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R E A S O N S

FOR THE

INEXPEDIENCY OF CHARTERING




A

NATIONAL

BANK.

DEDICATED TO THE PRESIDENT OF THE UNITED STATES.

NEW

YORK:

WILEY AND PUTNAM.
1 84 1 .




REASONS,

&,c.

T H E history of our country for the past ten years pres e n t s the most striking* vicissitudes that ever perhaps befell
w i t h i n so short a space any commercial nation. It has travelled through all the degrees of fortune and misfortune, and
m a y be said to have touched on cither hand the extremest
point. We do not intend to dwell on the effects thus produced.
It is not necessary to paint a picture with which
all among us are familiar ; but we may remark in passing,
t h a t neither the civil wars in England, which in the seventeenth century lacerated the bosom of that country for upw a r d s of thirty years, nor the sanguinary revolution which
uprooted the foundations of society in France some fifty
y e a r s ago, nor our own war of Independence, which scourged
t h e land for more than twenty years, produced so general
and violent a change in the circumstances of individuals, or
overwhelmed the land with such universal bankruptcy, as we
have witnessed in our own country and in our own day. In
another point of view, too, our pre-eminence is remarkable.
T h e mass of crime that has been engendered and matured among us—not among the wretched and ignorant, but
among the rich and reputable, in situations of trust and
honor, occupying the higher stations and exercising the
widest influence in society—is not to be equalled in the
history of any civil community -with which we are acquainted
Now, when we oOme t6 irjquire into the causes of this
moral ruin, the lq/(d£QXj& affects of which surround us on







every side, we are forcibly struck with the fact that it c a n not be attributed to any revolution in the State, nor t o
foreign oppression—there has been neither civil nor o u t ward war ; nor to convulsions in general commerce; nor t o
a bad condition of things in any other country with w h i c h
we are closely linked in trade. The outward atmosphere
has been all calm and peaceful, while within our borders a
disorder has been ramn^\ consuming the vitals of trade a n d
property, poisoning the morals and peace of society, and.
leaving in its train a scene of pain and exhaustion, capital
wrecked and scattered, and the nation oppressed by a
weight of foreign odium and reproach, such, we presume t o
say, as no commercial country ever before presented without the sad reality of some horrible convulsion,—such a s
adorn the mournful pages of history. Where, then, are w e
to find an adequate cause for such wide-spread disaster?
The ready answer is at hand : our financial difficulties have
produced the evil- Did financial ditViculties ever rise so in
dignity before ! Blessed country, whose financial difficulties
can inflict upon it pains equal to what other nations have
experienced only as a bitter judgment on the atrocious
crimes of revolutions, or as the accompaniment of some
great calamity that has reft them at once of liberty and
existence !
Still pursuing the inquiry, if we ask for an explanation of
these financial difficulties, we find that the only reasoning
answer we are to receive has been already given. Beyond
this all is doubt, confusion, and ignorance. Financial theories have been taken into the keeping of political partiesThey are bandied about bv demaffosrues in the thick and
Boeotian atmosphere of political meetings, and questions that
demand the highest degree of calmness, candour, and patience, astute and clear-sighted powers of reason, for their
proper investigation, are presented as a sort of test oath to
all the reckless men in the country, to prove their eligibility to

office. Better men too, those at least who do not gain their
daily bread by daily wrong, who do not live upon office, nor
expect to do so, lower their heads beneath the muddy waters
of party, unheeding where the stream may carry them, without ears to hear or eyes to see for themselves* Hence it is
that public sentiment among us, instead of being virtuous and
enlightened, marked by good sense and honesty, a check
and intelligent guide to the public servant, has become a
poor, blundering, blinded, inconstant creature, unrespected
and unfeared, whom every politician in the country may aspire to shift, confound, and defraud—even to manufacture,
SLS his own unprincipled designs may require. Hence it is,
that the country is covered by a weak and besotted legislation : laws of temporary expediency, of positive iniquity, of
certain injury to the happiness and welfare of society; a
tangled net of paltry, unprincipled devices, which bid fair
to reverse the example of a people rising in their strength to
overthrow a government, by showing how a government
may overthrow and destroy a people.
If there is any one blessing more than another, that needs
to be invoked for our country at the present time, it is that
men may learn to reflect—to form calm considerate judgments on public affairs, and to give these judgments utterance. There is about our countrymen a subserviency, not
to kings or potentates, but to the rule of a majority, that
does not grace, but disgraces the front of a freeman. We
are so little habituated to the exercise of our reason upon
matters of public concernment, that the faculty itself becomes
dried up and withered ; and in place of it, we are apt to
foster passions and prejudices, winch in truth form the very
worst substitute ; for even these passions and prejudices are
not of free and natural growth, but artificially excited and
planted at the will of party leaders. This spiritless lack of
intellectual vigor is a deformity in individual character, but,
in a country blessed by free institutions, of fatal detriment




6

to its safety and good government. Strange as it m a y
seem, the people of this free country are the truckling
slaves of unseen influences, but not the less imperative
because unseen, that haunt them at every turn. To t h e s e
they surrender self-respect, self-judgment, and other p e r sonal rights, that in less favored lands arc wont to be p r i z e d
above life itself; and this cringing deportment, be it r e marked, too, is in painful contrast with the free and u p r i g h t
bearing of the unfortunate subjects of governments, w h o s e
institutions and condition we are disposed to visit with o u r
scorn or hatred.
These remarks are but preliminary to our main object.
The question of a National bank is likely soon to be stirred
in Congress, and it is this question we now propose to discuss, with all possible brevity. We do not claim that o u r
opinions are infallible, but we respectfully urge upon o u r
readers to put away trite and childish common-places, and
to examine this important subject with something of t h e
candid air of men, the reasoning part of whose nature is not
quite buried beneath sordid passions and fears. The good
of our country must be, as it ought, our governing principle*
Patriotism is a capacious as well as noble feeling; it includes in itself policy, expediency, and our own individual
interests,—we cannot cherish it without profit and honor,
and we aro not permitted treacherously to evade it, without
punishment of the perfidy, instant and direct as the lightning
from Heaven.




§ In the present age the currency of all commercial
countries is composed of gold and silver coins, or of a mixture of these with paper. This paper is but the representative of the precious metals, for it exists exclusively
in promises to pay them ; it cannot serve the purposes of
money out of the country where issued ; it has no external

currency
; whereas gold and silver, in the shape of coin or
b ullion, are current in the general market of the world as
w e l l as within the borders of each country respectively,—
a n d hence these metals form the general currency everyw h e r e of value, of the same value, and that value constant.
N o w this general currency, enormous in amount when
g a t h e r e d into one sum, is divided among different countries
in a certain proportion to their population, their wealth, and
t h e i r trade, and this division depends on natural laws, which
it requires much effort to disturb, but none to enforce. The
s h a r e of each country, thus ascertained, is precisely the
a m o u n t of money requisite to exchange the products of its
s e v e r a l parts, to transact its business, and to serve the
c o m m o n purposes of life, whatever that may be. It is
variable, because the population, the wealth, and trade of
t h e country, may in the course of years increase or diminish,
b u t the proportion by which it is governed is not so. Now
t o apply this principle, let us take a single instance—our
o w n country for example* We have a mixed currency,
depreciated at times by excessive issues ; but we will select
a period when it is not depreciated, and under this condition
competent observers have estimated the amount of specie
in circulation at eighty or a hundred millions, to a hundred
millions of paper, making in round numbers an actual
currency of two hundred million dollars. Proceed we, then,
to strike out of existence this hundred millions of paper,—instantly, the channels of circulation it filled are equally occupied by gold and silver, and this without the aid of laws or
e/Iort of any kind. It comes we cannot tell from where, but it
conies as surely as that the sun will rise tomorrow. A case in
point from a neighboring State—in 1828, the Legislature of
Pennsylvania enacted a law prohibiting the issue of bank
notes of a less denomination than five dollars. A prominent member of the Senate opposed its passage in a speech,
from which the following sentence is an extract : " Pass




s
this law, sir, and there would not be specie enough i n a l l
the world to supply your want." What shall we s a y o f
this enlightened legislator, but that he was wrong. TChe
result proved it. for in six months after the law was p a s s e d ,
small notes entirely disappeared from circulation, and w e r e
replaced by silver change, without money pressure or d e rangement of business of any kind. The change w a s s o
tranquil as to be untelt.
Reverse this principle, and we discover a still more important one on the back of it : it is that if you put in c i r c u lation paper. WIKTC specie circulated before, you immediately
drive the latter out of the country—In other words, t h o u g h
paper and specie may circulate together, provided there b e
room for both, yet in proportion to the issues of the o n e
the other ^vill disappear, and if the amount of these issues of
the requisite denominations insufficient to fill the channels of
the currency, the other will totally disappear. There is n o t
a section of our country that docs not atiord repeated proofs
of the truth of this.
Now, from these data, we establish two points, very useful
in all reasoning, on our present subject : 1. We know the
amount of specie that will inevitably flow into the country
and permanently remain in its service, provided we remove
the paper barrier that keeps it out : the full amount that the
population, the business the habits ot the country require,
whatever that may be : and C A o know the amount of
V
specie we lose, if we prefer to have a currency partly or
wholly of paper. These points properly directed must fatally transfix the notion, that without paper, the country would
not have sufficient money current for its trade, its business,
and the wants of life. At this moment, in the State of N e w
York, the currency is not depreciated : and if every bank
note were destroyed, it would indubitably remain the same
in amount though changed in its nature.




9
§ Pass we now to the consideration of what this country
has been over and over again familiar with,—a depreciated
currency. The amount of money circulating in any country, i, e. the curxxncy of any country, bears a fixed proportion to the sum of its population its wealth, and its trade.
The currency of Great Britain is larger than our own, and
the latter exceeds the currency of other countries possessing
a smaller aggregate of population, wealth, and trade. The
currency of Great Britain is larger now than it was in 1815,
at the end of the war, and the currency of this country has
very much increased since the peace of 1783 ; in both countries, occasioned by the growth of their population, wealth
and trade, respectively. In using the term money, we have
single reference to the precious metals, to that which is universally current, and not to paper, which is called money
and serves its purposes only in the country where issued,
but outside of that country is no longer current. In the
precious metals, then, the currency of every country must be
measured, for in these only it exists. If in the case of any
particular country, paper has been substituted instead, we
must then estimate what quantity of the precious metals it
displaces, and that amount is the true, just and indisputable
measure of, and in fact is the currency, of that country.
Hence, we arrive at the impregnable position, that the
currency of any country can grow only with the growth
of the sum of its population, wealth and trade. Should the
sovereign power—the experiment has been tried-—coin many
millions of money, and continue this for years, the currency
would not be increased thereby one iota: the excess of coin
would constantly leave the country, or if the physical means
of departure were wanting, equally pass out of circulation
and lie idle at home. But what is true of money properly
so called, is not so of its paper simulator. It is impossible
to force more coin into circulation, than the precise amount
that measures and makes the currency of the country ; but
2



10
issues of paper, provided they have value or are so reputed,.
may be made to circulate to twice, to treble, to quadruple
the amount of the currency, or, in fact, to an extent unlimited
by the law that applies to coin. Now, bearing steadily i n
mind what the currency is. and hi/ what it is measured,
when we find it thus overlaid by issues o{ paper, we r e c o g nize at once the fact that it is depreciated, and depreciated
in proportion to the excess of these superfluous issues; a n d
the glaring evidence oi this is ever present in the rise of*
prices at home, though unfortunately the prices of our p r o duce and manufactures in foreign markets remain unaffected
by the change.
Again, there is no doubt that the currency of a country
forms part of its capital, but this is true only of currency
such as we have described it. The excess ot paper issues
is not capital, nor does it represent it, nor even point to it ;
it plays many important parts certainly in staying its growth,
and even destroying a country's wealth, but it cannot increase that wealth a single shilling. On this point the opinion of all countries and all men is unanimous, for a depreciated currency, w hen distinctly held up to view, is universally
dreaded as a curse.
Some persons however, though conscious of the disadvantages of paper issues, which indeed all admit, yet fancy
they find a particular benefit in them, which this country
can ill afford to surrender. Without paper, say they, the
manufactures and trade of the country would still be in the
infant state of colonial times. If this were so, it would stand
out a remarkable fact, inexplicable by any oi the known
principles of human nature, bv any of the recognized means
of public prosperity, by any ot the common elements that go
to make up national wealth. Hence, intelligent and cautious
minds would receive it at the outset with suspicion, and as
the processes of reason, competent to develope the truth on
all other subjects, are powerless to account for this, they




11

would naturally turn round for proof; but the only evidence
that can be adduced is the fact, that since the period of our
national independence, and even before that time, paper
issues have existed among us, and that the growth of our
trade and manufactures, whatever that may have been, has
taken place under the influence and in the close embrace of
this system. True, but this evidence may be used on the
other side too ; it is as easy to say that paper issues have retarded, as to insist that they have favored, the growth of
trade and manufactures, with this difference, however, that
the former assertion coincides with the result our reason
teaches us to expect, while the latter is irreconcileable with
it. Again, if this virtue did really reside in paper issuesf
TvouJd we not expect to find the growth of trade and manufactures, within the same time, greater in a country where
they form a larger part of the currency, than in one where
they constitute less. In England, paper issues form a far less
portion of the currency than they do with us, and this is as
true of any period within the last sixty years as it is at the
present moment, and yet any person who should affirm that
the growth of our trade and manufactures, great as it has
been, exceeds or even approaches the vast increase of trade
and manufactures in that country within sixty years, affirms
what is not consonant with the truth ; and yet even in England, there are many sound thinkers and able statesmen to
contend that this increase has been retarded and stinted by
the existence of paper.
No reasons then can be shown, why paper issues should
favor the growth of trade and manufactures, and no proof
that they have ever done so ; in reason and in proof, however, of their opposite tendency, the arguments and the evidences are numerous and irresistible ; of these we shall
select but one, that may serve our purpose as well as a
thousand.
We must bear in mind that individual capital makes up







12
the sum of national capital or national %vealth, and that consequently ne\*er a bankruptcy happens in trade without loss
of capital to the country. If the bankrupt's assets suffice to
pay his debts, his own capital has been entirely lost ; if not,
then, in addition, he has diminished the capital of other people- Associated or chartered companies, formed for constructing canals or railroads, or for other purposes, no matter
what, stand in the same category ; if their capital has been
expended upon objects that will not return a net intej-est,
more or less of it has been lost in proportion as those returns
are great or small. States that have borrowed money in
Europe, for internal improvements, that, when made, do not
pay interest upon their cost, have also diminished the capital
of the country ; the money so borrowed, remains an outstanding debt, or it is paid : it can only be paid by a resort
to taxation, which is directly a forage upon the capital of
individuals, and in either case it is subtracted from the
amount of the nation's wealth.
In this way, during the reverses of 1837, and again of '3940, an immense amount of capital was lost to the country.
No one cazi doubt, no one denies, that the proximate cause of
these was the paper issues, which, just prior to the period
first named, had reached an amount exceeding bv more than
fifty millions their amount at the present day, and by a
still larger amount the measure of the country's currency,
and again, between the first and last named period, after
dwindling down to a comparatively small compass, had
again overflowed—a single institution in the space of six
months having put out forty millions. But examples of this,
and always attended with the same effects, the least to be
regretted of which is the heavv loss of capital, have been
frequent in our country. Few of us have not lived long
enough to have witnessed it not once, or twice, or thrice
only, but many, very many times ; and there arc few persons, if any, whose individual losses thereby occasioned,

13
h a v e not made them realize in their own persons, a portion
of* the loss of capital which the whole country has sustained.
T h e s e examples, too, stretch over the whole of our history
since we have been an independent nation ; within a year
after the first charter of a National bank in 1795, paper
issues visited the land with wide-spread disaster, which has
"been the type of subsequent and oft-repeated instances of simi l a r ruin and distress- Now, unless heavy and oft-recurringlosses of capital are supposed to favor the growth of trade
and manufactures, this effect cannot be predicated of paper
issues, our experience of which—and no country ever had
such ample and familiar acquaintance with them—is invariably attended by injury and loss. No : the growth of this
oountry in wealth and greatness has resulted, not from paper
issues, but in despite of them. The fresh and vigorous energies of a youthful nation, the enduring virtues of our Saxon
ancestors—blood, bone and muscle,—have enabled us to contend against them, and clearly to understand what we
rnight have been, had no such impediment existed in our
path.
§ Banks and banking, properly so termed, describe a business very different from the issuing of paper intended to
pass as money. Their appropriate employment is the receiving other people's money on deposit for safe keeping,
lending other people's money or their own on security or on
credit, and finding a profit in the equation of exchanges on
distant places. Such is the occupation of the numerous
banks that are found in all large cities in Europe, and in all
other countries where European manners and commerce
have penetrated. Banks of discount and deposit had thus
existed for many centuries, but the charter of the Bank of
England was the first notable instance of a bank of issue.
This deliberate grant of the sovereign right of making the
money of the realm, set a fashion that has ruled in England







14
from that time and subsequently passed to this country. l a
the former, however, ever rigidly hampered by narrow
bounds, it has produced less—in this, unlimited and licentious
to an extreme, it has worked greater ills. The object of the
Legislature in passing this charter was connected with the
temporary convenience of the Government, but had no relation to any expected benefit to the public. The taxes and
customs in former reigns had supplied its wants ; but gradually becoming insufficient for the purpose, recourse was had
to loans ; but these were sometimes effected with difficulty,
and always with delay; and now, for the first time, the
plan was suggested of inducing the public, by the temptation of an extraordinary privilege, to subscribe a capital that might answer as a standing reservoir to supply the
necessities of State. The evils of paper issues were not
entirely unforseen ; but no one supposed that there could be
advantage in them; and all the convenience to the Government thus purchased, had reference simply to the facility of
borrowing large sums. The object was attained, and in the
course of not many years, the whole of the large capital of
the bank became invested in loans to the Government, and
so remains to the present day. At the time of the formation of the Federal Constitution, these evils, then recognised
in England, the recent fate of Law's bank in a neighboring
country, and the still fresher traces of the Continental issues
in our own, induced its framers, while they announced an
exclusive power in the Supreme Government to coin the
money of the country, which of itself barred the right of
any State to issue paper substitutes, to insert for greater
safety a prohibition, which, had it been duly obeyed, would
have saved us from copying a bad example only to display
its inherent vices to a yet unexampled extent.
We have thus far confined ourselves to a short-hand
statement of familiar principles, universally assented to by
all who have given attention to the subject. We have all

15
experience of the practical evils of paper issues ; and
t h o u g h all of us have not equally applied these principles to
t h e state of things before us, yet we have onjy to do so to
s e e the cause of the country's past and present misfortunes
s t r i p p e d of every thing like mystery. We now come to the
discussion of our more immediate subject.
§ At this moment there exist in the United States nearly
o n e thousand banks, chartered by the laws of twenty-nine
S t a t e s and Territories, and only controlled by the Legislat u r e s from which they have received their charters z^espectivelyWith the exception of New York and New England,
t h e s e banks are practically released from payment of their
d e b t s ; and hence, in most parts of the country, the currency
is depreciated, and would be much more so, had not NewY o r k and New England continued to maintain cash payments* No plan has yet been suggested by which uniformity, or even an approach to it, can be attained in the
l a w s by which these numerous institutions are chartered, or
in the principles which regulate their business and mode of
operation. Indeed, under present circumstances, the wit of
man cannot devise any such plan- It is easy to lay down
the rules which should govern the business of any individual
bank ; but when we desire to enforce these rules upon a
thousand banks, with a National bank above them, whose
power is without responsibility and supreme, we find the
task impossible. Many among us are disposed to dwell on
the few and simple principles which should rule in the direction of every bank disposed to act faithfully by its stockholders and the public, and others discriminate as justly what
they call the abuses of the system, each party forgetting the
while that the difficulty of the case lies not in searching out
principles obvious to every understanding, or in discovering
abuses which glare upon every eye, but that the present de-




16
mand upon their wisdom is for some practical, permanent,
and unfailing mode of enforcing these principles and preventing these abuses.
Will the charter of a National bank answer these ends ?
The power of a national institution over State banks is simply that of the stronger over the weaker, but it involves no
principles which can be set to watch, to guide, or restrain
the business or the abuses of these weaker agents. It is a
creature of precisely the same constitution with themselves,
acting in the same sphere, with like propensities, subject to
like temptations, and harboring the same inherent vices
it is called to control in them. If the directors of a State
bank sometimes swerve from their duty, so do the managers
of a National bank,—if the one sometimes abuse their trust
to private ends, so do the other,—if the former are sometimes shamelessly dishonest, so are the latter,—with this
difference, however, that the power and the opportunities of
evil are much the greatest in the bank of controlling capital, even if it does not give to these minor institutions the
ability to expand their issues injuriously—such, however, is
the fact.
We have witnessed in the course of some fifty years, the
existence of three national institutions, each one of which
has run precisely the same course of alternate expansions
and contractions, dissipating the fortunes and happiness of
thousands, disordering trade and wasting the capital of the
country, each one of which has been marked at some period
of" its career by confessed mismanagement, by palpable
fraud and dishonesty, by the indignation and opprobrium of
all honest men. While the process of expansion is going
on, every one is easy and comfortable, and some are sure to
exclaim, Was ever country blessed with such a perfect currency ! But in two or three, or five years, the periodical revulsion comes, and this perfect currency vanishes. To call
the currency of a country with sixteen millions of inhabi~




17
tants, perfect, which depends on the will of a knot of silly and
wicked men, or who may be both, or of one man who does
not or may not possess ordinary good sense, or ordinary
integrity, evinces great lack of wit; and yet ever since the
passing of the act of Congress, in 1793, adopting the Bank
of North America as a national institution, this country may
be said never to have had a currency of any other description. A well managed bank never does harm. True ; but if
our trust and our safety are to repose upon good management, State banks are equally susceptible of good management with a bank chartered by Congress ; and if they were
universally and for all time well managed, the argument for
the necessity of a national institution is without object—but
while the contrary of this is the evil to be cured, to invoke
the form of a National bank, more liable to mismanagement,
more difficult of good management, and powerful to produce
ills in these very State banks, which would not be found
without it, would seem to be like reasoning in a circle : it
brings us back to the point whence we started.
The folly of entrusting the currency, an interest more
vital perhaps than any other in the frame-work of society,
to the characters of men, has been often evinced in this
country, but never perhaps more strikingly displayed than
in the recent developcmcnts at Philadelphia,
For some
years these men have exercised supreme control over trade
and business ; their measures have worked great ills to individuals, and inflicted great evil on the country at large ; and
yet so completely were their operations hidden by the screen
of a national charter, that, for some portion of this period,
they were lauded by a large and respectable party in the
country as its wisest and purest friends. The curtain now
falls, and reveals in these very individuals a profligacy of
principle and conduct that may have been equalled, but
never has been surpassed, in the annals of fraud and peculation,
3



18
§ Another chief argument for the chartering a National
bank, is that it may serve as a regulator of the exchanges.
This regulation of the exchanges is a phrase taught us by
the same master genius, who has maintained in theory and
practice the necessity of millions of bank issues, to help the
crops to market, and again diminishing the circulation to an
equal amount, to correct the tendency to overtrading, and
the hundred other absurdities and criminal disturbances of
trade and industry, which it has been his pleasure over and
over again to inflict upon us. The phrase is obscure in
meaning ; but the best meaning that can be affixed to it involves a manifest and injurious fallacy. The desired end
probably is, that the merchant in the Atlantic cities who sells
a bill of goods to a purchaser residing in a different State or
distant part of the country, may receive a remittance which
shall be at par at the place of sale. In other words, that
he may be protected from loss by a difference of exchange
or difference of value between a depreciated currency and
a sound one. Let us remark, that the seller is affected by the
fluctuation, and not at all by the permanent rale. A change
occurring subsequent to the sale may involve him in loss,
but circumstances existing at the time, and continuing unchanged to the moment when the goods are paid for,
enables him to avoid injury by shaping the contract accordingly. The evil of disastrous fluctuation belongs exclusively
to a monopoly of the business of exchange by a National
bank ; under the operation of the natural laws of trade it
never can be found, as surely as it always has and always
will be felt under the influence of a national institution, the
whole art and mystery of whose dealing is to expand their
issues when about to sell, and to contract them wl^n disposed to buy.
The theory of exchange, though much mystified by
the arts of evil teachers, is easily comprehended. Each eoun-




19
try, or district of country, buys just as it sells ; the price
obtained for its products, is the fund with which it purchases from others ; these products being sent abroad, and
the proceeds used to purchase what may be necessary or
desirable at home. It is usually said that no country has the
ability to purchase more than it sells, and truly said, for
though a country may for a short season overtrade, yet this
is instantly followed by the embarrassment of debt without
means to pay and the necessary crippling of future purchases until the balance be restored. The products of the
country, natural or manufactured, are usually forwarded by
one class of merchants, and the purchase of foreign articles
for use or consump lon forms the business of another.
Thur, suppose an exporter has shipped a cargo to England
and sold it there, his object is to receive his money out of
the hands of his English correspondent.
An importer
appears v^ho wishes to place his funds in England, to purchase goods there: instead of fetching money across the
ocean and sending money back again, the one sells to the
other a bill on his correspondent, and this effectually answers the object of both—this is simply exchange.
TVow, it is apparent, that as a country buys with the proceeds of what it sells, there will be just as much exchange to
sell as there is any want to buy ; and thus in every country,
exchange on any other country with which it trades, unless
there be overtrading, will be constantly at or very nearly at
par. If there is overtrading, it amounts to this, that the country has purchased abroad more than it has funds abroad to pay
for, and of course there will be an increased demand for
bills to remit, and this extra demand will raise the priceBut this is a positive advantage, for it serves to indicate the
evil that otherwise might not be so readily discovered ; it is
a sure guide for the daily operations of business, which the
merchant cannot \veH do without ; and so soon as the excess
of importations so injurious to the whole class of sellers no




20

longer exists, the price resumes its accustomed level, and
the merchant may safely import acrain.
For some time
back, exchange in the city of !Xe\v York, on England, has
been at par, and unless artificial disturbance should be
again introduced, it will probably never for any length of
time rise much above the cost of importing money.
Domestic exchange is precisely similar to foreign ; the
same principles apply to it: it is governed by the same
natural laws. Take for instance, Xew Orleans. This city is
the commercial centre of the South-Western States ; it
receives the sugars and cotton from the country, and ships
them to New York and Liverpool for sale* and with the
proceeds purchases goods, which it fetches home and distributes to the surrounding country.
From the circumstance that its shipments are principally composed of agricultural products, bills are less scarce at the seasons of the
year when the crops come to market than at others ; but
besides this, and without overtrading, can any one adduce
an intelligible reason why exchange on Liverpool and New
York, in New Orleans, should ever much exceed, if at all,
the cost of transporting money to those places respectively.
None can be adduced ; and our actual experience would
always have conformed to this, were it not that we have
lived in the grasp of an artificial system that distorts and
displaces the natural laws of trade, as it does for the most
part the natural obligations of justice. So with every city
and neighborhood in the country, no matter where they
trade or where they buy, exchange depends on causes
equable and beneficial as the laws that move the tides,
accompanying and preserving a condition of things, which,
instead of being a misfortune or impediment to any pursuit,
is the only state in which trade thrives, the country
prospers, and the industry of individuals secures its merited
reward*




21
T h e premium of oxehnngn, which, when loft to the control
of natural cau<^^ is constant and small in amount, and which
in no instance in this country, even at the most distant point
from the centre of trade, would ever exceed two or two and
one half per cent., is of no disadvantage to any body. The
merchant purchasing abroad charges it in the price of his
goods, and the consumer receives it in the increased value
of his funds produced by the sale of crops and manufactures abroad. This is not generally thought to be so, by people in business, but it is nevertheless true. It is not admitted,
because our theory has always been prompted by the artificial effects of artificial causes, and not by the state of
things that must inevitably ensue so soon as these causes
are removed. The cost of exchange among us has ordinarily been affected by the existence of a depreciated currency
in one place or another, or by the fact that there has been
but a single dealer in the article throughout the country,
whose enormous capital has enabled him not only permanently to drive away all private competition, but from the
power possessed by him to increase and diminish the abiJity
to buy, to make the market according to his own exigencies.
Thus we assert the broad proposition, that the interests of
people in trade require no regulation of the exchanges ; the
phrase itself is a palpable absurdity, akin to that of regulating the currency, and of restoring confidence, which the artful folly of one man has for years been indoctrinating the
country into the belief, are essential blessings exclusively
within the power of a National bank to dispense, whereas
the truth will sooner or later be established, that the vicious
system which he has so long guided, never can secure a
permanently good currency, and never can inspire stable
and reasonable confidonce.
But suppose it wore within the power or will of a National bank permanently to sink exchange below the natural
rate. This would not be of the least advantage to trade, or to




22

persons engaged in it : on tho contrary, it would produce
an unnatural state of things, involving inconveniences and
dangers. But this is what no National bank has ever done,
because to do so would be not only to throw away profit,
but to incur actual loss ; on the contrary, cupidity and the
temptation resting in exclusive possession of the business,
have invariably led to raising the rate as far as possible.
There are, we think, few merchants or others familiar with
trade, who will be disposed to deny that their experience
confirms this. In England, Scotland and Ireland, in France
and elsewhere on the continent, in all other countries save
our own, domestic exchanges are left to individual bankers
and private competition—so should they be here.
But it is said that the notes of a National bank enable a
man to travel from one end of the country to the other, and
always find the money he carries with him at par. This is,
in a degree, an imaginary advantage : it is at best but a trifling one, and not at all worthy to be put in contrast with
the acknowledged and enormous evils in other respects of
the system that is said to produce it. It would be a cheap
sacrifice to surrender this as the price of exemption from expansions and contractions of paper issues, disorders of trade,
and periodical and quickly succeeding periods of loss and
disaster to the capital and industry of the country. But it
is certain that this advantage* small as it is, would be equally
present in the natural, permanent, and healthy condition to
which trade and business would soon attain, if left to themselves. Let us turn for an example to the States of Europe,
where no such machinery covers with its pernicious scaflblding twenty-six distinct sovereignties, and we find that at one
or more banking-houses in London you may purchase bills
of exchange, payable at all the principal places on the continent, in such sums as are desired, in the currency of each
place, and without commission. They give you a general
order, endorsed with your own signature, on their one hun-




23

and fifty correspondents, and you fill up the blanks on
presenting them. Here is the effect of free trade and open
competition in the business of dealing in exchange ; and this
effect we are sure to find permanently planted and flourishi n g in this country, if we do not continue bent upon the
o b j e c t of ?~egu!ati?ig the exchanges through the medium of a
^National bank.
§ Another argument is found in the common observation
t h a t the agency of a National bank is essential to the Gener a l Government in collecting and transferring its funds.
T h i s belief is grounded in error- It springs from the actual
condition of the country, which has oftentimes existed before, when its different portions have a depreciated currency
and different degrees of depreciation—a condition clearly to
b e traced to the existence of a National bank only, and which
w e shall hereafter show, by sound and obvious reasons, never
would be found without one* Thus the bank creates the
state of things whereby the funds of the Government are
lost or wasted, and then avers that its services are essential
to prevent these losses. Such reasoning surely ought not to
have much force.
The revenue of this Government consists exclusively of
enstoms and receipts from the sale of the public lands- The
customs are paid in the commercial cities, and in exact proportion to the trade of these cities respectively. Suppose,
for a moment, that exchange is left free of artificial disturbance and disorder, that the money of the country is permitted to flow under the influence of natural laws, and as the
wants of trade require, the Government would then find
that its funds were collected precisely at the points where
they are most valuable and most wanted. Its disbursements
in distant parts of the country, or in parts where no customs
are paid, wouid be made by drafts on the commercial cities.
These drafts would always be more valuable to the creditor




24

than an equal payment in coin : or if the sums to be paid
were small, the disbursing ntTicer would himself draw under
authority of the Treasury, and pay contractors, laborers, and
others in coin, or in the notes of specie-paying banks, or
whatever else may form the approved money at the point
in question. All salaries would be paid in ihe same mode,
and this payment would be positively crainful to all persons
having money to receive of the Government.
Thus the funds of the Government would bo found at
Boston, New York, Philadelphia. Baltimore, Charleston, New
Orleans, <fcc. Evcrv part of the country bears a relation to
one or other of those places as to its commercial centre.
There would be no possibility of a call lor bills on any one
of these points too great for the amount of Government funds
there, because the trade of each place, and consequently the
customs paid there, depend on the extent of the commercial district that surrounds it. But in case the Government
should be engaged in improving harbors, erecting fortifications, or in any other works involving extraordinary expenditures, then we find that these commercial centres point to
one great centre, to which they be;ir the same relation that
each district of country from which they receive and to
which they sell, does to them respectivelyNew York is
that great centre : all parts of the country have use for funds
there : never does it happen in any part of the country that
private, much less Government bills on that city, are obliged
to be sold at a discount. A public creditor residing to the
east of Boston might be very well content to receive a Government bill on that city, but a like hill on Xcw York
would equally pay his debt, if it did no more,
To enforce this view, which indeed every one with a
little reflection may work out of his own experience, let us
suppose, instead of the Government, tin* case of an individual. Imagine a person with a very large capital, owning factories in New England, working coal mines in Pennsylvania,




25

g r o w i n g wheat in Ohio, planting cotton in Alabama, and the
sugar-cane in Louisiana, and that all the ready money with
which ho carries on these diverse employments of capital is
deposited in the different Atlantic cities, or all of it in New
York, would lie find that the necessity of drawing his money
from Xew York, as wanted at so many different points, is to
occasion him loss or inconvenience 1 Certainly not. But, if
all his funds were deposited at Lowell, or at Pottsville, or at
Cincinnati, or at his plantation in Alabama, or at his sugar
estate in Louisiana, the case would be diflbrent ; and in disbursing it at one or more distant points, lie would then incur
loss. Just so is it with the Government: there are no other
places of deposit for its funds than the Atlantic cities that
would not involve loss and inconvenience ; and these cities
are the very places where these funds necessarily accumulate.
With regard to sales of the public lands, the specie circular, which excited angry debate some few years since,
has also fostered misapprehension, for passion and prejudice on either side of a question arc not favorable to clear
views. The simple truth of the matter is, without touching
at all the question of the necessity or expediency of this executive act at the time, that the Government has a clear
right to require payment for these lands in whatever kind of
funds it may please to select. Practically, and for a long
course of years, the notes of specie-paying banks have been
taken in payment of Government dues, but neither the constitution nor the former legislation of the country contained
any direct warrant for this ; and we must therefore confess,
that there was some ground apparent for this assumption of
right on the part of the executive, to require purchasers at
these sales to pay what alone is recognized by law and the
constitution, and what alone is—money. The objection
made to this, that it was requiring a different kind of pay-




2G
merit from different classes of public debtors, is utterly unfounded in reason. The persons who attend these sales
with the view of purchasing, are in no sense of the word
debtors to the public. The terms of sale are shaped, as In
the case of any other sale- as the nterests or wishes of the
owner may require ; they do not le* m an ex post facto regulation, but are announced beforehand : the company assembled are not public cebtors* but pcrs ns disposed to buy if it
is for their interest to do so : and to say that these terms
may not be as they a *f without infringing the rights of these
individuals, is simply a notable misunderstanding of the very
nat .re of right.
With regard to these sales, then, under a natural condition
of trade and business, a blessing which this country has seldom, if ever experienced* but which is sure to be brought
about, if our legislators will only leave us free and undisturbed a few years longer, it would be for the interest of
the Government to require payment for lands in New York
funds, or of some other of the Atlantic cities : and in this
way, the receipts from the public lands, like the receipts
from the customs, would be found at the very place where
the convenience of future use and disbursement requires
that they should be. Such a requirement would not interfere in the least with the convenience of purchasers. Immigrants, who always form by far the larger poi tion of these
purchasers, land on the sea-board ; of course, the money they
bring with them is there in the first instance, and this money
cannot be transported to the West without expense and risk ;
to these, therefore, such a requirement would be directly
suitable—and to purchasers residing in the West, Atlantic
funds could always be obtained for a small premium, while
the cost and risk of tendering: specie would involve much
greater expense. Thus, in 1S33, 16*3-1, and 1835, prior to
the operation of the specie circular, it is a fact well known,
that the purchases of public lands were principally paid for




27

i n Boston, New York and Philadelphia funds ; and it was a
rnode voluntarily chosen by purchasers, because convenient
t o them.
The transfer of the public funds under the circumstances
alluded to, would be easy, simple, and regular.
Imbecility,
It is true, must no longer preside over the Treasury, Punctuality, and a reasonable degree of skill, so essential to the
good credit of cverj-body, would be wanted in the Departm e n t ; but then the times would be steady, and these requisites proportionably cheap* The intervention of a National
bank interrupts the operation of natural causes, displaces
the laws that govern the flow and reflux of money, violently
raises and depresses its circulation, and renders every pursuit uncertain and unsafe, save that of speculation in the
currency.
It directly produces this state of things ; and
then, and then only, can it claim that it is a necessary agent
in the transfer of Government funds,
§ As to the mode of collection and keeping of the public
moneys, we are aware that great diversities of opinion exist.
W e are not willing ourselves to subscribe to either extreme.
W e remark, however, that this Government exists in a country with a mixed currency ; and this will probably always
be the case. At any rate, it is clear that the General Government, even if so disposed, lacks the actual power to
change it* The question is, as to the best mode, under the
actual circumstances of a mixed currency ; and we need
not look far to see that the plan of receiving only gold and
silver, and depositing this in Government vaults, is impracticable, or so far impracticable, that the interests of the revenue would suffer infinitely more than they would gain by it.
JVow, if we observe that individuals have deposited their
money in banks for ten, twenty, thirty, forty, or more years
together, without loss, it cannot be but that the Government
may, with equal discrimination and jqual caution, do the




like ; and this plan, though never tried except in the presence
of a National bank, or, at least, in very crisis of the disorders and confusion it had bequeathed as its legacy to the
country, will, we presume to think, be found the true one.
It is no objection to it, that the Government will then have
to do with bank notes. From the earliest date, it always has
received the notes of spceie-payinu banks, and to this moment continues to receive them : and there is no reason why
it should not- In Great Britain, in France, and perhaps elsewhere, though we arc not informed as to other countries, the
Government uses the same liberty and discrimination in receiving bankers' notes that individuals do. Its agents are
responsible in their bonds, but, with this security, they may
and do receive whatever notes thev deem entitled to credit.
m

In the absence of a Xational bank, and in the absence of
its peculiar evils, the stability vf State institutions will be infinitely increased. In confirmation of this, we point to the
banks of this city. Where can the instance be found, of
greater strength and good conduct under difficulties and disaster, than have been exhibited bv these institutions since
m

1838- Their suspension in 1S37 was directly caused by the
Bank of the United States ; but, at a period further removed
from the existence of a national charter, and more completely freed from its entangling tyranny, we see another and
much more violent attempt to break them fail of success.
Let us recollect that it will only be in the large commercial cities, where the banks are ol the highest credit, that the
Government will have large sums to deposit. It may now
and then, perhaps, find it convenient to remit twenty or
thirty thousand dollars to a country bank, to meet the payments of some disbursing officer ; but even this, under a stable condition oi^ affairs, it will be enabled to do with safety.
Now, it is certain, that in Boston, !Xew York, there will
always be found more or fewer banks with whom liie Gov-




29
e r n m e n t may safely trust its deposits. There is no differo n c e , in point of security, between holding the notes of a bank
a n d having credit on its books as a depositor. The Governm e n t always lias been, and always will be, a heavy holder
o f bank notes ; and at this moment, should all the banks in
t h i s city prove bankrupt, it would certainly incur a very large
loss- But, if the risk is too great, divide it among many
banks : place specie, or the notes of one bank, as a special
deposit with another : or, in short, make whatever conditions
o r rules may be expedient, it is not to be doubted that banks
of sufficient credit would always be found to accept the trust
and perform it faithfully*
The State bank deposit sj^stem, adopted in 1835,
failed of success ; but it is to be remarked, that even then
t h e Government did not lose a dollar of its deposits in Boston
o r New York, nor yet in Philadelphia, The plain reasons
of its failure were to be found in the condition of the count r y , apparently prosperous, but, in point of truth, a most disastrous condition,—in the fact, that institutions in each city
were selected on the single ground of party favoritism,—
that all business and all men were either in the delirium of
expansion or in the misery of a contraction of bank issues,—
that the Government chose to make sudden and large demands for specie ; but these evils do not now exist, and
in the continued absence of a National institution, we are
confident in saying, would never again occur.
The stability of individual banks in the commercial cities,
Is for the most part not so indifferent as the general odium
incurred by the system at large might lead us to think.
"Within the limited circle of our own acquaintance, there are
two that for more than forty years, and one other that for
fifty years, have continued in credit, and still command the
confidence of the community ; and probably others may be
able to recall many like instances. In these cities, too, there




30

are thousands of merchants and others, who, for a life-time,
have deposited their money in banks without loss; but, then,
they dealt only with banks really worthy of confidence ; and
we cite this merely to show that such institutions do exist*
State banks, when existing separately, and dislocated from
each other, are like so many individual bankers; they are
rivals in business, and not joint conspirators ; they lend each
other neither strength nor bad example for evil. Each one
is obliged to depend on its own good character and conduct,
upon its own skill and prudence. Combination among them
for general effect—to expand their issues, for instance—is in
the nature of things impossible ; and though the experiment
has never been fairly tried, it need only be so to prove
how much in the lapse of a very short time the character
and repute of these institutions would improve, until the
voice of complaint against them would be nearly hushedThese injurious expansions of bank issues, which a National bank fiads it so easy to inflict, and always has inflicted
on the country, would never be found, where she is wanting.
In that case, should a bank in the city of New York extend
her issues improperly, she is suddenly checked by the
return of her notes from her next-door neighbor. And so
of every other city and district in the country. But when
a National bank expands, no one, or two, or twenty, nothing
short of the combined and simultaneous effort of nine hundred
and ninety-nine banks can eifectually check her. Instead of
this, however, these banks welcome the license her example
alone can give them, and swell the evil. A general suspension
of cash payments would also be an impossible occurrence. As
•well might you expect to see a thousand merchants of the
highest standing in the different cities, resolve on a certain day
to gazette themselves bankrupts. The instances of the New
York and New England banks in 1839, and of the latter in
1814, at both of winch periods no National bank existed,
evince the strength with which State banks* in such case,




31
a r e enabled to resist difficulty.
The general suspension in
1 8 3 7 , was plainly the fruit of seeds sown by a National
b a n k , but when in two years after, we repeat, that same
b a n k , then without a national charter, but with precisely
t h e same enormous capital, again attempted to play the
g a m e of general bankruptcy, she unexpectedly met a virtue
i n the banks of a large portion of the country, too strong
for her solicitations and commands. If a capital of thirtysix millions was powerless to break the banks of New York
a n d New England, in 1839, where shall we find hereafter a
S t a t e bank competent to the task?
But when these same State banks are knit together in one
"body, with a National bank for a head-piece, they form, in
fact, a single institution—a mother bank with a thousand
branches. All individual conduct or individual accountability is lost; each one does, and may, discard the prudence
and skill so essential under different circumstances, for these
a r e then useless requisites. The safety of each depends not
on itself, but on the success of the system of which it forms
an insignificant part ; and its misfortunes or difficulties, too,
are not its own, but the embarrassments of that system. The
controlling head raises or depresses the rate of exchange, so
as to confound all calculation and all the signs by which
traders and bankers are to govern themselves: it leads and
forces expansion; it commands contraction; it issues the
order for a general suspension of cash payments ; and this,
like every other of its injunctions, is, and must be, instantly
obeyed.
After all, however, we must recollect that the revenue of
the State forms but an infinitesimal portion of a nation's
wealth,—that the convenience of the Government, in keeping and disbursing its funds, is a matter of least concern to
the interests of the people, and cannot affect at all the pub*
lie prosperity. Suppose this Government should annually
lose twenty or thirty per cent* of its income, who would feel




32

it ? It has for many years raised vast sums beyond its
wants, to which this twenty or thirty per cent* is but as a
drop to the ocean, by duties imposed on imports on the single principle of protection* yet neither the trade of the country, nor its capital, nor its prosperity, has been in the slightest degree injured. Better sink in the ocean the whole revenue of the Government tor twenty years to come, than subject the country to an equal loss of capital with that it suffered in 1837. This revenue may be guarded and disbursed
to the last dollar, and vet the wealth of the countrv and its
prosperity in equal degree may be daily diminishing by millions. How little reason, then, is there to incur the risk of
this latter consequence to attain so trifling an end ! The
plan of chartering a National bank as the agent of the Government for these purposes, does directly and inevitably
involve this consequence. It has over and over again produced it.
These are the arguments put forward by those who advocate the charter of a bank. We have sought to treat them
fairly ; we hope to have done so : but we also hope the
reader will see with us their entire fallacy. If, in spite of
this, Congress should pass a charter* it needs little perspicacity to foresee the result- We have only to point to our
experience. What has always happened* is sure to occur
agaiia. Various plans may be, and have been* concocted
by ingenious persons, which show remarkably well upon
paper, some of these, however, sketch a system of wheels
that never could be made to turn: but they all come to this,
that the charter of any National bank, however carefully
schemed, with the right of paper issues, is liable to objections, which at once bring to mind the many periods of disaster and difficulty which the country Iras survived, with
loss of business, capital, and fame. In the present condition
of the country, it would be some years before a National
bank could get into successful operation- la the States




33

-whose banks are now suspended, it would come in any
shape but that of relief; it would pay no debts, nor remove
present difficulties ; by violent and stringent measures it
must force these banks to liquidation or resumption ; and in
so doing, necessarily create much more distress than the
community has yet suffered.
But it is a matter of nice calculation, whether the operation of a National bank, or the
easier influence of public sentiment and other causes, without a bank, would sooner secure this desirable end. Hut
suppose this object accomplished, then commences the flow
of events that lead but to disastrous ends just as surely
as water finds its own leveL
But the country does not desire a currency that will last
good but five or eight years : it does not wish again the
prosperity the bank gave us in 183 1, '35, and '30: it is not
for its interest to return to the times of 181G, 1818, 1820,
1825, 183O, 1832, 1834, 1837, 1839—10: it only asks to be
let alone. And depend upon it, in that case, its growth in
'wealth in the next twenty years will far exceed its increase
in any equal period in its past history.
Our plan then, if we may humbly suggest one, is to do
nothing. Above all, do not charter a bank ; and we predict
that, before another Presidential election comes round, there
will not be fifty persons found to deny that this was the only
wise and true course* Public opinion will then be allowed
its just weight ; it will be purified and strengthened ; it will
bring to bear a restraining power upon each bank, which
cannot bo while these banks are sheltered and overshadowed
by a national institution, which exacts from them the single
virtues of silence and obedience. In a short time it will
show itself In legislative bodies: charters will be repealed or
modified, ixnd restricted, if it may be, and no new ones
granted.
The just principles that are made to govern banks
in other countries—those that distinguish the Scotch and
English banks from our own,—will gradually introduce




34

themselves here- The bankrupt banks will speedily disappear from view. Those that remain will be stronger than
ever in credit, and the whole number, now too large for the
public want, be permanently diminished. The popular voice,
legislative action, or the interests of the community, will
surely and speedily raise the currency to par where it is
now depreciated. The State banks, improved in character
and responsibility, will deal in exchanges like so many individuals, and sell at rates more favorable than the country
has ever before known,—by the mode L>£ competition, and not
by a monopoly. They will also, or such as shall be properly selected among them, safely keep and transfer the public
funds, and this with perfect convenience to the Government,
and without injury of any kind to the public : in short, all the
benefits that can be desired by the Government or individuals will be enjoyed, while the country will be spared the
general evils of the banking system as we have known them.
And this state of things, when once established, will bring
blessings to trade, to business of every kind, to the public
wealth and the national prosperity and happiness never yet
felt, and, above all, it will be permanent and lasting, subject
to no change, no revulsions, no internal disasters—a state
that there will no longer exist a power anywhere to overthrow.




New York, May 1st, 1S4K

INDEX.

.

P B E I J M I X A R Y .

CUBRKNCY.

•

•

•

.

.

.

.

.

.

-

.

.

.

*

Depreciated Currency,

.

.

ClIARTKR OF A N.-ITIOXAL ]>ANK.

.

.
.

.

p a g e
.

.

,

>

3
6

.

9

.

*

•

*

.15

As a Regulator of the Exchanges.

*

•

•

-

* 13

Exchange Tvhat.

.

>

•

.

.

.19

As Agent of the Government-

.

+

.

.

.

.23

Sales of the PuMic L a n d s .

-

*

-

•

.

.25

.

.

.

.

- 27

.

•

-

.

• 29

•

-

.

-

Keei>ing of the Government F u n d s ,
DEPOSITK

SVSTJSM OF 1635.

STATE BANKS.




.

.

.

.

.

.

.

.

.

.

.

.

30