and curtailing its discounts, with ft
view to the probable expiration of its charter, ^oing on extending its
accommodations regardless of the admonition; creating new interests,
and making new friends, relying upon its own influence nnd the supposed strength of public opinion, to carry it through. The direct^
congratulating the stockholders at the last annual meeting u»on the
fidelity and success with which the institution had been managed, (ana
thereupon receiving thanks,) having done business, for the last year,
to the amount of one hundred million of dollars, we find resort hacl to
the charter, m defiance of Congress; and, in the penal part of it, taking
the word order to mean an authority* upon which have been circu'j"^
seven millions of dollars in the shape of money, to the injury of tne
public by its not being receivable, except at the pleasure of the bank,
thereby destroying to a certain extent that uniformity in the current?)
which had been claimed for it: that, according to Mr. Cheves's rep°n>
within twenty-seven months after it first went into operation, it ™b




FEDERAL BANKING LAWS AND REPORTS

209

so badly conducted on the part of the then directors, by speculations
upon the stock far beyond its real value, and otherwise, as to have
brought it within one month of a state of complete bankruptcy, with
all the aid of the Government to support it, amounting to eight millions
of dollars. We now find the whole amount of notes issued to be $40,621,21118; one half of which may be considered in circulation, with but
$7,038,823 12 on hand. The picture is here presented, to be drawn out
by others.
We moreover view it as one of the most stupendous engines of political power that was ever erected; capable of being exerted not only
against the head, but every branch of the Government; corrupting by
its money, and aweing by its power, the virtuous and independent
action of the representatives of the people, in prostituting them to its
base and sinister purposes. Whole States are liable to be operated
upon in this way, and made to surrender their principles by the
reward and temptations held out in a loan; in case, for instance, the
question depended upon a renewal of its charter or not. On the other
hand, we can well conceive that an ambitious man, happening by
chance to get to the head of the administration, perhaps Dy its influence, might make it subservient to his views in maintaining his posihon against the will of the people, by corrupting the very source itself
or the elective franchise; in subsiding the presses of the country; and
causing branches to be established in different places, not in reference
to the public good, but to promote his own political views, and the
interests of the bank. It is not sufficient to say that this is reasoning
nk.
y
g
upon a s t t of corruption which h f
i
h i h heretofore h not existed, and C
d Constate f
has t i t d
gress would have it in its power to control at a stated period by a
Repeal of the charter; but, if it be a probable conseouence of the system
itseif, it is not claiming too much to suppose that it may be employed
this way at some time or other.
jt is also a question of the gravest consideration at this time, not
only with the.American Congress, but the whole people, how far it is
expedient to incorporate a moneyed institution, the stock of which is
^Pable of beinjr held by foreigners in sufficient quantity to control the
w
noie transactions of the system. In time of war, loans beyond the
^mount which the charter authorizes, might be withheld, and even
unas furnished the enemy of our common country, to be used against
^ and, in this way, the whole operations of the Government be
H-Vzed by this influence abroad! Already we see the amount of
« p t millions and a half held by foreigners, nearly one-fourth of the
^? ole capital stock; and, in case of renewal, there is no doubt but
twA i • Unite <* States; and more particularly at tins rime, wnen
> o elections of representatives to Congress, under the present census,
v
1 e t0
intervene, before the expiration of the charter.
M. ALEXANDER.
NATHAN GAITHER.




210

FEDEKAL BANKING LAWS AND REPORTS

Bill To Renew Charter of Bank of the United States
[This bill, vetoed by President Jackson (pp. 214^-228 below), is
now in the Senate records, National Archives.]
TWENTY-SECOND CONGRESS OF THE UNITED STATES;
At the first Session, Begun and held at the City of Washington, on Monday, the
fifth day of December, one thousand eight hundred and thirty one

AN ACT
to modify and continue the act entitled, "An act to incorporate the subscribers
to the Bank of the United States."

Be it enacted, By the Senate and House of Representatives of the
United States of America in Congress assembled, THAI, the a
entitled, "An act to incorporate the subscribers to the Bank ol in*
United States" approved on the tenth day of April, in the year one
thousand eight hundred and sixteen, shall continue in full iorce ai
effect for the term of fifteen years from and after the period therein
limited for its expiration, to wit: the third day of March, in theyei
one thousand eight hundred and thirty six; and that all thes a l
rigu^
interest, properties, powers and privileges secured by the res n . , j
with all the rules, conditions, restrictions and duties thereinarP ?1 ~[ie
and imposed be and remain after the said third day °^-^ ?^2 Leen
year one thousand eight hundred and thirty-six, during the saianit
years as if the said limitation, in the said act had not been made, su _
ject nevertheless to the modifications and changes hereinafter e
pressed. Section 2. Arid be it further enacted, That the T>^ectorZ'l
said Corporation shall have power to appoint two more Officere'w.
authority to sign and countersign any or all the notes thereof
denomination of each of which shall be less than one hundred cloUi*J
which notes when signed and countersigned by the said Officers resp
0
tively shall to all intents and purposes be binding and th»[lS£°l
upon the said corporation as if the same had been signed by f/*: o f
dent and countersigned by the principal Cashier or Treasurer tnere ,
and it shall be the duty of the Director of the said Corporation ^
make known in writing and as soon as may be to the Secretary oi ^
Treasury the names of the Officers who shall be appointed by vinue ^
this provision: Provided: That from and after the third da}
March, one thousand eight hundred and thirty six, no Branch J < j
>
draft, or other bank paper not payable at the place where i&^^Lbe put in circulation as currency by the Bank or any of its omcers
cept notes of the denomination of fifty dollars or of some greater s •
Section 3. And be it further enacted, That it shall not be lawtui i




FEDERAL BANKING LAWS AND REPORTS

211

the said Corporation to issue, pay out or put in circulation any note
or notes of a denomination less than fifty dollars, which shall not
upon the faces thereof, respectively, be payable at the Bank or Office
of Discount and Deposit whence they shall be issued, paid out or put
in circulation. Section 4. And be it further enacted, That the notes
or bills of the said corporation, although the same be upon the faces
thereof respectively made payable at one place only shall nevertheless
be received by the said Corporation at the Bank or at any of the Offices
of Discount and Deposit thereof, if tendered in liquidation or payment of any balance or balances due to said Corporation or to such
Office of Discount and Deposit from any other incorporated Bank.
Section 5. And be it further enacted, That it shall not be lawful after
the said third day of March, in the year one thousand eight hundred
and thirty six, for the said Corporation to hold, keep and retain for
a period exceeding five years after the date of acquiring the same any
right, title or interest, except by way of mortgage or judgement lien
in security of debts, to any lands, tenements and hereditaments other
than those requisite for its accommodation in relation to the convenient transacting of its business; and it shall be the duty of said Corporation, within the aforesaid period of five years to sell, dispose of
or otherwise bona fide divest itself of all right title and interest to any
lands, tenements and hereditaments conveyed to it in satisfaction of
debts previously contracted in the course of its dealings or purchased
at sales upon judgements which shall have been obtained for such debts,
and for any and every violation of this provision the said Corporation
shall be subject to a penalty of ten thousand dollars to be recovered
in the name of the United States of America by a qui-tam action of
debt instituted in any court of the United States having jurisdiction
oi the same; one half of which shall inure to the benefit of the informer and the other half to the use of the United States. Section 6.
And be it further enacted, That from and after the said tenth day of
A
pnl, in the year one thousand eight hundred and thirty six, it shall
not be lawful for the Directors of the said Corporation to have, establish or retain more than two Offices of Discount and Deposit in any
state: Provided; That nothing herein contained shall prevent the
said corporation from retaining any of the Branches which are now
established. Section 7. And be it further enacted, That in consideration of the exclusive benefits and privileges continued by this act to
lie said corporation for fifteen years as aforesaid, the said Corporation shall pay to the United States, the annuity or yearly sum of two
hundred thousand dollars, which said sum shall be paid on the fourth
a
*y of March, in each and every year during the said term of fifteen
years. Section 8. And be it further enacted, That it shall be lawful
or
t-ongress to provide by law that the said Bank shall be restrained
* any time after the third day of March, in the year one thousand
>
ei
ght hundred and thirty six from making, issuing or keeping in circulation any notes or bills of said Bank or any of its Offices of a less




212

FEDERAL BANKING LAWS AND REPORTS

sum or denomination than twenty dollars. Section 9. And be it
further enacted, That the Cashier of the Bank shall annually report
to the Secretary of the Treasury the names of all Stockholders, who
are not resident citizens of the united States; and on application of
the Treasurer of any State shall make out and transmit to such Treasurer a list of Stockholders residing in or citizens of such State with
the amount of Stock owned by each. Section 10. And be it further
enacted, That so much of any act or acts of Congress heretofore passed
and now in force supplementary to or in any wise connected with the
said original act of incorporation approved on the tenth day of April,
in the year one thousand eight hundred and sixteen as is not inconsistent with this act shall be continued in full force and effect, during
the said fifteen years after the said third day of March, in the year,
one thousand eight hundred and thirty six. Section 11. And be it
further enacted, That it shall be the duty of the President and Directors of the said Bank on or before the first day of the next session of
Congress to signify to the President of the United States their acceptance on behalf of the Bank of the United States of the terms and
conditions in this act contained and if they shall fail to do so on or
before the day above mentioned, that then this act shall cease to be in
force.
A. STEVENSON",

Speaker of the House of Representatives,
J. C. CALHOTJN,

Vice President of the United States
and President of the Senate.
I certify that this act did originate in the Senate.




WALTER LOWRIE,

Secretary.

213

FEDERAL BANKING LAWS AND REPORTS

,/rf../*

./Sr,*- '•/-..:, •/- *» s*..('~..*,..S,,-/S. ?/*.,

^-*>s'</"£
i •




(3
^

« A,

^r^

214

FEDERAL BANKING LAWS AND REPORTS

Veto Message—Andrew Jackson, on Bill To Renew Charter of
Bank of United States
Twenty-Second Congress, 1st Session
JULY 10, 1832.
[Source: James D. Richardson, A Compilation of the Messages and Papers of the
Presidents, Vol. 2, pp. 1139-1154]

To the Senate:
The bill "to modify and continue" the act entitled "An act to incorporate the subscribers to the Bank of the United States" 1 was presented to me on the 4th July instant. Having considered it with that
solemn regard to the principles of the Constitution which the day was
calculated to inspire, and come to the conclusion that it ought not to
become a law, I herewith return it to the Senate, in which it originated, with my objections.
A bank of the United States is in many respects convenient for the
Government and useful to the people. Entertaining this opinion, and
deeply impressed with the belief that some of the powers and privileges
possessed by the existing bank are unauthorized by the Constitution,
subversive of the rights of the States, and dangerous to the liberties of
the people, I felt it my duty at an early period of my Administration
to call the attention of Congress to the practicability of organizing an
institution combining all its advantages and obviating these objections.
I sincerely regret that in the act before me I can perceive none of those
modifications of the bank charter which are necessary, in my opinion,
to make it compatible with justice, with sound policy, or with the
Constitution of our country.
The present corporate body, denominated the president, directors,
and company of the Bank of the United States, will have existed at
the time this act is intended to take effect twenty years. It enjoys an
exclusive privilege of banking under the authority of the General
Government, a monopoly of its favor and support, and, as a necessary
consequence, almost a monopoly of the foreign and domestic exchangeThe powers, privileges, and favors bestowed upon it in the original
charter, by increasing the value of the stock far above its par value,
operated as a gratuity of many millions to the stockholders.
An apology may be found for the failure to guard against this result
in the consideration that the effect of the original act of incorporation
could not be certainly foreseen at the time of its passage. The act before me proposes another gratuity to the holders of the same stock, ana
m many cases to the same men, of at least seven millions more. Tnis
donation finds no apology in any uncertainty as to the effect of the act.
On all hands it is conceded that its passage will increase at least 20 oi
30 per cent more the market price of the stock, subject to the payment
of the annuity of $200,000 per year secured by the act, thus adding j f"
a moment one-fourth to its par value. It is not our own citizens on|J
who are to receive the bounty of our Government. More than ei£«j
millions of the stock of this bank are held by foreigners. By this act
the American Republic proposes virtually to make them a present ot
some millions of dollars. For these gratuities to foreigners and to
some of our own opulent citizens the act secures no equivalent whatever. They are the certain gains of the present stockholders under tnj
operation of this act, after making full allowance for the payment oi
the bonus.
1
 For text of bill see pp. 210-212.
Editor's note:


FEDERAL BANKING IAWS AND REPORTS

215

Every monopoly and all exclusive privileges are granted at the
expense of the public, which ought to receive a fair equivalent. The
many millions which this act proposes to bestow on the stockholders of
the existing bank must come airectly or indirectly out of the earnings
of the American people. It is due to them, therefore, if their Government sell monopolies and exclusive privileges, that they should at
least exact for them as much as they are worth in open market. The
value of the monopoly in this case may be correctly ascertained. The
twenty-eight millions of stock would probably be at an advance of 50
per cent, and command in market at least $42,000,000, subject to the
payment of the present bonus. The present value of the monopoly,
therefore, is $17,000,000, and this the act proposes to sell for three
millions, payable in fifteen annual installments of $200,000 each.
It is not conceivable how the present stockholders can have any
claim to the special favor of the Government. The present corporation has enjoyed its monopoly during the period stipulated in the
original contract. If we must have such a corporation, why should
not the Government sell out the whole stock and thus secure to the
people the full market value of the privileges granted ? Why should
not Congress create and sell twenty-eight millions of stock, incorporating the purchasers with all the powers and privileges secured in
tms act and putting the premium upon the sales into the Treasury?
*>ut this act does not permit competition in the purchase of this
Monopoly. It seems to be predicated on the erroneous idea that the
present stockholders have a prescriptive right not only to the favor
out to the bounty of Government. It appears that more than a fourth
Part of the stock is held by foreigners and the residue is held by a few
hundred of our own citizens, chiefly of the richest class. For their
oenefat does this act exclude the whole American people from competijjon in the purchase of this monopoly and dispose of it for many millions less than it is worth. This seems the less excusable because some
ot our citizens not now stockholders petitioned that the door of compeuuon might be opened, and offered to take a charter on terms much
PM™J?rable t 0 ^h.e Government and country.
£ut this proposition, although made by men whose aggregate wealth
js relieved to be equal to all the private stock in the existing bank,
*sgoeen set aside, and the bounty of our Government is proposed to
l f a i ? best °wed on the few who have been fortunate enough to
his
p
ure the stock and at this moment weld the power of the existwield
jP tT0Vermr I can not perceive the justice or policy of this course,
titution,
to E/t t n o t
ient must sell monopolies, it would seem to be its duty
b
£ n e ]™g less than their full value, and if gratuities must be
? Van f ofiftei.en o r twenty years let them not be bestowed on the
re
!
t
dignated and favored

to confine
favors to
V, l e nat.ure of the case wil1 admit >turn enjoy our opportunity
.
citizens, and let each in his
an
f ellow
• y our
1 8T

^

Purity. In the bearings of the act before me upon
fid
l
h it h l d ot become a law

\ k t h a t t h e calling in its loans will produce great embarrass
distress. The time allowed to close its concerns is ample,
L as ^
well managed its pressure will be light, and heavy
Jn
case its management has been bad. If, therefore, it shall



216

FEDERAL BANKING LAWS AND REPORTS

produce distress, the fault will be its own, and it would furnish a
reason against renewing a power which has been so obviously abused.
But will there ever be a time when this reason will be less powerful?
To acknowledge its force is to admit that the bank ought to be perpetual, and as a consequence the present stockholders and those inheriting their rights as successors be established a privileged order,
clothed botli with great political power and enjoying immense pecuniary advantages from their connection with the Government.
The modifications of the existing charter proposed by this act are not
such, in my view, as make it consistent with the rights of the States or
the liberties of the people. The qualification of the right of the bank
to hold real estate, the limitation of its power to establish branches,
and the power reserved to Congress to forbid the circulation of small
notes are restrictions comparatively of little value or importance. All
the objectionable principles of the existing corporation, and most of its
odious features, are retained without alleviation.
The fourth section provides "that the notes or bills of the said corporation, although the same be, on the faces thereof, respectively made
payable at one place only, shall nevertheless be received by the said corporation at the bank or at any of the offices of discount and deposit
thereof if tendered in liquidation or payment of any balance or
balances due to said corporation or to such office of discount and
deposit from any other incorporated bank." This provision secures
to the State banks a legal privilege in the Bank of the United States
which is withheld from all private citizens. If a State bank in Philadelphia owe the Bank of the United States and have notes issued by
the St. Louis branch, it can pay the debt with those notes, but it a
merchant, mechanic, or other private citizen be in like circumstances
he can not by law pay his debt with those notes, but must sell them
at a discount or send them to St. Louis to be cashed. This boon conceded to the State banks, though not unjust in itself, is most odious
because it does not measure out equal justice to the high and the low,
the ricli and the poor. To the extent of its practical effect it is a
bond of union among the banking establishments of the nation, erecting them into an interest separate from that of the people, and its
necessary tendency is to unite the Bank of the United States and the
State banks in any measure which may be thought conducive to their
common interest
The ninth section of the act recognizes principles of worse tendency
than any provision of the present charter.
It enacts that "the cashier of the bank shall annually report to the
becretary of the Treasury the names of all stockholders who are not
resident citizens of the United States, and on the application of the
treasurer of any State shall make out and transmit to such treasurer
a list of stockholders residing in or citizens of such State, with the
amount of stock owned by each." Although this provision, taken m
connection with a decision of the Supreme Court, surrenders, by ns
silence, the right of the States to tax the banking institutions createa
by this corporation under the name of branches throughout the Union*
it is evidently intended to be construed as a concession of their ngm
to tax that portion of the stock which may be held by their own citizen*
and residents. In this light, if the act becomes a law, it will be understood by the States, who will probably proceed to levy a tax equal w



FEDERAL BANKING LAWS AND REPORTS

217

that paid upon the stock of banks incorporated by themselves. In
some States that tax is now 1 percent, either on the capital or on the
shares, and that may be assumed as the amount which all citizen or resident stockholders would be taxed under the operation of this act. As
it is only the stock held in the States and not that employed within
them which would be subject to taxation, and as the names of foreign
stockholders are not to be reported to the treasurers of the States, it
is obvious that the stock held by them will be exempt from this burden.
Their annual profits will therefore be 1 percent more than the citizen
stockholders, and as the annual dividends of the bank may be safely
estimated at 7 percent, the stock will be worth 10 or 15 percent more
to foreigners than to citizens of the United States. To appreciate
the effects which this state of things will produce, we must take a
brief review of the operations and present condition of the Bank of
the United States.
By documents submitted to Congress at the present session it appears

and Southwestern States is $140,200, and in the four Southern States
W 3 , 1 0 0 , and in the Middle and Eastern States is about $13,522,W . The profits of the bank in 1831, as shown in a statement to ConU
gress, were about $3,455,598; of this there accrued in the nine Western
Mates about $1,640,048; in the four Southern States about $352,507,
ana m the Middle and Eastern States about $1,463,041. As little stock
? neld in the West, it is obvious that the debt of the people in that section to the abank is principally a debt to the Eastern and foreign stockholders; t n t the interest they pay upon it is carried into the Eastern
states and into Europe, and that it is a burden upon their industry and
arain of their currency, which no country can bear without incon^nience and occasional distress. To meet this burden and equalize the
exchange operations of the bank, the amount of specie drawn from
L T States through its branches within the last two years, as shown
"J itss official reports, was about $6,000,000. More than half a million
P t mr0peamountt h e not stop in the Eastern States, but passes on to
does
oini *to p a y .
dividends of the foreign stockholders. In the prinfP^ of taxation recognized by this act the Western States finds no
? com P en sation for this perpetual burden on their industry
in of their currency. The branch bank at Mobile made last
}140
cm r a • e > y e t under the provisions of this act the State of Alabama
a
i
| nos trevenuee lfrom these profitable operations, because not a
s]lar
s
sow
• o c k i mhe cd by any of her citizens. Mississippi and Misand <c *? m u- theasna d sucn n a in relation to the branches at Natchez
f
°ndition
ever <\r soe rins '
> * grater or less degree, is the condition of
t
act n V V e ses State. The tendency of the plan of taxation which this
tionPf°P° will be to place the whole United States in the same relaEai ±orei £n n countries which the Western States now bear to the
e
hank • m aWeh W o rhy 1 a 0t a x o n resident stockholders the stock of this
d
t
dents m
J 1 or 15 per cent more to foreigners than to resif it; Avi11
it; Avi11 inevitably leave the country,
Thi °^i °t l l i s
^i t l l i s
country.
i
Provisi iin it practical effect deprive the Eastern
as win
Provision
its ractical
reJnlU ^ ^ Southern and Western States of the means of raising a
fr the extension of business and great profits of this



218

FEDERAL BANKING LAWS AND REPORTS

institution. It will make the American people debtors to aliens in
nearly the whole amount due to this bank, and send across the Atlantic
from two to five millions of specie every year to pay the bank
dividends.
In another of its bearings this provision is fraught with danger.
Of the twenty-five directors of this bank five are chosen by the Government and twenty by the citizen stockholders. From all voice in these
elections the foreign stockholders are excluded by the charter. In
proportion, therefore, as the stock is transferred to foreign holders
the extent of suffrage in the choice of directors is curtailed. Already
is almost a third of the stock in foreign hands and not represented
in elections. It is constantly passing out of the country, and this act
will accelerate its departure. The entire control of the institution
would necessarily fall into the hands of a few citizen stockholders,
and the ease with which the object would be accomplished would be
a temptation to designing men to secure that control in their own
hands by monopolizing the remaining stock. There is danger that
a president and directors would then be able to elect themselves from
year to year, and without responsibility or control manage the whole
concerns of the bank during the existence of its charter. It is easy to
conceive that great evils to our country and its institutions might
flow from such a concentration of power in the hands of a few men
irresponsible to the people.
Is there no danger to our liberty and independence in a bank that
in its nature has so little to bind it to our country ? The president of
the bank has told us that most of the State banks exist by its forbearance. Should its influence become concentered, as it may under the
operation of such an act as this, in the hands of a self-elected directory
whose interests are identified with those of the foreign stockholders,
will there not be cause to tremble for the purity of our elections in
peace and for the independence of our country in war? Their power
would be great whenever they might choose to exert it; but if this
monoply were regularly renewed every fifteen or twenty years on
terms proposed by themselves, they might seldom in peace put forth
their strength to influence elections or control the affairs of the nation.
But if any private citizen or public functionary should interpose to
curtail its powers or prevent a renewal of its privileges, it can not be
doubted that he would be made to feel its influence.
Should the stock of the bank principally pass into the hands of tJie
subjects of a foreign country, and we should unfortunately hecp^
involved m a war with that country, what would be our condition.
Of the course which would be pursued by a bank almost wholly owned
by the subjects of a foreign power, and managed by those whose
interests, if not affections, would run in the same direction there ca£
be no doubt. All its operations within would be in aid of the hostile
fleets and armies without. Controlling our currency, receiving our
public moneys, and holding thousands of our citizens in dependence,




FEDERAL BANKING LAWS AND REPORTS

219

it would be more formidable and dangerous than the naval and military power of the enemy.
If we must have a bank with private stockholders, every consideration of sound policy and every impulse of American feeling admonishes that it should be purely American, Its stockholders should
be composed exclusively of our own citizens, who at least ought to be
friendly to our Government and willing to support it in times of difficulty and danger. So abundant is domestic capital that competition
in subscribing for the stock of local banks has recently led almost to
riots. To a bank exclusively of American stockholders, possessing
the powers and privileges granted by this act, subscriptions for $200,000,000 could be readily obtained. Instead of sending abroad the stock
of the bank in which the Government must deposit its funds and on
which it must rely to sustain its credit in times of emergency, it would
rather seem to be expedient to prohibit its sale to aliens under penalty
of absolute forfeiture.
. It is maintained by the advocates of the bank that its constitutionality in all its features ought to be considered as settled by precedent and
by the decision of the Supreme Court. To this conclusion I can not
assent. Mere precedent is a dangerous source of authority, and should
not be regarded as deciding questions of constitutional power except
where the acquiescence of the people and the States can be considered
as well settled. So far from this being the case on this subject, an
argument against the bank might be based on precedent. One Congress, in 1791, decided in favor of a bank; another, in 1811, decided
gainst it. One Congress, in 1815, decided against a bank; another, in
J«16, decided in its favor. Prior to the present Congress, therefore,
!{!e £ r e c e d e n ts drawn from that source were equal. If we resort to
™ States, the expressions of legislative, judicial, and executive
opinions against the bank have been probably to those in its favor us
* to 1. There is nothing in precedent, therefore, which, if its authority were admitted, ought to weigh in favor of the act before me.
If the opinion of the Supreme Court covered the whole ground of
t m s act
> it ought not to control the coordinate authorities of this Gov? r n ^ e t The Congress, the Executive, and the Court must each f
Th C
i
d h C
t
h for
s aided by its own opinion of the Constitution. Each public
0
«icer who takes an oath to support the Constitution swears that he
will support it as he understands it, and not as it is understood by
ouiers. It is as much the duty of the House of Eepresentatives, of
Ui
^oenate. nnc\ of the President to decide upon the constitutionality of
e, and r\f +1^ " P ^ C ^ I ^ * +^ A™\r\* nnnn fhp. mnstitutionalitv of
1 or resolution which may be presented to them for passage or
'lPProval as it is of the supreme judges when it may be brought before
3 K 1 • judicial decision. The opinion of the judges has no more
^nonty over Congress than the opinion of Congress has over the
«i7jfes'- and on that point the President is independent of both. The
authority o f the Supreme Court must not, therefore, be permitted to




220

FEDERAL BA1STKING LAWS AND REPORTS

control the Congress or the Executive when acting in their legislative
capacities, but to have only such influence as the force of their reasoning may deserve.
But m the case relied upon the Supreme Court have not decided
that all the features of this corporation are compatible with the Constitution. It is true that the court have said that the law incorporating the bank is a constitutional exercise of power by Congress; but
taking into view the whole opinion of the court and the reasoning
by which they have come to that conclusion, I understand them to
have decided that inasmuch as a bank is an appropriate means for
carrying into effect the enumerated powers of the General Government, therefore the law incorporating it is in accordance with that
provision of the Constitution which declares that Congress shall have
power "to make all laws which shall be necessary and proper for carrying those powers into execution." Having satisfied themselves
that the word "necessary" in the Constitution means "needful" "requisite," "essential? "conducive to? and that "a bank" is a convenient, a useful, and essential instrument in the prosecution of the Government's "fiscal operations," they conclude that to "use one must be
within the discretion of Congress" and that "the act to incorporate
the Bank of the United States is a law made in pursuance of the Constitution;" "but," say they, "where the law is not prohibited and is
really calculated to effect any of the objects intrusted to the Government^ to undertake here to inquire into the degree of its necessity
would be to pass the line which circumscribes the judicial department
and to tread on legislative ground?
The principle here affirmed is that the "degree of its necessity," involving all the details of a banking institution, is a question exclusively for legislative consideration. A bank is constitutional, but it is
the province of the Legislature to determine whether this or that
particular power, privilege, or exemption is "necessary and proper to
enable the bank to discharge its duties to the Government, and from
their decision there is no appeal to the courts of justice. Under the
decision of the Supreme Court, therefore, it is the exclusive province
of Congress and the President to decide whether the particular features of this act are necessary and proper in order to enable the banK
to perform conveniently and efficiently the public duties assigned to
it as a fiscal agent, and therefore constitutional, or unnecessary *m
improper, and therefore unconstitutional.
.,
Without commenting on the general principle affirmed by tne
Supreme Court, let us examine the details of this act in accordance
with the rule of legislative action which they have laid down. It ™»
be found that many of the powers and privileges conferred on it ca "
not be supposed necessary for the purpose for which it is proposea
to be created, and are not, therefore, means necessary to attain the ena
in view, and consequently not justified by the Constitution.




FEDERAL BANKING LAWS AND REPORTS

221

The original act of incorporation, section 21, enacts "that no other
bank shall be established by any future law of the United States
during the continuance of the corporation hereby created, for which
the faith of the United States is hereby pledged: Provided, Congress
may renew existing charters for banks within the District of Columbia
not increasing the capital thereof, and may also establish any other
bank or banks in said District with capitals not exceeding in the
whole $6,000,000 if they shall deem it expedient." This provision is
continued in force by the act before me fifteen years from the 3d of
March, 1836.
If Congress possessed the power to establish one bank, they had
power to establish more than one if in their opinion two or more banks
had been "necessary" to facilitate the execution of the powers delegated to them in the Constitution. If they possessed the power to
estblih
db k i
d i d f
h C i i
,
y
country or the emergencies of the Government might m e t
expedient. It was possessed by one Congress as well as another, and
b
J all Congresses alike, and alike at every session. But the Congress
fi n^ ^ a v e t a ^ e n ft away from their successors for twenty years, and
the Congress of 1832 proposes to abolish it for fifteen years more. It
can not be "necessary" or "proper" for Congress to barter away or
divest themselves of any of the powers vested in them by the Constitution to be exercised for the public good. It is not "necessary" to the
anciency of the bank, nor is it "proper" in relation to themselves and
their successors. They may properly use the discretion vested in them,
but they may not limit the discretion of their successors. This restriction on themselves and grant of a monopoly to the bank is therefore
unconstitutional.
In another point of view this provision is a palpable attempt to
amend the Constitution by an act of legislation. The Constitution
declares that "the Congress shall have power to exercise exclusive
^gislation in all cases whatsoever" over the District of Columbia,
^constitutional power, therefore, to establish banks in the District
° r ^°lumbia and increase their capital at will is unlimited and uncontrollable by any other power than that which gave authority to the
constitution. Yet this act declares that Congress shall not increase
™ capital of existing banks, nor create other banks with capitals
Receding in the whole $6,000,000. The Constitution declares that
^ongress shall have power to exercise exclusive legislation over this
. " ^ all cases whatsoever," and this act declares they shall not.
is the supreme law of the land? This provision can not be
ary" or "proper" or constitutional unless the absurdity be adwhenever it be "necessary and proper" in the opinion of
-SS t l l e y h a v e a r ^ h t to barter away one portion of the powers
in
them by the Constitution as a means of executing the rest.




222

FEDERAL BANKING LAWS AND REPORTS

On two subjects only does the Constitution recognize in Congress
the power to grant exclusive privileges or monopolies. It declares
that "Congress shall have power to promote the progress of science
and useful arts by securing for limited times to authors and inventors
the exclusive rignt to their respective writings and discoveries." Out
of this express delegation of power have grown our laws of patents
and copyrights. As the Constitution expressly delegates to Congress
the power to grant exclusive privileges in these cases as the means
of executing the substantive power "to promote the progress of science
and useful arts," it is consistent with the fair rules of construction to
conclude that such a power was not intended to be granted as a means
of accomplishing any other end. On every other subject which comes
within the scope of Congressional power there is an ever-living discretion in the use of proper means, which can not be restricted or abolished without an amendment of the Constitution. Every act of
Congress, therefore, which attempts by grants of monopolies or sale
of exclusive privileges for a limited time, or a time without limit, to
restrict or extinguish its own discretion in the choice of means to
execute its delegated powers is equivalent to a legislative amendment
of the Constitution, and palpably unconstitutional.
.
This act authorizes and encourages transfers of its stock to toreigners and grants them an exemption from all State and national taxation.
So far from being "necessary and proper" that the bank should posses*
this power to make it a safe and efficient agent of the Government in
its fiscal operations, it is calculated to convert the Bank of the e a c
unueu
States into a foreign bank, to impoverish our people in time of P ? l i c
disseminate a foreign influence through every section of the xtepu
and in war to endanger our independence.
,•
n
The several States reserved the power at the formation of t l i e J o n T j
tution to regulate and control titles and transfers of real property? *P
most, if not all, of them have laws disqualifying aliens from ^ m J i ? »
or holding lands within their limits. But this act, in disregard oi u
™
undoubted right of the States to prescribe such disqualifications, giv
to aliens stockholders in this bank an interest and title, as members
the corporation, to all the real property it may acquire within any
the States of this Union. This privilege granted to aliens is noi
"necessary" to enable the bank to perform its public duties, nor in aj,
sense "proper," because it is vitally subversive of the rights oi
States.
The Government of the United States have no constitutional powe
to purchase lands within the States except "for the erection of tor^>
magazines, arsenals, dockyards, and other needful buildings, &
even for these objects only "by the consent of the legislature oi™
State in which the same shall be." By making themselves stockholders in the bank and granting to the corporation the P°^ e ^ -n
purchase lands for other purposes they assume a power not granted




FEDERAL BANKING LAWS AND REPORTS

223

the Constitution and grant to others what they do not themselves
possess. It is not necessary to the receiving, safe-keeping, or transmission of the funds of the Government that the bank should possess
this power, and it is not proper that Congress should thus enlarge the
powers delegated to them in the Constitution.
The old Bank of the United States possessed a capital of only
$11,000,000, which was found fully sufficient to enable it with dispatch
and safety to perform all the functions required of it by the Government. The capital of the present bank is $35,000,000—at least twentyfour more than experience has proved to be necessary to enable a bank
to perform its public functions. " The public debt which existed during
the period of the old bank and on the establishment of the new has
been nearly paid off, and our revenue will soon be reduced. This
increase of capital is therefore not for public but for private purposes.
The Government is the only "proper" judge where its agents should
reside and keep their offices, because it best knows where their presence
will be "necessary." It can not, therefore, be "necessary? or "proper"
to authbrize the bank to locate branches where it pleases to perform
the public service, without consulting the Government, and contrary
f£ lfcs will. The principle laid down by the Supreme Court concedes
that Congress can not establish a bank for purposes of private speculation and gain, but only as a means of executing the delegated powers
of the General Government. By the same principle a branch bank
can not constitutionally be established for other than public purposes.
-Uie power which this act gives to establish two branches in any State,
jnthout the injunction or request of the Government and for other
tnan public purposes, is not "necessary" to the due execution of the
powers delegated to Congress.
1 he bonus which is exacted from the bank is a confession upon the
iace of thetsact that the powers granted by it are greater than are "neces8 r
'f yj^° * character of a fiscal agent. The Government does not tax
its officers and agents for the privilege of serving it. The bonus of
a million and a half required by the original charter and that of three
"unions proposed by this act are not exacted for the privilege of giving
tne necessary facilities for transferring the public funds from place to
Pmce within the United States or the Territories thereof, and for disibuhng tlle same in payment of the public creditors without charging
ommission or claiming allowance on account of the difference of ex/lange,' as required by the act of incorporation, but for something
«jore beneficial to athe stockholders. The original act declares that it
nn\ i ° n u s ) i s S r n t ed "in consideration of the exclusive privileges
j*na rbenefits conferred by this act upon the said bank," and the act
e
.me declares it to be "in consideration of the exclusive benefits
privileges continued by this act to the said corporation for fifteen
s, as aforesaid." It "is therefore for "exclusive privileges and
, s aforesaid.
is
exclusive
fits'
f
l t
d t for
nefits' conferred for their own use and emolument, and not f the




224

FEDERAL BANKING LAWS AND REPORTS

advantage of the Government, that a bonus is exacted. These surplus
powers tor which the bank is required to pay can not surely be "necessary" to make it the fiscal agent of the Treasury. If they were, the
exaction of a bonus for them would not be "proper"
It is maintained by some that the bank is a means of executing the
constitutional power "to coin money and regulate the value thereof."
Congress have established a mint to coin money and passed laws to
regulate the value thereof. The money so coined, with its value so
regulated, and such foreign coins as Congress may adopt are the only
currency known to. the Constitution. But if they have other power to
regulate the currency, it was conferred to be exercised by themselves,
and not to be transferred to a corporation. If the bank be established
for that purpose, with a charter unalterable without its consent, Congress have parted with their power for a term of years, during which
the Constitution is a dead letter. It is neither necessary nor proper
to transfer its legislative power to such a bank, and therefore unconstitutional.
By its silence, considered in connection with the decision of the
Supreme Court in the case of McCulloch against the State of Maryland, this act takes from the States the power to tax a portion of the
banking business carried on within their limits, in subversion of one
of the strongest barriers which secured them against Federal encroachment. Banking, like farming^ manufacturing, or any other
occupation or profession, is a business, the right to follow which is
not originally derived from the laws. Every citizen and every comhe prohibitory State laws were now repealed, every citizen would
_ m
agam possess the right. The State banks are a qualified restoration of
the right which has been taken away by the laws against banking,
guarded by such provisions and limitations as in the opinion of the
btate legislatures the public interest requires. These corporations,
unless there be an exemption in their charter, are, like private bankers
and banking companies, subject to State taxation. The manner in
which these taxes shall be laid depends wholly on legislative discretion,
it may be upon the bank, and the stock, upon the profits, or in any
other mode which the sovereign power shall will.
Upon the formation of the Constitution the States guarded their
taxing power with peculiar jealousy. They surrendered it only as it
regards imports and exports. In relation to every other object within
their jurisdiction, whether persons, property, business, or professions,
it was secured m as ample a manner as it was before possessed. All
persons, though United States officers, are liable to a poll tax by the
States within which they reside. The lands of the United States are
liable to the usual land tax, except in the new States, from whom
agreements that they will not tax unsold lands are exacted when they
are admitted into the Union. Horses, wagons, any beasts or vehicles,




FEDERAL BANKING LAWS AND REPORTS

225

tools, or property belonging to private citizens, though employed in
the service of the United States, are subject to State taxation. Every
private business, whether carried on by an officer of the General Government or not, whether it be mixed with public concerns or not,
even if it be carried on by the Government of the United States itself,
separately or in partnership, falls within the scope of the taxing power
of the State. Nothing comes more fully within it than banks and the
business of banking, by whomsoever instituted and carried on. Over
this whole subject-matter it is just as absolute, unlimited, and uncontrollable as if the Constitution had never been adopted, because in
the formation of that instrument it was reserved without qualification.
The principle is conceded that the States can not rightfully tax the
operations of the General Government. They can not tax the money of
the Government deposited in the State Banks, nor the agency of those
banks in remitting it; but will any man maintain that their mere selection to perform this public service for the General Government would
exempt the State banks and their ordinary business from State taxatlon?
. Had the United States, instead of establishing a bank at Philadelphia, employed a private banker to keep and transmit their funds,
would it have deprived Pennsylvania of the right to tax his bank and
his usual banking operations? It will not be pretended. Upon what
principle, then, are the banking establishments of the Bank of the
United States and their usual banking operations to be exempted
irom taxation ? It is not their public agency or the deposits of the
vjovernment which the States claim a right to tax, but their banks
and their banking powers, instituted and exercised within State jurisdiction for their private emolument—those powers and privileges for
^nich they pay a bonus, and which the States tax in their own banks,
ine exercise of these powers within a State, no matter by whom or
wider what authority, whether by private citizens in their original
n
ght, by corporate bodies created by the States, by foreigners or the
agents of foreign governments located within their limits, forms a
|ptimate object of State taxation. From this and like sources, from
le e
l? rsons, property, and business that are found residing, located, or
carried on under their jurisdiction, must the States, since the sur^nder of their right to raise a revenue from imports and exports,
all the money necessary for the support of their governments and
mai
ntenance of their independence. There is no more appropriate
^ p ect of taxation than banks, banking, and bank stocks, and none to
xation than banks, banking, and bank s t o c ,
ich the States ought
t i i l to cling
nich the 0Statesnecess ht more pertinaciously to cling,
of fLCa£ n t k®
<xy to the character of the bank as a fiscal agent
"i the Government that its private business should be exempted from
"jate taxation to which all the State banks are liable, nor can I con*nl iV "proper" that the substantive and most essential powers re^/vecl by the States shall be thus attacked and annihilated as a means
* Routing the powers delegated to the General Government. It may
saiely assumed that none of those sages who had an agency in




226

FEDERAL BANKING LAWS AND REPORTS

forming or adopting our Constitution ever imagined that any portion
of the taxing power of the States not prohibited to them nor delegated
to Congress was to be swept away and annihilated as a means of
executing certain powers delegated to Congress.
If our power over means is so absolute that the Supreme Court will
not call in question the constitutionality of an act of Congress the subject of which "is not prohibited, and is really calculated to effect any
of the objects intrusted to the Government," although, as in the case
before me, it takes away powers expressly granted to Congress and
rights scrupulously reserved to the States, it becomes us to proceed in
our legislation with the utmost caution. Though not directly, our
own powers and the rights of the States may be indirectly legislated
away in the use of means to execute substantive powers. We may
not enact that Congress shall not have the power of exclusive legislation over the District of Columbia, but we may pledge the faith of
the United States that as a means of executing other powers it shall
not be exercised for twenty years or forever. We may not pass an
act prohibiting the States to tax the banking business carried on within their limits, but we may, as a means of executing our powers over
other objects, place that business in the hands of our agents and
then declare it exempt from State taxation in their hands. Thus may
our own powers and the rights of the States, which we can not
directly curtail or invade, be frittered away and extinguished in
the use of means employed by us to execute other powers. That a bank
of the United States, competent to all the duties which may be required by the Government, might be so organized as not to infringe
on our own delegated powers or the reserved rights of the States I do
not entertain a doubt. Had the Executive been called upon to funusn
the project of such an institution, the duty would have been cheerfully
performed. In the absence of such a call it was obviously proper that
he should confine himself to pointing out those prominent features
in the act presented which in his opinion make it incompatible with
the Constitution and sound policy. A general discussion will now tan©
place, eliciting new light and settling important principles; and a
new Congress, elected m the midst of such discussion, and furnishing
an equal representation of the people according to the last census, will
bear to the Capitol the verdict of public opinion, and, I doubt not,
bring this important question to a satisfactory result.
Under such circumstances the bank comes forward and asks a renewal of its charter for a term of fifteen years upon conditions whicn
not only operate as a gratuity to the stockholders of many millions oi
i
Ll

o

.

, . , .. .
—*-ivestigation unwillingly concetl
restncted in time as necessarily to make it incomplete and unsatisfactory discloses enough to excite suspicion and alarm. In the practices
or the principal bank partially unveiled, in the absence of important




FEDERAL BANKING LAWS AND REPORTS

227

witnesses, and in numerous charges confidently made and as yet wholly
uninvestigated there was enough to induce a majority of the committee
of investigation—a committee which was selected from the most able
and honorable members of the House of Representatives—to recommend a suspension of further action upon the bill and a prosecution
of the inquiry. As the charter had yet four years to run, and as a
renewal now was not necessary to the successful prosecution of its
business, it was to have been expected that the bank itself, conscious
of its purity and proud of its character, would have withdrawn its
application for the present, and demanded the severest scrutiny into
ir^ transactions. In their declining to do so there seems to be an
additional reason why the functionaries of the Government should
proceed with less haste and more caution in the renewal of their
monopoly.
The bank is professedly established as an agent of the executive
branch of the Government, and its constitutionality is maintained on
that ground. Neither upon the propriety of present action nor upon
tne provisions of this act was the Executive consulted. It has had
no opportunity to say that it neither needs nor wants an agent clothed
with such powers and favored by such exemptions. There is nothing
in its legitimate functions which makes it necessary or proper. Whatever interest or influence, whether public or private, has given birth
jo this act, it can not be found either in the wishes or necessities of
tne executive department, by which present action is deemed prenature, and the powers conferred upon its agent not only unnecessary,
out dangerous to the Government and country.
« is to be regretted that the rich and powerful too often bend the
w'li i S° v e r n n i e n k to their selfish purposes. Distinctions in society
^m always exist under every just government. Equality of talents,
Ti i?u<iatlon> o r of wealth can not be produced by human institutions,
ind ! ece i W m e n t of the gifts of Heaven and the fruits of superior
t«Sf \? <>nomy, and virtue, every man is equally entitled to proeuion by d ; but when the laws undertake to add to these natural
law;
ad o
]US a d v a n t
ii
i S l v e ?gese artificial distinctions, to grant titles, gratuities,
X
rivil
* ithe P
ges, to make the rich richer and the potent more
Imiiu '
humble members of society—the farmers, mechanics,
lilS i aborers —who have neither the time nor the means of securing
Iay
ors to themselves, have a right to complain of the injustice of
{i .
eir eX1St n l y i n i t s Theres are no necessary evils in government. Its
(government. a b u s e
tecf
°
- H ^ would confine itself to equal prohifV°n' and, as Heaveni cdoes ( its rains, shower its favors alike on the
t h e low t h r n a n
hit •
> e
i the poor, it would be an unqualified

sarv lfg'

I n the act before m e th en seems to be a wide and unneces

. *

"

J .departure from these just principles.
u
invo • 1S o o fr tGovernment to be maintained or our Union preserved by
h e ri h
a S ?
g ts and powers of the several States. In thus
opting to make our General Government strong we make it weak.




228

FEDERAL BANKING LAWS AND REPORTS

Its true strength consists in leaving individuals and States as much
as possible to themselves—in making itself felt, not in its power, but
in its beneficence; not in its control, but in its protection; not in
binding the States more closely to the center, but leaving each to
move unobstructed in its proper orbit.
Experience should teach us wisdom. Most of the difficulties our
Government now encounters and most of the dangers which impend
over our Union have sprung from an abandonment of the legitimate
objects of Government by our national legislation, and the adoption of
such principles as are embodied in this act. Many of our rich men
have not been content with equal protection and equal benefits, but
have besought us to make them richer by act of Congress. By attempting to gratify their desires we have in the results of our legislation arrayed section against section, interest against interest, and
man against man, in a fearful commotion which threatens to shake
the foundations of our Union. It is time to pause in our career to
review our principles, and if possible revive that devoted patriotism
and spirit of compromise which distinguished the sages of the Revolution and the fathers of our Union. If we can not at once, in justice
to interests vested under improvident legislation, make our Government what it ought to be, we can at least take a stand against all new
grants of monopolies and exclusive privileges, against any prostitution of our Government to the advancement of the few at the expense
of the many, and in favor of compromise and gradual reform in our
code of laws and system of political economy.
I have now done my duty to my country. If sustained by my fellow citizens, I shall be grateful and happy; if not, I shall find in the
motives which impel me ample grounds for contentment and peace.
In the difficulties which surround us and the dangers which threaten
our institutions there is cause for neither dismay nor alarm. For relief and deliverance let us firmly rely on that kind Providence which
I am sure watches with peculiar care over the destinies of our Republic, and on the intelligence and wisdom of our countrymen. Through
His abundant goodness and their patriotic devotion our liberty ana
Union will be preserved.
ANDREW JACKSON.




229

FEDERAL BANKING LAWS AND REPORTS

/V

'^^

•JLr*

\~tr^

u

/<?




/

7

/

230

FEDERAL BANKING LAWS AND REPORTS

Fourth Annual Message—Andrew Jackson
Twenty-Second Congress, 2d Session
DECEMBER 4,

1832.

[Source: James D. Richardson, A Compilation of the Messages and Papers
of the Presidents, Vol. 2, pp. 1162-1163]
*
*
*
*
*
*
*

It is my duty to acquaint you with an arrangement made by the
Bank of the United States with a portion of the holders of the 3 per
cent stock, by which the Government will be deprived of the use of
the public funds longer than was anticipated. By this arrangement,
which will be particularly explained by the Secretary of the Treasury, a surrender of the certificates of this stock may be postponed until
October, 1833, and thus the liability of the Government, after its ability to discharge the debt, may be continued by the failure of the bank,
to perform its duties.
Such measures as are within the reach of the Secretary of the Treasury have been taken to enable him to judge whether the public deposits in that institution may be regarded as entirely safe; out as his
limited power may prove inadequate to this object, I recommend the
subject to the attention of Congress, under the firm belief that it is
worthy of their serious investigation. An inquiry into the transactions of the institution, embracing the branches as well as the principal bank, seems called for by the credit which is given throughout
the country to many serious charges impeaching its character, and
which if true may justly excite the apprehension that it is no longer
a safe depository of the money of the people.

Removal of the Public Deposits—Andrew Jackson
Read to the Cabinet, September 18,1833.
[Source: James D. Richardson, A Compilation of the Messages and Papers of the
Presidents, Vol. 2, pp. 1224^-1238]

Having carefully and anxiously considered all the facts and arguments which have been submitted to him relative to a removal of the
public deposits from the Bank of the United States, the President
deems it his duty to communicate in this manner to his Cabinet tne
final conclusions of his own mind and the reasons on which they are
founded, m order to put them in durable form and to prevent
misconceptions.
The President's convictions of the dangerous tendencies of the Bank
of the United States, since signally illustrated by its own acts, were so
overpowering when he entered on the duties of Chief Magistrate that
he felt it his duty, notwithstanding the objections of the friends W
whom he was surrounded, to avail himself of the first occasion to can
the attention of Congress and the people to the question of ltsi*
charter. Thet opinions expressed in his annual message of December
5 h o l T ™ e p a t o d i n th<*e of December, 1830 and 1831, and in that
of 1830 he threw out for consideration some suggestions in rdawf
to a substitute. At the session of 1831-32 an act^vas passed by a ma


FEDERAL BANKING LAWS AND BEPORTS

231

jority of both Houses of Congress rechartering the present bank, upon
which the President felt it his duty to put his constitutional veto. In
his message returning that act he repeated and enlarged upon the
principles and views briefly asserted in his annual message, declaring
the bank to be, in his opinion, both inexpedient and unconstitutional,
and announcing to his countrymen very unequivocally his firm determination never to sanction by his approval the continuance of that
institution or the establishment of any other upon similar principles.
There are strong reasons for believing that the motive of the bank in
asking for a recharter at that session of Congress was to make it a
leading question in the election of a President of the United States
the ensuing November, and all steps deemed necessary were taken to
procure from the people a reversal of the President's decision.
Although the charter was approaching its termination, and the bank
was aware that it was the intention of the Government to use the public
deposit as fast as it has accrued in the payment of the public debt, yet
did it extend its loans from January, 1831, to May, 1832, from $42,402,304.24 to $70,428,070.72, being an increase of $28,025,766.48 in sixteen
months. It is confidently believed that the leading object of this immense extension of its loans was to bring as large a portion of the
people as possible under its power and influence, and it has been disclosed that some of the largest sums were granted on very unusual
terms to the conductors of the public press. In some of these cases the
motive was made manifest by the nominal or insufficient security taken
for the loans, by the large amounts discounted, by the extraordinary
tjme allowed for payment, and especially by the subsequent conduct of
tnose receiving the accommodations.
Waving taken these preliminary steps to obtain control over public
°p;nion, the bank came into Congress and asked a new charter. The
object avowed by many of the advocates of the bank was to put the
president to the test, that the country might know his final determinatlon
relative to the bank prior to the ensuing election. Many docujaents and articles were printed and circulated at the expense of the
bank to bring the people to a favorable decision upon its pretentions.
Anose whom the bank appears to have made its debtors for the special
occasion were warned of the ruin which awaited them should the President be sustained, and attempts were made to alarm the whole people
y paintinglothe depression in the price of property and produce and
xT ?i 1 l eral .ss, inconvenience, and distress which it was represented
""ately follow the reelection of the President in opposition
j now be said that the question of a recharter of the bank was
not decided at the election which ensued ? Had the veto been equivocal,
10
^l!e ^ c o v e r e ( * t h e whole ground; if it had merely taken exceptil
details of the till or to the time of its passage; if it had not
m e t tj '
miffht t l0)e e n s o m e of constitutionality and expediency, then there
g^und
*as w ie - i b y t h e plausibilitywfort o allegation that the question
the
his sta i « t h e ( u e P?°Ple*a sU a s compel the President to take
time K
l s t i o n w brought forward at that particular
met
i e c la en e
advers neS SOUgIlt ^ o ^ o r ge ? h i m a n d f rtookl the position into which his
^
willingly a n k
0
t f c
PPositi +
. '
7 declared his unalterable
an a s e n
On that
k k k * 2 both unconstitutional and inexpedient,
ground the case was argued to the people; and now that the



232

FEDERAL BANKING LAWS AND REPORTS

people have sustained the President, notwithstanding the array of
influence and power which was brought to bear upon him, it is too late,
he confidently thinks, to say that the question has not been decided.
Whatever may be the opinions of others, the President considers his
reelection as a decision of the people against the bank. In the concluding paragraph of his veto message he said:
I have now done my duty to my country. If sustained by
my fellow-citizens, I shall be grateful and happy; if not, I
shall find in the motives which impel me ample grounds for
contentment and peace.
He was sustained by a just people, and he desires to evince his gratitude by carrying into effect their decision so far as it depends upon
him.
Of all the substitutes for the present bank which have been suggested, none seems to have united any considerable portion of the
public in its favor. Most of them are liable to the same constitutional
objections for which the present bank has been condemned, and perhaps to all there are strong objections on the score of expediency. In
ridding the country of an irresponsible power which has attempted to
control the Government, care must be taken not to unite the same power
with the executive branch. To give a President the control over the
currency and the power over individuals now possessed by the Bank
of the United States, even with the material difference that he is responsible to "the people, would be as objectionable and as dangerous as
to leave it as it is. Neither one nor the other is necessary, and therefore ought not to be resorted to.
On the whole, the President considers it as conclusively settled that
the charter of the Bank of the United States will not be renewed, and
he has no reasonable ground to believe that any substitute will be
established. Being bound to regulate his course by the laws as they
exist, and not to anticipate the interference of the legislative power
for the purpose of framing new systems, it is proper for him seasonably to consider the means by which the services rendered by the
liank of the United States are to be performed after its charter shall
expire.
The existing laws declare that—
The deposits bofn the n d br{m of the United States in places in
money
Sald a k a
i 1 1 111
.
ches thereof may be established
shall be made in said bank or branches thereof unless the Secretary ot the Treasury shall at any time otherwise order and
direct, in winch case the Secretary of the Treasury shall immediately lay before Congress, if in session, and, if not, immediately after the commencement of the next session, the
reasons of such order or direction.
T
T h e 7 ^ ° T r ^ f t h e Secretary of the Treasury over the deposits *
,^
unqualified The provision that he shall report his reasons to Cemf f 1S *° imitation. Had it not been inserted he would have be*1
C n r e S S h a d h e m a d e a ren
SS^
S £
»™l for any other than
S i p n f r f ' f n n h l S r e s P 0 1 ^bility now ceases upon the rendition* e
sufficient ones to Congress. The only object of the provision is t o n ^




FEDERAL BANKING LAWS AND REPORTS

233

his reasons accessible to Congress and enable that body the more readily to judge of their soundness and purity, and thereupon to make such
further provision by law as the legislative power may think proper
in relation to the deposit of the public money. Those reasons may be
very diversified. It was asserted by the Secretary of the Treasury,
without contradiction, as early as 1817, that he had power "to control
the proceedings" of the Bank of the United States at any moment
"by changing the deposits to the State banks" should it pursue an
illiberal course toward those institutions; that "the Secretary of the
Treasury will always be disposed to support the credit of the State
banks, and will invariably direct transfers from the deposits of the
public money in aid of their legitimate exertions to maintain their
credit;" and he asserted a right to employ the State banks when the
Bank of the United States should refuse to receive on deposit the notes
or such State banks as the public interest required should be received
in payment of the public dues. In several instances he did transfer the public deposits to State banks in the immediate vicinity of
branches, for reasons connected only with the safety of those banks,
"le public convenience, and the interests of the Treasury.
If it was lawful for Mr. Crawford, the Secretary*of the Treasury
ft
t mat time, to act on these principles, it will be difficult to discover
any sound reason against the application of similar principles in still
stronger cases. And it is a matter of surprise that a power which in
tJ
ie infancy of the bank was freely asserted as one of the ordinary
and familiar duties of the Secretary of the Treasury should now be
gravely questioned, and attempts made to excite and alarm the public
jfima asxifc u t h e new and unheard-of power was about to be usurped
some
T ' et e
*
: branch of the Government.
it is but a little more than two and a half years to the termination
<* the charter of the present bank. It is considered as the decision
°te the country that it shall then cease to exist, and no man, the Presi* nt believes, has reasonable ground for expectation that any other
nun* of ther e a s u
United States will be created by Congress.
frTnVi a T l i c a.ryn Department is intrusted the safe-keeping and
foi f i P Pl l e t iro s e of the public moneys. A plan of collection difm t
nW
P e n t must therefore be introduced and put in com011
sh 1 P P ^ ^
1
before the dissolution of the present bank. When
olpn lln . commenced? Shall no step be taken in this essential contil i tthe charter expires and the Treasury finds itself without
iuir]a?fntAvllolec c o i m t s i n confusion, with no depository for its funds,
' sa
dp] ye(l i m t i 1 business of the Government deranged, or shall it be
i
six months, or a year, or two years before the expiration
Of ?,e
It is obvious that any new system which may be
Slt i/l . carter?
j^stituterl in a thee d
place of the Bank of the United States could not
l
wirl l0Ut s etyo c s r r i
into effect on the termination of its existence
ri
yiQt a Ount u f inconvenience to the Government and the people. Its
<iVpni ?- o ! lote ,s are then to be redeemed and withdrawn from
he »!aVoul a "d its immense debt collected. These operations must
immwi u a ' otherwise much suffering and distress will be brought
UJ 1
IO > the community.




234

FEDERAL BANKING LAWS AND REPORTS

It ought to be not a work of months only, but of years, and the
President thinks it can not, with due attention to the interests of the
people, be longer postponed. It is safer to begin it too soon than to
delay it too long.
It is for the wisdom of Congress to decide upon the best substitute
to be adopted in the place of the Bank of the United States, and the
President would have felt himself relieved from a heavy and painful
responsibility if in the charter to the bank Congress had reserved to
itself the power of directing at its pleasure the public money to be
elsewhere deposited, and had not devolved that power exclusively on
one of the Executive Departments. It is useless now to inquire why
this high and important power was surrendered by those who are
peculiarly and appropriately the guardians of the public money.
Perhaps it was an oversight. But as the President presumes that the
charter to the bank is to be considered as a contract on the part of the
Government, it is not now in the power of Congress to disregard its
stipulations; and by the terms of that contract the public money is to
l)e deposited in the bank during the continuance of its,charter unless
the Secretary of the Treasury shall otherwise direct. Unless, therefore, the Secretary of the Treasury first acts, Congress have no power
over the subject, for they can not add a new clause to the charter or
strike one out of it without the consent of the bank, and consequently
the public money must remain in that institution to the last hour of
its existence unless the Secretary of the Treasury shall remove it at
an earlier day. The responsibility is thus thrown upon the executive
branch of the Government of deciding how long before the expirationof the charter the public interest will require the deposits to be placed
elsewhere; and although according to the frame and principle of our
Government this decision would seem more properly to belong to the
legislative power, yet as the law has imposed it upon the executive
department the duty ought to be faithfully and firmly met, and the
decision made and executed upon the best lights that can be obtained
and the best judgment that can be formed. I t would ill become the
executive branch of the Government to shrink from any duty wich
the law imposes on it, to fix upon others the responsibility
justly belongs to itself. And while the President anxiously ^
to abstain from the exercise of doubtful poAvers and to avoid all interference with the rights and duties of others, he must yet with unshaken
constancy discharge his own obligations, and can not allow hiniselt to
turn aside in order to avoid any responsibility which the high tnis
with which he has been honored requires him to encounter; and it
being the duty of one of the Executive Departments to decide in tne
first instance, subject to the future action of the legislative V°*ev!
whether the public deposits shall remain in the Bank of the XJmtea
htates until the end of its existence or be withdrawn some time betoj'£
the President has felt himself bound to examine the question carefulO
nnd deliberately in order to make up his judgment on the subject, ana
m his opinion the near approach of the termination of the charter ana
the public considerations heretofore mentioned are of themselves
amply sufficient to justify the removal of the deposits, without reference to the conduct of the bank or their safety in its keeping.




FEDERAL BANKING LAWS AND REPORTS

235

But in the conduct of the bank may be found other reasons, very imperative in their character, and which require prompt action. Developments have been made from time to time of its faithlessness as a
public agent, its misapplication of public funds, its interference in
elections, its efforts by the machinery of committees to deprive the
Government directors of a full knowledge of its concerns, and, above
all, its flagrant misconduct as recently and unexpectedly disclosed in
placing all the funds of the bank, including the money of the Government, at the disposition of the president of the bank as means of
operating upon public opinion and procuring a new charter, without
requiring him to render a voucher for their disbursement. A brief
recapitulation of the facts which justify these charges, and which
have come to the knowledge of the public and the President, will, he
unnks, remove every reasonable doubt as to the course which it is
now the duty of the President to pursue.
We have seen that in sixteen months ending in May, 1832, the bank
nad extended its loans more than $28,000,000, although it knew the
government intended to appropriate most of its large deposit during
that year in payment of the public debt. It was in May, 1832, that
its loans arrived at the maximum, and in the preceding March so
sensible was the bank that it would not be able to pay over the public
deposit when it would be required by the Government that it commenced a secret negotiation, without the approbation or knowledge
°i the Government, with the agents for about $2,700,000 of the 3 per
^ent stocks held in Holland, with a view of inducing them not to come
forward for payment for one or more years after notice should be
fnVv? A^ ^ e Treasury Department. This arrangement would have
nabied the bank to keep and use during that time the public money
a
h
A^ e r t f ? rs tne e P ? y m e n t o f these stocks.
•elnforme £°tiation had commenced, the Secretary of the TreasJ *k*
t _ J *k* d thetiti that it was hisdintention to pay off one-half
bank h d
ne 3 r k a +

JI

«

J»

i

J

:

T

l

"U^-

w
corninvestigation was then looking into its affairs at Philadelm
uifi h l eWi a sm e diately to Washington, and ugon representing that
at \r ^r r k desirous of accommodating the importing merchants
tei*t\ i ) roc h i c h ifc failed to do) and undertaking to pay the in(w
f
wiH fi! l Pi d e uredo the consent of the Secretary, after consultation
s
nt t
°f Oct h
> postpone the payment until the succeeding 1st
ha
abW SCi ° US ot v e rt tal ti et h e e n d °f t h a t q u a r ter the bank would not be
to L e x P ae y t e d
deposits, and that further indulgence was not
land P c
of the Government, an agent was dispatched to Engan|l i ^ t t yt h to negotiatef f e r the holders of the public debt in Europe
with
Piirl Ky he e m b y t h e o
of an equal or higher interest than that
in' JL . * t l lGovernment to hold back their claims for one year, dure bank
the n i l r m o n e
expected thus to retain the use of $5,000,000 of
Pavm *
y^ which the Government should set apart for the

9

*180 0 - 6 3

;
•16




236

FEDERAL BANKING LAWS AND EEPORTS

tally came to the knowledge of the public and the Government, then,
and not before, so much of it as was palpably in violation of the
charter was disavowed. A modification of the rest was attempted
with the view of getting the certificates without payment of the
money, and thus absolving the Government from its liability to the
holders. In this scheme the bank was partially successful, but to this
day the certificates of a portion of these stocks have not been paid and
the bank retains the use of the money.
This effort to thwart the Government in the payment of the public
debt that it might retain the public money to be used for their private interests, palliated by pretenses notoriously unfounded and insincere, would have justified the instant withdrawal of the public
deposits. The negotiation itself rendered doubtful the ability of the
bank to meet the demands of the Treasury, and the misrepresentations by which it was attempted to be justified proved that no reliance
could be placed upon its allegations.
If the question of a removal of the deposits presented itself to the
Executive in the same attitude that it appeared before the House of
Representatives at their last session, their resolution in relation to the
safety of the deposits would be entitled to more weight, although the
decision of the question of removal has been confided, by law to another department of the Government. But the question now occurs
attended by other circumstances and new disclosures of the most
serious import. It is true that in the message of the President which
produced this inquiry and resolution on the part of the House or
Representatives it was his object to obtain the aid of that body m
making a thorough examination into the conduct and condition of the
bank and its branches in order to enable the executive department to
decide whether the public money Avas longer safe in its hands. lj ie
limited power of the Secretary of the Treasury over the subject disabled him from making the investigation as fully and satisfactorily
as it could be done by a committee of the House of Representatives,
and hence the President desired the assistance of Congress to obtain
for the Treasury Department a full knowledge of all the facts wlucn
were necessary to guide his judgment. But it was not his purpose, as
the language of his message will show, to ask the representatives o
the people to assume a responsibility which did not belong to t lew
and relieve the executive branch of the Government from the am)
which the law had imposed upon it. It is clue to the President t wj
his object m that proceeding should be distinctly understood, and tn^
he should acquit himself of all suspicion of seeking to escape from tii
performance of his own duties or of desiring to interpose another DOU;
between himself and the people in order to avoid a measure wl»ch
called upon to meet. But although as an act of justice to hims
disclaims any design of soliciting the opinion of the House
sentatives m relation to his own duties in order to shelter himseIt
responsibility under the sanction of their counsel, yet he is at all tunt
ready to listen to the suggestions of the representatives of the peop '
whether given voluntarily or upon solicitation, and to consider w1
with the profound respect to which all will admit that they are ] & •
U
entitled. Whatever may be the consequences, however, to himsei:r,
must finally form his own judgment where the Constitution am .g
law make it his duty to decide, and must act accordingly; and n



FEDERAL BANKING LAWS AND REPORTS

237

bound to suppose that such a course on his part will never be reyarded by that elevated body as a mark of disrespect to itself, but
that they will, on the contrary, esteem it the strongest evidence he can
give of his fixed resolution conscientiously to discharge his duty to
them and the country.
A new state of things has, however, arisen since the close of the
last session of Congress, and evidence has since been laid before the
President which he is persuaded would have led the House of Representatives to a different conclusion if it had come to their knowledge.
The fact that the bank controls, and in some cases substantially owns,
and by its money supports some of the leading presses of the country
is now more clearly established. Editors to whom it loaned extravagant sums in 1831 and 1832, on unusual time and nominal security,
have since turned out to be insolvent, and to others apparently in
no better condition accommodations still more extravagant, on terms
more unusual, and some without any security, have also been heedlessly
granted.
The allegation which has so often circulated through these channels that the Treasury was bankrupt and the bank was sustaining it,
when for many years there has not been less, on an average, than six
millions of public money in that institution, might be passed over
as a harmless misrepresentation; but when it is attempted by substantial acts to impair the credit of the Government and tarnish the
wnor of the country, such charges require more serious attention.
With six millions of public money in its vaults, after having had
the use of from five to twelve millions for nine years without interest,
* ^ c a m e t l l e purchaser of a bill drawn by our Government on that
?r France for about $900,000, being the first installment of the French
indemnity. The purchase money was left in the use of the bank,
peing simply added to the Treasury deposit. The bank sold the bill
m England, and the holder sent it to France for collection, and arrangements not having been made by the French Government for
"s payment, it was taken up by the agents of the bank in Paris with
ne funds of the bank in their hands. Under these circumstances
c has
through its organs openly assailed the credit of the Government, and has actually made and persists in a demand of 15 per cent,
wfclo8,842.77,as damages, when no damage, or none beyond some
"fling expense, has in fact been sustained, and when the bank had

T h e J ^ o f e r t h e ro rt7ust?
^ l
House 0/1? ° t l ri e sre n ma P V e st a n t f a c t s not in the contemplation of the
e
t tl
thev vrt+ j " V P
or not known to the members at the time
Althn \ f 0 I ; t h e solution.
«not w U f ? tnh e e charter and the rules of the bank both declare that
s ven
°f businS
directors" shall be necessary to the transaction
nts t a n ^ Gtx ^elnet m ° s t * m P o r t a n t business, even that of granting dis? ^ e t 5 is intrusted to a committee of five members, who
t h b
y^ vu an means of communication with the Government m relat0
its most important acts at the commencement of the present
• not one of the Government directors was placed on any one com


238

FEDERAL BANKING XAWS AND REPORTS

mittee; and although since, by an unusual remodeling of those bodies,
some of those directors have been placed on some of the committees,
they are yet entirely excluded from the committee of exchange, through
which the greatest and most objectionable loans have been made.
When the Government directors made an effort to bring back the
business of the bank to the board in obedience to the charter and the
existing regulations, the board not only overruled their attempt, but
altered the rule so as to make it conform to the practice, in direct violation of one of the most important provisions of the charter which
gave them existence.
It has long been known that the president of the bank, by his single
will, originates and executes many of the most important measures
connected with the management and credit of the bank, and that the
committee as well as the board of directors are left in entire ignorance
of many acts done and correspondence carried on in their names, and
apparently under their authority. The fact has been recently disclosed that an unlimited discretion has been and is now vested in the
president of the bank to expend its funds in payment for preparing
and circulating articles and purchasing pamphlets and newspapers,
calculated by their contents to operate on elections and secure a renewal
of its charter. It appears from the official report of the public directors that on the 30th November, 1830, the president submitted to the
board an article published in the American Quarterly Review containing favorable notices of the bank, and suggested the expediency ol
giving it a wider circulation at the expense of the bank; whereupon
the board passed the following resolution, viz:
Resolved, That the president be authorized to take such
measures in regard to the circulation of the contents of the
said article, either in whole or in part, as he may deem most
for the interest of the bank.
By an entry in the minutes of the bank dated March 11, 1831, it
appears that the president had not only caused a large edition of tnai
article to be issued, but had also, before the resolution of 30th November was adopted, procured to be printed and widely circulated mi-

subserve the purposes of the institution, whereupon the following resolution was adopted, viz:
Resolved, That the president is hereby authorized to cause
to be prepared and circulated such documents and papers as
may communicate to the people information in regard to the
nature and operations of the bank.
The expenditures purporting to have been made under authorityu <
>
j
these resolutions during the years 1831 and 1832 were about $80> " '
For a portion of these expenditures vouchers were rendered, tt°
which it appears that they were incurred in the purchase of son
hundred thousand copies of newspapers, reports and speeches ma«
in Congress, reviews of the veto message and reviews of speecn
against the bank, etc. For another large portion no vouchers wn*
ever were rendered, but the various sums were paid on orders ot i
president of the bank, making reference to the resolution ot
11th of March, 1831.



FEDERAL BANKING LAWS AND REPORTS

239

On ascertaining these facts and perceiving that expenditures of a
similar character were still continued, the Government directors a few
weeks ago offered a resolution in the board calling for a specific account of these expenditures, showing the objects to which they had
been applied and the persons to whom the money had been paid.
This reasonable proposition was voted down.
They also offered a resolution rescinding the resolutions of November, 1830, and March, 1831. This also was rejected.
Wot content with thus refusing to recall the obnoxious power or even
to require such an account of the expenditure as would show whether
the money of the bank had in fact been applied to the objects contemplated by these resolutions, as obnoxious as they were, the board
renewed the power already conferred, and even enjoined renewed
attention to its exercise by adopting the following in lieu of the propositions submitted by the Government directors, viz:
Resolved, That the board have confidence in the wisdom
and integrity of the president and in the propriety of the
resolutions of 30th November, 1830, and 11th March, 1831,
and entertain a full conviction of. the necessity of a renewed
attention to the object of those resolutions, and that the
president be authorized and requested to continue his exertions for the promotion of said object.
Taken in connection with the nature of the expenditures heretofore
made, as recently disclosed, which the board not only tolerate, but
approve, this resolution puts the funds of the bank at the disposition
of the president for the purpose of employing the whole press of the
country in the service of the bank, to hire writers and newspapers,
and to pay out such sums as he pleases to what person and for what
services he pleases without the responsibility of rendering any specific
accoUnt. The bank is thus converted into a vast electioneering engine,
rj?th m e a n ts u to sembroil the country in deadly feuds, and, under cover
re m
nil+^pen
themselves improper, extend its corruption through
al
* the ramifications of society.
oome of the items for which accounts have been rendered show the
wVSV*uction which has been given to the resolutions and the way in
PV!! }hie m e° w e r it confers has been exerted. The money has not been
Pr
DOH * o m n?lye in the publication and distribution of speeches, recont'f ? n a l ili t t oes, or articles written for the purpose of showing the
t
nro
j 1o
y r usefulness of the bank, but publications have been
preparedhand extensively circulated containing the grossest invectives
to n n SSt t t cek officerrs of the Government, and the money which belongs
to d ^ l ? l o l d e s and to the public has been freely applied in efforts
mm^f •lner en i sPV b ^ c estimation those who were supposed to be instrution A s t i n & the wishes of this grasping and dangerous instituaccn f S tnh e oPresi<Jent of the bank has not been required to settle his
alrp a ' ° n e b u t himself knows how much more than the sum
mavV m e nt telro n e d may have been squandered, and for which a credit
resnl ?•
J?e cla imed in his account under this most extraordinary
rent ?°u" Se iintch s tsh e s e f a c t s b e f o r e u s c a n w e b e s u r P r i s e d a t t h e t o r "
^ e an
standt l y poured out against all who are supposed to
State ? ^n w a y o f t h e cu pidity or ambition of the Bank of the United
68
• Can we be surprised at sudden and unexpected changes of



240

FEDERAL BANKING LAWS AND REPORTS

opinion in favor of an institution which has millions to lavish and
avows its determination not to spare its means when they are necessary to accomplish its purposes? The refusal to render an account of
the manner in which a part of the money expended has been applied
gives just cause for the suspicion that it has been used for purposes
which it is not deemed prudent to expose to the eyes of an intelligent
and virtuous people. Those who act justly do not shun the light, nor
do they refuse explanations when the propriety of their conduct is
brought into question.
With these facts before him in an official report from the Government directors, the President would feel that he was not only responsible for all the abuses and corruptions the bank has committed or may
commit, but almost an accomplice in a conspiracy against that Government which he has sworn honestly to administer, if he did not take
every step within his constitutional and legal power likely to be efficient in putting an end to these enormities. If it be possible within
the scope of human affairs to find a reason for removing the Government deposits and leaving the bank to its own resource for the means
of effecting its criminal designs, we have it here. Was it expected
when the moneys of the United States were directed to be placed in
that bank that they would be put under the control of one man empowered to spend millions without rendering a A^oucher or specifying
the object? Can they be considered safe with the evidence before us
that tens of thousands have been spent for highly improper, if not
corrupt, purposes, and that the same motive may lead to the expenditure of hundreds of thousands, and even millions, more ? And can we
justify ourselves to the people by longer lending to it the money ana
power of the Government to be employed for such purposes ?
It has been alleged by some as an objection to the removal of the
deposits that the bank has the power, and in that event will have the
disposition, to destroy the State banks employed by the Government,
and bring distress upon the country. It has been the fortune of the
I resident to encounter dangers which were represented as equally
alarming, and he has seen them vanish before resolution and energy.
Pictures equally appalling were paraded before him when this ban*
came to demand a new charter. But what was the result? Has the
country been ruined, or even distressed ? Was it ever more prosperous
than since that act? The President verily believes the bank has not
the power to produce the calamities its friends threaten. The funds
of the Government will not be annihilated by being transferred. The)
will immediately be issued for the benefit of trade? and if the Bank of
the United States curtails its loans the State banks, strengthened &
>
the public deposits, will extend theirs. What comes in through one
bank will go out through others, and the equilibrium will be preserved. Should the bank, for the mere purpose of producing distress,
press its debtors more heavily than some of them can bear, the consequences will recoil upon itself, and in the attempts to embarrass tne
country it will only bring loss and ruin upon the holders of its o*»
stock. But if the President believed the bank possessed all the po*ei
winch has been attributed to it, his determination will only be rendered the more inflexible. If, indeed, this corporation now holds11"
its hands the happiness and prosperity of the American people, it»
high time to take the alarm. If the despotism be already upon us ana



FEDERAL BANKING LAWS AND EEPORTS

241

our only safety is in the mercy of the despot, recent developments in
relation to his designs and the means he employs show how necessary
it is to shake it off. The struggle can never come with less distress to
the people or under more favorable auspices than at the present
moment.
All doubt as to the willingness of the State banks to undertake the
service of the Government to the same extent and on the same terms as
it is now performed by the Bank of the United States is put to rest by
the report of the agent recently employed to collect information, and
from that willingness their own safety in the operation may be confidently inferred. Knowing their own resources better than they can be
known by others, it is not to be supposed that they would be willing to
place themselves in a situation which they can not occupy without danger of annihilation or embarrassment. The only consideration applies
to the safety of the public funds if deposited in those institutions, and
when it is seen that the directors of many of them are not only willing
to pledge the character and capital of the corporations in giving success
to this measure, but also their own property and reputation, we can not
doubt that they at least believe the public deposits would be safe in
their management. The President thinks that these facts and circumstances afford as strong a guaranty as can be had in human affairs for
the safety of the public funds and the practicability of a new system
of collection and disbursement through the agency of the State banks.
From all these considerations the President thinks that the State
banks ought immediately to be employed in the collection and disbursement of the public revenue, and the funds now in the Bank of the
United States drawn out with all convenient dispatch. The safety
< i the public moneys if deposited in the State banks must be secured
>
beyond all reasonable doubts; but the extent and nature of the security,
m
addition to their capital, if any be deemed necessary, is a subject
or detail to which the Treasury Department will undoubtedly give its
anxious attention. The banks to be employed must remit the moneys
°i the Government without charge, as the Bank of the United States
now does; must render all the services which that bank now performs;
must keep the Government advised of their situation by periodical
Wurns; in fine, in any arrangement with the State banks the Government must not in any respect be placed on a worse footing than it
now is. The President is happy to perceive by the report of the agent
tnat the banks which he has consulted have, in general, consented to
Performa the service on these terms, and that those in New York have
S?T e r £ree<l to make payments in London without other charge than
cost of the bills of exchange.
; r °eneht of internal commerce; to grant all reasonable lacniues to
ine payers of the revenue; to exercise the utmost liberality toward the
?r** State banks, and do nothing uselessly to embarrass the Bank of
^e United States.
As one of the most serious objections to the Bank of the United
°^tes is the power which it concentrates, care must be taken in finding
^ner agents for the service of the Treasury not to raise up another
Power equally formidable. Although it would probably be impossible
0
Produce such a result by any organization of the State banks which



242

FEDERAL BANKING LAWS AND REPORTS

could be devised, yet it is desirable to avoid even the appearance. To
this end it would be expedient to assume no more power over them and
interfere no more in their affairs than might be absolutely necessary to
the security of the public deposit and the faithful performance of
their duties as agents of the Treasury. Any interference by them in
the political contests of the country with a view to influence elections
ought, in the opinion of the President, to be followed by an immediate discharge from the public service.
It is the desire of the President that the control of the banks and
the currency shall, as far as possible, be entirely separated from the
political power of the country as well as wrested from an institution
which has already attempted to subject the Government to its will.
In his opinion the action of the General Government on this subject
ought not to extend beyond the grant in the Constitution, which onljr
authorizes Congress "to coin money and regulate the value thereof;
all else belongs to the States and the people, and must be regulated by
public opinion and the interests of trade.
In conclusion, the President must be permitted to remark that he
looks upon the pending question as of higher consideration than the
mere transfer of a sum of money from one bank to another. Its
decision may affect the character of our Government for ages to come.
Should the bank be suffered longer to use the public moneys in the
accomplishment of its purposes, with the proofs of its faithlessness
and corruption before our eyes, the patriotic among our citizens win
despair of success in struggling against its power, and we shall be
responsible for entailing it upon our country forever. Viewing it us
a question of transcendent importance, both in the principles and conj

Treasury..^ .«,., ^

v*w

v, W i ^«^»«

to immediate action. Upon him has been devolved by the Constitution and the suffrages of the American people the duty of superintending the operation of the Executive Departments of the Government and seeing that the laws are faithfully executed. In the performance of this high trust it is his undoubted right to express to those
whom the laws and his own choice have made his associates in tne
administration of the Government his opinion of their duties ui}ae
circumstances as they arise. It is this right which he now exercise&.
Far be it from him to expect or require that any member ot T
Cabinet should at his request, order, or dictation do any act Avhicli i
believes unlawful or in his conscience condemns. From them and iro
his fellow-citizens in general he desires only that aid and supP0
which their reason approves and their conscience sanctions.
In the remarks he has made on this all-important question he trus
the Secretary of the Treasury will see only the frank and respecti
declarations of the opinions which the President has formed on *
p
ich
f
t t i l i
d
i
h
^
measure of great national interest deeply affecting the hw*^
j
usefulness of his Administration, and not a spirit of dictationJ
the President would be as careful to avoid as ready to resist, ttftPPJ
will he be if the facts now disclosed produce uniformity of opin
and unity of action among the members of the Administration.




FEDERAL BANKING LAWS AND REPORTS

243

The President again repeats that he begs his Cabinet to consider the
proposed measure as his own, in the support of which he shall require
no one of them to make a sacrifice of opinion or principle. Its responsibility has been assumed after the most mature deliberation and
reflection as necessary to preserve the morals of the people, the freedom of the press, and the purity of the elective franchise, without
which all will unite in saying that the blood and treasure expended
by our forefathers in the establishment of our happy system of government Avill have been vain and fruitless. Under these convictions
he feels that a measure so important to the American people can not
be commenced too soon, and he therefore names the 1st day of October
next as a period proper for the change of the deposits, or sooner, provided the necessary arrangements with the State banks can be made.
A N D E E W JACKSOK.
Report of Secretary of Treasury (R. B. Taney), on Removal of
Public Deposits
Twenty-Third Congress, 1st Session
DECEMBER 4, 1833.

[Source: House Doe. 2, 23d Congress, 1st Session, pp. 1-21]
TREASURY DEPARTMENT,
T

December 3,1833.

io the Hon. ANDREW STEVENSON,

speaker of the House of Representatives:
: In pursuance of the power reserved to the Secretary of the
S y by the act of
^
Congress entitled "An act to incorporate the
ers to the Bank of the United States," I have directed that the
tlie m o n e
of
Jfi°K i
y
the United States shall not be made in the
b > A • ° r b a n d i e s thereof, but in certain State banks which have
w
en designated for that purpose; and I now proceed to lay before
ngresg t j l e r e a s o n g w ] 1 i c ] 1 induced me to give this order and
wori s!fAteenth section of the law above mentioned is in the following
of H T T • b e it( f u rther enacted, that the deposites of the money
ae
United States, in places in which the said bank and branches
ti
thprS m a y b e established, shall be made in said bank or branches
\VK ' i U n l e s s t h e Secretary of the Treasury shall at any time othershill ' e r i m d d i r e c t ' ' i n w h i c h case > t h e Secretary of the Treasury
diateilmm* a t e l y l a y b e f o r e Congress, if in session, and if not, lmmeter tlie
?
commencement of the next session, the reasons of
Jf S er eor sdirection.
r direction."
n ett]
bv I St
e d by repeated adjudications, that a charter granted
t 0 a cor
is a
f
Poration like that of the Bank of the United States
hoide
^^^een the sovereignty which grants it, and the stockg
,
i
same
?
l t
h t
t d b th
UnitA?*Q
P r m c i P'' e m u s t apply to a charter granted by the
be r e ^ ^ t a t e s ; and consequently the act incorporating the bank is to
and fiarcte(* a s a contract between the United States of the one part,
le s
tockholdei*s of the other; and by the plain terms of the con-




244

FEDERAL BANKING LAWS AND REPORTS

tract, as contained in the section above quoted, the stockholders have
agreed that the power reserved to the Secretary over the deposites
shall not be restricted to any particular contingencies, but be absolute
and unconditional, as far as their interests are involved in the removal.
The order, therefore, of the Secretary of the Treasury directing the
public money to be deposited elsewhere, can in no event be regarded
as a violation of the contract with the stockholders, nor impair any
right secured to them by the charter. The Treasury Department
being entrusted with the administration of the finances of the country,
it was always the duty of the Secretary, in the absence of any legislative provision on the subject, to take care that the public money
was deposited in safe keeping, in the hands of faithful agents, and in
convenient places, ready to be applied according to the wants of the
Government. The law incorporating the bank has reserved to him, in
its full extent, the power he before possessed. It does not confer on him
a new power, but reserves to him his former authority without any
new limitation. The obligation to assign the reasons for his direction
to deposite the money of the United States elsewhere, cannot be considered as a restriction of the power, because the right of the Secretary
to designate the place of deposite was always necessarily subject to
the control of Congress. And as the Secretary of the Treasury presides over one of the Executive Departments of the Government, ana
his power over this subject forms a part of the executive duties of his
office, the manner in which it is exercised must be subject to the supervision of the officer to whom the constitution has confided the whole
executive power, and has required to take care that the laws be faithfully executed.
The faith of the United States is, however, pledged, according to the
terms of the section above quoted, that the public money shall oe
deposited in this bank, "unless the Secretary of the Treasury shall
otherwise order and direct." And as this agreement has been entered
into by Congress in behalf of the United States, the place of deposits
could not be changed by a legislative act, without disregarding <
ged by a legislative act, without d g
pledge which the Legislature has given; and th money of the unite
pledge which the Legislature has i v e d the money of the unites
States must, therefore, continue to be deposited in the bank until
last hour of its existence, unless it shall be otherwise ordered by tn
authority mentioned in the charter. The power over the place o
deposite for the public money would seem properly to belong to tu
Legislative Department of the Government. And it is difficult
imagine why the authority to withdraw it from this Bank *as con
hded exclusively to the Executive. But the terms of thecliaiie
pp
pain
f
appear to be too plain to admit of question. And althog
although
should be satisfied t h t th public money was not safe i the c or
care
satisfid that the bli
f in
bank, or should be convinced that the interests of the people 01 w
United States imperiously demanded the removal, yet the passage 01 *
law directing it to be done would be a breach of the agreement im
which they have entered.
%
m Assuming this to be the true construction of the charter to the ban »
it must be the duty of the Secretary of the Treasury to withdraw «
deposites of the public money from that institution, whenevei
change would, m any degree, promote the public interest. It ili
*
necessary that the deposites should be unsafe, in order to )^ U
removal. The authority to remove is not limited to such a



FEDERAL BANKING LAWS AND REPORTS

245

gency. The bank may be perfectly solvent, and prepared to meet
promptly all demands upon it; it may have been faithful in the performance of its duties, and yet the public interest may require the deposites to be withdrawn. And as that cannot be done without the action of this department, the Secretary of the Treasury would betray
the trust confided to him, if he did not cause the deposites to be made
elsewhere, whenever the change would advance the public interests
or convenience. The safety of the deposites, the ability of the bank
to meet its engagements, its fidelity in the performance of its obligations, are only a part of the considerations by which his judgment
must be guided. The general interest and convenience of the people
must regulate his conduct.
^ s Principle was distinctly asserted by Mr. Crawford, when he was
the Secretary of the Treasury, soon after the bank obtained its charter.
In a postscript to his letter to the President of the Mechanics' Bank,
of New York, dated February 13,1817, he says, "The Secretary of the
Ireasury will always be disposed to support the credit of the State
banks, and will, invariably, direct transfers from the deposites of the
public money, in aid of their legitimate exertions to maintain their
Td I?11-1 a S t h e P r o P o s i t i o n . o f the B a n k o f the United States excludes the idea of pressure on its part, no measure of that nature appears to be necessary at this time." Other passages in the correspondence of Mr. Crawford, with the banks, about the period above mentioned, might be referred to, equally indicating the same opinion; and,
; ™at day, no doubt seems to have been entertained of the power or
°x the duty of the Secretary, in relation to this subject. I t does not
appear to have been then even suggested that the right of removal
depended on the solvency of the bank, or the safety of the public
noney committed to its custody; on the contrary, in the passage above
I
superior safety of the State banks is by no means reInAJ
p
ey
S t a e ba
y
as n
k the transfer to
t
Mraed as necessary t give hi the right to make th t f
to i him h i h t
t he a d t t
ep
,
«an; for he declares that khes will ngiveo the deposites to the State banks,
of t W i ^lte< f t h e i r ^T eea n s,
^ °
Protect them from the Bank
^T
tct
to o
* States, if, by means of its superior strength, it sought
opparess rthem. tNor can any distinction be taken between the transpa t an(
TIIP 1
' f * h e transfe r of the whole sum remaining on deposite.
Drin a i ^ l iaaSS e r o e d theMcharter recognises no such distinction; and the
of fh i S e f b ? r - Crawford would have led him to the removal
suii n i amount of the public money to the State banks, if a presunt
i p
p a r tt o f t h e B a n
°
i t d States had rendered such
S t t s had rendered such
am
* of the United
leJf• re necessary, in order to support the State banks "in their
Mi mate exertions to maintain their credit."
the i a n £ u a £ e uof dtheit;law,atherefore, and the usage and practice of
e
ls?°^ri rnment n w er r > e s t blish the following principles:
tlie
T'TQ x Jl P °
l
of removal was intended to be reserved ex~
~
—
- - .
di
t
- -IUIL cne power reserved to the Secretary oi me ireasury aoes
Q
epend for its exercise merely on the safety of the public money
[le nands ofu tthee bank,i e upon r theofidelity with which it has connor
«utv f *
* ' b l i l i a s t l " S h t t o e m v e t h e deposites, and it is his
/ y to remove them whenever the public interest or convenience will
06
Promoted by the change.



246

FEDERAL BANKING LAWS AND REPORTS

Taking these two principles as unquestionable, I proceed to state
the reasons which induced me to believe that it was necessary for the
interest and convenience of the people that the Bank of the United
States should cease to be the depository of the public money.
The charter of the bank will expire, according to the existing law on
the subject, on the 3d of March, 1836; and for two years after the
termination of the charter, it is authorized to use the corporate name
for the final settlement and liquidation of the affairs and accounts of
the corporation, and for the sale and disposition of their estate, but
not for any other purpose. It is the duty of the Executive Departments of the Government to exercise the powers conferred on them,
and to regulate the discretion confided to them, according to the existing laws; and they cannot be allowed to speculate on the chances of
future changes, by the legislative authority. Perhaps there may be
cases in which the discretion vested in an Executive Department might,
with propriety, be in some degree influenced by the expectation of
future legislation; but they must be cases in which the principles of
justice, or the public interests, manifestly call for an alteration of the
law; or where some expression of the public opinion has strongly
indicated that a change will probablv be made. But where nothing
of this kind exists, an Executive officer of the Government is not
authorized to regulate a discretion which the law has entrusted to him,
upon the assumption that the law will be changed.
In deciding upon the course which it was my duty to pursue in
relation to the deposites, I did not feel myself justified in anticipating
the renewal of the charter on either of the above mentioned grounds.
It is very evident that the bank has no claim to renewal founded on
the justice of Congress. For, independently of the many serious and
insurmountable objections which its own conduct has furnished, it
cannot be supposed that the grant to this corporation, of exclusive
privileges, at the expense of the rest of the community for twenty
years, can give it a right to demand the still further enjoyment of its
profitable monopoly. Neither could I act upon the assumption that the
public interest required the recharter of the bank; because I am firmly
persuaded that the law which created this corporation in many of its
provisions is not warranted by the constitution; and that the existence
off such a powerful moneyed monopoly is dangerous to the liberties
o
* people, and to the purity of our political institutions.
The manifestations of public opinion, instead of being favorable to
a renewal, have been decidedly to the contrary. And I have always
regarded the result of the last election of President of the TJnitea
btates as the declaration of a majority of the people that the charter
ought not to be renewed. It is not necessary to state here what is
now a matter of history. The question of the renewal of the charter
was introduced into the election by the corporation itself. Its voluntary application to Congress for the renewal of its charter four yeatf
before it expired, and upon the eve of the election of President, was
understood on all sides as bringing forward that question for incident*'
decision at the then approaching election. It was accordingly argu*J
on both sides before the tribunal of the people, and their vermci
pronounced against the bank by the election of the candidate wu
was known to have been always inflexibly opposed to it.




FEDERAL BANKING LAWS AND REPORTS

247

Under these circumstances, I could not have been justified, upon
either of the grounds above mentioned, in anticipating any change in
the existing laws in relation to the bank; and as the act of Congress
which created the corporation, limits its duration to the 3d of March,
1836, it became my duty, as Secretary of the Treasury, in executing
the trust confided to me under the law, to look to that period of time
as the termination of its corporate existence. I had no sufficient
grounds for presuming that the law would be altered in this respect
B future legislation, and a new charter be granted to the bank. It
y
was, therefore, incumbent upon me3 in discharging my official duties,
to act upon the assumption that this corporation would not continue
in being after the time above specified. And in this state of things,
without any reference to the manner in which the bank had conducted
itself, it became necessary to decide whether the deposites ought to
remain in the bank until the end of its corporate life, or be removed
at some earlier period. In forming my opinion on this subject, I
could only inquire which of these measures would most conduce to the
public good.
It is obvious that the interests of the country would not be promoted
by permitting the deposites of the public money to continue in the
bank until its charter expired. Judging from the past, it is highly
probable that they will always amount to several millions of dollars.
It would evidently produce serious inconvenience, if such a large sum
^ere left in possession of the bank until the last moment of its existence, and then be suddenly withdrawn, when its immense circulation
is returning upon it to be redeemed, and its-private depositors removing their funds into other institutions. The ability of the bank, under
such circumstances, to be prompt in its payments to the Government,
JJiay well be doubted, even if the ultimate safety of the deposites could
™ relied upon. Besides, the principal circulating medium now in the
fctoas of the people, and the one most commonly used in the exchange
n distant places,, consists of the notes of the Bank of the United
es, and its numerous branches. The sudden withdrawal of its
nt amount of circulation, or its sudden depreciation before any
. sound and convenient currency was substituted for it, would
wtainly produce extensive evils, and be sensibly felt among all classes
°i society.
It is well understood that the superior credit heretofore enjoyed by
™ notes of the Bank of the United States, was not founded on any
Particular confidence in its management or solidity. It was occasioned
2°£eth b
bli i th
t f
,
eive them in
pledge on the part of t e G
g
wencyf ta0v tohr e onf o t e g
M e a t remote branches. The same engagee iln
m
any other moneyed institution would give its notes
4ual credit, and make them equally convenient for the purposes of
^amerce. But this obligation on the part of the United States will
"T. 0 ? theei3d of March, 1836, when the charter expires; and as soon
cni; haPP *s, all thepossess; and the notes theybank will lose the pej£
hey now outstanding notes of p
p
£
^omevalue they depreciated as thethe notes payable at distant places
as much now possess; and notes of local banks. And if, in
A
e meai as m u h d
e * time, no other currencyth substituted cin lits place by
i d
t
f l a banks And if in
is




248

FEDERAL BANKING LAWS AND REPORTS

consent, it is easy to foresee the extent of the embarrassment which
would be caused by the sudden derangement of the circulating medium.
It would be too late at that time to provide a substitute which would
ward off the evil. The notes of the Bank of the United States in circulation on the 2d of September last, which was the date of the latest
return before me, when the order for removal was given, amounted to
$18,413,287.07, scattered in every part of the United States. And if a
safe and sound currency were immediately provided, on the termination of the charter, to take the place of these notes, it would still require time to bring it into general use, and, in the interim, the people
would be subjected to all the inconveniences and losses which necessarily arise from an unsound state of the currency. The evil would
be so great, and the distress so general, that it might even compel Congress against its wishes to recharter the bank. And perhaps more
effectual means could hardly be devised for ensuring the renewal of
the charter. It is evident that a state of things so much to be deprecated
can only be avoided by timely preparation; and the continuance of
the deposites can only'be justified by the determination to renew the
charter. The State banks can, I have no doubt, furnish a general
circulating medium, quite as uniform in value as that which has been
afforded by the Bank of the United States. Probably more so. For
it is well known that in some of the cities the branches of the bank
have been in the habit, whenever they thought proper, of refusing to
honor the notes of their own bank, payable at other branches, when they
were not offered in discharge of a debt due to the United States. But
a currency founded on the notes of State banks could not be suddenly
substituted for that heretofore furnished by the Bank of the United
States, and take the place of it, at the same moment, in every part 01
the Union. It is essential that the change should be gradual, and sutficient time should be allowed to suffer it to make its way by the ordinary operations of commerce, without requiring a hasty and violent
effort.
In this view of the subject, it would be highly injudicious to suffer
the deposites to remain in the Bank of the United States, until the
close of its corporate existence. And as they cannot be withdrawn
without the action of the Secretary of the Treasury, it must unavoidably become his duty, at some period of time, to exercise the power
of removal. Laying aside, therefore, for the present, all the considerations which the misconduct of the bank has furnished, tne
question presented to this department was, how long could the removal
be delayed consistently with the public interests? It is a question 01
time only. The duty must be performed at some period, and coum
not be altogether omitted, without justly incurring a heavy v®ff^
bihty to the community for all the consequences that might f0110^'
And it is, I think, apparent that the measure was delayed as long*
was compatible with the interest of the people of the United StatesThe monthly statement of the bank, of the 2d September ia*»
before referred to, shows that the notes of the bank and its brancw*.
then m circulation, amounted to $18,413,287.07, and that its disco^P1
amounted to the sum of $62,653,359.59. The immense circulate*
above stated, pervading every part of the United States, and n**>
commonly used in the Dusiness of commerce between distan
must all be withdrawn from circulation when the charter



FEDERAL BACKING LAWS AND REPORTS

249

If any of the notes then remain in the hands of individuals, remote
from the branches at which they are payable, their immediate depreciation will subject the holders to certain loss. Those payable in the
principal commercial cities would, perhaps, retain nearly their nominal value; but this would not be the case with the notes of the interior
branches, remote from the great marts of trade. And the statements
of the bank will show that a great part of its circulation is composed
of notes of this description. The bank would seem to have taken
pains to introduce into common use such a description of paper as
it could depreciate, or raise to its par value, as best suited its own
views; and it is of the first importance to the interests of the public
that these notes should all be taken out of circulation, before they
depreciate in the hands of the individuals who hold them; and they
ought to be withdrawn gradually, and their places supplied, as they
retire, by the currency which will become the substitute for them.
How long will it require, for the ordinary operations of commerce,
and the reduction of discounts by the bank, to withdraw the amount
of circulation before mentioned, without giving & shock to the currency, or producing a distressing pressure on the community ? I am
convinced that the time which remained for the charter to run, after
he 1st of October, (the day on which the first order for removal
took effect,) was not more than was proper to accomplish the object
I^th safety to the community. And if it had depended upon my
Judgment at an earlier period, I should have preferred and should
nave taken a longer time. Enough, however, is yet left, provided
no measures are adopted by the bank for the purpose of inflicting unnecessary suffering upon the country. Apart therefore from any considerations arising out of the conduct of the bank, and looking merely
near a
•*IJ
'PP r o a c h of the day when it would cease to exist, the
Withdrawal of the deposites appeared to be required by the public
aterest, at the time when the first order for removal was given by
«us| department.
i
n/tu c° Prmeiro n a s confirmed by the ground taken in favor of the renewal
ha t
5, *
> > December session, 1831. It was then urged that the
ort period which yet remained of its corporate existence, and the necessity of ]
"
. - . - , .
. i-berene
Verylii
not, concur in the opinions then expressed, and believe that the apphcaon was ill-timed and premature, yet the arguments then relied on, by
como 1- t hJudgment is entitled to respect, afford strong grounds for
a t
scnr**# lme; ta n hde t measureh e
now adopted is not objectionable on the
hat
hant M
^ t
deposites were not to continue in the
*WK until the termination of its charter, their withdrawal could not
^Propriety be longer delayed.
midp/?-18' h o w e v e r , another view of the subject, which in my opinion,
C ^ l m P o s 8 3 b l et h a d h to postpone the removal. About Hie 1st of
si
further
i S f Was ' 1 2 ' J
<*n ascertained that the present Chief MagC l o ? e l d c t etd ,e and that A t t decision tagainst the bank had thus
eb h
his h a t t i m e h e
W ? d nt 0e 6 ^
P e °P le discounts of the bank
so S
$ l,57l,625.66. Although the issue which the bank took
uuoh
pains to frame had now been tried, and the decision proa
gainst it, yet no steps were taken to prepare for its ap


250

FEDERAL BANKING LAWS AND REPORTS

proaching end. On the contrary, it proceeded to enlarge its discounts,
and, on the 2d of August, 1833, they amounted to $64,160,349.14, being
an increase of more than two and a half millions in the eight months
immediately following the decision against them. And so far from
preparing to arrange its affairs with a view to wind up its business,
it seemed, from this course of conduct, to be the design of the bank
to put itself in such an attitude, that, at the close of its charter, the
country would be compelled to submit to its renewal, or to bear all the
consequences of a currency suddenly deranged, and also a severe pressure for the immense outstanding claims which would then be due
to the corporation. While the bank was thus proceeding to enlarge
its discounts, an agent was appointed by the Secretary of the Treasury
to inquire upon what terms the State banks would undertake to perform the services to the Government which have heretofore been
rendered by the Bank of the United States; and also to ascertain their
condition in four of the principal commercial cities, for the purpose of
enabling the department to judge whether they would be safe and convenient depositories for the public money. I t was deemed necessary
that suitable fiscal agents should be prepared in due season, and it
was proper that time should be allowed them to make arrangements
with one another throughout the country, in order that they might
perform their duties in concert, and in a manner that would be convenient and acceptable to the public. It was essential that a change
so important in its character, and so extensive in its operation upon
the financial concerns of the country, should not be introduced without timely preparation. There was nothing in this proceeding, nor
in the condition of the bank, which should at that time have produced a sudden and entire change of its policy. For, in addition to
the ordinary receipts from bonds given on account of previous importations, the season was at hand when the cash duties on woollens
might well be expected to be very productive, and from these two
sources the receipts from the customs were in fact unusually lanre,
and the amount of the public deposites in the bank proportionablj
heavy. The capacity of the bank, therefore, at this time, to aftord
facilities to commerce, was not only equal, but greatly superior to
what it had been for some time before; and the nature of the inquiry
made of the State banks, confined as it was to the four principal commercial cities, showed that the immediate withdrawal of the entire
deposites from the bank, so as to distress it, was not contemplate*1'
And if any apprehensions to the contrary were felt by the bank, an inquiry at this department would no doubt have been promptly and satisfactorily answered. And certainly it was the duty of the bank, Before it adopted a course oppressive to the whole country, to be sure
of the ground on which it acted. It can never be justified for inflicts
a public injury, bv altering mistaken opinions of its own, ^nen
the means of obtaining information, absolutely certain, were so obviously within its reach. The change was always designed to be graaual, and the conduct of the bank itself has since compelled me tore
move a portion of the deposites earlier than was originally intendea.
1 here was nothing therefore, in the inquiry before mentioned, nor w
the views of the Executive Department, nor in the condition of tne
bank, which justified a sudden and oppressive change in its policy-




FEDERAL BANKING LAWS AND REPORTS

251

The situation of the mercantile claims also rendered the usual aids
of the bank more than ever necessary to sustain them in their business.
Their bonds for previous importations were, as before stated, constantly becoming due, and heavy cash duties were almost daily to be
paid. The demands of the public upon those engaged in commerce
were consequently unusually large, and they had a just claim to the
most liberal indulgence from the fiscal agent of the Government,
which had for so many years been reaping harvests of profits from
the deposites of the public money. But the bank about this time
changed its course.
By the monthly statement of the bank, dated 2d August, 1833, it appears that its loans and domestic
bills of exchange, purchased and on hand, amounted
to
$64,160,349.14
By the monthly statement of the 2d of September,
1833, they appear to have been
62,653,359. 59
By that of the 2d of October 1833, they were
60,094,202. 93
Reduction in two months
$4,066,146.21
By the same papers it appears that the public deposites including those for the redemption of the
public debt, the Treasurer's, and those of the public officers, were in August
$7,599,931.47
September
_
_
9,182,173.18
October
!_____"_
9,868,435. 58
Increase of the public deposites in two months

$2,268, 504.11

Total amount collected from the community

$6,334, 650.32

Thus upwards of six millions of dollars were withdrawn from the
business of the country by the Bank of the United States in the course
of two months. This, of itself, must have produced a pressure on the
^°ney market, affecting all commercial transactions. But the curailment in the bank accommodations of the community was much
i f I* T h e P° lic y adopted by the Bank of the United States, complled
pelled the State banks to take the same course in self-defence; and the
«ank of the United S t t appears to have resorted to the expedient
States
ot
drawing from the State banks the balances due, in specie, and to
w e hoarded up the article in its own vaults.
** August, 1833, that bank had in specie
$10,028,677.38
September
10,207,649.20
51

Showing an increase of specie in two months, of—

$639,764.13

This sum, it is believed, was chiefly drawn from the State banks,
i V O r t i fy d themselves, those banks were compelled to call on their
c
l
S ^ a nc a U su r itsa i a l w a accommodations; and so large a proportion
their a
n
Us is alwa
y s PaW i n their own notes, that, to obtain
i
blid t
ll f r four or five
specie, they are probably obliged to call for f
17



252

FEDERAL BANKING LAWS AND REPORTS

times that amount. To replace the specie taken from them by the
Bank of the United States, and to provide for their own safety, the
State banks, therefore, must have curtailed from two to three millions
of dollars. On the whole, it is a fair estimate, that the collections
from the community during those two months, without any corresponding return, did not fall much short of nine millions of dollars.
As might have been expected, complaints of a pressure upon the money
market were heard from every quarter. The balances due from the
State banks had, during the same time, increased from $368,969.98 to
2,288,573.19; and, from the uncertain policy of the bank, it was apprehended they might suddenly be called for in specie. The State
banks, so far from being able to relieve the community, found themselves under the necessity of providing for their own safety.
A very large proportion of the collections of the bank in August
and September, were in Philadelphia, New York, and Boston.
In August and September, the curtailment in Philadelphia was
$195,548. 69
Increase of public deposites
646,846. 80
Actual collections by the bank
Increase of public deposites in New
York^
15 396, 597.24
Deduct increase of loans
331,295.38
Actual collections by the bank
Curtailments in Boston
Increase of public deposites
Actual collections by the bank
Total collections in the three cities

842,395.49

1,065,301.86
717,264.45
48,069. 88
765,334.33
$2, 673,031.68

It will be perceived that it was solely through the increase of the
public deposites that the bank raised balances against the State banks
in New York, and was placed in a situation to take from them, at
its pleasure, large sums in specie. And when it is considered that
those curtailments and collections of the Bank of the United States
necessarily compelled the State banks to curtail also, we shall be at
no loss to perceive the cause of the pressure which existed in the commercial cities about the end of the month of September. It was impossible that the commercial community could have sustained itseli
much longer under such a policy. In the two succeeding months, the
collections of the bank would probably have exceeded five millions
more and the State banks would have been obliged to curtail in an
e(jual sum. ^ The reduction of bank accommodations to the amount ot
nineteen millions of dollars in four months, must have almost put an
end to trade; and before the 1st of October this pressure in the principal commercial cities had become so intense, that it could not have
been endured much longer without the most serious embarrassments.
11
ve

JLriw

i ^ R a s i n g ; and from the best information I h»

been able to obtain, I am persuaded that if the public moneys received
for revenue had continued to be deposited in the Bank of the United



FEDERAL BANKING LAWS AND EEPORTS

253

States for two months longer, and it had adhered to the oppressive
system of policy which it pursued during the two preceding months, a
widespread scene of bankruptcy and ruin must have followed. There
was no alternative, therefore, for the Treasury Department, but to
act at once, or abandon the object altogether. Duties of the highest
character would not permit the latter course, and I did not hesitate
promptly to resort to the former.
I have stated the condition of the mercantile classes at the time of
the removal, to explain why it was impossible to postpone it even for
a short period. Under otlier circumstances, I should have been disposed to direct the removal to take effect at a distant day, so as to
give Congress an opportunity of prescribing, in the mean time, the
places of deposite, and of regulating the securities proper to be taken.
It is true that the power given to the Secretary of the Treasury to
remove the deposites from the Bank of the United States necessarily
carries with it the right to select the places where they shall afterwards be made. The power of removal cannot be exercised without
placing them elsewhere; and the right to select is, therefore, contained
m the right to remove. It is also true that, in my judgment, as has
already been stated, the public interest would have been advanced if
the change had taken place at an earlier period. Yet as a few months
would, in ordinary times, have made no very serious difference, and
fhe removal had already been delayed until the meeting of Congress
was approaching, I should have preferred executing the measure in
a manner that would have enabled the Legislature to act on the subject in advance of the actual removal, if it had deemed it proper to
do so. But the conduct of the bank left me no choice, except between
tne immediate removal and its final relinquishment. For, if the
measure had then been suspended, to be resumed at a future time, it
was l n the power of the bank to produce the same evil whenever i%
w
as again attempted. Putting aside, therefore, from the view of the
object which I am now presenting, all the inducements which grew
out of the misconduct of the bank, and regarding only its approach*ng end, and the intensity of the pressure it was then producing, no
further delay was admissible.
1 lie facts and reasons above stated appear to have established the
iollowing propositions:
Ast. It was the duty of this department not to act upon the assumption that the legislative power would hereafter change the law in rela[lon to the Bank of the United States; and it was bound to regulate
KS conduct upon the principle that the existence of .this corporation
9 U i d ^ r m i n abtlei co n the 3d of March, 1836.
A i J e Pu
interest required that the deposites of public money
S i n o t c o n t i nue to be made in the Bank of the United States,
untii the close of its existence, but should be transferred to some other
w 1 ™ s o m ewP er iod prior to that time.
tim *t h e T r e er of removal being reserved exclusively to the becreP°
*2 •
asury, by the terms of the charter, his action was neces^JJ m order d e b
to effect it, and the deposites could not, according to the
hv fi? ment maat
y Congress with the stockholders, have been removed
l
ive branch of the Government, until the charter was at
an j




254

FEDERAL BANKING LAWS AND REPORTS

4th. The near approach of the time when the charter would expire,
as well as the condition of the mercantile community, produced by
the conduct of the bank, rendered the removal indispensable at the
time it was begun, and it could not have been postponed to a later day,
without injury to the country.
Acting on these principles, I should have felt myself bound to follow
the course I have pursued in relation to the deposites, without any
reference to the misconduct of the bank. But there are other reasons
for the removal growing out of the manner in which the affairs of
the bank have been managed, and its money applied, which would
have made it my duty to withdraw the deposites at any period of the
charter.
It will, I presume, be admitted on all hands, that the bank was incorporated in order to create a useful and convenient public agent to
assist the Government in its fiscal operations. The act of incorporation was not designed merely as an act of favor to the stockholders, nor
were exclusive privileges given to them for the purpose of enabling
them to obtain political power, or to amass wealth at the expense of
the people of the United States. The motive for establishing this vast
monopoly was the hope that it would conduce to the public good. It
was created to be the agent of the public; to be employed for the nvat
benefit of the people; and the peculiar privileges and means of P ?
emolument, given to it by the act of incorporation, were intended
as rewards for the services it was expected to perform. It was never
supposed that its own separate interests would oe voluntarily brought
into collision with those of the public. And still less was it anticipated
that it would seek, by its money, to obtain political power, and control
the action of the Government, either by the favors it can shower, or
the fear of its resentment. Its duty was simply that of an agent,
bound to render certain services to its principal, in consideration of
the advantages granted to it. And, like every other public agent or
officer, its own separate interests were subordinate to its duty to tne
public. It was bound to consult the general good rather than its private emolument, if they should happen to come in conflict with one
another. If; therefore, it sought to obtain political power, or to increase its gains by means which would probably bring distress on the
community, it violated its duty, and perverted, to the public injury,
the powers which were given to be used for the public good. And, m
such an event, it was the duty of the public servants, to whorn tlie
trust was reserved, to dismiss it, so far as might lawfully be done, froni
the agency it had thus abused.
Regarding the bank, therefore, as the agent of the United States,
and bound by the duties, and liable to the obligations which orcunarily belong to the relation of principal and agent, except where tne
charter has otherwise directed, I proceed to state the circumstances
which show that it had justly forfeited the confidence of the government, and that it ought not to have been further trusted as tne
depository of the public money.
The United States, by the charter, reserved the right of appointing
five directors of the bank. It was intended by this means not omy
to provide guardians for the interests of the public in the genew
administration of its affairs, but also to have faithful officers, W ?
situation would enable them to become intimately acquainted witn an



FEDERAL BANKING LAWS AND REPORTS

255

the transactions of the institution, and whose duty it would be to
apprise the proper authorities of any misconduct on the part of the
corporation likely to affect the public interest. The fourth fundamental article of the constitution of the corporation declares that
not less than seven directors shall constitute a board for the transaction of business. At these meetings of the Board, the directors on the
part of the United States had of course a right to be present; and,
consequently, if the business of the corporation had been transacted
in the manner which the law requires, there was abundant security
that nothing could be done, injuriously affecting the interests of the
people, without being immediately communicated to the public servants, who were authorized to apply the remedy. And if the corporation has so arranged its concerns as to conceal from the public
directors some of its most important operations, and has thereby destroyed the safeguards which were designed to secure the interests of
the United States, it would seem to be very clear that it has forfeited
its claim to confidence, and is no longer worthy of trust. In the
ordinary concerns of life, among individuals, no prudent man would
continue to place his funds in the hands of an agent, after he discovered that he was studiously concealing from him the manner in
which they were employed. The public money ought not to be guarded
with less vigilance than that of an individual, and measures of concealment on the part of this corporation are not only contrary to the
duties of its agency, but are also in direct violation of the law to which
jt owes its corporate existence. And the same misconduct which, in
thea case fofo private individuals, would induce a prudent man to dismiss
f £ e n t r m n i s employment, would require a similar course towards
K
thefiscalagent of the Government, by the officer to whom the law has
entrusted the supervision of its conduct, and given the power of
removal.
Tried by these principles, it will be found that the conduct of the
nk made it the duty of the Secretary of the Treasury to withdraw
its care the public funds.
. *st. Instead of a board constituted of at least seven directors according to the charter, at which those appointed by the United States
nave a right to be present, many of the most important money transactions of the bank have been, and still are, placed under the control
°* a committee, denominated the Exchange Committee, of which no
»™ of the public directors has been allowed to be a member since the
commencement of the present year. This committee is not even
«»ected by the Board, and the public directors have no voice in their
^ointment They are chosen by the President of the bank, and the
Dusmess of the institution, which ought to be decided on by the
£°ard of Directors, is in many instances transacted by this commit"®» and no one has a right to be present at their proceedings but the
j : ; Sl^ent, and those whom he shall please to name as members ot
;'!f/ om ^ittee. Thus loans are made, unknown at the time to a maZ 1 di attl lae Board, and paper discounted which might probably be
oZ!? f. Ons o f ^h" lba r meeting of the directors. The most important
t e
com *l
ank are sometimes resolved on and executed by this
ummittee ; and its measures are, it appears, designedly, and by regular
, so arranged, as to conceal from the officers of the Government
actions in which the public interests are deeply involved. And



256

FEDERAL BANKING LAWS AND REPORTS

this fact alone furnishes evidence too strong to be resisted, that the
concealment of certain important operations of the corporation from
the officers of the Government, is one of the objects which is intended
to be accomplished by means of this committee. The plain words of
the charter are violated, in order to deprive the people of the United
States of one of the principal securities which the law had provided to
guard their interests, and to render more safe the public money entrusted to the care of the bank. Would any individual of ordinary
discretion continue his money in the hands of an agent, who violated his
instructions for the purpose of hiding from him the manner in which
he was conducting the business confided to his charge ? Would he
continue his property in his hands, wThen he had not only ascertained
that concealment had been practised towards him, but when the agent
avowed his determination to continue in the same course, and to withhold from him as far as he could all knowledge of the manner in
which he was employing his funds ? If an individual would not be
expected to continue his confidence under such circumstances, upon
what principle could a different line of conduct be required from the
officers of the United States, charged with the care of the public interests ? The public money is surely entitled to the same care and protection as that of an individual; and if the latter would be bound in
justice to himself to withdraw his money from the hands of an agent
thus regardless of his duty, the same principle requires that the money
of the United States should, under the like circumstances, be withdrawn from the hands of their fiscal agent. And as the power of
withdrawal was confided to the Secretary of the Treasury, it was his
duty to remove it on this ground alone, if no other cause of complaint
had existed against the bank. The conduct of the bank in relation
to the three per cent, stock of the United States, is a memorable instance of the power exercised in secret by the Exchange Committee,
and the abuses to which it is incident. The circumstances attending
that transaction have been so fully laid before Congress and the public, that it is useless to repeat them here. It was a case in which this
committee not only managed in secret a moneyed transaction of vast
amount, intimately connected with the interests of the people of this
country, but one where the measures of the Government were thwarted
by the bank, and the nation compelled to continue for a time liable
for a debt which it was ready and desired to extinguish. Nor is this
the only measure of the kind which has come officially to my knowledge. I havedthec honor to present herewith a report, made by three
2L W
.? i r e t o r s to the President of the United States, on tne
22d of April, 1833, (marked A,) in which, in compliance with a request that they would communicate to him such information as ^ s
withm their personalt oknowledge, relative to the unusual proceedings
of direc rs
i H? 7 °
> they disclose the exceptionable manner in
which the power conferred by law on the board has been surrenderee:
to the Exchange Committee; that this has been done evidently with tne
design of preventing a proper and contemplated examination into tne
accounts of persons whose paper was offered for discount; that a
minority of the Board, apparently sufficient to have prevented tne
loan if the security was bad, were deprived of their votes upon tne
question; and that the long established by-laws of the institution
set aside for the purpose of carrying those designs into effect
less difficulty or embarrassment.



FEDERAL BANKING LAWS AND REPORTS

257

If proceedings like this are sanctioned by the constituted authorities
of the United States, the appointment of directors on their part is
an idle ceremony, and affords no safeguard to the public treasure in
the custody of the bank. And even legislative enactments in relation
to this corporation are of but little value, if it may at its pleasure
disregard one of the fundamental articles of its constitution, and
transfer to a secret committee the business which by law ought to be
transacted by the Board. It is scarcely necessary, m presenting this
document to the consideration of Congress, to notice an objection
which has been sometimes put forward against the publication of
any proceedings which relate to the accounts of private individuals.
The circumstances detailed are the regular and official transactions of
the Board of Directors, nor do they involve the private debtor and
creditor account of persons dealing with the bank, which is alone
included, in the distinction taken by the charter, in regard to private
accounts. If the argument thus brought forward were a sound one,
there could be no such thing as an examination of any value into the
conduct of the bank, because the business of the bank being with individuals, its misconduct could never be shown without bringing before the public the individual transaction in which the conduct of
the bank was impeached. And if it could make good the position that
such proceedings never are to be exposed to the public, because individuals are concerned in them, it would effectually shut out all useful examination, and be enabled to apply its money to the most improper purposes, without detection or exposure. When its conduct
js impeached, on the ground that it has used its great money power
to obtain political influence, the investigation of the charge is, in its
very nature, an inquiry into its transactions with individuals. And
although the accounts brought forward on such occasions may be the
accoUnts of individuals, yet they are also the accounts of the bank,
and show its conduct, And being the fiscal agent of the Government,
Wl
th such immense power to be exercised for good or for evil, the
Public safety requires that all of its proceedings should be open to
the strictest and most rigorous scrutiny. Its charter may be forfeited
b ?
} Us misconduct, and would be justly forfeited, if it sought to obtain
» Political influence in the affairs of the Nation. And yet such attempt onon a n cpart of the bank can never be proved, except by the
the l
eX
o? mat f
disclosure of its dealings with individuals.
< . It is not merely by its concealments that the bank has proved
M
uself regardless of the duties of its agency. Its own interests will be
round to be its ruling principle, and the just claims of the public to
^treated with but little regard, when they have come mto collision
«* .the interests of the corporation. This was but too plainly the
^ in the affair of the three per cents, above mentioned. A recent
nce proves that its rule of action is not changed m this respect,
the failure of the French Government to pay the bill drawn tor
hrst instalment due by the treaty, has been made the occasion of
^ v o roring to obtain from the public the sum of $158,842.77, to
ing
$158,8,
l f justice appears to entitle i Th money for
i it. The
fr
* l ich tno principle of j i
l i c l l , h e b i l 1 was sold, remained in the bank. The expenses it incurred were of small amount, and these the Government are willing
i? Pay- But the corporation, not content with the profits it was deJ"«ig from the millions of public money then in its vaults, and which
daily using in its discounts, endeavors to convert the public



258

FEDERAL BANKING LAWS AND REPORTS

disappointment into a gainful transaction for itself; and demands
the large sum above mentioned, without pretending that it sustained
any loss or inconvenience, commensurate with the amount it seeks to
obtain from the Government. The fiscal agent of the public attempts
to avail itself of the unexpected disappointment of the principal, for
the purpose of enhancing its own profits at the expense of the community.
3d. There is sufficient evidence to prove that the bank has used its
means with a view to obtain political power, and thereby secure the
renewal of its charter.
The documents which have been heretofore laid before Congress,
and are now on its files, will show that on the 31st of December, 1830,
the aggregate debt due to the bank was $42,402,304.24, and that, on
the 31st of December, 1831, it was $63,026,452.93, being an extension
of its loans, in a single year, of twenty millions of dollars, and an
increase of nearly fifty per cent, on its previous accommodations.
And, as if to leave no room to doubt as to the motive of this extraordinary conduct, it continued to add rapidly to its loans, and on
the 1st of May, 1832, while its petition for the renewal of its charter
was yet pending before Congress, they amounted to $70,428,070.72,
being an increase of $7,401,617.79 in the four preceding months, and
making altogether an addition of $28,025,766.48 in the short space of
sixteen months, and being an extension of more than 66 per cent, on
its previous loans. Such an increase at such a period of its charter is
without example in the history of banking institutions. On the 31st
of December, 1830, when its loans amounted, as above stated, to only
$42,402,304.24, the corporation had been in existence fourteen years.
The sudden and great increase was made when the charter was drawing to a close, and it had but little more than four years to run. It
cannot be supposed that these immense loans were made from a confident expectation that the charter would be renewed. On the contrary, it is now an historical fact, that the bank itself deemed the
chances of renewal so doubtful, that, in the session of Congress beginning in December, 1831, it petitioned for a recharter, and the reason generally assigned for pressing for a decision at that time was
the great extent of its business, and the necessity of preparing to
bring it to a close if the charter was not to be renewed. Thus, with
but little more than four years to run, with doubtful chances of renewal, and aware of the necessity of beginning to arrange its vast
transactions, it increases its loans in sixteen months more than
twenty-eight millions of dollars. Was this imprudence only ? It <*n'
not be believed that those who manage its concerns could* have committed such an oversight. Can any proper reason be assigned tor
this departure from the course which the interest of a moneyed corporation, as well as those of the country, obviously require? I f 1
not aware that any sufficient justification has been offered. And this
extraordinary increase of its loans, made in so short a space of time,
at such a period of its charter, and upon the eve of a severely contested election of President, in which the bank took an open and direct
interest, demonstrates that it was using its money for the purpose oi
obtaining a hold upon the people of this country, in order to operate
upon their fears, and to induce them, by the apprehension of ruin,
to vote against the candidate whom it desired to defeat. In other



FEDERAL BANKING LAWS AND REPORTS

259

words, this great moneyed corporation determined to enter the political arena, and to influence the measures of the Government, by causing its weight to be felt in the election of its officers.
But if the circumstances above stated were not of themselves sufficient to prove that the bank had sought by its money to obtain political
power, and to exercise, by that means, a controlling influence on the
measures of the Government, recent developments have furnished
such proof as to leave no room for doubt. I have the honor to transmit herewith an official statement, (marked B,) signed by four of the
public directors of the bank, showing at the same time the unlawful
manner in which its business is conducted, aiid the unwarrantable
purposes to which its money has been, and still is applied. I t will be
seen by the proceedings therein stated that the whole capital of the
bank is, in effect, placed at the disposition of the President of that institution. He is authorized to expend what he pleases in causing "to
be prepared and circulated such documents and papers as may communicate to the people information in regard to the nature, and operations of the bank," And he may therefore, under the very indefinite
terms of the resolutions, employ as many persons as he pleases, at
such salaries as he thinks proper, either to prepare daily paragraphs
tor newspapers in favor of the bank, or to write pamphlets and essays
to influence the public judgment. And he may even provide for the
publications by salaries to printers, or by purchasing presses and
rt?*?' a m * Pacing them in the hands of agents employed and paid by
tne bank. There is no limitation short of the capital of the bank, as
T ' n S c m °^ m o n e v he may thus expend in different parts of the
T
united States. From the description of articles which appear to have
oeen paid for under this resolution, it seems that the President of the
•flsntutionhas supposed that publications containing attacks on ofren i
Government who are supposed to stand in the way of the
wal.of the charter, is one of the modes of "communicating to the
bank » 1 ^ ° r m a t i o n in regard to the nature and operations of the
' ,?' *his construction was, it appears, approved by the Board,
^ tney .continued the authority in his hands unchanged, after the
befftv +i!n w h * c h a portion of the money had been applied was laid
oneril • I ? # A n d w e a r e l e f t t o conclude that this institution is now
warf m- field a s a P o l i t i cal partisan, and that one of its means of
O D D S IS
destruction of the political standing of those who are
the p
renewal of the charter. The sum actually charged to
nSe u n d e rr t h i s
e
^
resolution, is sufficiently startling. How much
morfi^
ee bbe e n a l l e
r
d
dd
t l
And
the W T *
ady squandered, we are yett to learn. And
presnm ;i ^ p a r i n g and circulating such publications is still, it is
m o jl m e c \ going on, under the last resolution of the Board. It is
monev 11T}Possib]e to ascertain the specific purposes to which the
to Sh;; m$ m fact have been applied, since vouchers are not required
Positiv
P ar ticular services for which it was given. With these
s o f t h e effort
fll^
fluencl^ m s o f t h e e f f o r t s of the bank to obtain power, and to ins of the bank to
p ,
T m e a s u r e s of the Government, I have not hesitated as to the
f
h
thittd
t th
path nVT
vy
If
ithdr ri'" AX> ^hen this eviuence was b f
wiitjn LIIIS evidence w before me, I h d failed to
I had f i l d t
withdr tf*
>
been i V
deposites of public money from the bank, it would have
di e countenance and support of this department to
measiiT. ?? *
f : ! 5 h l c h a r e but too well calculated to destroy the purity of our
"~~. and endanger thereby the liberties of the people. It can


260

FEDERAL BANKING LAWS AND REPORTS

not be supposed that these expenditures are justifiable on the ground
that the bank has a right to defend itself, and that the money in
question was therefore properly expended. Some of the items accounted for sufficiently show in what manner it was endeavoring to
defend its interests. It had entered the field of political warfare, and,
as a political partisan, was endeavoring to defeat the elections of those
who were opposed to its views. It was striving, by means of its money,
to control the course of the Government, by driving from power those
who are obnoxious to its resentment. Can it be permitted to a great
moneyed corporation to enter on such a controversy, and then justify
its conduct on the ground that it is defending its own interests? The
right of such an institution to interfere in the political concerns of
the country, for any cause whatever, can never Be recognized; and a
defence like this on the part of the bank could not be tolerated even
if the individual stockholders alone were thus using their own money
to promote their own interests. But it is not onlv the money of individuals which is thus applied. The one-fifth of the capital of the
bank, amounting to seven millions of dollars, belongs to the United
States, and the one-fifth of the money which has been expended, and
is yet to be expended under this resolution, is the property of the
public, and does not belong to private individuals. Yet the Board of
Directors assert the right, not only to authorize the expenditure of
the money of individual stockholders, in order to promote their individual interests, but have also, by the resolution in question, taken
upon themselves to give the like authority over money which belongs
to the United States. Is an institution which deals thus with the
money of the people, a proper depository for the public funds? When
such a right is openly claimed, and acted upon, by the Board of D1*
rectors, can the money of the United States be deemed safe in its
hands. The same principle that would sanction the application of one
portion of the public money to such purposes, would justify the life*
use of all that may come to its possession. The Board of Directors
have no lawful authority to employ the money of the United States
for such objects. So far as the nation is concerned in the character
of the bank, the people, through their own representatives in Congress, can take care of their own rights, and vindicate the character
of the bank, if they think it unjustly assailed. And they do not need
the aid of persons employed and paid by the bank, to learn whether
its charter be constitutional or not, nor whether the public interest
requires it to be renewed. Nor have they authorized the President
and directors of that institution to expend the public money to enlighten them on this subject.
JFhe resolution in question is moreover in direct violation of the act
ss by which this corporation was established. And ATT
itj
the unlimited and irresponsible power
nch the directors have given to the Presi
,. .
, _
clause in its charter which requires
directors to form a Board for the transaction of business. If the^expenditure of money for the purposes contemplated by the resolution
be a legitimate part of the business of the corporation, the B°ag
could not lawfully transfer it to one of its officers, unless they can, £
resolution, surrender into the hands of their President the entire




FEDERAL BANKING LAWS AND REPORTS

261

pcnyer of the corporation, and commit to the care of a single individual the corporate power which the Law has declared should be
exercised by the Board of Directors.
Chief Justice Marshall, in the case of the Bank of the United States
vs. Dandridge, when speaking of the bonds required to be given by
the cashiers of the bank, says: "It requires very little knowledge of the
interior of banks, to know that the interests of the stockholders are
committed to a very great extent to these, and other officers. It was,
and ought to have been the intention of Congress to secure the Government, which took a deep interest in this institution, and to secure
individuals, who embarked their fortunes in it on the faith of the
Government, as far as possible from the malpractices of its officers."
But the directors of the bank seemed to have acted on principles directly opposite to those stated by the Chief Justice, and, instead of
endeavoring to secure "as far as possible" the public and individuals
from the malpractices of its officers, they place the funds of the bank
under the control of a single officer, from whom neither security nor
specific vouchers have been required. It is true that, in the opinion
which the Chief Justice gave in the case from which the above passage
is quoted, he differed from the rest of the court. But the difference
was on other principles, and not on the one above stated.
In forming my judgment on this as part of the case, I have not
regarded the short time the charter has yet to run. But my conduct
has been governed by considerations which arise altogether out of
'he course epursued by the bank, and which would have equally in•J1??06? t n decision of this department in relation to the deposites,
ji the bank were now in the first years of its existence; and upon
'his view of the subject the following propositions appear to be fully
1
n 1S^' ^ h a t t b e b a n k > b e i n £ t h e fiscal a S e n t o f t h e Government in
lUe dut
?es which the law requires it to perform, is liable to all the
responsibilities which attach to the character of agent in ordinary
cases of principal and agent among individuals; and it is therefore
™ duty of the officer of the Government, to whom the power has
*en entrusted,n d u c withdraw from its possession the public funds
to
rid Ver i t s c o
t towards its principal has been such as would
jnauce a prudent man in private life to dismiss his agent from his
ei
nployment.
it* K ^ i a t ' V means of its exchange committee, it has so arranged
islousiness as to deprive the public servants of those opportunities of
uservmg its conduct which the law had provided for the safety
evirf p u b l i c money confided to its care; and that there is sufficient
how th
the
dp ih 6 \° s planneda t and is sti11 e r s i s t eonin the part ofllvthe bank c011
arrangement d
for the
of was

T

'

P

>

V V<x&

"

a J t has a l s o i n tne case of the three p r cent stock and f

l

>

?

'

°

own I i. sexcn &nge on France, endeavored unjustly to advance its
U P Ipl ofi t s a t t h e expense of the interests and just rights of the
Pe
r ff f f\\ ^ e United States.
of oJJl S aere P ro P°sitions be established, it is very clea that a man
-S
P°sitio b t b l i h d
clear
an a g enn t -j prudence in private life would withdraw his funds from
y PIUUGUUU m private m e wuuiu. ftnimiuu " * ^ ^v*^^ *-.«*«
g e n t ^ho h d th
ltion
^ho had thus b h d himself in relation to his pnncibehaved h i l f i



262

FEDERAL BANKING LAWS AND REPORTS

pal; and it follows that it was the duty of the Secretary of the
Treasury to withdraw the funds of the United States from the
bank.
4th. That there is sufficient evidence to show that the bank has been,
and still is, seeking to obtain political power, and has used its money
for the purpose of influencing the election of the public servants; and
it was incumbent upon the Secretary of the Treasury, on that account,
to withdraw from its possession the money of the United States, which
it was thus using for improper purposes. Upon the whole, I have
felt myself bound by the strongest obligation to remove the deposits.
The obligation was imposed upon me by the near approach of the time
when this corporation will cease to exist, as well as by the course of
conduct which it has seen fit to pursue.
The propriety of removing the deposites being thus evident, and it
being consequently my duty to select the places to which they were to
be removed, it became necessary that arrangements should be immediately made with the new depositories of the public money, which would
not only render it safe, but would at the same time secure to the
Government, and to the community at large, the conveniences and
facilities that were intended to be obtained by incorporating the Bank
of the United States. Measures were accordingly taken for that purpose, and copies of the contracts which have been made with the
selected banks, and of the letters of instructions to them from this department, are herewith submitted. The contracts with the banks in
the interior are not precisely the same with those in the Atlantic cities.
The difference between them arises from the nature of the business
transacted by the banks in these different places. The State banks
selected are all institutions of high character and undoubted strength,
and are under the management and control of persons of unquestioned
probity and intelligence. And in order to ensure the safety of the public money, each of them is required, and has agreed, to give security
whenever the amount of the deposite shall exceed the half of the
amount of the capital actually paid in; and this department has reserved to itself the right to demand security whenever it may think it
advisable, although the amount on deposite may not be equal to the
sum above stated. The banks selected have also severally engaged to
transmit money to any point at which it may be required by the directions of this department for the public service, and to perform all tlie
services to the Government which were heretofore rendered by tne

will afford facilities to commerce and in the business of domestic exchange quite equal to any which the community heretofore enjoyeolhere has not been yet sufficient time to perfect these arrangement^
but enough has already been done to show that, even on the score 01
expediency, a Bank of the United States is not necessary, either for
the fiscal operations of the Government, or the public convenience)
and that every object which the charter to the present bank was aesigned to attain, may be as effectually accomplished by the State ban»And, tf this can be done, nothing that is useful will be lost or^endangered by the change, while much that is desirable will be gained^
it. if or no one of these corporations will possess that absolute, anu



FEDERAL BANKING LAWS AND EEPORTS

263

almost unlimited dominion over the property of the citizens of the
United States which the present bank holds, and which enables it at
any moment, at its own pleasure, to bring distress upon any portion of
the community whenever it may deem it useful to its interest to make
its power felt. The influence of each of the State banks is necessarily
limited to its own immediate neighborhood, and they will be kept in
check by the other local banks. They will not, therefore, be tempted
by the consciousness of power to aspire to political influence, nor likely
to interfere in the elections of the public servants. They will, moreover, be managed by persons who reside in the midst of the people
who are to be immediately affected by their measures; and they cannot
be insensible or indifferent to the opinions and peculiar interests of
those by whom they are daily surrounded, and with whom they are
constantly associated. These circumstances always furnish strong
safeguards against an oppressive exercise of power, and forcibly recommend the employment of State banks in preference to a Bank of
the United States, with its numerous and distant branches. A corporation of the latter description is continually acting under the conviction of its immense power over the money concerns of the whole
country, and is dealing also with the fortunes and comforts of men
™o are distant from them, and to whom they are personally strangers.
Ane directors of the bank are not compelled to hear, daily, the complaints, and witness the sufferings of those who may be ruined by
their proceedings. From the nature of man, such an institution cannot
always be expected to sympathize with the wants and feelings of those
•° <Jr? affected by its policy. And we ought not, perhaps, to be surprised if fa corporation like the Bank of the United States, from the
5 ?? ° .rivalry, or from cold calculations of interest or ambition,
should deliberately plan and execute a course of measures highly injurious and oppressive in places where the directors who control its
conauct have no local sympathies to restrain them.
*t is a fixed principle of our political institutions to guard against
ne ha
unnecessary accumulation of power over persons and property in
j h y nds. And no hands are less worthy to be trusted with it than
sf°se of a moneyed corporation. In the selection, therefore, of the
™*te banks vasbthen fiscal agents of the Government, no disadvantages
thft t 0 h a e e e i n c urred on the score of safety or convenience, or
«e general interests of the country, while much that is valuable will
of ?u m £ad bk o h et hchange. I am however well aware of the vast power
yt
a ! l ? f e United States, and of its ability to bring distress
mI
suffering on the country. This is one of the evils of chartering a
r
*"th such an amount of capital, with the right of shooting its
[into every part of the Union, so as to extend its influence to
neighborhood. The immense loan of more than twenty-eight
"" of dollars suddenly poured out, chiefly in the Western States
"
and the first four months in 1832, sufficiently attests that the
l
.s sensible of the power which its money gives it, and has placed
J* an t t i t *de to make the people of the United States feel the
rU ^ aattitude to make the people of the United S
nt of its resentment, if they presume to disappoint the wishes ot
. c o r P °t(r awit o n . By a severe curtailment it has already made it
ti
t r Z / ? t o hdraw a portion of the money it held on deposite and
the
C S ? lt
custody of the new fiscal agents, in order to shield
16
immunity from the injustice of the Bank of the United States.



264

FEDERAL BANKING LAWS AND REPORTS

But I have not supposed that the course of the Government ought to
be regulated by the fear of the power of the bank. If such a motive
could be allowed to influence the legislation of Congress, or the action
of the Executive Departments of the Government, there is an end to
the sovereignty of the people; and the liberties of the country are at
once surrendered at the feet of a moneyed corporation. They may
now demand the possession of the public money, or the renewal of the
charter; and if these objects are yielded to them from apprehensions
of their power, or from the suffering which rapid curtailments on
their part are inflicting on the community, what may they not next
require? Will submission render such a corporation more forbearing
in its course ? What law may it not hereafter demand, that it will
not, if it pleases, be able to enforce by the same means ?
These considerations need not, however, be pressed further in this
report. They are too obvious and striking to need enforcement by
argument. And I rely with confidence on the representatives of this
enlightened nation to sustain a measure which the best interests of the
country called for, and which had become absolutely necessary to preserve untainted its free institutions, and to secure the liberties and
happiness of the people.
I have the honor to be, sir, very respectfully,
Your obedient servant,
R. B. TANEY,

Secretary of the Treasury.

Fifth Annual Message—Andrew Jackson
Twenty-Third Congress, 1st Session
DECEMBER 5, 1833.
[Source: James D. Richardson, A Compilation of the Messages and Papers of
the Presidents, Vol. 2, pp. 1240-1251]
•

•

•

•

*

•

•

Since the last adjournment of Congress the Secretary of the Treasury
has directed the money of the United States to be deposited in certain
State banks designated by him, and he will immediately lay before you
his reasons for this direction. I concur with him entirely in the view
he has taken of the subject, and some months before the removal*
urged upon the Department the propriety of taking that step, j
near approach of the day on which the charter will expire, as well
the conduct of the bank, appeared to me to call for this measure up
the high considerations of public interest and public duty. The extent of its misconduct, however, although known to be great, was no
at that time fully developed by proof. It was not until late m "»
month of August that I received from the Government directors a*
wie eieutiuiia u i m e p u D i i c o m c e r s b y m e a n s o± i t s m o n e y , a i m ^

'«I

violation of the express provisions of its charter, it had by a form
resolution placed its funds at the disposition of its president to be em



FEDERAL BANKING LAWS AND REPORTS

265

ployed in sustaining the political power of the bank. A copy of this
resolution is contained in the report of the Government directors before referred to, and however the object may be disguised by cautious
language, no one can doubt that this money was in truth intended for
electioneering purposes, and the particular uses to which it was proved
to have been applied abundantly show that it was so understood. Not
only was the evidence complete as to the past application of the money
and power of the bank to electioneering purposes, but that the resolution of the board of directors authorized the same course to be pursued
in future.
It being thus established by unquestionable proof that the Bank of
the United States was converted into a permanent electioneering engine, it appeared to me that the path of duty which the executive department of the Government ought to pursue was not doubtful. As
by the terms of the bank charter no officer but the Secretary of the
Treasury could remove the deposits, it seemed to me that this authority ought to be at once exerted to deprive that great corporation of the
support and countenance of the Government in such a use of its funds
and such an exertion of its power. In this point of the case the question is distinctly presented whether the people of the United States
are to govern through representatives chosen by their unbiased suffrages or whether the money and power of a great corporation are to be
secretly exerted to influence their judgment and control their decisions,
it must now be determined whether the bank is to have its candidates
?/*offices i n t h e S ountl 7> fr.om the highest to the lowest, or whether
candidates on both sides of political questions shall be brought forward
aS
A f r ? t . o f ? r e and supported by the usual means.
th A- t i m e t n e efforts of the bank to control public opinion, through
uie distresses of some and the fears of others, are equally apparent,
^a, if possible, more objectionable. By a curtailment of its accommodations more rapid than any emergency requires, and even while
t retains specie to an almost unprecedented amount in its vaults, it is
'tempting to produce great embarrassment in one portion of the community, while through presses known to have been sustained by its
ough presses known to have b
° > it a t t e t b unfounded alarms t create a panic i all.
™ y attempts by
f d d
l
t
i in ll
to
rest e . a r e t n e means by which it seems to expect that it can force a
storation of the deposits, and as a necessary consequence extort from
th? g r e ? a r e n e w a l of its charter. I am happy to know that through
Sense o f Olir
fail^
P e °Pk the effort to get up a panic has hitherto
bint v11 t l l a t t n r ° u g h the increased accommodations which the State
e been
ew
enabled to afford, no public distress has followed the
11S f t h e b a n k
BT
OC
?
> and it can not be doubted that the exercise of its
t h e ex
I^nii
Penditure of its money, as well as its efforts to spread
win b
"D
f,4^
e met and rebuked as they deserve. In my own
X s h o u l d feel
or U
. *y
myself called on by the facts disclosed to
<W a *?17? facias against the bank, with a view to put an end to the
itself^ n g ¥ s il h a s so palpably violated, were it not that the charter
ftp L . e x P i r e a s ? 0 °n as a decision would probably be obtained from
I ^ ^ last resort.
mess.]I
attention of Congress to this subject in my last annual
reacli *lnd i n f o ™ e d them that such measures as were within the
1 o t tn
e Secretary of the Treasury had been taken to enable him to




266

FEDERAL BANKING LAWS AND REPORTS

judge whether the public deposits in the Bank of the United States were
entirely safe; but that as his single powers might be inadequate to the
object, I recommended the subject to Congress as worthy of their serious investigation, declaring it as my opinion that an inquiry into the
transactions of that institution, embracing the branches as well as the
principal bank, was called for by the credit which was given throughout the country to many serious charges impeaching their character,
and which, if true, might justly excite the apprehension that they were
no longer a safe depository for the public money. The extent to which
the examination thus recommended was gone into is spread upon your
journals, and is too well known to require to be stated. Such as was
made resulted in a report from a majority of the Committee of Ways
and Means touching certain specified points only, concluding with a
resolution that the Government deposits might safely be continued in
the Bank of the United States. This resolution was adopted at the
close of the session by the vote of a majority of the House of Representatives.
Although I may not always be able to concur in the views of the pub]ic interest or the duties of its agents which may be taken by the other
departments of the Government or either of its branches, I am, notwithstanding, wholly incapable of receiving otherwise than with the
most sincere respect all opinions or suggestions proceeding from such
a source, and in respect to none am I more inclined to do so than to
the House of Kepresentatives. But it will be seen from the brief views
at this time taken of the subject by myself, as well as the more ample
ones presented by the Secretary of the Treasury, that the change in
the deposits which has been ordered has been deemed to be called for
by considerations which are not affected by the proceedings referred to,
and which, if correctly viewed by that Department, rendered its act
a matter of imperious duty.
Coming as you do, for the most part, immediately from the people
and the States by election, and possessing the fullest opportunity to
know their sentiments, the present Congress will be sincerely solicitous
to carry into full and fair effect the will of their constituents in regard
to this institution. It will be for those in whose behalf we all act to
decide whether the executive department of the Government, in the
steps which it has taken on this subject, has been found in the line of
its duty.
'

Sixth Annual Message—Andrew Jackson
Twenty-third Congress, 2d Session
DECEMBER 1, 1834.
[Source: James D. Richardson, A Compilation of the Messages and Papers of the
Presidents, VoL 2, pp. 1327-1331]
*
*
*
*
*
*
*
*
Circumstances make it my duty to call the attention of Congressii to

the Bank of the United States. Created for the convenience of *
ixovernment, that institution has become the scourge of the people. Its
interference to postpone the payment of a portion of the national debt



FEDERAL BANKING LAWS AND REPORTS

267

that it might retain the public money appropriated for that purpose to
strengthen it in a political contest, the extraordinary extension and
contraction of its accommodations to the community, its corrupt and
partisan loans, its exclusion of the public directors from a knowledge
of its mo^t impotrant proceedings, the unlimited authority conferred
on the president to expend its funds in hiring writers and procuring
the execution of printing, and the use made of that authority, the
retention of the pension money and books after the selection of new
agents, the groundless claim to heavy damages in consequence of the
protest of the bill drawn on the French Government, have through
various channels been laid before Congress. Immediately after the
close of the last session the bank, through its president, announced
its ability and readiness to abandon the system of unparalleled curtailment and the interruption of domestic exchanges which it had practiced upon from the lst of August, 1833, to the 30th of June, 1834, and
to extend its accommodations to the community. The grounds assumedin this annunciation amounted to an acknowledgment that the
curtailment, in the extent to which it had been carrier, was not neces?a*Jv t o the safety of the bank, and had been persisted in merely to
induce Congress to grant the prayer of the bank in its memorial relative to the removal of the deposits and to give it a new charter. They
jere substantially a confession that all the real distresses which individuals and the county had endured for the preceding six or eight
months had been needlessly produced by it, with the view of affecting
tnrough the sufferings of the people of the legislative action of Con
Conufferings
A \
- a s u b 3 e c t of congratulation that Congress and the country
aa t h e
virtue and firmness to bear the infliction, that the energies of
°ur people soon found relief from this wanton tyranny in vast imporanHrtf ° f t h e P r e c i o u s metals from almost every part of the world,
" a ™ a t tJ ie close of this tremendous effort to control our Governm n the bank found itself powerless and no longer able to loan out
et
\viUV^ S m e a n s - T l i e community had learned to manage its affairs
so i f l t s assistance, and trade had already found new auxiliaries,
to* f 2 n t h e lst. o f O c t °ber last the extraordinary spectacle was
eith i • ° f a n a t i o n a l b a n k more than one-half of whose capital was
g
bank
^productive in its vaults or in the hands of foreign
sion°^ h n needIess distresses brought on the country during the last seson fh ^ g r e s s has since been added the open seizure of the dividends
stock to the
dam P
amountbf $170,041, under pretense of paying
con^f f e !' c i ost ' a n d interest upon the protested French bill. This sum
o n
whtwiT a P° r t i . .n of the estimated revenues for the ye 1834, upon
P o
f
year
a p i i
C
bd
? t l l e ^appropriations made by Congress were based. It would as
&Oo
or ftp V e • n ex pected that our collectors would seize on the customs
®
of * f i v e r s of our land offices on the moneys arising from the sale
that tl! u ^ s u n ( i e r pretenses of claims against the United States as
cit>]P K n k W o u I d h a v e retained the dividends. Indeed, if the printhe TT •fesJaWished that anyone who chooses to set up a claim against
Sta
pronTf
t e s may without authority of law seize on the public
r mone
Wrm °
y wherever he can find it to pay such claim, there will
*ill h n ° a ^ u r a n c e that our revenue will reach the Treasury or that it
A
the h t a p £ i i e d a f t e r t h e appropriation to the purposes designated in
dW
- The paymasters of our Army and the pursers of our Navy
92




268

FEDERAL BANKING LAWS AND REPORTS

may under like pretenses apply to their own use moneys appropriated
to set in motion the public force, and in time of war leave the country
without defense. This measure resorted to by the bank is disorganizing and revolutionary, and if generally resorted to by private citizens
in like cases would fill the land with anarchy and violence.
It is a constitutional provision "that no money shall be drawn from
the Treasury but in, consequence of appropriations made by law." The
palpable object of tKis provision is to prevent the expenditure of the
public money for any purpose whatsoever which shall not have been
first approved by the representatives of the people and the States in
Congress assembled. It vests the power of declaring for what pur*
poses the public money shall be expended in the legislative department
of the Government, to the exclusion of the executive and judicial, and
it is not within the constitutional authority of either of those departments to pay it away without law or to sanction its payment. According to this plain constitutional provision, the claim of the bank can
never be paid without an appropriation by act of Congress. But the
bank has never asked for an appropriation. It attempts to defeat
the provision of the Constitution and obtain payment without an act
of Congress. Instead of awaiting an appropriation passed by both
Houses and approved by the President, it makes an appropriation
for itself and invites an appeal to the judiciary to sanction it. That
the money had not technically been paid into the Treasury does not
affect the principle intended to be established by the Constitution.
The Executive and the judiciary have as little right to appropriate
and expend the public money without authority of law before it is
placed to the credit of the Treasury as to take it from the Treasury.
In the annual report of the Secretary of the Treasury, and in his correspondence with the president of the bank, and the opinions of the
Attorney-General accompanying it, you will find a further examination of the claims of the bank and the course it has pursued.
It seems due to the safety of the public funds remaining in that
bank and to the honor of the American people that measures be taken
to separate the Government entirely from an institution so mischievous
to the public prosperity and so regardless of the Constitution and laws.
By transferring the public deposits, by appointing other pension
agents as far as it had the power, by ordering the discontinuance 01
the receipt of bank checks in the payment of the public dues after
the 1st day of January, the Executive has exerted all its lawful authority to sever the connection between the Government and this faitnless corporation.
The high-handed career of this institution imposes upon the constitutional functionaries of this Government duties of the gravest and m ^
imperative character—duties which they can not avoid and tr°
which I trust there will be no inclination on the part of any of tneii
to shrink. My own sense of them is most clear, as is also my reacting
to discharge those which may rightfully fall on me. To continue aiy
business relations with the Bank of the United States that may ^
avoided without a violation of the national faith after that institutel1
has set at open defiance the conceded right of the Government
examine its affairs, after it has done all in its power to deride u
public authority in other respects and to bring it into disrepute




FEDERAL BANKING LAWS AND REPORTS

269

home and abroad, after it has attempted to defeat the clearly expressed
will of the people by turning against them the immense power intrusted to its hands and by involving a country otherwise peaceful,
flourishing, and happy, in dissension, embarrassment, and distress,
would make the nation itself a party to the degradation so sedulously
prepared for its public agents and do much to destroy the confidence
of mankind in popular governments and to bring into contempt their
authority and efficiency. In guarding against an evil of such magnitude considerations of temporary convenience should be thrown out
or the question, and we should be influenced by such motives only as
look to the honor and preservation of the republican system. Deeply
and solemnly impressed with the justice of these views, I feel it to be
my duty to recommend to you that a law be passed authorizing the
sale of the public stock; that the provision of the charter requiring
the receipt of notes of the bank in payment of public dues shall, in
accordance with the power reserved to Congress in the fourteenth
section of the charter, be suspended until the bank pays to the Treasury
tne
.dividends withheld, and that all laws connecting the Government
?c 7^° . cer ? w i t n the bank, directly or indirectly, be repealed^ and
f
tnat the institution be left hereafter to its own resources and means.
Events have satisfied my mind, and I think the minds of the American people, e r b a l a n c mischiefs and dangers which flow from a national
that the
ht £ ar o v
e ^11 its advantages. The bold effort the present
oank has made to control the Government, the distresses it has wantonlyproduced, the violence of which it has been the occasion in one of
our cities famed for i its observance of law and order, are but premonidpl a°I- t o faa t eerw h c h awaits the American people should they be
Z T v k e P petuation of this institution or the establishment of
ll
&e It is fervently hoped that thus admonished those who
i WlUobr e ind
favored the establishment of a substitute for the pres! v • n v e n i e n c e ucedmto abandon it, as it is evidently better to incur
tho i i m o n e t l l a t a y b e reasonably expected than to concentrate
or n i
yed power of the Eepublic in any form whatsoever
sunder any restrictions.
2t s
tion 110 y n e cl e saslar e a d y illustrated that the agency of such an instituShTt i te a r e f o r y dtou the fiscal operations of the Government. The
?
whi I GIe r e ( u iurne d f U y adequate to the performance of all services
mSmf7 a n d w ilt
of the Bank of the United States, quite as
s e w a nyd di
h the same cheapness. They have maintained themShiT
?cnarged all these duties while the Bank of the United
not ! W - Ses tU 1conc
Powerful and in the field as an open enemy, and it is
o
onerVr
eive that they will find greater difficulties in their
ThA102?twhen t h a t e n e m y s h a 1 1 c e a s e t o e x i s t
therf!a t t . e n li 0 I it h e S t a t
of Congress is earnestly invited to the regulation of
e i S ^y t hne exe
e banks by law. Although the power now
uniWi y exe
cutive department in this behalf is only such as was
the P
rted through every Administration from the origin of
one wV e i rns. ment U P to the establishment of the present bank, yet it is
to be r i t eSusceT h e o w e r regulation by law, and therefore ought so
Ptible of
d
T s n ^ r aD'k e e t hP
of Congress to direct in what places the
im
i
P e moneys in the Treasury and to impose restricu
Pon the Executive authority in relation to their custody and



270

FEDERAL BANKING LAWS AND REPORTS

removal is unlimited, and its exercise will rather be courted than discouraged by those public officers and agents on whom rests the responsibility for their safety. It is desirable that as little power as
possible should be left to the President or the Secretary of the Treasury
over those institutions, which, being thus freed from Executive influence, and without a common head to direct their operations, would
have neither the temptation nor the ability to interfere in the political
conflicts of the country. Not deriving their charters from the national
authorities, they would never have those inducements to meddle in
general elections which have led the Bank of the United States to
agitate and convulse the country for upward of two years.
The progress of our gold coinage is creditable to the officers of the
Mint, and promises in a short period to furnish the country with a
sound and portable currency, which will much diminish the inconvenience to travelers of the want of a general paper currency should
the State banks be incapable of furnishing i t Those institutions have
already shown themselves competent to purchase and furnish domestic
exchange for the convenience of trade at reasonable rates, and not a
doubt is entertained that in a short period all the wants of the country
in bank accommodations and exchange will be supplied as promptly
and as cheaply as they have heretofore been by the Bank of the United
States. If the several States shall be induced gradually to reform
their banking systems and prohibit the issue of all small notes, we
shall m a few years have a currency as sound and as little liable to
fluctuations as any other commercial country.

Annual Report, Secretary of Treasury (Levi Woodbury)
Twenty-Third Congress, 2d Session
DECEMBER 4, 1834.
[Source: House Doc. 3, 23d Congress, 2d Session, pp. $-8,16-18]
TREASURY DEPARTMENT,

December 2, l
*
*
*
*
*
*
The revenue from bank dividends has been estimated at somewhat
less than heretofore, in consequence of the sales of our bank stock,
under the act of July 10, 1832, for the investment of the accruing
income of the Navy Pension and Hospital funds having a ready
amounted to $656,600, and on which the Treasury can now receive no
dividends applicable to general purposes. It might, perhaps, be advisable to deduct a still further sum to meet any contingency like that
of the present year, in which the United States Bank, without the
consent of this department, or the sanction of Congress, and without
any forewarning of its intention, seized on about $170,041 of the estimated revenue from this source, and has since withheld it from the
public lreasury.
Copies of the opinions of the Attorney General, and the whole correspondence on this subject between the Department and the BanJ,
which took place previously to the request for these opinions, are an-




FEDERAL BANKING LAWS AND REPORTS

271

nexed for the consideration and action of Congress, [B.] It may be
proper to add, that, within a few days past, a new communication in
relation to this transaction has been received from the Bank, and,
when a reply is finished, both will be submitted, if desired. No foundation appears to have existed, in laic or equity, for the great claim of
damages made by the Bank on account of the protest of what has been
called, in common parlance, the bill of exchange drawn on the French
Government by this department. It is believed that the bill, when
protested, ought by our agents abroad, had they acted with due regard
towards their principal, to have been taken up for the credit of that
principal, which was the United States, rather than for the credit of
the Bank; or, at the furthest, if similar and conflicting relationsexisted between them and the Bank, they should have pursued the
equitable course of taking it up for the credit of both the United States
and the Bank, or the more liberal one of giving the preference to the
government, which was the drawer; and, in either of these events, no
room for difficulty by this extraordinary claim would probably have
been left. But as these agents preferred a different course, thereby
justly impairing the further confidence of Uie Government in their
discretion, it would seem that the Bank, in the next place, having long
peen the general fiscal agent of the Government, and the primary one
HI importance, should have returned the bill, and made no charge
|*gainst ^s principal, the United States, except for the actual advances,
;jna the actual costs and expenses it had incurred in the transaction.
. e Uctual advances by the Bank, when the bill was originally received, had only been a matter of form, and were nothing.
ine money, in fact, never belonged to this department, except in
rust for the merchants, or their widows and orphans, who had suffered
y trench spoliations: and a sum exceeding the whole amount of it
naving been left in the Bank and its branches, and no part of the
money having ever been brought into the Treasury by warrant, it was,
^mediately on notice of the protest, restored in form, and a willingness was expressed to make remuneration to the Bank for all reasonable
costs and expenses.
• ^ {jne temptation of an opportunity to obtain more from its prinpai, by a novel species of litigation, through a virtual judicial
to T C U t l O n f o r d a m a g e s against the Government of the Union, seems
de Z% n t o ° s t r o n & f o r resistance; and the Bank concluded to
part from the above equitable rule, and, by some technical regulation
strict law between indivduals, to attempt to procure a large sum,
* mere nconstructive damages; and by the extraordinary mode of
toT i g ° t 0t ht]e edividends, which had been declared by the Bank itself
orii g
} U n i t e d States, and of withholding them, to abide the
unn ^ contingencies of a law-suit. It seems to have-preferred this
titin a dj d^rne ts es d c o u r s e rather than to pursue the usual mode of a pebnw 0 b ed to the justice of Congress, though Congress is well
V e Z? \ .lne sthe a customary and only tribunal for adjusting contrathan*-?*. S? a g i n s t the Government, when no suit is pending by
is em
^ t e s , and the only tribunal, which, under the constitution,
AftplP°Wered t o appropriate money to discharge any claim whatever.
W ^ P l y i n g to this department, and being, so long as a year ago
te, informed of its inability to admit, or authority to discharge



272

FEDERAL BANKING LAWS AND TtEPORTS

the damages demanded, it is remarkable that the Bank should have
continued to pay over the accruing dividends, and not till after the
last session closed, and when any deficiency in the current revenue
could not be provided for, should, without any prior application to
Congress, have resorted to this unusual proceeding, and sought to
have its claim against the United States adjudicated by the Judiciary,
when the United States are not amenable to any citizen or corporation,
high or low, before the Judiciary, for the decision of any claim, unless
they have, of their own accord, been pleased to resort to that tribunal,
by a previous action against a debtor; and in which event only is a
set-off under certain limitations, authorized to be pleaded as either
equitable or legal. But here the United States had instituted no such
action against the Bank, and had no intention or foundation to institute one: and yet the Bank, not in the case provided in the charter
where dividends might be withheld, but by an unfaithful act as an
agent, and as a public corporation, towards its principal and the community, proceeded to seize their dividends in a case entirely different
and most questionable, in equity as well as law, and refused to fulfil
the duty imposed by its charter, and by civil and moral obligations,
of paying over those dividends promptly to the Treasury. In the
adoption of this reprehensible course, an attempt is made to force the
Government either to lose their dividends entirely, or to pay a controverted claim for damages, which, so far as any of its departments or
officers have examined it, was found, and pronounced to be, groundless;
or consent to let the United States be arraigned as a debtor, and compelled to submit the claim to decision before a branch of their own
Government, to which such claims are not ordinarily submitted, and
to whose decision it could not be referred, in this instance, but by the
previous commission, on the part of the Bank, of a deliberate violation
of its obligations.
The further attempt appears to be made, in this way, to take from
Congress and the Executive the constitutional power, on their nign
official responsibilities and deep sense of duty, to make or withhold
appropriations to discharge all controverted demands against tlie
United States, and to enable the Judiciary, instead of them, indirectly
and unconstitutionally to make these appropriations, in all cases oi
citizens or corporations who possess doubtful claims, and are unscrupulous enough to commit, in order to prevent their adjudication
by Congress, a deliberate attack on the property of the United States,
or a deliberate sequestration of their acknowledged dues.
*or further and more detailed views on this extraordinary "n- •
•
a reference is made to the whole correspondence and opinions i
\vifh/VM+ flirt ^lir,^.,
:
.. i
»
, . ,
J
without the discussion of any course which the power and the vr&
dom of Congress are able to select for evincing its opinions on tn»
outrage, whether by withdrawing indulgencies from the Bank as to
the receipt of its notes for public dues, or by adopting some otiu
measure on. the ou^jcbi, which the nature oi tne transacts*, the "^gg
subject, »niuii me nature of the transaction, *i*v ngn»
.
w»v
of the United States, and the constitutional authority oi 001».^
may be thought to justify and demand. Believing that una si ^
a
seizure was not likely to be repeated by the Bank in 1835, ® of
other pretence of satisfying claims for damages, in consequei




L

A

FEDERAL BANKING LAWS AND REPORTS

273

the removal of the deposites, as set up in its second letter, this department has estimated the probable revenue the ensuing year from this
source, at the usual rate of dividends lately made on all our stock in
the Bank, remaining after the sales which have taken place for the
investment of the Xavy Pension and Hospital funds. But should
Congress, on a full examination of the subject, think otherwise, it may
be provident to supply some other equivalent for this portion of the
estimated receipts.
*
*
*
*
#
*
*
This subject of interest from the deposite banks, at some rate, and
under some circumstances, was adverted to in a report by a committee
m one House of Congress the last session, and would at this time be
more fully examined, in connexion with that report, and the subsequent intimation of the United States Bank of its claim for damages
on account of the late removal of the deposites, connected, it is apprehended, with the idea, of a profit or interest derived from them, were
it supposed that either point could, in the present condition of things,
be considered of any practical importance. But the balance of money
at present on hand, as before remarked, is merely the usual and convenient amount for current fiscal operations, and most of it is liable,
at any moment, to be withdrawn to meet existing appropriations.
. While the intimation of the Bank, resting, as it probably must, on an
impression that the bonus was paid instead of interest on the public
deposites, is not believed to be supported by the language or spirit of
the charter, which required the bonus "for the exclusive privileges and
benefits conferred bv this net on tha Rank." and which exclusive favors,

thought that a bonus should be paid to the Government; the latter
further observed, that, "independent of the bonus here proposed to be
exacted, there are undoubtedly many public advantages to be drawn
irom the establishment of a National Bank, but they are generally of
«n incidental kind, and, as in the case of deposites and distribution of
™ reyenue, may be regarded in the light of equivalents, not for the
monopoly of the charter, but for the reciprocal advantages of a fiscal
connexion with the Government."
of f 1 i r e a s o n s should ever be presented to this department, in support
jj1 the late intimation of a demand for damages for the removal of the
^ ,
^posites in a case where the bonus was claime and paid on the above
claimed
p
d h
h di
l
SPF°!T-S' and where the right to remove the deposites was expressly rehi • m t h e c h a r t e r to the officer removing them, it will then, probably,
ft \S?lSOn V> e n t e r m o r e f u l l v i n t o t h i s collateral question. Or should
^ o , u u ^ „«, „„„ ~
„ time become
? r , a n c e in. t h e possession of the State banks at any ti
milpll V
it t-n • I g e r t l l a n t h e current demands existing against the Treasury,
nor f' C o n g r e s s do not earlier think proper to act on it prospectively,
J to authorize any temporary investment of it, be then considered
U rI a i 7 a n 4 Proper for this department to examine in what cases, and
nl
conU l a t cir cumstances, on what surpluses, and at what rate, interest
bv lh e ^ l t a b l y ^ demanded, in addition to the useful duties performed
*cne selected banks in behalf of the Treasury.




274

FEDERAL BANKING LAWS AND REPORTS

On these points, however, it is hoped that this department will not
be understood as recommending that taxes should ever be imposed with
a view to permit a large surplus any more than a deficiency to occur;
but that, when the former unexpectedly and unintentionally happens,
an income should be realized from it, by interest or an investment,
until, at the end of every few years, a thorough revision of the tariff
would, in the pursuit of this policy, be made, and so graduated, as
during the next succeeding term to be likely to correct any great
irregularities, whether excesses or deficiencies, that had happend during the preceding term, and to lead to the sale and use of any interest
or investments which, in the mean time, had accumulated.
Those other questions naturally connected with the present deposits
banks, and, indeed, with our whole existing system of finance, so far
as regards the keeping and disbursing the public money, might here
be appropriately considered. Yet, without any desire to avoid, but
rather from a wish to submit, that full and frank discussion of them
which their acknowledged importance, and the exciting interest in
them, demand from the fiscal department of the Government, they
will be postponed to a separate supplemental report, which will be
confined exclusively to their consideration, and will soon be presented
to Congress.

Seventh Annual Message—Andrew Jackson
Twenty-Fourth Congress, 1st Session
DECEMBER 7, 1835.
[Source: James D. Richardson, A Compilation of the Messages and Papers of
the Presidents, VoL 2, pp. 1382-1387]
•

*

•

•

*

*

*

It is also incumbent on Congress in guarding the pecuniary interests
of the country to discontinue by such a law as was passed in 1812 tne
receipt of the bills of the Bank of the United States in payment of the
public revenue, and to provide for the designation of an agent whose
duty it shall be to take charge of the books and stock of the United
btates in that institution, and to close all connection with it after the «
W
of March, 1836, when its charter expires. In making provision in
regard to the disposition of this stock it will be essential to define
clearly and strictly the duties and powers of the officer charged witn
that branch of the public service.
It will be seen from the correspondence which the Secretary of tne
I reasury will lay before you that notwithstanding the large amount81
oi
the stock which the United States hold in that institution no info™ "
ion has yet been communicated which will enable the Government iu
anticipate when it can receive any dividends or derive any benefit trom
it.

Connected with the condition of the finances and the flourishing
state of the country in all its branches of industry, it is pleasing i"
witness the advantages which have been already derived from the re
cent laws regulating the value of the gold coinage. These advantage



FEDERAL BANKING LAWS AND REPORTS

275

will be more apparent in the course of the next year, when the branch
mints authorized to be established in North Carolina, Georgia, and
Louisiana shall have gone into operation. Aided, as it is hoped they
will be, by further reforms in the banking systems of the States and
by judicious regulations on the part of Congress in relation to the
custody of the public moneys, it may be confidently anticipated that
the use of gold and silver as a circulating medium will become general
in the ordinary transactions connected with the labor of the country.
The great desideratum in modern times is an efficient check upon the
power of banks, preventing that excessive issue of paper whence arise
those fluctuations in the standard of value which render uncertain the
rewards of labor. It was supposed by those who established the Bank
of the United States that from the credit given to it by the custody of
the public moneys and other privileges and the precautions taken to
guard against the evils which the country had suffered in the bankruptcy of many of the State institutions of that period we should derive from that institution all the security and benefits of a sound currency and every good end that was attainable under that provision of
the Constitution which authorizes Congress alone to coin money and
regulate the value thereof. But it is scarcely necessary now to say that
these anticipations have not been realized.
After the extensive embarrassment and distress recently produced
by the Bank of the United States, from which the country is now recovering, aggravated as they were by pretensions to power which dened the p
public authority, and which if acquiesced in by the people
y
p p
w
w
o l hv
u a
d
hd
th
hl
ht
G
ould have changed the whole character of f our Government,t every
candid and intelligent individual must admit that for the attainment
ot the great advantages of a sound currency we must look to a course
?t legislation radically different from that which created such an
institution.
n
c j considering the means of obtaining so important an end we must
set aside all calculations of temporary convenience, and be influenced
°y those only which are in harmony with the true character and the
Permanent interests of the Kepublic. We must recur to first prin3 e s . a n £ see what it is that has prevented the legislation of Congress
' uia the States on the subject of "currency from satisfying the public
"pectation and realizing results corresponding to those which have
^tencted the action of our system when truly consistent with the great
Finciple o f equality upon which it rests, and with that spirit of forwance and mutual concession and generous patriotism which was
llmo

and must

ever

continue t0 be

'

the vital

element

of

our

t] is Sllb ec
i
i t I am sure that I can not be mistaken in ascribing our
nil • . Sllccess to the undue countenance which has been afforded to
l
* spirit of monopoly. All the serious dangers which our system has
^encountered may be traced to the resort to implied powers and the
£ o t corporations clothed with privileges, the effect of which is to
l e int
felt»
erests of the few at the expense of the many. We have
( L ^ o n e c l a s s of these dangers exhibited in the contest waged by
font. k o f t h e United States against the Government for the last
r
i ^ years. Happily they have been obviated for the present by the
? a n t resist
ance of the people, but we should recollect that the
e whence they sprung is an ever-active one, which will not




276

FEDERAL BANKING LAWS AND REPORTS

fail to renew its efforts in the same and in other forms so long as there is
a hope of success, founded either on the inattention of the people or the
treachery of their representatives to the subtle progress of its influence.
The bank is, in fact, but one of the fruits of a system at war with the
genius of all our institutions—a system founded upon a political creed
the fundamental principle of which is a distrust of the popular will as
a safe regulator of political power, and whose great ultimate object and
inevitable result, should it prevail, is the consolidation of all power in
our system in one central government. Lavish public disbursements
and corporations with exclusive privileges would be its substitutes for
the original and as yet sound checks and balances of the Constitution—
the means by whose silent and secret operation a control would be exercised by the few over the political conduct of the many by first acquiring that control over the labor and earnings of the great body of the
people. Wherever this spirit has effected an alliance with political
power, tyranny and despotism have been the fruit. If it is ever used
for the ends of government, it has to be incessantly watched, or it
corrupts the sources of the public virtue and agitates the country with
questions unfavorable to the harmonious and steady pursuit of its
true interests.
We are now to see whether, in the present favorable condition of the
country, we can not take an effectual stand against this spirit of
monopoly, and practically prove in respect to the currency as well as
other important interests that there is no necessity for so extensive
a resort to it as that which has been heretofore practiced. The experience of another year has confirmed the utter fallacy of the idea
that the Bank of the "United States was necessary as a fiscal agent
of the Government, Without its aid as? such, indeed, in despite of all
the embarrassment it was in its power to create, the revenue has been
paid with punctuality by our citizens, the business of exchange, both
foreign and domestic, has been conducted with convenience, and the
circulating medium has been greatly improved. By the use of the
State banks, which do not derive their charters from the Genera
Government and are not controlled by its authority, it is ascertained
that the moneys of the United States can be collected and disbursed
without loss or inconvenience, and that all the wants of the community
in relation to exchange and currency are supplied as well as they nave
ever been before. If under circumstances the most unfavorable to
the steadiness of the money market it has been found that the considerations on which the Bank of the United States rested its claims to
the public favor were imaginary and groundless, it can not oe
doubted that the experience of the future will be more decisive against
them.
It has been seen that without the agency of a great moneyed
monopoly the revenue can be collected and conveniently and #satei)
applied to all the purposes of the public expenditure. It is aiw
ascertained that instead of being necessarily made to promote tm?
evils ot an unchecked paper system, the management of the revenue
can be made auxiliary to the reform which the legislatures of several
of the states have already commenced in regard to the suppression 01
small bills, and which has only to be fostered by proper regulation'
on the part of Congress to secure a practical return to the extent re
quired tor the security of the currency to the constitutional medium



FEDERAL BANKING LAWS AND REPORTS

277

Severed from the Government as political engines, and not susceptible
of dangerous extension and combination, the State banks will not be
tempted, nor will they have the power, which we have seen exercised,
to divert the public funds from the legitimate purposes of the Government. The collection and custody of the revenue, being, on the contrary, a source of credit to them, will increase the security which the
States provide for a faithful execution of their trusts by multiplying
the scrutinies to which their operations and accounts will be subjected.
Thus disposed, as well from interest as the obligations of their charters,
it can not be doubted that such conditions as Congress may see fit to
adopt respecting the deposits in these institutions, with a view to the
gradual disuse, of the small bills will be cheerfully complied with, and
that we shall soon gain in place of the Bank of the United States a
practical reform in the whole paper system of the country. If by this
policy we can ultimately witness the suppression of all bank bills
below $20, it is apparent that gold and silver will take their place
and become the principal circulating medium in the common business
or the farmers and mechanics of the country. The attainment of
such a result will form an era in the history of our country which will
be dwelt upon with delight by every true friend of its liberty and
jndependence. It will lighten the great tax which our paper system
has so long collected from the earnings of labor, and do more to revive
and perpetuate those habits of economy and simplicity which are so
congenial to the character of republicans than all the legislation which
ha
s yet been attempted.
To this subject I feel that I can not too earnestly invite the special
attention of Congress, without the exercise of whose authority the opportunity to accomplish so much public good must pass unimproved,
^eeply impressed with its vital importance, the Executive has taken all
cll
s steps within his constitutional power to guard the public revenue
ancl defeat the expectation which the Bank of the United States indulged
d g of renewing and perpetuating its monopoly on the ground of its
ssity
fil
t d
ffdi
d
thn
^ssity as a fiscal agent and as affording a sounder currency than
tV A o b t a i n e d without such an institution. In the performance of
ff] A}i y m u c n responsibility was incurred which would have been
Madly avoided if the stake which the public had in the question could
we been otherwise preserved. Although clothed with the legal auj ^ y a n dremo
supported by precedent, I was aware that there was in the
to V Utive ™le rof the deposits a liability to excite that sensitiveness
.
mPTw- u l Pe0;W u t which dito is tthe f e e l i n a l d iand ethe duty of freecharacteristic r e c t d b
and •' °f *?v g b J r e l i e n h i s
S ?°' .
y patriotism
J w T ^ n c b e,e nto avindicate the econduct which in the end would ape e
c lled for h
tl
amvr £ •l o n s
y } **&t interests of my country. The
&
?
natural to this feeling that there may have been a desire,
W O ^nstn
A
. ,..
, ., >
— to extend the Executive
inflii °~~e ^r t * ™entality bofe n *omeasure, . extend the Executive
that
free fr ° m' ° m bh ^ *fc m a y h a v e e P r m P t e d b y motives not sufficiently
instit ? 1a l^ i ° nu)b were not overlooked. Under the operation of our
resDo i? ^ ^ e P ^ c servant who is called on to take a step of high
preh nsi . 0118 should nfeel in the freedom which gives rise to such apty
whicWu a r^^ss ehis de sttn e security. T^Tien unfounded the attention
hdul fv^ o u t b ea n o w e r tdiscussions they excite deprive those who
o do narm
airrtv • °^
P
; when just they but hasten the
with which the great body of our citizens never fail to repel



278

FEDERAL BANKING LAWS AND REPORTS

an attempt to procure their sanction to any exercise of power inconsistent with the jealous maintenance of their rights. Under such convictions, and entertaining no doubt that my constitutional obligations
demanded the steps which were taken in reference to the removal of
the deposits, it was impossible for me to be deterred from the path of
duty by a fear that my motives could be misjudged or that political
prejudices could defeat the just consideration of the merits of my
conduct. The result has shewn how safe is this reliance upon the
patriotic temper and enlightened discernment of the people. That
measure has now been before them and has stood the test of all the
severe analysis which is general importance, the interests it affected,
and the apprehensions it excited were calculated to produce, and it
now remains for Congress to consider what legislation has become necessary in consequence.
I need only add to what I have on former occasions said on this
subject generally that in the regulations which Congress may prescribe
respecting the custody of the public moneys it is desirable that as little
discretion as may be deemed consistent with their safe-keeping should
be given to the executive agents. No one can be more deeply impressed
than I am with the soundness of the doctrine which restrains and limits,
by specific provisions, executive discretion, as far as it can be clone consistently with the preservation of its constitutional character. In
respect to the control over the public money this doctrine is peculiarly
applicable, and is in harmony with the great principle which I felt I
was sustaining in the controversy with the Bank of the United States,
which has resulted in severing to some extent a dangerous connection
between a moneyed and political power. The duty of the Legislature
to define, by clear and positive enactments, the nature and extent of the
action which it belongs to the Executive to superintend springs out of
a policy analogous to that which enjoins upon all the branches of the
federal Government an abstinence from the exercise of powers not
clearly granted.
In such a Government, possessing only limited and specific powers,
the spirit of its general administration can not be wise or just when it
opposes the reference of all doubtful points to the great source °r
authority, the States and the people, whose number and diversified
relations securing them against the influences and excitements which
may mislead their agents, make them the safest depository of power.
In its application to the Executive, with reference to the legislative
branch of the Government, the same rule of action should make the
.President ever anxious to avoid the exercise of any discretionary
authority which can be regulated by Congress. The biases which may
operate upon him will not be so likely to extend to the representatives
of the people in that body.




FEDERAL BANKING LAWS AND REPORTS

279

Annual Report, Secretary of Treasury (Levi Woodbury)
Twenty-Fourth Congress, 1st Session
DECEMBER 8, 1835.
*

[Source: House Doc. 3, 24th Congress, 1st Session, pp. 20-25]
*
*
*
*
*

*

VI. DEPOSITE BANKS AND THE CURRENCY

This Department takes pleasure in stating that the public money
ues to be collected and deposited, under the present system of
selected banks, with great ease and economy in all cases, and with
greater in some than at any former period. The transfers of it to
every quarter of the country where it is needed for disbursement, have
never been effected with more promptitude, and have been made ennreiy tree of expense to the Treasury. The payments to creditors,
c lc rs ftn(
2 ? » * Pensioners, have been punctual and convenient; and the
jniole fiscal operations through the State banks have, as yet, proved
mgnly satisfactory. Incidental to this, the facilities that have been
^IM
*° * b e c o m m e r c i a l community in domestic exchanges, were
probably never greater, or at so moderate rates. In the course of this
/ear, additional depositories have been selected in four States, where
n° n £ w ones before existed, and all the branches of the United States
ank, tor some months, have been discontinued for ordinary fiscal
Purposes. They are, however, still used, as claimed by the Bank,
of+?r ^° t S °^ Congress, for the payment of the outstanding portions
01
tne funded debt, and of invalid and other pensions, prior to 1832,
wept where the Department has been notified that the branches were
u
.drawn, a s i n ^ e w Hampshire, Connecticut, Kentucky, Ohio, Missouri, Western Pennsylvania, Maryland, South Carolina, and the
nterior of New York. The whole number of selected banks, without
X - * b r a n c l i e s > is now thirty-four, being, notwithstanding the
f f0Ur n e w o n e s l e s s b s i x t h a n l a s t y e a n
>
y
'
, TV A ° Ams diminution has been effected by the discontinuance of various
nn
a to the Treasury, unimportant institutions,, employed before
y,
iport
py
in connection with the United States Bank, and by adding no
w ?ues, except where the public interests seemed to render it imoe e t
ns
h
h
bli i t
dt
d
im
five or expedient. A great, though not the chief, cause of some
l form
ljp7 7
erly happened in the deposites in State banks, is behun 1 *? - h a V e b e e n t h e multiplication of them to something over one
reo
I l n n u m b e r - T 1 ^ system is now arranged so as probably to
cerni e e r e a f t e ^ f e ^ changes, excepting two or three instances, conicl1 a
antin- g
correspondence is now pending, unless, as is not
such onerou
of tli
tli
'' s u c h o n e r o u s conditions should be exa
s conditions should be exacted by Congress,
of
y
g ,
, yie p r e s e n t sQn-Poa nd efficient depositories, as to derange theesystem,
present a f e n^A ^flR^^^^- ^^^^cifrt^ioo nc in ^.eran^e t h system,
indii? s o m
00
Department to ine of them to withdraw, and compel the T
contln




280

FEDERAL BANKING LAWS AND REPORTS

trust the public funds to other agents, less cautious, skilful, and trustworthy. Great care has been exercised in preparing, from the last
returns made to this Department, and from data since obtained by
an extensive correspondence, tabular statements, which show, in the
most essential particulars, as near the first of January, 1835, and as
fully as could be obtained, the names and condition of each of the State
banks in the Union, of each of the selected banks, of the United States
Bank, and of all combined. They exhibit, further, the capital and
situation of all the banks in each of the large cities in the United
States, as well as of all in each State, arranged together for convenience of reference, and the changes which have since happened in the
condition of the deposite and United States banks. So far as regards
the capital, discounts, &c. of all the State banks, only the general
exhibit of the aggregate results in each State, is now communicated,
but, in a few days, all the voluminous details on those points will be
submitted to the House of Representatives, in compliance with its
resolution of the 10th of July 1832.
It will be seen that the situation of the selected banks, as a whole,
bears an enviable comparison with the rest.
In all cases deemed proper, they have given collateral security, and
are all believed to be entirely safe, to the extent they have been confided in. Their discounts have been, in general, somewhat increased,
but though tempted by the enterprising spirit of the times, not usually
increased in a degree disproportioned to all their immediate available
means. They have also, in some cases, been able to aid, and have liberally aided, other banking institutions in their neighborhood, by as
large and long balances and other indulgences as would generally
appear to have been sanctioned by correct principles. The names oi
each, with the amount of money in each belonging to the Treasury,
and subject to draft, not only at the commencement of the presem
year, but at the very last returns received, can be seen in three of tne
columns of the statement. The distribution of these sums is general!}
that which has been s^iven to them by circumstances connected wit"
their collection and disbursement. No occasion has arisen, in whicn
the Department felt justified in making transfers of the public money,
except from points where it had accumulated, in the natural course
of collection, much beyond the present and early anticipated want*
of the Government in that neighborhood, or in sums not proportioned
to the responsibility of the public depositories there, and to pom£
where it either would be better secured, or probably would soon t*
needed for disbursement, or could, from the course of trade and exchange, be more readily applied to any new objects which Congrfc*
would be likely soon to sanction. These transfers, when render^
necessary, have been performed in such directions, and so gradual!),
that it is believed they have tended to obviate rather than create am
pressure in the money market, and to aid materially the course o
p
oney market, and to aid materially the
business in exchan
d the h
il
tions
business in exchanges and th other commercial operations oi «
country.
The Department is aware, that, in the present overflowing con
tion of the Treasury, the regulation of these operations, ^ l t l 1 /
selection and superintendence of the deposite banks, is a task oi




FEDERAL BANKING LAWS AND KEPORTS

281

small difficulty and delicacy; and when governed by a strict and uniform adherence to sound principles, as has been attempted, must necessarily lead to mariy disappointed applications. But in the absence
of that specific legislation on the subject, which has been, and still is,
earnestly requested, the Department has not hesitated (it is hoped
faithfully) to discharge, and frankly to explain, the duties, and the
high and painful responsibility wThich so much discretionary power
has imposed.
For various reasons of public importance, it was deemed desirable,
and measures have been adopted, and recommendations urged, that
the specie in the vaults of a number of the selected Banks, should be
still more increased in comparison with their issues and deposites,
and that a still larger portion of the whole currency of the country,
especially for small purposes, should be metallic. In improvement
of the currency during the past year, many of the selected banks
have not only continued to obtain and pay, when wanted, to the pubhe creditors, American gold, but have entered into salutary arrangements for the redemption, in our large cities, of most of their bills,
which may be received in payment of the public dues. It is hoped,
that in the progress of time, these beneficial arrangements may be
further extended to most, if not all, of the bills in circulation, of
the large institutions, and the introduction of hard money, for the
ordinary uses of life, be facilitated, by all the banks ceasing to circuJate bills of small denominations. It is gratifying to find, that since
the adjournment of Congress, in addition to the States of Pennsylvania, Maryland, Virginia, Georgia, Tennessee, Louisiana, North
Urolina, Indiana, and Kentucky, which, before that time, are be"eved not to have allowed the circulation of bills under five dollars,
others, viz: Maine, Connecticut, New York, New Jersey, and Alabama, have united in similar legislative measures except Connecticut,
na
s, as yet, extended the prohibition to only one and two dollar bills.
In Mississippi and Illinois, it is understood that bills under five dol««s have not recently been issued, and Missouri has no bank issuing
?m °\ any denomination. So that more than two-thirds of the States
iye already usages or laws in existence, on this subject, of a highly
salutary tendency. The great benefits which have already resulted to

siffi• • a n n u a l report from this Department, would seem to be a
?~ncient inducement for similar legislation on this important subject
" m «e States. In some of them, where no laws have yet been passed
1 suppress the circulation of small notes, their deposite banks have
0
"'untanly entered into arrangements not to issue certain descriptions
witl i ' a n d m o s t o f the deposite banks have, in a correspondence
«n the Department, evinced a willingness to cooperate m the supFressum of small notes, whenever the regulation can be made general.
ne Treasury, so far as seemed practicable and judicious with its
onivTy P°wers> has endeavored to promote so desirable an end, not
strL- lnst ituting the inquiries in that correspondence, but by mir
>Jctions to its collecting officers not to receive in payment any bills




282

FEDERAL BANKING LAWS AND REPORTS

under five dollars after the 30th of September, 1835. It proposes to
go further on this point the ensuing year, so as to prevent the receipt
for public dues of all bank notes under ten dollars, unless Congress in
the mean time shall adopt some new provisions on this subject, similar, it is hoped, to what previously have been, and still are, urged by
this Department, not only as to the deposite banks, and the kind of
bills received for the revenue, but as to the suppression entirely in the
District of Columbia of the circulation of any bank notes under ten
dollars in amount. The means for a sound currency in this country
are at present ample. Within the last two years, or from October 1st,
1833, to Nov. 1st, 1835, in addition to the former stock of specie, there
has been imported into the United States, beyond the exports from it,
with a due allowance for what does not appear on the custom-house
books, more than twenty-seven millions; and the produce of our own
mines within that period, is estimated to have been over three millions. Hence the whole amount of specie now in the country, probably exceeds the sum of sixty-four millions, and the means of the
community to obtain more from abroad, to meet any contemplated
changes in the character of our currency, were never greater* The
actual amount of specie returned, and estimated as belonging to all
the banks in the United States, about the 1st of January, 1835, was
near forty-four millions. As a portion of that may have been bullion,
a sum quite equalling, if not exceeding the remainder of twenty millions, probably consists of the amount of specie in active circulation,
which has been somewhat increased throughout the country during
the last two years, so that, if the remaining small bills in circulation
under five dollars in the whole Union, which are chiefly in seven Mates,
and which probably do not exceed six or seven millions, were witndrawn, it would not require, to supply their places, one-third of tne
addition which has been made in the last two years to the national
stock of the precious metals. The specie on hand, in banks, will I
this way, as it ought, soon bear a larger proportion to their notes i
circulation, and the security and real usefulness of all banking i stitutions to the community be thus greatly augmented. The spec
in active circulation, thus increased by excluding small notes, will co *
stitute, while retained in the country, a great and safe reliance fort'
banks to depend on, (beside what belongs to them in their vamw
whenever an unfavorable course of exchange abroad, or a painc *
home, should cause an unusual demand for specie to be shipped abro< »
to meet a balance of trade against us, or to be used in circulation
home, by those whose confidence, from real or imaginary ca_useS' tj/fi
for a time become diminished in the security of banks. w &&*
further suppression of small notes, extending to all under ten aoi *
in amount, shall be deemed advisable by Congress and the j? t a t r' <
j
doubt is entertained that sufficient specie can and will be readily io
to supply their place, in connection with what now exists in thec ^
try. The proportion of specie to bank notes in circulation wi
then be so great as it is in all the most commercial nations m w v
How much further it may be deemed feasible to go, with a
pect of advantage to the community and our currency
settled at that time than at the present.
*
*
*
*
*
*




FEDERAL BANKING LAWS AND REPORTS

283

Act of June 23, 1836
[5 Statutes at Large 52, Twenty-Fourth Congress, Chapter 115,
1st Session, Approved June 23, 1836, by Andrew Jackson]
AN ACT TO KEGULATE THE DEI'OSITES OF THE PUBLIC MONEY.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That it shall be the duty of the Secretary of theSecretary of
the Treasury
Treasury to select as soon as may be practicable and to select hanks.
employ as the depositories of the money of the United
States, such of the banks incorporated by the several
States, by Congress for the District of Columbia, or by
the Legislative Councils of the respective Territories for
those Territories, as may be located at, adjacent or convenient to the points or places at which the revenues may
be collected, or disbursed, and in those States, Territories
or Districts in which there are no banks, or in which no
bank can be employed as a deposite bank, and within
which the public collections or disbursements require a
depository, the said Secretary may make arrangements
with a bank or banks, in some other State, Territory or
^strict, to establish an agency, or agencies, in the States,
lemtories or Districts so destitute of banks, as banks of
deposite; and to receive through such agencies such deposites of the public money, as may be directed to be made
at
"| e points designated, and to make such disbursements
as the public service may require at those points; the
duties and liabilities of every bank thus establishing any
such agency to be the same in respect to its agency, as are
»ie duties and liabilities of deposite banks genei-ally uny the provisions of this act: Provided, That at least Proviso.
°ne such bank shall be selected in each State and Terriw'iir a n y c a n b e f o u n d i n e a c h S t a t e a n d T e r r i t o r y
mmg to be employed as depositories of the public
°'l?yi uP<>n the terms and conditions hereinafter preSP f a n d continue to conform thereto; and that the
an^l
' ° f t h e T r e a s u i T shall n o t suffer to remain in
tliI p 0 S l t e bank, an amount of the public moneys more
jun equal to three-fourths of the amount of its capital
ner a c t l l a 'ly paid in, for a longer time than may be
bv !?safy \° en ^ble him to make the transfers required
selerf i ? x secfion o f this act; and that the banks so
1
be in n
nnkr S
'
is opinion, safe depositories of the
ney a n d s l l a 1 1 b e w i l l i n
and n n?° '
K t 0 undertake to do
'onnt I ^ l e s e v e r a l duties and services, and to consev
Sp o
eral conditions prescribed by this act.
h e if m ther
°rVh
- f '
enacted. That if, at any point Where there
is no bank
there i il^^'bich the public revenue may be collected, which the
Secretary
bank
ocil
tho SP
"?
^ ted, which, in the opinion of approves, or
where banks
1>y o f t h e T r e a s u i
is i n
^liero nn t fil e
T?
a safe condition, or refuse, ii selection
be
reflls | \b l banks at such point or place shall fail or mariemaypome
at
of tj e >l ? employed us depositories of the public money place adjacent.
United States, or to comply with the conditions
02

1SOO




284

Proviso.

Banks to
furnish certain
statements;
copy of charter, &c.

Terms to be
agreed to by
the banks.

Proviso.

FEDERAL BANKING LAWS AND REPORTS

prescribed by this act, or where such banks shall not have
sufficient capital to become depositories of the whole
amount of moneys collected at such point or place, he
shall and may order and direct the public money collected at such point or place to be deposited in a bank or
banks in the same State, or in some one or more of the
adjacent States upon the terms and conditions hereinafter prescribed: Provided, That nothing in this act contained shall be so construed as to prevent Congress at
any time from passing any law for the removal of the
public money from any of the said banks, or from changing the terms of deposite, or to prevent the said banks
at any time from declining any longer to be the depositories of the public money upon paying over, or tendering to pay, the whole amount of public moneys on hand,
according to the terms of its agreement with the said
Secretary.
SEC. 3. And be it further enacted, That no bank shall
hereafter be selected and employed by the Secretary of
the Treasury as a depository of the public money, until
such bank shall have first furnished to the said Secretary
a statement of its condition and business, a list of its
directors, the current price of its stock; and also a copy
of its charter; and likewise, such other information as
may be necessary to enable him to judge of the safety of
its condition.
SEC. 4. And he it further enacted, That the said banks,
before they shall be employed as the depositories of the
public money, shall agree to receive the same, upon the
following terms and conditions, to wit:
,
First. Each bank shall furnish to the Secretary of the
Treasury, from time to time, as often as he may require,
not exceeding once a week, statements setting forth its
condition and business, as prescribed in the foregoing section of this act, except that such statements need not, unless requested by said Secretary, contain a list of the directors, or a copy of the charter. And the said ban£s
shall furnish to the Secretary of the Treasury, and to w
Treasurer of the United States, a weekly statement of tne
condition of his account upon their books.
^\rr
Secretary of the Treasury shall have the right, b/ himself, or an agent appointed for that purpose, to inspe
such general accounts in the books of the bank, as sna
relate to the said statements: Provided, That this; snai
not be construed to imply a right of inspecting tne a
count of any private individual or individuals witn
bank.
to pay all checks, warrants, or drafts, drawn on su<
posites, in specie if required by the holder thereof.
Thirdly. To give, whenever required by the Secrjg
of the Treasury, the necessary facilities for transfers




FEDERAL BANKING LAWS AND REPORTS

285

the public funds from place to place, within the United
States, and the Territories thereof, and for distributing
the same in payment of the public creditors, without
charging commissions or claiming allowance on account
of difference of exchange.
Fourthly. To render to the Government of the United
States all the duties and services heretofore required by
law to be performed by the late Bank of the United
States and its several branches or offices.
issuing1
SEC. 5. And be it further enacted, That no bank shall Banksless than
notes
five dollars
be selected or continued as a place of deposite of the pub- not to be
lic money which shall not redeem its notes and bills on selected.
demand in specie; nor shall any bank be selected or continued as aforesaid, which shall after the fourth of July,
in the year one thousand eight hundred and thirty-six,
issue or pay out any note or bill of a less denomination
thanfivedollars; nor shall the notes or bills of any bank
he received in payment of any debt due to the United
states which shall, after the said fourth day of July, in
the year one thousand eight hundred and thirty-six, issue any note or bill of a less denominaiton than five dollars.
Secretary
SEC. 6. And be it further enacted, That the Secretary may require
V * treasury shall be, and he is hereby authorized, security.
ai
*a it shall be his duty, whenever in his judgment the
same shall be necessary or proper, to require of any bank
so selected and employed as aforesaid, collateral or additional securities for the safe keeping of the public
moneys deposited therein, and the faithful performance
°* the duties required by this act.
Secretary
^EC. 7. And be it further enacted, That it shall be law- authorized to
f0r
iu
the Secretary of the Treasury, to enter into con- enter into contracts.
cfC;S m t . he n a m e and for and on behalf of the United
states with the said banks so selected or employed,
| hereby the said banks shall stipulate to do and perform
ie several duties and services prescribed by this act.
di ni 8 ' And be i* further enacted, That no bank which No bank to be
selected
"mil be selected or employed as the place of deposite of discontinued
but for certain
*je public money, shall be discontinued as such deposi- causes.
fn Ji°r t l i e P u b l i c money withdrawn therefrom, except
or n v causes hereinafter mentioned, that is to say: if
the
a
time, any one of said banks shall fail or refuse
t
perform any of said duties as prescribed by this act,
anv ^Puhted to be performed by its contract; or, if
nof ° m s a ipde c i.e i!fiS s h a I 1 a t a n y t i m e r e f u s e t o P a y i t s o w n
• S b an
vanlf SUCh a n a m
demanded; or shall fail to keep in its
flipa eQ r e t a i
°unt of specie as shall be required by
ion c
7 of the Treasury, and shall be, in his opin!
> necessary to render the said bank a safe depository
y,
g
g
f H? e iP ublic moneys, having due regard to the nature
O
snovT b m e s
snvTc a sues s transacted by the bank; in any and every
Xr 1 s u r v ^ shall be the duty of the Secretary of the
a
to discontinue any such bank as a depository,



286

Banks now
employed to
be continued
until, &c.

Secretary to
lay a statement before
Congress.

Bank to pay
intWRt under
certain circumstances.

FEDERAL BANKING LAWS AND REPORTS

and withdraw from it the public moneys which it may
hold on deposite at the time of such discontinuance. And
in case of the discontinuance of any of said banks, it
shall be the duty of the Secretary of the Treasury to
report to Congress immediately if in session, and if not
in session, then at the commencement of its next session,
the facts and reasons which have induced such discontinuance. And in case of the discontinuance of any of
said banks as a place of deposite of the public money
for any of the causes herein before provided, it shall be
lawful for the Secretary of the Treasury to deposite
the money thus withdrawn in some other banks of deposite already selected, or to select some other bank as
a place of deposite, upon the terms and conditions prescribed by this act. And in default of any bank to receive such deposite, the money thus withdrawn shall be
kept by the Treasurer of the United States, according
to the laws now in force; and shall be subject to be disbursed according to law.
SEC. 9. And be it further enacted, That until the Secretary of the Treasury shall have selected and employed
the said banks as places of deposite of the public money,
in conformity to the provisions of this act, the several
State and District banks at present employed as depositories of the money of the United States, shall continue
to be the depositories aforesaid upon the terms and conditions upon which they have been so employed.
SEC. 10. And be it further enacted, That it shall be the
duty of the Secretary of the Treasury to lay before
Congress, at the commencement of each annual session,
a statement of the number and names of the banks employed as depositories of the public money, and of their
condition, and the amount of public money deposited in
each, as shown by their returns at the Treasury; and «
the selection of any bank as a depository of the public
money be made by the Secretary of the Treasury, wime
Congress is in session, he shall immediately report the
name and condition of such bank to Congress; ana n
any such selection shall be made during the recess or
Congress, he shall report the sair<> to Congress during
the first week of its next session
.,
SEC. 11. And be it further enacted, That whenever tne
amount of public deposites to the credit of the Treasurer
of the United States, in any bank shall, for a ^oie
quarter of a year, exceed the one-fourth part of tne
amount of the capital stock of such bank actually p*ia
in, the banks shall allow and pay to the United States,
for the use of the excess of the deposites over the onefourth part of its capital, an interest at the rate oi
two'per centum per annum, to be calculated for eau
quarter, upon the average excesses of the quarter; ana»
shall be the duty of the Secretary of the Treasury, at tn«
close of each quarter, to cause' the amounts on deposit




FEDERAL BANKING LAWS AND REPORTS

in each deposite bank for the quarter, to be examined and
ascertained, and to see that all sums of interest accruing under the provisions of this section, are, by the banks
respectively passed to the credit of the Treasurer of the
United States in his accounts with the respective banks.
SEC. 12. And be it further enacted, That all warrants
or orders for the purpose of transferring the public funds
from the banks in which they now are, or may hereafter
be deposited, to other banks, whether of deposite or not,
for the purpose of accommodating the banks to which the
transfer may be made, or to sustain their credit, or for any
other purpose whatever, except it be to facilitate the public disbursements, and to comply with the provisions of
this act, be, and the same are hereby, prohibited and declared to be illegal; and in cases where transfers shall be
required for purposes of equalization under the provisions
of this act, in consequence of too great an accumulation
of deposites in any bank, such transfers shall be made to
the nearest deposite banks which are considered safe and
secure, and which can receive the moneys to be transferred
under the limitations in this act imposed: Provided/That
it may be lawful for the President of the United States
to direct transfers of public money to be made from time
to time to the mint and branch mints of the United States,
f
°r supplying metal for coining.
SEC. 13. And be it further enacted, That the money
yuch shall be in the Treasury of the United States, on
tiie first day of January, eighteen hundred and thirtyseven, reserving the sum of five millions of dollars, shall
be
deposited with such of the several States, in proportion
to their respective representation in the Senate and House
of Representatives of the United States, as shall, by law,
authorize their Treasurers, or other competent authorities
f
o receive the same on the terms hereinafter specified;
and the Secretary of the Treasury shall deliver the same
to such Treasurers, or other competent authorities, on receiving certificates of deposite therefor, signed by such
competent authorities, in such form as may be prescribed
^v the eSecretaryd aforesaid: which certificates shall exnfl? ^ u s u a l a n l e £ a l obligations, and pledge the faith
01
jne State, for the safe keeping and repayment thereof,
:mtl ^ H pledge the faith of the States receiving the same,
? Pay the said moneys, and every part thereof, from
lm
' e to time, whenever the same shall be required, by the
secretary of the Treasury, for the purpose of defraying
W wants of the public treasury, beyond the amount of
\hv milli<>ns aforesaid: Provided, That if any State
on [nesetromrec eive rits proportion of the surplus aforesaid,
S A V o t l ise rb e f o e earned, the same shall be deposited
nn •* •
States, agreeing to accept the same on defhl %\n t h e P^Portion aforesaid: And provided furlGr
i 1 hat when said money, or any part thereof, shall be
ntftH u y t h e g a i d g e c r e t a r V j t 0 m e e t appropriations by



287

Transfers
under certain
cases declared
Illegal.

The surplus
in the Treasury above
5,000,000
dollars to be
deposited with
the several
States.

288

Proportions in
which the deposits shall
be made.

Secretary of
the Treasury
to appoint
three additional clerks.

FEDERAL BANKING LAWS AND REPORTS

law, the same shall be called for, in rateable proportions,
within one year, as nearly as conveniently may oe, from
the different States, with which the same is deposited, and
shall not be called for, in sums exceeding ten thousand
dollars, from any one State, in any one month, without
previous notice of thirty days, for every additional sum
of twenty thousand dollars, which may at any time be
required.
SEC. 14. And be it further enacted, That the said deposites shall be made with the said States in the following proportions, and at the following times, to wit: one
quarter part on the first day of January, eighteen hundred and thirty-seven, or as soon thereafter as may be;
one quarter part on the first day of April, one quarter
part on the first day of July, and one quarter part on the
first day of October, all in the same year.
SEC. 15. And be it further enacted, That to enable the
Secretary of the Treasury to carry into effect the provisions of this act, he be authorized to appoint three
additional clerks for his Department, the one at a salary
of one thousand six hundred dollars per annum, and the
remaining two at a salary of one thousand dollars each
per annum, and to pay the said clerks, quarter-yearly, out
of any money in the Treasury not otherwise appropriated.
APPROVED, June,23,1836.




Annual Report, Secretary of Treasury (Salmon P. Chase)
[Thirty-Seventh Congress, 2d Session, December 9, 1861, Pages 11-14]
*
*
#
*
#
#
$

To enable the government to obtain the necessary means for prosecuting the Avar to a successful issue, without unnecessary cost, is a
problem which must engage the most careful attention of the legislature.
The Secretary has given to this problem the best consideration in
ms power, and now begs leave to submit to Congress the result of
Ins reflections.
The circulation of the banks of the United States, on the 1st day
of January, 1861, was computed to be $202,000,767. Of this circulation $150,000,000, in round numbers, was in States now loyal, including West Virginia, and $50,000,000 in the rebellious States. The
whole of this circulation constitutes a loan without interest from the
people to the banks, costing them nothing except the expense of issue
and redemption and the interest on the specie kept on hand for the
latter purpose; and it deserves consideration whether sound policy
does not require that the advantages of this loan be transferred, in
part at least, from the banks, representing only the interests of the
stockholders, to the government, representing the aggregate interests
of the whole people.
It has been well questioned by the most eminent statesmen whether

constitutional prohibition of the emission of bills of credit by the
states, and of the making by them of anything except gold and silver
com a legal tender in payment of debts.
However this may be, it is too clear to be reasonably disputed that
tongress, under its constitutional powers to lay taxes, to regulate
commerce, and to regulate the value of coin, possesses ample authority to control the credit circulation which enters so largely into the
transactions of commerce and affects in so many ways the value of
coin.
In the judgment of the Secretary the time has arrived when Congress should exercise this authority. The value of the existing bank
note circulation depends on the laws of thirty-four States and the
character of some sixteen hundred private corporations. It is usuallv
h
l
^ p ,
ommonly, is in the inve
y
founded institutions, of large and solid capital, have, in general, comparatively little circulation; while weak corporations almost invari™>lj seek to sustain themselves by obtaining from the people the largest Possible credit in this form. Under such a system, or rather lack
01
system, great fluctuations, and heavy losses in discounts and ex289



290

FEDERAL BANKING LAWS AND REPORTS

changes, are inevitable; and not unfrequently, through failures of the
issuing institutions, considerable portions of the circulation become
suddenly worthless in the hands of the people. The recent experience
of several States in the valley of the Mississippi painfully illustrates
the justice of these observations; and enforces by the most cogent practical arguments the duty of protecting commerce and industry against
the recurrence of such disorders.
The Secretary thinks it possible to combine with this protection a
provision for circulation, safe to the community and convenient for the
Government.
Two plans for effecting this object are suggested. The first contemplates the gradual withdrawal from circulation of the notes of
private corporations and for the issue, in their stead, of United States
notes, payable in coin on demand, in amounts sufficient for the useful
ends of a representative currency. The second contemplates the preparation and delivery, to institutions and associations, of notes prepared for circulation under national direction, and to be secured as to
prompt convertibility into coin by the pledge of United States bonds
and other needful regulations.
The first of these plans was partially adopted at the last session of
Congress in the provision authorizing the Secretary to issue United
States notes, payable in coin, to an amount not exceeding fifty millions of dollars. That provision may be so extended as to reach the
average circulation of the country, while a moderate tax, gradually
augmented, on bank notes, will relieve the national from the competition of local circulation. It has been already suggested that the substitution of a national for a state currency, upon this plan, would be
equivalent to a loan to the government without interest, except on the
fund to be kept in coin, and without expense, except the cost of preparation, issue, and redemption; while the people would gain the additional advantage of a uniform currency, and relief from a considerable burden in the form of interest on debt. These advantages are,
doubtless, considerable; and if a scheme can be devised by which sucn
a circulation will be \ertainly and strictly confined to the real needs
of the people, and kept constantly equivalent to specie by prompt ana
certain redemption in coin, it will hardly fail of legislative sanction.
The plan, however, is not without serious inconveniences and hazards. The temptation, especially great in times of pressure and danger, to issue notes without adequate provision for redemption; tiie
ever-present liability to be called on for redemption beyond means,
however carefully provided and managed; the hazard of panics, precipitating demands for coin, concentrated on a few points and a singw
fund; the risk of a depreciated, depreciating, and finally worthless
paper money; the immeasurable evils of dishonored public faith ana
national bankruptcy; all these are possible consequences of the adoption of a system of government circulation. It may be said, and perhaps truly, that they are less deplorable than those of an irredeemable
bank circulation. Without entering into that comparison, the Secretary contents himself with observing that, in his judgment, these possible disasters so far outweigh the probable benefits of the plan that
he feels himself constrained to forbear recommending its adoption.




FEDERAL BANKING LAWS AND REPORTS

291

The second plan suggested remains for examination. Its principal
features are, (1st) a circulation of notes bearing a common impression
and authenticated by a common authority; (2d) the redemption of
these notes by the associations and institutions to which they may be
delivered for issue; and (3d) the security of that redemption by the
pledge of United States stocks, and an adequate provision of specie.
In this plan the people, in their ordinary business, would find the
advantages of uniformity in currency; of uniformity in security; of
effectual safeguard, if effectual safeguard is possible, against depreciation; and of protection from losses in discounts and exchanges;
while in the operations of the government the people would find the
further advantage of a large demand for government securities, of
increased facilities for obtaining the loans required by the war, and
of some alleviation of the burdens on industry through a diminution
m the rate of interest, or a participation in the profit of circulation,
without risking the perils of a great money monopoly.
A further and important advantage to the people may be reasonably expected in the increased security of the Union, springing from
the common interest in its preservation, created by the distribution of
its stocks to associations throughout the country, as the basis of their
circulation.
The Secretary entertains the opinion that if a credit circulation in
?ny form be desirable, it is most desirable in this. The notes thus
'ssued and secured would, in hjs judgment, form the safest currency
Wncli this country x has tever enjoyed; while their receivability for all
nh[ ern ? lent d u e s ' e c e P customs, would make them, wherever pay? le» of e(lllal value, as a currency, in every part of the Union. The
arge amount of specie now in the United States, reaching a total of
.not jess than two hundred and seventyfive m
dred and seventy-five millions of dollars, will
,
asily support p a y m t of d t i i coin, while these payments and
hile these payments and
support payments f duties in i
? 7 d e m a n d s will aid in retaining this specie in the country as a
j basis both of circulation and loans.
. e whole circulation of the country, except a limited amount of
811 C i n ?? w o u lld
a f t e r tlie
u d> a f t e r t l i e
°
imn
lapse of two or three years, bear the
yea,
of the nation w h t h
i
in or notes; while the amount
upresS of the nation whether in coin or notes; while the amount
e
n i e r ' always easily ascertainable, and, of course, always
l*£ ? known, would not be likely to be increased beyond the real
known, w
*ants of business.
busin a n
den e ? p r e s s e s
opinion in favor of this plan with the greater confjenr T ^ a u s e J t l i a s t n e advantage of recommendation from experils llot a n
onp
untried theory. I n the State of New York and in
Ore of t h e o t h e r S t a t e s
Hal i? T
i t h a s b e e n subjected, in its most essentlie t e s t of
usefiil T4°
experiment, and has been found practicable and
U1
* *he probabilities of success will not be diminished but incr
itS a d o t J o n
eountr
P
under national sanction and for the whole

m
coiiQiSy r en aw hsc h add that the plan is recommended by one other
^ to
much ' fi e n c e Xt >v o i d the judgment of the Secretary, is entitled to
' i
in
U
and s, n
" r i g e *n t l i e s almost, if not altogether, the evils of a great
i
exists . • m
currency by offering inducements to solvent
aut llo § institutions to withdraw tlie circulation issued under State
™y, and substitute that provided by the authority of the Union.




292

FEDERAL BANKING LAWS AND KEPORTS

Thus, through the voluntary action of the existing institutions, aided
by wise legislation, the great transition from a currency heterogeneous,
unequal, and unsafe,, to one uniform,, equal, and safe, may be speedily
q ,
q
d l t i t i b l y c c ml p h d
i e
and almost imperceptibly accomplished.
If the Secretary has omittd th di
y
omitted the discussion of the question of the
tittil
f Congress to put this plan into operation, it is
constitutional power of C
because no argument is necessary to establish the proposition that the
power to regulate commerce and the value of coin includes the power
to regulate the currency of the country, or the collateral proposition
that the power to effect the end includes the power to adopt the necessary and expedient means.
The Secretary entertains the hope that the plan now submitted, if
adopted with the limitations and safeguards which the experience
and wisdom of Senators and Representatives will, doubtless, suggest,
may impart such value and stability to government securities that it
will not be difficult to obtain the additional loans required for the
service of the current and the succeeding year at fair and reasonable
rates; especially if the public credit be supported by sufficient and certain provision for the payment of interest and ultimate redemption of
the principal.

Annual Report, Secretary of Treasury (Salmon P. Chase)
[Thirty-Seventh Congress, 3d Session, December 4, 1862, Pages 12- ^
*
*
*

*
*
*
*
*
*#
The Secretary does not concur in the opinion entertained
whose ability and experience command deserved respect,
^
aggregate currency of the country, composed of United fcta ^
e
and notes of corporations, is at this moment greatly in
^r
legitimate demands for its employment. Much less does n .^ j ^
in another opinion, not unfrequently expressed, but expresse
judgment without due consideration that any actual excess

y

wor cfe

is true that gold commands a premium in notes; in otne
,g
to purchase a given amount of gold a greater amount m
nts
required. But it is also coin of on the States notes, convert*- mC
and the substitution fortrue that,United suspension of specie p ) .^ 0
the substitution for as of United States of value, goia
six per cent specie bondscointhe legal standard notes convert* gupan article of merchandise, subject to the ordinary fluctuations 1y
ply and demand, and to the extraordinary fluctuations of niei e F ^
lation. The ignorant fears of foreign investers in national oan
rbonds and other American securities, and the timid alarms t -g^s
ous nervous individuals in our own country, prompted large sa
^
upon evidences of public and corporate indebtedness in our rin ftt
and large purchases of coin for remittance abroad or h o a r ngjjig
home. Taking advantage of these and other circumstances w
to an advance of gold, speculators employed all the arts of the> n ^ . g
to stimulate that tendency and carry it to the highest poin^ feet
point was reached on the 15th day of October. Gold sold in the m
at a premium of 37% per cent.




FEDERAL BACKING LAWS AND KEPORTS

293

That this remarkable rise is not due wholly, or even in greatest part,
to the increase of the currency, is established beyond reasonable doubt
by considerations now to be stated.
First: The whole quantity of circulation did not, at the time, greatly,
if at all, exceed the legitimate demands of payments. On the 1st
day of November, 1861, the circulation of United States notes, including credits to disbursing officers and to the Treasurer of the
United States, was $15,140,000. On the 1st day of November, 1862,
it was, with like inclusions, $210,104,000. Of corporate notes, on the
1st of November, 1861, the circulation in the loyal States was, according to the best estimates, $130,000,000; on the 1st of November, 1862,
it was $167,000,000. The coin in circulation, including the coin in
banks, was probably not less, on the 1st of November, 1861, than
$210,000,000. On the 1st of November, 1862, the coin had been practically demonetized and withdrawn from use as currency or as a
basis for currency, and is therefore not estimated. The aggregate
circulation of the loyal States, therefore, was, at the first date, $355,140,000; and at the second, only $377,104,000.
Secondly: The whole, or nearly the whole, increase in the volume
of the currency which has taken place was, it is believed, legitimately
remanded by the changed condition of the country in the year between
the two elates. The activity in business which, at the close of that
year, had taken the place of the general stagnation which marked
^s beginning, and the military and naval preparations and movements
^mch
tl
t d th
b
d amounts of payments
which had vastly augmented the number and amou
„
l
to be made in money, have, it is believed, legitimately d f d nearly
demanded
^ Quite the whole of it.
That such is the case may be reasonably inferred from the fact
tnat the prices of many of the most important articles of consumption
imve
declined or not materially advanced during the year. Wheat,
quoted at $1 38 to $1 45 per bushel on the 1st of November, 1861, was
quoted at $1 45 to $1 50 on the 1st of November, 1862. Prime mess
Pork, on the 1st of November, 1861, was quoted at $15 to $15 50 per
^rel, and on the 1st of November, 1862, at $12.50 to $13. Corn sold
^n e the 1st of November, 1861, at 62 to 63 cents per bushel, and on
^ e 1st of November, 1862, at 71 to 73 cents. A comparison beween the prices of hay, beef, and some other staples of domestic
produce at the two dates, exhibits similar conditions of actual depnesai^ i n p r i c e Q r m o d e r a t € ri^
ll
y: It is, perhaps, still more conclusive against the theory of
redundancy that, on the 15th day of October, when the aggrect
{m thJ ual circulation, national and corporate, was about $360,000,u
r > J & premium on gold was 37%; whereas, on the 29th day of Novemrt?I ™ e n t n e circulation had increased by more than twenty millions,
A
~ remium on gold was 29 to 30 per cent.
1
if the fact of considerable redundancy in circulation.be conlt
by no means follows that it is the circulation of United
- notes which is redundant.
r J • u sttobceor ema n d n o t e s o f t h ethe llaw dconfines national payments and
embered that
in
urv *
U l i t e States. Officers of the treas/, officers of the army and navy, all officers of all departments, must
ser
ve and enforce th'is law. For all payments to be made.in behalf




294

FEDERAL BANKING LAWS AND REPORTS

of the United States, in case of inability to obtain coin, United States
notes must be issued. It is, indeed, the duty of the legislature to see
that the purchasing power of these notes is kept as nearly as possible
equal to the purchasing power which gold would have had if specie
payments had been maintained; but the issue and use of the notes is
unavoidable, and the government can resort to borrowing only when
the issue has become sufficiently large to warrant a just expectation
that loans of the notes can be had from those who hold or can obtain
them at rates not less advantageous than those of coin loans before
suspension. The difficulty which the takers of the recent loan of
$13,613,450 found in obtaining United States notes with which to
meet their engagements to the treasury is very instructive on this
head. It points, indeed, directly to the conclusion that loans of United
States notes, in sufficient amounts to meet the disbursements of the
government, could not now be obtained at rates which a due regard
to the interests of the tax-payers would permit the Secretary to accept. Whatever may be said of the aggregate circulation, it cannot,
then, be successfully maintained that the circulation of United States
notes is excessive. When extended to the limits authorized by existing laws, it will be no larger than the wants of the people and the
government imperatively demand.
If there be a considerable redundancy then; if there be a considerable real depreciation of the circulation—which is by no means admitted—what has caused the redundancy and the depreciation?
The cause of all that exists is easily found in the statements ot
the banking corporations. The circulation of corporate notes increased
during the year ending on the 1st of November, 1862, from $130,000,000
to $167,000,000. During the same time the volume of deposits, which
answer very many of the purposes of circulation, had swelled from
$264,000,000 to $344,000,000. The greater portion of this increase
took place within the last seven months.
.
The augmentation of deposits always accompanies increase of circulation Together they stimulate loans, and are, in turn, stimulatea
by the desire of the interest derived from loans. As might have been
anticipated, loans increased, though not equally, with the circulation
and deposits. From $607,000,000 on the 1st day of November, lwh
they had grown to $677,000,000 on the 1st day of November, 1862.
Here is an obvious and sufficient explanation of whatever una"e
expansion may have taken place. The Secretary has already expressed the opinion that the circulation is not greatly redundant, ana
that no considerable depreciation of currency has actually occurred
He thinks it sufficiently proved, however, that whatever there ma)
of either is fairly attributable not to the increase of United States
notes, but to the increase of bank circulation and deposits.
.
It is to be observed that no law compelled and no public necessu)
required any enlargement of the volume of currency by the banks.
Un the contrary, there are, in some of the States, positive enactment
by which the increase of circulation during suspension is prohibit*1.'
and the principle embodied in them is so obviously just that . ^ i '
managed institutions, when obliged to suspend, almost invanaWJ'
without the constraint of any law, reduce their circulation instead oi
augmenting it. In obedience to this principle, a reduction of &«»*
circulation actually took place after the suspension in December.



FEDERAL BAKEQNG LAWS AKD REPORTS

295

was only when United States notes, having been made a legal tender,
were diverted from their legitimate use as currency and made the
basis of bank circulation, that the great increase of the latter began.
It was purely voluntary; prompted doubtless, by the desire of extending accommodations to business as well as by the expectation of
profit. No practical limit upon this increase has as yet been proposed by the parties interested in it.
The Secretary has already shown that the case was far otherwise
with the circulation of United States notes. A condition had been
created by the suspension which made loans of coin impossible. Loans
of corporate notes, objectionable in themselves, were positively prohibited by a law not likely to be repealed. The extension of the United
States note circulation, until sufficient in amount to enable the Secretary to obtain it from holders by way of loans, was equally inevitable. A practical limit on its increase is imposed by the judicious
legislation of Congress, which makes the notes receivable for loans,
and requires that the interest on bonds for loans shall be paid in coin.
Under these circumstances, the path of wisdom and duty seems very
clear. It leads to the support of a United States note circulation, and
to the reduction of the bank note circulation. A comparatively small
reduction of the latter will allow ample room for the whole increase
of the former, authorized by existing laws; and as the reduction proceeds the increase may be extended, never, however, passing the point
w
mch admits the negotiation of loans at reasonable rates. The Secretary has heretofore advised the imposing of a moderate tax on
corporate circulation, and now renews the recommendation as the best
jneans of reduction and gradual substitution. Such a tax involves no
hardships. Notes circulating as money cost nothing beyond the expense of production and supervision, and yet form a highly accumula; lve species of property. The necessities of the war have caused the
Ration of almost all forms of value. Can there be a sound reason
R
amost
i
d bi
hi
Jw exempting that which costs the proprietor least and brings him
cirIt may be properly added that this desirable substitution of a ci
culation, uniform in description and value, for a circulation varyin g
m in description and valu,
y
iflely i n b o tt |^ m a ^ p ^ ^ g b e m o r e easily and beneficially effecte d
ly i n b o |^ m a ^ p ^ ^ g b e m o r e easily and beneficially effected
"°* than at any other time. The circulation of United States notes
th
t
i
f U i t d Stt
t
greatly facilitate the payments to the banks through which their
TO notes must be withdrawn; and thus, not only protect the community from the inconveniences, but the banks from the losses which
u
«nt otherwise attend reduction.
At may also be added that when the substitution shall have been
n in
Payment of corporate notes. With comparatively
sa
cnfice,e v e n u egovernment can, whenever its expenditures are
the
f its r
° omme
> provide, by loan or otherwise, all the com

eda
\Vl V ° £
nce and maintain the resumption.
pJr J f rSecretary thus repeats the preference he has heretofore
a United
rectl K ° '
States note circulation, even when issued dirnenf-f y
government, and dependent on the action of the governo r regulation and final redemption, over the note circulation of



296

FEDERAL BANKING LAWS AND REPORTS

the numerous and variously organized and variously responsible
banks now existing in the country; and while he now sets forth
more fully than heretofore, the grounds of that preference, he still
adheres to the opinion expressed m his last report, that a circulation
furnished by the government, but issued by banking associations
organized under a general act of Congress, is to be preferred to
either. Such a circulation, uniform in general characteristics, and
amply secured as to prompt convertibility by national bonds deposited
in the treasury, by the associations receiving it, would unite, in his
judgment, more elements of soundness and utility than can be combined in any other.
A circulation composed exclusively of notes issued directly by the
government, or of such notes and coin, is recommended mainly bv
two considerations;—the first, derived from the facility with which it
may be provided in emergencies, and the second, from its cheapness.
The principal objections to such a circulation as a permanent system are, 1st, the facility of excessive expansion when expenditures
exceed revenue; 2d, the danger of lavish and corrupt expenditures
stimulated by facility of expansion; 3d, the danger of fraud in
management and supervision; 4th, the impossibility of providing it in
sufficient amounts for the wants of the people whenever expenditures
are reduced to equality with revenue or below it.
These objections are all serious. The last requires some elucidation. It will be easily understood, however, if it be considered that
a government issuing a credit circulation cannot supply, in any given
period, an amount of currency greater than the excess of its disbursements over its receipts. To that amount, it may create a debt in small
notes, and these notes may be used as currency. This is precisely the
way in which the existing currency of United States notes is supplied.
That portion of the expenditure not met by revenue or loans has
been met by the issue of these notes. Debt in this form has been substituted for various debts in other forms. Whenever, therefore, the
country shall be restored to a healthy normal condition, and receipts
exceed expenditures, the supply of United States notes will be arrested,
and must progressively diminish. Whatever demand may be made
for their redemption in coin must hasten this diminution; and there
can be no reissue; for reissue, under the conditions, necessarily implies disbursements, and the revenue, upon the supposition, supply
more than is needed for that purpose. There is, then, no mode m
which a currency in United States notes can be permanently maintained, except by loans of them, when not required for disburse^™,
on deposits of coin, or pledge of securities, or in some other way. in"
would convert the treasury into a government bank, with all its hazards and mischiefs.
If these reasonings be sound, little room can remain for doubt that
the evils certain to arise from such a scheme of currency, if adopt**
as a permanent system, greatly overbalance the temporary thougn
not inconsiderable advantages offered by it.
i
It remains to be considered what results may be reasonably, expected
irom an act authorizing the organization of banking associations, sucn
as the Secretary proposed in his last report.
. p
Ine central idea of the proposed measure is the establishment of one
sound, uniform circulation, of equal value throughout the country,
upon the foundation of national credit combined with private capita



FEDERAL BANKING LAWS AND EEPORTS

297

Such a currency, it is believed, can be secured through banking
associations organized under national legislation.
It is proposed that these associations be entirely voluntary. Any
persons, desirous of employing real capital in sufficient amounts, can,
if the plan be adopted, unite together under proper articles, and,
having contributed the requisite capital, can invest such part of it,
not less than a fixed minimum, in United States bonds, and, having
deposited these bonds with the proper officer of the United States,
can receive United States notes in such denominations as may be desired, and employ them as money in discounts and exchanges. The
stockholders of any existing banks can, in like manner, organize under
the act, and transfer, by such degrees as may be found convenient,
the capital of the old to the use of the new associations. The notes
thus put into circulation will be payable, until resumption, in United
States notes, and, after resumption, in specie, by the association which
issues them, on demand; and if not so paid will be redeemable at the
treasury of the United States from the proceeds of the bonds pledged
in security. In the practical working of the plan, if sanctioned by
Congress, redemption at one or more of the great commercial centres,
will probably be provided for by all the associations which circulate
the notes, and, in case any association shall fail in such redemption,
the treasurer of the United States will probably, under discretionary
authority, pay the notes, and cancel the public debt held as security.
t It seems difficult to conceive of a note circulation which will combine
higher local and general credit than this. After a few years no other
(•l)V»lilo^

T T 1

T

1 1

,1

•

1 il
»

_ _

J."

1

*

1_

vested in national stocks, and the total amount issued could always
oe easily and quickly ascertained from the books of the treasury.
Ahese circumstances, "if they might not wholly remove the temptation
e
;?e ^cessive issues, would certainly reduce it to the lowest point, while
!. f ° r n * of the notes, the uniformity of devices, the signatures of na"onal officers, and the imprint of the national seal authenticating the
lecJaration borne on each that it is secured by bonds which represent
"!e f a i t n and capital of the whole country, could not fail to make
, yery note as good in any part of the world as the best known and
*st esteemed national securities.
a
A J i b e c r ebt e rey hast ealready t mentioned the support to public credit
V
x e c d f r o m lie
tan ? a y P
proposed associations. The impor< nee of this point may excuse some additional observations.
ine organization proposed, if sanctioned by Congress, would rem
hn I W lft n h e a n i t e c few years, for deposit as security for circulation,
very
t
Itm °%ve l Ue
l States to an amount not less than $250,000,000.
in J. a n"d jv a expected, indeed, since the circulation, by uniformity
lue
wi]7h r
> a n d capacity Qf quick and cheap transportation,
t o b e lised m o r e
th-if fI i y
extensively than any hitherto issued,
see fu d e m a n d f o r bonds will overpass this limit. Should Congress
,w V ° restrict the privilege of deposit to the bonds known as fivet
Prorn H' a uson o r ^ z e d by the act of last session, the demand would
r
a
oom f r I n o r**b all of that description already issued and make large
k
, e - A steady market for the bonds would thus be estaband
the negotiation of them greatly facilitated.



298

FEDERAL BANKING LAWS AND REPORTS

But it is not in immediate results that the value of this support,
would be only or chiefly seen. There are always holders who desire
to sell securities of whatever kind. If buyers are few or uncertain, the
market value must decline. But the plan proposed would create a
constant demand, equaling and often exceeding the supply. Thus a
steady uniformity in price would be maintained, and generally at a
rate somewhat above those of bonds of equal credit but not available
to banking associations. It is not easy to appreciate the full benefits
of such conditions to a government obliged to borrow.
Another advantage to be derived from such associations would be
found in the convenient agencies which they would furnish for the
deposit of public moneys.
The Secretary does not propose to interfere with the independent
treasury. It may be advantageously retained, with the assistant
t reasurers already established in the most important cities, where the
customs may be collected as now, in coin or treasury notes issued directly by the government, but not furnished to banking associations.
But whatever the advantages of such arrangements in the commercial cities in relation to customs, it seems cleat* that the secured
national circulation furnished to the banking associations should be
received everywhere for all other dues than customs, and that these
associations will constitute the best and safest depositaries of the
revenues derived from such receipts. The convenience and utility
to the government of their employment in this capacity, and often,
also, as agents for payments and as distributers of stamps, need no
demonstration. The necessity for some other depositaries than surveyors of ports, receivers, postmasters, and other officers, of whose
responsibility and fitness, in many cases, nothing satisf actory can be
known, is acknowledged by the provision for selection by the Secretary contained in the internal revenue act; and it seems very clear that
the public interest will be secured far more certainly by the organization and employment of associations organized as proposed than by
any official selection.
Another and very important advantage of the proposed plan has
already been adverted to. It will reconcile, as far as practicable,
the interests of existing institutions with those of the whole people.
Ali changes, however important, should be introduced with caution,
and proceeded m with careful regard to every affected interest, Rash
innovation is not less dangerous than stupefied inaction. The time
has come when a circulation of United States notes, in some form,
must be employed. The people demand uniformity in currency,
and claim, at least, part of the benefit of debt without interest, made
into money, hitherto enjoyed exclusively by the banks. These demands are just and must be respected. But there need be no sudden
change; there need be no hurtful interference with existing interests.
As yet the United States note circulation hardly fills the vacuum caused
by the temporary withdrawal of coin; it does not, perhaps, full?
meet the demand for increased circulation created by the increased
number, variety, and activity of payments in money. There is opportunity, therefore, for the wise and beneficial regulation of its substitution for other circulation. The mode of substitution, also, may be
judiciously adapted to actual circumstances. The ptan suggested consults both purposes. It contemplates gradual withdrawal of bank



FEDERAL BANKING LAWS AND REPORTS

299

note circulation, and proposes a United States note circulation, furnished to banking associations, in the advantages of which they may
participate in. full proportion to the care and responsibility assumed
and the services performed by them. The promptitude and zeal with
which many of the existing institutions came to the financial support
of the government in the dark days which followed the outbreak of
the rebellion is not forgotten. They ventured largely, and boldly, and
patriotically on the side of the Union and the constitutional supremacy of the nation over States and citizens. It does not at all detract
from the merit of the act that the losses, which they feared but unhesitating risked, were transmuted into unexpected gains. It is a
solid recommendation of the suggested plan that it offers the opportunity to these and kindred institutions to reorganize, continue their
business under the proposed act, and with little loss and much advantage, participate in maintaining the new and uniform national
currency.
. The proposed plan is recommended, finally, by the firm anchorage
it will supply to the union of the States. Every banking association
TOose bonds are deposited in the treasury of the Union; every individual who holds a dollar of the circulation secured by such deposit;
every merchant, every manufacturer, every farmer, every mechanic,
interested in transactions dependent for success on the credit of that
circulation, will feel as an injury every attempt to rend the national
UI
"ty, with the permanence and stability of which all their interests
are so closely and vitally connected. Had the system been possible,
and had it actually existed two years ago, can it be doubted that the
national interests and sentiments enlisted by it for the Union would
n
ave so strengthened the motives for adhesion derived from other
S
*°urcoes tliafc t n e w ild treason of secession would have been impossible?
The Secretary does not yield to the phantasy that taxation is a
messing and debt a benefit; but it is the duty of public men to extract good from evil whenever it is possible. The burdens of taxa«on may be lightened and even made productive of incidental benefits
In n S 6 ) a n d aggravated and made intolerable by unwise, legislation.
n
'ike manner debt, by no means desirable in itself, may, when cir^mstances compel nations to incur its obligations, be made by discreet
i- J e f burdensome, and even instrumental in the promotion of pubuc and private security and welfare.
me rebellion has brought a great debt upon us. It is proposed to
] a P^rt of it in such a way that the sense of its burden may be
ex
Vn
perience of incidental advantages. The issue of United
notese is such ab use; but if exclusive, is hazardous and temTh
'
^ p r i t y y national bonds of similar notes furnished to
mtmg associations is such a use, and is comparatively safe and peri
i l
f
d
occcT- ' a n d w i t h this use may be connected, for the present, and
ordi^OUaily' a s circumstances may require, hereafter, the use of the
mary United States notes in limited amounts.
a
debt fVei7 eamr l y ^ w i l 1 Pr°bably witness the reduction of the public
nn *Li° the r s a r r e s required as a basis for secured circulation. Should
<>unt
^fa
t reduction and again demand expenditures beyond
will however at length come. When it shall arrive
th
be retained on low interest at that amount, or some



300

FEDERAL BANKING LAWS AND REPORTS

other security for circulation may be devised, or, possibly, the vast
supplies of our rich mines may render all circulation unadvisable
except gold and the absolute representatives and equivalents, dollar
for dollar, of gold in the treasury or on safe deposit elsewhere. But
these considerations may be for another generation.
The Secretary forbears extended argument on the constitutionality
of the suggested system. It is proposed as an auxiliary to the power
to borrow money; as an agency of the power to collect and disburse
taxes; and as an exercise of the power to regulate commerce, and of
the power to regulate the value of coin. Of the two first sources of
power nothing need be said. The argument relating to them was
long since exhausted and is well known. Of the other two there is
not room nor does it seem needful to say much. If Congress can
prescribe the structure, equipment, and management of vessels to
navigate rivers flowing between or through different States as a
regulation of commerce, Congress may assuredly determine what
currency shall be employed in the interchange of their commodities,
which is the very essence of commerce. Statesmen who have agreed
in little else have concurred in the opinion that the power to regulate coin is, in substance and effect, a power to regulate currency,
and that the framers of the Constitution so intended. It may well
enough be admitted that while Congress confines its regulation to
weight, fineness, shape, and device, banks and individuals may issue
notes for currency in competition with coin. But it is difficult to
conceive by what process of logic the unquestioned power to regulate
com can be separated from the power to maintain or restore its circulation, by excluding from currency all private or corporate substitutes which affect its value, whenever Congress shall see fit to exercise
that power for that purpose.
The recommendations, now submitted, of the limited issue of United
states notes as a wise expedient for the present time, and as an occasional expedient in future times, and of the organization of banking
associations to supply circulation secured by national bonds and convertible always into United States notes, and after resumption ot
specie payments, into coin, are prompted by no favor to excessive
issues of any description of credit money.
On the contrary, it is the Secretary's firm belief that by no other
path can the resumption of specie payments be so surely reached
ami so certainly maintained. United States notes receivable for
bonds bearing a secure specie interest are next best to notes convertible into com. The circulation of banking associations organize
under a general act of Congress, secured by such bonds, can be niost
surely and tsafely riiril th at the point of certain convertibility mto
maintained
K
k , em P°
y 5 ese associations redeem their issues witn
tes t
i
th
as victory shall restore peace, the ample revenue, already secured *
*ise legislation, will enable the government, through advantage^
pmchasese of specie, to replace at once h
large amounts, and, at no disle
t h i s ci

?

t?^ll

W ° n ?f
'
'°




™l»tion J coin, without detrimen o

contrar

^ ^ith great and manifest benefit to

FEDERAL BANKING LAWS AND REPORTS

301

The Secretary recommends, therefore, no mere paper money
scheme, but, on the contrary, a series of measures looking to a safe and
gradual return to gold and silver as the only permanent basis, standar
m
i5' t
easure of values recognized by the Constitution—between
which and an irredeemable paper currency, as he believes, the choice
is now to be made.
No country possesses the true elements of a higher credit—no country, m ordinary times, can maintain a higher standard of currency and
payment than the United States.
The government is less costly than that of most other great powers.
Ihe expenditures of the current fiscal year, excluding those of the
n ar and Navy Departments, can hardly equal those of the last year,
which amounted to $24,511,476 66. Estimating those of these departments at double the expenditures of the last year before the rebellion,
tney would for the current year, had the war ended before last midsummer as was anticipated at the date of the last report, amount to
the sum of $55,845,834 48. The interest on the public debt is for the
current year estimated at $25,041,532 07, and will not probably go over
that sum. The whole expenditures of the government for the current
(7? ft'i°n t l l e s u £ P o s i t i o n o f peace, would, therefore, not exceed $105,/1,843 21. This aggregate must be increased hereafter by the addition of interest on the loans of the current and future years and by pensions, the precise amount of which cannot be foreseen. Estimate the
former at fifty, and the latter at ten millions a year, and the total anO n e r S P e n d i t l l r e ? i n P e a c e wiH r e a ? h > omitting fractions, to $165,000,O
o \ o l h e expenditures of Great Britain during the year ending March
V
ft 1862, were $364,436,682; those of France for 1862, according to
trench official estimates, will reach $421,823,900, and the annual expenses of Russia, according to the best accessible information, do not
rail short of $230,000,000.
lo meet our annual expenditures, and to assure beyond contingency
ne
Punctual discharge of the interest of the public debt, and the
creation of a sinking fund for its reduction, Congress has provided
» revenue from customs even now reaching nearly seventy millions
fan Y' a n d a r e v e n u e f r ° n i internal duties which will not probably
^ h o r t of one hundred and fifty millions a year.
-J 1 o u t reckoning any other resources than those already probv fiff r e v emie, therefore, will annually exceed the expenditures
to Hr ^ e m iUi° n s > which sum may be used for the reduction of the
PubJic debt If, then, the war shall be continued, contrary to hope
"'^expectation, to midsummer of 1864, and the public debt shall
each the utmost limit now anticipated of seventeen hundred and
<y millions of dollars, the excess of revenue will reduce that debt
t? n S fc™ first year of peace, more than three per cent,
hav
American republic possesses immense resources which
of t£ n ?T ? e t b e e n c a l l e <l into contribution. The gold-bearing region
ne
, united States stretches through near eighteen degrees of latitud
t'h
k° m ^ t i s h Columbia on the north to Mexico on the south, and
^V m o r e t h a n t w ^ n t y degrees of longitude, from the eastern
Qt
° f t h ? R o c k y mountains to the Pacific ocean. I t includes
8
rf x ' ^ a l i f o r n i a and Oregon; four entire Territories, Utah,
ritcS "^ e w Mexico, and Washington; and parts of three other Ternes
j Colorado, Nebraska, and Dakota. I t forms an area of more



302

FEDERAL BANKING LAWS AND REPORTS

than a million of square miles, the whole of which, with comparatively
insignificant exceptions, is the property of the nation. It is rich not
only in gold, but in silver, copper, iron, lead, and many other valuable minerals. Its product of gold and silver during the current year
will not probably fall very much, if at all, short of $100,000,000; and
it must long continue gradually, yet rapidly, to increase. If this
product be subjected to a reasonable seignorage, as suggested by some,
or if, as suggested by others, the mineral lands be subdivided and sold
in convenient parcels, with proper reservations in favor of the miners
now in occupation of particular localities, a very considerable revenue
may, doubtless, be obtained from this region without hardship to the
actual settlers and occupiers.
And there are other mines than those of gold or silver, or copper
or iron, in the wide territory which includes the public lands of the
United States, Every acre of the fertile soil is a mine which only
waits for the contact of labor to yield its treasures; and every acre is
opened to that fruitful contact by the Homestead Act. When the
opportunities thus offered to industry shall be understood by the
Avorkinff millions of Europe, it cannot be doubted that great numbers
will seek American homes, in order to avail themselves of the great
advantages tendered to their acceptance by American law. Every
working man who comes betters the condition of the nation as well
as his own. He adds in many ways, seen and unseen, to its wealth,
its intelligence, and its power. It is difficult to estimate the contribution which immigration, properly encouraged by legislation and
administration, will make to revenue; but, directly and indirectly, it
cannot be reckoned as less than that which may be expected from the
metallic products of the gold bearing region.
With such resources at the disposal of the republic, no one need be
alarmed lest the United States may become unable to pay the interest
on its debt, or to reduce the principal to whatever point the public
interest may indicate. The republic is passing through the pangs of
a new birth to a nobler and higher life. Twice already she has paid
off a national debt contracted for the defence of her rights; the obligations of that which she now incurs for the preservation of her existence will be not less sacredly fulfilled.
But while resources are thus ample, it is not the less the dictate of
prudence and of good faith to a generous people that the greatest
pains should be taken to reduce the public burdens to the lowest point
compatible with justice to honest public creditors. Prodigality may
exhaust the amplest resources and impair the firmest credit. To retrench superfluity; to economize expenditures; to adjust accurately
measures to objects; to infuse resolute vigor and a just sense of responsibility into every department of public activity are not less important to credit and revenue than to general success in administration.
It has been already stated that the amount to be provided, beyond
resources available under existing laws, is, for the current year,
$276,912,517 66, and for the ensuing year, $627,388,183 56.




FEDERAL BANKING LAWS AND REPORTS

303

To provide these amounts loans in some form must be negotiated.
The Secretary has already expressed the opinion, with great deference to the superior wisdom of Congress, that it will be unwise, unless conditions greatly change, to authorize the increase of United
States notes beyond the limit now fixed by law. Should any vacuum
be created by the withdrawal of bank note circulation, that vacuum
should, doubtless, be filled by United States notes. Should Congress adopt the measures proposed by the Secretary, it is not improbable that an additional issue of fifty millions may be required for that
purpose within the year, and an equal additional issue during the following year. And it may well be hoped that military successes, reestablishing the authority of the United States in large districts of
the insurgent region, will call for further issues to supply the place of
the worthless currency which the rebellion has forced upon the people. Should it be deemed expedient to invest the Secretary with any
discretionary power, in view of these contingencies, it should be so
limited as to allow no increase of aggregate circulation beyond the
clear demands of real business.
, A considerable additional sum may probably be obtained by removing the limit on temporary deposits. The amount of these deposits
has steadily increased, notwithstanding large repayments to depositors. The treasury of the government has been made the savings
bank of the people. Should the restriction be removed, there is reason
to believe that twenty-five millions may be received beyond the maximum nowfixed,during the year.
Hut the chief reliance, and the safest, must be upon loans. Withf
p
i
fU i d S
b d th
t
thor
out any issues of United States notes beyond the amount now authored, it seems certain that loans for the whole amount required for the
current year can be readily obtained at fair rates; and it may be
c
°™dently hoped that before its close the resources of the country
*m be so well understood, and the restoration of its territorial inte
p t y so well assured, that capitalists will not hesitate to supply
whatever may be needed for the subsequent year.
*>ut m order to the advantageous negotiation of loans the action of
Congress is necessary.
, As an important element of facility in negotiation, the plan for
ranking associations has been already considered. Little direct aid
s
*er However, to be expected from this plan during the present, nor
,
\ tyO lmuch, perhaps, during the next year. The operation of assoI l } s organized under it must, at first, be restricted mainly to
^vesting United States notes in bonds; issuing a circulation based
n
tnese bonds; and transacting ordinary business. As the notes
y\e*Ved for the bonds cannot be reissued without injurious inflation
~ ~ ^wi ui«3 UUIlUb UUllllOt Ue 1151SSueu WlUiuuu m j u i i u u s i i i i i a ^ v «
r the circulation, they must necessarily be withdrawn and cancelled,
he aggregate circulation of government United States notes with-




304

FEDERAL BANKING LAWS AND REPORTS

be found in the market created for bonds, and the support thereby
given to the national credit. The more general advantages which
have been described must attend the gradual organization of banking
associations, and will only be fully apparent when the national circulation furnished to them shall become the established and sole note
circulation of the country.
Other legislation is therefore needed.
The act of last session authorized the Secretary to issue bonds of
the United States, already often mentioned as five-twenties, to the
amount of five hundred millions of dollars, and to dispose of them
for coin or United States notes at the market value thereof. In the
same act authority was given to issue $150,000,000 in United States
notes, which authority was afterwards enlarged to $250,000,000; and
it was provided that any holder of such notes to the amount of fifty
dollars, or any multiple of fifty, might exchange them for five-twenty
bonds, at par.
The effect of these provisions was to make negotiations of considerable amounts impossible; for considerable amounts are seldom
taken, except with a view to resales at a profit, and resales at any profit
are impossible under the law. Negotiations below market value are
not allowed, and if not allowed the taker of the bonds can expect no
advance, unless a market value considerably below par shall become
established. The act makes advance above par impossible, by authorizing conversion of United States notes into bonds at that rate.
The Secretary respectfully recommends the repeal of both these
provisions. The first imposes, it is believed, a restriction which
Congress did not intend; and the second has been followed by the
inconveniences which were feared, rather than by the benefits which
were expected. Convertibility by exchange at will is of little or no
.. . . ™ , ^ mC *wiunit5 ui notes readies a point at wmcn ioan& ^*« "~

ettected at rates fair to the country and desirable to takers, loans will,
ol course, be made, and ample opportunities for conversion offered.
Mioukl Congress, however, be of opinion that these clauses should
be retained, it will be necessary to provide for other loans, at rates
more favorable to the takers than convertibility into five-twenties.
iJus can be done either by authorizing bonds at longer time, or by
increasing the rates of interest offered.
1 he {secretary cannot recommend either cource except as an alternative to no provision at all.
an alternative he would prefer the issue of 7.30 tine ^ ^
convertible into five-twenty sixe"s at or before maturity, * ^
r notes bearing an interest of 3.65 per cent, as proposed
first report.
- ollferred
A discretionary power may, perhaps, be advantageously co ^^,
on the Secretary, to be exercised as exigencies may require o
encies mav




FEDERAL BANKING LAWS AND REPORTS

305

He does not covet the responsibilities belonging to such a power, but
would not shrink from such exercise of it as, in his best judgment, the
public good would require. He believes it, however, to be unnecessary.
He believes that the time and rate of the five-twenty loan authorized
were judiciously determined, and he believes that if the suggested
changes are made in the law, the needed supplies can be obtained
through these loans. No prudent legislator, at a time when the gold
in the world is increasing by a hundred millions a year, and interest
must necessarily and soon decline, will consent to impose on the labor
and business of the people a fixed interest of six per cent on a great
debt, for twenty years, unless the necessity is far more urgent than is
now believed to exist. The country has already witnessed the results
of such measures in the payment, in 1856, of more than four and a half
millions of dollars for the privilege of paying a debt of less than fortyone millions, some twelve years, averaged time, before it became due.
The general views of the Secretary may therefore be thus briefly
summed:
He recommends that whatever amounts may be needed beyond the
sums supplied by revenue and through other indicated modes be obtained by loans, without increasing the issue of United States notes
beyond the amount fixed by law, unless a clear public exigency shall
demand it. He recommends, also, the organization of banking associations for the improvement of the public credit and for the supply to
tne people of a safe and uniform currency. And he recommends no
change in the law providing for the negotiation of bonds except
the necessary increase of amount and the repeal of the absolute restriction to market value and of the clauses authorizing convertibility at
If Congress shall concur in these views, the Secretary, though
conscious of the great difficulties which vast, sudden, and protracted
expenditures impose on him, ventures to hope that he may still be
aDle t o
maintain the public credit and provide for the public wants.

Special Message—Abraham Lincoln, on Financing the War
Thirty-Seventh Congress, 3d Session
JANUARY 17, 1863.
[Source: Senate Journal, 37th Cong., 3d Sess., pp. 121-122.]

°tne Senate and Bouse of Representatives:
A have signed the joint resolution to provide for the immediate
^yment of the army and navy of the United States, passed by the

instaV* R e P r e s e n t a t i v e s

o n t h e 14th

> a n d by t h e

Senate on the 15th

und er 1"°^n* r e s °l u t i on is a simple authority, amounting, however,
-KT listing circumstances, to a direction to the Secretary of the
^^ury to make an additional issue of one hundred millions of dol-




306

FEDERAL BANKING LAWS AND REPORTS

lars in the United States notes, if so much money is needed for the
payment of the army and navy.
My approval is given in order that every possible facility may be
afforded for the prompt discharge of all arrears of pay due to our
soldiers and our sailors.
While giving this approval, however, I think it my duty to express
my sincere regret that is has been found necessary to authorize so large
an additional issue of United States notes, when this circulation and
that of the suspended banks together have become already so redundant as to increase prices beyond real values, thereby augmenting
the cost of living to the injury of labor, and the cost of supplies to
the injury of the whole country.
It seems very plain that continued issues of United States notes,
without any check to the issues of suspended banks, and without
adequate provision for the raising of money by loans, and for funding
the issues so as to keep them within due limits, must soon produce
disastrous consequences. And this matter appears to me so important
that I feel bound to avail myself of this occasion to ask the special
attention of Congress to it.
That Congress has power to regulate the currency of the country,
can hardly admit of doubt; and that a judicious measure to prevent
the deterioration of this currency, by a seasonable taxation of bank
circulation or otherwise is needed, seems equally clear. Independently of this general consideration, it would be unjust to the people
at large to exempt banks enjoying the special privilege of circulation
from their just proportion of the public burdens.
In order to raise money by way of loans most easily and cheaply,
it is clearly necessary to give every possible support to the public
credit. To that end, a uniform currency, in which taxes, subscriptions to loans, and all other ordinary public dues, as well as all private clues, may be paid, is almost, if not quite, indispensable. Such
a currency can be furnished by banking associations, organized under
a general act of Congress, as suggested in my message at the beginning of the present session. The securing of this circulation, by the
pledge of United States bonds, as therein suggested, would still further facilitate loans by increasing the present and causing a future
demand for such bonds.
In view of the actual financial embarrassments of the government,
and ol the greater embarrassments sure to come, if the necessary
means of relief be not afforded, I feel that I should not perform my
™7 -T-V i m P l e anouncement of my approval of the joint resolution, which proposes reliefi r e
only by 'increasing circulation, without
f h C T i n f f ^ f ni , eSt d o s
that measures, such in substance as
those I have just referred to, may receive the early sanction of Conr i e a i m ? S ' V1 ™y opinion, will payment be most certainly
not only to the army and navy, but to all honest creditors
17, 1 8 0 8 . A B R A H A M




LINCOLN-

FEDERAL BANKING LAWS AND REPORTS

307

Act of February 25,1863 (The National Currency Act)
[12 Statutes at Large 665, Thirty-Seventh Congress, Chapter 58,
3d Session, Approved February 25, 1863, by Abraham Lincoln]
AX ACT TO PROVIDE A NATIONAL CURRENCY, SECURED BY A
PLEDGE OF UNITED STATES STOCKS, AND TO PROVIDE FOR
THE CIRCULATION AND REDEJUFTION THEREOF.

Be it enacted' by the Senate and House of Representatives of the United States of America in Congress asBureau of
*embled, That there shall be established in the Treasury
currency.
Department a separate bureau, which shall be charged
^'lth the execution of this and all other laws that may be
passed by Congress respecting the issue and regulation
of a national currency secured by United States bonds.
Comptroller of
The chief officer of the said bureau shall be denominated currency; appointment;
the comptroller of the currency, and shall be under the term; salary.
general direction of the Secretary of the Treasury. He
snail be appointed by the President, on the nomination
of the Secretary of the Treasury, by and with the advice
and consent of the Senate, and shall hold his office for
™ term of five years unless sooner removed by the Presijteat, by and with the advice and consent of the Senate;
18 S
W1 receive an annual salary offivethousand dollars;
"e shall have a competent deputy, appointed by the Sec- Deputy;comptroller salary;
retary, whosewsalary shall be two thousand five hundred duties.
ail(
no
I ° A>. *
shall possess the power and perform
ril
e duties attached by law to the office of comptroller
luring a vacancy in such office, and during his absence
;v ability; he shall employ, from time to time, the necT
clerks to discharge such duties as he shall direct, Clerks.
clerks shall be appointed and classified by the
"~r of the Treasury in the manner now provided
,-.
• Within fifteen days from the time of notice of Oath and bond
snn P p i O i n tam e n t > t h e comptroller shall take and sub- of Comptroller
the o t
U i
h of office prescribed by the Constitution and deputy.
s of the United States; and he shall give to the
States a bond in the penalty of one hundred
d dollars, with not less than two responsible f reel
^*s as sureties, to be approved by the Secretary of
rlia i re . asur y>h iconditioned for the faithful discharge of
of
nni • J slla11 a lss officek- The deputy comptroller so apo ta
h*Lo
n
e the oath of office prescribed by
•,e «stitution and laws of the United States, and shall
,,ie a like bond in the penalty of fifty thousand dollars.
comptroller and deputy comptroller shall not, either
% or indirectly, be interested in any association
rt
g national currency under the provisions of this act.
• 2. And be it further enacted, That the comptrollerSeal of office.
•
currency, with the approval of the Secretary of the
lry
*or h1S Jc Slla11 d e v i s e a s^l) witn suitable inscriptions,
offtd °®ce2 a description of which, with a certificate
!!
Pproval by the Secretary of the Treasury, shall be



308
Certificates,
&c, under seal
to be received
in evidence.

Impression
may be on
l>aper.
Rooms in
Treasury building for bureau.
Fireproof
vaults.

"United Statea
lion<1&"to mean
what.

Banking associations, how
formed.
Certificate to
specify what.

FEDERAL BANKING LAWS AND REPORTS

filed in the office of the Secretary of State with an impression thereof, which shall thereupon become the seal
of office of the comptroller of the currency, and the same
may be renewed when necessary. Every certificate, assignment, and conveyance executed by the comptroller,
in pursuance of any authority conferred on him by l % ,
a y
and sealed with his seal of office, shall be received in evidence in all places and courts whatsoever; and all copies
of papers in the office of the comptroller, certified by him
and authenticated by the said seal, shall in all cases be
evidence equally and in like manner as the original. An
impression of such seal directly on the paper shall be as
valid as if made on wax or wafer.
SEC. 3. And be it further enacted, That there shall be
assigned to the comptroller of the currency by the Secretary of the Treasury suitable rooms in the treasury
building for conducting the business of the currency
bureau, in which shall be safe and securefire-proofvaults,
in which it shall be the duty of the comptroller to deposit and safely keej> all the plates and other valuable
things belonging to his department; and the comptroller
shall from time to time furnish the necessary furniture,
stationery, fuel, lights, and other proper conveniences for
the transaction of the said business.
SEC. 4. And be it further enacted, That the term
"United States bonds," as used in this act, shall be construed to mean all coupon and registered bonds no*
issued or that may hereafter be issued on the faith of tlie
United States by the Secretary of the Treasury in pursuance of law.
SEC. 5. And be it further enacted. That associations for
carrying on the business of banking may be formed »)
any number of persons, not less in any case than nyeSEC. 6. And be it further enacted, That persons ^ l t i n
to form such an association shall, under their hands an
seals, make a certificate which shall specify—;
First. The name assumed by such association.
Second. The place where its operations of disoo«»l
and deposite are to be carried on; designating the btaie*
Territory, or district, and also the particular city,
or village.
Third. The amount of its capital stock, and
j
ber of shares into which the same shall be divided; wniw
capital stock shall not be less than fifty thousand dollar^
and m cities whose population is over ten thousand r e
>
sons, the capital stock shall not be less than one huncim
thousand dollars.
.,
Fourth. The names and places of residence of ti
shareholders, and the number of shares held by each cu
them.
Fifth. The time when such association shall comment*
bixth. A declaration that said certificater is mfl<">
enable such persons to avail themselves of the advantage
of this act.




FEDERAL BANKING LAWS AND REPORTS

309

Certificate
The said certificate shall be acknowledged before a be acknowl-to
edged, certified,
judge of some court of record or a notary public, and and. preserved
the acknowledgement thereof certified under the seal of In office of
such court or notary, and shall be transmitted, together comptroller.
with a copy of the articles of association which shall have
been adopted, to the comptroller of the currency, who
shall record and carefully preserve the same in his office.
Copies of such certificate, duly certified by the comptrol- Authenticated
copies.
ler, and authenticated by his seal of office, shall be legal
and sufficient evidence m all courts and places within
the United States, or the jurisdiction of the Government
thereof, of the existence of such association, and of every
other matter or thing which could be proved by the production of the original certificate.
Capital stock,
SEC. 7. And be it further enacted, That at least thirty how paid in.
per centum of the capital stock of such association shall
be paid in at the time of the commencement of its banking business, and the remainder of the capital stock of
such association shall be paid in instalments of at least
10 per centum each on the whole amount to which the
association shall be limited, as frequently as one instalment at the end of each succeeding two months from
the time of the commencement of its banking operations,
until the whole of the capital stock shall be paid in.
Stock
SEC. 8. And be it further enacted. That if any share- quent of delinshareholder may be
holder, or his assignee, shall fail to pay any instalment sold.
°n the stock when the same is required by the foregoing Mode of sale.
section tot bek paid, the directors of such association may
86
lv s ° c h e l d b y s u c n delinquent shareholder, at
public auction, having given three weeks' previous notice
nereof in a newspaper published and of general circulation m the city where the association is located, if
ne same be located in a city, and if not so located, then
/; a newspaper printed, or of general circulation, m the
umnty where the same is located, to any person who
^ pay the highest price therefor, and not less than the
y
ighest
unt
d th
ith th
f de
*™unt then due thereon, with the expenses of adverto fT nt 3 a , nd s d e ; a n d t h e e x c e s s > i f a n y ^ s h a 1 1 b e P a i d
f ™e delinquent shareholder.c k tIf e no1110111 d u ecane rbe
bidder t h e
wil pa
for s u c h sto
h

on f *l
salp *il

aw

!

^

a*

^

w
a s s oicl i! p a ^ f o r s u c h s t o c k t h e a*1110111^ d u e t h e r e "
at
ion, and the costs of advertisement and
amount
previously paid shall be forfeited to the
lon a n d Su

. »
^h stock may subsequently be sold
g irectors he u order.
may
And
cerHfi :
farther enacted, That whenever a
tiolwT t hha11 h a v e b e e n transmitted to the compfe
L - n trans
currency, as provided in this act, and the
!?
*nitting the same shall notify the compt
t i S i eaetn l e aa isdt ahsi r t -y P e r c e n t u m o f i t s c a P i t a l
Nation t1
P
aforesaid, and that such assor e q ^ j ^ b e co
complied with all the provisions of this act
be aunT •
«iplied with before such association shall
^orized to commence the business of banking, and




Comptroller to
examine and
see if requisitions of this
act are com^
plied with.

310

If lawfully en j
titled to begin
banking, comptroller to give
certificate to
that effect.

Certificate to
be published.

Association
may have
common seal, j
name, and con
tinue not ovef
twenty years.
Powers of
association.

FEDERAL BANKING LAWS AND KEPORTS

that such association is desirous of commencing such
business, the comptroller shall immediately proceed, in
such manner as he shall by general rules prescribe, to
examine the condition of such association; to ascertain
especially the amount of money paid in on account of
its capital stock; the name and place of residence of
each of the directors of such association, and the amount
of the capital stock of which each is the bonafideowner,
and generally whether such association has complied
with all the requirements of this act to entitle it to
engage in the business of banking; and shall cause to
be made, and attested by the oaths of a majority of the
directors and by the president or cashier of such association, a statement of all the facts necessary to enable
the comptroller to determine whether such association is
lawfully entitled to commence the business of banking
under this act.
SEC. 10. And be it further enacted. That if, upon a
careful examination of the facts so reported, and of any
other facts which may come to the knowledge of the
comptroller, whether by means of a special commission
appointed by him for the purpose of inquiring into the
condition of such association, or otherwise, it shall appear that such association is lawfully entitled to commence the business of banking, the comptroller shallgiye
to such association a certificate under his hand and official
seal, showing that such association has complied with all
the provisions of this act required to be compiled witn
before being entitled to commence the business of banking under it, and that such association is authorized to
commence said business accordingly; and it shall be the
duty of such association to cause said certificate to be
published in some newspaper, published in the city or
county where such association is located, for at least
sixty days next after the issuing thereof: Provided, in«*
if no newspaper is published in such city or county, suc11
certificate shall be published as the comptroller of tne
currency shall direct.
SEC. 11. And he it further enacted, That every association formed pursuant to the provisions of this act ma)
make and use a common seal, and shall have succession
by the name designated in its articles of association ana
for the period limited therein, not, however,
e
twenty years from the passage of this act; by suc
may make contracts, sue and be sued, complain and ae
lend m any court of law or equity as fully as natural
persons, and may make by-laws, approved by the co^P:
trolley of the currency, not incoAsistent with the la*ai oi
the United States or the provisions of this act, for U»
election of directors, the management of its V™Vf&
the regulation of its affairs, and for the transfer of «*
01
stock; and shall have power to carry on the businessac
banking by obtaining and issuing circulating notes m




FEDERAL BANKING LAWS AND REPORTS

311

cordance with the provisions of this act; by discounting
bills, notes, and other evidences of debt; by receiving deposits; by buying and selling gold and silver bullion,
foreign coins, and bills of exchange; by loaning money
on real and personal security, in the manner specified in
their articles of association, for the purposes authorized
by this act, and by exercising such incidental powers as
shall be necessary to carry on such business; to choose one
of their number as president of such association, and to
appoint a cashier and such other onicers and agents as Business, where
their business may require; and to remove such president, b trans
cashier, officers, and agents at pleasure, and appoint oth- act ed. *
ers in their place; and their usual business shall be transacted in banking offices located at the places specified respectively in its certificate of association, and not elsewhere.
SEC. 12. And be it further enacted, That the shares of shares to be
associations formed under this act shall be deemed personal property, and shall be transferable on the books of
the association in such manner as may be prescribed in
the by-laws or articles of association; and every person
Scorning a shareholder by such transfer shall, in pro- How transferPortion to his shares, succeed to all the rights and lia- a b l e "
51 11? °* ^ e P r * o r holder of such shares; and no change
snail be made in the articles of association by which the
J"jgWs, remedies, or security of the existing creditors of
tne association shall be impaired. For all debts, con- shareholder
"acted by such association for circulation, deposits, or S T o twice
o herwise, each shareholder shall be liable to the amount, ^ 8 a h m a ° r e S n t 0 f
»t their par value, of the shares held by him in addition to
™ amount invested in such shares.
; !3 A
capital stock,
deemec

m
expedient,
X t o t lme lt iim i? t o t i m e a s m a y ^e d e e m e c * *expedient,
h icrease
H i u V a lli d u n t tiations of this act; buttno such increase
mi t l c e t h l t h e increased capital shall be paid in,
notice thereof shall h
been transmitted tto th
the
cZ ?°
h l l have b
ittd
f t f
sne Pf, m g rt lo e a h e ocu n t o f s u cand his certificate obtained,
•
rrency, h
i
m u
andn
increase of capital stock,
that the same has been duly paid to such association.
?c; 14. And be it further enacted, That it shall be
for any such association to purchase, hold, and
Restate as follows:
Such as shall be necessary for its immediate acSP ~~\ltion i n t l i e transaction of its business,
h a s sha11
by w
^ mortgaged to it in good faith
J vav of security for loans made by such association, or

of dK
dealin

S u c h a s sha11 b e
previousl

conveyed to it in satisfaction
y contracted in the course of its




leal estate of
uchf
tlon.

312

Associations,
before corn-*
meneing banking business,
to transfer to
treasurer

United States
v
and shall be
entitled to receive ninety
per cent, of
their current
value in circulating currency
notes.

Issue of circulating note&i
unfrr this act,
not to exceed
$800,000,000.

How to be apportioned

Circulating
notes, how to
be prepared.

FEDERAL BANKING LAWS AND REPORTS

Fourth. Such as it shall purchase at sales under judgments, decrees, or mortgages held by such association.
Such association shall not purchase or hold real estate
in any other case or for any other purpose than as specified in this section.
SEC. 15. And be it further enacted, That every association, after having complied with the provisions of this
act preliminary to tho commencement of banking business under its provisions, shall transfer and deliver to
the treasurer of the United States any United States
bonds bearing interest to an amount not less than one
third of the capital stock paid in; which bonds shall be
deposited with the treasurer of the United States, and
by him safely kept in his office until the same shall be
otherwise disposed of, in pursuance of the provisions of
this act.
SEC. 16. And be it further enacted) That upon the making of any such transfer and delivery, the association
making the same shall be entitled to receive from the
comptroller of the currency circulating notes of different
denominations, in blank, registered and countersigned as
hereinafter provided, equal in amount to ninety per
centum of the current market value of the United States
bonds so transferred and delivered, but not exceeding the
par value thereof, if bearing interest at the rate of six
per centum, or of equivalent United States bonds bearing
a less rate of interest; and at no time shall the total
amount of such notes, issued to any such association, exceed the amount at such time actually paid in of i*s
capital stock.
SEC. 17. And be it further enacted, That the entire
amount of circulating notes to be issued under this act
shall not exceed three hundred millions of dollars. One
hundred and fifty millions of which sum shall be apportioned to associations in the States, in the District oi
Columbia, and in the Territories, according to repre'
sentative population, and the remainder shall be app?r"
tioned by the Secretary of the Treasury among associations formed in the several States, in the District of W'
lumbia, and in the Territories, having due regard to ru
existing banking capital, resources, and business, of sue
States, district, and Territories.
, fn
SEC. 18. And be it further enacted, That, in order to
furnish suitable notes for circulation, the comptroller ^
the currency is hereby authorized and required, unae
the direction of the Secretary of the Treasury, to cauplates to be engraved in the best manner to guard agau»
counterfeiting and fraudulent alterations, and to w
printed therefrom, and numbered, such quantity oi £
culatmg notes, in blank, of the denominations of ^
dollars ten dollars, twenty dollars, fifty dollars, one m
dred dollars, five hundred dollars, and one thousaJJ
dollars, as may be required to supply, under this act,




FEDERAL BANKING LAWS AND REPORTS

313

associations entitled to receive the same; which notes
to exshall express upon their face that they are secured by Notes what.
press
United States bonds, deposited with the treasurer of the
United States, and issued under the provisions of this
act, which statement shall be attested by the written
or engraved signatures of the treasurer and register, and
by the imprint of the seal of the treasury; and shall
also express upon their face the promise or the association receiving the same, to pay on demand, attested by
the signatures of the president, or vice-president, and
cashier; and the said notes shall bear such devices and
such other statements, and shall be in such formt as the
Secretary of the Treasury shall, by regulation, direct
SEC. 19. And be it further enacted. That the plates and Plates and dies
to be under
special dies to be procured by the comptroller of the cur- control of
rency for the printing of such circulating notes shall re- comptroller.
main under his control and direction, and the expenses
necessarily incurred in executing the provisions of this
act respecting the procuring of such notes, shall be audited and paid as contingent expenses of the Treasury Department; and for the purpose of reimbursing the 'same,
and all other expenses incurred under this act, and in lieu Expense of procuring notes.
or all taxes upon the circulation authorized by this act,
associaor upon the bonds deposited for the security of the same, Eachto pay
tion
annually one
such association organized under this act shall semi- per cent, of its
annually, on the first days of January and July, after circulation.
Jts organization, pay to the comptroller of the currency,
in lawful money of the United States, one per centum
Provision in
°n the amount of circulating notes received by such asso- case of default.
ciation? and in default thereof, the treasurer of the United
states is hereby authorized to reserve and retain one per
centum on the amount of said bonds so deposited, at each
semi-annual payment of interest thereon; and all sums
so reserved and retained shall be paid into the treasury
not
«ntter the direction of the Secretary, and every bank, Banks, Ac,under
organized
this
aninng association, or corporation, not organized under makeact, to
returns
r 1 6 ^visions of this act, issuing notes calculated or in- semi-annually.
l
£naed to circulatel as money, shall, on the first day of
hY ?v Xt > and r e g u arly on the first days of January and
*uly thereafter, make and deliver to the comptroller of
ne currency a true and accurate return of the gross
. niount ults notes issued by it, whether in circulation, or
of
for
an v ^ > o r on deposit elsewhere, and in default of Penalty and
default,
how recovered.
DmLr s o^ " r n , the bank, banking association, or corKrUtion failing to make return, shall pay to the United
shvTv8 a P e n a % of two per centum upon its entire capital
/<**, to be recovered, for the use of the United States,
any coUrt of competent jurisdiction.
J™®- ^0. And, be it further enacted, That after any suchWhen association may issue
T^iation tshall have caused its promise to pay such notes the currency
circulation as
an d o b e
b
and C Snier
.
signed y the president or vice-president money;
obli ^
thereof in such manner as to make them
igatoiy promissory notes, payable on demand, at its



314
to be received
at par for all
except duties,
and to be paid
for all except
interest on
public debt.

Other issues
prohibited.

Bonds transferred, flS
security for
circulation, to
have the fact
stated thereon.

iiow
transferred.

Record of
transfers to
contain what.

Duty of
comptroller.

Duty of
comptroller.

Comptroller
and treasurer
may examine
each others
books.

FEDERAL BANKING LAWS AND REPORTS

place of business, such association is hereby authorized
to issue and circulate the same as money; and the same
shall be received as par in all parts of the United
States in payment of taxes, excises, public lands, and
all other dues to the United States, except for duties on
imports, and also for all salaries and other debts and
demands owing by the United States to individuals, corporations, and associations within the United States, except interest on public debt; and no such association shall
issue post notes, or any other notes to circulate as money,
than such as are authorized by the foregoing provisions
of this act.
SEC. 21. And be it further enacted, That all transfers
of United States bonds which shall be made by any association as security for circulating notes under the provisions of this act, shall be made to the treasurer of
the United States, with a memorandum written or
printed on the certificate of such bonds, and signed by the
cashier, or some other officer of the association making
the deposit, stating that it is held in trust for the association on whose behalf such transfer is made, and as security for the redemption and payment of the circulating
notes delivered to such association; and no transfer of
any such bonds by the treasurer shall be deemed valid,
or of binding force and effect, unless sanctioned by the
order or request of the comptroller of the currency upon
the treasurer. It shall be the duty of the comptroller
of the currency to keep in his office a book in which shall
be entered the name of every association from whose
account such transfer of bonds is made by the treasurer,
and the name of the party to whom such transfer is made,
unless such transfer is made in blank, in which case the
fact shall be stated in said book, and in either case the
par value of the bonds so transferred shall be entered
therein; and it shall be the duty of the comptroller, immediately upon countersigning and entering the same,
to advise by mail the association from whose account sucn
transfer was made, the kind of bonds and the amount
thereof so transferred.
. ., _
SEC. 22. And be it further enacted, That it shall be tne
duty of the comptroller of the currency to countersip
and enter in the book, in the manner aforesaid, e^erj
transfer or assignment of any bonds held by the ti-easiue
presented for his signature; and the comptroller snai
have at all times during office hours access to the &oo*
of the treasurer, for the purpose of ascertaining the cm
rectness of the transfer or assignment presented to n
to countersign; and the treasurer shall have the ^
access to the book above mentioned, kept by the coinp
troller, during office hours to ascertain the correctness v
the entries in the same.




FEDERAL BANKING LAWS AND REPORTS

315

Some officer of
SEC. 23. And be it further enacted, That it shall be the each banking
duty of either the president or cashier of every banking association to
examine
association having stocks deposited in the office of the its bonds yearly
and
compare same
treasurer of the United States, once or more in each fiscal with the books
year, and at such time or times during the ordinary of the departbusiness hours as said officer or officers may select, to ex- ment.
amine and compare the bonds so pledged with the books
of said Department, and, if found correct, to execute to
the said treasurer a certificate setting forth the different
kinds and the amounts thereof, and that the same are in
the possession and custody of the treasurer at the date
of such certificate. Such examination may be made by an
agent of such association, duly appointed in writing for
that purpose, whose certificate before mentioned shall
be of like force and validity as if executed by such
president or cashier.
Associations
p SEC. 24. And he it further enacted, That every associa- to report
tion issuing circulating notes under the provisions of this quarterly to
comptroller
act, shall make a quarterly report to the comptroller of under oath.
the currency commencing on the first day of the quarter
of the year next succeeding the organization of such association, and continuing on the first days of each succeedContents
ing qiiarter in every year thereafter, which report shall report. of
oe verified by the oath or affirmation of the president and
cashier, and all wilful false swearing in respect to such
report shall be perjury, and subject to the punishment
prescribed by law for such offence. The report hereby
required shall be in the form prescribed by the comptroller, and shall contain a true statement of the condition of the association making such report, before the
transaction of any business on the morning of the day
specified, next preceding the date of such report, in repect of the following items and particulars, to wit:
^oans and discounts, overdrafts due from banks, amount
^ e from the directors of the association, real estate,
f le ' cash items > st ocks, bonds, and promissory notes,
of solvent banks, bills of suspended banks, loss and
^pnse account, capital, circulation, profits, amount due
0
banks, amount due to individuals and corporations
°«ier than banks, amount due the treasurer of the United
states, amount due to depositors on demand, amount due,
sil a n 11el eluded ™der either of the above heads. And it
u b
the duty of the comptroller to publish full ab- Abstracts of
i
ch reports together in two newspapers to be reports to be
1 racts of such reports together in two n e s p p
«*ignated n b hi t h e f o t h e rh t purpose, one i the city of published.
by him for t
that
in
hikv g t o ™ d
in the city of New York, ex*n)iting d items of capital, circulation, and deposits, Separate rethe h
cuvVe a n a n c a stlie items > P u b l i c securities and private se- ports of each
ta k?' d . se Pamte report of each association shall association to
be published
* Published in a newspaper published in the place where in local
uc
n eassociation is established, or, if there be no news- newspaper.
eflpP.aflr,at such place, then in a newspaper published at the
it
of the State, at the expense of the association
&2180O—63-

21




316

Association in
larger cities to
publish reports
monthly.

Upon failure to
redeem its circulation, holder
may protest the
same, unless,
&c

Association not
afterwards to
continue banking business.

Proviso.

Upon notice of
such failure to
redeem, comptroller to ascertain the fact.

FEDERAL BANKING LAWS AND REPORTS

making such report. In addition to the quarterly reports
required by this section, every association located and doing business in the cities of Boston, Providence, New
York, Philadelphia, Baltimore, Cincinnati, Chicago, St.
Louis, and New Orleans, shall publish, or cause to be published, on the morning of the first Tuesday in each month,
in a newspaper printed in the city in which the association making such report is located, to be designated by the
comptroller of the currency, a statement, under the oath
of the president or cashier, showing the condition of the
association making such statement, on the morning of the
day next preceding the date of such statement, in respect
to the following items and particulars, to wit: average
amount of loans and discounts, specie, deposits, and
circulation.
SEC. 25. And be it further enacted. That if any such
association shall, at any time fail to redeem, in the lawful
money of the United States, any of its circulating notes,
when payment thereof shall be lawfully demanded, during the usual hours of business, at the office of such association, the holder may cause the same to be protested,
in one package, by a notary public, unless the president
or cashier of the association shall offer to waive demand
and notice of the protest, and shall, in pursuance of such
offer, make, sign, and deliver to the party making such
demand an admission in writing, stating the time of the
demand, the amount demanded, and the fact of the nonpayment thereof; and such notary public, on making
such protest, or upon receiving such admission, shall
forthwith forward such admission or notice of protest
to the comptroller of the currency; and after such default it shall not be lawful for the association suffering
the same to pay out any of its notes, discount any notes
or bills, or otherwise prosecute the business of banking,
except to receive and safely keep money belonging toit»
and to deliver special deposits: Provided, however, That
if satisfactory proof be produced to such notary public
that the payment of any such notes is restrained by order
of any court of competent jurisdiction, such notary public
shall not protest the same; and when the holder of sucn
notes shall cause more than one note or package to w
protested on the same day, he shall not receive pay *or
more than one protest.
SEC. 26. And be it further enacted, That on receiving
notice that any such association has failed to redeem any
ot its circulating notes, as specified in the next preceding
section, the comptroller of the currency, with the concurrence of the Secretary of the Treasury, may appop

to pay its circulating notes, in the lawful money of the
United States, when demanded as aforesaid, and rep01*



317

FEDERAL BANKING LAWS AND REPORTS

to the comptroller the facts so ascertained; and if, from
such protest or the reports so made, the comptroller shall
be satisfied that such association has refused to pay its
circulating notes as aforesaid, and is in default, he shall,
within thirty days after he shall have received notice of
such failure, declare the United States bonds and securities pledged by such association forfeited to the United
States, and the same shall thereupon be forfeited accordingly; and thereupon the comptroller shall immediately give notice, in such manner as the Secretary of
the Treasury shall, by general rules or otherwise, direct,
to the holders of the circulating notes of such association
to present them for payment at the treasury of the
United States; and the same shall be paid as presented,
whereupon said comptroller may, in his discretion, cancel
an equal amount of the bonds pledged by such associa^
tion, equal at current market rates, not exceeding par, to
the notes paid; and it shall be lawful for the Secretary
of the Treasury, from time to time, to make such regulations respecting the disposition to be made of such
circulating notes after presentation thereof for payment
as aforesaid, and respecting the perpetuation of the evidence of the payment thereof, as may seem to him proper;
out all such notes, on being paid, shall be cancelled; and
ior any deficiency in the proceeds of the bonds pledged
b
y such association, when disposed of as hereinafter
specified, to reimburse to the United States the amount
so expended in paying the circulating notes of such association, the United States shall have a first and paramount hen upon all the assets of such association, and
such deficiency shall be made good out of such assets in
preference to any and all other claims whatsoever, except
tne necessary costs and expenses of administering the

If satisfied of
such failure, he
shall declare
the bonds
pledged to be
forfeited, and
notify holders
of notes to
present them
for payment.

Proceedings.

Instead of

SEC. 27. And be it further enacted^ That whenever the canceling the
comptroller shall become satisfied, as in the last preced- bonds comp-sell
troller may
them at
e s section specified, that any such association has re- auction, public
used to pay its circulating notes as therein mentioned,
2] f*7, instead of cancelling the United States bonds
i ^ged by such association, as provided in the next preying section, cause so much of them as may be necessary
Vjedeem the outstanding circulating notes of such assoy n ° nato be sold at public auction in the city of New
* , •' fter giving thirty days' notice of such sale to such
««
association.
or private sale,
SEC. 28. And be it further enacted, That the compiler of the currency may, if he shall be of opinion that
e
™erests of the United States will be best promoted
t
ferTrF'o sell at v private sale any of the stock so transeith t h i m b s u c h association, and receive therefor
a** • ^oney or the circulating notes of such faili
failing but not for less
d hl
, relat
relation: P
Provided, Th no such bonds shall be sold than par.
That
y P^vate sale for less than the par, nor less than the



318
Sale, -when
complete.

Comptroller
may appoint a
receiver.

Proceedings in
such case.

Association denying failure
may apply to
court for
injunction, and
have the issue
tried.

FEDERAL BANKING LAWS AND REPORTS

market value thereof at the time of sale. And provided
further, That no sales of any such stock, either public or
private, shall be complete until the transfer thereof shall
have been made with the formalities prescribed in this
act.
SEC. 29. And be it further enacted, That on becoming
satisfied, as specified in this act, that any such association
has refused to pay its circulating notes as therein mentioned, and is in default, the comptroller of the currency
may forthwith appoint a receiver, and require of him
such bond and security as he shall deem proper, who,
under the direction of the comptroller, shall take possession of the books, records, and assets of every description
of such association, collect all debts, dues, and claims
belonging to such association, and, upon the order of a
court of record of competent jurisdiction, may sell or
compound all bad or doubtful debts, and, on a like order,
sell all the real and personal property of such association,
on such terms as the court shall direct; and such receiver
shall pay over all moneys so made to the treasurer of
the United States, and also imke report to the comptroller of the currency of all his acts and proceedings.
The comptroller shall thereupon cause notice to be given,
by advertisement in such newspapers as he may direct,
for three consecutive months, calling on all persons who
may have claims against such association to present the
same, and to make legal proof thereof; and from time to
time the comptroller, after full provision shall have been
first made for refunding to the United States any such
deficiency in redeeming the notes of such association as
is mentioned in this act, shall make a ratable dividend
of the moneys so paid over to him by such receiver on
all such claims as may have been so proved or adjudicated
m a court of competent jurisdiction, and from time to
time, as the proceeds of the assets of such association
shall be paid over to him, he shall make further dividends, as aforesaid, on all claims previously proved or
adjudicated; and the remainder of such proceeds, if any>
shall be paid over to the shareholders of such association,
or their legal representatives, in proportion to the stqcK
by them respectively held: Provided, however, That n
any such association, against which proceedings have
been so instituted on account of any alleged refusal w
redeem its circulating notes as aforesaid, shall deny having failed to do so, such association may at any time
within ten days after such association shall have




FEDERAL BANKING LAWS AND REPORTS

319

notified of the appointment of an agent, as provided in
this act, apply to the nearest circuit, or district, or territorial court of the United States, to enjoin further proceeding in the premises; and such court, after citing the
comptroller of the currency to show cause why further
proceedings should not be enjoined, and after the decision of the court or finding of a jury that such association has not refused to redeem its circulating notes, when
legally presented, in the lawful money of the United
States, shall make an order enjoining the comptroller,
and any receiver acting under his direction, from all
further proceedings on account of such alleged refusal.
Bonds transSEC. 30. And be it further enacted, That the bonds ferred as
security, shall
transferred to the treasurer of the United States, as here- be held exinbefore provided, by any banking association for the clusively for
that
security of its circulating notes, shall be held exclusively until,purpose,
&c.
for that purpose, until such notes shall be redeemed, except as provided in this act; but the comptroller of the
currency may give to any such banking association
powers of attorney to receive and appropriate to its own
use the interest on the bonds which shall have been so
transferred to the treasurer by it; but such powers shall Interest.
become inoperative whenever such banking association May be surrendered on
shall fail to redeem its circulating notes as aforesaid; and cancelling
circulation.
said comptroller may direct the return of any of said
bonds to the banking association which transferred the
same, upon the surrender to him and the cancellation of
a proportionate amount of such circulating notes: Pro- Proviso.
nded, That ninety per centum of the current market
value of the remaining bonds which shall have been transferred by the banking association offering to surrender
such circulating notes shall be equal to the amount of all
™ circulating notes retained by such banking association: And provided, further. That there shall have been
|*o rail ure by such association to redeem its circulating
l0
*es, and that there shall have been no other violation
? Sljchs e c u r i t v
association of any of the provisions of this act
sMi
of the creditors of such association; nor
* lftH the treasurer be required to surrender such bonds
.
A fractional sums of less than one thousand dollars; and
h at any time after said bonds shall be deposited with
"* treasurer of the United States, as aforesaid, the marci,. Cas?1 v a l u e s h a l l b e reduced, the comptroller of the
rency is hereby authorized to demand and receive the
at ov ° f s u c h depreciation in other United States bonds
L asl?-value, tor bm money, from the association receivc s ' o e deposited with the treasurer of the
States, as long as such depreciation continues.




320
If market
value of bonds
depreciates,
and difference
is not made
good, comptroller to retain,
interest,

and invest the
same quarterly
in bonds.

When former
market value
is regained.

Worn-out or
mutilated notes
may be exchanged for
new.

Proceedings.

FEDERAL BANKING LAWS AND REPORTS

SEC. 31. And be it further enacted, That whenever
the price of any of the bonds pledged as aforesaid for the
redemption of the circulating notes of any such banking
association shall be, at the stock exchange in the city of
New York, for four consecutive weeks, at a rate less than
that at which they shall have been estimated when so
pledged, and such depreciation shall not have been made
good by a deposit of other bonds or money, it shall be the
duty of the comptroller of the currency to notify the
treasurer of the United States of such fact, and the payment of interest upon such depreciated bonds shall be
suspended, and such interest shall be retained by said
treasurer until the same, when added to the current market value of the bonds so pledged, to be ascertained as
before provided, shall be equal to the amount for which
such bonds were pledged: Provided, That it shall be the
duty of the comptroller of the currency, at the expiration of every period of three months, to cause the whole
of the sums so retained, and then remaining in the treasury of the United States, to be invested in United States
bonds, in the name of the comptroller of the currency, in
trust for the respective associations by which the bonds
on which such interest shall have accrued shall have been
pledged; and whenever the price of such depreciated
bonds at the stock exchange in New York shall rise to tne
price at which they were pledged, and so remain for ioui
consecutive weeks, such investment shall be a s ^ ^ d w
such association, and all accruing interest on sue!
bonds shall thereafter be paid to such association on
mand thereof.
, fl
SEC. 32. And be it further enacted, That it shall be tne
duty of the comptroller of the currency to receive *on
out or mutilated circulating notes issued by any su
banking association, and to deliver in place t l i e ^uai
such association other blank circulating notes to an eq <
amount; and such worn-out or mutilated notes, an ^
memorandum slmll have been entered in the proper DO »
in accordance with such regulations as may pe es . _
lished by the comptroller, as well as all circulating
which shall have been paid or surrendered _to be
hich shall have been paid or surrend
celled, shall be burned to ashes in presence of y ^ L .
sons, one to be appointed by the Secretary of the x .
ury, one by the comptroller of the currency, and on
the treasurer of the United States, under such reguw. .^
as the Secretary of the Treasury may prescribe; O J ^
case such notes shall have been delivered to the comy ^ e
ler by an officer or agent of such association, then




FEDERAL BANKING LAWS AND REPORTS

321

presence, also, of such officer or agent; and a certificate of
such burning, signed by the parties so appointed, shall
be made in the books of the comptroller, and a duplicate
thereof given to such officer or agent.
SEC. 33. And be it further enacted, That it shall be un- Notes not to
be delivered
as prolawful for any officer acting under the provisions of this exceptin this
act to countersign or deliver to any such association, or vided
act.
to any other company or person, any circulating notes
contemplated by this act, except as hereinbefore provided, and in accordance with the true intent and meaning of this act; and any officer who shall violate the
provisions of this section shall be deemed guilty of a Penalty.
high misdemeanor, and on conviction thereof shall be
punished by fine not exceeding double the amount so
countersigned and delivered, and imprisonment not exceeding fifteen years, at the discretion of the court in
which he shall be tried.
Costs of
SEC. 34. And be it further enacted, That all fees for protest.
protesting the notes issued by any such banking association shall be paid by the person procuring the protest
to be made, and such banking association shall be liable
therefor; but no part of the stock pledged by such banking association, as aforesaid, shall be applied to the payment of such fees j and all expenses of any preliminary
or other examinations into the condition of any association shall be paid by such association; and all expenses of Expenses of
preliminary
wy receivership shall be paid out of the assets of such examination,
of receivership.
association before distribution of the proceeds thereof.
SEC. 35. And be it further enacted. That the stockhold- Indebtedness
ers, collectively, of any such association shall at no time of stockholders
to association
** liable to such association, either as principal debtors limited,
or sureties, or both, to an amount greater than three fifths
°i the capital stock actually paid in and remaining unjjiminished by losses or otherwise; nor shall the directors of directors.
be
so liable, except to such amount and in such manner
as shan be prescribed by the by-laws of such association,
adopted by its stockholders to regulate such liabilities.
Capital stock
OEC. 36. And be it further enacted, That the capital of association,
stock of any association formed under this act shall be how divided.
divided into shares of one hundred dollars each, and Shares, how
Sn
all be assignable on the books of the association m assignable.
such manner as its by-laws shall prescribe; but no shareholder in any association under this act shall have pow- Limit upon sale
er
to sell or transfer any share held in his own right so and transfer.
i011
g as he shall be liable, either as principal, debtor,
sm
*ety, or otherwise, to the association for any debt




322

Associations
not to take
their stock as
security for
loans, &c,
nor own it, or
stock of other
association,
unless, &c.

Shareholders
entitled to one
vote for each
share.
Proxies.

Directors.
Number.

Residence.

FEDERAL BANKING LAWS AND REPORTS

which shall have become due and remain unpaid, nor in
any case shall such shareholder be entitled to receive any
dividend, interest, or profit on such shares so long as
such liabilities shall continue, but all such dividends,
interests, and profits shall be retained by the association, and applied to the discharge of such liabilities;
and no stock shall be transferred without the consent
of a majority of the directors while the holder thereof
is thus indebted to the association.