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61ST CONGRESSl

2d Session

SENATE

/DOCUMENT

No. 571

NATIONAL M O N E T A R Y COMMISSION

The

First and Second Banks
of the United States

By
JOHN T H O M H O L D S W O R T H , Ph. D .
and

DAVIS R. D E W E Y , Ph. D .

Washington : Government Printing Office : 1910

NATIONAL MONETARY COMMISSION.

JULIUS C.

NELSON W. ALDRICH, Rhode Island, Chairman.
EDWARD B. VREELAND, New York, Vice-Chairman.
BURROWS, Michigan.
JESSE OVERSTREET, Indiana.

E U G E N E H A L E , Maine.

J O H N W . W E E K S , Massachusetts.

PHILANDER C. K N O X , Pennsylvania.

ROBERT W . BONYNGE, Colorado.

THEODORE E. BURTON, Ohio.

SYLVESTER C. SMITH, California.

J O H N \V. DANIEL, Virginia.

LEMUEL P . PADGETT, Tennessee.

HENRY M. TELLER, Colorado.

GEORGE F\ BURGESS, Texas.

HERNANDO D. MONEY, Mississippi.

ARSENE P . P U J O , Louisiana.

JOSEPH W. BAILEY, Texas.

ARTHUR B . SHELTON, Secretary.

A. PIATT ANDREW, Special Assistant to Commission.

TABLE OF CONTENTS.
T H E FIRST BANK OF T H E UNITED STATES.
By JOHN THOM HOI^DSWORTH, P h . D., of the University of

Pittsburgh.

Page.

Hamilton's plan of 1779
Hamilton's plan of 1781
Hamilton's report in 1790
Establishment of the bank
Charter provisions
Subscriptions for stock
Organization
By-laws and regulations
Paying in of capital
Paying in of capital by the Government
Election of directors
Branches
Relation of state banks
Loans to the Government
The government sale of bank stock
Circulating notes
Counterfeiting of notes
Cooperation with the mint
The Treasury and the bank—Foreign exchange operations
Government deposits
Aid to importers
Attitude of Democratic administrations toward the bank
Gallatin's defense of the bank in 1803
Application for recharter
Recharter favored by Gallatin
Modifications recommended by Gallatin
Indecisive action by Congress
Second petition for recharter
Attitude of banks and trade organizations
Memorials and popular discussion
Debate on recharter
Temporary extension refused

9
. 10
13
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19
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25
27
29
31
34
36
40
42
48
49
52
53
54
58
63
66
71
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97

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Page.

State charter refused
Charter granted to New York stockholders
Girard's bank
Fiscal operations after dissolution of bank
Liquidation
Consequences of dissolution
Bank reports
Profits and dividends
Taxation
Conservatism, a characteristic

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109
in
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123

APPENDICES :

A. Act of incorporation
B. Ordinance and by-laws of the bank
C. Quotations of bank stocks
* D. Dividends
E. Records and accounts of the bank

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136
137
138

T H E SECOND UNITED STATES BANK.
By DAVIS R. DEWEY, Ph. D., of the Massachusetts Institute of Technology.

Page.

Preface
Debate on plans
Relation to state banks in resuming specie payments
Comparison of charters of First and Second United States banks
Payment of capital
Friction in transfer of public deposits
The conflict over the acceptance of State bank notes
Branches
Ownership of stock
Loans on bank stock
Change in character of capital
Government deposits
Transfer of public funds
• Circulation
Sale of drafts
Exchange
Discounts and loans
President Jackson's opposition to the bank
Charges against the bank—political activity
Criticism of branch drafts
Criticism of other banking operations

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204
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261

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APPENDICES :

Page.

A. Act of incorporation
B. Rules and regulations for conducting the business of the
Bank of the United States
C. Rules and regulations for the government of the offices of
discount and deposit established by the Bank of the
United States
D. The bill to continue the charter, which was vetoed by President Jackson
E. Veto message of President Jackson, July 10, 1832
F . Balance sheets of bank: 1820, 1825, 1831, 1832

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290
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299
308

The First Bank of the United States

By
JOHN THOM HOLDSWORTH, Ph. D.
University of Pittsburgh

THE FIRST BANK OF THE UNITED
STATES.
The establishment of the Bank of the United States in
1791 was an essential and vital part of the general scheme
for the support of public credit proposed by Alexander
Hamilton, first Secretary of the Treasury. The institution of a national bank Hamilton regarded as " a n indispensable engine in the administration of the finances/' a
HAMILTON'S PLAN OF

1779.

This conception of the utility of a bank was not a matter
of impulse or sudden exigency. As early as 1779, Hamilton wrote to Robert Morris favoring a bank of issue based
on landed security. 6 Later, in 1780, when the Revolutionary finances were at low ebb and the currency of the
country was demoralized, Hamilton, then serving in the
army, wrote to Morris discussing the financial situation
thoroughly and proposing measures of relief. "The only
plan that can preserve the currency is one that will make
it the immediate interest of the moneyed men to cooperate
with the Government in its support." He proposed an
American bank with a capital of $200,000,000. His
project contemplated a foreign loan of $10,000,000 " t o
be thrown into the bank as a part of its stock.'' The
Government was to guarantee one-twentieth of the subscription money to the stockholders, and was itself to
share half the stock and profits of the bank. All the
a Hamilton's Report on Public Credit, December 13, 1790.
b Hamilton's Works (Hamilton), Vol. I, p. 116.

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remaining paper was to be called in and bank notes
issued in its stead. The bank was to lend Congress
£2,000,000 annually at 4 per c£nt. Hamilton questioned the necessity of so large a capital, but he wished
to have it large enough " t o engage a sufficient number of
the principal moneyed men in the scheme." This "hasty
production" of Hamilton's was the result "of some reading on the subjects of commerce and finance," but in the
ten years which intervene before Hamilton's great
project for a national bank materializes his ideas on the
subject undergo considerable change.
HAMILTON'S PLAN OF

1781.

On April 30, 1781, Hamilton, whose mind ran constantly
to questions of government and finance, wrote again to
Morris, who had recently been appointed Superintendent
of Finance. a Hamilton had great respect for Morris,
and he was eager to render him every aid possible. In
this letter, discussing ways and means of raising revenue,
Hamilton renews his suggestion of a national bank. He
proposes a bank with a capital of £3,000,000 (though he
thought it would succeed if only half that amount were
obtained) founded in part upon landed security. Thus a
subscriber of from 6 to 15 shares (£500 each) should pay
one-half in specie (or plate or bullion), the other half in
good landed security. Subscribers to 16 shares and
over should pay one-third in specie, one-sixth in foreign
bills of exchange, and one-half in good landed security.
Hamilton recognized that to procure so much specie resort
would have to be made to foreign assistance, for he esti<*> Hamilton's Works, Vol. I, p. 223; Dunbar, Economic Essays, pp.
89-90.

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mated that in all of the States there was not more than
$6,000,000. The United States, or a particular State, or
foreigners might subscribe in sums not to exceed one-half
the capital. The notes were to be payable in pounds,
shillings, and pence " t o produce an illusion in the minds
of the people favorable to the new paper," or rather to
escape by a change of nomenclature the universal prejudice against the old continental currency, which was
payable in dollars. Notes under 20 shillings were to bear
no interest; above that sum they were to bear 4 per cent.
This latter device was to give them preference over
specie, and prevent a run upon the bank. Gradually the
interest was to be reduced to 2 per cent. Some of the
notes were to be payable in Europe as well as at home, so
as to enable the bank to use its funds there and to increase
the demand for bank notes by making them useful in
foreign commerce. Loans were to be made at a rate not
above 8 per cent. The bank might purchase estates and
coin money to the amount of half its capital. This latter
provision was necessary because the bank might receive
plate or bullion as subscriptions, and profit might result
from converting these into coin. The bank was to have
the right to contract with the French Government for
the supply of its armies and fleets in America and to
contract with Congress for the supply of its armies. A
loan of £1,200,000 at 8 per cent was to be made to
Congress, for the payment of which a sinking fund of
£110,400 per year was to be established for twenty years,
and the States generally and severally were to pledge
themselves for its payment. The bank was to be chartered for thirty years " b y way of experiment/' and no

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other bank was to be permitted during that period.
Three agencies were to be established, one each in Massachusetts, Pennsylvania, and Virginia, to facilitate the
circulation and payment of the notes. Hamilton thought
they should be located in the interior, distant from the
leading trading centers, so as to "make applications for
the payment of bank notes less convenient.'' The
management of the bank was to be in the hands of 12
directors, 8 to be chosen by the stockholders and 4 by
Congress. Commenting upon this proposed plan, Hamilton says that if the leading principles of his scheme be
approved, " t h e structure may easily be determined. We
shall find good models in the different European banks,
which we can accommodate to our circumstances.'' 0
Hamilton later came to realize that land was not the
proper security for bank notes. In 1784, Chancellor Livingston, of New York, fathered a project for a land bank in
that city, and application was made to the state legislature
for an exclusive charter. Hamilton, by this time thoroughly convinced of the folly of such an enterprise, started
an agitation for a bank founded on a more solid basis. 6
Out of this movement grew the Bank of New York, the
constitution of which was drawn by Hamilton himself.6
Hamilton became a director of the bank, and, though this
relation was severed in 1788, he always showed a lively
interest in its prosperity, and threw many favors in its
way, when that was legitimately permissible, during his
0 Many of Hamilton's suggestions were incorporated in Morris's report to
Congress recommending the establishment of the Bank of North America.—
Knox, History of Banking, p. 40.
& Hamilton to J. B. Church, March 10, 1784.
c Domett, Bank of New York, p. 11.

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administration of the federal finances. In return, the
directors of the bank were prompt to respond when called
upon to assist the Government with temporary loans.
For several years the Bank of New York carried on business
under the articles of association drawn by Hamilton, but
finally, after repeated failures, it secured a charter as an
incorporated concern, March 21, 1791. At that time
Hamilton held one and a half shares of its stock (par
$500).«
HAMILTON'S REPORT IN

1790.

In December, 1790, Hamilton submitted an elaborate
report on the subject of a bank to be founded under a
national charter. He clearly appreciated the popular
prejudice against the establishment of banks, and consequently devoted a large part of his argument to the defense
of banking institutions and a bank-note currency. He
anticipated possible objections by noting the successful
experiences of public banks among the principal and most
enlightened commercial nations of the world. In those
countries the experience of centuries showed that such
banks rendered invaluable service both to the Government
and to trade. The Government of the United States, too,
not only in the critical period of the recent war, but also in
times of peace, had received from the banks indispensable
aid. His discussion was undoubtedly the most informing
and illuminating presentation of banking principles and
practice known to American literature up to that time.
It did much to remove misunderstanding regarding banking institutions, and incidentally it furnished an arsenal

o Domett, Bank of New York, p. 132.

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of arguments for the defense of the proposed bank in the
debates which followed in Congress.
The first advantage which Hamilton claims for the bank
is " the augmentation of the active or productive capital of
a country.'' He means by this not the creation of additional capital, but more effective utilization of capital by
which scattered and otherwise idle amounts are concentrated and made to serve the uses of business. He
states that the great proportion of the notes issued
are "indefinitely suspended in circulation;" " t h a t large
sums are transferred by check" without the intervention of a single piece of coin; " t h a t deposits for safekeeping as well as for accommodation " form an " effective
fund " for the operations of the banks, for, even if they are
withdrawn, they are speedily replaced, as money "much
oftener changes proprietors than place," and not only is
the quantity of money increased, but its circulation is
" quickened." Without notes coin must be remitted from
place to place with "trouble, delay, expense, and risk."
Bank notes, however, can be transmitted by post or other
convenient conveyance. With their use, therefore, the
metals are not "suspended from their usual functions
during this process of vibration from place to place," but
"continue in activity."
Hamilton laid great stress upon the advantage of a bank
in making loans to the Government, especially in sudden
emergencies, and in facilitating the payment of taxes.
This latter benefit had been demonstrated in places where
banks already existed. These governmental advantages
were, doubtless, foremost in Hamilton's mind. A
national bank to him was not " a mere matter of private

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property, but a political machine of the greatest importance to the state.'' Thus conceived as a political machine,
the Bank of the United States never threw off entirely its
political trappings, and it finally died as the result of
political enmities and jealousies.
The most serious charges against banks were that they
served to increase usury; they tended to prevent other
kinds of lending; they furnished temptations to overtrading; they afforded aid to ignorant adventurers who
disturbed the natural and beneficial course of trade; they
gave to bankrupt and fraudulent traders a fictitious credit,
enabling them to maintain false appearances and to
extend their impositions; and they tended to banish gold
and silver from the country. Hamilton reviewed these
charges and either refuted them or opposed counterbalancing advantages.
Hamilton concluded the introduction to his nationalbank scheme by arguing strongly against the issue of
paper by the Government and in favor of bank issues payable in coin.
Having demonstrated the desirability of a national
bank, Hamilton next considered the possibility of utilizing
one of the three existing banks—the Bank of North
America, in Philadelphia, the Bank of New York, and the
Bank of Massachusetts. He considered only the Bank
of North America, the only one of the three which had
had at any time a direct relation to the Government.
While paying willing tribute to the great services of that
bank to the United States during the Revolution and the
aid it had extended after the war, he reasoned that it
lacked certain of the essential requisites of a national

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bank. This bank, chartered originally by the Continental
Congress, had afterward accepted and acted under a new
charter from the State of Pennsylvania, which greatly
narrowed its scope. The original capital was $10,000,000,
but this had been reduced in the state charter to $2,000,000,
which would not insure " t h e requisite aid to the Government nor the requisite security to the community."
Another objection raised by Hamilton was that the
charter of the Bank of North America did not provide
for rotation in the board of directors. This principle
he regarded as essential in that it would lessen the
danger of combinations among the directors to use the
bank's influence for partisan purposes or to monopolize its
funds for the accommodation of any particular set of men
or interests. Danger of a monopolization of the power
and benefits of the bank lay, also, in the principle of one
share one vote recognized in the charter of the Bank of
North America. And, finally, that bank did not guard
against the influence of foreigners by prohibiting them
from becoming directors or voting by proxy. If, however, that institution should be willing to make such
changes as were "necessary to the due extent and safety
of a national bank," every reasonable facility should be
offered it to do so, not only because of its earlier relation
and services to the Government, but also because its
cooperation would remove the possibility of a collision
of the two institutions. The Bank of North America,
however, showed no disposition to undertake the reorganization which would have been necessary to bring it
into accord with Hamilton's plan. "The quiet and
prosperous business in which they were engaged, under

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state auspices, was to them preferable to the anxieties
and hazards which would probably attend the new national
undertaking." a
ESTABLISHMENT OF THE BANK.

The bill to charter the Bank of the United States was
introduced in the Senate December 23, 1790, and was
debated there until January 20, when it was transmitted
to the House. On January 31 the House went into Committee of the Whole for the consideration of the bill. It
was opposed by Madison and 18 others, all of whom, with
one exception, were members from the Southern States.
The debate was concentrated largely upon the question
of the constitutionality of the proposed bank. 5 Madison
and his supporters assailed the constitutional authority
of Congress to incorporate a national bank. He argued
that the question of authority to incorporate a bank had
arisen in relation to the Bank of North America under the
old Confederation and that the constitutional convention
had specifically refused to include among the powers of
Congress that of incorporation, because this might be
construed to confer power to establish a bank. The
advocates of the bank, however, met this argument with
the claim that there was nothing particularly awe-inspiring
or sovereign about acts of incorporation; that the erection
of a bank was merely an act of legislative expediency,
clearly included in the implied powers of Congress under
the Constitution.
a Lewis, History of Bank of North America, p. 79.
& Clarke and Hall, Legislative and Documentary History of the Bank of
the United States, pp. 36-85.

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After a week's debate the bill was passed, February 8,
by a vote of 39 to 19. This was not a strictly party vote,
for 11 of those who voted for the bank were Democrats,
while 6 Federalists voted against it; but it afterwards
became " one of the landmarks of party, and in the Second
Congress a resolution.declaring the bank charter unconstitutional was within one vote of passing the House/' a
As the bank bill reached its final stages numerous
attempts were made to limit the scope or the life of the
proposed institution. A motion in the Senate to expunge the section providing that no other bank should
be established by the United States was defeated. h Another motion to add a clause that nothing should prevent
Congress from abolishing the corporation after May 4,
1802, was likewise voted down. c On January 13, 1791,
a motion to limit the term of the charter to seven years
was met by another motion to extend it to March 4, 1815,
both of which were postponed. d
The bill was presented to the President February 14,
1791. Washington gave it anxious and diligent consideration. The question of its constitutionality, which
had been the chief ground of controversy and opposition
in Congress, was carefully considered by the President.
To aid him in reaching a sound decision, he asked three
of his cabinet advisers for their written opinion. The
Attorney-General (Randolph) and the Secretary of State
(Thomas Jefferson) argued against the constitutionality
of the bank, but Hamilton, Secretary of the Treasury, to

Gouge, Paper Money and Banking, p. 38.
& Annals of Congress, Vol. II (1789-1791), p. 1748.
c Ibid., p. 1769.
<*Ibid:, p. 1745.
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whom these opinions were submitted by Washington,
swept away their arguments so completely that Washington signed the bill, February 25, 1791.0
CHARTER PROVISIONS.

. The bill provided for a Bank of the United States to be
located in Philadelphia with a capital of $10,000,000,
divided into 25,000 shares of $400 each. One-fourth
of all subscriptions, private and corporate, was to be
paid in specie, and three-fourths in United States stock
bearing 6 per cent interest, payable in four equal semiannual payments. The President of the United States
was authorized to subscribe, on behalf of the United
States, $2,000,000, a loan of equal amount to be made
by the bank, which was to be reimbursed in 10 equal
annual installments. No subscription other than that
of the Government was to exceed 1,000 shares. There
were to be 25 directors, not more than three-fourths of
whom were to be eligible for reelection the next ensuing
year. Seven directors were to constitute a quorum.
No stockholder, unless a citizen of the United States,
could be a director. The directors were to elect a president who was to receive a salary, but they were to serve
without compensation. No foreign stockholder might
vote by proxy. One share was to have * vote, 3 shares
2 votes, 5 shares 3 votes, and so on until 100 shares had 20
votes. The bank was allowed to issue notes, payable
to any person or persons, assignable and negotiable, or
to bearer assignable by delivery. The notes were legal
tender in payment of all debts to the United States.

a Works, Vol. IV, p. 104.
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The maximum amount of debts which the bank might
owe at any time, except for moneys deposited for safekeeping, was never to exceed $10,000,000, unless the
contracting of such debts was authorized by Congress,
and in case of. excess the directors under whose administration it occurred were to be personally liable for the
amount. The bank was forbidden to buy or sell goods
except forfeited collateral, under penalty of forfeiting
three times the value of the commodities, one-half of
the forfeit to go to the informer, the other half to the
United States. It might sell but not buy United States
stocks (bonds). It was permitted to hold only such real
estate as was necessary in the immediate accommodation
of its banking business or such as had been mortgaged
to it as security or conveyed to it in satisfaction of debts
previously contracted in the course of its dealings or at
sales upon judgments obtained for such debts. The
bank was not to loan to the United States more than
$100,000, nor to any State more than $50,000, nor make
any loan to a foreign prince or State, unless previously
authorized by act of Congress. Loans and discounts were
not to be made at a rate above 6 per cent. The directors
were permitted to establish offices for discount and deposit
only wherever they should think fit within the United
S t a t e s . / A report of the condition of the bank was to
be furnished to the Secretary of the Treasury at his
demand, but not oftener than once a week, and that
officer had the right to inspect the books, except private
accounts. The charter was to expire March 4, 1811,
and during the continuance of the corporation no other
bank was to be established by the United States./ The

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bank might begin operations when $400,000 had been
paid in gold and silver.a
On March 20, 1791, a supplementary bill was passed
providing that subscriptions should not be opened until
the first Monday in July, thus affording three months
longer to allow citizens in distant parts of the country
to subscribe. This bill also provided that payments in
the United States 3 percents might be subscribed as well
as the 6 percents, computing the former at one-half the
latter, and reserving to subscribers the right to redeem
the threes with sixes any time before January 1, 1793;
that the specie proportion was to be paid at the time of
subscribing, failure to make future payments forfeiting the
first payment; and that no person or corporation, except
on behalf of the United States, should, for three months
after July 4, subscribe in any one day for more than
thirty shares.
It is to be noted that the bank was to be under private
management. In this, as Dunbar points out, Hamilton
followed English rather than continental precedent.
"This independence of the Executive he secured by forbidding loans of serious amount for the use of the Government, unless specially authorized by law." 6 A comparison of the Bank of England act of 1694 and the United
States Bank act of 1791 shows, moreover, that a careful
study had been made of the English institution. The
powers of the banks, relating to the scope of the business,
were practically identical. " I n each the redemption of
notes in specie was required, and the amount of the issue

a For full text of the bank bill, see Appendix A.
b Economic Essays, p. 91.
21

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was limited in the charter of the Bank of England by forbidding debts in excess of the capital, and in the charter
of the Bank of the United States by forbidding the debts
exclusive of deposits to exceed the capital. ,,a
SUBSCRIPTIONS FOR STOCK.

Under date of May 3, 1791, the commissioners appointed
to receive subscriptions gave notice in the newspapers
that the books would be opened for that purpose at the
Bank of North America, in Philadelphia, July \.h The
commissioners included some of Philadelphia's leading
business men—Thomas Willing, Beale Bordley, David
Rittenhouse, Samuel Howell, and Lambert Cadwalader.
Active interest in subscriptions to the stock developed
at once all over the country, but especially in New York
and Boston. In the latter city the Bank of Massachusetts received subscriptions, and in New York the Bank
of New York had to refuse many who wanted to subscribe. In Boston it was said that subscriptions for
2,400 shares were filled in four days, and a specie deposit
of $60,000 was paid into the Bank of Massachusetts. 0
Similar interest was shown in Baltimore, Richmond, and
Charleston. In Charleston the Chamber of Commerce
instituted steps to secure a branch of the bank in that
city, and resolutions were adopted inviting the people
of South Carolina, by public advertisements, to subscribe for stock. Under date of June 2, 1791, certain
public-spirited citizens of Charleston announced in the
papers that they would receive and transmit subscriptions

o Economic Essays, p. 92.
6 General Advertiser, May 13, 1791.
^Dunlap's American Daily Advertiser, June 30, 1791.
22

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and urged haste, saying that in the North subscriptions
were pouring in so fast that Charleston might be left
out unless they subscribed at once. They estimated
that annual profits on the stock would amount to 8 or
10 per cent. At the end of June it was reported that
South Carolina had already subscribed 1,000 shares and
that a part of the specie deposit had been deposited in
the Bank of North America.0 Commenting upon this
interest in the new bank, the Daily Advertiser said:
"The Bank of the United States may justly be considered as a proposition made to the moneyed interest,
foreign and domestic, and in fact appears to both in
a very favorable point of light—the latter, from every
information, are making great preparations to subscribe,
and the terms are so advantageous that no equal object
of speculation is perhaps presented in any quarter of
the globe to the former." 6 Subscriptions continued to
pour in from all quarters. A long debate in the Massachusetts legislature on the proposal to subscribe for 400
shares was defeated. The Bank of North America, the
only bank in Philadelphia at that time, might naturally
have resented the intrusion of this new giant in the local
banking field, over which for years it had held undisputed
sway, and by some it was thought that "the jealousy
and rivalry drawn from the existence of the Bank of
North America" might prevent the moneyed men of
Philadelphia from participating to their proportionate
quota in the subscriptions to the new concern.0 Later
aDunlap's American Daily Advertiser, June 9, 24, 1791.
blbid., May 9, 1791.
c General Advertiser, June 24, 1791.

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developments, however, disclosed the fact that Philadelphians were as eager to participate in the benefits
and profits of the new bank as were the people of any
other section, while the Bank of North America evinced
a lively interest in the welfare of the new institution,
with which it worked harmoniously from the outset.
On July 4 the subscription books were opened in
Philadelphia, and within two hours the entire capital
of 25,000 shares was subscribed and application was
made for 4,000 additional shares. a The commissioners,
accordingly, were compelled to deduct a certain proportion from every subscription. In some quarters there
was " lament that Philadelphians have engrossed so
much of the stock and have so divided the shares as
to multiply their notes. They believe that there was
management and partiality in the commissioners." 6
Immediately a violent speculation sprang up in bank
stock or " script/' as it was called. Two days after
the subscription books were closed $35 was paid for a
right to the certificate which the commissioners were
to deliver, acknowledging receipt of the first cash payment of $25, and within a week sales were made at
$50.c Brokers' offices sprang *up on all sides advertising
the purchase and sale of bank script. The New York
Daily Advertiser, in warning the public against speculators, notes that the stock under speculative manipulation rose in August, 1791, to 56, then dropped to 45,
"from 45 to 60, from 60 to 100 in two days, from 100
to 150 was the leap in a single day." It was claimed
°Gibbs, Administrations of Washington and Adams, Vol. I, p. 68.
& Fisher Ames to Hamilton, July 31, 1791, Works, Vol. V, p. 473.
c General Advertiser, July 6, 8, 1791.

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... * .
. . ,
. —.—that the interests of agriculture, commerce, and manufactures suffered by the withdrawal of considerable sums
of specie with which to speculate in bank script.
ORGANIZATION.

The work of organization proceeded very slowly, and
it was not until October 7 that a meeting of the Philadelphia stockholders was called to select a committee
to meet like committees of other States to propose
names of directors. a
On October 21 a general meeting of the stockholders
was held in the city hall, Philadelphia, and 25 directors
were chosen. Ten of the directors received 2,936 votes
each, and the lowest vote cast for any director was 2,920.°
The directors met October 25 to select the officers of
the bank. The presidency was offered to Oliver Wolcott^
at that time serving as Comptroller of the Currency
under Hamilton, but he declined it, " preferring the public
service, and believing that such a station would be deemed
unsuitable for a young man without property." 6 Thomas
Willing, president of the Bank of North America, and
formerly a business partner of Robert Morris, was then
made president, a position which he retained until 1808.
Willing was, by social position, business talent, and
experience in public affairs, remarkably well qualified to
assume the responsible position of president of the most
powerful financial concern in the country. He had wide
business experience as partner in the prosperous business
of Morris & Willing and as president of the Bank of North
o General Advertiser, October 21, 1791..

Gibbs, Vol. I, p. 68.

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America. He had served successively as secretary to
the congress of delegates at Albany, judge of the supreme
court of Pennsylvania, mayor of Philadelphia, member
of the Colonial Assembly, president of the Provincial
Congress, and delegate to Congress under the Confederation. He thus enjoyed a wide acquaintance with public
men and affairs.a The appointment of Willing as president did not meet with general satisfaction. In Boston,
for example, it was feared that he might be dominated
by men like Robert Morris, a powerful influence in the
affairs of the Bank of North America, who was regarded
in the East as a desperate speculator and as " a man of
talents and intrigue. " b
With the selection of a president, the business of
organization proceeded more rapidly. John Kean was
appointed cashier, with a salary of $2,700, and George
Simpson, first teller at $1,500. There was a second
teller at $1,000, a first and second bookkeeper at $1,000
and $800, respectively, a discount clerk at $750, an
assistant clerk at $600, and a runner at $600. Some of
the papers reported that President Willing's salary had
been fixed at $3,000, but the General Advertiser denied
this, remarking that the president's salary could not be
fixed by the directors, but only by a general meeting of
the stockholders. Later his salary was fixed at $3,000.°
The records of the Bank of North America show that, a
few years later, the salary of the president of the Bank
of Pennsylvania was $3,000, while the Farmers and
a Simpson, Lives of Eminent Philadelphians, p. 960.
& Ames to Hamilton, Works, Vol. V, p. 474.
c Minute book, Bank of North America.

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Mechanics* and the Bank of North America each paid
$2,500 to their respective presidents.
BY-LAWS AND REGULATIONS.

At a general meeting of stockholders, held in City Hall,
October 28, 1791, a committee of seven was appointed to
draft by-laws and regulations for the bank. A month
later the committee submitted its report. The by-laws
as adopted provided that the bank should be open every
day in the year excepting Sundays, Christmas, and July 4.
The books were to be kept in dollars and cents, and
were to be balanced the first Monday in January and
July, when the semiannual dividends were to be declared
and published in four newspapers. The bank was to take
charge of the cash of all who cared to deposit it there,
free of expense, and keep it subject to their order, payable at sight; also to receive deposits of gold ingots, silver
bars, wrought plate, or other valuable articles of small
bulk. It was to receive and pay all specie coins according to the rates and value fixed by Congress. Until the
contemplated offices of discount and deposit should be
established, there were to be two discount days each
week, at which times a meeting of the board of directors
was to be assembled. Discounts were to be made at
such rates, not less than 5 per cent or more than 6, as
the board should deem proper "on bills of exchange that
have not more than sixty days to run, and with such
securities and under such modifications" as the board
should deem satisfactory and expedient. The president
was authorized to convene the board on special occasions
and to affix the seal of the bank to all conveyances and

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documents. A committee of at least three of the directors was to be elected by ballot monthly to visit and inventory the vaults to see that the cash agreed with the
books. The bank was to issue no notes or bank paper
except by direction of the board. It was further provided that if the directors should declare a dividend above
what the profits justified, thus diminishing the capital,
the assenting directors should be responsible therefor.
The board was authorized to receive the money subscribed from the commissioners. They were to determine how the balance of the stock should be paid in and
to establish forms for stock transfers, dividend receipts,
proxies, notes, etc. They were to establish a seal and
fix the duties of the officers. The directors were empowered to make loans to the Government or to any State,
but the assent of a majority was required. They were
also empowered to purchase a lot and erect a bank building thereon. 0
On November 22, 1791, the following bank regulations
were adopted and published for the information of stockholders and customers: The bank was to be open from
9 to 4. The discount rate, "for the present," was to be
6 per cent. The charter of the bank fixed that as the
maximum interest rate. 5 Bills or notes offered for discount were to be delivered at the bank Mondays and
a

Daily Advertiser, November 14, 1791.
& Fisher Ames thought t h a t if the rate were made 5 per cent the bank
would do more business and with safer people. By giving better terms to
borrowers the bank would overpower the state institutions, which he
feared might become unfriendly and through hatred and rivalry narrow
the business of the United States Bank, and, perhaps, become dangerous
instruments in the hands of state partisans.—Ames to Hamilton, July 31,
1791, Works, Vol. V, p. 474.

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Wednesdays and presented to the directors on Tuesdays
and Thursdays. The results of their action were to be
known on the next succeeding days—that is, borrowers
submitting paper for discount were apprised of the result
two days later. After the bank got under way, this rule
was changed so that bills and notes for discount were presented on Mondays and Thursdays. 0 Discounts were to
be made on personal security only, with at least two re°
sponsible names—that is, double-name paper—and were
limited to sixty days. Three days of grace were allowed
on all bills payable to the bank, interest being charged for
the same. The bank would present without charge bills
or notes left for acceptance, provided that in case of nonpayment and protest the protest charges should be paid
by the person lodging the bill. Payments made over the
counters of the bank were to be examined at the time,
and no errors were to be corrected afterward. The regulations also prescribed and set out in detail the forms for
voting by proxy at elections, for transferring stock, and
similar forms. 5
PAYING IN OF CAPITAL.

December 12, 1791, ten months after receiving its
charter, the bank opened for the regular transaction of
business. It is assumed that the prescribed amount of
specie, $400,000, necessary to begin operations had been
paid in. Sumner says: "The belief at the time, and subsequently, was that no more than the specie part of the
first installment ever was paid into the bank in specie. ,,c

a Daily Advertiser, January 3, 1792.
b Ibid., November 22, 1791.
c History of Banking in all Nations, Vol. I, p. 33.

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Bollman, writing in 1810, said: "No more or little more
than the first installment, $675,000, can be considered as
having been received by the bank actually in hard
money."* In a debate in the Pennsylvania legislature in
1793, it was stated that one great source of profit to the
Bank of the United States when it was first established
was in the discounting of notes for stockholders, to enable
them to pay subsequent installments. No one seemed
sufficiently informed or inclined to defend the bank from
this charge, and in the light of facts bearing upon this
dangerous practice in the organization of other banks it
seems probable that the charge was not groundless. 6
To facilitate the payment of the second installment of
specie, due in January, 1792, the bank arranged with the
Bank of Massachusetts and the Bank of New York to receive the payments. The cashiers of these banks issued
receipts or certificates which were accepted by the Bank
of the United States as evidences of payment. Further,
the bank encouraged stockholders to prepay the remaining installments by allowing full-paid shares to draw
dividends from the first of the month following such payments. 0 Arrangements were made whereby the specie
portion of the third installment, due in July, 1792, might
be made at the bank or any of its branches, while transfers of United States stocks might be made on the books
of the Treasury or at the office of the commissioners of
loans. The transfer books were closed for two weeks
prior to dividend days—July 1 and January 1. Though
the major part, probably, of the shares were not fully

a Paragraphs on Banks, p. 35.
& House Journal (Pa.), 1793-95, Vol. Ill, p. 180.
c
Daily Advertiser, March 24, 1792.
30

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paid in until the end of 1792, dividends were declared in
July, 1792. vShares completed in March received $12, in
April $10.67, a n ( i m May $9.33.
PAYING IN OF CAPITAL BY THE GOVERNMENT.

The proposal to permit the President to subscribe
$2,000,000 on account of the public was obviously to
secure a share in the profits of the bank. 0 Hamilton
explained that the main design of this provision was
" t o enlarge the specie fund of the bank, and 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 will
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." But he concludes this naive explanation with the statement that " as far as the dividend
on the stock shall exceed the interest paid on the loan,
there is a positive profit."
Hamilton deemed it necessary to make a special explanation and defense of one other feature in his bank scheme—
the provision that United States stocks might be subscribed into the capital. The chief object of this was " t o
enable the creation of a capital sufficiently large to be the
basis of an extensive circulation, and an adequate security
for it." To collect a specie capital of $10,000,000 into one
depository was out of the question; recourse must be had,
then, as was the case with the Bank of England, to basing

a See p. 45.

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the circulation in large part on the public debt. Public
stocks could always be converted promptly into coin.
But as Professor Sumner very properly puts it: "When
the first Bank of the United States was organized, the
Government did not need to borrow and did not obtain any
loan by the subscription of the public stock into the
capital. That- arrangement never had any proper cause
or excuse, and only served to give occasion for some clamor
against the bank, as a piece of jobbery and favoritism to
the bondholder/' 0
The device by which Hamilton carried through the
government subscription of $2,000,000 and received a loan
of a similar amount, " a simultaneous transaction" which
did not involve the payment of a single dollar in money,
was an ingenious example of financial juggling. For the
Government to pay for its stock by actually drawing
money from Europe, and then to remit back to Europe
out of the loan to be obtained from the bank, would be at
once useless and disadvantageous. This would involve
a loss on exchange in consequence of overstocking the
market with foreign bills and a loss in interest while the
transaction was being carried through. Accordingly,
upon Hamilton's suggestion, the following "merely formal
arrangement" was adopted. The United States Treasurer
drew bills on the American commissioners in Amsterdam
for the amount of the subscription. These bills were
bought by the bank, and warrants on the bank in favor of
the Treasurer placed the proceeds in the Treasury. Warrants were then issued on the Treasury in favor of the bank

a History of Banking in all Nations, Vol. I, p. 32.

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and the amount of the subscription was receipted for as
paid. Simultaneously with this transaction, the bank
loaned $2,000,000 to the Government, which sum was
paid by the redelivery of the Amsterdam bills. Finally
warrants were drawn upon the Treasurer to replace the
money supposed by this arrangement to be drawn from
the foreign fund. The bills were canceled, attached to
the warrants, and held in the Treasury as vouchers of the
transaction. 0 Shorn of technicalities, the Government
paid for its stock in bills of exchange on Amsterdam, then
it borrowed these bills and gave its note for $2,000,000,
payable in ten equal annual installments of $200,000 each,
with interest at 6 per cent. The practice thus instituted
by the Government itself of paying subscriptions with
stock notes was followed widely and, in numerous instances,
with disastrous effects, in the next fifty years. 6
It will be fitting here to trace how the Government met
its subscription obligations to the bank. The first
installment was due January 1, 1793. In the preceding
November Hamilton brought the matter to the attention
of the House, but that body made no provision for paying
it; so Hamilton left a deposit of $200,000 with the bank
as an offset until legislative provision should be made.
This had the effect of suspending interest on the installment. On March 2, 1793, Congress authorized payment
out of the proceeds of foreign loans. The AttorneyGeneral decided, however, that under the legal construction of the contract the foreign fund could not be applied
in that way until June 25. Not until July 20—a delay of
°> American State Papers, Finance Folio, Vol. I, p. 91.
& Sumner, History of Banking in all Nations, Vol. I, p. 32.
7069—10

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more than six months—was the first installment actually
paid. A similar delay occurred in paying the second
installment. Congress was even more tardy in acting,
for it was not until July 4, 1794, that payment was authorized. Hamilton advised the bank that as an offset he
would defer calling the last installment of the $800,000
loan which the bank had made to the Government. This
arrangement favored the Treasury, for it arrested interest
at 6 per cent on the sum due the bank with a fund obtained
from the bank itself bearing only 5 per cent/* The foregoing transactions established the principle of paying the
installments on the last day of the year. Congress provided for the payment of the next installment, due at the
end of 1794. The next two payments were not made
until January, 1797, when 2,160 shares of the Government's stock were sold at $500 (a premium of 25 per cent)
and $400,000 was applied in paying the fourth and fifth
installments. The other five installments were paid more
promptly.
ELECTION 01? DIRECTORS.

The bank had been open only about two weeks when
the time came for the election of directors, of whom only
three-fourths were eligible for reelection. Of the 25
chosen, 11 were from Pennsylvania, 6 from New York, 3
from Massachusetts, and 1 each from Maryland, South
Carolina, North Carolina, Connecticut, and Virginia. 5
In the list were several recognized leaders of the Federalist
party and several of them were members of Congress. It

a Finance, Vol. I, p 278.
6 General Advertiser, January 5, 1792.

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was but natural that the directors of the bank, chartered
by a Federalist Congress, should be largely of that party,
yet this fact gave the Republicans and opponents of the
bank a basis for criticism and opposition which was never
in the twenty years of its existence wholly silenced. In
the next annual election of directors, January 5, 1793,
only 10 Pennsylvanians were elected to the directorate,
and 15 from other States. This would indicate that more
than a majority of the stock was held out of the home
State. The Philadelphia stockholders apparently were
slow in nominating their quota of directors, so the outsiders named 10, of whom 2 were not included in the ticket
of 12 which a few of the stockholders in the city had got
together at short notice. In a letter to the General
Advertiser a disgruntled stockholder urged that nonresident directors could not serve the interests of the bank
so effectively, since " they do not visit the bank more than
once or twice in the course of twelve months, and then
only for a few days when their private business calls them
to this city. , , a
For the first few years the Bank of the United States
occupied Carpenters' Hall on Chestnut street between
Third and Fourth. b In 1797 a superb building was erected
for its accommodation on Third street between Chestnut
and Walnut, after plans drawn by Samuel Blodget. c
Under date of December 3, 1791, the cashier, John Kean,
gave notice in the newspapers that the bank would open
on Monday, December 5, and that it would begin to
a

February 5, 1793.
& Philadelphia Directory, 1793.
c Blodget's Economica, p. 165. This site is now occupied by the Girard
National Bank.

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receive deposits the following Monday, December 12.
The intervening week was occupied in making transfers
of stock and with matters of routine incident to the commencement of actual business.
BRANCHES.

Hamilton's original plan of the bank did not contemplate the establishment of branches, and the clause providing for them was inserted against his judgment. a In
his report to Congress on the national bank he admits
that there might be some advantages in the branch plan.
It would afford more general accommodation, and would
lessen the danger of a run on the bank. But, on the other
hand, the mismanagement of any branch, which, though
under subordinate direction, must necessarily be intrusted
with considerable discretion, might endanger the interests
of the whole system. Because of the complexity and
uncertainty of the branch scheme, therefore, he thought
it well to go no further than to insert a provision by which
branches might be established some time in the future
if experience demonstrated their utility and safety.
There was much difference of opinion on this subject.
Wolcott, who was consulted, favored the branch plan, and,
" a majority of the stockholders assenting, it was adopted
on a plan suggested by him." 6
The directors decided to open branches at New York,
Boston, Baltimore, and Charleston as soon as possible
after the first Monday in January, 1792. The plan provided that the directors of the parent bank should appoint
a Hamilton to William Seton, November 25,1791, Works, Vol. V, p. 486.
& Gibbs, Vol. I, p. 67.

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annually not less than nine directors for each branch, a
majority to constitute a board. Not more than threefourths of them, exclusive of the president, were to be
eligible for the next year. The directors of the main bank
appointed the cashiers of the several branches; the directors of the branches appointed their own president,
tellers, and clerks, but the sureties of the latter were subject to the approval of the directors of the Bank of the
United States. ^ The salaries of all the branch officers
and clerks were fixed by the directors of the parent bank,
who also prescribed the method of keeping the accounts
and records. It was provided that the part of the capital
which consisted of United States stock (bonds) should not
be divided, but the branches could discount upon such
part of the specie capital as the directors should apportion
to them, and "with such part of the deposits as shall be
lodged with them" as the branch directors should deem
safe and expedient. All the notes issued at the branches
were to be signed and countersigned by the president and
cashier of the parent bank, to be payable at the branch
issuing them, and to be delivered to the cashier of the
branch, who was required to give duplicate receipts for
them, one to be lodged with the president of the parent
bank, the other with the president of the branch. All
notes unfit for circulation were to be canceled by the
president and directors of the branch, and immediately
transmitted to the directors of the main bank, where they
were to be credited to the branch. Each branch was
required to send to the mother bank a weekly statement
of condition—debits and credits, notes issued, and cash on

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hand, distinguishing specie and the several kind of bank
notes. The continuance of the branches was to be at the
pleasure of the directors of the main bank, but none of
the foregoing regulations was to be rescinded except at a
meeting of a majority of the directors. 0
At a meeting of the directors January 12, 1792, 13
directors were elected for each of the branches at New
York, Boston, and Charleston, and a month later a like
number were chosen for the Baltimore branch. b Within
a short time other branches were opened at Norfolk (1799),
Savannah, and Washington, and in 1804 a branch was
established at New Orleans, making in all eight branches.
Contrary to the original arrangement, under which that
part of the capital which consisted of United States bonds
was not to be divided, each branch was apportioned a share
of the whole capital. The capital reserved for the parent
bank at Philadelphia was $4,700,000, the balance being distributed among the several branches as follows: New York,
$1,800,000; Boston, $700,000; Baltimore, $600,000; Norfolk, $600,000; Charleston, $600,000; Savannah, $500,000;
New Orleans, $300,000; and Washington, $200,000.c
This distribution gave the eight branches a total capital
of $5,300,000, a trifle more than the amount allotted to
the main bank. In 1792, when these branches went into
operation, Boston had one bank, the Bank of Massachusetts, established in 1784; Baltimore had one, the Maryland
Bank, chartered in 1790; Philadelphia had the Bank of
North America, founded in 1781; and New York had the
a

Daily Advertiser, November 18, 1791.
& Pennsylvania Journal, January 25, February 15, 1792.
c Finance, Vol. II, p. 479.

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Bank of New York, which began business in 1784, but
which did not secure a charter until 1791. The other
banks in the country at that time were the Bank of Providence, established in 1791, the Bank of Albany, the
unchartered Bank of South Carolina, the Union Bank of
Boston, and the Hartford Bank, all founded in i792. a
It has already been noted that Hamilton did not favor
the establishment of branches. Writing to his friend,
William Seton, cashier of the Bank of New York, November 25, 1791, Hamilton says: "Strange as it may appear
to you, it is not more strange than true that the whole
affair of branches was begun, continued, and ended, not
only without my participation, but against my judgment." 6 He naturally had a deep interest in the Bank of
New York, and Professor Sumner suggests that one reason
for his opposition to the establishment of branches was
that he foresaw a collision of interests. 0 Apparently he
had hoped to make the Bank of New York the exclusive
fiscal agent of the Government in that city.
In a letter to Seton, January 24, 1792, he stated his
wish that the Bank of New York should continue to
receive deposits from the collector and payment for
the Dutch bills in the paper of the Bank of the United
States. He had explicitly directed the treasurer not
to draw upon the New York institution without special
direction from himself. It was his intention to leave it
in undisturbed possession of whatever government funds
it might have until the commercial crisis impending

a Gouge, Journal of Banking, p. 240.
& Works, Vol. V, p. 486.
c History of Banking in all Nations, Vol. I, p. 33.

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at that time should subside. Hamilton even commended the action of the Bank of New York in refusing
to receive the paper of the Bank of the United States
during the crisis, and assured Seton that, if pressed, his
bank should receive whatever support the Secretary
could render. He wrote: " I consider the public interest
as materially involved in aiding a valuable institution like
yours to withstand the attacks of a confederated host
of frantic and, I fear in too many instances, unprincipled
gamblers." a
Hamilton recognized, however, that the establishment
of a branch of the Bank of the United States in New
York would ultimately make it incumbent upon him
to deposit the public funds in the branch rather than
with the Bank of New York. He assured Seton, however, that he would precipitate nothing, but would effect
the transfer so as not to embarrass or disturb his bank.
Realizing that the branch must preponderate, he advised
Seton to cast his lot with it. 6 Experience demonstrated
the safety and wisdom of the branch system, and in time
Hamilton's doubts were dispelled. In 1794 we find him
urging the bank to open a branch at Alexandria, Va. c
RELATION TO STATE BANKS.

From the outset the United States Bank entered into
friendly cooperation with the State banks. Early in the
year 1792 the directors appointed a committee to confer with a similar committee of the Bank of North America
once a week, "for the purpose of communicating freely
upon the business of both, as well to prevent improper
a Works, Vol. V, p. 492.

*> Ibid., p. 486.
40

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interference with each other as to promote the accommodation of the citizens/' a The two banks made settlements and exchanged notes daily, and when the
Bank of Pennsylvania was established in 1793 it was
included in this arrangement. Some years later the
three banks went still further and adopted uniform rules
regarding discounts and other matters of routine. At a
joint committee meeting held March 2, 1797, the rule
was adopted that " after March 31 all bills made payable
at sight or on demand must be paid on the same day
they are presented/' It was also agreed not to discount any note in which the words "without defalcation" or "without set-off" were omitted. 6 Again, during the hard times that followed the devastations of
the yellow fever we find committees from the three banks
conferring on "the prevailing distress of the mercantile
interests of this city." c
Similar cooperation existed at first between the New
York branch and the Bank of New York. When financial
stringency threatened, however, each bank looked to its
own interests. In 1796 Europe experienced a severe
financial crisis, which caused the Bank of England to
suspend specie payments, and its effects were felt in this
country. The Bank of New York, partly because of
heavy loans to the Government, and partly because of
an overextension of credit, became a heavy debtor to
the Bank of the United States. The New York branch
demanded the payment of $100,000 in specie on account,
a

Directors' Minute Book, Bank of North America, March 22, 1792.
blbid., March 2, 1797.
clbid., May 16, 1799.

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which, it was apprehended, would be followed by further
demands. It was feared that the Bank of New York
would be compelled to sell the public stock which it held
as collateral, if the Government should not be punctual.
Hamilton wrote to Wolcott, December 6, 1796, asking
him to come to the aid of the Bank of New York. " It
would be wise/' he writes, "if possible, to anticipate a
particular payment. It will be also useful to arrest for
a time too free calls from the office. " a Wolcott replied,
December 8, that the Bank of New York might rest
assured of as full and cordial assistance from him as was
in his power. He thought, however, that they would
have to rely upon sales of stock, principally, as it was
impracticable in the existing state of the Treasury to
anticipate payments. In this same letter, Wolcott says:
"These institutions have all been mismanaged; I look
upon them with terror. They are at present the curse,
and I fear they will prove the ruin, of the Government.
Immense operations depend upon a trifling capital
fluctuating between the coffers of the different banks. "b
The bank undoubtedly had an influence in restricting
the circulation of state banks. This was admitted by
these institutions, and by many of them regarded as a
benefit.
LOANS TO THK GOVERNMENT.

The first loan which the bank made to the Government
in connection with the subscription of capital has already
been referred to. Under the terms of the charter the
bank loaned the United States $2,000,000 at 6 per cent,

<* Works, Vol. VI, p. 184.

& Ibid., p. 176.

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reimbursable in 10 equal annual installments or in any
greater proportions that the Government might think
fit. The interest on $1,000,000 of the loan commenced
December 20, 1791, at which time the dividends on the
stock began to accrue. On the other $1,000,000 interest
commenced July 1, 1792. Toward the close of the year
1792 Congress asked Hamilton to submit a plan to reimburse the loan to the bank. He proposed to borrow the
money. He thought a loan could be floated in Holland,
which, based upon the rates of earlier foreign loans, would
effect a net saving to the Government of $35,000 a year—
the difference between the interest on the proposed foreign
loan and that on the bank loan. But the dividends on
the bank stock were 8 per cent, while the interest on
the loan was only 6, and with this profit Congress seemed
satisfied.0 The Government, however, was not content
with this. It was without funds at the outset, and
though Hamilton early worked out a scheme to supply
it with revenue, the money flowed into the Treasury
but slowly, while obligations had to be paid when due.
Recourse was had to temporary loans, which were secured
from the bank. Unexpected exigencies required the
expenditure of considerable sums before there was time
to raise them by the normal method of additional taxes.
These loans, therefore, were larger and continued for a
longer time than was at first expected, causing embarrassment to the Treasury and uneasiness to the bank before
they were finally settled.
In May, 1792, the Government needed money to meet
the expenses of one of its Indian wars, and Hamilton

« Finance, Vol. I, p. 178.
43

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contracted with the bank for a loan of $400,000 at 5 per
cent. a In 1794 Congress authorized a loan of $1,000,000,
and Wolcott, who had succeeded Hamilton as Secretary
of the Treasury, entered into negotiations with the Bank
of the United States, which, fettered by its previous loans,
could not advance the money. The bank, however,
offered to lend $800,000 in Government 6 per cents, if certain duties were pledged for payment. Another loan of
$1,000,000 was made by the bank at the same time. h
The difficulties of the Government increased with both
England and France, and more money was needed to prepare for hostilities. In December, 1794, another loan of
$2,000,000 at 5 per cent was authorized. 0 In the following February a loan of $800,000 was authorized to reimburse the bank for that amount borrowed the previous
year. On March 3, 1795, Congress authorized still another loan of $1,000,000. The bank advanced one-half of
this March 24, and the balance September 30, at 6 per
cent. Again on December 31, 1795, the bank advanced
$500,000 at 6 per cent for payment of interest on the
public debt. Three years then elapsed without further
loans from the bank. On January 1, 1799, Wolcott secured another loan of $200,000 at 6 per cent, payable January 1, 1803.
Thus it appears that the Bank of the United States
accommodated the Government whenever called upon
and continued the loans to suit its convenience. At the
end of its first year the bank had loaned the Government

« Act May 2, 1792, 2d Cong., 1st sess., ch. 27, sec. 16.
& Act March 20, 1794, 3d Cong., 1st sess., ch. 8.
c
Finance, Vol. I, p. 630.

First

Bank

the

United

States

over $2,500,000; by January 31, 1795, when Hamilton
resigned, the total loan amounted to $4,700,000. This
indebtedness increased under his successor, Wolcott, until
it finally amounted to $6,200,000 at the close of the year
1795.® Within four years the Government had borrowed
nearly two-thirds of the entire capital of the bank. The
bank naturally became restive and impatient; the loan of
so large a proportion of its funds crippled its services to
commerce and manufactures and made it difficult to
"facilitate the financial operations of the Government by
temporary loans." Wolcott proposed to commute the
whole debt due to the bank into a funded stock a 6 per
cent, and irredeemable for such a period as would invite
purchases at par. He argued that inasmuch as this debt
was contracted in exchange for an equal sum of the capital stock or consisted of sums advanced for the public
service in anticipation of revenue, it might fairly be considered as first in merit and importance. Moreover, the
proposed commutation would enable the bank to grant
further loans as public exigencies should require without
exposing the Government to certain expenses always attending loans from individuals. Then, again, sales of
stock could be made to the best advantage through the
agency of the bank, and any premium would inure to the
advantage of the Government. 5
In March, 1796, the Ways and Means Committee, acting upon Wolcott's proposal, recommended a loan of
$5,000,000 to discharge the debt to the bank. But in
May, William Smith, the chairman of the committee, was
oGibbs, Vol. I, pp. 187, 288.
& Statement of Public Debt, December 31, 1795, Finance, Vol. I, p. 372.

National

Monetary

Commission

delegated to inquire whether the bank might be willing
to continue the loans of the Government by new loans on
terms similar to the old ones.® The bank, however, was
not disposed to permit even so powerful a customer as
the United States to continue to monopolize its funds.
There had been a great increase in the price of all kinds
of property, which required a corresponding increase of
circulating medium to represent it. The bank needed
more available funds to serve more generally the interests
of commercial and manufacturing customers, and also to
be in a position to aid the Government by temporary
loans. The active employment of a larger specie capital
would also be to the immediate advantage of stockholders
and customers. While serving as president of the Bank
of North America, Willing had seen that institution crippled by large loans to a few powerful customers, who met
their maturing obligations by renewal upon renewal, and
he seems now determined that the Bank of the United
States shall not be subjected to the same experience,
through monopolization by the Government. He, therefore, requested that the United States should extinguish
the loans already due, as well as provide for those maturing during the year 1796.
When the bank took this firm stand a bill was introduced into the House authorizing the commissioners of
the sinking fund to issue $5,000,000 of 6 per cent stock,
the proceeds of which were to be paid to the bank. The
stock was to be redeemable in 1819, and was not to be
sold below par. But the Government's credit had been
so weakened by its failure to meet expenditures through

Finance, Vol. I, p. 409.
46

First

Bank

the

United

States

additional taxation that the stock was selling at a discount when this bill passed the House. 0 The directors
of the bank saw clearly that the bill would not furnish
the desired relief. Willing, therefore, wrote to the Secretary of the Treasury protesting against the kind of
relief proposed in the bill then before the Senate. The
bank's advances amounted to $6,000,000, of which
$4,400,000 was due or payable during the year 1796.
The existing state of moneyed operations, and the prosperity and reputation of the bank, absolutely required
the active use of a larger portion of its specie capital.
If the Government should provide no other means of
liquidating their claims than by the sale of stock at par,
a violation of public faith would surely follow. Government stocks fluctuate in price like other property,
and if these could be sold only at par the bank might have
to wait indefinitely for reimbursement. Moreover, even
if they were disposed to make a sacrifice and receive the
stock at par, they were debarred by a clause in the charter
from making such a commutation. b
Wolcott, recognizing that the bill would fail of its
purpose, addressed a letter to the Senate May 12, 1796,
suggesting that the commissioners be empowered to
obtain loans unfettered by any conditions which might
result in a failure of public credit. 0 The act was, in
consequence, modified so as to allow not more than onehalf the stock to be sold below par; and as a final resource
the commissioners were authorized to sell the bank shares.
« Goodrich to Oliver Wolcott, sr., May 6, 1796, Gibbs, Vol. I, p. 336.
& Communication to Senate, May 11, 1796, Finance, Vol. I, p. 412.
c Gibbs, Vol. I, p. 348.

National

Monetary

Commission

T H E GOVERNMENT SALE OF BANK STOCK.

Even in its amended form the act was unsatisfactory,
and the new securities thus authorized went a-begging.
After a lapse of several months only $80,000 had been
sold, and the commissioners were compelled to sell some
of the government holdings of bank stock to reimburse
the bank. Hamilton deplored the sale of the bank
stock and declared that he wished to forget there was
a bank or a treasury in the United States. Writing to
Wolcott, he said: " I shall consider it as one of the most
infatuated steps that ever was adopted." a Wolcott, too,
opposed the sale, and it was only resorted to by the commissioners upon the most urgent compulsion. On January 24, 1797, Wolcott reported the sale of 2,160 shares
of bank stock on a credit of sixty days without interest
at $500 (a premium of 25 per cent). 6 The proceeds,
$1,080,000, together with $120,000 realized on the sale
of the new government stock up to that time, were paid
over to the bank. c By July, 1797, 620 more shares were
sold through the bank as agent, 387 shares at a premium
of 20 per cent, the rest at 25 per cent advance, netting
a total of $304,260. They were sold mostly in small
lots of 6, 10, 20, and 50 shares.d By November 30, 1797,
Wolcott had made additional payments to the bank to
the amount of $560,000, making for the year a reduction
of about one-fourth of the indebtedness. Thereafter the
Government made greater effort to reduce the debt,
a Works, Vol. VI, p. 143.
6 The bulk of these shares were sold in Philadelphia, a few in New York
and Boston.—Finance, Vol. I, pp. 468-469.
c Finance, Vol. I, p . 467.
d For details of these sales, see Finance, Vol. I, pp. 467-500; ibid., Vol.
II, P. 3 5 i .
48

First

Bank

the

United

States

but it was not entirely discharged for several years. a
These sales of bank stock, rendered necessary by the
stupid failure of Congress to provide adequate revenues
by resort to taxation, or its desire to embarrass the
administration, h reduced the holdings of the Government
to 2,220 shares. These were sold in 1802 to the Barings
at a premium of 45 per cent. c Thenceforth the Government ceased to be a stockholder. Exclusive of dividends, the Government made a profit of $671,860. The
dividends amounted to $1,101,720 in addition. 4
CIRCULATING NOTES.

The act of Congress laying duties on imports, which
went into effect August 1, 1789, provided for the acceptance of gold and silver only in payment of duties. Hamilton, however, construed the object of this provision to be
the exclusion of payments of the notes of the States, and
" the securing the immediate or ultimate collection of the
duties in specie, as intended to prohibit to individuals the
right of paying in anything except gold or silver coin; but
not to hinder the Treasury frdm making such arrangements as its exigencies, the speedy command of the public
resources, and the convenience of the community might
dictate, those arrangements being compatible with the
eventual receipt of the duties in specie. The measure is
understood by all concerned to be temporary. Indeed,
whenever a national bank shall be instituted, some new
disposition of the thing will be a matter of course.M*
<*Bolles, Financial History, Vol. I, p. 139. cSee below, p. 85.
&Gibbs, Vol. I, p. 348.
<*Seybert, Statistics, p. 519,
< Finance, Vol. I, p. 49.

7069—10—4

National

Monetary

Commission

The charter of the Bank of the United States, therefore,
provided specifically that its notes should be receivable in
all payments to the United States. Both the parent bank
and the several branches issued notes, the lowest denomination being $5. The total amount in circulation never
exceeded $6,000,000. The notes issued by the branches
were signed by the president and cashier of the main bank.
The cashier of each branch gave duplicate receipts for
them, one copy to remain in the hands of the branch president, the other to be kept by the president of the parent
bank. At first the bank established the rule of making
the notes payable only at the places where they were
issued. Subsequently, it undertook to receive them in
Philadelphia or at any branch, but a short experience with
this practice led to its discontinuance. a The fact that the
bank refused to accept the notes of its own branches gave
occasion for much criticism, but the rule, under the conditions existing at that time, was, probably, a wise one.
It compelled each branch to stand upon its own bottom,
and checked any possible disposition to overissue. On
the other hand, this rule protected the bank from the
effects of a sudden demand for payment, at any of its
offices, of a large accumulation of its bills. The principle
was recognized in the charter of the second Bank of the
United States. h
For protection against loss in transmission " half notes,"
or duplicates, were issued and widely employed. Payment of these notes could be secured only upon presentaa

Minute book, Bank of North America, April 27, 1795.
& Finance, Vol. IV, p. 809.

First

Bank

the

United

States

tion of both halves or upon furnishing a guaranty of the
destruction of the missing half.
The bank also issued post notes in various denominations, not infrequently of $100, and having various terms
to run. Generally, they were payable thirty days after
the post date. They were signed by the president and
cashier of the bank, and instead of being made payable to
the bearer, as with the ordinary circulating notes, were
made payable to the order of some merchant or trader who
would pass them by indorsement in the course of business.
They differed in no essential particular from the ordinary
personal promissory notes, except that the bank stood
behind the promise. The papers of this period contained
frequent notices of the loss in transit of these post notes
and of application to the bank for renewal or payment.
By making all duties payable in notes of the Bank of
the United States, these notes gained a far more extensive
circulation than those of any other bank. Moreover, the
bank and its branches exercised a salutary restraint upon
overissue by other banks by following the practice of
presenting promptly the notes of other banks received
over their counters.
Owing to the lack of published reports, it is impossible
to present statistics showing the volume of notes issued
at different dates. In 1811, just before liquidation, the
total note issues amounted to $6,152,553, of which about
$5,000,000 was outstanding. The mother bank had
issued $1,600,000, of which $1,500,000 was in circulation;
New York had about $1,000,000 in circulation against
$1,200,000 issued; Boston issued only $435,680, of which
$259,248 was on hand; Charleston and Savannah each had

National

Monetary

Commission

put out over $800,000, the bulk of which was in circulation; the total issue of the New Orleans branch, $192,140,
was in circulation.
COUNTERFEITING OF NOTES.

As early as 1794, counterfeiting of bank notes became
alarmingly prevalent. Counterfeits of the $5 bills of the
Bank of the United States were especially common. 8 In
March of that year, a joint committee from the Bank
of North America and the Bank of the United States met
to take action. The two institutions joined in offering a
reward of $1,000 for the apprehension of the counterfeiters. Winchester, Va., was headquarters for a nest of
them, and in April, 1794, George Simpson, assistant
cashier of the United States Bank, and the teller of the
Bank of North America were sent there to gather and
present evidence against them. They were instructed
to post hand bills in every tavern and public place along
the route advertising rewards for the detection of the
counterfeiters. 6 In 1798, Congress passed an act making
it a felony to counterfeit the notes of the Bank on penalty
of imprisonment for from three to ten years, or ten years'
imprisonment and a fine of $5,000.c In 1807, this act
was amended so as to include the passing of counterfeit
notes.** The courts had decided that the former law was
inconsistent with itself and would not support an indictment for knowingly uttering as true a forged paper. e
a Minutes, Bank of North America, March 31, 1794.
&Ibid., April 30, 1794.
c Act June 27, 1798.
& Act February 24,1807.
«4 Cranch, 167.

First

Bank

the

United

States

COOPERATION WITH THE MINT.

Under the terms of the coinage act of February 9, 1793,
all foreign silver coins, except Spanish milled dollars
and parts of such dollars, ceased to be a legal tender after
October 15, 1797. These coins, however, constituted a
considerable part of the silver in circulation, and much
embarrassment and loss resulted. The Bank of the
United States showed a willingness to receive French
crowns and other silver coins at current rates as a legal
tender. The Treasury Department, therefore, sent out
a circular authorizing collectors of the customs and supervisors of the revenue to accept such coins in payment to
the Government. Not until 1857 did these foreign gold
and silver coins cease entirely to be a legal tenders
As late as 1798, the bulk of the bank's specie supply
consisted of French and Spanish coins, for which there was
a large foreign demand at that time. The mint received
these foreign coins from the bank in sums not exceeding
$10,000.b The specie in the vaults of the bank, collected
on government account, was not regarded as the exclusive property of the United States; it was considered
rather, as an aggregate fund in which the Government and
the bank were jointly interested. The bank, however,
was always willing to cooperate with the mint by advancing foreign coins and bullion to be recoined. It was the
chief source of supply of bullion for coinage, and the
temporary depository of bullion until required in the mint
operations. 0
a Hepburn, Contest for Sound Money, pp. 48, 497; 11 stat. L. 163.
b Finance, Vol. II, pp. 503, 506.
« Finance, Vol. II, pp. 165, 224, 458, 611.

National

Monetary Commission

On January n , 1803, the Director of the Mint reported
that the most of the bank's specie was in gold coin, and
that for some time past they had been canceling their $5
notes, substituting half-eagles " b y which our coins begin
to be more generally dispersed among the people. ,, °
THE

TREASURY AND THE BANK—FOREIGN

EXCHANGE

OPERATIONS.

The relations of the bank to the Treasury were, as
designed by its establishment, of a most intimate character. In addition to making loans, it aided the Government in its foreign exchange operations; it was the depository of a large part of the government funds; it assisted
the importers in the payment of customs duties; it transferred the public funds from place to place at its own
expense.
The article of the charter which set forth the objects
in which the bank might trade, specifically permitted
dealing in bills of exchange. In view of its superior
resources, the wide distribution of its funds through the
medium of its eight branches, its practical control of the
specie supply of the country, and its intimate relation
to the Government, it is but natural that the Bank of the
United States should have secured the lion's share of the
exchange business, both foreign and domestic. The
purchase of the Government's foreign remittances generally fell to the bank or one of its more important
branches. At certain periods the volume of this business
on government account was very large. That it was profitable may be inferred from the fact that the second

<» Finance, Vol. II, p. 18.
54

First

Bank

the

United

States

Bank of the United States was eager to secure a monopoly
of it. a
Hamilton utilized the services of the Bank of the United
States, as well as some of the state banks, in negotiating
the foreign bills drawn upon the American commissioners
in Amsterdam and elsewhere. He was accused of displaying favoritism toward the bank. In a communication
to one of the papers, in 1793, " Observer " takes Hamilton
sharply to task for his rather curt report to the House of
Representatives in obedience to a resolution calling for a
report of certain operations and accounts of the Treasury,
especially in relation to the bank in the matter of the
foreign loans. 6 "Observer" suggests that the proceeds
of these loans, instead of being placed in the Treasury,
where they would be subject to official checks, were
deposited in the bank "in concert with the directors,
many of them members of the legislature, well-trained
partisans of the fiscal faction, and deeply immersed in
paper speculations. ,,c
In a letter to the House of Representatives, February
19, 1793, Hamilton replied rather brusquely, but in considerable detail, to the criticism that the proceeds of the
foreign bills served no object of public utility, and that
they were calculated merely to indulge a spirit of favoritism toward the Bank of the United States. He presented
a detailed statement of all receipts on account of these bills
which began in March, 1791, and ended in March, 1792,
showing that the government deposits in the Bank of the
o McCulloh to Secretary Crawford, March 17,1817, Finance, Vol. IV, p. 774.
& Journal, House of Representatives, March 1, 1793, pp. 151-156.
c General Advertiser, February 27, 1793.

Nat ion a l

M on etary

Commission

United States were about one-fourth of those in the Bank
of North America and one-half of those in the Bank of
New York, these two institutions being agents of the
Treasury for the sale of the foreign bills. The Bank of
New York continued as a depository of public revenues
until April i, 1792, when the New York branch of the
Bank of the United States went into operation. Indeed,
a portion of the government deposits, as shown in the
following table, was continued in the state banks through
the year 1792. After the bank got well under way a
concentration of the public deposits in that institution,
growing out of its relation to the Government, followed
as a matter of course. But this concentration was accomplished gradually by drafts upon the other depositories
to meet government disbursements, rather than by
direct transfer.

Statement of cash in the Treasury, showing monthly balance during

iyp2.a

[Cents have been omitted throughout t a b l e ]

Date.

Bank
of the
United
States.

1792.
J a n . 1 __ $ 1 3 3 , 0 0 0
456,278
Feb. 1
692.959
A p r . 1 __ 3 5 9 , 6 4 3
May 1 _ _ 3oi,455
June 1_ _ 309,186
J u l y 2 _ _ 212,403
Aug. 1 _ _ 208,988
S e p t . i__ 4 0 1 , 0 8 4
O c t . 1 __ 1 1 7 , 1 9 8
Nov. 1 _ _ 172,405
D e c . 1 _ _ 2 4 7 . 139
1793.
Jan. 1 _ _ 1 0 9 , 1 6 9 '

Boston
branch.

Bank of
New
York.

Bank of
North
America.

Bank of Bank of
ProviMarydence.
land.

$43,805
6
$2,53Q
49,113
33.66i
3.454
36,970
22,344
51.616
43.644
81,074
69.354

$65,578 $ 2 2 4 , 6 7 7
128,708
7i,215
31,769
32,352
3 7 , 712
254,930
50.78s
305,854
3.735
294.527
n,4i5
62,628
13.012
54.078
13.626
5 4 . 259
13,626
60,219
13,626
69.019
c13,626
69,019

$47L972
151.516
3i,5i5
3L5I5
31.515
3i,5i5
6 1 , 601
61,601
61,601
6 1 , 601
6 1 , 601
61 6 0 1

$7,969 $50,665 $953,862
865,271
7.969
49.583
831,754
34,752
8, 404
751.377
60,418
7.156
86,618 « 777.385
1, 156
754,191
5,856
85.095
623,133
37.58i
18,434
593,762
2, 723
21.588
790,457
9 . 800
18,649
420,914
(b)
17. 157
6 2 1 , 962
28, 452
9 4 0 , 735
45.957

62,015

69,019

61,601

New
York.

Baltimore.

Charleston.

$24,273
63,919
$in,343
83.099
99,538
n o , 139 9 3 , 9 8 o
14. 130
77, 666
64, 908
116,686
14,3267 223,321

154, 860 224. 734

<* Finance, Vol. I, p. 214.

73.653

Bank of
Massachusetts.

& On August 15.

28, 157

Total.

783,212

Sums in
bills as
returned
by Bank
of the
United
States.

Specie.

$ 1 5 7 , 5 0 8 $596,683
220,900
402,233
73,650
520,112
118,700
67L757
3 1 , 100 3 8 9 . 8 1 4
88,700
533.262
58,300
882,435
209, 200

c On November 15.

628,012

Co
St

National

Monetary

Commission

From the foregoing treasury statements, Hamilton
demonstrated that so far as any advantages accrued
from the deposits on account of foreign bills drawn prior
to April, 1792, they inured to the benefit of the Bank of
New York and the Bank of North America, and not to
the Bank of the United States or its branches. Indeed,
in transferring its fiscal operations from the state banks
to the Bank of the United States regard had been paid to
the convenience of the former, and so little solicitude had
been shown for the accommodation of the latter that the
Treasury had been criticised as consulting the accommodation of the Bank of the United States less than was due
to its relation to the Government and to the services
expected from it. a
GOVERNMENT DEPOSITS.

The charter of the bank contained no stipulation that
the Government should deposit the public funds in the
bank and its branches, nor was there any engagement on
the part of the bank to transfer the public funds from one
part of the country to another. " I t therefore became
the subject of arrangement between the Treasury and the
bank, and the benefit of the exclusive deposits, it is believed, was made the condition of the service." 6 The
successive Secretaries of the Treasury seem to have been
content to leave the public deposits with the bank in exchange for the services rendered by the latter in transmitting government funds and in accommodating the
Treasury with loans when called upon. Though Gallatin
had occasion to turn to the bank for assistance only once,
a Finance, Vol. I, p. 223.

& Finance, Vol. IV, p. 808.
58

First

Bank

the

United

States

be stated that it always showed a willingness to aid the
Government in every way; and he was careful not to displease it because he recognized that in an emergency the
Treasury would have to depend upon it for loans. This
arrangement was satisfactory to both the Government
and the Treasury, and continued under the administrations of Hamilton's successors. Gallatin said of it:
"They place instantly our money where we want it, from
one end of the Union to the other, which is done on the
tacit condition of our leaving our deposits with them." a
He maintained that the state banks could not effect the
transmission of the public funds with the same facility or
to the same extent as the Bank of the United States
through its several branches. 6 No step seems to have
been taken, therefore, toward requiring the bank to pay
interest on the public deposits. In recommending the
renewal of the charter, however, Gallatin proposed that
the bank should be required to pay 3 per cent on deposits
above $3,000,000, which wotild provide the Government
with a means of accumulating an emergency or war fund. c
The reports of the bank that have been preserved are
so few and fragmentary that it is impossible to present a
progressive statement of the government deposits. During the first few years of the bank's existence the Government was not a large and probably not a very profitable depositor.
At the beginning of the year 1793 the treasury funds
amounted to $783,212, of which $624,431 was on deposit
in the bank and the four branches that had been established by that time. d The largest balance to the credit
« See p. 64.
b
See pp. 71, 78.

c S e e p . 73.
^See table, p. 53.
59

National

Monetary

Commission

of the Government at any one time was at the close of
the year 1806, when its balance reached nearly $5,500,000.
By the close of the year 1810, however, it had fallen to
less than $2,000,000.
In obedience to a resolution of the House, Gallatin
submitted a statement December 23, 1806, of the amount
of public deposits in the several banks for the three years
previous. The Government's average deposits in all
banks during that period ran from $4,000,000 to
$5*500,000. The average balance, considered as a permanent deposit, in the Bank of the United States and its
branches ranged from $3,500,000 to $4,200,000. The
following table shows the government balance in each of
these depositories at the end of the year: °
1804,

1803.
Bank of the United States
Boston branch
New York branch
Baltimore branch

Charleston branch

$996,047
588,078
1.244.276
616,177
229.648
471.978
430.224
138.591

$if130,905
666 909
702.768
227,208
178.034
188.339
305 6 4 4
150.445

1805.

$554,488
818.569
1,097.099
43L430
72.398
332,406
159.180
119 720
1 2 1 OOO

Ten other banks

(<*)

4036,985

$877,505
I.173.714
I.340.620
294,560
305.740
180.595
244.975
62.328
236 748
a

()

(O)

4.285,811

1806.

3.999.368

5.497-984

a Small amounts.

The deposits in the state banks were inconsiderable,
the Pittsburg branch of the Bank of Pennsylvania carrying
the largest amount, a total of $1,190,277 for the three
years. That bank was used largely as an agent in collecting the revenues from the sale of western lands. The

« Finance, Vol. II, p. 218.
60

First

Bank

the

United

States

banks located in the leading customs ports were, of
course, the largest depositories. The growth of the
business of Boston, and especially of New York, and the
decline of the southern ports during this period, are
significant.
Among the charges brought against Hamilton was
favoritism to the bank in making large deposits of government funds instead of reducing the government debt
by buying in stock. Hamilton, however, showed that
speculation had so increased prices that profitable purchases could not be made other than those he had negotiated. He also entered into a long and lucid explanation of the treasury practice of keeping $500,000 on hand
at the different depositories. This sum was not concentrated at the seat of the Government, but was scattered
among the several branches from Boston to Charleston.
Funds more remote than New York on one side and
Baltimore on the other could not be counted upon as
ready cash in less time, on the average, than sixty days,
"making allowance for the usual delays in the sale of bills
and the usual terms of credit." a
Although the bank did not pay interest on the government deposits, it maintained that they were not profitable. In the main, they were not permanent deposits
and fluctuated from time to time and from place to place.
The heaviest and most frequent demands were made, of
course, on the main bank, which always stood ready to
support the branches, but each office had to be prepared
at all times to meet Treasury drafts payable at some other
office or bank. These fluctuations in the deposits, and

a Finance, Vol. I, p. 223.
61

National

Monetary

Commission

the care and expense involved in their transfer, were
such that the bank did not regard them as " a profitable
item in the estimates of a discount day." In support
of the claim that the Government had added little or
nothing to its profits, the bank pointed to the fact that
its dividends were usually less than those of other banks
which had no government patronage. a On the other
hand, the bank's opponents contended that the state
banks would cheerfully undertake the custody and transmission of public funds in exchange for the benefits arising
from government deposits.6 In the debates of 1811 it
was claimed that the large loans of the New York branch,
$4,175,000 on a capital of only $1,800,000, were due to
the immense deposits of revenue collected there. 0 At
different times state banks made overtures to the Treasury
to receive a share of the public deposits. d
The bank dealt largely in domestic exchange, also,
the premium being enhanced considerably by the restriction of the circulation of its notes to the region of the
branch issuing them. 6 Government funds were transmitted by the bank from one part of the country to another without direct commission or compensation, but
the monoply of public deposits was probably a liberal
return for this service.
The following practice for the simplification of the
treasurers bank account, begun with the Bank of North
America, had been continued with the Bank of the United
States: Bills drawn by the treasurer upon distant points,
<* Bank Petition for Renewal, April 20, 1808, Finance, Vol. I, p. 301.
d
& See p. 92.
See p. 65.
c Ibid.
« Finance, Vol. IV, pp. 271, 272, 808, passim.

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and deposited with the bank for sale, were credited at
once to his account as cash, though they might be sold
at credits of from thirty to sixty days. It was understood, however, that the proceeds could not be drawn
upon until they were collected. Hence the actual balance
in the bank was always less than the apparent amount.
Drafts on supervisors and collectors of customs were
credited immediately on deposit; those upon foreign
agents of the United States were not so credited, but
after being collected by the bank were passed upon warrants to the treasurer. Bills deposited in the bank were
sold according to general instructions from the Secretary
of the Treasury. The instructions generally were to
dispose of all bills drawn on the domestic revenue at par.°
AID TO IMPORTERS.

The first revenue act provided that all duties should
be paid in gold or silver coin only. Upon the establishment of the bank, however, Hamilton construed this
regulation to allow post notes of the bank not having
more than thirty days to run to be received in payment,
and circular instructions were sent out to all the customhouses authorizing collectors to accept these notes. 6
In the spring of 1792 importations into Philadelphia
were unusually heavy, and merchants were pressed for
money with which to pay their bonds. Hamilton wrote
to the bank, March 19, 1792, reminding it that these
notes were thus receivable, leaving it to the bank to
a Report of Committee to Examine the State of the Treasury, May 22,
1794, Finance, Vol. I, p. 282.
& Finance, Vol. IV, p. 267.

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decide "how far it might be convenient to make these
operations payable in such notes, which might not be
convenient if payable immediately in specie or cash
notes.'' In December, 1792, "certain mercantile speculations " had caused an unusual pressure for money,
and Hamilton advised the bank that he would have no
objection if the notes in which the Government was
interested should be renewed for thirty days in all cases
where it could be done with perfect safety to the public.
Again, in February of 1793, an arrangement was made
with the Bank of the United States for the accommodation of the merchants of Philadelphia whose bonds
for duties were to become payable within the next few
weeks by which the bank would discount their thirtyday notes for the amount of their bonds and receive
these notes from the collector as cash, to be drawn for
only by the collector. The branch offices at New York,
Boston, and Baltimore were advised that if similar accommodations seemed necessary at those points the Treasury
would not draw for the sums involved until the middle
of the following May. a One striking instance of cooperation between the bank and the Treasury in assisting
the importer occurred in Wolcott's administration. John
Wilcocks, a Philadelphia merchant, received a cargo of
coffee in 1797. He already owed so much for duty
bonds that he was unable to meet the obligation on
the coffee. He appealed to the Treasury Department,
and Wolcott suggested to the bank that they give him
the necessary accommodation upon the presentation of
indisputable paper and upon the condition that the

a Finance, Vol. IV, p. 269.
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sum discounted be paid in a post note to be deposited
with the collector of the customs. a
Prior to 1800 the bank was not utilized in any special
way for the collection of the public revenue. The collectors of government revenues kept the collections in
their own hands, giving bond for the faithful discharge
of their duties. This system was not altogether satisfactory, for there was fear that the collector might lend
the public funds to the bondsmen. It seemed wise,
therefore, both in the public and private interest, to
deposit the revenue bonds in the larger ports in banks.
After 1800 the revenue bonds in the half-dozen largest
cities were deposited in the Bank of the United States
and its branches, by which they were collected. Through
this agency the revenues were collected with greater
punctuality and economy. A merchant who failed to
pay his revenue bond when due lost all credit at
the custom-house; and if he failed to pay promptly
any bond deposited in the bank for collection, he was
denied further accommodation at that bank and the
privilege of renewing his paper. Furthermore, whenever any merchant was known to be thus in default,
all the other local banks refused him credit and called
his loans. This was an obligation he was compelled to
meet under penalty of losing his credit at the banks.
The bank exercised another direct influence upon the
collection of the revenue. The parent bank at Philadelphia established a rule that any person whose bond
to the Government was deposited there had the right,
a Finance, Vol. IV, p. 270.

7069—10

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upon securing an additional indorser, to claim a discount for half the amount of his bond. The proceeds
of this discount were carried immediately to the credit
of the Government. In this way one-half of the bond
was collected at the sole risk of the bank without any
possibility of loss to the Government. 0
Gallatin, in citing the advantages derived by the
Government from the bank, said: "The punctuality of
payments introduced by the banking system and the
facilities afforded by the bank to importers indebted
for revenue bonds were among the causes which enabled
the Government to collect with such facility and with so
few losses the great revenue derived from imports." &
Opponents of the bank contended, however, that the
revenues were nowhere better collected than in those
districts where there was no branch of the Bank of the
United States, and that in some instances the state banks
offered better collection facilities, for they received the
notes of banks which the Bank of the United States and
its branches would not accept. 0
ATTITUDE

OF DEMOCRATIC ADMINISTRATIONS TOWARD
THE BANK.

The passing of the political control of the country's
affairs from the h^nds of the Federalists to those of the
Democrats at the beginning of the nineteenth century
had no immediate effect upon the interests or fortunes of
the bank. Though always regarded as a Federalist institution, and managed largely by men of Federalist leanings,
its affairs were administered in the main with an eye
"Finance, Vol. II, p. 452.

& See p. 70.
$6

«See pp. 88, 90.

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single to business and profit, and it never became embroiled in political controversies as did its successor, the
second Bank of the United States. Only once did the
Treasury, under Democratic administrations, apply to
the bank for aid, and then it was as cheerfully and generously given as under earlier Federalist administrations.
Jefferson, however, never gave up his antagonism to
banks in general and to the Bank of the United States in
particular. Writing to Adams in 1814, he says: "My
zeal against those institutions was so warm and open at
the establishment of the Bank of the United States that I
was derided as a maniac by the tribe of bank mongers." 0
In the Anas papers he shows his enmity toward the bank.
"While the Government remained at Philadelphia, a
selection of members of both Houses were constantly
kept as directors, who, in every question interesting to
that institution, or to the views of the Federal head
(Hamilton), voted at the will of that head, and, together
with the stockholding members, could always make the
Federal vote that of the majority. " 5
In 1802, the Bank of Pennsylvania ran in debt to the
Bank of the United States at the rate of $100,000 a week,
owing, it was claimed, to the government deposits in the
latter. The cashier of the Bank of Pennsylvania went
to Washington to apply for relief. Gallatin, writing to
Jefferson, says: " I t is evident they have extended their
discounts too far. They say they can not at once curtail
without ruining their customers, chiefly retail shopkeepers. Those for whom the Bank [of the] United States
discounts are generally importers." Gallatin suggests
a Works of Thomas Jefferson, Vol. VI, p. 305.

& Ibid., Vol. IX, p. 95.

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three possible lines of relief: (i) To write to the United
States Bank to spare them; (2) to deposit $300,000
with them, or to direct the collector at Philadelphia to
deposit part of his public money with them; (3) to contract with them for part of the Dutch debt, which, as
the Government always paid considerably in advance,
would have the effect of a deposit. He had proposed
the last of these expedients to the Bank of Pennsylvania,
but fearing that they might not be able to agree upon
terms, he asks Jefferson whether either of the other two
plans might be adopted. Gallatin wanted to avoid any
step which would displease the Bank of the United States,
" because they place instantly our money where we may
want it from one end of the Union to the other, which is
done on the tacit condition of our leaving our deposits
with them, and because if we shall be hard run and want
money, to them we must apply for a loan. ,, a
Jefferson's reply again shows his antipathy to banks,
and throws light upon the banking practices of the period.
He says the difficulties of the Bank of Pennsylvania were
due to excessive discounts The bank, in its plea for help,
had submitted a statement showing $3,000,000 of outstanding debts due to them. Jefferson calculates that
they owed $2,200,000, with $965,000 of good assets. To
pay the $1,235,000 balance, "they depend on $3,000,000
of debts due them, the amount of which shows that they
are of long standing, a part desperate, a part not commandable. ,, He concludes, therefore, that to deposit
public funds with them would only enable them to continue these excessive discounts, the checking of which was

« Adams, Writings of Gallatin, Vol. I, p. 80.
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the only means of avoiding bankruptcy. The least
dangerous plan would be to recommend indulgence to the
Bank of the United States, but that would virtually be
asking it to lend money to the other bank in order that it
might continue lending to others. "The monopoly of a
single bank/' he says, " is certainly an evil. The multiplication of them was intended to cure it, but it multiplied
an influence of the same character with the first, and completed the supplanting the precious metals by a paper circulation. Between such parties the less we meddle the
better.""
Another illustration of Jefferson's position is seen
in the fact that although there was a tacit understanding that the government deposits were to be kept in
the Bank of the United States and its branches, he
viewed with favor the overtures which state banks made
from time to time to the Government to secure a share
of them. In the autumn of 1802, the Bank of Baltimore
applied for a deposit of government funds. Jefferson
wrote to Gallatin: "The consideration is very weighty
that it is held by citizens while the stock of the United
States Bank is held in so great a proportion by foreigners." 6
If Hamilton regarded the Bank of the United States as a
political agent of great possible usefulness to the new
government, Jefferson valued no less the political support
of banks in general. In the above-mentioned letter, he
says: " I t is certainly for the public good to keep all the
banks competitors for our favors by a judicious distribution of them, and thus to engage the individuals who
belong to them in the support of the reformed order of
a Jefferson's Works, Vol. IV, p. 439.

& Writings of Gallatin, Vol. I, p. 101.
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things.'' Again, writing to Gallatin, July 12, 1803, Jefferson says: " As to the patronage of the Republican bank at
Providence, I am decidedly in favor of making all the banks
Republican by sharing deposits among them in proportion
to the dispositions they show; if the law now forbids it, we
should not permit another session of Congress to pass without amending it."°
With the acquisition of the Louisiana territory from
France in 1803 and the consequent expansion of American
trade in the Mississippi Valley, the need of more adequate
fiscal and banking facilities became imperative. Gallatin
urged the Bank of the United States to establish a branch
at New Orleans. The bank was disinclined to hazard
its resources in the new and undeveloped territory.
While negotiations were in progress, Claiborne, governor
of the territory, took it upon himself without instructions
to establish a bank called the "Louisiana Bank," with a
capital of $6oo,ooo,which might be increased to $2,000,000.b
Gallatin was apprehensive that the Bank of the United
States would seize this opportunity to break off negotiations for the establishment of the proposed branch, and
suggested to Jefferson that Claiborne should be instructed
to revoke the charter, leaving the Louisiana Bank on the
footing of a private association.0 The New Orleans
branch project stirred Jefferson to a fresh outburst against
the bank. Writing to Gallatin, December 13, 1803, he
says: "This institution is one of the most deadly hostility
existing against the principles and forms of our Constitute Writings of Gallatin, Vol. I, p. 129.
& United States Gazette, April 9, 1804.
c Gallatin to Jefferson, April 12, 1804, Writings of Gallatin, Vol. I, p. 184.

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tion." Its hostility was evident from a knowledge of the
principles of the persons composing the body of directors in
every bank, principal or branch; from their opposition
to the measures and principles of the Government, and
to the election of those friendly to it; and from the sentiments of the papers they support. He urges that in time
of war, the bank with its many branches might be a great
obstruction, withdrawing its aid or dictating the terms
of peace. Now, while the Government was strong they
ought to bring "this powerful enemy to a perfect subordination under its authorities. The first measure would
be to reduce them to an equal footing only with other
banks as to the favors of the Government." a
GAUVATIN'S D E F E N S E OF T H E B A N K I N

1803.

In reply, Gallatin cited the advantages the Government derived from banks, and especially from the Bank of
the United States, as follows: A safe place for the deposit
of public money; the instantaneous transmission of funds
from one part of the country to another; the great facility
which an increased circulation and discounts give to the
collection of the revenue. For these reasons he was
anxious to see a bank established at New Orleans. He
could see none but political objections, which, he thought,
lost their force when the dependence of banks upon the
Government was properly considered. " They are formidable only as individuals and as merchants, and not as
bankers. Whenever they shall appear to be really dangerous, they are completely in our power and may be
crushed." 5
o Jefferson's Works, Vol. IV, p. 518.

& Writings, Vol. I, p. 171.

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The branch at New Orleans was duly established under
the act passed March 23, 1804, which authorized the bank
to establish offices of discount and deposit in any part of
the Territories or dependencies of the United States. 0 Gallatin's persuasion overcame Jefferson's objections and he
signed the bill, thus waiving, so the friends of the bank
afterwards maintained, all opposition to the bank on the
score of its unconstitutionality. 6
APPLICATION FOR RECHARTER.

In 1808, three years before the charter expired, the
stockholders of the bank memorialized Congress for a
renewal. The memorial recited that "in view of the
extensive operations of the bank, its intimate connection
with public credit and finances, and the wide dispersal of
the stockholders, duty to the Government, to the commercial world, and to themselves, prompted them to
submit the expediency of protracting the duration of their
charter." Without assurance upon this point, prudence
and justice would demand the adoption of measures to
effect a gradual dissolution. Dissolution would unavoidably impair the fiscal machinery provided by the bank for
the collection and payment of public funds, while the
withdrawal of $10,000,000 of banking capital would produce serious embarrassment to the trade and commerce
of.the country. The petition set forth the advantages
o- United States Statutes, Vol. II, p. 274.
& And yet in the face of this obvious waiver, Jefferson had the temerity
t o write to Eppes, November 6, 1813: " During the life of the United States
Bank, the nation had time to consider the constitutional question, and when
the renewal was proposed they condemned it, not by their representatives
in Congress only, but by express instructions from different organs of their
will."—Jefferson's Works, Vol. VI, p. 232.

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reaped by the Government from the bank. During the
thirteen years that the Government had been a stockholder
it had made a neat profit through the difference between
its loan from the bank at 6 per cent and the dividends on
its stock which averaged about 8 per cent, and when,
finally, it disposed of its stock it realized a profit of over
$650,000. The bank had aided the Government in maintaining the public faith and credit both at home and abroad
by advancing loans amounting to millions of dollars at 5
and 6 per cent. By establishing branches, in some cases
upon the suggestion of the Secretary of the Treasury for
the peculiar accommodation of the public, and " not always
for the general emolument of the bank," it had enabled
the Government to carry on its fiscal operations with ease,
security, and economy. These fiscal services had been
performed without charge or compensation. The petitioners were not insensible to the advantages they, in
turn, had derived from this fiscal relationship to the Government. But these advantages consisted, not so much
in the government deposits which were subject to such
fluctuations and to so much care and cost in transfer that
they could hardly be regarded as profitable. That the
Government had added little to the profits arising from
the general business of the bank was shown by the fact
that ''the dividends of the bank had always been moderate,
and usually less than those of other banks." The advantage to the bank came rather from the confidence of the
Government, " founded upon a constant knowledge of the
interior management and condition of the bank," which,
in turn, had attracted the confidence of both Europe and

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America and had given it a character of dignity and stability. The memorial concluded by assuring the Government that, at a time of some national apprehension and
alarm, it might confidently rely, in every emergency, upon
the prompt and legitimate aid of the bank. a
RECHARTER FAVORED BY GAI^ATIN.

The memorial was referred to Gallatin, who brought in
a report, March 3, 1809, in every way favorable to the
bank. 5 Indeed in the struggle for renewal which ensues,
Gallatin became the advocate and champion of the bank,
laboring as faithfully, but with less success, to preserve
and perpetuate its life as Hamilton had done twenty years
before to bring it into existence. In doing so, he encountered even more opposition and obloquy from his
own party than Hamilton had met at the hands of the
opposition. The founder lived to see the beneficent effects of the bank enjoyed both by the Government and
the business interests of the country; the defender and
advocate witnessed its fall and a resulting stream of disaster and ruin.
In stating the advantages derived from the bank by the
Government, Gallatin laid stress upon the safe-keeping and
transmission of the public funds, the economical collection of the revenue, and the aid furnished to the Government in the matter of loans. The punctuality of payments
introduced by the banking system, and the facilities
afforded by the bank to importers indebted for revenue
bonds, were among the causes which had enabled the
a Communicated t o Senate, April 20, 1808, Finance, Vol. I, p . 301,
& Finance, Vol. I I , p . 351.

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Government to collect with such facility and with so few
losses the great revenue derived from imports. The numerous state banks might afford considerable assistance
to the Government in its fiscal operations, but they could
not effect the transmission of public funds with the same
facility or to the same extent as the Bank of the United
States'through its several branches. Moreover, the superior capital of the latter afforded greater security against
losses, and greater resources in making loans. Another
argument advanced by Gallatin was that the Government, in respect to its own operations, should not be dependent upon institutions over which it had no control
whatever. A national bank would feel stronger inducements, both from interest and from a sense of duty, to
afford the Union every assistance in its power. Though
the Government, during the first ten years of Gallatin's
administration, had been able to finance its obligations
without asking the bank for aid, it had been eminently
useful in making the necessary advances in earlier years;
and a similar disposition had been shown repeatedly when
treasury matters had rendered it advisable to ascertain
whether new loans might be obtained if needed.
The strongest objection raised against the renewal of the
charter was the large holdings of the bank's stock abroad,
requiring the payment of dividends to foreigners. Gallatin turned the tables on these objectors by noting that
if the bank should be liquidated, $7,200,000, the amount
of foreign holdings, would have to be remitted at once,
whereas, if the charter were renewed, only the dividends of
about %y2 per cent would be sent abroad. The renewal of
the charter would, in that respect, act as a foreign loan

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bearing 8>£ per cent. He suggested that this objection
might be removed by a modification of the charter " providing for the repayment of that portion of the principal by a new subscription to the same amount in favor of
citizens/' Apparently Gallatin did not look far enough
ahead to see that, unless foreigners were specifically forbidden to hold stock of the bank, a considerable portion
of so good an investment would soon again be in the
hands of foreigners. But he dismissed the matter of foreign holdings as trivial compared with the manifest public
advantages to be derived from a renewal of the charter.
MODIFICATIONS RECOMMENDED BY GAI^ATIN.

By the time of Gallatin's report it had become quite
popular for the States to exact bonuses from the banks
chartered under their authority. Gallatin considered
this possibility with respect to the recharter of the Bank
of the United States. Assuming that the market rate
of interest would continue at 6 per cent for the next twenty
years, and that the dividends of the bank would continue
to average %y2 per cent, the profits arising from the banking
privilege would be equal to an annuity of $250,000 on the
capital. That annuity payable semiannually would be
worth almost $2,890,000. Such a huge bonus no bank
would, of course, be willing to pay for a charter. Gallatin
thought that about $1,250,000 would be the maximum
which could be obtained as a bonus if it was deemed
advisable to sell the renewal of the charter for a fixed
sum of money. He believed, however, that there were
other considerations much more important than the
mere temporary aid that might come through the exac-

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tion of a bonus. His chief suggestions may be briefly
summarized. The bank should pay interest on government deposits in excess of $3,000,000. It should be obligated to lend the Government a sum not to exceed threefifths of its capital at a rate not over 6 per cent, the
amount of such loans to be advanced by the bank in
monthly installments and to be repaid at the pleasure
of the Government. The capital should be increased to
$30,000,000, as follows: $5,000,000 to be subscribed by
citizens of the United States in such a way as to make
an equitable apportionment among the several States
and Territories; $15,000,000 to be subscribed by such
States as might desire to enter, and a branch to be established in each subscribing State if applied for by the
State; all subscriptions to be in specie or stock of the
United States; state subscriptions to be payable in ten
annual installments or sooner, their shares of bank stock
to be nontransferable. Both the general and the state
governments should have some share in the direction
of the bank, the general government appointing a few
directors for the parent bank, and the state governments
appointing a few directors in their respective state
branches.
Gallatin urged in support of this plan that by requiring
interest on the public deposits the Government might
in times of peace and prosperity accumulate a fund sufficient to meet periods of war and calamity. Further, the
Government could always rely upon a4oan of $18,000,000.
Payment of the greater part of the proposed increase of
capital, in ten annual installments, would be gradual and
keep pace with the steady progress of the country, and,

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finally, the bank itself would form an additional bond of
common interest and union among the several States.
INDECISIVE ACTION BY CONGRESS.

The memorial of the bank for renewal was presented to
the House March 26, 1808, and referred to the Committee
of the Whole, but it got no further during the session. It
was presented in the Senate April 20, 1808, and referred
to the Secretary of the Treasury for consideration and
report at the next session. On March 3, 1809, Gallatin's
report was communicated to the Senate.
The memorial of the bank was presented to the House
again January 29, 1810, and referred to a committee,
which made a report, February 19, in favor of renewal.
Agents of the bank had appeared before the committee
authorized " t o 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. ,, On April 2, 1810, Love,
of Virginia, reported the plan of a national bank to be
established at Washington with branches in such States
and Territories as should apply for them. The States
were to be allowed to subscribe an alloted number of
shares. April 7, 1810, a bill was introduced to continue
for twenty years the existing Bank of the United States,
with the charter modifications suggested by Gallatin.
The bank was to pay a bonus of $1,250,000; it was to
loan the Government, upon three months' notice, any
sum not to exceed $5,000,000 at not over 6 per cent; and

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it was to pay 3 per cent on all government deposits above
$3,000,000 remaining for a whole year. This bill was
debated in Committee of the Whole April 13, 1810, but it
never got any further.
Upon the failure of the House of Representatives to act
upon the memorial the bank contracted its discounts and
the other Philadelphia banks followed its example. The
resulting pressure produced great business distress throughout the city. a The curtailments were applied particularly to accommodation paper, of which all the banks
appear to have carried a considerable amount. It was said
of the Bank of the United States that it met its contractions on accommodation paper by discounting an equal
amount of real or business paper. Discounts on these
accommodation notes were in the nature of permanent
loans, the practice of the banks being to renew them
every sixty days. The directors of the Bank of the
United States, finding that their action in calling loans had
caused so much distress, made an arrangement with the
state banks that all should continue their discounts
"until the last hour." 5
Carey, while admitting that money was scarce, says it
had often been much more scarce without exciting nearly
so much comment. For a long period past, except during
the embargo, when the banks had difficulty in keeping
their funds employed, there had been a scarcity of money
two or three times a year. Brokers were now discounting
good notes at 9 and 12 per cent, while in other times the
rates had been as high as 1 % and even 2 per cent a month.
<*See testimony of Philadelphia delegations—Clarke & Hall, pp. 323-327.
& Ibid., p. 438.

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People then submitted to the high rates without complaining. But now that the charter of the bank was an
issue, political capital was being made of the money
pressured
SECOND PETITION FOR RECHARTER.

Congress having failed to act upon the first memorial,
the stockholders submitted a second one, dated December
10, 1810, only three months before the expiration of the
charter. The memorial recited that a consideration of the
stockholders' own convenience and security would have
led them to prepare for dissolution, but, in the belief that
the general interest required and would obtain a continuance of their charter, they had delayed taking this
step, which would inevitably entail so much public as
well as private distress. In general, the memorial
claimed that the bank, by its early establishment, its
extensive and combined operations, and its large capital,
had become acquainted with and had materially advanced
the trading interests of the entire country. Not being
restricted to any particular district, it had acted as the
general guardian of commercial credit, and had prevented the balance of trade in the different States from
producing a deficiency of money in any of them. It had
protected and aided the state banks when unexpectedly
pressed, and generally they had the use of not less than
one-tenth of its capital. It had been liberal but discreet
in its loans to merchants and manufacturers, and by providing a fund sufficient to meet all reasonable accommodations it had repressed usurious lending. The memorial

o Letters to Doctor Seybert, p. 19.
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laid great stress, again, upon its services and benefits to
the Government, and concluded with a statement of the
disastrous consequences that would inevitably attend the
dissolution of the bank. Great and general injury would
ensue from the depreciation in the value of property, the
stagnation of business, and the check to commercial
enterprise. To discharge the debts due to the bank, the
resources of borrowers would be drained, while failure to
do so would give an irreparable blow to commercial credit
and punctuality. Heavy loss would result to the public
revenues, charitable institutions, widows, children, and
others interested in the stock.a
The petition of the stockholders was presented in both
bodies of Congress, December 18, 1810, and for the next
three months the question of renewal was uppermost both
in Congress and in the country at large. b
Crawford, chairman of the Senate committee to which
the petition for renewal was referred, wrote to Gallatin,
requesting his opinion whether the renewal of the bank's
charter would not greatly facilitate the collection of the
revenue and promote the public welfare. Gallatin
replied, January 30, 1811, that in a report to the Senate
two years before he had expressed his opinion in favor of
a renewal of the charter, and that his opinion remained
unchanged. The advantages of banks in the fiscal operations of the Government were unquestionable. The only
question was whether these services could be most conveniently performed by a national bank or by a number
of state banks. State banks might be used, and in case
<* Finance, Vol. I I , p. 451.
& For detailed proceedings and debates, see Clarke and Hall, pp. 135-471.
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of nonrenewal of the charter must be used, by the Treasury, but surely with less convenience and safety. " If 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." Adverting to the question
of constitutionality, Gallatin wished to say 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
the 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." 0
Many years after this memorable struggle over the
renewal of the bank's charter Gallatin wrote to Nicolas
Biddle, president of the second Bank of the United
States: " I n 1810 the weight of the administration was
in favor of renewal, Mr. Madison having made his opinion
known that he considered the question as settled by
precedent, and myself an open and strenuous advocate.
We had the powerful support of Mr. Crawford in the
Senate, and no formidable opponent in either House
but Mr. Clay, a majority of political friends in both
Houses, and almost all the Federalist votes on the ques-

o Finance, Vol. II, p. 480.
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tion, with no other untoward incumbrance but the personal opposition to Mr. Madison or myself of the Clintons,
the Maryland Smiths, Leib, and Giles. The banking
system had not yet penetrated through the country,
extending its ramifications through every hamlet, and
the opposition, due to the jealousy or selfishness of rival
institutions, was confined to a few cities; yet the question was lost." a
ATTITUDE) OF BANKS AND TRADE ORGANIZATIONS.

In general, the banks and trade organizations of the
country favored renewal. They apprehended loss to
themselves and prostration of credit and confidence in
all lines of business if such a large concern should suddenly be forced to liquidate. The directors of the Bank of
New York sent a memorial to Congress in January, 1811,
asking that the Bank of the United States be granted a
renewal. They regarded it as highly useful to the state
banks. From the extent of its capital, its numerous
branches all over the country, and its government protection, it was able " t o equalize the balance of specie capital
among the different cities, and in case of any sudden
pressure upon the merchants to step forward to their
aid in a degree which the state institutions were unable
to do. "b A meeting of the joint committee of the four
state banks in Philadelphia—North America, Pennsylvania, Philadelphia, and Farmers and Mechanics'—held December 15, 1810, adopted resolutions declaring that
"general distress and inconvenience will attend the cessation of so great a monied institution/' and expressing
a Gallatin's Writings, Vol. II, p. 435.

& Domett, Bank of New York, p. 64.

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the opinion t h a t " it can not be injurious but advantageous
to the state institutions. " a The Philadelphia banks sent
a memorial to the state legislature, also, saying that the
dissolution of the bank would be materially injurious
to the state banks. The Chamber of Commerce of
Philadelphia, in a memorial to the Senate, December
24, 1810, urged recharter and set forth many facts favorable to the bank based upon local experience. Citizens of Pennsylvania, they asserted, held $1,000,000
of the bank's stock, nearly one-third of the total held
in the United States, and had bought the stock at a premium through faith in its management and perpetuity.
Some $7,000,000 was held abroad, but there could be
no valid objection to this; it was not prohibited in the
charter, and the Government itself had but recently sold
its own holdings to foreigners. The establishment of
the bank had opened large sources of accommodation
and insured punctuality in trade. As a result its stock
had advanced and attracted a large amount of foreign
capital, thus enabling the country to trade upon outside capital at an interest below its market value. The
interest and concerns of other banks were interwoven
with the existence of the national bank. From the collection of customs bonds at the Bank of the United States,
it always held a large amount of paper of other banks.
Its continuance, therefore, was "almost indispensable to
their safety;" its liquidation would produce "all the evils
of prostrated credit and general delinquency in which
the other banks must largely share." As to the administration of the bank, these representative business men,

a Philadelphia National Bank, p. 52.
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many of whom had had dealings with the bank, testified
that it had extended its accommodations impartially
and to the greatest extent compatible with safety. The
foreign trade had for some time been generally embarrassed because of the embargo, and "during the past
year merchants had labored under the pressure of a heavy
sequestration of property abroad.'' Specie continued
to be exported, and the demand for money was unusually
great. They must needs fall back upon the bank to
tide them over. Mercantile interests, therefore, looked
with alarm to the suspension of the circulation of
$15,000,000, the average amount of its loans, to the accumulation of specie in the bank to the amount of its
capital (in order to pay off the stockholders), to the
withdrawal of $7,000,000 of capital from the country,
and to the payment of duties in specie instead of the notes
of the bank.®
MEMORIALS AND POPULAR DISCUSSION.

The friends of the bank in Philadelphia were active fri
its support. A petition signed by 868 Philadelphia citizens, dated January 31, 1811, recited the alarm with
which they witnessed the opposition to renewal, and
prayed that, if renewal were denied, the bank should be
given time gradually to close its affairs.6 A flood of petitions flowed in from all sides, both for and against renewal.
A memorial of Pittsburg citizens, dated February 4, 1811,
attacked the bank memorial and everyone who had
favored renewal. It stated that the bank had shown " a
studied delay in its collections to gain a renewal under
<* Finance, Vol. II, p. 453.

& Ibid., p. 470.
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stress of weather; a studied pressure on individuals and
state banks to gain auxiliaries; a studied memorial, containing the most daring insults on the dignity and independence of a free people/' In rebuttal of the bank's
claim that, to accommodate the Government, it had
established branches at places disadvantageous to its
business, and from which no profit was expected, the
Pittsburg petition exhibited a statement of the capital
and loans at the several branches. According to this
statement, all the branches, except Boston and Norfolk,
had loans outstanding to more than twice the amount
of their allotted capital. Washington, one of the two
branches established at the request of the Government,
had loaned $485,285 on a capital of $200,000, and New
Orleans, the other, had outstanding loans of $611,516
on a capital of $300,000. The total capital of the eight
branches was $5,300,000; total loans, $10,965,256. The
memorial exclaims: "A serious disappointment to men
who expected no profit." a In a like spirit of bombast
and bad reasoning, it belittled every claim and benefit
urged in the memorial of the bank.
J. J. Astor, one of the wealthiest men in New York, sent
a verbal message to Gallatin assuring him that if renewal
were refused, all his funds and those of his friends to the
amount of $2,000,000 would be at the command of the
Government, either in importing specie, circulating government paper, or in any other way that would prevent
distress arising from dissolution. Astor, it was said,

o Ibid., p. 479.

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"would go great lengths, partly from pride, and partly
from wish to see the bank down." a
The most direct and pertinent testimony to show the
disastrous consequences of nonrenewal was that submitted to the Senate committee by two delegations from
Philadelphia, one representing the manufacturers and
mechanics, the other the merchants of the city. 6 They
were a unit in testifying to the impartiality of the bank,
the desire for its continuance, the absence of party influence from its management, and the stagnation of business
and prostration of credit which they believed would
accompany dissolution. Some of the delegation of
mechanics, all of whom were Democrats, had been customers of the bank for many years, and they united in
contradicting the idea that the bank was partial or wras
influenced in the slightest by the politics of its customers.
One of them said, explicitly, that in Philadelphia opposition to renewal was confined principally to the newspapers.
The Aurora, the organ aud mouthpiece of the Democratic
party in Philadelphia, but a bitter enemy of Gallatin, in
an editorial, November 8, 1810, offered 20 reasons why
the bank's charter should not be renewed. Great stress
was laid upon the fact that two-thirds of the stock was
held by foreigners and that the bank was subservient
to British interests. Duane, the editor, charged the bank
with employing its influence in local elections, especially
at Charleston and New Orleans. The most novel reason
suggested for winding it up, however, wras "in order that
the public should know how far it has fulfilled or how
a Gallatin to Madison, January 5, 1811, Writings, Vol. I, p. 495.
& Leg. and Doc. His., pp. 325-328.

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far it has executed its trust; of which there are various
opinions, which never can be reconciled but by a clear
winding up."
Among the ablest advocates of renewal in the pamphlet
literature of the day was Mathew Carey. His experience
as a director of the Bank of Pennsylvania for several years
gave authority to his utterances on financial topics. He
complained that ''the obligation of secrecy in banking
transactions " precluded him from the use of many of the
most important documents necessary to a complete
defense of the bank. Duane, in the Aurora, and other
opponents of the bank, charged it with deliberate and
malicious attempts to depress the money market and,
by curtailing discounts, to cause general business distress
in order to force Congress into renewing its charter.
Carey, however, in a series of letters to the Daily Advertiser,
attributed the distress and the scarcity of money to the
multiplication of branch banks in Pennsylvania (the Bank
of Pennsylvania and the Bank of Philadelphia each had
four branches), and to the necessity, recently imposed
on the mother banks by act of the legislature, of receiving
the notes of the branch banks in payment. 0 The notes
of the branches were paid largely in Philadelphia for
purchases, and when deposited in any except the mother
banks acted as balances against them, drawing their specie.
Only notes of the Bank of the United States were accepted
in payment of duty bonds, so, in the spring and fall, there
was a steady flow of specie to the bank from the four state
banks, which compelled them to curtail their business
somewhat. Moreover, the low rate of exchange on London

November 2, 1810.
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was an important factor. Exchange was at about five
below par; recent extensive importations promised a rise,
so a merchant having funds in England and who wanted
money preferred to borrow from the banks at 6 per cent
rather than to sell bills at the low rate. On the other
hand, those who had remittances to make to England
strained their credit at the bank to raise money to buy
bills at the low rate. Hence both buyers and sellers of
exchange, in unusual numbers, pressed the banks for
additional loans.
In his letters to Doctor Seybert, Carey argued that,
since the Government had sold to Sir Francis Baring
$1,287,600 worth of bank shares at a premium of 45 per
cent it would disgrace American credit not to recharter
the bank. He admitted that there was ground for complaint in the fact that the bank had not accepted the
notes of its branches in payment from its customers. It
owed that accommodation to the public. He tried to
turn the point of the criticism by stating that the Bank
of Pennsylvania and the Bank of Philadelphia refused,
in the same way, to receive the notes of their branches at
Pittsburg and Washington until they were compelled to
do so by an act of legislature. Carey's chief argument
for renewal was the terrible calamity that would overtake
the business community if the bank should be compelled
to wind up. a
Dr. Eric Bollman was another ardent advocate of
renewal. He estimated that the banks of the country
had brought into use bank credits and bank notes amounting to $70,000,000 and that they held not over $15,000,000

o Letters to Dr. Adam Seybert, p. 64.
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specie in their vaults. The winding up of the Bank of the
United States would, therefore, involve the destruction
of $55,000,000 of circulating medium, which was onlysufficient for the daily transactions of the country. He
thought Congress would not dare to make so dangerous
an experiment. a
The state banks, though their note issues and discounts
had been kept in check by the superior resources and
power of the Bank of the United States, favored the
extension of the charter, and memorialized Congress to
that effect.6
A large majority of both branches of the Pennsylvania
legislature, however, were opposed to the bank, and
resolutions were passed requesting the Pennsylvania
Senators and Representatives at Washington to vote
against the renewal of the charter. They likewise
opposed the granting of a charter to any other bank
without securing the consent of the legislature of the
State where it was to operate. c During the course of the
debates on renewal, resolutions opposing renewal were
presented from the legislatures of Virginia, Massachusetts,
and Maryland.
DEBATE ON RECHARTER.

The debate on the bank renewal in Congress centered
mainly around the two questions of the constitutionality
and expediency of the bank. d On the first point the
arguments developed nothing new. The supporters of the
a

Paragraphs on Banks, p. 50.'
& See p. 79.
c House Journal (Pa.), December 13, 1810.
<* For full debates, see Leg. and Doc. Hist., pp. 113-471.

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bank met the long-drawn arguments of those who still
persisted that it was unconstitutional by submitting that
its constitutionality was decided at the time the charter
was granted. That decision had met with the general
approbation of the States and the people. Branches had
been established in several of the States and the bills circulated everywhere. For twenty years the bank had
received the countenance and patronage of the Government, which originally owned two-fifths of its capital. It
had received repeated sanction from the different administrations, and especially from Jefferson and the Democratic
party, by authorizing the establishment of a branch at
New Orleans and selling a million of the government
stock to British subjects at a profit of $400,000.
The debates on the expediency of the bank did throw
some new light upon its methods and machinery and its
relations to the Government, to the other banks, and to
the general business public. In this connection it was
argued that in proportion as the bank became a source of
supply to the Government it ceased to be one to the
merchants. Fisk, of New York, estimated that the exports
of the country, which when the bank was established
amounted to $18,000,000, had risen by 1804 to $76,000,000,
an increase due in large part to the increased activity of
capital created and promoted by the Bank of the United
States. The bulk of the country's trade was conducted
on a paper medium, specie having largely disappeared.
By closing up the bank at least one-third of the $50,000,000
of circulating medium in the country would be checked
and all paper credit would receive a mortal wound. The
estimated $10,000,000 of specie in the country would,

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under dissolution, be collected by the bank. The result
would be general embarrassment and distress.
It was generally conceded that the Bank of the United
States, by virtue of its large capital and the amount of
specie it always carried, had regulated the discounts and
note issues of the state banks, compelling them to preserve
a just proportion between their liabilities and actual funds.
Senator Smith, of Maryland, a director of the state bank
in Baltimore, and one of the most violent opponents of
renewal, denied that the state banks either received or
required any check by the Bank of the United States.
He said the " trifling branch " of the bank in Virginia was
located in a corner of the State with which the people of
the State had very little intercourse. Their intercourse
was with the banks of Richmond and Fredericksburg.
The Bank of Virginia was capitalized at $1,500,000; it
had $2,000,000 in its vaults and had recently declared a
dividend of 10 per cent. He concluded that the Bank of
Virginia received no check from the United States Bank,
and instead of the branch of the latter keeping the state
banks in check the fact was that the Bank of Virginia kept
the branch at Norfolk in check.
Smith also denied the necessity or utility of the bank
and its branches in the collection of government revenues,
and contended that the bank had no instrumentality
whatever in obtaining payment of the revenue bonds.
He had been informed that nowhere was the revenue
better collected than in the busy New England towns outside of Boston, the only place having a branch in the whole
region. The Boston branch, then, was nothing more than
a treasury chest, " a n office where the Secretary of the

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Treasury keeps an account to know whether the state
banks transmit the money properly to Boston or not."
So, too, in Georgia, North Carolina, and South Carolina
the duties were as well or better paid where there was no
branch. At one time the Bank of Manhattan, in New
York, held $188,000 of government funds. The New
York branch of the bank had refused to receive Connecticut or Rhode Island paper, and the Secretary was compelled to deposit it in the Manhattan Bank, which had
agreed to accept the paper. Again, the branch bank at
Washington had refused to accept Virginia paper from
the collectors, "and refused to give any aid or assistance
in the collection of the revenue, except that which went to
their own emolument." But the Bank of Columbia
opened its vaults to all, receiving on deposit the paper of
Virginia, Maryland, or Pennsylvania, and gave checks on
some of the banks of those States for the amount. This
kind of accommodation could not be had from the branch
bank. The revenues derived from the sale of public lands
in Ohio and Kentucky were collected, not by the Bank of
the United States, but by the Pittsburg branch of the
Bank of Pennsylvania. The government deposits in the
Manhattan Bank arose from the collection of revenues in
Rhode Island and Connecticut. It was apparent, therefore, that the collection and transmission of public funds
could be accomplished without the aid of the United States
Bank or its branches.
Smith also denied that the notes of the bank formed a
universal medium throughout the country. If a merchant
in New York wanted to remit for a purchase of tobacco in
Richmond, the New York branch could not aid him, but

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any of the state banks there would give him a draft on
Richmond. Government funds would be transmitted in
the same way. But the branch banks would not accept
the paper of even the mother bank. Each branch was
bound only to receive its own paper and not that either of
the parent or any other branch. Recently the Baltimore
branch had been called upon by the mother bank for
specie. The branch applied to the Union Bank, which
was in its debt, for $50,000 specie. The Union offered to
meet the balance with notes of the mother bank, of which
it held $100,006, but the branch would not accept them
and demanded the specie. The Union was, therefore,
compelled to send to Philadelphia for payment of the
notes it held of that very bank. A similar transaction
had occurred between the Mechanics' Bank of New York
and the branch in that place. These cases showed that
the paper of the Bank of the United States was "not a
universal medium, not even payment to its own branches.''
In the interior the paper of the state banks, and of the
state banks alone, was in circulation. Whether this were
true or not, it is certain that the notes of no state bank
possessed to anything like the same degree the quality of
universality. One member declared the credit of any
other bank in the country would be outridden in twentyfour hours.
Testimony as to the impartiality of the bank in granting
loans, irrespective of party, was submitted both in committee and in Congress, but some of its opponents cited
specific cases of partiality and political influence. Wright,
of Maryland, asserted that Philadelphia merchants had
been coerced into signing petitions to ratify Jay's treaty,

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against their convictions, under threat by the bank directors that if they refused they could get no more accommodation at the bank. Directors of the branch bank in
Baltimore had been dropped from the directorate because
they voted for General Smith. Evan Jones, who had
been elected president of the branch bank at New Orleans
to succeed a Republican, was a refugee Tory and was suspected of being "one of Burr's chosen band." Wright
urged that " these directors, who by the charter have the
right to establish as many branches in the United States
as they please, say, one to each State, with the appointment
of 13 directors, a president, and 7 officers to each branch,
with as great accommodations as directors, and salaries
to their officers averaging $1,000 a year each, making
upward of $170,000 to their officers, and more to their
directors/' possessed a patronage larger than that of the
President of the United States. "All the directors," he
continued, "of the mother bank, at all times, have been
Federal or worse—many of them Tories or Monarchists—
so that being under such control, I have ever doubted the
statement of its funds." This argument was met by the
statement that an examination of the boards of the state
banks would show that Federalists comprised a majority
of the directors. Lloyd, of Massachusetts, testified that,
though he had been unceremoniously dropped from the
board of the branch bank at Boston a few years before,
and so would not be accused of cordiality to the bank, he
freely declared that from a personal knowledge of the
management of that branch it was impossible for "any
moneyed institution to be conducted with more correctness, integrity, and impartiality." Smith, of Maryland,

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read correspondence from New York to show that men
employing large capital in importing had been refused
accommodation by the branch bank there, " whilst the
Manhattan Bank has freely discounted the paper which
the branch rejected merely by reason of the contamination
of passing through Republican hands.'' In Norfolk the
conduct of the bank had never been considered impartial.
Smith did not believe the statement which had been made
that the Baltimore branch discounted as much for Republicans as for Federalists. He said also that for two sessions
the Bank of the United States had its agents in Washington, intriguing with members of Congress to obtain a
renewal of its charter.
Another member (Love) belittled the evils which it
had been said would attend the dissolution of the bank.
To prove their unreality he cited the discounts at the
Boston and New York branches. At Boston the loans on
a capital of about $700,000 amounted to about $1,000,000.
Of these loans three-fourths were on real paper, which
any bank or branch would be glad to take. There remained then only $250,000 "from what is called the
standing customers." The United States Bank, because
of the advantages the government deposits gave it,
always had the choice of customers. Give to any other
bank in the vicinity these deposits and they would be
glad to take those customers off its hands, and to four
times the amount if necessary. New York had loaned
$4,175,000 on a capital of $1,800,000, the largest proportion of any of the branches. This had been done, the report of the bank to the contrary notwithstanding, on the
immense deposits of revenue collected there. Give them

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to the state banks and they would gladly accommodate
the "constant customers, not only to the amount of onefourth, but to the whole $4,175,000."
Opponents of the bank admitted that its fate was a
party question, and, since the Democrats had an assured
majority in Congress, the friends to renewal recognized
that the fate of the bank was sealed. Already agents of
the state banks were in Washington fattening on the prospects of receiving government deposits. In the House of
Representatives the renewal of the charter was indefinitely postponed, January 24, 1811, by a vote of 65 to 64.
The vote in the Senate, February 20, stood 17 to 17.
Vice-President Clinton, an enemy to both Gallatin and
Madison, cast the deciding vote against renewal. Thus
perished the first Bank of the United States.
TEMPORARY EXTENSION REFUSED.

After the final rejection of the bill to renew the charter,
the bank memorialized Congress for an extension of two
years to wind up its affairs. The memorial was presented simultaneously in the two Houses, February 25,
1811, and was referred to a select committee in each.
Both reported against any extension. Clay, chairman
of the Senate committee, reported that a majority held
that, since the Constitution did not authorize Congress
originally to grant the charter, any extension would be
equally repugnant. There appeared to be no good reason
for prolonging its political existence for the purpose of
settling up its affairs. A trust could be created under
existing laws by which liquidation could be effected.
The committee had understood that the apprehensions
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as to the distress resulting from nonrenewal had not
been realized in Philadelphia. The paper of the Bank
of the United States was returning rapidly and the notes
of the state banks were taking its place. Their ability
to enlarge their accommodations would be increased by
receiving the deposits held by the Bank of the United
States. The injurious effects of a dissolution would
"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." The House committee made a similar report
unfavorable to extension.
STATE CHARTER REFUSED.

The Bank of the United States closed its doors for
business on the afternoon of March 3, 1811, and trustees
were appointed to liquidate its affairs. But the bank
was not ready to give up its existence. The trustees
decided to petition the legislature of Pennsylvania for
a state charter. On March 14, 1811, they sent a memorial
to the legislature praying for an act of incorporation for
the whole amount of the original capital, with permission to apply to other States for the privilege of establishing branches.05 The memorial urged that it was
impracticable to reduce the existing capital owing to the
difficulty of discriminating or designating the stock to
be retained. Stress was laid upon the almost total stagnation of business that had been produced by the failure
of Congress to renew their charter. Great sacrifices of

oHouse Journal (Pa.), March 18, 1811.
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property were being made to support individual credit,
mone^ rates were ruinously high, and the state banks
were unable to meet the demand for loans. It was
pointed out that the amount of capital employed by the
Bank of the United States in Pennsylvania amounted to
about a half of the total banking capital in the country.
The withdrawal of so large a proportion of capital would
be disastrous. One of the newspapers urged that if Pennsylvania did not " seize the opportunity of continuing
that truly useful bank New York surely would." 0 It
was reported that the bank offered to pay the State a
bonus of $40,000 a year for a charter.
This application was defeated, but was renewed in the
next legislature. A second memorial, signed by David
Lenox, president of the board of trustees, December 7,
1811, was sent to the legislature, and a strong lobby was
maintained in Harrisburg. The memorial stated that
though the bank had stopped all banking operations,
they had continued "their exertions for the preservation of credit.'' They had authorized the trustees, in
making collections, "to require payment of but small
portions at a time, and to receive new securities from
their debtors for the residue.1' Only a part of these loans
had been called in; the worst was yet to come if liquidation had to continue. Already considerable distress prevailed, business was stagnant, and bankruptcies frequent.
Had the bank been in a position to come forward with
aid, as it had done in former times of depression, much
of the distress could have been averted. The petition
urged that a large part of the stock was held by citizens

o Daily Advertiser, March 23, 1811.
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and institutions of Pennsylvania. The foreign holdings,
which had lately been considerably diminished, should not
weaken the claim of citizens to legislative favor. The
constitutional question which came up in connection
with the federal charter could not arise in a state charter.
If Pennsylvania refused a charter the trustees must
secure it from some other state or states. 0 The
trustees offered a cash bonus of $500,000, to aid certain
specified public works, for a twenty-year charter of a
bank with $5,000,000 capital, or proportionate amounts
for any capital of $3,000,000 or upward. In addition,
they offered to loan the State any time during the twenty
years $500,000 at 5 per cent for internal improvements. 6
These liberal offers were all refused. Their very liberality accomplished their defeat. The feeling spread
that to warrant such bids the profits of the banking
business must be enormous, and that they ought to be
enjoyed not by one large bank alone but by many small
ones.
CHARTER GRANTED TO N E W YORK STOCKHOLDERS.

In the spring of 1812 the stockholders applied to the
New York legislature for a charter for a bank to be established in New York City, to be called the Bank
of America. Charges of bribery and corruption were
rife while the bill was under discussion in the house,
and to prevent its passage in the senate Governor Tompkins prorogued the legislature March 27, 1812, for a
period of sixty days " t o give time for reflection/' When
the legislature assembled again a bitter struggle ensued
a Ibid., December 30, 1811.

& House Journal (Pa.), 1811-12, p. 302.
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over the bill, but it finally passed by a vote of 16 to 15
on June 2, 1812. Under the terms of the charter the
Bank of America was to have a capital of $6,000,000,
consisting of $5,000,000 of the stock of the Bank of the
United States and $1,000,000 in cash, subscriptions
to which were not open to stockholders of the bank.
For every share in the late Bank of the United States
stockholders were entitled to subscribe four shares of
the new institution. Dividends on shares of the Bank
of the United States were to be collected free of expense
and applied to subscriptions in the Bank of America.
If the sale of the United States Bank stock produced
more than par, $400, the surplus was to be refunded
to subscribers; if less, subscribers would be required
to pay the deficiency in money with interest at 6 per
cent. The bank was to pay $400,000 to the State,
and was bound to loan the State at any time $2,000,000,
one half at 5 per cent, the other half at 6.a Subscription books were opened in 10 States, from June 6 to
August 26. Oliver Wolcofr:, former Secretary of the
Treasury, was made president, and Jonathan Burrall,
former cashier of the New York branch of the Bank
of the United States, cashier of the new concern. The
bonus and the loans to the State required by the charter were subsequently remitted on the stipulation that
the capital should be reduced to $4,000,000 and then
to $2,000,000.b
a The Merchants' National Bank (New York), p. 89.
&Ibid.; advertisement in United States Gazette, April 15, 1812.

101

National

Monetary

Commission

GIRARD'S BANK.

When the charter of the Bank of the United States
expired in 1811, Stephen Girard, then the foremost merchant and the wealthiest man in the country, was the
largest stockholder. Believing that the commercial and
financial interests of the country would compel Congress
to renew the charter, he had bought bank stock heavily
both at home and abroad. Girard's purchases of foreign
holdings came about in this way. For years the proceeds
of his extensive shipments to Europe had been collected
through the Barings, of London, against whom he drew
from-time to time. On December 31, 1809, his balance
with the Barings amounted to £116,701, and he instructed them to invest his funds in shares of the Bank
of the United States. His orders were not carried out
until the following year, when he sent a special agent
to London, who purchased over a half million of stock
at a figure considerably below the market of the year
before. In 1811 the indebtedness of the Barings to
Girard amounted to nearly $1,000,000. The war between
England and France made trade with Europe increasingly hazardous, and the Barings were on the verge
of bankruptcy, so Girard sent two agents to London to
extricate his immense funds from their hands. Part of
the funds were invested in British goods, part in American 6 per cent stocks, and part in United States Bank
shares, then at about $430^. a It is said that Girard's
purchases of foreign holdings cost him in all $1,800,000.b
Had the charter of the bank been renewed as he expected,
o Simpson, Life of Girard, p. 99.
& Leach, History of the Girard National Bank, p. 19.

102

First

Bank

the

United

States

Girard's profits upon this speculation would have netted
him a fortune. In view of his very large holdings of
the bank's stock, it might be easy to account for Girard's
espousal of recharter on the ground of self-interest.
Renewal would have materially enhanced the value
of bank stock. But, though a strict Republican, Girard
believed in the constitutionality of the bank, and, having been one of the largest borrowers, none knew better
than he of its expediency and benefits to trade.
When renewal was denied by the federal authorities,
Girard was active in the support of the movement for a
state charter. This project having failed, he decided to
establish a private bank of his own, thus becoming the
foremost banker, as he was the foremost merchant, of
the country. George Simpson, who had been for seventeen years the cashier, and, apparently, the real head,
of the Bank of the United States was engaged to organize
the bank, and when the work was completed Girard put
him in charge as cashier and manager. He purchased
the bank building and the cashier's house for $120,000,
less than a third of their cost, and on May 12, 1812, he
opened his banking house, with a capital of $1,200,000.
On the 1st of January, 1813, the capital was increased to
$1,300,000. The business of the trustees of the Bank
of the United States was immediately transferred to
Girard's bank, together with $5,000,000 in specie. The
officers and clerks of the old bank were retained at the
same salaries. Most of the customers of the Bank of the
United States opened accounts with Girard's bank, wAich
also retained a large part of the custom-house business.0

Simpson, Life of Girard, p. i n .
103

National

Monetary

Commission

Girard did not use the notes of the old bank, but paid
out the notes of state banks until his own were ready.
These bore the device of an American eagle and a ship
under full sail. They were signed by Girard and countersigned by his cashier, and, though some of the banks
at first refused to accept them, they finally came to be
accepted as freely as other bank notes. Redemption in
specie was never refused. To give to his bank something of the permanence of an incorporated institution,
and to insure to depositors prompt payment in the event
of his death, Girard executed a deed of trust vesting in
five prominent citizens all the property of the bank. a
Undoubtedly the prompt establishment of Girard's
bank did much to lessen the business distress which
otherwise must have resulted from the liquidation of
the Bank of the United States. It rendered invaluable aid to the Government in the financial difficulties of the next few years. "Girard's bank was the
very right hand of the national credit, for when other
banks were contracting, it was Girard who stayed the
panic by a timely and liberal expansion, and frequent
were the calls made upon him by the Government for
temporary loans, which calls were invariably responded
to immediately." 5
Girard's bank continued in successful operation until
his death, December 26, 1831, when the trustees wound
up its affairs, turning over to the executors money,
securities, and property to the value of more than $4,000,000. To occupy the field made vacant by the liquidation
of Girard's bank, a group of capitalists organized a bank,
a I^each, History of the Girard National Bank, p. 20.

104

Ibid., p. 24.

First

Bank

the

United

States

called the "Girard Bank," and secured a state charter in
1832. It continued as a state institution until 1865,
when it entered the national banking system.
FiscAiv

OPERATIONS AFTER DISSOLUTION

OF BANK.

As soon as it was ascertained that the charter of the
Bank of the United States would not be renewed, Gallatin
instructed the collectors of all the leading ports to stop
depositing custom-house bonds for collection in the bank,
to withdraw those falling due after March 3, 1811, and
thereafter to deposit the bonds in state banks. The
only condition imposed upon these depositories was that
they should give a preference in discounts to those having
duty bonds to pay. The public deposits in the Bank of
the United States were gradually withdrawn, and the
government account was closed September 2, 1811,
with the exception of a balance of $70,000 in the New
Orleans branch, for which a credit had been given some
months before to the agents of the War and Navy Departments and which had not yet been drawn upon. By
this time the government deposits were divided among 21
banks. In December, 1811, Gallatin reported that there
had been no difficulty in the transmission of public
money, and that with the exception of Norfolk and Savannah the revenue had been as well collected as under
the Bank of the United States. a
In his report, January 23, 1811, Gallatin expressed a
doubt whether, in the event of the dissolution of the bank,
its notes would continue to be receivable in payments to
the United States. He suggested the propriety of some

« Finance, Vol. II, pp. 516-522.
105

National

Monetary

Commission

legislation which would remove all doubt on the subject.
Congress took no action on the question, but Gallatin
instructed the collectors and receivers of public money
not to accept any which the bank refused to take from
the Government, or which they could not conveniently
redeem. The circuit court of Virginia, however, had
recently decided that the notes of the bank were everywhere a legal tender in payment of duties. Inasmuch as
a'considerable amount of the notes of the New Orleans,
Savannah, and Charleston branches was outstanding
and would be forced on the Treasury at considerable risk
and expense to collect, Gallatin urged the immediate
repeal of that part of the law which, according to the
recent decision, was considered as being in force. Accordingly, on March 19, 1812, Congress passed an act repealing the section of the bank act providing that notes of
the Bank of the United States were legal tender in payment to the United States. By the act of June 30, 1812,
treasury notes were made legal tender to the Government.
Seybert states that on March 4.. 1816, there were still
$217,160 of United States Bank notes outstanding, of
which many had been destroyed or lost. a In 1823 the
amount of notes still unpresented was $205,000. By
decree of the court the trustees were then released from
further obligation to redeem outstanding notes. A fund
of $5,000 was reserved to meet cases of peculiar hardship.
Up to 1839 the whole amount presented for redemption
was about $1,100, most of which had been in the hands
of an invalid Revolutionary soldier. Niles reports the
redemption of a $10 note in 1839.b
a Statistical Annals (1818).

& Niles Register, Vol. LVI, p. 273.
106

First

Bank

the

United

States

LIQUIDATION.

The work of liquidating the bank was carried on with
considerable dispatch and without the dire financial disturbances apprehended.
The following table shows the progress of liquidation in
the first year after dissolution: a
Jan. i, 1811. Mar. 1, 1811.Sept. i, 1811 Mar. 1, 1812,

Loans and discounts
Specie
Public deposits

$i7,759,ooi $14,587, 134 $7,152,786
4,500,527
4,835.702
S,3i7,88s
6,474,402
322,349
2,874.833

Private deposits

3,855,402

Notes in circulation.

6,070,153

3.583,596
6,552,875

$3,792,795
6,116,776

448,112

81.517
223,442

2, 963,209

1,070,459

Thus it appears that in the first six months of liquidation the bank collected over $7,000,000 of its loans
and discounts; paid off practically all of its public and
private deposits; and redeemed $3,600,000 of its bank
notes, yet its stock of specie fell only $335,175. In the
first year it paid over $11,600,000, and its specie increased
nearly $1,300,000. The discounts were reduced nearly
$10,000,000 and the circulating notes $6,500,000.
On June 1, 1812, the trustees declared a dividend of 70
per cent of the capital. Stockholders in the States where
branches had been established were paid by draft on the
respective branches. All others were paid at Philadelphia. 5 October 1, 1812, another dividend of 18 per cent
was paid, and a third one of 7 per cent on April 1, 1813,
making 95 per cent within about two years after dissolution. Subsequent dividends were paid as follows: Five per
a

Minority report (Ways and Means Committee) on Renewal of the
Deposits, March 4, 1834, 23d Cong., 1st sess., No. 313.
& Advertisement, United States Gazette, April 15, 1812.

107

National

Monetary

Commission

cent, April 3, 1815; 4 per cent in 1817; 1% per cent in
1820; 2% per cent in 1823; ]/2 per cent in 1830; yi per cent
in 1834, making a total of 109 per cent on the original
capital. Raguet calculated that if these dividends, made
at such long intervals, were regarded as deferred payments, compounded semiannually, the actual return to
stockholders was only 97 per cent on the day the charter
expired.a Some years before the stock had sold at 156.
In 1834 the city councils of Philadelphia appointed a
committee to determine the best way to close the trust
of the old bank in order to get possession of the house
which had been willed to the city by Girard, but which
was still occupied, rent free, by "the late cashier of
Girard's Bank." The committee brought in a report
February 12, 1835, showing that on June 25, 1812, Girard
had executed a lease to the trustees of the old bank of
parts of the bank and the cashier's dwelling until the
affairs of the bank should be closed. The bank building
had already passed to the city and was leased to the
Girard Bank. Finding that possession of the dwelling
depended upon the closing up of the trust, the committee
procured a copy of the most recent statement of the trustees. This showed $22,564 still in the hands of the trustees, after a recent dividend of $51,250. There were still
several debts due from estates in the hands of assignees.
It was thought that most of the $22,564 had been in the
hands of the trustees unclaimed for nearly twenty years
and that it would be difficult to reach those entitled to it.
The unclaimed balance would be increased by every suc-

Gouge, Journal of Banking, p. 239.

108

First

Bank

the

United

States

cessive dividend and the trust would be protracted indefinitely. The committee, therefore, recommended that the
city take over the trust and have it administered by the
commissioners of the Girard estate.
CONSEQUENCES OF DISSOLUTION.

Although the failure to renew the charter of the Bank
of the United States was not followed immediately by the
train of dire disasters predicted by its friends, the march
of events was soon to bring the country and the Government to the edge of bankruptcy, which the perpetuation
of the bank might have averted. No higher authority
than Gallatin's need be presented upon this point.
Writing in 1831, he said: ''The dissolution of the Bank of
the United States deprived the country of a foreign capital of over $7,000,000, which was remitted abroad during
the year that preceded the war. At the same time the
state banks had taken up a considerable part of the paper
formerly discounted by that of the United States. As the
amount of this exceeded $15,000,000, their aid was absolutely necessary in order to prevent the great distress
which must have otherwise attended such diminution of
the usual accommodations. The creation of new state
banks to fill the chasm was a natural consequence. The
expectation of great profits gave birth to a much greater
number than was wanted. * * * From January 1,
1811, to January 1, 1815, 120 new banks went into operation, with a capital of $40,000,000, adding about $30,000,000 to the banking capital of the country. * * *
And as the salutary regulating power of the Bank of the

109

National

Monetary Commission

United States no longer existed, the issues were increased
beyond what was necessary.'' a
Gallatin made the following estimate of the banking
facilities at the dates mentioned:
Capital.

Notes in circulation.

($10,000, 000

$5,400,000

$5,800,000

}

22,700,000

9,600,000

Year.

Bank of the United States

|I8II

88 state banks

208 state banks
846 state banks

42,610,601

Specie.

52,610,601

28,100,000

15,400,000

1815

82,259,590

45,500,000

17,000,000

1816

89,822,422

68,000,000

19,000,000

The Government was compelled to rely upon the state
banks for aid during the war of 1812, and their universal
suspension of specie payments in 1814 almost paralyzed
the operations of the Treasury. The notes of the state
banks did not pass current out of their own locality, and
it became impossible to make transfers of funds, public
or private, from one part of the country to another. In
the essay quoted above, Gallatin expressed his deliberate
opinion that the suspension of specie payments might have
been prevented if the Bank of the United States had still
been in existence. He believed that the enormous increase of banks occasioned by the dissolution of the bank
would not have occurred. That bank would have restrained their issues within proper bounds, and, " through
the means of its offices, it would have been in possession
of the earliest symptoms of approaching danger. I t
would have put the Treasury Department on its guard;
both acting in concert would certainly have been able at
least to retard the event; and, as the treaty of peace was

a Writings, Vol. Ill, p. 284.
no

First

Bank

the

United

States

ratified within less t h a n six months after t h e suspension
took place, t h a t catastrophe would have been altogether
avoided."
BANK

REPORTS.

I n the early days of banking a veil of mystery was
thrown over t h e operations of banks, and t h e general
public knew b u t little of their n a t u r e or modus operandi.
Even t h e Bank of t h e United States, semipublic institution
though it was, published no reports. Under t h e terms of
its charter it was required to make reports of condition to
t h e Secretary of t h e Treasury when called for, b u t not
oftener t h a n once a week. There is indisputable evidence
t h a t reports were m a d e regularly, b u t t h e y were not
given to the public. 0 I n t h e debates of 1811, after t w e n t y
years of t h e bank's contact with t h e public and the
Government, t h e statement was made, and passed unchallenged, t h a t " t h e n a t u r e of the loans, t h e deposits, and all
t h e bargains, dealings, and contrivances between the
Government and t h e b a n k are wholly invisible t o the
public." E v e n those friendly to t h e bank, and eager to
defend it, were unable to procure t h e facts and figures
necessary for an adequate defense. 6
The Treasury officials, during t h e entire time of its
existence, gave out no statement of its affairs except when
Congress called for information. Unfortunately, only two
reports of resources and liabilities have been preserved.
A careful search has failed t o reveal any trace of t h e
original books and records of the bank. The two surviving reports on t h e b a n k were made to Congress by

a See Appendix E.
in

See p. 84.

National

Monet

ary

Commission

Gallatin, one in 1809, the other in 1811, while Congress
was considering the bank's petition for a renewal of its
charter.
The financial statement of the bank's condition in
January, 1809, as stated in Gallatin's report of March 3,
1809, gives the actual amount of public stock, real estate,
and undivided surplus, but loans, deposits, specie and
notes are "average" amounts. The amount of specie on
hand and the deposits at the time of this report were
actually several million dollars in excess of this " averaged
statement," both having been increased considerably
above normal amounts by the embargo and by the unusually large Treasury balance which was principally on deposit in the bank.
Financial statement of Bank of United States.
J a n u a r y , 1 8 0 9 0 J a n u a r y , 181i.&

RESOURCES.
Loans a n d discounts
United States 6 per cent stock
Other United States indebtedness _
D u e from other b a n k s
Real estate
N o t e s of o t h e r b a n k s o n h a n d
Specie

$15,000,000
2,230,000

£14,578,294
2,750,000

800,000
480,000

894,145

57,046
500,653
393,341
5.009,567

Total.

23,510,000

24,183,046

10,000,000

LIABILITIES.

Capital stock
Undivided surplus
Circulating notes outstanding

510,000

509,678

4,500,000

Individual deposits _

8,500,000

5,037.125
5,900,423
1,929.999
634,348

United States deposits
Due to other banks
Unpaid drafts outstanding

I7L473

Total.

23,510,000
« Finance, Vol. I I , p . 352.

112

&See p . 112.

24,183,046

First

Bank

the

United

States

The balance of $510,000, the amount of undivided
profits, commonly called the "contingent fund, "was
reserved " t o cover losses which may arise from bad debts
or other contingencies, and for extra dividends/' Commenting upon this statement, Gallatin says: "The affairs
of the bank, considered as a moneyed institution, have
been wisely and skillfully managed.'' a
In obedience to a House resolution, Gallatin submitted
a statement, January 9, 1811, of debts due the Bank of the
United States by individuals and by other banks, of the
amount of notes of the bank and its branches in circulation, and of the Treasury cash in the different depositories. b Gallatin notes again that the only statements
which the Treasury could require of the bank, under the
act of incorporation, were the amount of capital stock,
debts due the bank, deposits, notes in circulation, and
cash on hand. He had no right to ask for the accounts
of private individuals or for any other than these general
statements. The bank statement is as follows:
a

Report to Senate, March 3, 1809, Finance, Vol. II, p. 352.
b Ibid., p. 460.

7069—10

A.—Debts due by indidviuals and banks.
Due by banks.

D u e b y individuals.

Date.
Bills a n d n o t e s
discounted.

Philadelphia

Washington
Norfolk
Charleston
Savannah__
New Orleans

Jan.
Dec.
Dec.
Dec.
_ _ Dec.
._
Dec.
_ _ _ Dec.
Dec.
Nov.

Total

i , 1811
22, 1810
29, 1810
29, 1810
29, 1810
22, 1810
15,1810
15, 1810
24, 1810

$5, 123,690.00
1,306,366.88
4,068,625.01
1,100,265.04
390,911.64
6 7 4 , 997. 20
711,315.92
772,729.48
601,689.85

Bills and notes
in suit.

fc>7i, 500. 00
$21,982.20

Bills and notes discounted, and bonds due by individuals, as above
Balance due by other banks
Bank notes of other banks on hand
Overdrawn by commissioners of loans (circumstances not explained)
Treasury drafts on collectors and other banks not yet collected
Converted 6 per cent stock, as per Treasury books

7069.

(To follow page 113.)

Total.

149,929.86

Deposited in
other banks.

950,309-40

$175,766.00
3 2 0 , 000. 00
480,504.00
383. 543-72
160,426.06
70,156.26
73,000.00

772,729-48
601,689.85

2 1 , 734. 00

$5,123,690.00
1,306,368.88
4, 140, 1 2 5 . 0 1
r, 100, 265. 04
412,893-84
718,115.54

43. 118.34
89,063.62

I4.750.593-02

Loan to the United States, December 31, i8io_

Bonds.

15,126,187.04

Due to other
banks.

Balance due by
other banks.

Bank notes of
other banks on
hand.

$28,982.00

$146,784.00
178,000.00
4 8 0 , 5 0 4 . 00
I90 476.21

$191,895.00
26,750.00

I57.369.03
70,156.26
73,000.00

3 1 , 142. 40

142,000.00
193.067.51
3,057.03

7 1 , 131. 66
3 1 , 8 9 0 . 00
23.095.00

1,685, 130.83

367, 106.54

2 1 , 734- 79

24, 7 6 5 . 0 0

1, 3 1 8 , 0 2 4 . 29

511,909.06

$15,126, 187. 04
1,318, 024.29
511, 909.06
32,579.07
31,446.01
23,066.23

1 7 , 0 4 3 , 2 3 1 . 70
2,750,000.00
19. 7 9 3 . 2 3 1 - 70

First

Bank

the

B.—Notes in
Date.

United

States

circulation.

Issued.

On h a n d .

Philadelphia

Jan.

I,I8II

$1,708,013

$101,750.00

Boston

Dec.

22, 1810

45L435

N e w York

Dec.

29, 1810

1,223,300

207,036.34
179,421.00

I n circulation.

$1,606,263.00
244,398.66
i, 043.879.00

Baltimore

Dec.

29, 1810

386,505

216,855.00

169, 6 5 0 . 0 0

Washington

Dec.

29,1810

288,880

33,114.83

255.765-17

Norfolk

Dec.

22, 1810

300,140

77,922.00

222,218.00

Charleston

Dec.

15, 1810

792.565

3,850.00

788,715.00

Savannah

Dec.

15, 1810

850,800

216, 4 5 0 . 00

634.350.00

N e w Orleans

Nov.

24, 1810

192,140

Total

6,193.778

192,140.00
1 . 0 3 6 , 3 9 9 - 17

5. 1 5 7 . 3 7 8 . 8 3

C.—Government deposits in various banks, January 7, 1811.
Bank of the United States (Philadelphia)
Office of discount and deposit at—
Boston
New York
Baltimore
Washington
:
Norfolk
Charleston
Savannah
New Orleans
Bank of—
Maine, (Portland)
Saco
Newport
Roger Williams (Providence)
Manhattan (New York)
Pennsylvania (Philadelphia)
(Pittsburg branch)
Marietta
Kentucky (Frankfort)
Columbia (Georgetown)—
Alexandria

° $ I 6 I , 557-64

°336, 264. 77
° 551. 988.51
"272, 293-77
° 6 s , 776.42
» i 4 , 006. 36
"29, 084.99
° 46, 841.63
° 166, 701.55
b

37, 392.38
26, 409.53
*> 3 4,843-49

0 4 3 , 382.79

c xgg, 670. 32
<* 92,628.17
d
13 7, 442.11
p 11, 242.25
d 75, 137-88
e
115, 080.15
/ 86, 917.90

While the debate on renewal was in progress in the
House, Gallatin was requested to submit a statement giv<* The collectors of Philadelphia, New York, etc., were directed by act of May 10, 1800 to
deposit for collection in the Bank of the United States or one of its branches all revenue
bonds.
b The deposits in these banks arose from payments made by several collectors in Maine
and Rhode Island.
c This deposit arose from occasional collections of surplus revenue in Rhode Island and
Connecticut.
d Deposits by receivers of public moneys on account of sales of public lands.
« This deposit due to occasional drafts on some collectors in Virginia, and from the
receipt of moneys paid at the treasury for lands, patents, etc.
/ Due to payments made by the collector at Alexandria.

National

Monetary

Commission

ing a list of the directors of the bank and its branches, the
amount of stock held by foreigners and by citizens, and
the amount of specie on hand, distinguishing between that
belonging to the bank, to individuals, and to the Government. The Secretary, in his report, January 24, 1811,
again pointed out that he could require from the bank only
general statements, which did not include either the names
of directors or the*residences of the stockholders.
His report included the following statement of the bank's
resources and liabilities, the only complete, detailed report
extant. 0 Many of the figures, it will be observed, are for
dates only a few weeks apart from those for which returns
were given in the previous statement:
RESOURCES.

Loans and discounts
$14,578, 294. 36
Loan to the United States
$2, 750, 000. 00
Funded debt
14, 338. 00
Overdrafts by Charleston commissioner.
31, 242. 48
Treasury drafts not yet collected
11, 466. 01
2, 807, 046. 49
Due by other banks
894, 144. 77
Notes of other banks on hand
393, 341. 15
1,287,485.92
Specie
,
5 > 009 > 5 6 7• 1 °
Real estate
500, 652. 77
24, 183,046.54
LIABILITIES.
Capital

10, 0 0 0 , 0 0 0 . 0 0

Circulating notes
Deposits:
Government
Banks
Individual

$5>037> 125. 22
$1,929,999.60
634,348.01
5, 900, 42 2. 83

Outstanding drafts on bank and branches

8, 464, 770. 44
171,473.17
13,673,368.83
509, 677. 71

Undivided surplus

24, 183,046.54
0

Finance, Vol. I I , p. 470.
116

The following table shows in detail how these resources and liabilities were divided among the bank and the several branches:
Deposits.
Date.

Due by banks

Notes of
other banks.

Treasury.
Bank of the United States
Boston
New York
Baltimore
Washington
Norfolk
Charleston
Savannah

Jan.
15, 1811
Jan.
5,1811
Jan.
12, 1811
___do
__.do

5M,98i,373-oo
1, 1 3 8 , 9 2 3 - 5 9
3,919,628.98
1, 1 0 8 , 5 4 2 . 36
412,161.60

$79,177.00
61,000.00
76,420.00

5>i37,57o.oo
45,610.00

330.454-54
146, 376. 86

86,292.71

Jan.
s , 1811
Dec.
29, 1810
I
do

713.724-40
935.71392
768,681.97

3,300.34
186,000.00

28, 3 6 2 . 6 0

New Orleans

I Dec.

8, 1810

Total.
0

Loan to United States _
Funded debt
Totai__

7069.

(To face page 116.)

16,46584

24,000.00
21,225.00

5 9 9 . 5 4 4 - 44

11,416.03

14,578,294.26

894, 144. 97

$2,750,000
14,338
2,764,338

33,815.00

393,341-15

Bank notes.

Specie.

$1,407,373.00
474.497-38
5 7 1 , 5 2 0 . 42
604,398.46
2 9 7 , 6 1 5 - 83
307,596.40
459,181.62
6 0 2 , 8 7 9 . 41
284, 5 0 4 - 5 8
5,009,567.10

a$2,

764,338.00
b 466.01

$392,909-24
3 4 1 , 0 5 4 - 47
625,417.09
199,201.28

11,000.00

IOI.895-55
16,483.76

c 3 1 , 242. 48

36,645.03

$140,765.00
241,000.00
29,860.00
2 1 5 , 9 9 1 . 23
6 , 7 3 1 - 78

49,691.63
166,701.55
2, 807, 0 4 6 . 49

Individuals.

1,929,999-60

634,348.01

$2,560,864.25
825,000.11
8 7 8 , 4 5 1 . 11
84,057.38
539,993-04
112,303.28
4 9 1 , 6 7 8 . 93
1 9 6 , 8 5 4 . 86
211,219.87

$1,687,893.00
435,680.00
1, 254. 5 3 0 . 0 0
371.865.00
297, 8 6 0 . 0 0
283,900.00
802,735.00
825,950.00
192, 140. 00

5, 900, 422. 83

6.152,553.00

b Treasury drafts not yet collected.
« Overdraft by late commissioner of loans, Charleston.

$126,060.00
259, 2 4 8 . 3 9
176,540.00
2 1 0 , 8 2 2 . 56
36,414-83
77, 232. 00
12, 500. 00
216,610.00

circulation.

$1,561,833.00
176,431.61
1,077,990.00
161, 042. 4 4
2 6 1 , 4 4 5 . 17
206, 6 6 8 . 0 0
79o,235.00
609, 340. 0 0
192, 140. 0 0

1, 115,427- 7 8

5,037,125.22

First

Bank

the

United

States

An analysis of these statements will serve to throw
some interesting side lights upon the condition and
operations of the bank and its branches. Of the total
resources, aggregating over $24,000,000, the chief items
were loans, $14,500,000; specie, $5,000,000; and government indebtedness, $2,800,000. The latter consisted
chiefly of a 6.per cent loan of $2,750,000 obtained in
1810. This loan had been at first negotiated, May 30,
for $3,750,000, but the treasury expenses having proved
less than was anticipated, the loan was, by mutual consent,
reduced in October to $2,750,000. It was reimbursable
on the last day of December, 1811, with a reservation that
the bank might, in case of nonrenewal of its charter,
demand earlier payment on giving three months' notice. 0
The Government repaid this loan in March and September,
1811.
The following table, based upon the foregoing statement,
shows the amount of loans of the bank and its branches
with relation to capital, deposits, and notes in circulation:
Capital.

Discounts.

Deposits.

Philadelphia,.
Boston
New York
Baltimore
Washington _.
Norfolk
Charleston
Savannah
New Orleans.

H . 700,000
700,000
1,800,000
600,000
200,000
600,000
600,000
500,000
300,000

$4. 981,373
1, 138,923
3,919,628
1,108,542
412,161
713,724
935,713
768,681
599,544

$3,094,538
1,507,054
1.633.728
499.249
648,620
128,787
528,323
246,546
377.921

$1,561,833
176,431
I.077,990
161,042
26l,445
206,668
790,235
609.340
192,140

Total,.

10,000,000

14.578,294

8,464,770

5.037.I2S

a Gallatin's annual report, December 10, 1810, Finance, Vol. II, p. 441.

117

National

Monetary

Commission

Of the total discounts, over three-fifths stood on the
books of the Philadelphia bank. Boston and Baltimore
each carried over $1,000,000 of loans, and Charleston
nearly as much, followed in order by Savannah, Norfolk,
New Orleans, and Washington. In every case excepting
Boston and Washington discounts exceeded deposits, and
in New York, Baltimore, and Savannah discounts were
slightly in excess of the combined capital and deposits.
In this respect, the mother bank made the most conservative showing with discounts of nearly $5,000,000 against
capital and deposits of about $7,800,000. This was due
to the fact that the parent held itself responsible for all
of the eight scattered branches, and limited its discounts
carefully in order to be in a position to aid any of the
branches if occasion should arise.
At the time of this report, the various state banks owed
the Bank of the United States $894,000, while their
deposits in the latter amounted to $634,000, leaving only
a small balance in their favor. The Baltimore branch
was the largest creditor of the state banks, which owed
it about a third of a million. The bank also held $393,000
of the notes of state banks. Of the $5,000,000 specie on
hand, the parent bank held nearly one-third, the Baltimore,
Savannah, and New York branches having about one-half
as much. Years later, it was said that at one time the
New York branch had less than $10,000 in specie in its
vaults. 0
The aggregate deposits of $8,500,000 consisted of
government deposits, $1,900,000; individual deposits,
$5,900,000; bank balances, $600,000. New York held

a Gouge, Journal of Banking, p. 252.
118

First

Bank

the

United

States

$625,000 of treasury funds, about one-third of the total,
followed by Philadelphia with $393,000, and Boston with
$341,000. Of bank balances, Boston and Baltimore each
had something over $200,000; Norfolk, Charleston,
Savannah, and New Orleans had none. The parent bank
had individual deposits amounting to over $2,500,000,
nearly one-half of the total; New York stood second, and
Boston third, with over $800,000 each; Baltimore had
only $84,000, while the small Washington office had over
half a million. At this date the undivided profits of the
Bank of the United States amounted to $509,677.
PROFITS AND DIVIDENDS.

On April 4, 1810, Gallatin submitted to the Senate a
list of dividends declared by the bank down to January 1
of that year. In addition to the semiannual dividend of
4 per cent, some extra dividends were declared, making
an average of 8|~§ per cent. At the date of this report,
the bank had a surplus of $409,410, made up of " general
bank estate/' $125,000, intended as an offset against loss
on the bank's real estate, which had been paid for out of
the capital and not out of profits; and " contingent fund,"
$284,410, to cover possible losses. As to the actual profits
of the bank and its branches, Gallatin said: " The nominal
profits resulting to the bank from each of its offices of
discount and deposit could not be ascertained without an
investigation of all the weekly returns made to this department; and there are no returns from which the actual loss
sustained by each office can be known." Estimating
annual expenses at $125,000, "the losses must in the
whole have amounted to about $35,000 a year."

119

National

Monetary

Commission

The following table shows the capital and the loans of
the parent bank and the several branches, according to
the most recent returns at the time of this report, April
4, 1 8 1 0 : a
Capital.
Boston
New York
Baltimore
Washington
Norfolk
__
Charleston
Savannah
New Orleans
Philadelphia:
Balance due in account current by branches
Capital reserved
Funded debt
Total

$700,000
1,800,000
600,000
200,000
600,000
600 000
500,000
300,000
750,000
3,950,000

Notes discounted.
$998,859
4,175,874
1, 3 4 9 , 550
485,285
880,170
1,409,916
1,054,113
611,517

4 , 5 7 2 , 586
1,411,627

10,000,000

With these figures as a basis, Gallatin estimated the
annual expenses and losses of the bank as follows: Six
per cent on the $17,000,000, the amount usually loaned
on interest, amounted to $1,020,000. The dividends on
the $10,000,000 at 8^f per cent would be $836,111,
and the undivided profits ($409,410 on January 1, 1810,
divided by eighteen, the years of the bank's existence),
$22,745; subtracting these two sums there remained.
$161,448, the annual amount of expenses and losses. Of
this amount, Gallatin had estimated $125,000 for annual
expenses, which left $36,448 a year for actual losses. This
loss of less than one-half of 1 per cent per annum on bad
debts speaks strongly for the conservative management
of the bank's affairs. Long after the bank had disap-

« Finance Vol. II p. 418.

First

Bank

the

United

States

peared one authority estimated its average annual losses,
during the twenty years of its existence, at sixty-one
one-hundredths of i per cent. a
In the debates of 1811, the accuracy of Gallatin's statement of the profits of the bank was challenged. It was
contended that the bank had concealed its real profits
under charges to the loss and contingency accounts, and
that its actual net profit was over 11 per cent. It was
argued that the branches had made a gross profit of more
than 13 per cent. These had a total capital of $5,300,000
and discounts of $11,964,000, but the mother bank,
which retained a capital of $4,700,000, granted discounts
of only $4,572,000. It was well known, however, that
bank capital had been as profitably used in Philadelphia
as in any other city, and the state banks unaided by
government deposits had yielded dividends so large
as to send their stock to 35 to 50 per cent premium. It
was thought, therefore, that "after the deduction for
losses (that probably never happened) and contingencies
never expected to take place," the net profit was more
than 11 per cent instead of 8 ^ per cent, as had been
reported by the Secretary. (I^ove.) On the other hand,
it was contended that the parent bank had to have at all
times sufficient reserve to meet every emergency, and so
could not extend its discounts too far. A branch that
produced no profit but sometimes actual loss might be
just as expensive to maintain as one that was productive.
The experience of only the most profitable branches had
been cited by the critic; others might show a considerable
loss. (Finley.) The complete record of dividends shows

«H. C. Carey: The Credit System.
121

National

Monetary

.Commission

that Gallatin's estimate, based upon the report of the
bank, was substantially correct. a
The first few dividends declared by the Bank of the
United States were quite low in contrast with those of
the Bank of North America. Up to 1800, dividends at
the rate of 8 per cent were paid, with an extra dividend
of 1 per cent in January, 1798. In 1801, 10 per cent was
distributed, 9 per cent in 1802, and %% per cent in 1803
and 1804. Thereafter 8 per cent was the regular dividend, excepting for the year 1807, when 10 per cent was
declared.
The largest annual dividend of the Bank of the United
States was 10 per cent in 1801 and in 1807; the lowest 7 ^
per cent in 1793. In 1792, the Bank of North America
declared a dividend of 15 per cent; in 1793, 13 per cent;
and from 1794 to 1799, inclusive, 12 per cent; 1800, 1801,
1802, 10 per cent; 1803, 9% per cent; 1804 to 1810,9 per
cent. The Bank of Pennsylvania, established in 1794,
started with 8 per cent, then rose to 10 for one year,
dropped to 9 ^ for three years, then to 8 for six years, up
to 9 for seven years, returning to 8 as the regular dividend. The uniform dividend of the Philadelphia Bank,
established in 1804, was 8 per cent; also that of the
Farmers and Mechanics,, which opened in 1808.6
TAXATION.

In 1797, a federal tax of 6 mills on the dollar was laid
on the notes of all banks below $50, with lower rates on
the higher denominations. Provision was made that the
tax might be commuted at 1 per cent on the dividends.
a> See Appendix C.

& Carey's Letters to Seybert, Appendix D
122

First

Bank

the

United

States

The Bank of North America and probably other banks
paid the tax by the latter method. 0
In 1805, the legislature of Georgia passed a law taxing
the branch of the Bank of the United States at Savannah.
The bank refused to pay the tax, whereupon the state
officers seized two boxes of specie worth $2,004. The
bank brought an action for trespass in the circuit court,
which rendered a decision in favor of the defendant on
a demurrer. The case was appealed to the Supreme
Court of the United States, where it became involved in
technicalities. Georgia then desisted until it should be
decided whether the bank was to be rechartered. b The
question of taxing the bank was mooted in the Pennsylvania legislature, but no action was taken.
CONSERVATISM, A CHARACTERISTIC.

Conservatism, verging at times upon extreme and
unnecessary caution, characterized the management of
the bank's affairs, restricting both its full usefulness to
the business community and its returns to the stockholders. Soon after the establishment of the second
Bank of the United States, in 1817, which was much more
liberal in its general policies, President Jones, writing to
William H. Crawford, Secretary of the Treasury, said: ".I
am not at all disposed to take the late Bank of the United
States as an exemplar in practice; because I think its
operations were circumscribed by a policy less enlarged,
liberal, and useful than its powers and resources would
have justified. * * * It had but few powerful competitors, and these were rendered harmless by the cau0 Minutes, Bank of North America, September 28, 1797.
& Sumner, History of Banking in all Nations, p. 48.

123

National

Monetary

Commission

tious policy of its directors and the narrow sphere of its
operation." a
The bank adopted a system of permanent loans to both
individuals and banks. 6 These permanent accommodations were well-nigh universal in the practice of the
early banks, and were even more stifling to progress
and impartial sen'ice then than in our own day because
of the limited sources of loanable funds. The enormous permanent loans to the Government during the first
few years of the bank's life prevented it from serving
the business interests of the country as fully as it might
otherwise have done, and were an incubus which it
finally shook off only by making the most unqualified
demand for payment. It would have been better,
probably, had the bank taken the same firm stand with
other accommodation borrowers. The charges of partiality in making loans, which were made against the
bank in the debates of 1811, do not seem to have been
well sustained. The Philadelphia delegations of mechanics and manufacturers who went to Washington
to urge a renewal of the charter testified that the bank
was impartial in its accommodations. 0
There is some ground for the belief that, in the case of
the parent bank, at least, large importers and traders of
the type of Stephen Girard were accommodated before
the needs of the retailer and shopkeeper were served.
Because of the additional resources arising from the government deposits the bank had " the choice of customers."
The New York branch was accused of refusing accommodations to importers who were perfectly acceptable to
o Finance, Vol. IV, p. 807.

& Ibid., p. 774.
124

^See p 83.

First

Bank

of the

United

States

the Manhattan Bank there, and the Norfolk and Baltimore branches were charged with similar partisan
partiality. 0 These refusals, however, may have been
based upon perfectly good and sufficient business circumstances. In the main, the bank as far as its resources
and the exigencies of the times would permit, met all
the reasonable demands of borrowers at a fair rate of
interest. It was largely instrumental, therefore, in
repressing the practice of usury, which had long preyed
upon legitimate business.
It was estimated in 1811 that the total specie supply of the country amounted to only $10,000,000. Of
this sum the Bank of the United States held more than
$5,000,000, which gave it a powerful influence over all
other banking institutions. In some sections the state
banks had much larger resources and conducted a much
more extensive business than the branch in that section,
yet behind the branch there always loomed the shadow
of the big bank, whose enmity no other institution willingly incurred. But, though the powerful Bank of the
United States tended to restrain the smaller banks,
compelling them to keep within the limits of conservative business, yet it was always friendly and ready to
aid them when unexpectedly pressed, and " generally
they had the use of not less than one-tenth of its capital." 6
By virtue of its large resources and its numerous branches
it was able to equalize the benefits of large loanable
capital throughout the country and to relieve any sudden pressure in trade much more effectively than the
state banks were able to do. c
a

See p. 92.

& Second petition for renewal, p. 76.
c Memorial of the Bank of New York, p. 79.
125

APPENDIX A.

ACT OF INCORPORATION.
(February 25, 1791.)
AN ACT to incorporate the subscribers to the Bank of the United States.

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, and 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 in sudden emergencies; and will be productive of considerable advantages to trade and industry in general: Therefore—
SECTION I . Be it enacted, etc., T h a t a Bank of the United States shall be
established, the capital stock whereof shall not exceed ten million dollars,
divided into twenty-five thousand shares, each share being four hundred
dollars; and that subscriptions toward 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 that purpose by the President of the United States (who is
hereby empowered to appoint the said persons accordingly), which subscriptions shall continue open until the whole of the said stock shall have
been subscribed.
S^c. 2. And be it further enacted, T h a t it shall be lawful for any person,
copartnership, 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 t h a t the sums
respectively subscribed, except on behalf of the United States, shall be
payable one-fourth in gold and silver and three-fourths in t h a t part of the
public debt which, according to the loan proposed in the fourth and fifteenth sections of the act entitled "An act making provision for the debt
of the United S t a t e s / ' shall bear an accruing interest at the time of payment
of six 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.
SEC 3. And be it further enacted, T h a t all those who shall become subscribers to the said bank, their successors and assigns, shall be, and are
hereby, created and made a corporation and body politic by the name
and style of the president, directors, and company of the Bank of the

126

First

Bank

the

United

States

United States, and shall so continue until 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 to 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, alien, 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 hereinafter 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 hereinafter
prescribed and declared.
SEC. 4. And be it further enacted, T h a t 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 the said corporation and
by plurality of the votes actually given; and those who shall be duly chosen
at any election shall be capable of serving as e l e c t o r s by virtue of such
choice until the end or expiration of the Monday of January next ensuing the time of such election and no longer. And the said directors at
their first meeting after each election shall choose one of their number as
president.
SEC. 5. Provided always, and be it further enacted, That, as soon as the
sum of four hundred thousand dollars in gold and silver shall have been
actually received on account of the subscriptions to the said stock, notice
thereof shall be given, by the persons under whose superintendence the
same shall have been made, in at least two public gazettes printed in the
city of Philadelphia; and the said persons shall, at the same time in like
manner, notify a time and place within the said city, a t the distance of
ninety days from the time of such notification, for proceeding to the election of directors; and it shall be lawful for such election to be then and
there made; and the persons who shall then and there be chosen shall be
the first directors and shall be capable of serving, by virtue of such choice,
until the end or expiration of the 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: And 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

127

National

Monetary

Commission

to have been made, the said corporation shall not, for t h a t cause be deemed
to be dissolved; but it shall be lawful on any other day to hold and make
an election of 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, absence from the United States, or removal
of a director by the stockholders his place may be filled up by a new choice
for the remainder of the year.
SEC. 6. And be it further enacted, T h a t 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 described, fixed, and determined by the laws, regulations, and ordinances of the same.
SEC. 7. And be it further enacted, T h a t the following rules, restrictions,
limitations, and provisions, shall form and be fundamental articles of the
constitution of the said corporation, viz:
I. 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 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 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 others,
may vote in election by proxy.
I I . 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 reelected.
I I I . None but a stockholder, being a citizen of the United States, shall
be eligible as a director.
IV. No director shall be entitled to any emolument unless the same
shall have been allowed by the stockholders a t a general meeting. The
stockholders shall make such compensation to the president for his extraordinary 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.

128

First

Bank

the

United

States

VI. 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 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.
V I I . Every 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 condition for his good behavior.
V I I I . 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 fide mortgaged 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.
IX. The total amount of the debts which the said corporation shall at
any time owe, whether by bond, bill, note, or other contract, shall not
exceed the sum of ten million dollars over and above the moneys then
actually deposited in the bank for safe keeping, unless the contracting of
any greater debt shall have been previously authorized by a law 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, their or any of their heirs, executors, or administrators, in any court
of record of the United States, or of 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 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 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 anything,
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.
7069—10

129

National

Monetary

Commission

X I . 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.
X I I . 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.
X I I I . 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 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 bearer, though 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 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 foreign 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
failure in the payment of any part of any sum, subscribed by any person,
copartnership, 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.
XV. It shall be lawful for the directors aforesaid to establish offices
wheresoever they shall think fit, within the United States, for the purposes of discount and deposit only, and upon the same terms and in the
same manner as shall be practiced at the bank, and to commit the management of the said offices and the making of said discounts to such persons,

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States

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.
XVI. 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 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.
S E C 8. 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 t r a d e 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 h?.~. 2 oeen
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 with costs of suit.
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 offense, treble the value or amount of the
sum or sums which shall have been so unlawfully advanced or lent, onefifth 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 or 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 of 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
million dollars, on behalf of the United States, to an amount not exceeding
two million 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

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Commission

for the debt of the United S t a t e s ; " and the other entitled "An act making
provision for the reduction of the public d e b t ; " borrowing of the bank an
equal sum, to be applied to the purposes, for which the said moneys shall
have been procured, reimbursable in ten years, by equal annual installments, or at any time sooner, or in any greater proportions, t h a t 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.

132

APPENDIX B.

ORDINANCE AND BY-LAWS FOR THE REGULATION
THE BANK OF THE UNITED STATES.

SECTION I. The charter of incorporation granted to the Bank of the
United States, amongst other rights, privileges, and abilities therein conveyed, having empowered the stockholders at general meetings, legally
convened, to make, 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: Be it ordained, By the president,
directors, arid company of the Bank of the United States—
S^c. I I . That the bank shall be open for the transaction of business
every day in the year (Sundays, Christmas Day, and the Fourth of July
excepted) during such hours as the board of directors shall deem advisable.
SEC. I I I . That the books and accounts of the bank shall be kept in
dollars and cents, and shall be regularly balanced on the first Mondays in
January and July in each year, when the half-yearly dividends shall be
declared and published in at least four of the public newspapers.
SEC. IV. T h a t the bank shall take charge of the cash of all those who
choose to place it there (free of expense) and shall keep it subject to their
order, payable at sight; and shall receive deposits of ingots of gold, bars
of silver, wrought plate, or other valuable articles of small bulk, in the
same manner, and return them on demand of the depositor.
SEC. V. That the bank shall receive all specie, coins according to the
rates and value that have been or shall hereafter be established by Congress.
S E C VI. That until offices of discount and deposit shall be established,
there shall be at least two days in every week, when meetings of the board
of directors shall be assembled. Discounts shall be made at a rate not
exceeding 6 per cent per annum on notes or bills of exchange that have
not more than sixty days to run, and with at least two responsible names,
and under such modificatiAns, as the board of directors in their discretion
shall deem satisfactory and expedient.
S E C VII. That the president shall have power to convene the directors
on special occasions, and with the approbation of the board of directors, to
assemble and affix ths seal of the corporation to all conveyances or other
instruments, and sign the same in behalf of the corporation—the said seal
shall always remain in the custody and safekeeping of the president.
S E C VIII. That a committee of the board, consisting of at least three
members to be elected monthly by ballot, shall visit the vaults in which

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the cash and other effects shall be deposited at least once in every month,
and make an inventory of the same, to be compared with the books, in
order to ascertain whether they perfectly agree therewith.
SEC. IX. That no notes of the bank shall be struck or signed, or bank
paper made, but by the direction of the board.
SEC. X. That in case the board of directors shall at any time make a
dividend exceeding the profits of the bank and thereby diminish capital
stock, the members assenting thereto shall be liable in their several individual capacities for the amount of the surplus so divided.
SEC. X I . That the board of directors shall, previous to the first day of
December in every year, call a general meeting of the stockholders to be
assembled, within three days after each annual election.
SEC. X I I . That the board of directors are hereby empowered to demand
and receive from the commissioners appointed to superintend the subscriptions to the capital stock of the bank, all moneys which have been paid
to the said commissioners on account of the first specie payment, together
with the original book of subscription.
SEC. X I I I . That the board of directors are hereby authorized to ascertain and determine in what manner the remaining portions of the capital
stock, due on the shares subscribed, consisting of specie and public debt,
shall be paid and received, and they are hereby further authorized and
empowered to receive into their possession the certificates of said public
debt, and demand and receive by their president, or in such other manner
as they shall think proper, the interest that shall accrue and become due on
the same, and to give receipts therefor in behalf of the said corporation.
SEC. XIV. That the board of directors are hereby authorized and
empowered to fix and establish requisite, safe, and convenient forms for
transferring bank stock; for receiving half-yearly dividends; for conveying
a right to proxies to represent stockholders at any general meeting after the
second Monday of January next; for the certificates of capital stock of the
bank; for the circulating and post notes of the bank; and for the oath or
affirmation of the officers of the bank, previous to their entering on the
execution of their respective duties.
SEC. XV. That the board of directors are hereby authorized and empowered to establish a common seal, with suitable devices; to ascertain and
mark out the various duties and employments of the officers, clerks, and
servants of the bank, and to direct them accordingly—as well as to determine the amount of securities they shall respectively give for the faithful
discharge of their duties; to assign to the president such additional functions as are not already designated by law; and to reissue or renew a t their
discretion the notes in circulation.
SEC XVI. T h a t the directors shall have power to make loans to the
Government of the United States, or of any State, to such extent, and on
such terms as they shall deem expedient, not contrary to law; provided

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that a board consisting of not less than a majority of the whole number
of directors shall be necessary to decide in all such cases.
SEC. XVII. T h a t the board of directors are hereby authorized to lease
or hire for a term not exceeding two years such suitable buildings as the
administration of the affairs of the bank may require.
SEC. X V I I I . That in case it shall happen that an election of directors
shall not be made at a meeting of the stockholders for that purpose on the
first Monday of January next, and on said day in each succeeding year, it
shall be lawful for the stockholders to adjourn said meeting to any future
day within five days from the said first Monday of January, and at said
adjournment to make, complete, and finish said election.
SEC X I X . That the board of directors are hereby empowered to form
and establish all other rules and regulations that they may deem necessary
for the interior management of the bank.
On motion, resolved, That it is the sense of the stockholders of the Bank
of the United States, that the president and directors should turn their
immediate attention to the establishment of offices of discount and deposit
at such places in the United States as the interest and safety of the institution will admit.«
Attest:
EDWARD F O X , Secretary,
a

D u n l a p ' s American Daily Advertiser, November 14, 1791.

135

A P P E N D I X C.
QUOTATIONS OF BANK STOCKS..

Date.

August 22, 1792
November 6, 1792.
January 3, 1793 —
January 4, 1794
January 2, 1795
January 16, 1795..
February 15, 1796February 14, 1797January 10, 1798-January 1, 1800
December 20, 1800

Bank of
the United
States.

Bank of
North
America.

150

130

142

133

i3S
no
126
145

130

Bank of
Pennsylvania.

108

120
140 I

126
140

130

145
146

112

145

113

°I23

150

124

150

124

139

153

134

January 17, I 8 O I . _

133

147

126

August 2, 1802
January 1, 1803
March 10, 1804
May 18, 180s
January 4, 1806
December 21, 1807
January 26, i8o8__
May 21, 1808
January 5, 1809

153

151

141

I47K

154

134

148

143

125

132

135

130

^31

131^

I28>

123M

145

134

119

145

130

140

127^

January 22, I 8 I O _ _

127

April 2, 1810
December 19, 1810
January 15, 1811__
January 28, i 8 n _ _
April 2, 1811
December 30, 1811
April 9, 1812
June 8, 1812

145
147
146
149M

115
°H3
107
90

95K
92
94

a Dividend off.

136

130

134
140
145
141
140

137

APPENDIX

DIVIDENDS.
Bank of the United
States.
January

July.

Per cent.

17871788,
17891790179117921793179417951796179717981799i8oo_
I8OI_

l802_
1803i8o4_
1805i8o6_
i8o7_
i8o8_
1809.

4
3 ^

North
America

Philadelphia.

Per cewi
6
6
7
7
7

Per cent.

IS
13

4
4
4
5
4
4
6
4/4

4
4
4
4
4
4
4
4>2

4^2

4'A
4
4
6

4
4

9K
9
9
9
9
9
9
9

a The third dividend was 10 per cent; fourth, fifth, and sixth, 9% percent; thirteenth
to nineteenth, 9 per cent.

137

APPENDIX

RECORDS AND ACCOUNTS OF THE FIRST BANK OF THE
UNITED STATES.

The scantiness of data relating to the first Bank of the
United States, especially of reports of its condition, has
long been regretted by historians and investigators.
Though there are indisputable evidences that the bank
made frequent reports to the Treasury Department, only
two apparently have been preserved. The Treasury officials now in charge of the records and archives share the
opinion expressed in Professor Dunbar's subjoined article
that if any of these reports were in existence at the time of
the fires in 1814 and 1833 they were probably destroyed.
In undertaking a study of the first Bank of the United
States, however, it was hoped that a diligent search might
reveal some old records, diaries, or other data, which would
throw additional light upon its methods and practices. It
was thought that the papers and documents of the bank,
after its business and the bank building were purchased by
Stephen Girard, might have passed into his possession and
have been preserved either among his private papers, now
in the possession of the Girard estate, or among the old
records of the Girard National Bank, which was organized
as a state bank in 1832 to fill the financial gap caused by
Girard's death and the liquidation of his bank. These
possible sources, however, proved fruitless. The Girard
National Bank has no records relating to the old bank;
while the superintendent of the Girard estate, who is
having Girard's papers classified and catalogued, believes

138

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States

that the collection contains no material of value on this
subject.
Through the officers of the Pennsylvania Historical
Society inquiry was made to ascertain whether any of the
old bank records had passed into the possession of, and had
been preserved by, descendants of Willing, Simpson, and
others directly connected with the bank. This line of
inquiry, too, proved unfruitful. A careful reading of the
newspapers and pamphlets for the entire period of the
bank's existence furnished considerable new material,
especially for the first few years of its history. The old
minute books and records of the Bank of North America,
which were made accessible through the courtesy of President Michener, contained some valuable data, but this is
the only bank which was contemporary with the first
Bank of the United States whose records have yielded
much material for this study. Extensive use has been
made of the Finance folios in the American State Papers,
as well as the works and writings of Hamilton, Gallatin,
Jefferson, and other public men of the time.
Professor Dunbar's article on the "Accounts of the First
Bank of the United States" follows:
"The first Bank of the United States was obliged by its
charter to report its condition to the Treasury Department
as often as required, not exceeding once a week. It is
well known that Mr. J. J. Knox, when Comptroller of the
Currency, found that the existing records do not show that
any formal reports were ever made. Two balanced statements were given to Congress by Mr. Gallatin, one in
March, 1809, and the other in January, 1811; and it has
sometimes been assumed that these were the only reports
ever made.

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"That Mr. Knox's search in the Treasury Department
brought no reports to light proves but little. The Treasury Department, it will be recollected, was burned when
Washington was occupied by the British forces in August,
1814; and it was burned again in March, 1833. The
official statements made to Congress as to the documents
and books lost and saved on these two occasions raise a
presumption that any such reports, if in existence at the
time of either conflagration, would not have been among
the papers saved, the effort being made in both cases to
save primarily what was needed for the current public
service. The failure, therefore, to discover at the present
time a set of papers, which even in 1814 had only an
historical value, can not be regarded, under the circumstances, as having any weight.
" There are, however, many pieces of evidence scattered
in the public documents tending to show that the bank was
required by the Treasury Department to make frequent
report of its condition, and that it did so in obedience to
the law.
'' The most complete account which we have is that which
was sent to the House in January, 1811, as above stated,
and is given in State Papers on Finance. (Vol. II, p.
468.) This statement, made in much detail, is said by
Mr. Gallatin in the letter communicating it to be 'extracted from the latest returns received at this office from
the bank/ It was then one of a series. The return of
1809 above referred to (ibid., p. 352), although a balanced
account, is given in round numbers and has been stigmatized as an account 'trumped u p ; ' but Mr. Gallatin's
letter transmitting it states expressly that the amount of

140

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Bank

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States

the principal items 'is taken on a medium'—that is, it
is an averaged account, and no more ' trumped u p ' than
• the averaged accounts now published weekly by the clearing-house. Mr. Gallatin's language shows that he preferred to give an averaged account, because it better
represented the ordinary condition of the bank than the
actual figures at the date of his report; and, as the question before Congress related to a renewal of the charter, it
was the ordinary condition of the bank which Congress
most needed to understand. For the present purpose,
however, the important point is that, in making a statement 'taken on a medium,' Mr. Gallatin probably had
before him the various detailed statements of which this
medium is the average. In one other instance we have
direct evidence that an account of the bank was in possession of the Government. In Gallatin's Writings (Vol. I,
P- 59) > Jefferson writes to Gallatin, November 11, 1801,
giving a comparative table of certain items in the accounts
of the Bank of the United States and of banks in several
of the principal cities. If we take the items relating to the
Bank of the United States and arrange them in their
proper form, we find that they make up an account as
follows:
Liabilities.
Capital
Undivided profits
Notes
Deposits:
Government
Individual

Resources.
$10, 000, 000
40,000
5. 200, 000
3,560,000
5,240,000

Discounts
$12, 150, 000
Six per cent and advance to
Government
5,460,000
Due from banks
1, 450, 000
Specie
5, 000, 000

24,040,000

141

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National

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Commission

" It is sufficiently evident that Jefferson in this case had
a balanced account of the bank which he simplified by
throwing off the thousands, this process causing the discrepancy which appears in the totals of debit and credit.
'' Besides these references to other statements than
those now known to exist, there are numerous significant
allusions to be found in Gallatin's correspondence and
in the debates in Congress upon the proposed renewal of
the charter. Thus, in Gallatin's ' Writings ' (Vol. I, p .80),
we have Gallatin in June, 1802, comparing the condition
of the Bank of Pennsylvania with that of the Bank of
the United States. To cite only one passage from the
debates, we find Mr. Finley, on April 30, 1810, saying in
the course of his speech that ' the Secretary of the Treasury has, for the time being, had authority by law to
inspect the directors of the bank, and did do it, and
obtained weekly returns of its situation.' In Gallatin's
communication to the House, January 10, 1811, in 'State
Papers on Finance ' (Vol. II, p. 460), there are significant
references to 'the returns made to the Treasury,' and
'the official statements transmitted in conformity with
* * * the charter,' and the like. And in Mr. Gallatin's well-known 'Considerations on the Currency and
Banking System,' published in 1831, we find him making
a general statement as to the proportion which the loans
made and stocks owned by the bank bore to its capital
for the whole of its existence—a statement which a man
of his caution never made without full documentary
evidence. In short, there is ample reason to believe
that when the stockholders declared in their petition

142

First

Bank

the

United

States

for a renewal of the charter, in April, 1808,' that the confidence of the Government (was) founded upon a constant knowledge of the interior management and condition of the bank,' they told the truth. Indeed, it is
inconceivable that they should have made this statement
to a Congress in which their opponents had the majority,
if there had been any possibility of a denial.
* That the accounts given to the Treasury Department
were not made public, as they would be in our own day,
is not surprising when we see the different views then
commonly held as to giving publicity to such statements.
For example, in Jefferson's letter of November, 1801,
referred to above, it will be observed that he suggested
that statements from the state banks should be generalized, and the total of the yearly average should be
presented to Congress. ' I t would give u s / he says,
'the benefit of their and of the public observations and
betray no secret as to any particular bank.' And it will
be recollected that at that period the Bank of England,
on which the Bank of the United States was closely
modeled, made no publication of its accounts, and that
it was not until 1834 that even a quarterly statement
was required to be made. In the earlier part of the
century the public could learn nothing as to the condition
of the bank, except the selected facts cautiously given
out in parliamentary investigations. Mr. Tooke, in his
evidence before the committee of 1832, in ' Parliamentary
Documents,' 1831-32 (Vol. VI), described the accounts
thus given of the cash held by the bank at some critical
periods as 'mystical;' and some important witnesses,

143

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Commission

even in 1832, maintained that to give the bank accounts
to the public, especially to state the amount of bullion
held, might be a mischievous practice. It is not surprising then that the accounts of the first Bank of the United
States down to 1811 were regarded as confidential. That
under the seal of confidence they were regularly made
from an early period and probably for the whole of the
bank's existence seems to be more than probable/' a

o> Quarterly Journal of Economics, Vol. VI, p. 471.

144

The Second United States Bank
By
DAVIS R . DEWEY, P h . D .
Massachusetts Institute of Technology

7069—IO

145

THE SECOND UNITED STATES
BANK.
PREFACE.
In the following report on the Second Bank of the
United States, I have not attempted to present a complete
history or to cover every phase of the bank's activity.
This has been most satisfactorily achieved by Professor
Catterall; his monograph, "The Second Bank of the
United S t a t e s " a is based on a collection of material,
including Biddle's private papers, hitherto inaccessible, and is characterized by searching analysis and
sober judgment. Professor Sumner has also treated
the subject at length in his "Life of Jackson/' and in
Volume I of " History of Banking in all Nations." I wish,
therefore, at the outset, to express my indebtedness to
these two writers, and more particularly to the former,
who enjoyed the use of sources unavailable to the latter.
Although personally I have examined with care all the
Congressional documents which relate to the bank, including reports and debates, a large part of this labor has
necessarily been of a perfunctory character, because the
trail had been previously so carefully blazed by Professor
Catterall.
An especial effort has been made to set forth the reasons
for the establishment of the bank, the mistakes which it
made at the beginning of its career, its operations under
more conservative guidance, the reasons for its downfall,
and more particularly at every stage the kind of work
which it performed in the general field of banking. Espe«Published by the University of Chicago Press, pp. xiv, 538 (1903).

147

National

Monetary

Commission

cially have I endeavored to include those operations which
might be concerned in the discussion of a central bank at
the present time.
Although a preface does not ordinarily present conclusions, it may not be improper to advise the reader in
advance that the circumstances which gave rise to the
establishment of the vSecond Bank were altogether different
from those which have brought about a discussion of the
question of a central bank at the present juncture; that
the bank in its final operations was nothing more or less
than a large commercial bank with practically the same
functions as other banks established under state charters,
and differed from them in little save size and enjoyment
of a few special privileges; that the bank began its operations during a period of commercial demoralization and
developed its practice during a period of crude banking
methods, as measured by current standards; and finally,
that the bank in its closing years, was subject to a political
attack, violent, indiscriminating, and even unscrupulous
in its character. It is difficult, therefore, to find in the
experience of this institution, any lessons of importance
which may be of special service in the preparation of a
plan for a large national central bank at a later period,
when business methods have been transformed by the
railroad, the telegraph, and by the development of corporate enterprise, to say nothing of the change in banking
law through the general substitution of national supervision for state control.

148

THE SECOND UNITED STATES BANK.
DEBATE ON PLANS.

The embarrassments of the money market in less than
three years after the dissolution of the First United States
Bank in 1811 revived a demand for the establishment of a
similar institution. On January 4, 1814, a petition from
New York was presented " praying for the incorporation of
a national bank, with a capital of $30,000,000."a The
Committee on Ways and Means reported adversely, on
the ground that it was unconstitutional to "create corporations within the territorial limits of the States
without the consent of the States." 6 Discussion, however, did not die out, and proposition after proposition followed in rapid succession. Calhoun proposed
the establishment of a bank in the District of Columbia;6
but this was open to the objection that it would not
furnish a national currency unless branches in the
several States were permitted; nor was this indirect
method of extending the operations of the bank over
the whole country acceptable to the advocates of strict
construction in favor of state supremacy.** When Congress met in special session in September, 1814, the situ-

Annals of Congress, 13th Cong., I, 844.
6Ibid., I, 873.
clbid., I, 1235.
^Catterall, 8.
149

National

Monetary

Commission

ation had been aggravated by the suspension of specie
payments in the previous month. A new and more
vigorous Secretary of the Treasury, Dallas, succeeded
Campbell, and announced without delay that a national
bank was "the only efficient remedy for the disordered
condition of our circulating medium." 0
The Committee on Ways and Means thereupon promptly
reported a bill for the establishment of a bank founded on
specie and government war stock. Among its provisions
was the grant of power to the President of the United
States to suspend specie payments when such suspension
seemed necessary. 6 "Opposition came from three quarters: From the strict constructionists, a meager band;
from the Federalists, able, noisy, persistent, and bitterly
aggrieved by the provision to limit stock subscriptions to
war stock; and from those members of the Republican
party who were willing to charter a bank, but wished
one of a different character. This party was respectable
in size, most ably led by Calhoun and Lowndes, and
supported by Speaker Cheves." c Calhoun consequently
introduced a bill providing for a bank with a capital of
$50,000,000 founded on specie and treasury notes, with no
authority for the suspension of specie payments. At first,
this plan prevailed over that of the administration/ but
further divisions soon appeared among the Republicans.
Some wanted a bank with less capital, and Dallas argued
that the nation's credit under Calhoun's plan would not be

a Annals of
blbid., I l l ,
cCatterall,
d Annals of

Congress, 13th Cong., I l l , 400-409.
404-406.
11.
Congress, 13th Cong., I l l , 613.
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strengthened.05 Efforts to pass a bill consequently failed in
the House. The Senate thereupon passed a bill in harmony
with the proposals of Dallas. Again the House took up
the discussion, but, by the Speaker's vote, the bill was lost.
Dallas, however, insisted upon action and the bill was
reconsidered.b A compromise measure was the result, providing for a bank with a capital of $30,000,000—$5,000,000
in specie, $10,000,000 in war stock, and $15,000,000 in
Treasury notes. No provision was made for suspension,
and the Government did not participate. c This bill passed
the House and was forced through the Senate. It now
met the disapproval of President Madison, who returned
a veto on the ground that the proposed bank would not
revive the public credit, provide a national medium of
circulation, or aid the Treasury by facilitating anticipations of revenue, or afford more durable loans.d Fortunately at this juncture the war came to an end, and as there
was no longer need of founding a bank for the main object
of procuring loans, the grounds for opposition between
Calhoun and Dallas were largely removed.
"The prime necessity now was to settle the currency,
which remained in the utmost disorder, and to resume
specie payments. Had it been possible to persuade the
state banks to take steps looking to resumption, it is conceivable that the administration's advocacy of a national
bank would have ceased. But this was not possible.
Dallas, therefore, again proposed that a national bank be
a Annals of Congress, 13th Cong., I l l , 652-654.
bDallas, Life of Dallas, 138-139; Catterall, 15.
c Annals of Congress, 13th Cong., I l l , 1039-1040; Catterall, 15.
& Messages and Papers, 1: 555.

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established."** Once more he maintained that the state
banks could not successfully be employed to furnish a
uniform national currency, for the attempt to associate
them for that purpose had failed; another attempt to
use their agency for the circulation of Treasury notes had
been only partially successful, and a proposed plan to
fix public confidence in the administration of the banks
by curtailing their circulation and to give each bank
a legitimate share in the circulation was not likely to
receive the general sanction of the banks. 6 The Government was not in a position to force the banks. A
refusal on its part to receive bills of non-specie paying
banks would be " t o visit the sins of the banks upon the
great mass of unoffending citizens, unless the Government
was prepared to furnish a sufficient legal currency to meet
the indispensable demands of the community/' c President Madison also, in his annual message, favored a bank.
On January 8, 1816, a new bill was reported providing
for a bank with charter provisions similar to those of the
First Bank. The capital was increased to $35,000,000,
but the proportion of government subscription remained
the same. After a few amendments the measure passed
in the House by a vote of 80 to 71 and in the Senate by
22 t o 12. d

In brief, the charter included the following provisions:
Capital, $35,000,000, in shares of $100 each, one-fifth, or
aCatterall, 17.
b Report of Secretary of Treasury, D e c , 1815; summarized by Gallatin,
Amer. Quart. Rev., D e c , 1830, p. 483.
cLetter of Crawford to Jones, Nov. 29, 1816; Finance, 3: 316.
dDerwey, Financial History of the U. S., 145-150.

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$7,000,000, to be subscribed by the Government, and
four-fifths, or $28,000,000, by individuals, companies, or
corporations; no one individual, company, corporation,
or State to subscribe for more than $300,000, and such
subscription to be made payable in installments extending
over one year, one-fourth in specie and three-fourths in
specie or funded debt of the Government.
The charter ran for twenty years, and gave the bank
power to hold property "of whatsoever kind, nature, and
quality," not exceeding $55,000,000, including the capital.
The management was placed in the hands of 25 directors,
5 to be appointed annually by the President of the United
States, of whom not more than 3 were to be resident of
any one State, and 20 were to be elected annually by the
stockholders under a system of qualified or restricted
voting whereby no person could have more than 30 votes.
No director could be director in any other bank; and not
more than three-fourths of the directors elected by
stockholders and not more than four-fifths of those
appointed by the President were to be reeligible for
election for the next succeeding year; this restriction
however, was not to apply to the president. Not less
than 7 directors should constitute a board for the transaction of business, and no director was to receive any
emolument; 60 stockholders—holders of at least 1,000
shares—should have power to call a special meeting of
the stockholders; the cashier to give bond for at least
$50,000. The holding of real estate was limited to that
requisite for the transaction of business, and such as
shall have been mortgaged for security or conveyed in

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satisfaction of debts. Indebtedness, excluding deposits,
was not to exceed $35,000,000; in case of excess, the
directors to be liable in their private capacities. The
bank could deal only in bills of exchange, gold or silver
bullion, or in the sale of goods pledged for loans, and not
to purchase any public stock. No loan was to be made
on account of the Government of the United States for
more than $500,000, or of any particular State for more
than $50,000. All bills and notes under $100 were made
payable on demand, and larger bills for a term not
exceeding sixty days; no note to be issued for less than
$5. Offices of discount were to be established in the
District of Columbia or upon application of the legislature in any State in which 2,000 shares were held, or in
any place wheresoever the managers might deem fit. For
such branches the boards of directors and presidents were
to be appointed by the directors of the central bank.
Periodical statements not exceeding once a week were to
be made to the Secretary of the Treasury, who should
also have power of inspecting the books of the bank.
Every three years the bank should make an exact statement of unpaid debts and surplus profits. Notes issued
payable on demand were receivable in all payments to
the United States unless otherwise directed by Congress.
The bank was obliged to furnish facilities for transferring
public funds without charging commission or claiming
allowance on account of difference in exchange. Deposits
of public funds were to be made in the bank or branches,
"unless the Secretary of the Treasury at any time otherwise order and direct;" in which case the Secretary must

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lay before Congress the reasons for such action. The
bank could not suspend specie payments, and in case of
refusal to redeem obligations in specie it must pay 12 per
cent interest until the demand was satisfied. The bank
was called upon to pay a bonus to the Government of
$1,500,000 for the franchise.^
It will be observed that the control of the Government
over the bank was confined to the appointment or removal
of five of the directors, the withdrawal of public deposits,
the exaction of weekly statements, and the inspection of
its general accounts.
In providing for a subscription of Government stock
or Treasury notes to the capital, the basic principle was
similar to that later incorporated into the national banking system. The essential difference between the earlier
and later systems lay in the treatment of state banks.
The national banking system was given a monopoly of
note issue, and the problem of restoring bank-note currency to a sound condition was, at least, simplified. In
1816 no attempt was made to eliminate local bank issues.
It was believed that a federal bank could not only aid the
Government, but also assist the state banks to recover
their stability. Jefferson had suggested that local banks
be deprived of this privilege to issue notes; not, however,
to give free play to the issues of a national bank, but in
the interest of a greater circulation of Treasury notes. 6
The task of controlling the banks was, however, well-nigh
impossible to accomplish. The experience of the First

03 Stats., 266.
b Letter to Cooper, Sept. 10, 1814, Works, 6: 375.

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Bank, which began its operations with only $400,000 of
specie in a total capital of $10,000,000, could not be
relied upon as a precedent, for it must be remembered
that in 1791 there were but few banks, that their circulation was prudently curtailed, and that later, when state
banks multiplied, the First Bank confined its operations
within narrow limits.
The history of the bank, in brief, was as follows: The
bank was chartered April 10, 1816, and on April 30 Congress ordered that resumption of specie payments go into
effect on February 20, 1817. The bank was quickly
organized under the presidency of Jones and began operations in January, 1817. Owing to mismanagement Jones
was forced to resign in 1818, and Langdon Cheves became
president. He held office until 1823, when he was succeeded by Nicholas Biddle. In June, 1829, Senator
Woodbury of New Hampshire brought complaints against
Jeremiah Mason, manager of the Portsmouth branch;
in the following December President Jackson, in his
annual message, questioned the constitutionality of the
bank and accused it of failing to establish a sound currency. On April 30, 1830, a committee of the House of
Representatives reported at length on the points raised by
Jackson, its conclusions being entirely favorable to the
bank. A Senate report was likewise friendly. In 1831
Senator Benton supported a resolution against rechartering the bank. In January, 1832, the bank,petitioned for
recharter, and this was favorably acted upon by committees of the Senate and the House. A bill for recharter
was passed, but vetoed by Jackson July 10, 1832. In the

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a u t u m n of this year Jackson was reelected president, and
interpreted t h e vote as an endorsement of his opposition
to t h e bank. I n December, 1832, Jackson raised the
question whether t h e funds of t h e Government were safe
in t h e custody of the bank. An investigation was ordered
by t h e House, and a majority report of the Committee on
Ways and Means upheld t h e bank. This report was
adopted March 2, 1833, b y a vote of 109 to 46. Notwithstanding this t h e President determined to remove the
deposits, and in order to accomplish his purpose on September 23 dismissed Duane, Secretary of the Treasury,
who objected to removal, and appointed Taney in his
place. T h e latter on September 26 ordered t h a t deposits
henceforth be made in certain state banks. On December
3, 1833, Taney reported his reasons for removal to t h e
Senate. I n 1836 t h e charter of t h e bank expired.
RELATION TO STATE BANKS I N RESUMING

SPECIE

PAYMENTS.

The history of t h e bank and t h e development of public
opinion in regard to this institution can not be understood
without a careful consideration of its relation to local
banks during t h e struggle for resumption of specie payments in 1817. Seeds of dissension, jealousy, and hostility were then sown which the b a n k was never able to
eradicate. During the period of expansion after 1811
and t h e speculative profits which attended suspension
and unwise legislation, state banking had assumed proportions which were beyond control. If t h e b a n k h a d been
organized when commercial operations were normal and
banking methods were sound, the United States bank

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would undoubtedly have had a different history. Established, however, at the time it was, after local banks had
enjoyed a free license for their operations, it was wellnigh impossible for it to do its work without clashing
with local and selfish interests. The First Bank was
organized to aid public and private credit; the Second, to
restore to the country an orderly currency through the
resumption of specie payments. The burden was placed
upon the bank. Dallas had in vain attempted to hasten
the local banks toward resumption, setting the date at
February 20, 1817; and Congress in April, 1816, had
passed a joint resolution declaring that after the date
mentioned all payments to the United States ought to
be made either in gold or silver or in treasury notes, or
in the notes of the Bank of the United States, or in notes of
banks payable and paid on demand in specie.^ The banks
refused, postponing the date to July 1, and as the Government could not compel the banks to resume, Secretary
Crawford, who succeeded Dallas, urged the bank to use
its power.6 Crawford also proposed to the banks, which
were at that time public depositories, that if they would
resume on the date set, the public funds, as far as possible, would not be transferred to the bank until July i. c
The replies were again discouraging.
The situation was full of embarrassment. The bank
complained of the local institutions; the latter were suspicious of the new establishment, and the Treasury was
a Annals of Congress, 14th Cong., 1 sess., I, 440, 919; 3 Stats., 342;
other references in Catterall, 23.
& Crawford to Jones, Nov. 29, 1816; Finance, 3:317.
cDec. 20, 1816; Finance, 4:283.

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not sure of the disinterestedness of either in working
for the public welfare. Jones, the president of the bank,
complained "that the state banks, instead of putting
their shoulders to the wheel, indulged in the most extravagant expectations of relief in the operations of the bank
and calculated upon replenishing their vaults by transferring to it their debtors, and by this ingenious kind of
transmutation convert their paper into solid coin."®
Crawford, on the other hand, referred to the ''unexpected
taciturnity of the directors of the Bank of the United
States upon every subject which has been presented to
them by the Treasury Department." 6
Jones then proposed that the Treasury should transfer
all of its balances to the bank and its branches, thus
bringing a pressure upon the local institutions which
might induce them to resume. 0 He declared that the
principal banks were rich in surplus funds and resources
which were abundantly sufficient to relieve them from
the reproach of delinquency d and that they were withholding from circulation the coin which they had accumulated in their vaults. Crawford, however, would not
give the bank this power. As the bank had declined
to accept state bank notes as cash, but only as a "special
deposit/' e he could not indorse such a course without
qualifications, and consequently declined to transfer this
unlimited privilege to the bank./ The bank had good
reason for declining to receive local notes as cash, for if
it accepted such currency it would be liable for specie
a

J a n . i, 1817; Finance, 4: 764.
&Jan. 6, 1817; Ibid., 4:495.
cjan. 9, 1817; Ibid., 4:779.

159

<*Ibid., 4: 765.
«Ibid., 4:764.
/"Ibid., 4:496.

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when called upon by the Treasury, and would subject
itself to the heavy penalty prescribed in section 17 of the
charter if it should refuse thus to pay. a
The serious question at issue was whether there would
be a sufficient amount of current legal money if the bank
should attempt resumption alone. Crawford believed
that unless the local banks could be brought into an
arrangement by which their paper would be received in
payment of taxes there would not be a large enough
volume of medium on January 20, in which dues could be
paid. b The bank, however, did not take this view and
was willing to attempt the enterprise single-handed. By
a vote of January 9 it agreed to discount from February
20 to July 1 sixty-day bills made payable in specie or
notes of the bank, or of specie paying local banks on account of revenue arising from imports in the principal
commercial cities.0
Finally, on February 1, after a conference was held
with representatives of the banks of New York, Philadelphia, Baltimore, and Richmond, the institutions in
those cities agreed to resumption at the earlier date. For
this, however, certain concessions had to be made by the
bank. The bank agreed not to force the actual payment
of the Government balances which were soon to be transferred to its custody until July 1; and after that it would
not call for the payment of balances which might thereafter
accumulate against these institutions until discounts had
been made at the Bank of the United States to the amount
of $6,000,000. Mutual pledges of good faith and friendly
a Finance, 4:768.

& Ibid., 4:497.
160

cIbid., 4:766.

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offices to contribute their resources in case of emergencies
were also interchanged.^ As Catterall observes, this was
a one-sided agreement, with the advantages largely in
favor of the local banks. The bank assumed at once
the responsibility of paying on a specie basis all drafts
which might be drawn by the Government on its
deposits, and yet the bank could not draw specie
from the local banks by the presentation of their notes
for redemption until July i. Moreover, it forced the bank
to make large loans on the supposition that the local
banks would reduce their discounts in order to be enabled
to pay over the public funds. By making these loans the
bank endangered its own specie reserve, since the local
banks could, in accumulating the bills of the bank, drain
it of its specie.6
Although the bank thus promptly cooperated to establish a sound monetary medium, it did not manage its
own affairs with discretion. There were three strong
reasons why it should have exercised caution: (i) There
was an unfavorable balance of trade due to large importations from England at the close of the war; (2) specie
was scarce, due to its hoarding and disappearance through
the period of suspension; (3) the unstable position of
many local banks. The bank, however, followed a shortsighted policy. The country had suffered so keenly from
the varying rates of depreciation of local bank bills that
public attention was concentrated on the benefits to be
derived from the equalization of exchange. The bank
accepted the theory of the Treasury, that all evils would
a Finance, 4:451.
7069—10

& Catterall, 25-26.
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be cured if resumption were once obtained. There was,
however, a wide difference between nominal and real
resumption, between temporary and permanent resumption. Real and permanent resumption could only be
secured by contraction of loans and a reduction of banknote circulation. The bank, on the contrary, accepted
the extraordinary commercial expansion which occurred
after the establishment of peace as a normal and healthy
condition. It loaned freely, particularly in Philadelphia
and Baltimore, and it allowed the branches, especially in
the South and West to extend discounts beyond the margin of safety.0* Moreover, it displayed favoritism in loans
to its own stockholders and promoted the operations of
speculators at its Baltimore branch.
The weakness of state banks and their ineffectiveness
in accomplishing the task of resumption is well illustrated
by the experience of the Maryland banks, as described
by Bryan. Most of the country banks in that State had
been chartered after 1812; their deposits were smaller
than those of the city banks, and they had to depend
more upon circulation; 6 their resources were locked up
in real estate, and although they resumed temporarily
in February, 1817, they could not stand the strain. 0
Throughout 1817-1820 their notes were below par, ranging in depreciation from 10 to 90 per cent, and brokers
even refused to buy them. Thirteen of these banks
in 1820 were obliged to wind up their affairs. During
aCatterall, 33-34.
b A. C. Bryan, History of State Banking in Maryland, 52.
clbid., 57.

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the inflation period of 1816-17 loans were made to farmers, and prices of agricultural products fell so that the
farmers were unable to pay at maturity. In 1818 one of
these country banks had one hundred and fifty suits at
law against individuals for debt.05 The Baltimore banks
suffered heavy losses due to maladministration, bad practice, and bad investments; renewals of notes were unwisely
made and investments in internal improvements were not
profitable.b Loans were made too freely to officers of the
banks, whose administration was largely in the hands of
cashiers.c It was common for paper to run four or five years
without change in the indorsement. Indorsers, therefore,
who were sound in 1814, were found to be without property
in 1818. As the depreciation of bank notes varied, banks
sought to buy in their notes at the lowest possible rates,
and oftentimes special arrangements were entered into
with note brokers. Demand for specie was in many
cases the cause of unpleasant relations.d Under such conditions the responsibility which was imposed upon the
United States Bank in leading the way to resumption
proved obnoxious to local banks.
COMPARISON

CHARTERS

OF T H E

FIRST

AND

SECOND

UNITED STATES BANKS.

For purposes of comparison, the following summary is
given, showing by points the principal provisions of the
charters of the First and Second United States banks. A
stands for the First and B for the Second Bank. When
a

A. C. Bryan, History of State Banking in Maryland, 66.
&rbid., 60.
c Ibid., 67.
dIbid.,69.

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no entry is made after the letter the charter is silent. It
will be observed that many of the provisions are practically identical,
i. Size of capital:
A. $10,000,000.
B. $35,000,000.

2. Par value of shares:
A. $ 4 0 0 .
B. $100.

3. Management of subscriptions:
A. Under superintendence of at least three persons appointed by the President; subscriptions to be opened at Philadelphia
and continued until all the stock has been
subscribed.
B. Under superintendence of five commissioners at Philadelphia, and of three other
commissioners each at Portland, Me.,
Portsmouth, N. H., etc. (eighteen other
places), appointed by the President.
4. State ownership or subscriptions by the Government:
A. $2,000,000.
B. $7,000,000.
5. Limitations in the number of shares to be subscribed
by any one person:
A. Not exceeding 1,000 shares, or $400,000.
B. Not exceeding 3,000 shares, or $300,000.
6. Private subscriptions to be paid:
A. One-fourth in gold and silver, three-fourths
in the public debt.

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6. Private subscriptions to be paid—Continued.
B. One-fourth in gold or silver coin of the
United States, or in gold coin of Spain, or
in other foreign gold or silver coin at prescribed rates, and three-fourths in the
funded debt of the United States.
7. Length of time for payment:
A. Four installments, six months apart, the first
to be paid at time of subscription.
B. Three installments: At subscription, $5 in
specie and $25 in specie or government
stock; in six months, $10 in specie and $25
in specie or government stock; in twelve
months, $10 in specie and $25 in specie or
government stock.
8. Maximum amount of property to be held:
A. $15,000,000, including capital stock.
B. $55,000,000, including capital stock.
9. Length of charter:
A. Twenty years.
B. Ibid.
10. Limitations in ownership of real estate:
A. Land, tenements, and hereditaments "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 fide mortgaged 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 judgment/'
B. Ibid.

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i i . Beginning of business:
A. As soon as $400,000 is received in specie,
notice to be given in Philadelphia for election of directors, who shall forthwith commence operations. (Sec. 5.)
B. As soon as $8,400,000 in specie and in public
debt has been received, directors to be
elected. (Sec. 9.)
12. Indebtedness:
A. $10,000,000 over and above deposits "whether
by bond, bill, note, or other contract/'
unless authorized by law of the United
States.
B. $35,000,000 over and above deposits "whether
by bond, bill, note, or other contract/'
unless authorized by law.
13. Scope of business:
A. Shall not " directly or indirectly deal or trade
in anything 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/'
B. Ibid.
14. Limitations in powers:
A. Could not purchase any public debt whatsoever.
B. Ibid.
15. Restrictions on sale of its government stock:
A. Could sell any part of the public debt whereof
its stock was composed.

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15. Restrictions on sale of its government stock—Cont'd.
B. Could sell for coin or bullion, its government
stock, limited, however, as follows:
(i) To $2,000,000 in any one year.
(2) Could not sell within the United States
without giving notice to the Secretary of the Treasury and offering the
same to the United States " a t the
current price, not exceeding the
rates aforesaid," that is, the rates
at which the stock was subscribed.
(Sec. 3.)
16. Rate of interest:
A. Could not charge more than 6 per cent per
annum upon its loans or discounts.
B. Ibid.
17. Loans to Government:
A. No loan to the United States exceeding
$100,000, or to any particular State over
$50,000, or to any foreign prince or State,
unless authorized by law.
B. To the United States, not over $500,000, or to
a particular State, $50,000, or to a foreign
prince or State, unless authorized by law.
18. Number of directors:
A. Twenty-five.
B. Ibid.
19. Government directors:
B. Five to be appointed by the President of the
United States, by and with the advice and
consent of the Senate, and not more than
three to be resident in any one State.

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20. Election of directors:
A. Annual, by stockholders, by plurality of votes
actually given.
B. Twenty to be elected annually by stockholders other than the United States.
21. Qualifications of directors:
A. Must be stockholders and citizens of the
United States; not more than three-fourths
of the directors, exclusive of the president,
shall be eligible for the next succeeding
year; the director who shall be president
may always be reelected.
B. Must be stockholders and resident citizens of
the United States; not more than threefourths of the directors elected by stockholders, and four-fifths of the directors
appointed by the president shall be elected
or appointed for the next succeeding year.
No director to hold his office more than
three years out of four in succession, but
the director who shall be president may be
reelected.
22. Duties of directors:
A. Have power to appoint officers, clerks, etc.,
and to allow them compensation and to
exercise their powers for government as
fixed by by-laws.
B. Ibid.

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23. Compensation to directors:
A. No director to be entitled to any emolument
unless the same shall have been allowed by
stockholders at a general meeting.
B. A director other than the president shall not
be entitled to any emolument. (The clause
permitting the stockholders at a general
meeting to allow compensation is omitted
in the charter of the Second Bank.)
24. Quorum for business by directors:
A. Not less than seven.
B. Ibid.
25. Compensation to the president:
A. Stockholders may make compensation to the
president for his " extraordinary attendance" at the bank, as shall appear to them
reasonable.
B. Ibid.
26. Liability of directors:
A. In case of excess of indebtedness, directors
under whose administration it shall happen
shall be liable in their natural and private
capacity, and an action of debt may be
brought against them in any court of record
in the United States. A director who may
have been absent when the excess was contracted for, or who may have dissented,
may exonerate himself by giving notice to
the President of the United States and to
the stockholders at a general meeting.
B. Ibid.

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27. Voting by stockholders:
A. For 1 share and not more than 2 shares, 1 vote.
For every 2 shares above 2, not exceeding 10,
1 vote.
For every 4 shares above 10, not exceeding 30,
1 vote.
For every 6 shares above 30, not exceeding 60,
^ 1 vote.
For every 8 shares above 60, not exceeding
100, 1 v o t e .

28.

29.

30.

31.

For every 10 shares above 100, 1 vote.
No person to have more than 30 votes.
B. Ibid.
Conditions in ownership of stock to qualify voter:
A. Stock must be held for three months previous
to election.
B. Ibid.
Residence of voters:
A. Stockholders actually resident within the
United States to vote by proxy.
B. Ibid.
Calling of meetings:
A. Not less than 60 stockholders who own 200
shares, or $80,000, of stock could call a
meeting, giving ten weeks' notice.
B. Not less than 60 stockholders holding 1,000
shares, or $100,000, of stock could call a
meeting, giving ten weeks' notice.
Bills of credit under seal assignable by indorsement:
B. No bill, obligatory or of credit or of other
obligation under its seal, to be made for the
payment of a sum less than $5,000.

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32. Bills not under seal:
A. Binding upon the bank, etc.
B. Provided that notes not payable on demand
might be made for sums not less than $100
and payable to the order of some person or
persons not exceeding sixty days. (Sees.
11 a n d 12.)

33. Denominations of notes:
B. No note for less than $5.
34. Non-redemption of bills:
B. If the bank suspended or refused payment in
specie, holder to be entitled to 12 per cent
interest until demand is satisfied.
35. Branches:
A. Lawful for the directors to establish ofl&ces
where they shall think fit, within the
United States, for the purposes of discount
and deposit only.
B. Shall establish an office of discount in the
District of Columbia whenever Congress
shall require; also an office of discount and
deposit in any State in which 2,000 shares
shall have been subscribed or may be held,
upon application of legislature of such
State, or of Congress; also bank could
establish offices of discount and deposit
wherever they thought fit, or they could
employ any other bank approved by the
Secretary of the Treasury to transact its
business other than for the purpose of discount.

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36. Management of branches:
A. " Upon same terms and in the same manner as
shall be practiced at the bank."
B. Not more than thirteen nor less than seven
managers or directors of each branch to be
annually appointed by the bank, to serve
one year. These shall choose a president
from their own number. Directors must
be citizens of the United States and resident
of the State. Not more than three-fourths
can be reappointed for the next succeeding
year, and no director to hold his office more
than three years out of four, but the president could be reappointed.
37. Supervision by the Government:
A. Treasury Department to be furnished, as
often as required, not exceeding once a
week, with statements of the amount of
capital, debts, deposits, notes in circulation,
cash on hand, and to have the right to inspect the general accounts; not, however,
the account of any private individual.
B. Ibid.
38. Right of Congress to investigate:
B. Committee of either House of Congress,
appointed for that purpose, to have the
right to inspect books and to examine proceedings of the bank and report whether
charter has been violated. (Sec. 23.)

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39. Action in case of violation of charter:
B. Whenever a violation of charter was reported,
or the president had reason to believe that
the charter had been violated, it should be
lawful for Congress to direct, or the President to order, a scire facias out of the District of Columbia, calling on the corporation to show wherefore the charter should
not be declared forfeited.
40. Dividends:
A. Semi-annual dividends to be made as appear
to the directors advisable.
B. Ibid.
41. Unpaid debts:
A. The bank once in three years to lay before
the stockholders an exact and particular
statement of debts which have remained
unpaid for the period of treble the term of
credit. If any subscriber shall be in
arrears, he shall lose the benefit of the
dividend.
B. Ibid.
42. Penalties for engaging in business contrary to the
charter:
A. Every person concerned to forfeit and lose
treble the value of goods, wares, merchandise, commodities in which the deal
and trade shall have been. One-half to
go to the use of the informer and the other
half to the United States. *
B. Ibid.

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43. Penalty for loaning money to the Government in
excess of that permitted by charter:
A. Every person concerned in making such advance to forfeit treble the value. One-fifth
to go to the informer and four-fifths to the
United States.
B. Ibid.
44. Tender of notes to the United States:
A. Notes payable on demand in gold or silver
coin to be receivable in all payments to
the United States.
B. Ibid., with the addition "unless otherwise
directed by act of Congress.''
45. Transfer of public funds:
B. Bank to transfer public funds within the
United States and to distribute the same
in payment of public debtors without
charging commission or claiming allowance
on account of difference of exchange.
(Sec. 15.)
46. To act as commissioner of loans:
B. Bank to perform the duties of commissioner
of loans for the several States whenever
required by law. (Sec. 15.)
47. Bonus:
B. Bank to pay $1,500,000.
48. Deposits of the United States:
B. Bank to receive the deposits of the United
States " unless the Secretary of the Treasury shall at any time otherwise order and

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48. Deposits of the United States—Continued.
direct; in which 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." (Sec. 16.)
49. Monopoly of franchise:
A. No other bank to be established by the
United States during the continuance of
the bank.
B. Ibid.
50. Bonds of cashier:
A. Cashier to give bond with two or more
sureties, not less than $50,000.
B. Ibid.
51. Counterfeiting:
B. Penalties. (Sees. 18, 19.)
52. Object:
A. To be conducive to the successful conducting
of the national finances; tend to give
facility to the obtaining of loans for the
use of the Government in sudden emergencies; and to be productive of considerable advantage to trade and industry in
general. (Preamble.)
PAYMENT OF CAPITAL.
The charter called for the payment of (1) $7,000,000
by the Government and (2) $28,000,000 by individuals,
companies, or corporations.
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Payment by the Government was to be made in stock;
and by private subscribers one-fourth, or $7,000,000, in
specie; and three-fourths, or $21,000,000, in government
stock or specie.
The settlement of private subscriptions could be made
in three installments, six months apart, the first being
made at the time of subscription. The final payment
was thus not called for until a year from the time the
first steps were taken. Installments were to be paid as
follows: First, at subscription, $5 in specie and $25 in
government stock or specie; second, in six months, $10 in
specie and $25 in government stock or specie; third, in
twelve months, $10 in specie and $25 in government
stock or specie.
According to the charter (sec. 9) directors could be
elected as soon as $8,400,000 in specie and in the public
debt had been received. This obviously authorized the
bank to begin operations when the first installment of
$1,400,000 in specie and $7,000,000 in stock had been
paid in. Subscriptions were made in July, 1816, and the
bank authorized discounts to be made beginning December 31.
The bank was in a difficult position, for specie at this
time was at a premium. In December, 1816, the premium amounted to 8 per cent. If there had been any
unusual demand, it would have risen to at least 12 per
cent. a Individuals naturally would not deposit specie,
and the government receipts, which were deposited with
the bank, were still in depreciated paper. The only penalty

® Lloyd to Calhoun, Finance, 3: 153,
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attached to stockholders' failure to pay any installment
as it became due was forfeiture of the dividends a loss
which would be trifling in comparison with the payment of a premium on specie in the bullion market. In
December there were rumors that the management of
the bank had countenanced arrangements by which the
specie part of the second installment would be evaded or
postponed. The bank was expected to begin operations
before the resumption of specie payments, February 20,
1817. If, however, it should put its notes into circulation,
they would be presented for redemption in specie, and
thus its resources would be drained. Consequently, in
December, when it voted to begin discounting sixty-day
bills on the pledge of bank stock or United States stock,
it demanded that notes should be made payable at maturity, either in specie or bills of the bank.
The bank, however, could not force the stockholders to
pay specie on the several installments if they preferred to
accept the penalty of forfeiting their dividends, and
many stockholders were willing to take this alternative.
As one of the directors of the bank observed, "any very
strong reliance upon the constructive policy of moneyed
men in opposition to their pecuniary interest and in the
absence of any special agreement on their part would
form a most fragile dependence for a great banking institution to bottom its operations upon."& The president
of the bank also, on January 1, 1817, stated that the
punctual payment of the second installment was yet prober Sec. 11, clause 13.
& James Lloyd to Calhoun, J a n . 9, 1817; Finance, 3: 153.
7069—10

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lematical, for the act of incorporation did not provide
the necessary means to insure punctuality. Moreover,
"the premium demanded for the specie and the interest
on the amount of the installments furnished stronger
motives to delinquency than any hope of dividends from
the bank during the first year does to observe punctuality."*
Notwithstanding this apparent recognition of insecurity, the bank appears to have exerted no special pressure
to force stockholders to pay specie. Indeed, it appears
to have been more solicitous to provide shareholders with
easy methods for paying for their stock rather than to
establish a solid institution founded on specie which
could withstand the attacks of fluctuating credit. Although the charter demanded payment in specie, there
was no provision against the withdrawal of the specie,
nor could there be as long as the bank redeemed its own
notes. If the bank issued its bills, they could be presented for redemption in specie. That was practically
the method followed in the organization of the state
banks, where specie installments were nominally required,
and its possible adoption in the present case was recognized in the congressional debates at the time of the
charter. b
The management of this new bank, to which had been
committed the task of restoring the currency, weakly accepted the tolerant practice which was then in use; and
o Jones to Crawford, Jan. i, 1817; Finance, 4: 764.
& Speech of Mason, Annals of Congress, 14th Cong., 1 sess., I : 236; Calhoun, Jan. 7, 1817, Annals of Congress, 14th Cong., 2 sess., 431; Annals
of Congress, 15th Cong., 2 sess., I l l ; Lowndes, 306-307, McLean, 13401343, Sergeant, 1389-1391; Catterall, 59.

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on December 18, before discounts of any character had
been made, voted that on the 31st it would discount
notes secured by a deposit of an equal amount of bank
stock, and also authorized the branches at Boston, New
York, and Baltimore to make similar loans, not exceeding,
however, one-tenth of the amount of subscription of the
capital of the bank at the respective places.^ On December 27 it was further voted that the loans should be made
for the accommodation of stockholders exclusively, and
" to the amount of their respective proportion of the payments in coin on account of the second installment of
the capital of the bank." 5 It would have been safer if the
management had ordered the acceptance of state bank
notes, for this would have enabled the bank to gain possession of local currency, and thus given it a lever to use in
restoration of the currency. After resumption was accomplished the president of the bank in May, 1817, notified
the several branches that for the third installment it was
"not intended to exact from the subscribers the actual
payment of the specie proportion in coin. ,,c Later it
was frankly admitted that "the notes of and checks on
the Bank of the United States and the notes of banks
actually paying specie were indiscriminately received with
the gold and silver in payment of the cash part of this
installment." d
Subscribers were also dilatory in meeting their payments. The first installment was promptly met, but on
a Finance, 3:335.
blbid., 3:336.
clbid., 3:341<* Jones to Crawford, Nov. 11, 1818; Ibid., 3:288.

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the second only $2,251,000 of the so-called "specie," according to the liberal interpretation accepted by officers
of the bank, out of $2,800,000 real specie demanded by
the charter was turned in when due; and in stock only
$5>379>°°° o u t of $7,000,000. As the method of evasion
became better understood, the "specie" paid in at the
third installment was over the required amount, nearly
meeting the deficiency of the second installments
Another consequence of the subterfuge permitted by
the board of management was that a smaller proportion
of the capital than that contemplated by the charter
was represented by government stock. The charter permitted $21,000,000 of the capital subscribed by private
individuals to be contributed in stock or specie. It was
not, however, expected that the latter provision would
be taken advantage of; but if so elected, the payment
would naturally be made in coin. As notes of the bank
and other specie-paying banks were accepted, and the bank
made loans to stockholders on their stock, subscribers
found it more profitable to make their payments in
what was accepted as "specie," rather than in securities.
The result was that only $15,430,000 of government
stock, instead of $21,000,000, was turned in by private
subscription. The capital was thus weakened, for United
States stock was appreciating in value and was a safer
investment than the stock notes of speculative shareholders. 6

a Finance, 4:964.

&Ibid., 3:291.

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FRICTION IN TRANSFER OF P U B U C DEPOSITS.

Aside from the bank's own errors of management and
policy, there were two points of friction with the state
banks: first, in the transfer of public deposits; and, second,
in the credit to be given to the notes of state banks. On
each of these points the Treasury was disposed to act
leniently. Dallas, in July, 1816, gave notice that the
transfer of the public funds from the state institutions to
the national bank and its branches would be gradual, and
that the notes of the state banks would be freely circulated
by the Treasury and the bank.** This anticipation was
renewed by Crawford, in his circular letter of December 20,
1816 6 when the depository banks were informed that if
resumption were accomplished on February 20, between
that date and July 1 only such withdrawals would be made
as were necessary, and that even after the latter date funds
would not be transferred except to sustain the bank against
pressure. The proposition for resumption, however, was
declined by the banks in general, and its accomplishment,
as has been stated, was effected only by a special agreement
between the bank and the local banks in New York, Philadelphia, and Baltimore. The bank, therefore, was under no
obligations to banks in general to adopt the forbearing
measures previously proposed. As the country banks, however, were not invited to be parties to the agreement which
was made with the eastern city banks, they afterwards
claimed, when the bank demanded a more summary transfer, that they were being treated with harshness, if not
with insincerity. 0
^Finance, 4:1023.

& Ibid., 4: 266, 283.
181

cibid., 4:787-788.

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Commission

On March 15, 1817, a convention of banks in the western
part of Pennsylvania, Virginia, and the eastern districts of
Ohio notified the bank that it was only equitable that
they, as well as the eastern banks, should be aided in
resumption before they opened their vaults for the withdrawal of specie. As western merchants were largely
indebted to the East there was danger of a drain of specie
to meet the demands for their notes which were held as a
special deposit for the United States in the branch office at
Pittsburg. They asked, therefore, that the banks be
given until August 1 before the balance was withdrawn,
and then only "in a manner as favorable to the bank
as circumstances will warrant." a These local banks
even objected to the use of the branch offices in
that section; they notified Crawford that it was a serious disadvantage to place these western institutions in the
hands of a corporation the directors of which were not
identified in feeling or interest with the western banks or
country; it would be more advantageous to place the
deposits in banks nearer to the land offices, thus creating a community of interest and avoiding a drain of
specie.6 Crawford was disposed to regard such suggestions in a friendly spirit, for the Treasury could not
afford to have the credit of these local institutions suffer.c
He also wrote Jones that the Treasury was under no
obligation to order transfers in places where there were
no branches of the bank; and if special terms were
offered to these institutions the banks in the East would

o Finance, 4: 788.
& Ibid., 4: 994.
c March 17, 1817; Ibid., 4:509.
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have no cause for complaint. He therefore suggested that
the country banks should not be required to pay interest
on delayed transfers before April i, and that in Kentucky and Ohio interest should not be demanded until
branches were established in those States. Crawford also
refused to withdraw the treasury funds from its local
depository in Rhode Island until the bank had established
an agency there, on the ground that it would have been
impossible for merchants in that State to obtain means to
pay their bonds when due, and this would have delayed
the payment of the revenue.
The bank, however, treated the requests of the western
banks in a summary manner. It demanded that, on condition of assuming at once the debt to the Government by
the banks, the latter should pay over the whole amount
on August i, with interest from April i, and that the banks
should jointly and severally guarantee this payments
This reply so angered the western institutions that they
curtly informed the bank that they saw no advantage
which could result from accepting such a proposition,
and that the requirement of a guarantee was of such a
character that self-respect compelled them to decline any
further correspondence on the subject. b The bank, after
advising with Crawford, who again counseled leniency/
negotiated with each bank separately through a "conciliatory" agent. It expressed its willingness to defer
the demand for interest on balances, but it refused to
credit the Treasury with cash until interest did begin.d
a Finance, 4: 739, April 3, 1817.
6 Ibid., 4: 788.

clbid., 4: 524, 787.
d Ibid., 4: 791.

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An illustration of the difficulties, which is typical of
many others, is disclosed in the correspondence between
the bank and the Cincinnati banks in August, 1818.
The bank, hampered by a long delay in settling the balances, which amounted to $721,000, notified the three
local banks that they must reduce their debt by the payment of 20 per cent during each of the succeeding months,
and that 6 per cent interest would be charged at the
expiration of every thirty days. The banks viewed this
demand for so rapid a reduction with astonishment and
no small degree of alarm. a Their funds were loaned
to manufacturing and commercial establishments, to
public, literary, and charitable institutions, on the supposition that they could be redeemed. Those expectations were disappointed, due in great measure to the
establishment of the branches of the bank, which withdrew the notes of the local banks from circulation and
did not issue their own or a substitute. The banks did
not have an adequate amount of specie; what they formerly held had been drawn upon to supply the needs of
the newly established branches and the new banks in
Kentucky. Nor was it possible to secure eastern funds.
The banks also objected to the payment of interest as
"an unprecedented grievance" and a practice not usual
between banks. They consequently refused to accede
to the terms of the bank, contenting themselves with a
proposal to reduce the debt as fast as they could conveniently.
The bank regarded this reply as " a n appeal to popular
prejudice and delinquent sympathy" rather than " t h e

a Finance, 4: 859.
184

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frank and manly exposition of a candid debtor." a
It admitted that the charge of interest between banks
was unusual, but so was it unusual for banks to decline to redeem their notes. There was also good
reason to believe that one of the banks had funds in
Philadelphia used for the purpose of drawing specie
from the bank. The bank therefore notified the branch
at Cincinnati to refuse the notes of these banks and to
demand in legal form the payment of the debt. This
summary action precipitated a run on the banks, so that
they suspended specie "payments, and attempts were
made to excite public indignation against the bank. b
The Bank of Muskingum complained that the branch
refused to receive anything but specie or notes of the
United States Bank, declining the notes of local banks
of the town in which the branch was located, although
these bills were received in ordinary transactions. The
branch did not issue any notes of its own, but in making loans issued checks on the mother bank which were
sold at a premium. c The branch at Chillicothe was
accused of declining to receive checks drawn on the
mother bank, although these bore a premium of i per
cent, and it was necessary to send a messenger to
Philadelphia to collect them. d The Bank of Steubenville, Ohio, declared that it was impossible to pay the
third installment on its balance, for it had loaned its
money to relieve settlers and had given extensive
accommodations to persons embarking in manufacturer Finance, 4:861.
elbid., 4:717.
&Ibid., 4:864.

<*Ibid., 4:718-719; also 737-738.
185

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Commission

ing. To press these for their loans would mean ruin. °
In Charleston, S. C , the demand for payment by the local
banks of large sums which had been left by the branch
office on temporary deposit, as its own temporary vault
was inadequate for the safe-keeping of specie, aroused
"unwarrantable
excitement and hostility." 6 But one
further illustration need be given: The Bank of Washington, Pa., demanded delay on the ground that when
the currency was depreciated it had received large
sums on deposit from the Treasury which had been converted at a loss into funds advantageous to the Government; it had assumed, however, that the loss would
be made good. Instead of that, it was now called upon
to transfer its deposits in specie.c Banks, moreover,
did not hesitate to call upon the Treasury to support
their credit, even when they had no direct and specific
claim for consideration. The Franklin Bank in Alexandria asked Crawford for a government deposit, as it
was in danger of suspending specie payments and thus
subjecting itself to the penalty in the charter of paying 10 per cent interest. d
Eastern as well as western banks felt the pressure.
Even as strong an institution as the State Bank in Boston
felt obliged to ask for indulgence. It had assumed heavy
burdens in behalf of the Treasury, and had made large loans,
amounting to $800,000, to merchants to enable them to
pay their bonds to the Treasury, on an agreement not to
call for more than 10 per cent every sixty days, thus
a Finance, 4:720.
& Ibid., 3:323.

cMay 25, 1818; Ibid., 4:1023.
d
A u g . 23, 1819; Ibid., 4:1042.

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requiring twenty months for the liquidation of the
loan. a It therefore requested that not more than
$30,000 a month of the deposits be withdrawn. The
Bath Bank in Maine also reminded Crawford that during the war it had received Treasury notes at par and
that for a considerable time 60 per cent of its capital
was so invested. For this it hoped that the Government might be disposed to indemnify them for loss by
leaving portions of the deposits with the bank. 6 The
Bank of Pennsylvania called attention to the services
which the bank had previously rendered to the Treasury, for which it had received the warm approbation
of Gallatin and Dallas. 0 For several years the business of the Government had been a losing venture and
had been continued only from the hope of benefit after
the restoration of peace. It was a hardship, therefore,
that the deposits should be withdrawn as soon as the
bank began to realize this hope. So, also, the Bank of
Alexandria, August 3, 1819/ asked that there might
be a fair discrimination between those who had aided
the nation and those who had withdrawn their cooperation.
Moreover, the deposits which the bank
had enjoyed for a long period of years had been
employed in nourishing the commerce of the town and
its withdrawal would contract business. e The real
difficulty was the inability of the local banks, which
had been depositories of the Treasury, to meet their obligations to the Government. Some had overtraded in
•

•

—

•

—

•

Jan. i, 1817; Finance, 4:974.
&July 16, 1818; Ibid., 4:1026.
«Ibid., 4:1038.

187

clbid., 4:1006.
<* Ibid., 4:1041.

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government funds, while others had invested unwisely.
The task of forcing a settlement was imposed upon the
bank, and this institution consequently incurred the displeasure and unpopularity which more justly should have
been directed against the Treasury Department.
The Second Bank was thus placed in a much more difficult position than the First. The earlier bank had no part
in the arrangements which the Government made with
local institutions, and consequently there was little opportunity for the collisions which its successor experienced.
THE CONFLICT OVER THE ACCEPTANCE

OF STATE

BANK

NOTES.

The controversy over transfers was hardly begun when
disputes arose in regard to the acceptance of notes of
local banks in current payment on account of public
revenues. In the eastern cities, where the banks were
withdrawing circulation in order to effect resumption,
there was a " vacuum which had not yet been filled by the
bills of the Bank of the United States." Under these
circumstances, the receipt of country money was held
to be inevitably necessary. But it was in the West, where
inflation had been carried to the greatest excess, that the
most bitter disputes arose. The Treasury Department
insisted that in the payments for public lands it was
necessary to receive the bills of western banks in good
credit; otherwise these sales would have been stopped, for
settlers in that section had no other currency. The bank,
however, discriminated against these notes by entering
them as "special'' instead of as cash. This practice

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Crawford declared could not be permitted; if it continued t h e Treasury would select its own banks for depositories and m a k e independent arrangements. a On this
point t h e b a n k was not so complaisant. The receipt of paper
of distant banks, which the collectors of internal revenue
might deem of good credit in their local spheres, was regarded
as hazardous, especially as t h e bank, from its experience in
transfers of deposits, h a d not been inspired with t h e highest
confidence in the disposition of m a n y of the local banks
to fulfill their obligations. Moreover, it was urged t h a t
as long as t h e notes of country banks were acceptable for
the p a y m e n t of taxes neither specie nor t h e bills of t h e
Bank of t h e United States would be employed. I t was
held t h a t specie was in reality more a b u n d a n t in the
West t h a n in t h e East, and if t h e receipt of country
paper was a necessity to the Treasury the burden of any
loss or delay in redemption ought to be borne b y t h e Government rather t h a n b y t h e bank. 5 Crawford did not yield,
b u t boldly announced t h a t the Treasury could carry on its
operations independent of t h e b a n k " without t h e slightest
inconvenience." c H e would not permit t h e interest of the
great body of t h e people to be sacrificed; after t h e direct
t a x h a d been paid, he was willing to accede to t h e wishes of
t h e bank, a n d would direct t h a t only notes of t h e branch
offices and such local banks as made arrangements for their
redemption would be received b y the collectors. d
The task, therefore, of securing t h e redemption of local
bank notes was transferred b y t h e Government t o t h e bank,
aMay 6, 1817; Finance, 4:524.
&May 13, 1817; Ibid., 4:792.

cMay 19; Ibid., 4:527.
<*Ibid., 4:530.

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and the bank had to suffer the odium.a In many instances
the local institutions threw every obstacle possible in the
way of redemption. The bank was thus engaged in a
double contest,—with the Treasury Department as well as
with the local institutions. During the years 1817-18 the
sales of public land were very large, and many of these were
made on credit, when the notes of nearly all the western
banks were receivable as good tender. Between the desire
of the Government to obtain revenue and the unwillingness,
if not inability, of local banks to redeem their notes the
bank found it difficult to establish a stable policy. It is
unnecessary to narrate the long and wearisome controversy with the Government or to describe the various
plans proposed. h This conflict with the banks was far more
serious in its final results, for, as already intimated, it
was responsible for much of the unpopularity which for
many years attended the bank in its operations in the
West.
Many of the local banks in the West actively opposed
resumption if it involved contraction. Jones, in October,
1817, complained that the circulation of the banks in
the interior of Pennsylvania had as little of the quality
of money as it jhad twelve months previously c and
more impatient yet, a month later, he declared that in
appointing agencies the difficulty was not in selecting
from the multitude of small banks in the interior of
Pennsylvania and the northwest of Ohio—those whose
paper could be converted into specie or eastern funds—
a Dec. 10, 1817; Finance 4:361.
6 Ibid., 4:848, 577, 845, 846, 583, 853, 854, 587,588.
clbid., 4:820.

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but in finding any banks at all which were able and will
ing to fulfill conditions.a
Some of the local banks resorted to trickery, and some
were forced to wind up their affairs. In May, 1818, representatives of the bank were sent out to hasten negotiations with certain banks in the West. The Virginia
Saline Bank endeavored to meet its obligations by the collection of funds, and obtained judgments against its own
debtors sufficient to pay the bank's balance. The clerk
of the county, however, was among those against whom
judgment had been obtained, and he refused to issue
execution. At Smithfield the bank had nothing but
eastern funds, and these they refused to exchange for
their own notes. The German Bank refused positively
to pay, without giving any reason. The Commercial
Bank of I^ake Erie, at Cleveland, after a sharp ruse, got
possession of notes presented for redemption, and then,
breaking an agreement to redeem, forced upon the agent
a post note payable twenty days after date. Its president admitted that his action was deliberate, and claimed
that the Bank of the United States had converted its
offices into brokers' shops, and it was a duty owed to
society to resist its encroachments, and that he would
call upon other banks in coalition to act in like manner. h
Disputes over the redemption of notes between the
bank and local institutions continued after the settlements on account of the transfer of deposits had been
made. The circulation of the bank came into competition with that of state banks. In many of the States

oFinance, 4:822.

&Ibid., 4:855-856.
191

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there was no effective penalty for non-redemption of notes
and custom allowed bills to circulate at a discount. The
United States Bank, however, could not enjoy any such
privilege. Its responsibility for protecting the soundness
of its credit extended, of course, to its notes, and the
watchfulness of its rivals, who were quick to report any
infraction of the provisions of its charter, made it imperative that it should at all times be in a position to redeem
its bills. It was therefore necessary to demand the
redemption of notes of state banks which came over its
counter. This demand, however, in some sections was
regarded as unreasonable. As intimated, in some parts
of the country redemption was contrary to custom.
Many banks, therefore, were disposed to regard this
requisition as an unfriendly act, intentionally designed to
cripple their activity. During the administration of
Cheves, who adopted a policy of contraction, this difficulty was aggravated in the opinion of complaining banks
in the South and West because the branches did not
issue notes and thereby provide a currency which might,
when it passed into the vaults of the local banks, be used
as an offset for the claims presented by the bank. For
example, the banks of Cincinnati complained that there
were no branch notes in circulation in that section, but
the notes of the local banks flowed into the branch through
the medium of the land office. By this means a local
note was returned in a few months after it was issued
and "as we find none of the paper of the United States
Bank in circulation here, we are compelled to create
extraordinary resources to redeem it." Liquidation every

192

The

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Bank

thirty days was denounced as an unprecedented grievance. a The Bank of Augusta, Ga., had the same complaint. It loaned its money to land buyers and, of
necessity, the credit ran for a considerable length of
time. The notes which thus went into circulation
did not rest on ordinary commercial transactions which
would be closed within brief periods. It had a sufficient
amount of coin for all ordinary mercantile transactions,
but it could not withstand the claims which might be
made by any institution bent on obtaining specie.5 The
State Bank of North Carolina also urged, in behalf of
indulgence, that it was necessary to loan a larger proportion of its funds to farmers and country merchants than
was the case with banks which transacted business by
running accounts and checks.c The Planters' Bank and
the Bank of Georgia declared that the demand for daily
cash settlements was without example in the intercourse
of banks in that quarter of the Union.d The Bank of
Savannah denounced the requirement of such settlements
as a hostile act.* So great was the opposition aroused
that the bank finally consented to weekly instead of daily
calls.
The friction occasioned by the demand of the bank on
the state banks for the redemption of notes in specie persisted throughout the history of the institution. In a
report of McDuffie's Committee of Ways and Means,
a Finance, 4:860.
&June 30, 1819; Ibid., 4:1040.
cSept. 15, 1819; Ibid., 4:1044.
djune 21, 1821; Ibid., 4:1055.
«Ibid.,4:933; Sumner, History of Banking in All Nations, 1:113-115.

7069—10

193

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April 13, 1830, reference is made to the complaint then
existing—that the bank made heavy and oppressive drafts
on the local banks for specie, which compelled them to
curtail their own discounts. While conservative bankers
in the East recognized the useful service of the bank in
thus controlling local circulation, opinion was adverse in
those sections which claimed that their progress was held
in check because of a lack of currency. The bank in the
West and South exercised to a considerable degree the
same function as the Suffolk Bank did in New England.
The making of currency was easy; legislatures, in spite of
penalties for non-redemption, were tolerant; and the burden of keeping the currency sound fell in a considerable
measure on the bank. If the issue of notes of state
banks had been restricted, as it is at the present time or
as under the free banking law of New York, the bank
would have fared better.
BRANCHES.

The provisions of the charter of the Second Bank in
regard to the establishment of branches were more
explicit than those to be found in the act of incorporation
of the First bank. In the first, the power to establish
offices was permissive; in the second, their organization
was, under certain conditions, required. The charter
demanded that the bank should establish an office in the
District of Columbia whenever Congress should require
it; also an office in any State in which 2,000 shares were
subscribed or held, upon application of the legislature of
that State or of Congress. The bank was also permitted

194

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States

Bank

to establish offices wherever it thought fit. If the bank
preferred, it could employ a state bank, approved by the
Secretary of the Treasury, to transact the Treasury business.a
The charter also planned for the control of the branches
by the parent bank. All the directors of the offices were
to be appointed by the board of the central bank; each
branch board had the right to select a president from its
own number, but the power of the selection of the directors
practically gave the central board the control of this
officer. It was also provided that the central bank could
make such regulations for the business of the offices as it
deemed just and proper. Consequently, under the rules
and regulations for the government of the offices of discount and deposit, "it was provided that the central
board should appoint the cashiers of the offices."6
The bank did not delay in the establishment of its
branches. In October, 1817, 19 had been designated, as
follows:
Portsmouth, N. H.
Boston, Mass.
Providence, R. I.
Middletown, Conn.
New York, N. Y.
Baltimore, Md.
Washington, D. C.
Richmond, Va.
Norfolk, Va.
Charleston, S. C.

Savannah, Ga.
New Orleans, La.
Cincinnati, Ohio.
Chillicothe, Ohio.
Lexington, Ky.
Louisville, Ky.
Pittsburg, Pa.
Fayetteville, N. C.
Augusta, Ga.

Fourteen States thus came within the direct operations
of. the bank. The organization of the office at Augusta
oSec. i i , clause 14.

&Art. iv; Catterall, Appendix X, 509.
195

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Commission

was abandoned.05 Later, the branch at Middletown was
transferred to Hartford and that at Chillicothe was discontinued. Eight others, as business developed, were
established, as follows:
Mobile, Ala
Nashville, Tenn
Portland, Me
St. Louis, Mo

1826
1827
1828
1829

I Buffalo, N. Y
Burlington, Vt
Utica, N. Y
I Natchez, Miss

1829
1830
1830
1831

Every State on the Atlantic seaboard, except New
Jersey and Delaware, thus had a branch, and in the
interior every district except Indiana and Illinois was
provided for. Many applications were received to establish other branches, but the bank declined, being compelled to " resist the importunities of applicants from
about every State in the Union.''
Cheves in 1819 told Crawford that there were too many
branches: "For a time we must bear with them, but I
hope they will be reduced.'' In 1822 the stockholders
at their triennial meeting recommended the withdrawal
of some.6 The losses due to the branches in proportion
to their capital were ten times greater than that of the
mother bank. In 1831 there were under consideration
applications from at least thirty cities. 0 At the outset
commercial considerations had less weight in the selection of places, and the needs of the Treasury Department were an influential factor. Unfortunately, fiscal
necessities were the most urgent in the newly settled
sections where local banks were under less control and
where sound business practice had not yet been estaba

Finance, 4: 820.
& House Report No. 460, 22nd Cong., 1st sess., p. 15.
c Report of Triennial Meeting of Stockholders; Niles, 41:112.

196

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lished. F o r this reason t h e b a n k did not s t a r t under fair
auspices; it was bound to come into collision with local
institutions and to tolerate methods of administration
which injured its prestige. The pressure of t h e Government did not stop with the initial organization, for later
the branches a t Portland, Mobile, and St. Louis were established a t t h e urgent request of the Treasury Departm e n t s The Treasury D e p a r t m e n t also asked for a branch
a t Detroit, a n d t h e b a n k compromised by placing one at
Buffalo.
The bank, a t t h e beginning of its operations, did not
think it wise t o give a definite capital to its respective
offices. According to Jones, the b a n k was " integral in its
organization, b u t indivisible in its interest. Its offices,
though distantly located, have no analogy t o institutions
established by local authority, and the a p p a r e n t interest
of any particular office must necessarily be subordinate to
t h e general i n t e r e s t / ' h As a result of this policy, an excessive a m o u n t of t h e capital was transferred to t h e South a n d
West. As t h e investments of these sections, a n d particularly the latter, were not so safely made, t h e capital
became tied u p and imperiled. The Baltimore branch,
which nominally h a d a large capital, invested a considerable portion of it in loans which became doubtful
and in stock discounts which could not be m a d e active.
When Cheves succeeded Jones as president, he undertook
a policy of transferring t h e capital from t h e western and
southern offices to t h e northern branches. I t was also
thought best t h a t definite capitals should be assigned t o

°Senate Doc. No. 17, 23d Cong., 2d sess., p. 225.
&Dec. 5, 1817; Feb. 6, 1818; Finance, 3:335.
197

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Commission

the several branches.^ Under the old system of unassigned capitals, the capitals of the offices varied with the
daily transactions, resulting in frequent conflict of interests; if definite capitals were assigned, it was believed
there would be greater freedom of action on the part of
the management of the different offices. It was recognized, however, that it would be difficult at the outset to
determine just what proportions should be assigned,
since the capitals of the western offices could not be
reduced without a severe and injurious pressure on the
debtors. The distribution, therefore, went into effect
November i, 1819. The following table shows the distribution of capital at different dates:
[Finance, 4 : 907, 477 ]

$118,000

Portsmouth. _
Providence _ _
Middletown _ _
New York
Baltimore
Washington _ _
Richmond _*_ _
Norfolk
Fayetteville..
Charleston
Savannah
New Orleans .
Lexington
Cincinnati
Louisville
Chillicothe.-.
Pittsburg

335.000
256,000
245,000
5,646,000
556,000
1,761,000
862,000
678,000
1.935.000
1,421,000
1,666.000

J&200, 000
300,000
200,000
1,500,000

$200,000
350,000
200,000
2,500,000

500,000
1,000,000
500,000
500,000
1,500,000
1,000,000
1,000,000

500,000
1,000,000
500,000
500,000
1,500,000
I,OOO,OOO
I,OOO,OOO

1,502,000
2,401,000
1,129,000
650,000
769,000

Philadelphia.
Boston

13,046,000

24,245,000
I,500,000

Column 1: May, 1819, before the assignment went into effect.
Column 2: Proportions assigned by the bank for November, 1819.
Column 3: December, 1822, at which time certain modifications had gone into effect.

o Finance, 4:906.
198

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Bank

It will be observed that in the capital assigned to
Philadelphia is included all the property and debts due
the bank, including debts due by the state banks and the
$7,000,000 of 5 per cent stock subscribed by the Governments Here again the bank was open to criticism, for the
capital was not distributed according to the commercial
importance of the respective localities.
At the beginning of its operations, Baltimore did by
far the largest amount of business, largely due to speculative operations of its officers. Its loans in 1818 nearly
equaled those of the central bank at Philadelphia. Each
of these two made approximately one-fourth of the discounts at that time. The following brief table shows the
loans of the principal offices in June, 1818:
Philadelphia
Baltimore
Richmond
Charleston
New York
Cincinnati
Lexington
New Orleans
Norfolk
Washington

$10, 832, 000
9, 289, 000
3, 041, 000
2, 786, 000
2, 016, 000
1, 825, 000
1, 620, 000
1, 441, 000
1, 403, 000
1, 392,000

Between Baltimore and its nearest competitor, Richmond, there was a wide gap. The business of the four
New England offices did not equal that of Cincinnati,
which was sixth in order. Boston was thirteenth in the
total number of nineteen, including the parent office;
even New York was fifth. Baltimore quickly lost its preponderating influence, and the activities of the bank were
a Finance, 3:593; for distribution in 1832, see H. R. No. 460, 22d Cong.,
1 sess., p. 316.

199

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Commission

shifted to the South and West. In 1825 the loans of the
several offices were as follows:
Loans.

Portsmouth
_ __
Boston.
_
Providence
_ _ _
Middletown and Hartford _ _
New York
_
Philadelphia
Pittsburg
_ __
Baltimore.
Washington
__ _ __
Richmond
__
Norfolk
Fayetteville
__ Charleston

Louisville
Lexington
Cincinnati
Chillicothe

_ _
_

$437,000
1,790,000

$5,000

440,000

159,OOO

536,000

__ __
__
_
__ __

__
_

Bills of
exchange.

4,895,000
3,723,000
730,000

223,000

4,031,000

250,000

1,294,000
1,226,000
696,000

41,000
90,000

457,000
2,428,OOO
626,000
2 , 4 5 5 000
1,069,000
1,002,000
1.329,000

784,000
85,000

92,000
367,000
150,000
1,017,000

149,000

450,000

Here, again, it is seen that instead of taking a position
of leadership in the banking operations of the whole
country, th^ bank adopted a policy of supplementing
banking facilities in those sections where there was weakness. Biddle admitted that large amounts of the capital
were given to those sections where there was a deficiency,
because the production of the great staples seemed to
require most assistance in order to get them into the
markets As Catterall points out, one result of the branch
system was the supplying of loans to the South and West at
a cheaper rate than could have been possible without them.*

«H. R. No. 460, 22d Cong., 1 sess., p. 316.
& Catterall, 401.

The

Second

United

States

Bank

Thus the bank undoubtedly was a powerful factor in the
development of the South and West.
Although by its fundamental regulations the bank
apparently had the power to supervise and restrict the
branches in their operations, it did not effectually exercise this right during its early management. Southern
and western offices sold an excessive amount of drafts
which were sent to the eastern offices, as Boston and New
York. Baltimore, in particular, engaged in this practice.
When these drafts were sold, the bills of the Baltimore
branch were issued and remitted at the same time to the
northern offices. This process continually drained specie
from the Boston office and so restricted its operations
that it could not, even if it wished, make discounts of its
own. Although the parent bank cautioned the Baltimore
office, the latter continued selling its drafts, "and such
was the want of firmness or of foresight in the parent
board, that after finding its repeated remonstrances disregarded, it never removed one of the offending directors
or took any effectual steps to control them," until on
August 28, 1818, the offices were* forbidden to draw
on each others Until this was done the branches were
"made tributary to Baltimore."
In Baltimore the president and cashier were for a time
permitted to purchase or discount drafts and bills payable from sight to sixty days without reference to the
discount committee of the directors, and large overdrafts
were permitted. 5 At Richmond an improper delegation
a Report of Spencer's Committee, Jan. 16, 1819, Finance, 3:308; Cheves's
Exposition.
& Report of Committee of Stockholders of Bank, Nov. 5, 1819; Niles,
17:165.

201

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of power to the cashier was granted, in authorizing him
to discount notes on stock at sixty days and then at
four months, but after three weeks the practice was
abandoned. a
O W N E R S H I P OF STOCK.

Under the act of incorporation the number of shares
which could be subscribed by any one person was 3,ooo,
calling for $300,000, or less than 1 per cent of the entire
capital. This was a stricter limitation than that laid
down in the charter of the First Bank, which permitted
a single subscriber to take 1,000 shares, each of a par
value of $400, or 4 per cent of the total. Deceit, however,
entered into the subscriptions of the stock for the Second
Bank; there was an "illegal and reprehensible division
of the stock.'' Although the charter provided that no
person should have more than 30 votes, when subscription was made, shares were divided into small parcels,
varying from 1 to 20 shares to a name, held in the names
of persons who had no interest in them, so that votes
could be given for the pretended proprietors. The object
of this arrangement was to influence elections; in Baltimore 1,172 shares were taken in 1,172 names by George
Williams as attorney, all of which in reality he owned himself. One-seventh of the shares owned in Baltimore
gave one-fourth of all the votes; and Philadelphia, which
owned nearly one-third, controlled two-ninths of the
votes. In Baltimore 15 persons had command of threefourths of the stock held in that city. 6 The bank at the

0Finance, 3:313.
& Report of Spencer's Committee, Ibid., 3: 314.
202

The

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Bank

outset thus fell into the hands of speculators. Moreover,
it is to be noted, that in not insisting rigidly upon the
payment of installments when due, speculative stockholders were able to hold shares which otherwise would
have reached the hands of solid capitalists who would
have held only what they could pay for.** The charter
was therefore defective in not defining more precisely
the duties and powers of the judges of elections, for
there was no way by which these officials could hinder
violations of the law. 6 As a result of this experience,
corrective legislation was subsequently enacted, which
made it impossible for a stockholder to cast more votes
than he was entitled to. c
The speculative character of the holdings in 1817 is
evidenced by the statistics of shareholdings. In 1817
there were recorded 31,349 stockholders; in 1820, however, this number was reduced to 2,720; in 1831, there
were 4,145. In this latter year the largest number of
names is to be found in Pennsylvania, namely, 937; there
were 466 foreign against 3,679 domestic stockholders.
The foreign stockholders owned 79,159 shares; of the 3,679
domestic stockholders, about one-fifth (766) were holders
of 5 shares and under. More than one-fourth of the total
stock was owned by females, trustees, executors, and by
religious, benevolent, and other associations.d Ownership by this class became marked as early as i820. e
a Report of Spencer's Committee, Finance, 3: 310.
6 Annals of Congress, 15th Cong., 2 sess., 3:1344-1345, 1391, 1392.
clbid., 4: 2522.
^Niles, 41:112.
«See Memorial of the Bank, Jan. 12, 1821, Finance, 3:591.

203

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Monetary

Commission

The following table shows, in brief, the concentration of
ownership at successive dates in the States of Pennsylvania,
New York, Maryland, and South Carolina. It also shows the
ownership of stock by the Government of the United States,
by the bank itself, and by foreigners. It will be observed
that the latter greatly increased their holdings after 1828:
1820.

1821.

1822.

1823.

37.334
23,543
41,528
47.458

36,231

37.268

28,116

44,200

42,702

37.748

40,199

33.444

37,269
40,289
38,490
29.685

149.863

147.248

152,660

United States
I n other S t a t e s

70,000
62,770

70,000
66,173

B a n k of t h e U n i t e d
States
Foreigners

38,079
29,288

36, i 7 9 t
30,400

Pennsylvania
New York
Maryland _
S o u t h Carolina
Total

1828.

1831.

1832.

70,763

52,638

46,638

32,903

34,262

34.503

35.495

40,674

34.235
40,242

145,733

187,158

160,718

156,386

70,000
61,369

70,000
66,011

70,000
46,820

70,000

40,123

39.559

37.654

38.239

28.317

30,017

5,6io
40,412

79.159

84,055

51.028
30,881

As a result of the failure of debtors of the branch at
Baltimore and other places to the number of 37,954 shares,
there was a forfeiture of stock and the capital of the bank
was decreased by $3,795,400^ Efforts were made to persuade Cheves to sell this, but he thought that the capital
was too large. In 1825, however, the bank sold its stock
at 119 and the profits in the first six months of that
year amounted to $481,000.b
LOANS ON BANK STOCK.

In regard to the business of loaning, the following
charter provisions were laid down:
1. Not more than 6 per cent per annum could be charged
as interest.
a Cheves, 29; Niles, 23:95.
&H. R. No. 460, 21st Cong., 1 sess., pp. 252-255, 294.

204

The

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Bank

2. Loans to the United States were limited to $500,000
and to any one of the States to $50,000; no loan could be
made to a foreign state unless authorized by law.
3. In case loans were made to the Government in excess
of the above limitations, every person who was implicated
in such approval or in such loan should forfeit treble the
value.
4. Once in three years the management was ordered to
lay before the stockholders a statement of debts which had
remained unpaid for a period of treble the term of credit.
The above provisions were practically identical with
those in the charter of 1791. The by-laws also provided:
1. That bills and notes for discount should be delivered
on Mondays and Thursdays and laid before the directors
on Tuesdays and Fridays.
2. Discounts should not be made upon personal security
without two responsible names, but if stock of the bank,
funded debt of the United States, or such other property
as should be approved, be pledged, one responsible name
might be taken.
3. It was also provided in the by-laws of 1816, but subsequently modified, that no accommodation notes should
be discounted unless payment was secured by deposit of
bank or government stock or other approved property.
4. On each application for discount every director who
was present should give his opinion, and no discount was
to be made without the consent of three-fourths present.
All such notes were to be entered in a book in such manner
as to discover to the board at one view on each discount
day the amount for which any person is indebted to the
bank, either a payer, discounter, or indorser. (Rule 5.)

205

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Commission

The principal characteristic of the discount business of
the bank at the beginning of its operations was the making
of loans to stockholders on the pledge of bank stock. On
December 18, 1816, the directors agreed to discount sixtyday notes, secured by a deposit of an equal amount of the
stock of the bank, and authorized the branches at Boston,
New York, and Baltimore to discount in like manner, not
exceeding, however, one-tenth of the subscription to the
capital of the bank at their respective places. These loans,
however, were limited to the amounts called for by the
second installment. This practice of discounting on stock
to the full amount paid upon shares was justified under
by-law 4. Discounts were here authorized on only one
responsible name, thus omitting the requirement of an
indorsed On July 25, 1817, the board again authorized
the granting of temporary loans to stockholders.6
On August 26, because of the redemption of $13,000,000
of the funded debt, the bank voted that as no better security could be offered than the stock of. the bank at a
safe and reasonable evaluation, as there was good reason
to believe that the banks in New York and elsewhere had
loaned upon the stock of the bank at the rate of $120 a
share, and as it was necessary to extend the discounts in
order to earn a reasonable dividend, it was expedient that
the loans on bank stock be extended at the rate of $125 a
share upon notes with two approved names. The construction given to this resolution was that the indorser
was held liable only for the excess above the par value. 0
The regulation that indorsers, on collateral security, be
a Finance, 3:333-

6Ibid., 3^34o.
206

Ibid., 3:441.

The

Second

United

States

Bank

required on the excess above par, was moreover evaded by
some of the largest borrowers who indorsed for each other. a
On September 30, 1817, it was voted that the president
and cashier be authorized to renew notes on stock as they
became due between discount days until otherwise
directed. b
The greater part of these loans were renewed from time
to time, and the notes in many cases ran from four to six
months. They were not temporary, therefore, as implied
in the resolution of July 25, 1817. Such loans were-frequently renewed, even by the president and cashier, without the intervention of the board. In August and September, 1817, by four successive votes, $500,000 was placed
in the hands of the president and cashier, without the intervention of the board, to loan on the pledge of bank stock. c
Out of stock loans for $8,047,000, at least $5,231,000 was
constantly renewed.d Although such loans were recorded,
they apparently caused no comment, the directors thinking that they had no business to inquire into the loaning on
stock. Discounts thus made were commonly to speculators
and brokers and in many instances were excessive, amounting to single individuals to sums of $365,000, $400,000, and
$1,800,000.e

From the opening of the bank to July 30, 1817, notes
secured by the pledge of bank stock were discounted to
oFinance, 3:311.
&Ibid., 3:341; for blank form used in obtaining such loans, ibid.
clbid., 3:346.
dlbid., 3: 337.
« Annals of Congress, 15th Cong., 2 sess., 4:1292, 1311; see also Finance,
3*337-

207

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Commission

the amount of $8,047,000.a The amount which remained
unpaid on the latter date was $5,321,000. These loans
were subsequently increased, running from $9,913,000 in
October, 1817, to $10,335,000. The largest amount discounted in bank stock was in January and February, 1818,
when it amounted to $11,245,000. The parent board was
responsible for this policy, as is seen in the returns, for on
October 20, 1818, such loans were as follows:
Philadelphia
Baltimore
Charleston
Washington
Richmond

$4,681,000
2,402, 000
897, 000
299,000
210, 000

At each of the other offices the amount was less than
$100,000.b

The directors avowed that they intentionally and uniformly gave preference to stock notes over business
paper. c As the capital in government securities, which
had been relied upon by the "reasonable expectation
of stockholders," had been lessened by the redemption
of $13,000,000 of government stock, the bank complained that it had been deprived of a profitable form
of investment, and under these circumstances it did
not appear wise to enlarge the general line of discounts until the course of exchange was determined and
the currency had been established upon a sounder
basis.d Moreover, as the market price of the stock
at this time was 140, its acceptance in pledge at that
rate was justified. Nor was there a good supply of
«Finance, 3:337.
&Ibid., 3:312.

cibid., 3: 311.
<*Ibid., 3:361

208

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Bank

business paper, for the state banks took the best and
rejected the less desirable.*1
In 1818 inquiry was made as to the legality of transfers of public debt to the bank to secure loans. The
charter of the bank, like those in many state banks,
restricted dealings in government securities, owing to a
fear that state credit might be affected by speculative
operations. A committee, however, decided that in the
present case there was no occasion for concern or congressional action.
Although there was a reduction in loans on bank stock
when a change in the administration of the bank took
place in October, 1818, the general policy was not abandoned. A rule was established to reduce the discounts
at Philadelphia, which had been granted on bank stock,
at the rate of 5 per cent every sixty days, but this small
reduction "was the subject of loud, angry, and constant
remonstrances among the borrowers, who claimed the
privileges and the favor which they contended were due
to stockholders, and sometimes succeeded in communicating their sympathies to the board.'' b For several years
these loans amounted to about $6,000,000, or about one-fifth
of the total. Biddle discountenanced such loans, as they
had a tendency " t o lock up the funds" of the bank. c
During the crisis of 1825 he permitted some departure
from his general principle on the ground that merchants
who held bank or government stock should be favored,
a Origin and Progress of the Second Bank, by Friendly Monitor, 1819,
p. 20.

& Cheves, Exposition, Goddard Edition, p. 110,
cCatterall, 100. a

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as there was at t h e moment no outside m a r k e t for such
securities. a

Between 1825 and 1831 there was contrac-

tion, until in t h e latter year there was less t h a n $1,000,000
of such loans. 6
CHANGE IN CHARACTER OF CAPITAL.
During the first two years of t h e operations of t h e b a n k
its capital rapidly changed in form. At t h e outset a large
proportion was in government securities; for example, in
April, 1817, out of total fundsof $46,880,000, one-half was
in government stock. One of t h e reasons originally
assigned for large capitalization was the desirability of
absorbing a large a m o u n t of t h e funded indebtedness, b u t
t h e b a n k had hardly opened its doors before there was a
favorable t u r n in t h e government finances which led to
a surplus of receipts over expenditures and a consequent
rise in t h e value of government securities. By t h e charter
provisions the Government could redeem any p a r t of its
funded debt subscribed to the capital of the b a n k a t t h e
rates fixed a t t h e time of subscription. T h e Treasury
Department, therefore, determined t h a t it was more
profitable for the Sinking F u n d commission to use its
surplus by the purchase of the government stock lodged
with t h e bank, since it could be bought in a t a lower rate
t h a n t h a t held outside. 0 The b a n k did not favor this
redemption, for the p a r t to be redeemed was a productive
portion of the funded debt of its capital, and there were no
adequate means for the employment of so large an a m o u n t
aCatterall, 107
&Niles, 4 1 : 117.
c
Crawford to Jones, May 18, 1817; Finance, 4: 525.

210

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in cash as would result from the sale.** The Treasury
Department, however, persisted in its intentions, and
redeemed $13,044,000 in July, 1817, and continued this
policy, so that on September 30, 1818, the capital of the
bank was represented by only $7,431,000 of government
securities. b This practically left only the stock note of
$7,000,000 which had been originally subscribed by the
Government, which was held until its redemption in 1831.
When Cheves became president in 1818, he thought it
wise to make larger investments in government securities.
The bank consequently, in 1820, purchased $2,000,000 of
government 6 per cent stock, and in 1821, $4,000,000 5 per
cent. c Biddle also made a large purchase in 1824. The
following table shows in brief the amount of government
funded debt which the bank held from 1819 to 1831:
1819
1820
1821
1822
1823
1824
1825
1826
1827
1828
1829
1830
1831

$7,400,000
7,200,000
, 9,200,000
13,300,000
11,100,000
10,900,000
18,400,000
18,300,000
17,800,000
17,600,000
16,100,000
11,600,000
8,700, 000

GOVERNMENT DEPOSITS.

By the charter of the bank the public funds deposited
in places where the bank or its branches were established
a President Jones to Crawford, May 16, 1817; Finance, 4: 793.
&Ibid., 3: 292.
cCheves, Exposition, 22, 30; also Niles, 23:91, 95.

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must be deposited in them unless there were urgent reasons
to the contrary.^ In places where there was no branch
this obligation to deposit the public money in the bank
did not exist, and the Treasury could deposit in state
banks according to its own arrangements. Crawford, however, desired that the bank should be the sole depository.
The internal-revenue laws were still in force, necessitating
collections in remote and sparsely populated districts, and
the Government enjoyed large receipts from the sale of
public lands. It was expected that the internal-revenue
laws would be repealed within a year, and the sale of
public lands fluctuated so widely at different points that
no dependence could be placed upon this source of government business which would justify the bank in establishing
an office in any particular place to meet this particular
emergency. The bank, therefore, was not ready to organize an office of its own in every district simply because it
would serve the convenience of revenue officers. From
the Government point of view, however, it could not be
expected that a collector who lived at a great distance
from the branch should deposit in that office more than
two or three times a year, and, on the other hand, it was
unwise to expose the collector to the temptation of keeping large sums for long periods. b
It was therefore agreed by the Treasury, as well as by
the bank, that state institutions should be used as "intermediate" places of deposit. The selection of these agencies and the arrangements to be made with them was left
to the bank by Crawford.c In choosing the agencies the
o Sec. 16.

& Finance, 4:506,530.

212

c Ibid., 4:498.

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bank moved with caution, for it was already involved in
disputes with western banks because of the delays in the
transfer of public funds which had previously accumulated
and because of the depreciation of the notes in which the
state banks were disposed to pay their balances. It consequently hoped that as few intermediate agencies as
possible would be needed.a When Crawford urged the
prompt selection of agent banks in the interior of Pennsylvania and northwest of the Ohio, owing to the sale of
public lands, b the bank asked the Treasury to forego the
use of state banks entirely in the northwest, c but Crawford would not accede to this. It was desirable to secure
places of deposit convenient to the land offices, and the
public receipts were too large to be exposed to the dangers
of distant transportation.
Under the arrangements which the bank made with the
Treasury, all deposits received either at its own offices or
at the banks employed as agents were passed to the credit
of the bank for the use of the Government and corresponding credits were entered on the books of the bank to
the Treasury. d In other words, the Treasury did not concern itself with the character of the money in which the
payments of its collectors were made to the bank and its
agencies; the responsibility was left entirely to the bank.
This agreement was made in April, 1817, before the bank
clearly realized the struggle which it would have to make
to enforce payments in legal currency, and apparently the
bank did not understand how far its liability was likely to
a Finance, 4: 775.
&Ibid., 4:553.

c Ibid., 4: 821.
<*Apr. i 7 > 1817; Ibid., 4:783

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extend in case depreciated currency was turned in. As the
culmination of much correspondence between Crawford
and Jones in June, 1818, the former notified the bank that
it was responsible for all money which was deposited in
the state banks selected for that purpose. a The bank felt
compelled in self-protection to abandon the agreement,
and henceforth state banks in places where branches were
not serviceable were selected directly by the Treasury
Department. As a result, the use of a certain part of the
Government deposits was lost.
The bank was still obliged to be on its guard in its
receipt of government funds. In July, 1820, Crawford
proposed a revision of the instructions as to the kinds of
money to be received in payment of public lands; and
among the notes receivable he included those of the banks
in the District of Columbia with the exception of two. 5
Cheves assented in the main to Crawford's suggestions but
objected to crediting as cash to the Treasury the notes of
the banks of the District of Columbia, if they were not punctually paid. c He also added that it would be better for the
government receivers to make a demand for acceptable currency, since no odium attached to requests made by the
agents of the Treasury " unless the agent happened to be the
Bank of the United States, which from the habit of railing
against it, were the plague to visit the land, would not
improbably be charged with having winged the ' Destroying Angel.' " d Crawford assented to this and agreed that
notes which were not punctually paid upon presentment
should be charged to the Treasury. 6
oFinance, 4:587,262.
&Ibid., 4:669.

^Ibid., 4:935.
<*Ibid., 4:935.
214

«Ibid., 4:670.

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Although the government deposits, as a whole, were
profitable to the bank, the relationship which was thereby
involved was not without its drawbacks. At the beginning of its operations the bank was forced to establish
branches, which proved unprofitable and difficult to manage, and later, at the request of the Treasury Department,
because of its dissatisfaction with the services of state
banks which were employed as agents, it organized offices
to aid the Government rather than to meet commercial
necessities.a Crawford thought that the treasury deposits
in the western branches was a positive injury to the bank,
for it tempted these offices to make excessive discounts.
This made exchange still more unfavorable, necessitating
the transfer of specie to the East, and this withdrawal
of specie caused irritation against the bank. h
In 1828 the question was raised as to whether the bank
should not pay interest on the government deposits. A
Senate committee, however, reported that this could not
be demanded without a direct violation of the charter:
In the bonus and the services rendered by the bank the
United States had been promptly paid for all the advantages derived from the deposit of its funds in that institution. 0 The bank proved to be a safe depository; the
Government did not lose a dollar from this connection.
The total amount cared for during the existence of the
a Portland, Mobile, Natchez, Buffalo, St. Louis; Rush to Biddle, Jan.
26, 1826; Sen. Doc., No. 17, 23d Cong., 2d sess., pp. 254-255.
b Finance, 4:641.
c Report of Senate Committee on Finance, Apr. 21, 1828; also report of
same committee, Feb. 20, 1829.

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bank was $410,000,000.° For the period 1817-1836 the
public deposits were as follows:
i8i7-_ L
1818
1819
1820
1821
1822
1823
1824
1825
1826
1827
1828
1829
1830
1831
*
1832
1833
1834
1835
1836

$10, 200, ocx)
7,400, 000
2,900, 000
3, 600,000
2,900, 000
2,600, 000
4,300, 000
10, 200, 000
6, 700, 000
5,800, 000
8, 900,000
8,400, 000
10, 700, 000
9,700, 000
9, 100, 000
12,600, 000
12, 800, 000
4, 000, 000
2, 600, 000
6oo, 000

It will be observed that there were wide fluctuations,
and if figures were supplied by months the changes would
appear still more marked. Considering the total resources
available for loaning, a change of $5,000,000 within a few
months meant a serious disturbance in facilities for discounts. b
TRANSFER OF PUBUC FUNDS.

Under the charter the bank was obliged to give the
necessary facilities for transferring the public funds within
the United States without charging a commission or claiming an allowance on account of difference in exchange. 0
In the arrangements originally adopted it was agreed
oCatterall, 465.
& Gouge, Paper Money and Banking, 199.

216

^Sec. 15.

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that the Treasurer of the United States could draw upon
the bank at any place where the public money was deposited, whether there were public funds at the time at
that place or not, with the understanding, however, that
reasonable notice should be given. Difficulties immediately arose because of lack of sufficient notification.
In August, 1817, the Treasurer of the United States drew
upon the bank at Philadelphia for $11,000,000. As there
was not that sum to the credit of the Government at the
mother bank, the cashier complained and asked that the
draft should be made payable at the offices from whence
the money was intended to be drawn, so that the bank
could place, the funds at the points desired.0 The Treasury, however, replied that it kept no account with the
offices, only with the bank, and it was for the bank to transmit the funds when ordered. 6
Again, in November, a draft on the Richmond office for
$200,000 came back unpaid for lack of a treasury balance
at that place. Crawford immediately notified the bank
that all treasury drafts must be paid by the branches and
the state banks employed as agents, without regard to the
amount of public funds in their individual possession. He
agreed that if large sums were to be expended in places
where but little public money was collected, due notice
should be given, but this could not be done in ordinary
transactions. 0 The bank, as already stated, increased
its difficulties by making its branch notes payable at
any office irrespective of the place of issue. In April,
1819, Cheves asked for a modification of the existing
a Finance, 4:813-814.

& Ibid., 4:550.

217

cibid., 4:560, 825.

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agreement, affirming that the bank could not henceforth
engage to meet treasury drafts except at the points
where the funds were collected or its notes were made
pay able. 0 Later in the year the management proposed
the following rules:
That the Treasury, when it desired to use its funds
otherwise than where they were deposited, should direct
the bank to transfer to the office where the funds were
required from the specific office where they were deposited,
with allowance in time as follows:
From the western offices to the Atlantic offices, respectively, and vice versa, four months.
From and to New Orleans, in all cases, four months.
From the offices south to the offices north of Washington, and vice versa, sixty days.
From the offices north of Washington to the offices
north of Washington, thirty days.
From the offices south of Washington to offices south
of Washington, thirty days.
That the Government should only draw on offices to the
amount of its funds in those offices, respectively, except
the office at Washington where it could draw at pleasure;
and that when the Government should draw on a bank or
an office not having funds to meet the draft it should
simultaneously grant a draft in favor of the bank or the
office on the bank where it had funds as the bank might
designate, to cover such drafts.6
To these proposals Crawford assented. c The bank
consequently abandoned the original policy of President
a Finance, 4:823; Niks, 17:2.

& Finance, 4:909.

218

c Ibid., 4:640.

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Jones, which considered the bank as a unit, and provided
that all the accounts of the Government be kept with
the central office rather than with the several branches.
In carrying out these new regulations the Treasury notified the bank weekly in regard to the transfers that
would be needed, and in 1829 a daily statement was
rendered.
Transfers for the Treasury during the period 1815-1827
averaged $28,000,000 a year. a When the bank was
under attack there was a decided division of opinion as to
the benefits of the services thus rendered to the Government, and Catterall notes that adherents of the bank
were wont to magnify the advantages. 6 " I t s opponents
on the other hand belittled the claims and asserted
positively that it possessed no special virtues in this particular. Polk in his minority report of March, 1833,
asserted that the bank rendered no special service in
transferring government funds. Secretary Woodbury, in
1834, argued that the transfers were profitable to the
bank, and Gouge, in a pamphlet issued in 1837, made an
elaborate argument against the bank as a necessary or
even a convenient treasury. He held that its services in
this capacity had been greatly overrated, and that at
those points where the transfers incurred risk or expense
the Government was compelled to be its own carrier, and
that a private merchant occupying a position similar to
that of the bank would have made an immense fortune." 0
oCatterall, 468.
^Gallatin's Writings, 3:328-329, 345; Colton, Works of Clay, 5.615;
Webster's Works, 3;401-402; 4:201.
c Catterall, 466.

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After analyzing the evidence, Catterall concludes that the
transfer of the funds was a great convenience and saving
to the Government. Even if a profit was made by the
bank, it did not follow that the Government lost. Moreover, the bank possessed three very definite advantages
over the state banks in performing this service: " I t s
notes, checks, drafts, and bills of exchange were willingly
received everywhere from Montreal to the City of Mexico.
A credit so extensive made possible a system of domestic
exchange by means of which the funds of the Government
were transported from place to place, always at a very
low rate and frequently with a profit to the bank. In the
third place all this was made easier and the system of
exchange rendered of the highest efficiency by the organization of the bank with its twenty-five offices scattered
through the Union. " a It is estimated that if a rate of
one-fourth of i per cent had been charged the Government would have had to pay over $60,000 a year.
For the seventeen years which the bank was a public
depository the Government thus saved a little over
$1,000,000.b
CIRCULATION.

That the new institution would put an end to the evils
of the depreciated local currency was the common expectation, and apparently the bank began its operations with
a desire to meet this demand. The measures which it
adopted, however, were ineffective; the management did
not understand the principles upon which a sound note
currency is based. It agreed to redeem the notes of the

oCatterall, 467.

&Ibid., 468.

220

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parent office and all the branches north of Charleston,
indiscriminately, at any other office. Although the capital
of the bank was large, its specie holdings were small.
Even if these had been larger, the bank began without an
adequate experience from which it could determine the
points at which the specie would be needed for purposes of
redemption. The management either was ignorant of the
facts in regard to the course of trade between the different
sections of the country or failed to appreciate the superior
power of economic law. As the notes of each office were
payable at all the other offices and the office issuing them
was not exclusively liable for their redemption, and as
discounts were made without limit, regardless of trade
conditions, an impossible situation was created. Moreover, the offices in the South and West were encouraged
to make large loans.
The bank, indeed, criticised the branches for not increasing their circulation. When the branch at Lexington
made use of local bank paper or specie, instead of its own
notes, the president of the parent bank (Oct. 4, 1817)
called the management to account, writing that "the
wants of the country and the interest of the bank require
an extensive circulation of its paper, and it is the policy
of the parent board to encourage the indiscriminate use
of the notes of the bank. , , t t As the balance of trade
was against the West in particular, the notes of the
branches were rapidly carried off to be presented at the
northern offices, which were ill prepared to redeem
them. As the influx of these bills was so sudden and

<* Finance, 3:321.

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of such magnitude, it was impossible to estimate at
any time the amount or to comprehend the extent
and direction of the circulation of the notes. a Under
such a system the bank was left to " vacillate between the hazards of rashness and the fruitless results
of a torpid prudence." Often the northern offices which
received the notes had to wait a turn in exchange before
they could be reimbursed, and frequently had to curtail
their discounts in order to provide means for redemption. b Even without instructions, the Boston office, to
save itself from failure, early in 1818, declined to receive the bills of southern branches. a Moreover, the
payment of these southern and western discounts when
they fell due was generally made in the notes of local
banks which thus became heavily indebted to the
branch office. The bank aggravated the difficulty by
not instructing the branches to demand settlements in
specie with the local banks promptly. Large balances
were allowed to accumulate until the local institutions
became involved in an indebtedness which they in
turn could not liquidate without inflicting hardship
upon their own debtors. c
The most that can be said in defense of the bank's policy
is that indiscriminate redemption aided in the resumption
of specie payments by forcing the state banks to improve
the standing of their own bills; that it created an acceptable currency, coextensive with the limits of the Union; d

Finance, 3:325.
& Ibid., 3:589.

c Ibid., 3:307,
d Ibid., 3:590.

222

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and that it "invigorated and confirmed public confidence and facilitated commercial intercourse." a If this
defense be accepted, it makes the bank a martyr in
behalf of the general welfare of the country. Local
bank-note circulation decreased from 1816 to 1819.
Whether this was due to the operations of the bank
or to the general contraction due to resumption it is
difficult to tell, but for the disturbance and suffering
caused by this contraction the bank was generally
blamed. It thus had to accept the censure for revolutionary changes for which it primarily was in no way
responsible.
From a financial standpoint the policy of the bank was
so obviously illogical that little is to be gained for present instruction through the presentation of any detailed
account of the complications in which it soon found itself
involved. In 1818 the system broke down, and on August
26 the bank resolved that no branch should take the
notes of other branches except in payments due to the
United States. 6 It was found impossible to provide
for the indiscriminate redemption of the bills at nineteen distinct places, embracing the extremes of the
Union. 0 The bank had ample justification for this
action; the twelfth section of its charter, which defined
the nature and obligatory effect of the current notes,
was a verbatim copy of the thirteenth section of the
charter of the First United States Bank. The old
bank did not pay or receive on deposit the notes of its
a Finance, 3:325.

Ibid., 3:326.

223

c Jones, Ibid., 3:324.

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branches, nor did these pay or receive on deposit the
notes of the parent bank or of each other, unless the
state of exchange rendered it possible.^ The first bank
bill which had received the attention of Congress during
the discussion of 1814-1816 contained a clause which explicitly provided that the bank and all its branches should
pay the notes of each other, but this requirement was
not inserted in the charter as it was finally enacted; b
and Jones, the president of the bank, afterwards stated
that the practice of making branch notes universally
redeemable was never intended to be permanent. It had
been introduced in the West because that part of the
country was indebted to the Atlantic cities and had no
other form of currency which it could send. c
The restrictions of August 28, 1818, had some effect and
the circulation was reduced from $9,045,000 in July to
$7,286,000 in November of the same year. But this was
not sufficient. When Cheves took office in March, 1819,
the southern and western offices were issuing notes "most
profusely.''
The offices were now ordered not to issue
notes when exchange was against them. d In October,
new regulations were issued. It was ordered that the
branches could reissue the notes of the parent bank
and each other only when they were creditors, and then
only when it appeared from the state of the exchanges
that it was manifestly for the interest of the bank. When
« Finance, 4:807.
*> Lowndes, Annals of Congress, 15 Cong., 2d sess., 1:33c.
cOrigin, etc., by a Friendly Monitor, 1819.
dCheves' Exposition, Goddard's Edition, 115; Finance, 4:903.

224

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the notes of an office above $5 were drawn from it to be
used as a substitute for exchange, further issue of such
notes should forthwith cease, unless their issue was necessary to sustain the credit of the office." These orders
were mitigated by the welcome notice that the bank
would receive at any office notes for $5 issued at any
other branch. Cheves also endeavored to secure concessions from the Treasury, and urged that the exception
made in favor of payments due to the Government, by
the indiscriminate use of branch notes, be abandoned. &
Crawford, Secretary of the Treasury, was therefore asked
to give his approval to the rejection of foreign notes in
the payment of dues. 0 He declined,d but in December, 1820, he admitted the*embarrassments under which
the bank labored, and suggested that the charter of the
bank be amended so as to make the bills of all the
offices of the bank " except that at the seat of government, receivable only in the States where they are
made payable and in the States and Territories where
no office is established. The effect of this modification would be to make the notes of the offices of the
Bank of the United States, except the office in this district, a local currency which will enter and continue in the
local circulation of the States in which they are issued/' •
Cheves also / turned to Congress, complaining that under
the existing regulations the circulation of the bank was
° Oct. 5, 1819; Finance, 4:908.
&Catterall, 74.
c April 6, 1818; Finance, 4:874.

7069—10

^See Exposition, pp. 59, et seq.
« Finance, 3:552.
/ J a n . 12, 1821; Ibid., 3:587.

225

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limited to those places where it was least wanted, and
asked for reliefs
Neither Crawford's recommendation nor Cheves's appeal
were successful, and the bank again had to make its
adjustment as best it could. When the bank imposed its
new set of restrictions upon the branches in October,
1819, it agreed to increase the issue of $5 notes. 6 In this
way a place could be made for at least a small volume of
notes of the bank in the West which would otherwise be
deprived of all circulation, and it also provided a universal
currency in small denominations. The difficulty, however, was that the president and cashier did not have time
to sign any large number of these notes. c As early as January 13,1818, the bank had petitioned for an amendment
to its charter to relieve the. officers named from signing
the notes, and a bill of relief was passed by the Senate, but
postponed in the House. In 1820 another application was
made and again the Senate voted favorably, but no action
was taken by the House. In 1822 the same procedure
was repeated. In 1823 a House committee reported in
favor of relieving the president and cashier of the exhausting manual labor in signing notes which disqualified them
from applying their minds to the more critical and important concerns of the bank, but Congress delayed action.
In 1826 the bank again renewed its petition and Congress with its usual procrastination neglected to legislate.
These successive failures led the bank to invent the use of
branch drafts.d
aNiles, 19:245.
b Finance, 4:908.

c
d

I b i d . , 3:589.
H . R. No 42, 23d Cong., 2d sess., pp. 5-6.

226

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There were three ways by which the bank could control
or partially control its circulation and protect its reputation: First, by providing a specie reserve; second, by
requiring prompt settlements with state banks; and third,
by contracting its issues. Cheves chose the latter course.
In January, 1820, the circulation stood at $3,600,000 as
against $8,300,000 in 1818. As a result of this policy but
few of the notes of the bank circulated in the South and
West. a This policy created much dissatisfaction: the
bank was accused of creating an unnecessary scarcity of
money; it denied the people an equalization of exchange;
it left the currency at the mercy of local banks, nearly
all of whose bills were at a discount except at the place
where they were issued.^
Biddle, who became president in 1825, changed this
policy. He believed that notes might safely be issued
notwithstanding the necessity of paying them everywhere
on government account, provided the bank could put an
end to the depreciation of state bank notes. He therefore insisted upon constant settlement of state bank balances and on the issue of the bank's own notes instead of
paying out those of state banks. The latter were withheld and forced upon the state banks for redemption. 0
The note circulation consequently increased. In 1825 it
amounted to $6,740,000 and in 1828 to $9,856,000. At
Philadelphia the notes of all branches were indiscrimia

Finance, 3:552.
bNiles, June 26, 1819; 16:290; 17:2; 18:274.
c
Report of Triennial Meeting of Bank of the United States in 1828,
Niles, 35-72-

227

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nately taken. The following table shows the circulation
of the bank in 1817-1836:
1817
1818
1819
1820
1821
1822
1823
1824
1825
1826.,
1827
1828
1829
1830
1831
1832
1833
1834
1835
1836

_
v

$1,900,000
8, 300,000
6, 600, 000
3, 600,000
4,600, 000
5, 600,000
4, 300,000
4,600,000
6,000,000
9, 500,000
8, 500,000
9, 900, 000
11,900, 000
12,900, 000
16,200, 000
21, 300, 000
17,500,000
19, 200, 000
17,300,000
23,000, 000

As the bank was unable to secure legislative relief, in
order to put out a small note circulation it resorted to
indirect methods and accomplished its end by the invention of bank drafts in 1827^ Able legal advisers of the
bank declared that since the issue of checks upon the bank
by its branches was an original banking operation the proposed use was legal whether the checks were for small
sums or more, signed by one officer or more, with or without the external appearance of a bank note. The bank
authorized the issue of $5 and $10 drafts, signed by the
branch president and cashier, drawn upon the principal
cashier at Philadelphia, and transmitted to the offices,
which resembled bank notes so closely that after a short

c-Catterall, 117.

228

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time but few could detect the difference.0
branch draft read as follows:

Bank
In form, the

Cashier of the Bank of the United States:
Pay to Jas. L. Smith, or order, five dollars.
Office of discount and deposit in Utica.
The 3d day of September, 1831.
J O H N B. LEVING,

President.

N. V. GRAZIER, Cashier.

This was then indorsed: " P a y to the bearer, Jas. L.
Smith." Twenty-dollar notes were added in 1831. The
Government accepted them as notes. Catterall states that
technically the drafts differed from notes in the following
particulars:
1. They were not signed by the president and cashier of
the parent bank.
2. They were not drawn in the name of a corporation.
3. They were not subject to the supervision of the Secretary of the Treasury.
4. They were not legally receivable in payment of public
dues.
5. They were not payable where issued.
6. They were not suable at the issuing branch.
7. They were not limited to the denominations of $5 or
above. b
Seventeen of the branches issued these drafts, and in
1832 four-fifths were put out at eight offices, two in the
South and six in the West and Southwest. In that year
the proportion of drafts to the total circulation was less

o Catterall, 117.

&Ibid., 123.

229

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than one-fourth, and at Pittsburg, Lexington, and Louisville the volume of drafts was greater than that of notes. 0
Practically these drafts became a part of the circulation,
and in any complete study of circulation ought to be
included.
SALE OF DRAFTS.

At the time the bank began its operations the commercial world was not in agreement as to whether it should
sell drafts. Some thought that the new bank should be
called upon to sell checks only when it was convenient and
then only at par, for even if it sacrificed a premium which
might be exacted it would receive its compensation in the
increased confidence and support of the commercial community. On the other hand, it was contended that a system of gratuitous drafts would lead to favoritism. 5 The
practice involved a still larger question, namely, the establishment of a universal medium of exchange. Secretary
Crawford, in July, 1817, upon learning that the bank intended to make charges on domestic exchange, vigorously
objected. One of the objects of the bank, he declared, was
to do away with inequalities in rates of exchange which had
formerly existed between the different sections of the country and to put an end to the system of brokerage which
had imposed unnatural and arbitrary rates which were not
based upon the actual balance of trade existing between
different sections. In his opinion, the exaction of onefourth or one-half of 1 per cent on checks drawn on one
office by another "without reference to the commercial
relations which exist between the two places by a cap-

oCatterall, 129.

& Finance, 3:309.
230

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italist who always sells and never buys, will as effectually
convince the community of the prostration of its rights
and interests at the will of the bank as the exaction of
10 per cent."® He warned the bank against arousing
hostility which might prevent the renewal of its charter,
and served notice that if any obstacles were placed
in the way of " universality" the treasury would have
to take steps to save the community from the cupidity
of the bank. Although Crawford may have fairly interpreted the ill-defined anticipations of the public in
regard to the advantages to be derived by the establishment of a bank and may have accurately measured the
opprobrium which would attach to the bank if it should
charge for drafts, it was clear that he confused the operation of domestic exchange caused by commercial factors
and the exchange of currencies of banks at par. As
Catterall points out, the phrase ''equalization of
exchange" was used in three senses: First, in that of
putting an end to the depreciation of state bank notes;
second, in that of real exchange; third, in that of putting
an end to the discount of bank notes, which was due to
their being at a distance from the place of issue and redemption. "This confusion of use led people to believe that
the bank ought not to charge for making exchanges
for the public." & Moreover, it was possible here as in
state banking, in the sale of a draft, to make a charge
whereby more than the legal 6 per cent interest could be
obtained. For illustration of the confusion of thought
on the subject of exchange abundant evidence may be

a Finance, 4:540.

& Catterall, 137-138.

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found in Niles Register. When the cashier of the bank at
Philadelphia, in 1818, gave notification that the notes of
the bank of the United States which wcsre made payable
at its several branches would not be received except in
payment of debts due to the United States Bank, Niles
denounced the action because it destroyed the equalization of exchange; as the facilities of remittances were thus
destroyed the discount paid on good bank bills must be
advanced; and again, when the parent bank, in 1823,
agreed to receive and deposit the notes of certain banks
in the vicinity, Niles demanded that this accommodation
should be extended to other places. a
Jones, president of the bank, July 20, 1817, in his reply
to Crawford, denied that the bank was under any legal
obligation to furnish a national currency, nor did Congress in granting a charter require this. During the
existence of the old bank no one imagined that it was
bound to transmit the money of individuals from place
to place without premium or compensation. Crawford's
interpretation of the obligation to provide an absolute
equality oft exchange throughout the Union was the first
intimation he had received of any such expectation on the
part of the public. 6 It was also claimed in defense of the
bank that as there was a provision in the charter that the
bank should not charge the Government anything for
difference of exchange, it was expected that charges would
be made in the case of private individuals. 0
a Niles, 23: 322.
& Finance, 4: 809.
cLowndes, Annals of Congress, 15th Cong., 2 sess., 1:330.

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It is possible that the bank would have escaped some
of the criticism if it had followed more uniform rules.
The investigating committee, which reported in January,
1819, stated that drafts had been sold by the Philadelphia
office on Charleston, New Orleans, and Savannah, within
a few days of each other at very different rates, varying
from 1 to 5 per cent on the same office. Without expressing a definite opinion as to the policy of such
charges, it thought that if drafts were sold they should
be delivered at fixed and permanent prices, not exceeding
the expense of transportation of specie. Niles noted that
at some of the offices premiums were charged for drafts;
at others, the accommodation of drafts was refused; " that
is, the equalization of exchange is denied to any except those
who keep their accounts exclusively with such offices.''a In
August, 1818, the bank found it necessary to restrict this
business and forbade the branches to draw on each other or
the parent bank unless a premium " equivalent at least to
the expense, risk, and loss of time incurred in transmitting specie" was allowed.6 Under the reform administration of Cheves, the officers were ordered not to draw
on each other, except on funds provided in advance to
meet payments of drafts, unless there was some definite previous understanding. c In the course of time the selling of
drafts constituted a considerable part of the bank's business.
In 1829 such transactions amounted to $24,384,000.d
oNiles, Feb. 28, 1818; 14: 4
b Finance, 3: 326.
clbid., 4: 908.
^Gallatin's Writings, 3: 344; in 1832 it amounted to $45,157,000; S.
Doc. No. 17, 23d Cong., 2d sess., p. n o .

233

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etary

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Rates, as a rule, were low, ranging from par to i y2 per cent,
the most common being one-half of i per cent." The
best financial opinion also justified the making of charges
on such instruments; Gallatin gave it his commendation b
as well as Tucker. c It was recognized that the bank must
"on occasions of unusual disturbances, in the course of
trade, be compelled to transmit specie from place to place/'
and it was just that the bank should be compensated for
performing this office.
EXCHANGE.

The buying of bills of exchange by the bank, like the
sale of drafts, was in the early years of its operations regarded with suspicion. Crawford's objections to exchange
operations as a whole have been noted. d Though it is
probable that this criticism at that time was directed more
against the sale of drafts than the purchase of bills, all operations in exchange were viewed with disfavor. Up to
this period it was the practice of banks to discount
notes payable on the spot, and if for accommodation they
discounted a.bill payable at a distance it was done on
the same terms, no profit in the way of exchange being
expected. e
There were two possible evils in the practice of charging
for exchange: First, the opportunity of fixing an excessive rate, which would practically make the discount on
aCatterall, 142; Appendix, VII, p. 505.
& Writings, 3: 345"34^c Theory of Money and Banks Investigated, 301.
djuly, 1817; Finance, 4: 540.
«Raguet, Currency and Banking, 114-121; Summer, History of Banking, 185.

234

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usurious terms; and, second, it gave possibilities of expanding and contracting the circulation through the
purchase or refusal to purchase such bills. During the
period of maladministration under Jones' presidency,
bills of exchange were dealt in which were not founded
upon true commercial transactions. "Race horse" bills
were common; that is, the payment of one bill of exchange
was made by the purchase of a new one, which might or
might not be based upon a real transaction. a Although
in the first few years the dealings in exchange were inconsiderable, Cheves, in enforcing his policy of contraction,
found it necessary to impose stricter regulations and ordered the office not to buy exchange at longer periods
than sixty days sight, nor to buy at more than the current rates, and in no case above par. 6 In June, i8i9,the
bank did not own a single dollar of domestic bills.c
Biddle undertook a development of .this form of business. By 1825, when he became president, internal commerce had been established on a much sounder basis;
state bank notes were also in better repute, and there was
not the popular misunderstanding which had been provoked in the earlier controversies over the bank's duty
to "equalize" exchange.
Up to 1820 there is no separate statement in the bank
returns as to investments in bills of exchange. In that
year, in the annual balance sheet, the amount was $1,500,000, and, as will be noted in the following table, the

aCatterall, 158.
& Finance, 4: 808.
C
H . R. No. 460, 226. Cong., 1st sess., p. 312.

235

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amounts did not increase very much until 1823. Investments in bills of exchange, as shown in the annual balance
sheets of the bank, from 1820 to 1836 were as follows:
1820
1821
1822
1823
1824
1825
1826
1827
1828
1829
1830
1831
1832
1833
1834
1835
1836

$1,500,000
1,500,000
1,600,000
1,900,000
2,300,000
2,700,000
3,100,000
3,300,000
5,000,000
7,700,000
8,700, 000
10, 5 0 0 , 0 0 0
16,700, 000
18,100,000
16, ^00, 0 0 0
17, 2 0 0 , 0 0 0
19,300,000

It will be observed that these investments at the date of
the annual return selected in the foregoing table gradually
increased under Biddle's administration until, in 1831, it
amounted to $10,500,000. The next year there was an
increase of more than 50 per cent, a gain which was subsequently held. There are no returns which will show the
total volume of the dealings in exchange by years for the
whole period. In 1823 the total purchases were $7,353,000\ a from July, 1827, to July, 1828, they were reported
at $22,000,000;b and in the year ending June 30, 1831, the
bank purchased $44,000,000.
«Sen. Doc. No. 17, 23d Cong , 2d sess., p. 25.
6 Report of the Committee of Stockholders, Sept. 21, 1828, published in
Niles, 35:74.

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Great pride in the development of this business was
taken by the management in later years. It was claimed
that not only was the capital of the several branches kept
more stable, a but commerce was benefited. Biddle declared that, next to the preservation of the currency, the
most important service the bank could render was to facilitate the internal exchanges: Its object was to melt
down into one uniform and healthy mass all the depreciated currencies with which some parts of the country
were afflicted, thus bringing down exchanges to the least
cost. The branches in the South and West were encouraged to purchase bills instead of discounting on personal
security. The cashier of the mother bank, in advising
the branch at Cincinnati, declared that the business of
discounting local paper was peculiarly the business of the
local state banks, while exchange business properly belonged to the branch. b The proceeds from these bills provided a fund for the redemption of notes issued in the
southern and western offices, and thus made it possible to
make larger loans in those sections without running the risk
of transferring capital to that section from the North and
East. At this time trade with New Orleans in the West
and Southwest was increasing. A large amount of produce was sent to that city and bills were drawn on the
proceeds which were purchased by the several branches
and remitted to the branch at New Orleans. Large funds,
therefore, accumulated at New Orleans. When the notes
oCatterall, p. 98.
&H. R. No. 121, 22d Cong., 2d sess., p. 148; see also H. R. No. 460, 22d
Cong., istsess., p. 517.

237

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of the western branches which were issued in the course
of trade found their way to the East, in the purchase of
eastern products, they were met in turn by drafts on the
funds accumulated at the branch at New Orleans. These
drafts were always available because of the purchases
made in New Orleans on account of the northern merchants or manufacturers. a
It is undoubtedly true that one of the chief services of
the bank to the commercial world lay in its ability to furnish exchange at low and fairly uniform rates. Its connections were widely extended and its resources ample.
And yet most contradictory statements were made in regard to the usefulness of the bank in undertaking this
work. Some claimed that if it were not for the bank and
its dealings in exchange planters and the agricultural interests in the South and West would be subject to the
extortionate rates of private dealers. It was stated that
before the bank went into operation exchange at Charleston was from 8 to 10 per cent, either for or against.
McDuffie, chairman of the Committee on Ways and
Means, in his report of 1830, went so far as to declare that
the bank actually furnished a circulating medium more
uniform than specie. On the other hand, because of the
lack of a proper understanding of the subject of exchange,
it was argued that the bank ought to make no charge.
President Jackson, in his message of 1829, declared that
the demand of a small commission for the transfer of funds
of individuals from one part of the United States to ano H . R. No. 460, 22d Cong., 1st sess., p. 316; Catterall, p. 406; Niles,
2 9 : 3 1 - 3 2 ; 35^74-

238

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other justified him in stating that the bank had " failed
in the great need of establishing a uniform and sound currency.' ' Because the bills of the mother bank were not
redeemable at New Orleans it was held that they were not
of equal value with silver to the merchant who wished to
purchase cotton in the latter city, and that consequently
the bills were depreciated. It was forgotten that the
transportation of specie from Philadelphia to New Orleans
could not be made without cost. By 1832, however, the
bank no longer held its preeminent position in exchange
operations. State banks entered the field; in 1834 three
of these institutions in the West and Southwest carried
on a business in domestic exchange of nearly a million
dollars more than all the seven branches of the United
States Bank situated in that section of the country.**
This was in part due to the necessity of contraction by the
bank caused by the loss of the government deposits, but
it also shows that the bank's service in this direction
was not indispensable.
The bank, moreover, was charged with forcing its customers to purchase bills on their crops when they desired
to discount notes. By doing this it would secure more
than the legal rate of interest, for if the borrower paid 6
per cent on the loan and \% per cent on exchange he
would be obliged to pay for a ninety-day bill what
amounted to 12 per cent per annum.
The rates of exchange, according to the summarized
statement made by Catterall, varied from par to two and
oSen. Doc. No. 13, 23d Cong., 2d sess., pp. 13, 63.

239

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a half. The rates from the East to the West and South
were higher than the rates on the East from those sections; between the eastern offices the rate was low. The
rates in the West on their western offices were high, in
order to discourage bills drawn on western cities, since it
was considered more advantageous that bills should be
drawn on the East or on New Orleans. The rates, therefore, between the western offices were almost as high as
the rates on the East, and sometimes higher. Again,
according to Catterall, who has analyzed the exchange
operations by sections, exchange on the Southwest and
West in 1824 amounted to $8,890,000, or less than 29 per
cent of the bank's entire purchases. In 1827 they were
32 per cent; in 1829, 46 per cent; in 1830, 56 per cent;
and in 1832, over 60 per cent.
In 1824 the western dealings were not as large as the
South, and only a little over half as large as those of the
North and East, while in 1832 they were in excess of
other sections. The offices which did most of the business were only four or five. From 1829-1832, inclusive,
the four offices in New Orleans, Nashville, Louisville, and
Lexington did four-fifths of all the exchange business in
the West and Southwest, during the remaining years of
the history of the bank three of these, with the addition
of Mobile and Natchez, did over four-fifths. New Orleans
was the center. It was the branch where most bills were
purchased and on which most offices drew the most bills.a
The profits of the bank from this source of business are
^Catterall, 143; H. R. No. 460, 22d Cong. 1st sess., pp. 316-317.

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shown in the following table; profits from discounts are
also given for purposes of comparison:
Discounts.
1818
1819
1820
1821
1822
1823
1824
1825
1826
1827
1828
1829
1830
1831
1832
1833
1834

$1, 152.300

988,200
694,600
620,500
512,200
573.7oo
678,600
558.600
711,100
721,600
697,900
823,200
876,600
889,900
254.300
234.500
074,100

Exchange.
$51,000
142,200
106,800
44.900
32,500
49,800
67,400
78,800
107,400
101,400
190,800
274,000
372,900
401,500
584,300
676,100
605,400

DISCOUNTS AND LOANS.

Among the early decisions of the directors was a vote,
January 9, 1817, that between February 20 and July 1
of that year sixty-day loans would be made to those who
had bonds to pay on account of revenue arising from imports. a It is impossible to determine the volume of these
loans, but when the bank was investigated in the latter
part of 1818 it was reported that the bank and its offices
had very little good business paper on hand. b As previously noted, an excessive amount of the bank's capital was
loaned to stockholders on pledge of stock; and it is, therefore, presumable that loans to merchants formed but a
small part of the discounts. The bank thus placed beyond
o Finance, 3:342.

7069—10

&Ibid., 3:312.

241

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its reach a large part of its resources, and when in July, 1818V
it became necessary to curtail discounts the reduction, in
almost all cases, fell on business paper. Nor is it possible
to present very much information in regard to the details
of the discount business in subsequent years. During the
earlier years of Jones's administration, when the branches
were encouraged to discount heavily, large loans were made
on security which in the last analysis was real estate. As
a result of this ill-advised policy there was a considerable
volume of suspended debt in the South and West and a large
amount of real estate was thrown back upon the bank.
The total amount of doubtful indebtedness in 1822
amounted to over $10,000,000, including that lost by the
Baltimore branch, due to speculation of its officers.0 The
suspended debt at the Cincinnati office alone amounted to
$2,528,000. Here, in particular, it was necessary to take
real estate. When the loan was secured by mortgage and
interest was regularly paid the debtor was not disturbed.
If the security was insufficient, the mortgage was foreclosed
and the property sold, usually to be purchased by the bank
and then improved. 6
Biddle undertook to exercise stricter regulations, and
ordered that discounts should be made for short dates
and only on good commercial paper; loans on real estate
and stock security were forbidden. In 1824 the New York
office was instructed to loan only at sixty and ninety days,
^ R e p o r t of Stockholders, Oct. 1, 1822, in Niles, 3: 87.
&H. R. No. 460, 22d Cong., 1st sess., p. 523; Executive Doc. No. n 8 ,
24th Cong., 2d sess., pp. 114-115; Catterall, 400.

242

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though it might increase the term to four months, if the
loan was " beyond all exception and for a good customer." ^ When asked by the president of the New
York office to permit longer discounts in the interest of
larger profits, Biddle replied: "Let us not, by the hope
of doing better or getting more business, risk the property and safety of the institution;" and to the directors
of the Baltimore office he wrote in like spirit: "Our
great object is business men and business paper." 0
The wisdom of this policy was seen during the crisis of
1825, when the bank was able to loan freely. During
the spring of 1827, owing to the ease in the money
market, Biddle relaxed the regulations for a short period, officers being allowed to discount on six months'
paper. Large sums were consequently loaned on accommodation notes, and renewals became more common/
For this liberality the bank had to pay the penalty,
for during the pressure of 1828 it was obliged to refuse
assistance to merchants. c
After 1827 t h e ' W e s t and Southwest received still
more generous treatment. The rapid payment of the
public debt deprived the bank of investments in government securities, and the development of the cotton
industry invited an extension of credit. In 1828 the
bank's discounts and bills of exchange in the West
and Southwest amounted to $13,700,000 out of a total
of $39,350,000; in 1832, the respective figures were
oCatterall, 100.

& Ibid., 109, 390.

243

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$36,400,000 and $70,400,000. The proportion of about
one-third arose to one-half.a That the loaning policy of
the United States Bank did not differ from that of local
institutions was seen in 1831 and 1832. Its experience
at that time is thus described by Catterall: In the West
and Southwest " money was advanced to grow the crops,
and the loan paid out of the proceeds when they came
to market. The bills of exchange by which these loans
were made were frequently six months' paper. * * *
In 1831 and 1832 the crop was short. When to this
was added importations and disturbances arising from
a visitation of the cholera it will be readily supposed
that the bank could not get its debts paid when they
fell due. Nor could it secure foreign bills to send
abroad in order to check specie drains, since foreign
bills were drawn for the most part upon the cotton
crop." & Although the management of the parent bank
at Philadelphia again and again counseled the western and southern branches to adopt more conservative methods, the advice was not heeded. Indeed, the
branch officers defended their operations as wise and
necessary. The central bank, however, must be held ultimately responsible for the mistakes which were made and
which became so obvious during the critical experience
of 1834; it had granted to the South and West a disproportionate part of the capital and thus tempted them to
inflation. If reform had been earnestly desired, it could
have been secured by a different distribution of the bank's

^Catterall, 137.

&Ibid., 152.

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resources. In the valley of the Mississippi the amounts
due the bank in the years 1829-1832 were as follows:
1829

$11,000,000

1830

18,000,000

1831

23,000,000

1832

31,000,000

In May of the latter year it stood at $37,500,000. The
debt of the western country was thus more than trebled
in a little more than three years, and was more than
doubled in fifteen months. a
In 1832 Biddle described in some detail before an
investigating committee of Congress the general procedure of the bank in making loans. The length of ordinary
discounts varied with the state of business—sometimes four
months, sometimes six months. In 1830 the committee
of exchange was authorized to " loan on collateral security
and approved public stock large sums of money at a rate
of discount not lower than 5 per cent," and under these
ample powers the length of loans was left entirely to
their discretion. The committee was also authorized to
make loans on stocks or other approved security at a
rate not less than 4 ^ per cent, and the length of their
loans was left to the committee. Frequently discounts
had been made where the drawer and indorser were
partners in the same concern without any additional
name. I t was common for the parent bank to discount
notes where both the drawer and indorsers resided out of
the State without requiring the name of one responsible
man in Philadelphia, but preference, thDugh not exclu-

°H. R. No. i2i, 22d Cong., 2d sess., p. 37.

245

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sively so, was given to Philadelphia paper. 0 Loans
were made on stock of canal, turnpike, and bridge
companies. 6 In 1833 it was reported that accommodation paper did not cover more than 10 per cent of
the total discounts, and what there was was of the
best character. 0 The following table shows the discounts for the bank in 1818-1836, distinguishing between loans on personal security, bank stock, and other
securities. Loans on " other securities" were generally
insignificant until 1832.
Personal
security.

Bank
stock.

Other
securities.

1818

$29,600, 000

1819

27,100,000

8,400, 000

300,000

1820

21,000,000

7,000, 000

1,900,000

1821

20,600,000

6, 700, 000

2,100,000

1822

20,300,000

6, 100, 000

100,000

1823

22,600,000

6,100, 000

1824

24,300.000

6, 700, 000

IOO 0 0 0

1825

23,200,000

5. 700, 000

300 000

HI,

200, 000

$300,000

1826

27,100,000

3.100, 000

IOO 0 0 0

1827

1 24,300, 000

2,900, 000

300 000

1828

1 26,500, 000

1,900, 000

300 000

1829

29,900,000

1.400, 000

300 000

1830

30,700,000

1,000, 000

300 000

1831

32,800,000

700, 000

IOO 0 0 0

1832

48,900,000

700, 000

1833
1834

40,100,000

700, 000

2,900,OOO

33, 700,000

900, 000

4-000,000

1835

29,900,000

1,000, 000

3,700,000

1836

22,300,000

3.5oo, 000

14.200,000

«H. R. No. 460, 22d Cong., 1st sess., p. 84.
b Ibid., 192.
C
H . R. No. i2i, 22d Cong., 2d sess., p. 77.

246

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As a rule, the largest amount of discounts was made
in the summer months. During the years 1820 to 1831
the months of maximum discount were as follows:
1820
1821
1822
1823
1824
1825
1826
1827
1828
1829
1830
1831

June.
June.
July.
July.
July.
May.
June.
June.
June.
May.
June.
October.

_»

During the summer, in the interval between the old and
the new crop, commercial operations and the loans founded
on them declined. This is again illustrated in the reductions of the business of the bank between July 1 and October 1. For the years 1823 to 1833 these reductions were
as follows:a
1823
1824
1825
1826
1827
1828
1829
1830
1831
1832
1833

oNiles, 46:127.

247

$1,240,000
2,119,000
131,000
3,012,000
2,216,000
1,474,000
3,258,000
2,711,000
Increase.
4,723,000
3,276,000

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PRESIDENT JACKSON'S OPPOSITION TO THE BANK.

President Jackson, elected in 1828, in his first annual
message submitted to Congress in December, 1829,
startled the country by an attack upon the bank. His
references to this institution were confined to two short
paragraphs, but in these he declared that both the constitutionality and expediency of the law creating the bank
were well questioned by a large portion of his fellowcitizens and that the bank had failed to establish a uniform and sound currency. He also suggested the foundation of a fiscal institution, based upon the credit of the
Government and its revenues, which would avoid all
constitutional difficulties and at the same time secure
the necessary advantages to the Government and the
country.
"The President's reference to the bank was made the
basis of inquiry in both Houses of Congress. The House
committee, in its report of April 13, 1830, favorably discussed the bank from three points of view: First, its constitutionality; second, its expediency; and, third, in
accordance with the vague suggestion made by Jackson in his message, the wisdom of founding a different
institution upon the credit and revenues of the Government. The argument in favor of the expediency of the
bank was practically a currency argument. It set forth
that the dispute was not between an issue of paper currency and metallic currency, but between a national paper
currency and a local paper currency. Since Congress
had no constitutional power to forbid the issue of paper
money by state banks, local bank notes would circulate,

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and it was not worth while to discuss the superior advantages of a specie currency. The question therefore arose,
Is it not better to have a stable currency which by virtue
of its uniformity of value will prevent local bank notes
from circulating far from the place of issue? And the
committee was convinced that the United States Bank,
by its notes, did actually furnish such a circulating medium, more satisfactory even than specie. If the current
medium were confined to specie, a planter in Louisiana
who wished to purchase merchandise in Philadelphia
would be obliged to pay i per cent for a bill of exchange
on Louisiana, covering the transportation and insurance
of the specie—an expense of which one-half was saved
through the issue of drafts. Again, the bank was shown
to have performed with most scrupulous punctuality its
stipulation to transfer free of expense the funds of the
Government to any point where they might be wanted. " a
Jackson, however, did not give way. In his second
annual message, December 6, 1830, he again renewed his
criticism, but indicated more definitely the kind of an
institution which he thought might be substituted. He
suggested that a branch of the Treasury Department be
established as a bank, based on public and individual
deposits, but without power to make loans or purchase
property. It might, however, sell bills of exchange at a
moderate premium, and the profits thus derived might
meet the expenses of remitting the funds of the Government. As it would not be incorporated, having no stockholders, debts, or property, it would avoid any objection
o D . R. Dewey, Financial History of the United States, 200-201.

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on the ground of unconstitutionality, and it would not
" operate on the hopes, fears, or interests of large masses
of the community.''
By insisting upon specie redemption of all notes issued
by state banks, as a condition of deposit, such an institution could exercise an effective control on local issues.
In 1831 Senator Benton introduced a resolution against
rechartering the bank, and again President Jackson, in the
message of that year, referred to his previous statements
as expressing his opinion in regard to the bank.
Early in 1832 the bank determined that the time had
come to secure a new charter. A bill was consequently
introduced which continued the old bank for a period of
fifteen years from 1836, subject, however, to certain
changes, as follows:
1. Two officers to be appointed with authority to sign
all notes of denominations less than $100.
2. No branch bank draft or other bank paper in denominations less than $50, not payable at the place
where issued, to be put in circulation.
3. The notes which were made payable at one place
only to be received at any office if tendered in liquidation or payment of any balance, by any other incorporated bank.
4. Unlawful for the bank to hold any real estate except
that necessary for transacting business.
5. Not more than two branches to be established in any
one State.
6. The bank to pay an annuity of $200,000 per annum
for fifteen years.

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7. The bank not to issue any notes of a less denomination than $20.
8. The bank to report to the Secretary of the Treasury
the names of stockholders who were not resident citizens,
and on application of the treasurer of any State to transmit a list of stockholders residing in said State.
The petition for recharter was favorably reported upon
by committees in the Senate and in the House, but the
opponents endeavored to counteract this indorsement
by securing the appointment in the House of a special
committee to investigate the bank. Three reports were
the result. Although the majority was adverse, these
charges were regarded by the House as inconsequential
and the bill for recharter was passed by both branches of
Congress.
On July 10 President Jackson vetoed the measure. His
list of objections covered a wide range:
1. The bonus paid by the bank was altogether too
small; the passage of the bill was equal to a gratuity to
the holders of the stock due to the increase in its market
value. The stock would rise at once to 125 and ultimately to 150, and as about one-fourth of it was held
by foreigners this meant a present to them. If the Government sold a monopoly, it ought to ascertain its value.
In this case the value was estimated at $17,000,000, for
which the bank proposed to pay only $3,000,000. The
Government should rather sell the stock and put the
premiums in the Treasury.
2. The bill gave to the existing stockholders a prescriptive right to government favor and did not open
subscriptions to public competition.

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3. The measure discriminated against private citizens,
inasmuch as notes of the branches were made legal tender
if paid in by any incorporated state bank, but were not
receivable except at the office of issue when offered by
any private citizen. This did "not measure out equal
justice to the high and low, the rich and poor."
4. The bill practically exempted from state tax that
part of the stock which was owned by foreigners. According to Jackson's interpretation of the amendment
proposed above under paragraph 8, "Only the stock held
in the States, and not that employed without them, would
be subject to taxation." As the names of foreign stockholders would not be reported to the treasurer of the
State, the stock held by them would escape local taxation.
In particular, the western States would be unable to
obtain any adequate compensation for the drain of their
money in exchange operations.
5. The management would fall into the control of a few
citizen stockholders; as foreigners were excluded from
the directorate, and as more and more stock was transferred abroad under the exemption from taxation, it
would be easy for a few "designing men " t o secure control by monopolizing the stock at home. If the influence
of the bank were thus "concentered," there would be
"cause to tremble for the purity of our elections in peace
and for the independence of our country in war." The
bank should be "purely American."
6. The bank as proposed was unconstitutional. Although two Congresses, one in 1791 and another in 1816,
had decided in favor of a bank; two, one in 1811 and

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another in 1815, had decided against it. The expressions
of legislative, judicial, and executive opinion of the States
against the bank, as compared with those in favor, was
practically in the proportion of 4 to 1. The decision of
the Supreme Court of the United States in the case
McCulloch v. Maryland, according to Jackson, did not
limit the authority either of Congress or the Executive.
That opinion did not define whether a bank was necessary
or not, but held that a bank was constitutional only if
held to be necessary; it was therefore inferred that if
the legislative branch held that the bank was unnecessary, it was unconstitutional.
7. There was suspicion that the bank had violated its
charter, but notwithstanding this the bank had declined
to demand the severest scrutiny of its transactions.
The attack upon the bank by President Jackson, which
has been briefly outlined, and the dramatic events which
followed constitute a chapter in political history rather
than an instructive commentary on banking methods
and policy. The charges were for the most part inconsequential, and for this reason call for only brief consideration by the more special student of banking. Moreover,
the history of this period of the bank's career has been
repeatedly described by many competent investigators,
who have so thoroughly traversed the points at issue that
there is but little more to be said. The charges against
the bank grew in number as the " w a r " progressed; at
first they were confined to the two general accusations
made by President Jackson in his first message of 1829—
unconstitutionality and inexpediency. When Jackson's

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followers determined to make the bank an issue, a drag-net
was thrown out and every act of the bank which could
possibly be construed unfavorably was seized upon and
magnified into a distinct reason for the non-renewal of the
charter. By 1832 the list, as presented by Senator Clayton, 0 covered seven main and fifteen minor points. Later
the operations of the bank, as witnessed in its procedure
in the monetary crisis of 1834 and in the withholding of
dividends on government stock because of the dispute
over the French indemnity bill, whether due to resentment or to force of circumstances on account of uncertainty as to the future, gave rise to new and distinct
charges which should be considered apart from the indictment drawn up at the earlier period, when the business
of the bank was of a more normal character.
In brief, the charges against the bank may be summed
up under the following general headings: First, that the
bank exercised an improper influence in politics; second,
that some of its banking operations were ill-advised and
violations of the charter; third, that the bank was unconstitutional; and fourth, that it was a monopoly and
thus undemocratic in character.
CHARGES AGAINST THE BANK—POLITICAL ACTIVITY.

i. Political opposition at the time of Jackson's election had become bitter and many personal animosities
had been aroused. The disposition of every public question was influenced by intense partisanship. It was only
natural, therefore, that the bank should have to suffer
0 February 27, 1832; see Summary in Niles, 42:28.

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in common with other questions of public policy. It is
hardly fair, therefore, to hold the bank too strictly to
account or to decide adversely against a national or central bank at the present time on the ground that it may
exercise improper political influence because of incidents
which occurred eighty years ago.
But even if the bank be put to the test, the central
management will stand exonerated. Catterall, who has
made a most exhaustive investigation of this charge, having at command, beside the usual sources, Biddle's letterbooks and papers, declares that "it may be said at once
that there has not been any evidence produced to show
that the bank as a national bank ever spent a dollar corruptly." 0 Though Biddle did not believe in creating
branch directorates in which political parties were evenly
balanced, pains were taken to appoint members of the
various parties, subject, however, to fitness for office.5
"The safety of the bank lies in its complete estrangement
from politics/' The bank, however, was unfortunate
in " that the vast majority of the bank's officers and directors were drawn from the ranks of the party hostile to
Jackson, not because the bank supported this party, but
because most of the business men were unfriendly to
Jackson, and the officers and directors had to be selected
from the ranks of business m e n / , c Considering that
there were 25 branches, each with its own board of directors, scattered throughout the country and that questions involving banking practice excited much political
attention and frequently came before state legislatures,
o Catterall, 243.

& Ibid., 246.

255

c Ibid., 174.

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it was to be expected that some of the directors and officers of the branches would take sides on one or more of
these questions. Particularly was this so in Kentucky,
where the agitation for stay and relief laws was a burning
political issue for many years.
In detail, the charge of political activity of the branches
covered the following specifications:
i. That the president of the Washington branch,
though incompetent, was retained in office because of
his influence with the Monroe administration. For his
efforts to secure election, however, he was criticised
by Biddle in 1824: "The Bank of the United States can
preserve its usefulness to the country only while it maintains its independence, its entire uncontrolled exemption
from every influence and every motive except the interest of the stockholders and the service of the country.'' a
2. It was asserted that bank officials in Louisiana
endeavored to influence elections. This charge, however, was admitted by President Jackson to be without
foundation.*
3. Bank officials in South Carolina engaged in politics.
It was true that the president of the branch was an active
politician and Biddle found it necessary to caution him
to abstain from politics. c
4. The Portsmouth bank was a "party engine/' This
charge was prompted by the appointment of Jeremiah
Mason, a Federalist and friend of Webster, who showed
a Sen. Doc. No. 17, 23d Cong., 2d sess., p. 297.
&Catterall, 188.
c September 27, 1830; Sen. Doc. No. 17, 23d Cong., 2d sess., p. 308.

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little tact in dealing with customers of the bank. For
years Mason had been opposed to Hill, one of the ardent
supporters of Jackson in New Hampshire.
5. The president of the Norfolk branch had been
politically opposed to Jackson. This was explained as
limited to personal activity without involving the bank
in any way.°
6. The cashier of the Lexington office in 1831 asked
Biddle to provide loans to help the anti-Jackson candidate. Biddle, however, again restated his conviction
that officers should abstain from any connection with
what was called politics, " t o abstain not in appearance
merely, but entirely, candidly, and honestly." 5
After the bank was attacked it did exercise certain
pressure upon legislative bodies in order to support its
cause. It maintained lobby agents and endeavored to
secure the election of its advocates. For this it should
be criticised, but in justice it must be remembered that
this action was subsequent to the original attack and was
prompted by the special plight in which the bank found
itself.
Under Biddle's administration the bank was also accused of selecting new branches from political considerations, "but there is not a grain of evidence to support
these charges. Had such motives swayed the directors,
they would certainly have established many more offices,
for they had most tempting inducements in the applications made by the Secretary of the Treasury, the governors of territories, state legislatures, statesmen, Const Catterall, 250.
&Ibid., 251.
7069—10

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gressmen, politicians, state officials, and prominent
business men." a
In conclusion, therefore, it may be said that until a
political attack had been made upon it the central management of the bank kept itself singularly free from
political activity. The branch management in some
places was open to criticism, but any defect here could
have been remedied in a great measure by a different
relationship between the mother bank and the branches,
and criticism on this point might well be directed against
the plan of organization rather than against the principle.
CRITICISM O F BRANCH DRAFTS.

A second class of objections dealt more particularly
with the operations of banking. The most important
of these was directed against the use of branch drafts as
a means of supplying the smaller denominations of currency. In the first place, it was claimed that their issue
was contrary to law, and secondly, that they were harmful
because they contracted the circulation of state banks.
As to their legality, the bank rested on the opinion of
able lawyers, Webster, Wirt, and Binney, secured in advance of the use of the drafts. 6 This opinion was confirmed by a decision of the circuit court of the United
States, 1831, which held that while the charter did not
expressly authorize the officers of the bank to draw on the
branches, it did not prohibit them from doing so. c Moreover, from the beginning of their use, branch drafts had
a Catterall, 398.
& H. R. No. 460, 23d Cong., 1st sess., p. 51.
c i Baldwin, 370; Catterall, 120; for opposing view, see correspondence
between Woodbury and Biddle, H . R. No. 42, 23d Cong., 2d sess.

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been received by the Treasury Department in payment
of public dues on an equality with the notes of the bank.
To a certain extent, therefore, they had thus received
the sanction of use. In McDuffie's minority report of
May I I , 1832, it was held that branch drafts were nothing
more nor less than bills of exchange drawn by the branch
upon the mother bank and that the charter expressly
authorized the buying and selling of bills of exchange.
If these drafts were used as circulation, it was not a
ground of complaint against the bank; that was the
affair of the community; the bank could not be made
responsible for the use which the public made of the
drafts. a Senator Benton, who followed up every attack on
the bank with unwearying pertinacity, took direct issue
with the court's decision, and Secretary Woodbury declared
that the bank, in view of the failure of Congress to pass
any one of the several bills introduced at successive sessions
to permit the issue of small notes on easier terms than
permitted by the charter, had acted in " derogation of
the spirit of the laws and in direct hostility to the views
and policy of Congress." This was "but another admonitory lesson against the danger of continuing a corporation with such ability and inclination to disregard
the wishes and restraints of legislative authority." 6
As to the influence of these drafts upon local circulation,
Gouge declares that the bank was thus able to throw out
of circulation the notes of the Cape Fear Bank of North
Carolina, and that it displaced the notes of other local

• H. R. No. 460, 23d Cong., 1st sess., p. 298.
b H. R. No. 42, 23d Cong., 2d sess., p. 23.

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banks. To this was attributed a great part of the difficulties of the year 1828.° And Catterall concludes that
the employment of branch drafts did reduce the note
issues of local banks and helped to give the bank a larger
part of the exchange business. 6 It was also held that
through their use the bank lost control of its circulation
and that their issue tended to inflation. To this, however, may be answered that the parent bank prepared all
the drafts and distributed them to the several offices.
While it might not know at a given moment just how
many had been put out, it had a final check. In 1832 the
proportion of drafts to circulation was less than onefourth. c
Whatever may be the merits or demerits of the use of
branch drafts, there is no doubt that their employment
was unfortunate for the bank; it gave the opposition a
definite point of attack and undoubtedly increased the
hostility of state institutions, which found their activity
contracted. The bank, moreover, lent itself indirectly
to an indorsement of the use of notes of small denominations, as low as $5; this was a mistake for at that time,
earnest efforts were made in many of the States to abolish
all notes under that sum. The bank, of course, could not
issue these smaller notes, because of the charter prohibition, but in throwing into circulation so large a number of
$5 drafts it apparently showed a lack of sympathy for the
movement which was supported by the most conservative
element in the country; it sacrificed a possible position
a

Gouge, Short History of Paper Money and Banking # in the United
States, 201.
& Catterall, 131.
c For examination of conflicting opinions, see Catterall, 120-127,

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of leadership in a needed reform for its own individual
profit.
CRITICISM OF OTHER BANKING OPERATIONS.

Other accusations involving illegal practices were: The
charging of usury, sale of coin, trading in public securities, and speculation in real estate. The indictment on
these points is in its final analysis of little importance, for,
as a rule, t h e accusation under each heading referred to
b u t a single action, which, if true, might well be regarded
as exceptional. The bank had charged discount and
exchange on domestic bills, t h u s obtaining in some cases
more t h a n t h e 6 per cent interest allowed by t h e charter.
I t was difficult, however, t o prove t h a t this device, which
was openly used b y state banks in m a n y sections to evade
the usury laws, had been intentionally employed b y t h e
bank for illegal purposes. The b a n k did endeavor t o
develop its business in exchange, even though discount
operations were contracted. This was particularly so
in the West. As there was a strong prejudice against
charges for exchange, the b a n k had to suffer in public
estimation for operations which of themselves were
entirely justifiable.
The b a n k was accused of selling coin when the charter
limited it to dealings in bullion. I n all, the sales of
American gold coin amounted to $84,734; an excuse for
this might be found in t h e fact t h a t until 1834 gold coin
was underrated a t t h e m i n t and did not circulate as
money. a Another charge related to speculation in public stocks. I n 1834 t h e Treasury wished to pay off a p a r t

Sumner, Jackson (revised edition), p. 303.
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of t h e government indebtedness represented b y t h e 3 per
cent stock. T h e b a n k was consequently notified t h a t
deposits would be withdrawn, b u t t h e demand came a t
an unfortunate time. Previous withdrawals for t h e
retirement of the public debt had been large, and t h e
b a n k had been taxed to t h e utmost to m a k e t h e necessary
contraction in its business in order to meet t h e plans of
t h e Treasury. Biddle, therefore, offered to p a y a quarter's interest on t h e stock, provided its retirement was
postponed. The Treasury agreed to this. Unfortunately the agent, General Cadwalader, who was sent t o
London in order to secure from t h e holders of t h e 3 per
cent stock, which was largely owned abroad, their consent to delay retirement and accept t h e responsibility of
t h e b a n k for the p a y m e n t *of interest, permitted t h e
banking house of t h e Barings, which carried through t h e
negotiations, to deviate from this plan. The Barings
bought outright t h e 3 per cent stock, and t h u s t h e b a n k
indirectly became responsible for t h e purchase of governm e n t securities. Although t h e arrangements m a d e b y
Cadwalader and t h e Barings were disavowed b y Biddle,
t h e negotiations, coming at a time when t h e b a n k was
under fire, gave critics ample opportunity for charging t h e
b a n k with trickery and a high-handed purpose of defeating t h e Government in its efforts to extinguish t h e debt.
T h e dealings of t h e b a n k in real estate ^ d m i t of easy
explanation. During t h e earlier and more speculative
period of t h e bank's operations, t h e branch at Cincinnati
was obliged t o t a k e a large a m o u n t of real estate in settlem e n t of indebtedness; t h e sale of this was slow and the
b a n k found it necessary t o improve some of t h e property

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in order to secure any sale at all. For many years, therefore, the bank was both landlord and purchaser. All the
evidence, however, goes to show that the bank made
every possible effort to get rid of this dead asset and
convert it into more active funds.
Additional charges against the bank reflected upon the
judgment of the management. The bank was accused of
establishing too many branches, making excessive expenditures, which were charged up to the contingency
account, of favoritism to Thomas Biddle, a cousin of the
President, of refusing to give to the state officials of Connecticut a list of stockholders resident in that State to
be used by the taxing authorities, of making loans to
Congressmen, and of putting the control of the bank in
the hands of the exchange committee of which Biddle
was the head. For the most part, these were trivial
reasons to justify a refusal to recharter the bank if its
general policy was otherwise advantageous. The last
accusation is the most serious one, but it concerns the
personality of one man, the president of the bank rather
than the merit of the system. Biddle was a large figure
in the contest. CatteraH's characterization is accurate
and instructive: "Nicholas Biddle was a man of intense
energy, autocratic in temper, and possessing supreme
confidence in his own judgment. It was inevitable that
he should rule and not merely reign, and the proofs that
he did rule are observable everywhere. He appointed
the committees of the bank after 1828, though the rules
giving him this power were not adopted until 1833; ^ e
does not want the bank's books examined by the gov-

263

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ernment directors and he gives orders that the books
must not be examined by them, though only the board
could rightfully do this." 0 Biddle became the bank executive at a time when its business was small and dividends in doubt. He devoted his whole heart to the
service of the bank; his directors, as is often the case in
like circumstances, accepted his leadership without critically reviewing his acts. The quarterly committee of
examination provided for under the by-laws did its work
in a perfunctory manner, and as a consequence the
responsibility for every act had to be shouldered by
Biddle.
Aside from these specific criticisms, opposition to the
bank was inspired by political intrigue and by selfish
jealousy of state banks. Many were convinced that
Clay, who was a candidate for the Presidency in 1832,
was behind Biddle in forcing the bank question to the
front, in order to secure political capital. There is
reason to believe that Clay foresaw a veto from Jackson, and on that issue thought he could successfully
appeal to the country in the autumn elections. Biddle
was also of this opinion and declared that Jackson's
veto exhibited "all the fury of a chained panther biting
the bars of his cage." 6
Clay mistook the temper of the voters. Aside from
the opposition to the bank, there were other qualities
in Jackson's administration which commanded the confidence of the people. There was a general approval of
his position on the tariff and monopolistic corporations.
Jackson was reelected and interpreted this as a popular
oCatterall, 275.

& Meigs, Life of Ingersoll, 177.
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indorsement of his position on the bank. The next step
was the removal of the deposits, even at the cost of dismissing a Cabinet secretary. The bank, on its side, was
provoked into imprudent acts, which added to the bitterness of feeling; compromise was impossible, and the
contest became a war of extermination. The history
of this later period therefore is a record of recrimination
and counter recrimination; of investigations which settled
nothing; and finally of denunciatory resolutions and
efforts to expunge resolutions. Biddle, the successful
bank president, engaged in daring and imprudent speculations, and the bank, in order to continue its existence,
secured a charter from the State of Pennsylvania under
terms which meant either legislative corruption or a
most astonishing ignorance of the fundamental conditions
of sound banking.
A second source of hostility to the bank is to be found
in the opposition of local banks; this was not universal,
but it was strong enough in some States to be an important factor. Especially was this so in New York; a
considerable part of the national revenue was paid into
the branch of the bank at New York City, and was consequently under control of the mother bank at Philadelphia. The state banks naturally desired these deposits and used their influence to arouse antagonism to
the bank and indorsement of Jackson's policy.

265

APPENDIX A.

ACT OF INCORPORATION.
[Fourteenth Congress, first session, chapter 44.

1816.]

CHAPTER XLIV.—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. T h a t a bank of the United T T A bank of the
.

United

States,

States of America shall be established, with a capital of thirty-five with a capital of
millions of dollars, divided into three hundred and fifty t h o u s a n d * 3 5 , 0 0 0 ' 0 0 0 ' e t c *
shares, of one hundred dollars each share. Seventy thousand 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, towards 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; Places, etc.,
at Portsmouth, in the State of New Hampshire; at Boston, in the State of
^ptionl^^^
Massachusetts; at Providence, in the State of Rhode Island; at Middletown, in the State of Connecticut; at Burlington, in the State of Vermont; at New York, in the State of New York; at New Brunswick,
in the State of New Jersey; at Philadelphia, in the State of Pennsylvania; at Wilmington, in the State of Delaware; at Baltimore, in the
State of Maryland; at Richmond, in the State of Virginia; at Lexington,
in the State of Kentucky; at Cincinnati, in the State of Ohio; at Raleigh, in the State of North Carolina; at Nashville, in the State of
Tennessee; at Charleston, in the State of South Carolina; at Augusta,
in the State of Georgia, at New Orleans, in the State of Louisiana; and
at Washington, in the district of Columbia. And the said subscriptions shall be opened under the superintendence of five commissioners
at Philadelphia, and of three commissioners at each of the other
places aforesaid, to be appointed by the President of the United
States, who is hereby authorized to make such appointments, and
shall continue open every day, from the time of opening the same,
between the hours of ten o'clock in the forenoon and four o'clock in
the afternoon, for the term of twenty days, exclusive of Sundays,
when the same shall be closed, and immediately thereafter the com-

267

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Monetary

Commission

P l a c e s , etc., missioners, or any two of them, at the respective places aforesaid, shall
scriptions, etc. cause two transcripts or 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 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, t h a t 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, or corporation, for any number of shares
not exceeding, in the whole, the amount required to complete the said
sum of twenty-eight millions of dollars.
Regulations SEC. 3. And be it further enacted, That it shall be lawful for any indiscretion^ a n i v i d u a l , company, corporation, or state, when the subscriptions shall
p a y m e n t s o n ^ opened as herein before 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, and paid, in the manner
following; that is to say, seven millions of dollars thereof in gold or
silver coin of the United States, or in gold coin of Spain, or the dominions of Spain, at the rate of one hundred cents for every twenty-eight
grains and sixty hundredths of a grain of the actual weight thereof, or

268

The

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States

Bank

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 c^fl^
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 and fifty-one cents, 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 coin 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 dollars on each share, in gold or silver coin as aforesaid,
and twenty-live dollars more in coin as aforesaid, or in funded debt as
aforesaid; at the expiration of twelve calendar months from the time
of subscribing, there shall be paid the further sum of ten dollars on
each share in gold or silver coin as aforesaid, and twenty-five dollars
more, in coin as aforesaid, or in funded debt as aforesaid.
SEC. 4. And be it further enacted, That at the time of subscribing to
the capital of the said bank as aforesaid, each and every subscriber
shall deliver to the commissioners, at the place of subscribing, as well
the amount of their subscriptions respectively in coin as aforesaid, as
the certificates of funded debt, for the funded debt proportions of their
respective subscriptions, 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 bank of the United States," as soon as the said bank shall be
organized. Provided always, That if, in consequence of the apportionment of the shares in the capital of the said bank among the subscribers,
in the case, and in the manner, herein before provided, any subscriber
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

269

IO l8o<5

National

Monet ary

Commission

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 t h a t 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
Reasonable soon as shall be required after the organization of the said bank. And

compensation to

• ,.

J ,1

• ^-

the commission- the said commissioners appointed to superintend the subscriptions to
ers
"
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.
The United g^c. 5. And be it further enacted, That it shall be lawful for the
deem the funded United States to pay and redeem the funded debt subscribed to the
the *'bank" may c a p i t a l of the said bank at the rates aforesaid, in such sums, and at
sell for gold and such times, as shall be deemed expedient, anything 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 two millions of dollars in any one year; nor sell any part 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.
The Secretary g^c. 6. And be it further enacted, That at the opening of subscripto subscribe on tion to the capital stock of the said bank, the Secretary of the Treasury
United °Statese sha\\ subscribe, or cause to be subscribed, on behalf of the United
etc
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 at 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 payable quarterly, to commence from the time of making such
payment on account of the 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

270

The

Second

United

States

Bank

made in the usual form, and shall pay and deliver the same to the
president, directors, and company, of the said bank on the first day of
January, one thousand eight hundred and seventeen, which 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 to the said
,

TT •

1 VA

•

1 •

•

The subscrib-

ers t o t h e b a n k

bank of the United States of America, their successors and assigns, incorporated etc.
shall be, and- are hereby, created a corporation and body politic, by
the name and style of " T h e 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
Corporate
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, fifty-five millions of 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 circuit court of the United
States; 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, and ordinances, and
regulations, as they shall deem necessary and convenient for the government of the said corporation, not being contrary to the Constitution thereof, or to the laws of the United States; and generally to do
and execute all and singular the acts, matters, and things, which to
them it shall or may appertain to do; subject, nevertheless, to the
rules, regulations, restrictions, limitations, and provisions, hereinafter
prescribed and declared.
SEJC. 8. And be it further enacted, That for the management of the
~ .

„

.«

., ,

name,

Twenty - five
d i r e c t o r s : five t o

affairs of the said corporation, there shall be twenty-five directors, be appointed by
five of whom, being stockholders, shall be annually appointed by the etc p r e s l e n t *
President of the United States, by and with the advice and consent of
the Senate, not more than three of whom shall be residents of any
one state; and twenty of whom shall be annually elected at the
banking house in the city of Philadelphia, on the first Monday of
January, in each year, by the 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 di- Regulations
rector in the bank of the United States, or any of its branches, shall direction of the
be a director in any other bank; and should any such director act as a n ' e c*

271

National

Monetary

Commission

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 virtue
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 such appointments or
elections be made, the directors and president of the said bank, for the
time being, shall continue in office: And provided also, T h a t in case of
the death, resignation, or removal of the president of the said corporation, the directors shall proceed to elect another president from the
directors as aforesaid: and 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 President of the United States, or by
the stockholders, as the case may be. But the President of the United
States alone shall have power to remove any of the directors appointed
by him as aforesaid.
M a n n e r and SEC. 9. And be it further enacted, That as soon as the sum of eight
2oing°intffop«-aS m ilHons four hundred thousand dollars in gold and silver coin, and
tion, etc.
- n t j i e p U bii c debt, shall have been actually received on account of the
subscriptions to the capital of the said bank (exclusively of the subscription aforesaid, on the part of the United States) notice 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

272

The

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Bank

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
office, by virtue thereof, until the end and expiration of the first
Monday of the month of January next ensuing the said appointments
and elections; and they shall then and thenceforth commence, and continue the operations of the said bank, at the city of Philadelphia.
SEC. IO. And be it further enacted, That the directors, for the time The directors
being shall have power to appoint such officers, clerks, and servants, ap^oin7Officers!
under them as shall be necessary for executing the business of the said c l erks » servants,
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 officers of the said corporation, as shall be prescribed, fixed,
and determined, by the laws, regulations, and ordinances of the same.
SEC. I I . And be it further enacted, That the following rules, restrictions, limitations, and provisions, shall form and be fundamental a r ^ j ^ s a ^ n
articles of the constitution of the said corporation, to wit:
First. 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 proportion 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; in^vo^injfarSfor every four shares above ten, and not exceeding thirty, one v o t e ; r e c t o r s 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 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 .A part of the
stockholders, and not more than four-fifths of the directors appointed pointed byS the
by the President of the United States, who shall be in office at the time stockholders and
J

president, alone

of an annual election, shall be elected or appointed for the next sue- eligible a second
ceeding year; and no director shall hold his office more than three sively. President
years out of four in succession: but the director who shall be t h e a l w a y s e l i g i b l e 7069—10

273

National

Monetary

Commission

president a t the time of an election may always be re-appointed or
re-elected, as the case may be.
Stockholder s, Third, None but a stockholder, resident citizen of the United States,
only appointed shall be a director; nor shall a director be entitled to any emoluments;
rectorsfSto have ^ u t ^ e directors m a v make such compensation to the president for
no compensa-his extraordinary attendance a t the bank, as shall appear to them
tion, other than

the president.
reasonable.
Seven direc- Fourth. Not less than seven directors shall constitute a board for
the' president, the transaction of business, of whom the president shall always be
b o ^ d 0 n S t i t U t e a o n e > e x c ^ p t m c a s e °f sickness or necessary absence: in which case his
place may be supplied by any other director whom he, by writing,
How his place under his hand, shall depute for that purpose. And the director so
case of absence deputed may do and transact all the necessary business, belonging
or sickness.
t o ^ e 0 f g c e 0 f t h e president of the said corporation, during the continuance of the sickness or necessary absence of the president.
General meet- Fifth. A number of stockholders, not less than sixty, who, together,
holders—how to shall be proprietors of one thousand shares or upwards, shall have
be called.
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.
Cashier to give Sixth. Each cashier or treasurer, before he enters upon the duties
rity. S a n SeCU °f m s 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 faithful performance of his duties to the corporation.
L i m i t a t i o n Seventh. The lands, tenements, and hereditaments, which it shall
a° description11^ be lawful for the said corporation to hold, shall be only such as shall
the
real estate ^ requisite
for its immediate accommodation in relation to the conM
which may b e e
held by the cor- venient transacting of its business, and such as shall have been bona
pora ion.
_ ^ mortgaged 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.
Maximum of Eighth. The total amount of debts which the said corporation
corporation may s n a ^ a t a n y ^ m e o w e » whether by bond, bill, note, or other contract,
at one time con- o v e r 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
R e m e d y b y law of the United States. In case of excess, the directors under
rectors u n d e r w ^ o s e administration it shall happen, shall be liable for the same in
whose adminis- their natural and private capacities: and an action of debt may in
tration

ex-

cess of debt shall such case be brought against them, or any of them, their or any of their
e crea e .
heirs, executors, or administrators, in any court of record of the
United States, or either of them, by any creditor or creditors of the

274

The

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United

States

Bank

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
.,

. .

Directors ab-

sent or dissent-

excess was contracted or created, or who may have dissented froming exempted.
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 the purpose.
Ninth. The said corporation shall not, directly or indirectly, deal in what the
or trade in anything except bills of exchange gold or silver bullion, transact busm^ss
or in the sale of goods really and truly pledged for money lent and n o t a n d t r a d e «
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 centum per
annum for or upon its loans or discounts.
Tenth. No loan shall be made by the said corporation, for the use m Loans exceedor on account of the Government of the United States, to an amount not°to be1 made
exceeding five hundred thousand dollars, or of any particular state to | k e Y n * lr d.
an amount exceeding fifty thousand dollars, or of any foreign prince ular states, or
or state, unless previously authorized by a law of the United States, but by act! 6of
Eleventh. The stock of the said corporation shall be assignable and Congresstransferable, according to such rules as shall be instituted in that prescribed for
behalf, by the laws and ordinances of the same.
making the stock
'

assignable.

Twelfth. The bills, obligatory and of credit, under the seal of the The bills, oblisaid corporation, which shall be made to any person or persons shall |redi7 under the
be assignable by endorsement thereupon, under the hand or hands of seal of the corsuch person or persons, and his, her, or their executors or administra- assignable,
tors, 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, T h a t Proviso.
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 by the president, and countersigned by the principal cashier or treasurer thereof, promising t h e
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

275

National

Monetary

Commission

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
Proviso.
only: Provided, T h a t 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.
Half
yearly Thirteenth. Half yearly dividends shall be made of so much of the
made? ndS t 0 b e P r °fits of t n e bank as shall appear to the directors advisable; and once
A statement of i n every three years the directors shall lay before the stockholders, at
the affairs of the
\
/ . « . . .
.
,
. <
company to be a general meeting, for their information, an exact and particular statestockholders. t h e m e n t oi 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
Deli n q u e n t dividends. If there shall be a failure in the payment of any part of
loSSCth^elbenefit a n y s u m subscribed to the capital of the said bank by any person, coof dividends.
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.
Offices to be Fourteenth. The directors of the said corporation shall establish a
established m competent office of discount and deposit in the District of Columbia
Columbia and whenever any law of the United States shall require such an establishstates when au- ment; also one such office of discount and deposit in any state in
thorized and re- w n i c h two thousand shares shall have been subscribed or may be held,
J

quired by law

Proviso.

whenever, upon application of the legislature of such state, Congress
may by law require the same: Provided, the directors aforesaid shall
not be bound to 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 t h a t they may deem
safe and proper, to manage and transact the business proposed as aforesaid, other than for the purposes of discount, to be managed and

276

The

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Bank

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 office 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 than three
years out of four, in succession; but the president may be always reappointed.
Fifteenth. The officer at the head of the Treasury Department of Secretary of
the United States shall be furnished, from time to time, as often as he thorized S1toY call
may require, not exceeding once a week, with statements of the amount ^ p o n * h e b a n J c
of the capital stock of the said corporation and of the debts due to the not exceeding a
same; of the moneys deposited therein; of the notes in circulation, unconcerns? °
and of the specie 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 imply a right Proviso,
of inspecting the account of any private individual or individuals with
the bank.
Sixteenth. No stockholder, unless he be a citizen of the United No stockholdStates, shall vote in the choice of directors.
^ b^ea
^ ^
Seventeenth.

j ars
* -

No note shall be issued of less amount than five dol-

States may vote
in choice of directors.

smaller

notes than five
dollars to be issued.

SEC. 12. And be it further enacted, That if the said corporation, or Penalties for
any person or persons, for or to the use of the same, shall deal or trade or l ^ a r t f c k s ^ 7
in buying or selling goods, wares, merchandise, or commodities w h a t - t e r d i c t e d soever, 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 the 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 Penalties for
advance or lend any sum of money for the use or on account of theSans n g t U o^the
Government of the United States, to an amount exceeding:
& five hun- United States or
, , ,
., , „
„
. <
particular states
dred thousand dollars; or of any particular state, to an amount or to foreign
exceeding fifty thousand dollars; or of any foreign prince or s t a t e , g o v e r n m e n s«
(unless previously authorized thereto by a law of the United States,)

277

National

Monetary

Commission

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.
bank^recefvable S E C * Z 4 ' And be il further enacted, That the bills or notes of the said
in payments of corporation originally made payable, or which shall have become
United States, payable on demand, shall be receivable in all payments to the United
until, &c.
States, unless otherwise directed by act of Congress.
Repealed,
SEC 15. And be it further enacted, That during the continuance of
3 , c .97.
^ . s a c t ^ a n ( j w j i e n e v e r required by the Secretary of the Treasury, the
The bank to said corporation shall give the necessary facilities for transferring the
sajry facilities public funds from place to place, within the United States, or the
without
a n y territories thereof, and for distributing the same in payment of the
ferring the funds public creditors, without charging commissions or claiming allowance
States to differ- °n account of difference of exchange, and shall also do and perform
ent quarters.
j-j^ s e veral and respective duties of the commissioners of loans for the
several states, or of any one or more of them, whenever required by law.
D e p o s i t s of S£ C l 6 j{n(i fe it further enacted, That the deposits of the money
J
the public mon-

eys to be made of the United States, in places in which the said bank and branches
its branches, or thereof may be established, shall be made in said bank or branches
the reasons to be thereof, unless the Secretary of the Treasury shall at any time othergress by the Sec- wise order and direct; in which case the Secretary of the Treasury
TrSsury°for its shall immediately lay before Congress, if in session, and if not, immenot being done, diately after the commencement of the next session, the reasons of
such order or direction.
c
,°M^?r,aV o n
SEC. 17- And be it further enacted, That the said corporation shall
prohibited from

<•

suspending pay- not at any time suspend or refuse payment in gold and silver, of any
by^being Smade °f ^ s notes, bills or obligations; nor of any moneys received upon
chargeable with deposit in said bank, or in any of its offices of discount and deposit.
the payment of .

« .. ,

« „

interest at the And if the said corporation shall at any time refuse or neglect to pay
centum p^r a n - o n demand any bill, note or obligation issued by the corporation,
num
according to the contract, promise or undertaking 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
Proviso.
of such demand as aforesaid; Provided, That Congress may at any time
hereafter enact laws enforcing and regulating the recovery of the

278

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States

Bank

amount of the notes, bills, Obligations or other debts, 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.
SEC I 8 . And be it further enacted, That if any person shall falsely fo^i^" 1 countermake, forge, or counterfeit, or cause or procure to be falsely made, feiting, &c.
forged or counterfeited, or willingly aid or assist in falsely making,
forging or counterfeiting, any bill or note in imitation of or purporting
to be a bill or note issued by order of the president, directors, and company of the said bank, or of any order or check on the said bank or corporation, or any cashier thereof; or shall falsely alter, or cause or procure
to be falsely altered, or willingly aid or assist in falsely altering any bill
or note issued by order of the president, directors, and company of the
said bank, or any order or check on the said bank or corporation, or any
cashier thereof; or shall pass, utter or publish, or attempt to pass,
utter or publish as true any false, forged, or counterfeited bill or note
purporting to be a bill or note issued by order of the president, directors and company of the said bank, or 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 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 counterfeited 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 Proviso,
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 IO. And be it further enacted, That if any person shall make or
i.

1 11 1

•

F° r engraving
after

t h e

simili-

engrave, or cause, or procure to be made or engraved, or shall have m tude of the
his custody or possession, any metallic plate, engraved after the simili- the^bank^ any
tude of any plate from which any notes or bills issued by the said plates, etc.
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

279

National

Monetary

Commission

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
and printed after the similitude of any notes or bills issued by the 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,
any paper adapted to the making of bank notes or bills, and similar
to the paper upon which any notes or bills of the 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 issued by the said corporation, every such person, being thereof
Punishment, convicted, by due course of law, shall be sentenced to be imprisoned,
and kept to hard labour, for a term not exceeding five years, or shall
be imprisoned for a term not exceeding five years and fined in a sum
not exceeding one thousand dollars.
Bonus to be $gC^ 2 o. And be it further enacted, That in consideration of the

p a i d t o t h e

United States exclusive privileges and benefits conferred by this act, upon the said
for t is c arter. ^ank, the president, directors, and 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 hereinbefore provided.
Congress to es- $£ C . 2 1 . And be it further enacted. That no other bank shall be estabtabhsh no other .

bank except in hshed by any future law of the United States during the continuance
Columbfa.nCt ° °f t n e corporation hereby created, for which the faith of the United
States is hereby 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 of dollars, if they shall deem it expedient. And notwithstanding the expiration of the term for which the said corporation is created, it shall be
Authority to lawful to use the corporate name, style, and capacity, for the purpose
the corporation, of suits for the final settlement and liquidation of the affairs and
years after ^ e accounts °f t n e corporation, and for the sale and disposition of their
charter shall ex estate, real, personal, and mixed: but not for any other purpose, or in
pire
*
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 subscriptions and payfo?thePt>eaSnk go- ments to said bank shall not be made and completed so as to enable
ing into opera- the same to commence its operations, or if the said bank shall not
commence its operations on or before the first Monday in April next,

280

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States

Bank

then, and, in that case, Congress may, at any time within twelve
months thereafter, declare, by law this act null and void.
SEC. 23. And be it further enacted, That it shall, at all times, be law- . Committees of
, „ ,

• <

<• ,-A

•

1 r

e i t h e r H o u s e of

ful for a committee of either House of Congress, appointed for that Congress may inpurpose, to inspect the books, and to examine into the proceedings of | ^ of t £ e j^nk'.
the corporation hereby created, and to report whether the provisions For what purof this charter have been, by the same violated or not; and whenever
any 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 facias, to examine
into the truth of the alleged violation, and if such violation be made
appear, then to pronounce and adjudge that the said charter is forfeited
and annulled. Provided, however, Every issue of fact which may be Proviso,
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, shall 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.

281

APPENDIX

RULES AND REGULATIONS FOR CONDUCTING THE
BUSINESS OF THE BANK OF THE UNITED STATES.
[As revised in 1833.]
I.
Days and
The Bank shall be kept open for the transaction of business, from
ness.
nine o'clock in the morning until three o'clock in the afternoon every
day in the year, except Sundays, Christmas day, the First of January,
and the Fourth of July.
II.
Deposits.

The Bank shall take charge of the cash of all such persons as shall
choose to place it there, free of expense, and shall keep it subject to
the order of the depositor, payable at sight; and shall also receive special
deposits of ingots of gold, bars of silver, wrought plate and other valuable articles of small bulk, for safe keeping, at the risk of the depositor.
III.

Days of dis-

^11 bills and notes offered for discount, shall be delivered into Bank

count.

on Monday and Thursday in each week, and laid before the Board of
Directors, on the succeeding Tuesday and Friday, together with a
statement of the funds and situation of the Bank; on which days the
discounts shall be settled, and such as shall be admitted shall be
passed to the credit of the applicants on the day on which they are
discounted, and may be drawn for at any time after twelve o'clock;
and the notes or bills not discounted, shall be returned at any time
after twelve o'clock of the same day.
IV.
Discounts and Discounts shall not be made upon personal security without two
' responsible names (the firm of a house being considered as one name
only;) but if stock of this bank funded debt of the United States, or
such other property as shall be approved by the Board, be deposited
and pledged to an amount sufficient to secure the payment, with all
damages, one responsible name shall be taken.
V.
Mode of deci- On each application for discount, every Director who may be prestion f o r d i s - ent, shall be held to give his opinion for or against the same. And no
counts.
discount shall be made without the consent of three-fourths of the

282

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States

Bank

directors present; and all notes and bills discounted shall be entered
in a book, to be called the Credit Book, in such manner as to discover
to the Board, a t one view, on each discount day, the amount for which
any person is indebted to the Bank, either as payer, discounter, or
indorser.
VI.
On every discount day, the name of every person who shall have
overdrawn the Bank since the last discount day, shall be reported to
the Board; and no person while he remains an overdrawer, shall have
any note or bill discounted at this Bank. And in no instance will this
Bank give a release or discharge to any debtor where the debt arises
from an overdraft. And every officer who shall knowingly suffer an
overdraft to be made on the Bank, without communicating it to the
President or Cashier, shall be dismissed from the service of the Bank.

Overdrafts.

VII.
If any bill or note belonging to this Corporation, shall not be paid
before the shutting of the Bank on the last day of grace, such bill or
note shall be forthwith protested; and while such bill or note remains
unpaid, no discount or accommodation shall be granted to any drawer,
acceptor, or indorser of the same. Bills and notes deposited for collection, at any time before the commencement of the days of grace,
shall be proceeded with, as bills and notes discounted; unless the person depositing the same shall otherwise direct in writing; provided, that
in case of non-payment and protest, the person lodging the same shall
pay the charges of protest.

Protest.

VIII.
Every rperson who opens an account, and transacts business with this
^

Books of sig-

natures.

Bank, shall subscribe his name in a book, to be kept for that purpose,
to be called The book of signatures, and all the persons who compose
any house, keeping any account with this Bank, shall subscribe their
names, and the signature of the firm, in this book, if residing in Philadelphia.
IX.
No director, without special authority, shall be permitted to inspect The cash acthe cash account of any person with this Bank.
viduals not to be
v

examined by a
director.

The books and accounts of the Bank shall be regularly balanced on Times for balthe first day in January and July in each year; and the half-yearly divi- books, etc.
dends shall be declared on the first Monday in said months, and published in at least three of the newspapers in the city of Philadelphia:—

283

National

Monetary

Commission

and the books of transfer shall be shut for ten days immediately preceding each of the days appointed for declaring the half-yearly dividends.
XI.
Cashier may In all cases when required, the Cashier shall accept powers of attorney
dends on the for receiving any interest or dividend due, or to become due, on any
hfteres^of' *the s n a r e s * n t n * s Bank, or on any funded debt of the United States payable
funded debt of in Philadelphia; which interest or dividend shall be held by the Bank,
States.
subject to the order of the proprietor, free of charge.
XII.
How lost cer- If any person claims a certificate of Bank stock to be issued in lieu
be renewed!6 t 0 o f o n e l o s t o r destroyed, he shall make an affidavit of the fact, and state
the circumstances of the loss or destruction; and he shall advertise in
one or more of the public newspapers in the city of Philadelphia, for
the space of six weeks, an account of the loss or destruction, describing
the certificate and its number, calling on all persons to show cause why
a new certificate shall not issue in lieu of that lost; and he shall transmit
to the Bank his affidavit, and the advertisements before mentioned,
and give to the Bank a bond of indemnity, with one or more sureties if
required, (in the sum of two hundred dollars, for each share to be renewed) against any damage which may arise from issuing the new certificate: whereupon the Cashier shall, six months after the notice by
advertisement as aforesaid, issue a new certificate, of the same number
and tenor with t h a t said to be lost or destroyed, and specifying that it
is in lieu thereof.
XIII.
Committees.

A Committee on the Offices consisting of five members, shall be
appointed by the President every three months, who shall have special
charge of the situation and concerns of the several Offices and
Agencies, with authority to report such measures in relation thereto
as they may deem beneficial. The said Committee shall have like
charge of all matters relating to the nomination and election of
Directors for the several Offices.
A Committee on Exchange consisting of three members shall be
appointed at the same time and in like manner, who shall have special
charge of all matters relating to the operations of the Bank and its
Offices, in Foreign and Domestic Exchange and Bullion—and who
shall act as a daily Committee for the purchase of Domestic Exchange
at the Bank.
A Committee on the State of the Bank consisting of five members
shall a t the same time be appointed by ballot, who shall have charge
of such matters relative to the local business of the Bank as may
from time to time be referred to them by the Board; they shall at

284

The

Second

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States

Bank

least once during their time of service examine and count the discounted notes, and compare the amount thereof with the balance of
the amount of bills discounted in the General Ledger; they shall also
count the cash, and the printed and unprinted paper in the possession
of the Cashier—examine the evidences of the public debt and property
of the Corporation, make an inventory of the same to be compared
with the books in order to ascertain their agreement, and report to
the Board.
XIV.
Thirty days' notice shall be given by the Cashier in at least two of
the daily newspapers of Philadelphia, of each annual election for
Directors of the Bank; and within one week preceding the same, the
Directors for the time being, shall appoint by ballot five Stockholders,
not being Directors, to be Judges of the election, who shall conduct
and regulate the same, commencing at ten o'clock A. M. on the first
Monday of January.
But in case an election of Directors shall not begin, or shall not
be completed on the said first Monday, the Judges shall adjourn the
same from day to day, not exceeding five days, until the said election
shall be completed.
The Judges shall on the forenoon of the day after the election shall
have been completed, at the furthest, transmit to the Cashier of the
Bank, an authentic certificate of the persons elected: and the Cashier
shall thereupon forthwith give notice to all of the said Directors who
shall be within convenient distance, to meet at the Bank at six o'clock
in the evening of the same day, for the purpose of choosing a President.

ElecHon of di-

XV.
I n every election to an office (except that of the President) b y . M o d t o f cle<Jf
this Board, there shall be a previous nomination of the candidate the bank, etc
at least one week before the election: Provided, that such previous
nomination may be dispensed with by a unanimous vote of the
Directors present:—and every President, Cashier and Assistant Cashier
of this Bank, shall take and subscribe, an oath or affirmation, to
the following effect,—to wit:—I
do swear {or affirm) that I will
to the best of my knowledge and abilities, perform the duties assigned to,
and the trust reposed in me, as
of the Bank of the United States.
XVI.
It shall be the duty of the President to take into his custody at the
J

Bank, the Seal of the Bank which he shall cause to be affixed to all
instruments and documents when so ordered by the Board; and to
sign all bills and notes issued by the Corporation.

285

«Jies of the

president.

National

Monetary

Commission

He shall preside at all meetings of the Board, except in cases of
necessary absence, convene the Directors on special occasions, and
serve as a member of all committees of the Board.
XVII.
8

f thC

castor* °

sha11 b e t h e

dut

of t h e

Cashier

to
y
countersign all bills, notes,
certificates of stock, and bills of exchange to be signed by the President, or by order of the Board; He shall take into his custody at the
Bank, the plates, paper-moulds, bank note paper, unprinted and
printed until issued, blank certificates of stock, and bills of exchange,
superintend the printing of whatever supplies of these may from time
to time be considered necessary for the use of the Bank and Offices;
keep a regular account of all the articles in his custody, which account
shall be checked by quarterly examinations by the Committee on the
State of the Bank; he shall attend all meetings of the Board, keep a
fair and regular record of its proceedings, furnish official extracts therefrom, and give all such information as may be required by the Board or
any Committee.
He shall correspond with the Officers of the several Offices, as the
organ of the Board or Committees of the Board, in directing the general operations of the Bank, in stock and bullion, and in foreign and
domestic exchange; he shall also correspond with the Agents of the
Bank in Europe, and with all other persons doing business with the
Bank on subjects connected with his department; he shall carefully
observe the conduct of all persons employed under him, and report
to the Board such instances of neglect, incapacity or bad conduct as
he may discover in any of them, and generally shall perform all such
other services as may be required of him by the Board.

XVIII.
Duty of the

first

cashier.

assistant „

i t shall be the duty of the First Assistant Cashier to take charge of
.

. ,

, .

, , , .

the local operations of the Bank in Philadelphia m the same manner
and with the same duties, as the Cashiers of the Offices do of the concerns of their respective Offices, except when otherwise provided by
the by-laws or directed by the Board; carefully to observe the conduct
of all persons employed under him, and report to the President and
Cashier such instances of neglect, incapacity or bad conduct as shall
come to his knowledge, daily to examine the settlement of the cash
accounts of the Bank, to take charge of the cash, and whenever the
actual amount disagrees with the balance of the cash account report
the same to the President and Cashier without delay, and generally
to perform such services as shall be required of him by the Board, the
President, or the Cashier.

286

The

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United

States

Bank

XIX.
It shall be the duty of the Second Assistant Cashier to take charge of o n J u t y a ^ s f ist s ^t
the general statements and accounts of the Bank; the accounts be-cashier,
tween the several Offices, the accounts with the Government of the
United States, the foreign exchange accounts, and the returns of all
foreign or domestic bills purchased at the Offices. On all these subjects he shall correspond with the Offices and the parties concerned,
under the special superintendence of the President and Cashier; and
generally perform such other services as may be required by the Board
or by the President or Cashier.

XX.
I t shall be the duty of the third Assistant Cashier to take charge of t h f d t i e LSstant
the Suspended Debt and the Real Estate of the Bank and the several cashier.
Offices, and correspond thereon with the Officers and Agents of the
Bank and the Offices, and with other parties concerned under the
special superintendence of the President and Cashier, and generally
perform such other services as may be required by the Board, or by the
President or the Cashier.
XXI.
In the election of
be first taken for all
of the votes of all
having the highest

Cashier, or of Assistant Cashiers, the ballots shall i e ^ ^ ^sistlnt
the candidates, and if no one shall have a majority cashiers are to
be elected
the Directors present, then the three candidates
number shall be voted for again; and if no one

shall be elected, the ballots shall then be taken on the two highest.
XXII.
The Cashier before he enters upon the duties of his office shall give . Security to be
1

given

the

bond to the President, Directors and Company, with two or m o r e c a s h i e r a n d
approved sureties, in the sum of seventy thousand dollars, with a condi- etcf
tion for his good behaviour and the faithful performance of his duties to
the Corporation. The First Assistant Cashier, and the Cashier at each
Office, shall give bond in like manner, in the sum of fifty thousand
dollars, with the same condition. The Second and Third Assistant
Cashiers shall give bond in like manner in the sum of twenty-five thousand dollars with the same condition. The paying and the receiving
Tellers, in the sum of twenty thousand dollars each; The Book-keepers
Discount Clerks, Note Clerks, and other Clerks, in the sum of five thousand dollars each; and the Porters in the sum of two thousand dollars
each, with the same condition.

287

National

Monetary

Commission

XXIII.
c

r s

X ^ », ,

etc

No Clerk or Porter in this institution shall be permitted to have an

prohibited from

having an ac-account with the Bank, but shall receive his salary quarterly, or
count with the m o n t h l y # A n d e v e r y c l e r k a n d s e r v a n t of the Bank shall take, and
subscribe, an oath or affirmation to the following effect, to wit:—
/
do swear or {affirm) that I will to the best of my knowledge and
abilities perform the duties assigned to, and the trust reposed in me as
of the Bank of the United States, and keep secret the business thereof.
XXIV.
How the pres- None of the foregoing rules or regulations shall be repealed or altered,
may be altered unless a majority of all the Directors vote for the repeal or alteration,
or repea e . flQr u n i e s s U p o n a m o t i o n offered for the purpose at a previous meeting.
XXV
How the pro- f^
proceedings of the Board of Directors, when conducting their
board of direct-business as a deliberative body, shall be governed by the following
ors are to
governed.

. .
article.

i. When the President takes the chair, the members shall take their
seats.
2. The Discounts shall be settled, and the minutes of the preceding
meeting shall then be read, before the Board proceeds to any other
business; and no debate shall be admitted, nor question taken, at
such reading, except as to errors and inaccuracies.
3. The President shall be the judge of order, and his decisions shall
be immediately submitted to, unless two members require an appeal
to the Board. He shall name all Committees, unless herein otherwise
provided, or unless the Board shall otherwise determine; and he shall
call special meetings of the Board, whenever in his opinion the business
may require it, or on the request of three members of the Board.
4. Every member presenting a paper to the chair, shall first state
its general purport; and every member who shall make a motion, or
offer a resolution, or speak on any subject under discussion, shall rise
and address the President.
5. No debate shall be entered into on any motion or resolution,
until it shall be stated from the chair; and all motions shall, if requested by the President or by two members, be reduced to writing;
and no member shall speak more than twice upon any one question
without leave from the Board.
6. While a resolution is under consideration, no motion shall be
made, except to amend, divide, commit or postpone it: But it shall
be in order, at any time, on the call of three members, to take the

288

The

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States

Bank

previous question, which shall be " Will the Board at this time act on this
subject®" and if it shall be decided in the affirmative, the debate may
be continued. A motion to adjourn, shall always be in order, but
shall be decided without debate.
7. A member may call for the division of a question or resolution
where the sense will admit of it; b u t no amendment which tends to
destroy the general sense of the clause of a resolution shall be admitted.
8. If business of different kinds shall be called for, at the same time,
by different members, the Board will judge and give preference accordingly.
9. The yeas and nays shall be taken on any question, if called for
by two members previous to the decision on such question; but no
motion for reconsideration shall be permitted, unless made and seconded by members who were in the majority on the original question.
10. At the request of any two of the Board, the names of the members who make and second a motion shall be entered on the minutes.

7069—10

289

APPENDIX C.

RULES AND REGULATIONS FOR THE GOVERNMENT OF THE OFFICES
OF DISCOUNT AND DEPOSIT ESTABLISHED BY THE BANK OF THE
UNITED STATES.
[Printed by order of the Board of Directors.

Preamble.

1817.]

WHEREAS, by the act incorporating the subscribers to the Bank of
the United States, the directors are authorized and empowered to
establish Offices of Discount and Deposit within the United States, or
the Territories thereof, subject to such regulations as they shall deem
proper, not being contrary to law, or the constitution of the Bank;
therefore, We, the Directors, by virtue of the power and authority
vested in us, do resolve, that the following rules and regulations be
established, for the government of the Offices of Discount and Deposit
of the Bank of the United States:
ARTICLE

Directors of The Directors of the Bank of the United States shall annually appoint
pointed. ° W &P n o t * e s s than nine Directors for each Office, a majority of whom shall
constitute a Board.
ARTICLE

II.

Choose a Pres- The Directors of each Office shall choose one of their number for
'
President.

ident

ARTICLE

Duty of Presi-

III.

I t shall be the duty of the President to preside a t all meetings of
the Board, except in cases of necessary absence, to convene the Directors upon special occasions, and to give such attendance at the Office,
as the interest of it may require.
ARTICLE

IV.

Cashiers of of- The Directors of the Bank of the United States shall appoint the
pointedh°W aP~ C a s h i e r s o f t n e Offices of Discount and Deposit.
ARTICLE V.

Duty of Cash-

i t shall be the duty of the Cashier, carefully to observe the conduct
of all persons employed under him, and report to the Board such
instances of neglect, incapacity or bad conduct as he may discover
in any of them; daily to examine the settlement of the cash account of

290

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the office; take charge of the cash, and whenever the actual amount
disagrees with the balance of the cash account, report the same to
the President and Directors without delay; to attend all meetings of
the Board; keep a fair and regular record of its proceedings; give such
information to the Board as may be required; consult with committees
when requested, on subjects referred by the Board; and also to perform
such other services as may be required of him by the Board.
ARTICLE

VI.

The Tellers, Clerks, and Servants of the Offices, shall be appointed by & c T d l e h 0 ^ ] e r ^ l
their Directors, and before they enter on the duties of their respective pointed,
offices, bond shall be given with sufficient surety (to be approved by
the Directors) for the faithful performance of the trust reposed in them.
ARTICLE

VII.

No Teller, Clerk, or Servant, in an Office shall be permitted to have an , N<>t permitted
,

to have an ac-

account with the same, but shall receive his salary, quarterly or monthly, count in the offrom the Cashier; and every Teller, Clerk, and Servant of an Office shall
take, and subscribe, an oath, or affirmation, to the following effect, to
wit: I,
, do swear (or affirm) that I will to the best of
my knowledge and abilities, perform the duties assigned, and the trust
reposed in me as
of the Office of Discount and Deposit of the
Bank of the United States, and keep secret the business thereof.
ARTICLE V I I I .

The Offices shall be kept open for the transaction of business, every fi D f n ect i? rs
day in the year, during such hours as the Directors thereof may deter- business,
mine, except Sundays, Christmas day, the first of January, and the
fourth of July.
ARTICLE

Deposits,

XI.

The Offices shall receive and pay all specie coins, according to the
rates and value, that have been or shall be established by Congress.
291

Books to be

focll£LllC€*ti

The Offices shall take charge of the cash of all such persons as shall
choose to place it with them, free of expense, and shall keep it subject to
the order of the depositor, payable at sight; and shall also receive special deposits of ingots of Gold, bars of Silver, wrought plate, and other
valuable articles of small bulk, for safe keeping, at the risque of the
depositor.
ARTICLE

IX.

The books and accounts of the Offices shall be regularly balanced on
the first day of June and the first day of December, in each year.
ARTICLE

Rates of Coins,

National

Monetary
ARTICLE

Day of Dis-

Commission

XII.

There shall be at least one Discount dayJ in each week, when the Di-

count.

rectors shall be assembled; a majority of the members shall be required
to form a quorum, except for the purpose of settling Discounts, for
which five shall constitute a quorum, and no bill or note shall be discounted the unexpired term of which exceeds sixty days.
ARTICLE X I I I .

President may In case of sickness or necessary absence of the President, such other
statute? e a s u " Director shall preside as he shall by writing nominate, or in case of
omission of such nomination, by such other Director as the Board may
for that purpose appoint.
ARTICLE

Statement of

XIV.

^11 Bills and Notes offered for Discount, shall be laid before the Board

funds to be made

on days of Dis- of Directors by the Cashier on the days assigned for Discount, together
count
w i t h a statement of the funds and situation of the Office, for their information.
ARTICLE

Discounts and

accommodation.

XV.

Discounts shall not be made upon personal security without two re.

sponsible names (the firm of a house being considered as one name
only;) but if Stock of the Bank of the United States, Funded Debt of
the United States, or such other property as shall be approved by the
Board, be deposited and pledged to an amount sufficient to secure the
payment, with all damage!, one responsible name may be taken. B u t
no accommodation note (i. e., a note, the proceeds of wrhich are to be
placed to the credit of the drawer) shall be discounted, unless its payment be secured by a deposit of the Stock of this Bank or of F u n d e d
Debt of the United States, or such other property as shall be approved
by the Board together with an express authority to the Bank to sell the
Deposit in case of non-payment at any time after the Note shall become
due.
ARTICLE

Mode of de-

XVI.

Qn each application for discount, every Director who may be present,

cision on apph-

, .

. .

cation for Dis- shall be held to give his opinion for or against the same. And no Discount,
count shall be made without the consent of three fourths of the Directors present; and all notes and bills discounted shall be entered in a
book, to be called The Credit Book, in such manner as to discover to
the Board, at one view, on each Discount day, the amount which any
person is discounter, or is indebted to the Office, either as payer or as
indorser.

292

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Bank

ARTICLE X V I I .

On every Discount day, the name of every person who shall have
overdrawn the Office since the last Discount day shall be reported t o
the Board; and no person while he remains an overdrawer, shall have
any note or bill discounted b y the Offices. And in no instance will
this Bank give a release or discharge to any debtor when the debt
arises from an overdraft. And every officer who shall knowingly
suffer an overdraft to be made on the Office, without communicating
it to the President and Cashier, shall be dismissed from the service of
the office.

Overdrafts,

ARTICLE X V I I I .

If any Bill or Note belonging to the Bank, shall not be paid before Protests.
the shutting of the Office on the last day of grace, each bill or note
shall be forthwith protested; and while such bill or note remains unpaid,
no discount or accommodation shall be granted to any drawer, acceptor,
or indorser of t h e same. Bills and notes deposited for collection, a t
any time before the commencement of the days of grace, shall be proceeded with as bills and notes discounted; unless the person depositing
the same shall otherwise direct in writing: provided that in case of
non-payment and protest, the person lodging the same shall pay the
damages of protest.
ARTICLE X I X .

Every person who opens an account, and transacts business with an
Office, shall subscribe his name in a book, to be kept for that purpose,
to be called The Book of Signatures; and all the persons who compose
any house, keeping an account with an Office shall subscribe their names,
and the signatures of the firm, in the book, if residing in the place where
the Office is established.

Book of signa-

ARTICLE X X

No Director, without special authority, shall be permitted to inspect Cash account
the cash account of any person with the Office.
not to be examined by a Director

ARTICLE X X I .

A Committee on the state of the Office, shall be appointed by ballot
.

r r

Committee to
examine and re-

every three months to examine and count the discounted notes, and port on the state
compare the amount thereof with the balance of the amount of bills o f t b e office *
discounted in the general ledger; they shall also count the cash, and
examine the evidences of the other property of the Bank, and make an
inventory of the same to be compared with the books in order t o
ascertain their agreement, and make report to the Board.

293

National

Mon etary

Commission

ARTICLE X X I I .

Presidentsand Xhe Presidents and Cashiers of Offices, shall take, and subscribe an
fices to subscribe oath, or affirmation to the following effect, to wit: I,
,
an oath.
^ 0 s w e a r ( o r affirm) t h a t I will, to the best of my knowledge and abilities, perform the duties assigned to, and the trust reposed in me as
of the Office of Discount and Deposit of the Bank of the United
States.
ARTICLE X X I I I .

Only notes and ^11 Notes and Bills receivable at an Office, shall be paid in Specie, or
with specie to be in the Notes of the Office, or in the Notes of such Banks established in
posltT6 m e t n e same place with the Office, as redeem their Notes to bearer, with
ARTICLE X X I V .
A

d l

Pay

*t f th
" ^
Offices of Discount and Deposit shall receive in payment of the
enue of the u. s. revenue of the United States, the Notes of such State Banks as redeem
their engagements with Specie, and provided they are the Notes of
Banks located in the city, or place, where the Office receiving them is
established. And also the Notes of such other Banks as a special deposit on behalf of the Government, as the Secretary of the Treasury
may require.
ARTICLE

XXV.

Offices to set- The Offices of Discount and Deposit shall at least once every week,
a w e e k with settle with the State Banks for their Notes, received in payment of t h e
other Banks.
revenue, or for the engagements of individuals to the Bank, so as t o
prevent the balances due to the Office from swelling to an inconvenient
amount.
ARTICLE X X V I .

Accounts of f fre manner of keeping, stating, and rendering the accounts of t h e
stated and ren- Offices shall be prescribed by the Directors of the Bank of the United
scribed &by PDi- States, and the observance of the rules established and instructions
rectors of B.u.S. given shall be enforced by the Directors of the Bank of the United
States, to whom accounts of the Offices shall be rendered.
ARTICLE X X V I I .

Offices once a f l i e respective Offices, shall once in every
J week, make out and transweek to transmit to Bank of mit to the Directors of the Bank of t h e United States, a distinct abstract
abstract of^heS °f the state of their funds; which abstract shall ascertain the amount
funds.
0 f the debts and credits of t h e Office, amount of Notes issued by the
Office, and then in circulation, the amount of cash on hand; and shall
likewise distinguish in t h e account of cash on hand, how much thereof,
is in specie, and how much in the several kinds of Bank notes, designating the notes of t h e parent Bank and those of each Office particularly.

294

The

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United
ARTICUJ

States

Bank

XXVIII.

All notes issued from the Offices shall be delivered to their respective g c C *f^Vcf duCashiers, who shall give duplicate receipts for the same, one of which plicate receipts
is to be lodged with the President of the Bank of the United States,
and the other with the President of the Office.
ARTICLE

XXIX.

All Notes which shall have become unfit for circulation, shall be can- . Notes unfit for
•
/vI •
1'
circulation to be
celled by the President and Directors of the Office, and immediately cancelled,
thereafter transmitted to the Directors of the Bank of the United
States, who shall cause the said Office to be credited with the same.
ARTICLE X X X .

The Cashier of each Office shall give bond to the President, Directors, c Cashiers of Of°

' fices to

give

and Company of the Bank of the United States with two or more ap- Bond.
proved securities, in the sum of fifty thousand dollars, with a condition
for his good behaviour, and the faithful performance of his duties to
the Corporation.
ARTICLE X X X I .

The Directors of the Offices shall be empowered to form and establish Direct or s of
all other Rules and Regulations for the interior management of the rules for their inOffices: Provided, the same be not repugnant to law, or to the Rules JjjJ^ m a n a g e "
and Regulations of the Bank of the United States, or the Resolutions
of the Directors thereof.

295

APPENDIX

THE

BIIX

TO CONTINUE

THE

CHARTER, WHICH

WAS

VETOED BY PRESIDENT JACKSON.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled, That the act entitled " A n act to
incorporate the subscribers to the Bank of the United States," approved
on the tenth day of April, in the year one thousand eight hundred and sixteen, shall continue in full force and 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 the year one thousand eight hundred and thirty-six; and that
all the rights, interests, properties, powers and privileges, secured by the said
act, with all the rules, conditions, restrictions, and duties, therein prescribed
and imposed, be and remain after the said third day of March, in the year one
thousand eight hundred and thirty-six, during the said fifteen years, as if
the said limitation in the said act had not been made; subject, nevertheless, to the modifications and changes hereinafter expressed.
S^c. 2. And be it further enacted, T h a t the directors of the said corporation shall have power to appoint two or more officers, with authority to
sign and countersign any or all the notes thereof, the denomination of each
of which shall be less than one hundred dollars; which notes, when signed
and countersigned by the said officers, respectively, shall, to all intents and
purposes, be binding and obligatory upon the said corporation as if the same
had been signed by the President, and countersigned by the principal Cashier or Treasurer thereof; and it shall be the duty of the directors of the said
corporation to make known, in writing, and as soon as may be, to the Secretary of the Treasury, the names of the officers who shall be appointed by
virtue of this provision: Provided, T h a t from and after the third day of
March one thousand eight hundred and thirty-six, no branch bank draft, or
other bank paper not payable at the place where issued, shall be put in
circulation, as currency, by the bank, or any of its offices, except notes
of the denomination of fifty dollars, or of some greater sum.
SEC. 3. And be it further enacted, That it shall not be lawful for the
said corporation to issue, pay out, or put in circulation, any note or notes
of a denomination less than fifty dolla^, which shall not, upon the faces
thereof, respectively, be payable at the bank or office of discount and
deposite whence they shall be issued, paid out, or put in circulation.

296

The

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United

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Bank

SEC. 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 a t one place only, shall, nevertheless, be received by the said
corporation at the bank, or a t any of the offices of discount and deposite
thereof, if tendered in liquidation or payment of any balance or balances
due to said corporation, or to such office of discount and deposite, from
any other incorporated bank.
S E C 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 judgment lien in security of
debts, to any lands, tenements, 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 judgments 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 of the same; one half of which shall enure to the
benefit of the informer, and the other half to the use of the United States.
SEC 6. And be it further enacted, That from and after the said tenth day
of April, 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 deposite in any State: Provided, That nothing herein contained shall prevent the said corporation
from retaining any of the branches which are now established.
SEC 7. And be it further enacted, That, in consideration of the exclusive
benefits and privileges continued by this act to the 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 day of March in each and every year,
during the said term of fifteen years.
SEC 8. And be it further enacted, That it shall be lawful for Congress to
provide, by law, that the said bank shall be restrained, at any time after
the third day of March, in the year one thousand eight hundred and thirtysix, from making, issuing, or keeping in circulation, any notes or bills of
said bank, or any of its offices, of a less sum or denomination than twenty
dollars.
SEC. 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 stock-

297

National

Monetary

Commission

holders 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.
SEC. IO. And be it further enacted, T h a t so much of any act or acts of
Congress heretofore passed, and now in force, supplementary to, or in
anywise 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.
SEC I I . 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.—
Senate Journal, 22d Cong., i sess., pp. 451-453, July 11, 1832.

298

APPENDIX E.

VETO MESSAGE OF PRESIDENT JACKSON, JULY IO,

1832.

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" 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 oXJJie,,»paw£rs-a4id -privileges
possessed by the existing bank are miajxthorized 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. I t 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 exchange. The 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 t h a t 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, and in
many cases to the same men, of at least seven millions more. This 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 or 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 in a moment
one-fourth to its par value. It is not our own citizens only who are to

299

National

Monetary

Commission

receive the bounty of our Government. More than eight millions of the
stock of this bank are held by foreigners. By this act the American
Republic proposes virtually to make them a present of 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 the operation of this
act, after making full allowance for the payment of the bonus.
Every monopoly and all exclusive privileges are granted at the expense
of the public, which ought to receive a fair equivalent. The many millions
whick this act proposes to bestow on the stockholders of the existing bank
must come directly 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.
I t 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 this act and putting the premium upon the sales into
the Treasury?
But this act does not permit competition in the purchase of this monopoly. I t seems to be predicated on the erroneous idea t h a t the present
stockholders have a prescriptive right not only to the favor but to the
bounty of the 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 benefit does this act
exclude the whole American people from competition 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 of our citizens not now stockholders petitioned that the door of competition might be opened, and
offered to take a charter on terms much more favorable to the Government and country.
But this proposition, although made by men whose aggregate wealth
is believed to be equal to all the private stock in the existing bank, has been
set aside, and the bounty of our Government is proposed to be again bestowed on the few who have been fortunate enough to secure the stock and
at this moment wield the power of the existing institution. I can not per-

300

The

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States

Bank

ceive the justice or policy of this course. If our Government must sell monopolies, it would seem to be its duty to take nothing less than their full
value, and if gratuities must be made once in fifteen or twenty years let
them not be bestowed on the subjects of a foreign government nor upon a
designated and favored class of men in our own country. It is but justice
and good policy, as far as the nature of the case will admit, to confine our
favors to our own fellow-citizens, and let each in his turn enjoy an opportunity to profit by our bounty. In the bearings of the act before me upon
these points I find ample reasons why it should not become a law.
It has been urged as an argument in favor of rechartering the present
bank that the calling in its loans will produce great embarrassment and
distress. The time allowed to close its concerns is ample, and if it has been
well managed its pressure will be light, and heavy only in case its management has been bad. If, therefore, it shall 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 both 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 " t h a t the notes or bills of the said corporation, although the same be, on the faces thereof, respectively m a d e 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 if 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 rich and the poor.
To the extent of its practical effect it is a bond of union among the banking

301

National

Monetary

Commission

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 t h e
United States and the State banks in any measure which may be thought
conductive 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 Secretary 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 in connection with a decision of the
Supreme Court, surrenders, by its silence, the right of the States to t a x the
banking institutions created by this corporation under the name of branches
throughout the Union, it is evidently intended to be construed as a concession of their right to tax that portion of the stock which may be held by
their own citizens 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 to that paid upon the stock of banks incorporated by themselves.
In some States that tax is now i per cent, 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 i per cent more than the citizen stockholders, and as the
annual dividends of the bank may be safely estimated at 7 per cent, the
stock will be worth 10 or 15 per cent 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
that on the 1st of January, 1832, of the twenty-eight millions of private
stock in the corporation, $8,405,500 were held by foreigners, mostly of
Great Britain. The amount of stock held in the nine Western and Southwestern States is $140,200, and in the four Southern States is $5,623,100,
and in the Middle and Eastern States is about $13,522,000. The profits
of the bank in 1831, as shown in a statement to Congress, were about
$3,455,598; of this there accrued in the nine Western States about
$1,640,048; in the four Southern States about $352,507, and in the Middle
and Eastern States about $1,463,041. As little stock is held in the West,
it is obvious that the debt of the people in that section to the bank is
principally a debt to the Eastern and foreign stockholders; t h a t the
interest they pay upon it is carried into the Eastern States and into

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Europe, and that it is a burden upon their industry and a drain of their
currency, which no country can bear without inconvenience and occasional
distress. To meet this burden and equalize the exchange operations of
the bank, the amount of specie drawn from those States through its branches
within the last two years, as shown by its official reports, was about
$6,000,000. More than half a million of this amount does not stop in
the Eastern States, but passes on to Europe to pay the dividends of the
foreign stockholders. In the principle of taxation recognized by this
act the Western States find no adequate compensation for this perpetual
burden on their industry and drain of their currency. The branch bank
at Mobile made last year $95,140, yet under the provisions of this act
the State of Alabama can raise no revenue from these profitable operations, because not a share of the stock is held by any of her citizens. Mississippi and Missouri are in the same condition in relation to the branches
at Natchez and St. Louis, and such, in a greater or less degree, is the
condition of every Western State. The tendency of the plan of taxation which this act proposes will be to place the whole United States
in the same relation to foreign countries which the Western States now
bear to the Eastern. When by a tax on resident stockholders the stock
of this bank is made worth 10 or 15 per cent more to foreigners than to
residents, most of it will inevitably leave the country.
Thus will this provision in its practical effect deprive the Eastern as
well as the Southern and Western States of the means of raising a revenue
from the extension of business and great profits of this institution. I t
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. I t 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. I t 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.

303

National

Monetary

Commission

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 monopoly 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 wTould be made to feel its influence.
Should the stock of the bank principally pass into the hands of the subjects of a foreign country, and we should unfortunately become involved
in a war with t h a t 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 can 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, 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 t h a t it
should be purely American. I ts 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 t h a t 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.
[Paragraphs relating to question of constitutionality are omitted.]
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 " i s not prohibited, and is really calculated to effect any of the objects entrusted 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

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substantive powers. We may not enact that Congress shall not have the
power of exclusive legislation over the District of Columbia, b u t we may
pledge the faith of the United States t h a t 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 t a x the banking business carried on
within their limits, b u t we may, as a means of executing our powers over
other objects, place t h a t 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 reerved rights of the States I do not entertain a doubt. Had the Executive
been called upon to furnish 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 take place, eliciting new light and settling important principles;
and a new Congress, elected in 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 which not only
operate as a gratuity to the stockholders of many millions of dollars, but
will sanction any abuses and legalize any encroachments.
Suspicions are entertained and charges are made of gross abuse and violation of its charter. An investigation unwillingly conceded and so restricted in time as necessarily to make it incomplete and unsatisfactory
discloses enough to excite suspicion and alarm. In the practices of the
principal bank partially unveiled, in the absence of important 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 all its 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.
7069—10

305

National

Monetary

Commission

The bank is professedly established as an agent of the executive branch
of the Government, and its constitutionality is maintained on t h a t ground.
Neither upon the propriety of present action nor upon the provisions of this
act was the Executive consulted. It has had no opportunity to say t h a t 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 to this act, it can not be found either in the wishes
or necessities of the executive department, by which present action is
deemed premature, and the powers conferred upon its agent not only unnecessary, but dangerous to the Government and country.
I t is to be regretted that the rich and powerful too often bend the acts
of government to their selfish purposes. Distinctions in society will
always exist under every just government. Equality of talents, of education, or of wealth can not be produced by human institutions. In
the full enjoyment of the gifts of Heaven and the fruits of superior industry, economy, and virtue, every man is equally entitled to protection by
law; but when the laws undertake to add to these natural and just adv a n t a g e s artificial distinctions, to grant titles, gratuities, and exclusive
privileges, to make the rich richer and the potent more powerful, the
humble members of society—the farmers, mechanics, and laborers—who
have neither the time nor the means of securing like favors to themselves,
have a right to complain of the injustice of their Government. There
are no necessary evils in government. Its evils exist only in its abuses.
If it would confine itself to equal protection, and, as Heaven does its rains,
shower its favors alike on the high and the low, the rich and the poor, it
would be an unqualified blessing. In the act before me there seems to
be a wide and unnecessary departure from these just principles.
Nor is our Government to be maintained or our Union preserved by
invasions of the rights and powers of the several States. I n thus attempting to make our General Government strong we make it weak. I t s true
strength consists in leaving individuals and States as much as possible to
themselves—in making itself felt, not in its power, b u t 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

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threatens to shake the foundation 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 a t 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 fellowcitizens, 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 and Union will be preserved.

307

APPENDIX
B A L A N C E S H E E T S OF B A N K :

1820,

1825,

1831,

1832.

November, 1820.
[Finance, 3:570.]
DR.

CR.

Funded debt of the United States, various
_
$9,157,604.15
Louisiana 54 per cent
278,008. 00
Bills discounted, viz:
On personal security
$19, 977, 821. 31
On personal security and funded debt77, 750. 00
On personal security and bank stock,
etc
6,865,818. 62
26,921,389.93
Bills of exchange, viz:
Foreign
_
52,659.65
Domestic
1, 083,09 7. 86
1,135.757-51
Baring Bros. & Co
189, 941. 20
Hope & Co., Amsterdam
63, 200. 00
Overdrafts
199, 547. 00
Debt of S. Smith and Buchanan, George Williams, and
J . W . McCulloch
1, 540, 000. 00
Due from offices of discount and deposit
16, 430,187. 66
Due from state banks
2,625, 996. 99
Interest and commission on loan from Baring & Co. and
Hope &Co
8, 200. 00
Real estate, permanent expenses, and bonus
1, 393, 247. 04
Expenses
89, 718. 94
Deficiencies
310, 445. 24
Cash, viz:
Notes of Bank of United States and
branches
6, 295, 992.19
Notes of other banks
955. 899. 08
Specie
_
6,051,499. 25
13.303,390.52

Capital stock
$34, 976,958. 63
Bank and branch notes
11, 621, 380. 04
Dividends unclaimed
_
22, 079. 80
Discount, exchange, and interest
645, 723. 92
Profit and loss, and contingent interest
2, 668, 244. 30
Due to Bank of the United States and offices _$i 4,283,150.81
Due to state banks
1,175,905.01
15,459,055.82
Loan from Baring & Co. and Hope & C o
2, 040, 000. 00
Damages on sterling bills protested
26, 048. 59
Bills of exchange received of S. Smith & Co
37,355-55
Deposits, viz:
On account of Treasurer of United
States
1,135,205. 44
Deduct overdrafts
287, 499. 20

73,646,634. 18

On account of public officers
On account of individuals

847,706.24
1,507,813.75
3, 794, 267. 54
6,149,787.53

APPENDIX

F (continued).

JANUARY 3 1 , 1 8 2 5 .
[Finance, 5:324.]

DR.
Funded debt United States (various)
Bills discounted on—
Personal security
Funded debt
Bank stock

<g
vo

CR.
$18, 422, 027. 38
$22, 862,162.15
87, 882. 94
5,527. 744- 68

28 477»789.77
Domestic bills of exchange
2 467.398. 10
Foreign bills of exchange
24, 178. 00
Realestate
1 362,266. 72
135.091-85
Mortgages, etc
*
Due from Bank United States and offices.- 16, 109, 461. 53
Due from state banks
1,837, 512. 29
17 946,973-82
Debt of Smith and B. G. Williams and J. W. McCulloch. _ 1 207,332.08
5, 267. 32
Debt due by the United States
500,931.15
Deficiencies
Banking houses, borais, and premium on loans
1 882,853.12
45.363.66
Expenses
Cash:
Notes of Bank United States and
offices
6, 336, 763. 06
Notes of state banks
1,178, 353. 64
Specie
6, 616, 049. 98
14,131,166.68

86,608,639.65

Capital stock
Notes issued
Dividends unclaimed
Discount, exchange, and interest
Profit and loss and contingent interest
Due to Bank United States and offices
Due to state banks

$34, 995, 919. 63
13, 001, 957. 46
181, 710. 77
165, 429- 9*
732, 095. 32

$16,368, 760. 33
1, 426, 161. 46

Seven per cent stock
Six per cent stock exchanged
Baring Bros. &Co
Deposits on account of Treasurer United
States
Deduct overdrafts

2, 825, 436. 46
195, 525. 64

Deposits of public officers
Deposits of individuals

2,629,910.82
1, 543, 618. 63
7, 533, 406. 46

Special deposit of Treasury drafts
Contingent fund

17.794,921.79
1,053, 840. 82
353, 934- 34
2, 574, 646. 03

11,706,935.91
296,300. 00
3, 750, 947. 67

86,608,639.65

APPENDIX

F (continued).

MARCH 2, 1 8 3 1 .
[H. R. 523, 23d Cong., 1st sess., p. 13.]
CR.

DR.
funded debt, various
Bills discounted on—
Personal security
Funded debt
Bank stock
Domestic bills of exchange

.
.

$7, 674, 68x. 06

$33, 502, 614. 39
6, 800. 00
711. 034- 01
34,220,448. 40
12, 943,653.09

47,164,101.49
Real estate
«
2, 616,313. 10
Baring Bros, & Co., Hope & Co., Hottinguer & Co
_ 1,161,076. 75
Due from—
Bank United States and offices
20, 535, 786. 05
State banks
3.004, 593-87
23,540,379.92
United States
5,267.32
Deficiencies
142, 010. 55
Banking houses, bonus, and premium
__
__ 1, 283, 384• 71
Expenses
89, 204. 62
Cash, viz:
Notes of the Bank of the United States. 14, 833, 665. 86
Notes of state banks
2,069,754.31
Specie
12, 012, 232. 73
28,915,652.90
Mortgages
„_
_
_
143, 588. 44
Navy agent, Norfolk
40, 144• 17

Total

112,775,805.03

Capital stock
_
$34, 696, 269. 63
Notes issued
33, 335,126. 76
Discount, exchange, and interest
616, 931. 60
Foreign-exchange account
7.329-25
Dividends unclaimed
169, 869. 48
Profit and loss
1, 626, 281. 53
Contingent fund
$5, 452, 040. 95
Less losses chargeable to contingent fund _ 3,389,244.98
2,062,795.97
Due to—
Bank of the United States and offices. 21, 331, 213. 58
State banks
1, 734, 203. 08
Redemption of public debt
Deposits, viz:
On account of Treasurer United States.
Less overdrafts and special deposits. _

23,065,416.66

525,921. 91

7,243,273.59
239, 544. 99
7,003,728.60

Of public officers
Of individuals

1, 190, 787. 61
8, 475, 346. 03
16,669,862.24

Total. __

112,775,805.03

APPENDIX

F (continued).

MARCH 2, 1 8 3 2 .
[H. R. 523, 23d Cong., 1st sess., p. 85.]
DR.
Bills discounted on—
Personal security
Bank stock
Other stocks

CR.

Domestic bills of exchange

48,617,028. 61
20, 354, 748. 79

Foreign bills of exchange
Due from—
Bank United States and offices
State banks

29,288,810.19
3, 752, 822. 73

$68,971,777-40
91, 238. 23

United States
Real estate
Deficiencies
Banking houses
Expenses
Cash, viz:
Notes of Bank United States and
offices
18,401,011.03
Notes of state banks
2, 836, 900. 40
Specie
_
6, 799, 753- 63
Mortgages
Navy agent, Norfolk

Capital stock
$35, 000, 000. 00
Notes issued
42, 118, 452.13
Discount, exchange, and interest
855,958. 17
Foreign-exchange account
371,610.55
Baring Bros. & Co., Hope & Co., Hottinguer & Co
1,876,802.39
Dividends unclaimed
166, 432. 73
Profit and loss
1, 750, 263. 52
Contingent fund
$5, 613, 346. 20
Less losses chargeable to contingent fund . 3,477,737-29
2, 135,608.91
Due to—
Bank United States and offices
28, 461, 352. 88
State banks
2, 600, 270. 50
,061,623. 38
Fund for extinguishing cost of banking houses
551, 292.05
Redemption of public debt
857,613.12
Deposits, viz:
On account of Treasurer of the United
States
6, 781, 114. 55
Less overdrafts and special deposits. _
260, 976. 99

$45, 850, 367. 27
620, 766. 14
2,145, 895• 20

33,041,632.92
5, 267. 32
2, 131, 359. 64
122, 973. 18
1,163,691.92
106, 720. 02

Of public officers
Of individuals

28,037.665.06
89, 573. 78
40,144.17

6,520,137-56
1, 719, 489. 32
8, 816, 759. 81
17,056,386.69

133,802,043-64

Full text of The First and Second Banks of the United States

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