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__No. 105.

March '24, 1834.
Message from the Governor*
3 ^ E L L . O W - 6 I T I Z E N S O F T H E S E N A T E AM> A S S E M B L Y :

S i n c e m y communication to the l e g i s l a t u r e at the commencement* of, the present session, the unusual derangement of the busi
jaess operations of the community has been such, as in my judgment
Jta r e n d e r it the duty of the Executive to call your attention to the
I t w a s not then perceived that the order of the Treasury Detoattment,
directing the accruing receipts of the public moneys to
|>e deposited in the local banks instead of the Bank of the Umted
S t a t e s , could essentially interrupt the business transactions of the
eomjmunity; nor is it now supposed that any necessary connect i o n exists between that act, and the present state of commercial
e m b a r r a s s m en t,
A l t h o u g h it was known that the Bank of. the United States had
c o m m e n c e d a rapid curtailment^ cf( ILF debt anterior to the action
o f t h e government upon the deposit^?, r.iiUiad actually, reduced it
m o r e than four millions of dollars during the sixty d^y* previous
t o t h e first of October, when the order of the Secretary took effect;
y e t as the g o v e r n i n g L had d i r e ^ e l the\ch*trge to be ma'Io in a
m a n n e r best calculated to avoia any pressure upon the bank 01^ injurjr to the ccm(nunity, U was not ( reason a]t>le tc suppose that the
Occasion would have bbe£ sci>ed for'tlCe nurposc of irivinar an unn e c e s s a r y shock to business, much less of exciting a causeless panic.
C e r t a i n it is, however, that since the change referred to, such has
been the attitude assumed by that institution in regard to the local
b a n k s , that the latter a r e u n a b l e to afford to the community those
assurances of future accommodations, which are so essentially nec e s s a r y to inspire confidence among business men in entering into
n e w engagements.
T h e partisans of that institution, and certain presses devoted to
its recharter, b y systematic and persevering efforts in disseminat i n g distrust of the credit of our monied institutions, particularly
[ S e n a t e N o . 105.]



those of this State, of the credit of individuals, of the resources of
the country, and its ability to meet the crisis; and by endeavoring
to fasten public opinion upon this act of the government as the
cause of all the depression which has been experienced, as well as
that which is daily predicted and held up to the public view in a
distorted and exaggerated form; have also produced an excitement
among the business community, calculated essentially to aggravate
the pressure* and prolong its existence.
Looking at the immense wealth and resources of the country—*^
presenting externally, as indicated by the course of exchange, an
appearance of prosperity unknown for many years, and internally y
until within a short period, the same favorable appearance, as indicated by abundant crops, fair prices, active mercantile and manufacturing operations; it appears to be impossible that the existing
state of things should have sprung from a cause so inadequate as
the mere substitution of one place for another as the depositary 4>f
the accruing receipts by the government.
Although the removal of the deposites, effected as it was prospectively, and operating upon the funds in hand, not withdrawing
the whole suddenly, but gradually, as the wants of the government
required, furnished of itself no sufficient cause for the results
which in point of time have followed it; yet it is said that its operation has been to derange the currency, to destroy confidence^
and thus to produce the present er-ibarrassment.
It is undoubtedly true that much of the pressure upon the money
market has been occasioned by the destruction of confidence; but
it is not ^asy to p^rc^ive how that is to be charged as the necessary
camrujuence of the action of ih^ government. It is the conse-~
quence of the attitude assumed by the Bank of u.e United States
towards othsr banks—r.n attitude no1; n-wessary, although its advocates attempt to justify it, cither as a measure of r e t a l i a t i o n
upon the government, or for the purpose of compelling those institutions to surrender or to refuse to accept the public deposites.
Nor is it easy to perceive how the action of government should
of necessity derange the currency or the commercial operations of
the country, through the medium of domestic exchanges* T h e
ability of the bank to conduct all ordinary business, has not been
essentially impaired, and its amount of discounted bills of exchange
is at this moment as large or about as large as it ever has been.
W h a t e v e r inconveniences may have resulted from its refusal latterly to furnish drafts at sight between its different offices at t h e

I t f o . 105.]


visual r a t e s , (and tliese inconveniences undoubtedly have been
g r e a t , ) would seem, therefore, to be of its own creation, or the res u l t of t h a t position in regard to the other banks which it has chosen
t o assume.
I t is-believed that the principal causes of the present embarrassm e n t h a v e no essential connection with the removal of tho depositee.
In D e c e m b e r , 1830, the Bank of tho United States commenced
<a r a p i d increase of its loans and circulation, and continued augm e n t i n g them until M a y , 1832, having within that period added
a b o u t t w e n t y - e i g h t millions of dollars to its accommodations to the
p u b l i c , and over four millions to its notes in circulation. T h e nec e s s a r y eon-sequence of such a large and sudden increase of facilit i e s t o business men, was to encourage a corresponding liberality
o n t h e p a r t of the local banks, overaction in trade, and to stimul a t e to excess the industry and enterprise of the country. A t all
e v e n t s , since that period., foreign commercial operations, domestic
t r a d e and manufactures, speculations in stocks, lands and produce,
h a v e been carried on to an extent and upon a scale before entirely
T h e policy of contraction on the part of the Bank, which imm e d i a t e l y followed this unexampled expansion, had scarcely been
-commenced when the tariff law of July. 1S3-2, went into effect,
t h e operation of which, with its subsequent modification, was well
calculated to dcvelope the injurious eonscquencos of the overtrad i n g which had preceded.
U n d e r the former law, duties to the amount of about fifteen millions annually accrued upon imports at the port of N e w - Y o r k , the
p a y m e n t of which was secured by bonds payable at different periods, some as long as eighteen months. As the merchandize was
g e n e r a l l y sold by the importer, soon after the execution of hi*
b o n d for the duties, it is obvious that the credit afforded by the
g o v e r n m e n t , was to him equivalent to so much capital until the
t i m e of p a y m e n t should arrive. Before this time, a fresh importation enabled him to create a new credit, and thus a v e r y large
a m o u n t of capital was constantly in use among those engaged in
commercial pursuits.
T h e law of J u l y , 1832, considerably reduced the amount of duties, while that of 1833, operated still further to diminish the capital of the importer thus derived from g o v e r n m e n t credits, by adm i t t i n g m a n y n e w articles to the free list, by shortening the



bonds in some cases, and by substituting cash payments on many
articles subject to duty.
This law took effect on the fourth of March 1S33, and during
the past year the bonds of the preceding year have been falling
due, while the shortened bonds and cash duties have created an
additional demand for money, thus casting upon the importer the
burthen of repaying the capital formerly loaned to him by the go^
vernment. and also of paying the cash duties required upon his recent importations. It has been estimated that the effect of this
law has been equivalent to the withdrawal from commercial investments of from twelve to thirteen millions of capital.
T h e depressed rate of foreign exchange also> although an indication favorable to the general condition of the country, has, it is
understood, prevented the drawing of considerable sums of money
from Europe, the proceeds of produce as well as of stocks sold
These causes, together with the rapid curtailment of its debf
hy the United States bank, between the first days of August and
December, amounting to nearly ten millions of dollars, and all operating upon a state of trade unusually and extravagantly extended, are supposed to be sufficient to account for most of the distress
hitherto experienced.
T h e severity of the pressure in New-York, has undoubtedly been
very much mitigated, by placing the public deposites in the local
banks, which have thereby been enabled to discount, and have actually discounted upwards of four millions more than they otherwise could have done.
And as the charter was soon to expire, and the bank had actually commenced its curtailments sometime previous to the action
of the government, that action would seem to have been indispensably necessai-y for the protection of the public, so far as the funds
of the government would afford the means. This measure, however, which as we have seen, involved no necessary destruction of
individual confidence or credit, no necessary derangement of ordinary commercial operations, much less any necessity for the panic
which has followed, has furnished to the bank the pretext for
niacin** itself in a new and menacing attitude, and to its partisans
the occasion of wantonly sporting with the fears of the timid, the
standing of the weak, the stability of the currency, and the credit
of our monied institutions.




T h i s Corporation, brought into existence for the purpose of sub*
s e r v i n g the general good, (if for any justifiable purpose,) seems to
b e bending the whole of its prodigious energies towards compelling
t h e people, by force of pecuniary suffering, to acknowledge the nec e s s i t y of its recharter.
O u r constituents have distinctly expressed their unbiassed judgm e n t upon the question of recharter; and I cannot doubt that they
possess sufficient patriotism to meet any crisis, which the controv e r s y m a y produce, and that in the maintenance of principles of
vital importance to themselves and to posterity, they will be ready
t o endure any pecuniary privation, rather than to submit to the dictation of a great monied power.
F r o m recent debates in the National Legislature; from the tone
of the presses which advocate the cause of the Bank; from the
l a n g u a g e of public incetings; from the organizations of p a r t y ; and
from other indications too plain to be mistaken, /the efforts on the
p a r t of the Bank seem to be directed especially against the monied
institutions and the business relations of the State of New-York.
U n d e r such circumstances, I deem it the imperative duty of the
S t a t e to put forth its energies to aid these institutions in the struggle, and to protect its citizens from oppression. Connected as
these institutions are, with the industry and prosperity of the State
pll classes of our constituents, whether agricultural, mercantile or
manufacturing, are equally interested in their welfare.
I am furnished by the Bank Commissioners, with a statement of
the condition of the banks subject to their supervision on the fourth
of M a r c h instant, by which it appears that their circulation had
been diminished since the first day of January last, more than three
millions of dollars; and that the country institutions, or those located out of the cities of New-York and Albany, while they had reduced their loans and discounts only about $600,000, had reduced
their circulation about two millions of dollars. The entire resources of the country banks on the fourth of March, excluding the
bank fund, amounted to $21,984,000, and their entire liabilities to
Notwithstanding the redemption, between those
dates, of about two millions of their paper, the reduction of their
specie was less than $25,000; and their immediate means of redemption, consisting of specie at home and funds on deposite in Albank and New-York, subject to be drawn at sight, amounted to
m o r e than thirty-five per cent, of their whole circulation.



So far, therefore, as the banks themselves are concerned, I entertain not the slightest doubt, either of their present or future
ability to meet any crisis that can occur; but under a state of things
which may be imagined, a proper regard for their own safety, may
put it out of their power to afford those accommodations to the public, which its interests may require.
T h e Bank of the United States has recently declared its intention to continue its curtailments, but in what ratio we know not.
It probably has due to it in this State about seven millions; and
what portion of this amount our citizens may be called upon to pay
before the next session of the Legislature, cannot now be determined. If this amount shall be called in rapidly, our banks must
necessarily strengthen themselves by calling in a portion of their
debt; and thus it will be in the power of the Bank of the United
States, if it should have the disposition, to occasion serious embarrassment to all classes of the community, unless the Legislature
make some suitable provision to guard against such a resultIt has been suggested to me by several intelligent and practical
gentlemen from the city of New-York, for whom and for whose
opinion I entertain the highest respect, and who, I am sure, were
governed by no motives of individual interest in the matter, that
the establishment of a large banking institution in that city was
called for at the present time. A capital of ei.srht or ten millions
was mentioned; and it was proposed that the State should take one
half, and pay for it by a State stock, bearing an interest of four or
five per cent., redeemable at the expiration of the charter; the balance of stock to be distributed by commissioners to bo appointed
by the Governor and Senate, or in such other manner as should be
thought best; the State to appoint its share of directors; the rate
of discount to be fixed at six per cent., and if deemed proper, the
surplus profits over six or seven per cent, per annum to be paid into the State treasury; the institution to issue no notes under twenty dollars, and in other respects to bq made subject to the general
laws of the State, reserving to the Legislature the usual right to
modify or repeal the charter.
It was urged that the stock issued by the State might readily
be disposed of in Europe for specie, and that such a charter would
furnish a sufficient inducement to insure the necessary subscriptions
for the residue of the capital; that such an institution would be
able to take the debt now due to the United States Bank in this
State, whenever it should be called in; to furnish the requisite
facilities to the commercial interests of the city of N e w - Y o r k in

N o . 105.]
the discount and collection of domestic exchange; to acquire &
c h a r a c t e r in Europe which would enable it to sustain mercantile
c r e d i t in times of revulsion in trade; and, in short, to exercise a
healthful iniluence over all the diversified interests of that great
city, and consequently over every branch of industry throughout
the State.
Although many of the advantages anticipated from an institution
of such a character, might and probably would be realized, there
a r e , nevertheless*, objections to this proposition, of serious if not
preponderating weight* It is deemed by many to be objectionable
in principle for any government to ^fgage in the ordinary pursuits
of individual enterprise. Such an institution, possessing ample
p o w e r s over the currency of the State, which, properly directed,
might be productive of salutary effects, might also, by a misdirect
tion of its efforts, be equally capable of producing serious and extensive injury. It might in its administration be subject to the
fluctuations of political power, and thereby be in danger of becoming an engine wielded to subserve the interests of a party. It
might, by the acquisition of political influence, paralize the controlling power reserved to the Legislature; it might, for the purpose of acquiring this influence, openly take the field of party politics, and exhibit the disgusting spectacle, with which wc are alr e a d y too familiar, of a large monied corporation arrayed in political opposition to the government of the county.
Unless, therefore, such an institution, or one of a somewhat
similar character, should be found indispensably necessary to enable us to counteract a greater evil, I should be unwilling to hazard
so dangerous an experiment.
It has occurred to me, that a remedy, as well for the existing
evil, as for the inconvenience which may in any event result from
the withdrawal oi the capital now employed by the Bank in this
State, may be provided, by the issue of a State Stock, if necessary,
to the amount of four or fivG millions of dollars, and by increasing
the ability of the banks in the city of New-York with loans of this
stock, in such manner as would be perfectly safe to the State, and
at the same time enable them to extend their accommodations so
as to supply the amount of capital to be withdrawn by the Branch
in that city. It is due to the city banks to say, that this suggestion
does not proceed from them; they have thus far sustained themselves with creditable ability, and feel a perfect confidence in their
resources to do so under any emergency that may happen; but the
suggestion is intended for the relief of the whole community, by



sustaining the markets for our agricultural and manufacturing productions, and giving activity and vigor to commercial enterprize.
Should this measure be adopted, the necessity will at once be
perceived of imposing upon certain persons to be designated bv
the Legislature* the power and responsibility of carrying it int
feet. Ample provision should be made to secure the regul*
ment of interest, and the ultimate redemption of the stocK v
banks to which the loans may be made, so that the State v
ther be subject to inconvenience, nor incur any responsibl y
yond the loan of its credit to stable and well conducted in*
tions. It may also be necessary to provide, that during the continuance of the loans to the banks, they shall possess the power of
discounting upon them as upon so much additional capital, without
allowing them to extend their circulation beyond the limits now
prescribed by law. T h e banks in New-York, from their position,
must necessarily meet and sustain the first shock of any pressure
upon the money market, and by strengthening them therefore, \fre
aid every branch of industry throughout the State. A depression
in the city necessarily affects prices in the country, and ope.
to the injury of the agricultural, as well as the manufacturing,
mercantile interests of the whole State. Should it be deemed visable, a portion of this stock might be disposed of, and the av>'!*s
loaned in the different counties of the State through the agency of
the county loan officers, as has heretofore been done on sever - *••
casions, to the great relief of the community.
It is not doubted that the State, by the loan of its credit in <f such manner, may, without incurring any loss or inconvenient
do much to sustain the great interests of the people, if the nee*
sity for it should arise; and I cannot entertain the slightest doui
that the measure would meet with their cordial approbation.
Being perfectly satisfied, that the energies and resources of this
State, will enable it to bear up against any temporary depression
of business which can be anticipated; that in this desperate struggle
by a great monied power to perpetuate its own existence by the
force of its pressure upon the community, the patriotism of the
people will be found to rise, regardless of mere pecuniary sacrifices: and that it is the duty of the State to stand forth in its
strength, and by the use of its credit and the sanction of its name,
to shield its institutions and its citizens from h a r m ; I commit the
entire subject to your deliberate considerationW . L. M A R C Y .
Albany, March 22, 1834.