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OUTLINE OF A PLAN
FOR A
;
WITH INCIDENTAL REMARKS
ON THE
y
A*
BANK OF THE UNITED STATES.
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NEW-YORK:
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Printed for NEWCOMB & CBOPSKT, Stationers, 73 Wall-street
1833.
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HARVARD C0UE6C
BY EXCHANGE
JAN 4 1*934
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E X T R A C T from the proceedings :of an adjourned Meeting of .
merchants and others Interested in the commerce of the Qity of
NEW-YORK, convened on the 20th "of Feburary, J833 r /or the
purpose of receiving a Report from the Committee appointed at
a former meeting and fo whom was referred a PLAN FOR A NEW
NATIONAL BANK. '-
'< , >
'
PRESERVED FISH resumedthe chair, and HENRY W. HICKS was *
«gain ^appointed Secretary.
The Cpnj|Mhee, consisting ofISAAC BRANSON, GEORGE GRXSWOLD, jano* JOHN BOLTON, then presented the following J U *
port:-7c . •
v
" The ptenmittee to whom was referred the outline of a plan%t.
a National Mnk, with introductwy and explanatory remarks, hayfjg
*
W
f
maturely^feJiisidered till same, Reportv^.
**
*^
imF
"That they have introduced some impSlnirnln, afid mafie soibe
alterations in the original draft, which they now beg leave to sub*
mitasthe
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A PLAN
ON THE
8 A V X OF TBB UilATHD
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OUTLINE OP A PLAN ? &C.
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WHEN, at the Triennial Meeting of the Stockholders of the Bank
of the United States, held on the 1st September, 1831, the communication made by the Board of Directors was referred to,a committee of seven, to report thereon, that committee, among other
resolutions, offered to the adoption of the meeting the following:
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"Resolved, that an administration, by which the interests of the
Stockholders and public are successfully blended, is that* system
*• *
which is properly characteristic of the Bank tf&e United States;
and that to the present able administration of the Bank, the Stock'
holders and the public are indebted fir the full, efficient and profita-
*
<•
ble development of such a system,"
*
The above resolution, with others recommendatory of the renewal
of the charter, having been adopted by the Stockholders on the occasion referred to, and ordered by them to be given to the public,
*
the time has certainly arrived for the public .to discern for themselves not only the* actual condition of this Institution,; represented
*
to be " gfeater and more stable than at any former epoch," but also
to judge for themselves of the expediency of that renewal of the
charter so strongly advocated by the committee in question.
*
JVheS wb consider how much the stability of mercantile credit
deposits on the soundness of our monetary systenf, and the pre-
judicial changes that nay te wrought on the general and individual
interests o/thef country, by the continuance or introduction of a vicious or imperfect system, the subject 'assufhes a character of the
deepest interest, inasmuch &s it is a subject, in the investigation of
which, every single member 'of the community is more or leas concerned*
Whatever views may be now taken of the existing charter, it must
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be admitted that its principles and provisions were, at the time of its
enactment, deemed alike just and adequate.
In somje of its parts,
however, it seems in practice to have proved defective; for in
speaking of the formidable difficulties they have had to encounter,
the Directors particularly advert to " an interesting and hazardous
experiment" they were compelled to resort te in self-defence, or
rather in counteraction of a certain " disabling provision of the
charter."
It has&een asked whether the counteraction thus alluded to hag
not involved the Directors in the discharge of duties somewhat incompatible and contradictory, in regard to the discrimination of what
was due to the public, and what they felt bound to perform for their
own body; but be this as it may, if all their experiments have succeeded without endangering the stability of the Bank—if the
privileges exercised by this Institution have had no tendency, as
some have apprehended, to render the interests of the many secondary to the few—if, in short, we have been entrusting our monied system to able and faithful hands, it might indeed be questionable,
whether it would be consistent with sound policy to disturb its administration.
But were the merits of the system, to which the committee have
paid so flattering a tribute, admitted by all, it would not follow that
one more perfect yould be less desirable, nor would it furnish'
grounds for supposing that an improved one was no where to be
found.
At any rate, the experience this and other countries have
acquired upon the subject of banking has been purchased too dearly*
to be lightly thrown away, and the time has now arrived for every
practical man to contribute his mite.
Men of letters being usually
men of theory, have no opportunity of measuring the opinions which
they have adopted upon hypothetical reasoning by the* standard of
experiment.
To have this subject, therefore, safely dealt with or properly
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judged of, an appeal must be made to the feelings and intelligence of
the really practical men of business.
Discussion must be invited;
some may holdback, in consequence of the tendency of human
nature to realize the old adage, and to get rid of trouble by transferring the business of every body to nobody—but if projects are
brought forward—if measures are proposed, those who are likely to
be affected, by them will be excited accordingly, and however illdigested or ill-conceived they may be found, no harm can at any
rate ensue* On the contrary, the excitement they are not unlikely
to produce, is precisely that excitement which, at sijch a time and
on such a subject, is required.
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Nevertheless, as a national Bank should stand insulated, and be
set apart from all political influence, even discussions, upon such a
subject are not to be desired, unless kept free from political excitement
A. national Bank should belong to, the ukolt community, or
its own expressive appellation is disregarded.
It is an Institution
which should benefit the country at large, not confined in its opera-*
tion to a part nor limited to any sect or party.
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After the numerous evils which have arisen from the instability
of our currency, it is believed, the public were1 never better disposed
than at present to countenance and give consideration to any plans
which may be brought forward with a view to lessen the injurious
effects of the groat fluctuations constantly occurring,in the value
«oF money—-^without entering, therefore, upon any lengthened disquisiturii* on banking systems, these remarks will be restricted to
what is thought to l*e the real object of inquiry by the* nation at large.
' namely, what better* plans can be devised than now exists for the attainnient of a sound currency; or in other words,* can any improved
principles be suggested for the basis of a national Bank? To meet
this inquiry the following outline of a plan is respectfully submitted.
1st. That a Bank of the United States be established by a new act
of incorporation, fir the term of twenty years, with a capital of
thirty-scven and a half millions of dollars, whereof
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Ten millions to be subscribed by the Government of the United
States, and
Tweke and a half millions by the several States, in the tmhe of
their electoral votes, {subject tchtnodificatioiis introduced hito
Sec* llth.) in a Stock bearing four per ceni interest, payable
halfyearly, and subjeet to the restrictions hereinafter specified*
The remaining fifteen millions of capital to be subscribed by individuals or corporate bodies', and paid for in money.
The Stock, in which the subscriptions of the Government and the
States, are to be made, to be irredeemable during the existence of the
charter*and inalienable as regards the Bank; except with the consent of the government, unfer circumstances of imperious necessity,
and then only in hypothecation, for money borrowed for the term of
one, two or three years.
The object contemplated by making this stock irredeemable and
It is 'well known that the whole of the original capital, as well as
that which has been adde£ to it from surplus profits of the Bank of
England, is invested in government stocks. Thus, k is obvious, that
its business is conducted without monied capital, and exclusively on
means arising frem its credit The English system would be feasible to the Banjc of the United States, yet it may be expedient to
yield in some degree to that which is 'prevalent here; this plan,
therefore, embraces a portion of monied capital, and fixes the
amount atfifteenmillions, and assuming, with a view to illustration*
an aggregate of forty millions of dollars, as constituting the amount
of circulation, deposits and cash capital, on which the Bank is ?o
derive a profit of 6 per cent, the yearly realization of profit will
amount to
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$2,400,000
To which add interest on twenty-two and a hall
millions at 4 per cent payable annually by the
general state governments
• «.
•
•
900,000
$3,300,000
Deduct 6 per cent dividend on capital of thirty-seven
and a half millions
,
2,250,000
There would then be left
.
$1,050,000
to meet loses, cover expenses and provide a contingent fund.
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In reference to the constitution and practice of the present Bank,
one amongst the most objectionable features that have been recognized and felt, is that which rendera the whole capital of thirty-five
'
millions available to the Institution in money.
In its anxiety to employ capital, wholly disengaged from investment, -the temptation to encourage overtrading must jiecessarily be
* induced, while the only security that can be furnished to the public
are the debts due by individuals to the Institution.
The furtim regulations applicable to the Subscriptions in Stock
are a*follows:
The Bank Stock subscribed by the general and State govemmejUs
not to be sold during the existence of the Charter.
Hie dividends of Bank Stock owned by the general and State
governments, and the interest on the A per cent Stock subscribed by
them, in payment of their Bank Stock, to be made payable aj one
and the same period, at the Bank.
The excess of dividends over the interest payable % the TJniUd
States and the several States, may be considered an ample substitute
for bonus to the former, and for taxes on the part of the latter.
2.
The United States to appoint eight Directors&nd the States
to elect ten Directory
butt not more than two. of those appointed by
the United States, nor more than one of those elected by the States,
to be residents of (he same State.
*
»The money stockholders to elect twelve Directors, each stockholder being a citizen of the United States, to vote in person, and
, no votes by proxy to l& allowed, excepting those of Trustees, Gfiidrddans, Executors and Administrators, who may delegate their power
to one of their associates—and excepting also corporate bodies who
may authorize one of their officers or a Director to vote on their
behalf. At the annual election, one fourth of the Directors elected
by the government, and by the money stockholders who shall then be
•n office, to retire from the board; and of the Directors elected by
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the States, two to go out of office the first election, three the second,
two the third, and three the fourth election.
Stockholders residing out of the State in which the Bank is heated may lodge their votes at an office, on a certain day to be specified,
or may forward the same by mail, addressed to the Cashier of the
Bank under v sealed envelope, on which shall be written the number
of shares which they respectively hold, bearing their own signatures
written across the seal of said envelope. The votes thus sealed, if
lodged in the offices'if the Bank, to be forwarded by the cashiers
thereof, accompanied by a statement and a list of the stockholders
and number ofshares then on the books of the respective offices, and
which are not to be opened until the close of the polls at the
Bank.
• Each subscribing State, in which an Office is established, may oppoint two Directors of such Office. Other Directors of Officesio be
appointed by the board of the Bank.
The preceding regulations concerning votes are suggested from
circumstances believed to have occurred early in the establishment
of the existing Bank, when the accumulation of votes in the hands of
an individual became a frequent subject of complaint.
The disad-
vantages attending the system are sufficiently obvious ; not one of
the* least is, that the Directors hold their places at the will of an individual—a tenure repugnant to men the best qualified to serve, and
under which they are almost necessarily excluded.
It is believed,
tjiat the rejection of proxy votes is indispensable to the election of
high-minded, independent men, who, would be able advisers of the
President, and would feel in the acceptance and discharge of such a
trust that-they had active and not merely passive duties to perform.
It will certainly be admitted, that the person most competent to
discharge the duties which devolve upon the President of a Bank, is
the one whose views upon commercial subjects, and whose opinions
respecting money and its uses, have been practically and not the*2
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reticallyfbrmed. Errors in judgmentmay even then occurrence the
importance of diffusing the great responsibility connected with the
management of a national Bank among the Directors of the Inatitution, and of selecting for the direction, men whose habits of
life have led them to a knowledge of the real wants of a commercial a n t industrious people, in a country where the production of
national wealth is in such rapid and progressive activity.
The
FrMidedt of a Bank should be assisted in the greater difficulties of
hid department by a certain number of Directors formed into an Executive Committee.
It would be the duty of this Committee, or any
one of them, to animadvert without reserve on such measures as emanated from the presidency which were at all indicative of hasfy,
ill-judged, or imperfect views; and as the success of the provisions
m view would call for rotation and not permanency of office, it is
recommended that " Jit the first meeting of the Board of Directors
(after ah election) a President, a Viet President and an Executive
Committee of five members be appointed for the term of one year, of
\ohich Committee the President and Vice President should also be
members exofficio."
The President and Vice President of the Bank to be re-eligible
as Directors;
the office of President, however, not to be held by the
tame individual two years in succession, but to befilled6y the Vice
President or a member of the Executive Committee.
3.
The Bank to bt located in Mew-York.
4.
Jin Office of Discount and Depositealso to be established in
the same city, for the management of its local business, with m
specific capital assigned therefor.
The advantages that would accrue to government, and to the
commerce of the country at large, from the establishment of the
Bank at New-York, are too obvious to need elucidation.
The
experience of Europe is conclusively in favor of the establishment
ef a common centre in each country, for monied operations, and
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the advantages derivable from the system are found to be greatly
enhanced by establishing it in the chief emporium of commerce,
That New-Vork stands in that position to the United States, and
from this circumstance, possesses paramount advantages, nong
will question.
As regards the establishment of an office in the same city ja which
the Bank is located, the plan is deemed essential to an impartial
appropriation of the capital and means of the Institution, Qjqii*
designed to effect that separation which ought to exist betweem
the mere local and the more general business of the country.
Under the existing system, the same men who manage the local
business o£the Bank in Philadelphia direct and control die operations of the different Branches ; thus the former almost inevitably
becomes an object of primary attraction, and the latter secondary
in importance, or what is worse, may be made subservient to the
interests of the city, within the narrow bounds of which are concentrated the views and feelings and pecuniary concerns of the
Directors themselves, at least of a majority of those who are residents of the city, and on whom, from that circumstance, the chief
direction of the affairs and business of the Bank devolves.
As well might the legislature of a single State be called upon to
legislate for the whole Union, as the Directors of the Bank of the
United States, whose appropriate duties apply to the superintendence and control of the great monied concerns of the nation, be
appointed to perform those appertaining to the local business of a
city.
In both cases the attraction of local influence and the pre-
ference of local interests would J>e alike exemplified.
T o expect,
indeed, that the duties of the one would be applicable to, or made
compatible with the other, would be to overlook the inferences
suggested by common sense, and to expect men to be what nature
has not made them.
Besides, in divesting the general board of all direct concern in
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the local business of the city, the station would become more
honorable, and would be filled with men of higher qualifications,
and of more liberal and national views than are requisite or perhaps even desirable in those who necessarily mingle in the active,
daily business of the place, and who are consequently best fitted
for a safe and judicious management of strictly local business.
Jin 'Office of Discount and Deposite to be established in each
State, but it shali not be obligatory on the corporation to place an
Office in a non-subscribing State, unless required by the Government of the United States so to do.
The Directors of the Bank to have the same, but no other control,
over the Office in New-York than is exercised over other Offices.
Capitals to be assigned to each Office, and varied at pleasure.
5. The Notes or Bills issued by the Bank to be made receivable
at any and all the Offices in payment of debts due the Bank or
Offices, and also in payment of Government Revenue.
It would be a salutary restraint on the issues of the Bank, to
make the notes receivable at all the Offices in payment of debts
due, whether by State Banks or by individuals, and it would have
an equally good effect in checking excessive loans, and restricting
the credit afforded on them; besides which it would extinguish the
chief and fruitful source of difficulty and dissatisfaction existing
between the State Banks and the Offices, and arising from the demands of the latter for specie. Now, it is a case of common occurrence, that the State Banks are called upon ftr balances in
specie, whilst the same Bank, and at the same period, have in their
possession a much larger amount^in notes of the Bank, payable at
the Bank, or at the distant offices.
Finally, these provisions would have the effect of producing a
more equal distribution of business, and of superseding that exclusive control of our monied operations now possessed and irrecistably acquired by the Bank of the United States. The State
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Banks and the National Bank would mutually check each other.
Indeed all experience shows a constant tendency to excess in the
issues and loans of our Banking Institutions, and the same experience proves that this tendency is not less operative on the Bank
of the United States than it is on the State Banks.
6.
JY6 note or bill to fkissued under twenty dollars.
Checques
or Drafts not to bear the similitude of current Bank Notes*
This restriction on the Bank jvill give the small circulation to
the State Banks, and operate as a check on excessive issues of the
former.
It will also have a beneficial effect on, by imparting sta-
bility to the currency, and as, generally speaking, the notes of the
local Banks, especially those of a smaller denomination, are confined in their circulation to their own States respectively, a demand
will be created for gold and silver for the various items of small
expenditure, which will at the same time serve to retain those coins
in circulation.
By the adoption, moreover, of a higher value for
gold, and the introduction of small gold pieces, travellers may supply themselves with coin in lieu of the five dollar notes and
checques now issued by the Bank of the United States.
Specie
would thus Ifecome more generally distributed, and by transferring
a portion of the treasure of the Banks to the pockets of the community, more time would be required to collect it for remittances
abroad.
Now, the basis of our circulating medium, from its being
chiefly in the vaults of Banks at the seaports, is liable to sudden
and extensive reduction, often compelling the Banks to extensive
and equally sudden reductions in their discounts and circulation,
whereas that portion of the specie which is distributed over the
country would, in the event of foreign deman£, gradually come in to
replenish the Banks, and, in its operation, be productive of the
same effect on prices.
7.
No note or bill having more than ninety days to run to be
discounted either directly or indirectly, nor any loan to be made for
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a Umger period than ninety days by the Bank or any ofUs Offices ;
and ever)/ note, bill or other obligation to be bond fide paid as they
respectively become due; nor is any renewal to be granted unless t he
essential interests of the Bank should require ity and then only with
additional security, and by the1 affirmative vote of three fourths of
the Board.
**
It should be a primary object in the administration of a Bank of
the United States^ so to regulatejts operations as to give ample
facilities to the real business of the country, without presenting any
allurements to overtrading.
%It
is believed that the discounting by the Banks of what is termed
long paper has more effect than any other measure in producing
excess in the operations of merchants, and more especially of business not based on capital. '
The true and legitimate purposes of Banking Institutions are
fulfilled by enabling the merchant who sells' his goods on credit
promptly to realize the amount of sales, and not by furnishing capital to trade upon, and thereby involving the Banks in the results of
such trading.
It was the wide departure of the United States
Bank, and the State Banks from this safe rule in 183$ and 31, that
produced in the latter year, the disastrous reaction of that period,
and the pressure on the money market subsequently and very
seriously felt in 1832.
The Bank of England, it is understood,
discounts no paper of a longer term than sixty-five days, and it was
a standing rule of the first Bank of the ffnited States and its Offices
to give a preference to paper not exceeding sixty days, when the
amount offered exceeded the amount appropriated on the day for
discount
t
If it be objected, that the limitation of ninety days will turn over to
the State Banks a larger share of business than they now enjoy, it
will be admitted that the Bank of the United States will thereby be
prevented from taking the lead in promoting operations which
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necessarily increase the hazards of business, and invariabi^result
in disastrous excess and reaction.
Had this restriction been incorporated in the charter of the
present Bank,,the excess o^ importations from Europe and Canton
in 1831-2 would not ha^e occurred, and our most enterprising
merchants would not have had to lament the loss of their earnings
for several years previous to 1832, and in many cases, the entire
loss of property, besides the involvment of their friends.
8. The whole amount of profits to be divided half yearly, eav
cepting only a reasonable sum to provide for losses; but the fund
thus reserved not to exceed two millions of dollars at any one time*
9. The Bank not to charge over the rate of 6 per cent, per
annum on loans or discounts, not to deal in Foreign Exchange,
but to have this privilege in Domestic bills of Exchange and in
gold and silver bullion.
The privilege of dealing in foreign exchanges requires, to say the
least, a very discreet and skilful exercise, and the expediency of
conferring it on any incorporated body has long been questioned. It
is believed the regulation of foreign exchange had better be left to
the actual operations of trade, and therefore relinquished iiHo the
hands of those whom it most concerns, and whom, it is presumed,
will prove the best guardians of their own interests.
In promoting the particular views of the Bank, the interests of die
mercantile community must often be lost sight of; the very combinations which the Bank, with a view to its own temporary conre-*
niences, or supposed advantages, may occasionally set on foot,
may as often produce injuriousfluctuationsin the rates of exchange,
which, if undisturbed by schemes purely artificial, they would sot
be exposed to.
•
Left to its natural operation, the course of exchange would serve
as an indication of the relative amount of imports and exports, fore*
warning the merchant of any accruing mass of the former, uA
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guarding him in season againt the effect ©f specie shipments, to
make up the deficient value of property exported; but while the
Bank, wielding its enormous means and credit, nearly monopolizes
that branch of business, the merchant is deprived of that sure and
faithful monitor, and, as the victim, is obliged to yield bis skill, his
intelligence and his interests to those who are empowered to dispense and* unwilling to entrust him with the exercise or use of
either.
l(K
*
'!
The amount of Discounts and loans not to exceed forty
millions of dollars ; but, if from the aggregate statements of the
Bank and its Offices it be at any time found that this sum has been
exceeded, the excess in that case to be reduced within ninety days.
11.
Hie Stock of the Bank appropriated to any on* State not to
be less than 200,000 dollars, whether entitled by its number of
Electors to this amount or not, but after assigning this minimum
to the States that may be thus restricted; the remainder of the
twelve and a half millions to be apportioned among the other States
according to the provisions of the first article, and the capital may
be increased, on the admission of ecmh new State into the Union, to
the extent of $200,000, if desired by such new States.
12.
If the capital assigned to an Office be more than double the
amount of Bank Stock appointed to the State intwhich such Office
is located, the excess may be taxed at the same rate as State Banks
tn the same State.
This provision is introduced on the^ presumption that the Bank
will pay dividends at the rate of 6 per cent, per annum, which being
2 per cent more than the interest on the State Stock issued in payment of the Stock of the Bank,Vilt yield to the States an equivalent
for the highest rate of tax imposed upon double the amount of the
capital of the State Banks.
13.
*
The Bank to render the same services to Government in the
collection and distribution of its funds, and on the same terms preuribed and provided for in the charter of the existing Bank.
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Such provisions, in the existing charter of the Bank Of the United
States, as have not been alluded to m these remarks are those
which', if necessary, would, it is believed require no essential
modification to render them suitable for the adoption of any new*
Bank.
' *
The allusions made to the present Institution have certainly proceeded from no improper feeling, but have been unavoidable in
pursuing to their results the actual operations in which it has been
engaged.
T^b^£, therefore, it is admitted that many circumstances connected with the Bank of the United States, and affecting i,ts course
of policy, may have existed, of which no account has been taken in
the arguments submitted with the foregoing plan, they cannot, it is
thought, be arraigned on the score of prejudice, whether personal
or political 5 the most scrupulous endeavors having been made to
confinfe the reasoning upon this important subject to events known
to have occurred.
*
After reading and discussing the foregoing # plan, and introducing some amendments adopted by the meeting, the following
Resolutions, proposed by the Committee, were unanimously passed.
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is
RESOLVED, that this meeting, approving of the Plan for a N a tional Bank,* as amended and reported by the Committee appointed
for its examination, hereby recommend the same%> their fellow
citizens of the United States; and in submitting the Plan to their
consideration, invite them to join in an application to the Congress
of the United §tates for an act of incorporation of a Bank based on
the principles contained in such Report.
RESOLVED, that 1000 copies of this Report be printed for distribution to the public.
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@FedFRASER