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" Where no ox is, the crib is clean ; but much increase is by the strength of the ox." 


1 84.2. 




You are aware that there is a difference of opinion amongst the people 
of the United States, on the subject of the Banking System of this country 
generally, and especially upon the subject of a NATIONAL BANK. 

This difference of opinion has been made at times a matter of party 
distinction. Each of the two political parties, into which the country is 
frequently divided, taking opposite sides: one for, and the other against 
Banks, and one for, and the other against a National Bank. In this way 
the real subject of enquiry has been lost sight, of. The question with both 
sides, having been more to know what will favor this or that party, than 
to know whether Banks are good in themselves, or not ; or whether a Na- 
tional Bank be a benefit to the country or not. 

It needs but a moment's consideration, however, to convince any one 
that, aside from all party views whatever, and even on the supposition, 
that there were no political parties in existence, it a matter of very oreat 
importance, to know whether Banks, such as our State Banks are, should 
be sustained or not : whether they are a good, or an evil whether, if a 
good, they require restraint, or regulation, and if they do require it, what 
kind of restraint this should be. So also to know whether a National 
Bank, such as we have had in the country, be useful or not ; and if useful, 
how and for what reasons it is so. 

No matter what political party be in power, or who may be at. the head 
of the government, these are subjects to be treated upon their own merits. 
The interests of party is not to be. taken into consideration in coming to 
a decision as to the expediency of these institutions. It is a case like that 
of a question of war or peace, you will readily admit that we should not 
declare war against another nation, merely because it would benefit this, 
or that party at home, you would say, that such a subject should be looked 
at separately, and that we should decide as the permanent well being of 
the whole nation might seem to require. 

My object is to prevail upon you to take up the subject of Banks, and 
of a National Bank in this way. To allow if to stand upon its own 
merits. To discuss it, and to decide upon it, as a matter of importance 
to the whole body of the nation, and especially the great mass of the 
people, the LABORING CLASSES. 

The moment is favorable. There are no important elections now pend- 
ing : and if there were, this is a subject about which persons of the same 
political party, may reasonably be allowed to differ in opinion. It is a 
subject, too, not of importance merely for the present moment, or for the 
present generation ; but it is one, which will continue to be of import- 
ance for years to come. It is of importance not merely for you, but it 
will be of the same importance for your children, and for your children's 

You have heard repeated declarations that Banks are evils ; and that 


a National Bank particularly, is a great evil, and, on the other hand, you 
have heard as positive declarations that Banks are benefits, and that a Na- 
tional Bank is a great benefit ; but no one has distinctly shown you in 
what respect Banks are an evil, or what classes of persons suffer by them ; 
or to whom a National Bank is a great evil, or what portion of the commu- 
nity may have reason to object to its operations. 

On the other hand again, no one has shown you how Banks are bene- 
ficial to the people : in what respect they are a good, or under what cir- 
cumstances of restraint they are beneficial ; neither has any one as dis- 
tinctly shown you how, or why, a National Bank is desirable for the gene- 
ral welfare ; however it may interfere with the operations of comparative- 
ly a very small number of individuals. 

My purpose is to prevail upon you to enter with me into an examination 
of these particulars. To enquire in what manner Banks generally are 
advantageous to the nation ; what evils attend their establishment ; how 
these evils may be remedied ; and what class of persons may be incom- 
moded by their operations. To enquire, also, in what manner a National 
Bank is, or may be, advantageous to the country, what objections may be 
made to such a Bank. By whom these objections may be made, and 
what the mass of the people has to do with the reasons of these objec- 
tions. To enquire, in fine, whether the interest of the working classes has 
been consulted at all, in the hostility so frequently exhibited towards a 
National Bank, and indeed, to all Banks : and, if this hostility be not 
founded in any regard for the welfare of the people, to enquire how it is 
that public opinion has been, in certain respects, so much misled upon the 

In pursuing this investigation, we may be obliged to enter more fully 
into the examination of some particulars, than is necessary for the under- 
standing of persons familiar with matters of this kind ; but as there are 
many to whom the subject is not so familiar, it seems necessary to go 
back in some degree to first principles, in order to be equally understood 
by all. 

This mode of treating the enquiry may appear to impose a tax upon 
your patience ; but the principles alluded to are generally of a character 
sufficiently interesting to merit attention : even aside from the purpose 
for which they have been introduced. Beyond this patience, 1 have only 
to ask your candid and unbiased attention to the statement presented. 

You are most of you of the class of citizens who are, or have been, 
subject to jury duty, you know the state of mind with which a juryman 
should come to his seat in any trial of importance. The question of a 
National Bank, or no National Bank ; of Banks or no Banks, presents 
one of the most important civil cases, upon which you can be called to 
give an opinion. 

In exercising your judgment upon the facts and arguments here laid be- 
fore you, I trust you will feel it a duty to lay aside all party prejudice and 
personal feeling ; as you would feel it so in a court of justice, where the 
majesty of the laws, and the well being of your fellow citizens might de- 
pend upon your decision. 

In this trust I shall submit the case, reminding you only that the wel- 
fare of YOUR COUNTRY is dependant upon your verdict. 



Use and Importance of Money Capital. 

IN the working of all machinery, it is desirable that there should be as 
little loss of power as possible. 

Suppose the steam engine of a factory to be capable of performing to 
advantage twice as much as it does, with the same expense : there is 
here a loss of half the power employed. If there be two factories in the 
same neighborhood, in one of which, with the same machinery, and the 
same outlay, only half the work is turned out which is produced in the 
other, the owner of the establishment producing most will be able to un- 
dersell the proprietor of the other so much, that from this circumstance 
alone the latter may be obliged to relinquish his business. 

It is equally desirable that a piece of land should yield as much as it is 
capable of producing with the same labor and expense. Suppose, for ex- 
ample, a field manured, and plowed, and prepared for seed : if but one half 
of it be sown, there is here a loss of so much power. If there be two 
countries, both capable of producing the same quantity of wheat ; both 
cultivated at the same expense ; but one of them, from want of manage- 
ment, producing only one half of what the other produces, the country pro- 
ducing most will be able to undersell the other so much as to shut it out 
of any foreign market. 

Man himself may be contemplated as a machine of the same kind. If 
a laborer, able to earn one dollar per day for every working day in the 
year, be employed but half of this time, there is in his case so much loss 
of power. Suppose two mechanics, both having it equally in their power 
to earn one dollar per day, or three hundred dollars for the year ; and both 
subsisting equally well on one hundred and fifty dollars a year. If one of 
these persons work only one hundred and fifty days, and the other three 
hundred days, the first will do no more than earn his bare subsistence, 
while the other will not only be able to live as well as his neighbor, but 
he will lay up besides one hundred and fifty dollars at the end of the year. 
If a year succeed in which it is difficult for these mechanics to obtain 
work, he who can work the cheapest will soonest find employment. The 
man who labors three hundred days in the year, can now work for seven- 
ty-five cents a day, and he will live as well as he did before, and lay by 
seventy-five dollars at the close of the year ; while he who works only 
half this time, cannot labor for less than he did before, without depriving 
himself of some of the necessaries of life. It is the same with nations. 

Suppose a country, the inhabitants of which labor three hundred days 
in the year : and another, where, from the number of holidays, the people 
work only one hundred and fifty days in the year. The productions in 
both cases being the same, the country where the people labor most will 
be able to undersell the other. In the country where there are not so 
many holidays, the inhabitants may become wealthy ; when, under the same 
circumstances, except in this particular, the inhabitants of the other coun- 
try may be impoverished, and barely able to sustain themselves. 

The result would be the same, if in one country only half the people 
labored, while in the other they were all alike employed. Where the 
greatest number of the people labor, in proportion to the whole number of 
consumers, there, other things being equal, the productions of the country 
will be afforded at the lowest rate. The difference arising from the loss, 
or gain, in labor power. 

What is true of loss of power in regard to the labor of men, or to the cul- 
tivation of land, or to the working of a machine, is equally true with regard 
to capital, or to that part of property which is capable of being employed 
so as to yield a profit. 

Suppose a man to earn by his labor three hundred dollars a year, while 
his whole expenses do not exceed two hundred dollars. At the end of 
the year, he will have one hundred dollars, to be lent on interest, or to be 
employed in trade, so as to give him a profit. This one hundred dollars 
is so much capital. If this capital be placed out at interest, the one hun- 
dred dollars has the power of producing six or seven dollars at the end of 
the year. If it be employed in trade, it will probably produce more ; as 
interest may be considered somewhat less than the lowest profit expected 
in the place where it is given ; no one, as a general rule, being willing to 
give more interest for money, than he expects to make profit out of it 
while many will pay interest for a very small gain over and above this inter- 
est. If this capital of one hundred dollars, however, be allowed to remain 
idle, it gains neither interest nor profit. Here, then, is so much loss of 
power in capital. Of course the importance of this loss of power increases 
in proportion to the amount of capital, or of any number of capitals, thus 
left idle. 

All the capital in the world may be considered as so much saving from 
the compensation of labor of some kind, after deducting expenses. The 
capital of every country consists of the savings of labor of that country, 
together with the accumulated savings of labor which have been brought 
into it from other countries. A nation becomes richer, or more prosperous, 
in proportion as more or less of the whole capital of the country is employ- 
ed so as to yield a profit. If only half the amount be employed which 
might have been employed to equal advantage, the nation will not increase 
in riches half as much as it might. 

Suppose two countries with each the same amount of capital, and each 
subject to the same expenses for consumption. If one of these countries 
employ only half its capital, and the other employ the whole, both at the 
same rate of profit, the last will be able to furnish its produce, other, th'ings 
being equal, at a rate so much cheaper than the first, as perhaps to shut it 
out of a foreign market. 

Suppose two men employed in the same trade, each having a capital of 
ten thousand dollars, and each being subject to the same expense of'iiving, 
equal to the profits on one half of this capital. If one of them employ 
the whole of his ten thousand dollars, he will be able, besides his expen- 

ses, to lay up as much more at the end of the year ; while the other, who 
keeps five thousand dollars of his money idle, may be barely able to make 
both ends meet. The first will therefore be able to undersell his neigh- 
bor, and accumulate a surplus from a reduced rate of profit ; while the 
other must deprive himself of some of the necessaries of life, in order to 
sell his goods at the same prices. Such is the consequence of the loss of 
power in respect to capital. 

The operation is the same with nations. As we have seen, where the 
capital of both countries are the same, the country which employs most 
of its capital will have the advantage of the other ; but we may go still 
further. Suppose two countries, one of which has a much larger capital 
than the other, but which does not employ so much of this capital as it 
might : the other with less capital employs the whole amount ; other cir- 
cumstances being the same in both cases. The country with the smallest 
capital is able to compete so much the better with the richer country, in 
proportion as one has a great deal of its capital lying idle, while the other 
gives full employment to every dollar that can be scraped together. Hence 
the less capital any country may possess, in proportion to the capitals of 
its richer neighbors, the more desirable it is that there should be no loss 
of power, by allowing any part of this smaller capital to remain idle or 

Great Britain affords the example of a country where there is probably 
the least loss of power, either in respect to time, labor, or capital ; and to 
this peculiarity she is no doubt indebted for much of her pecuniary 

Spain and Italy, on the other hand, afford examples of power lost, in all 
these particulars. A great portion of the year, in those countries, being 
occupied with holidays, and the habits of the people inducing them to la- 
bor only so much, and so long, as may be absolutely necessary for their 
subsistence. The wealth of these countries being in possession of com- 
paratively a small number of persons, and many of these persons allowing 
a large part of what they possess to be in a great degree idle and unim- 
proved ; while there are few or no institutions to enable the small capi- 
talists to bring their means together, in order that the whole sum may be 
employed by those, who would be able and disposed to make a profitable 
use of it. 

In most of the old countries, as they are called, the capital, though in 
few hands, is abundant in proportion to the opportunities of employing it. 
Under such circumstances, the occasion of economizing this kind of power, 
is less sensibly perceived. In the United States of America, on the con- 
trary, as in all new countries, the capital is small in proportion to the va- 
rious profitable uses to which it may be applied. With a very few indi- 
viduals there may be an abundance of capital, but with the mass of the 
people engaged in business there is a want of it ; and in any competition 
which arises in trade or manufacture, between these United States and the 
nations of the old world, those countries, having by far the largest capitals, 
will possess in this respect an almost overwhelming advantage. Hence 
in the United States it is particularly desirable that all the capital which 
the country can command, from whatever source it may be derived, should 
be drawn into active operation, and should be so continued, that in this 
particular there may be no loss of power. 


N. B. The important advantages of capital may perhaps be further illustrated 
by a few instances of the inconvenience resulting from the want of it. 

As capital unemployed is power lost, so the unemployed faculties of enterprise 
and industry are equally power lost. Add to this, we may say, as a general rule, 
the faculty of capital, and the operative faculty, must be brought together, or the 
power of both are Jost. 

Suppose a person to possess an immense tract of land in a country entirely unin- 
habited. Such an individual is a large capitalist in land, but as there is no one to 
improve his land, his capital is idle. It is entirely unprofitable, for want of being 
brought within the reach of the enterprise, activity and labor, of those who might 
improve it. Here is so much lost power in capital. 

Suppose, on the other hand, a number of persons accustomed to farming, to be 
brought together in a place where there is no land to be cultivated, and to be in a 
situation disenabling them from doing any thing else. Here is so much labor power 
lost, because it cannot be brought within the reach of capital in land- 

It is the same with money. We may suppose a person possessed of a million of 
dollars, which he can neither employ himself, nor lend out on interest; there being 
no one within his reach, of enterprise and activity, to make use of his funds. Here 
is power in money capital lost, for want of meeting with the operative power. 

So, on the other hand, a number of industrious and enterprising persons accustom- 
ed to different branches of manufacture, may be living in a village on the banks of a 
rapid stream, admirably calculated for mill-seats, all" idle, and suffering from want 
of employment. Ask these persons why they do not go to work, set up mills, and 
engage in manufacturing. They will say they have no money, and there is no one 
from whom they can borrow any. They cannot build mills without money. They 
cannot procure the raw material without money, they are therefore idle. Here is a 
loss of Labor power, for want of being brought within the reach of money capital. 

Suppose in the same place some person to come forward with money sufficient to 
build mills, and furnish machinery, but not having means sufficient to purchase the 
raw material. The mills when built, are idle, and the people are still idle. Here 
there is a loss both of money power and labor power, for want of sufficient capital. 

We may see the same operation in a town or city. There may be vacant lots ; 
there may be materials for building; there may be abundance of mechanics and la- 
borers desirous of employment, but if there be no money with which to build, all this 
power in lots, and materials, and labor, remain idle for want of sufficient capital. 
So in ship-yards, materials and workmen may abound ; but if no one have money to 
pay for building vessels, the capital in materials and tools, and the faculty in the 
workmen, is so much power lost, for want of further capital. The same with the 
merchant ; his warehouses may be built, his ships may be ready to receive cargoes, 
his masters and mariners may be anxiously waiting for employment ; but if there be 
not capital enough, to load his vessels, there must be here again a double loss of 
power. Nor is it the shipping merchant alone that suffers in this way. The grocer, 
the linen draper, the artizan, and the trader of every description, must not only have 
the use of capital, but he must have the use of sufficient capiial, to enable him to car- 
ry on his business advantageously ; and what is true of each individual, is true of the 
whole nation. The country must not only have capital, but it must have the use of 
sufficient capital, to enable it to employ that which it has to advantage. Capital un- 
employed is power lost; the faculty of labor unemployed for want of capital, is 
power lost; and capital idle, and the faculty of labor unemployed for want of suffi- 
cient capital, is a double lods of power. 


Discrimination to be made between real and fictitious capital. 

IN speaking of the importance of capital, it is to be borne in mind that 
we mean real and not fictitious capital. The latter, it is true, may some- 
times be the means of yielding profit to the possessor, but its operations 
partake of the character of fraud. They may transfer property from the 
possessions of one person to that of anotber, but what one gains the other 
loses. The dealer in fictitious property may make a profit on the real 
property of which he gets possession, but in that case he gains a profit, 
which does not belong to him, the owner of the real capital being the per- 


son to whom the profits on that capital rightly belong. Like all other 
acts of injustice therefore, dealing in fictitious capital must result in loss 
to some one, and should like other frauds be discountenanced, on the com- 
mon principles of justice. Such dealing may not always be accompanied 
with fraudulent intentions ; and so far it may not be considered criminal, 
but its result to the community is the same as the execution of an absolute 

Aside however from the question of justice, real capital is something 
limited in its amount, it cannot exceed a certain extent, whatever public 
confidence may be. Fictitious capital on the contrary is unlimited. It may 
be created to any extent, so long as it is sustained by the confidence of 
the public, or of a sufficient portion of the public. At the same time, like 
other frauds, it must ultimately be rJetecteJ ; and whenever the illusion 
vanishes, a reaction takes place in proportion, and more than in propor- 
tion to the magnitude of the fiction. The advantages supposed to have 
been gained, disappear, and the loss falls upon those who are compara- 
tively most innocent of the cause, and least able to suffer the disasterous 

Heal capital is something which has cost so much labor ; more or less 
of it may be brought into activity, but the whole quantity of it cannot be 
increased except by labor. More or less of it may be withdrawn from ac- 
tivity : it may be more or less in demand for use ; but wherever it is, 
whether dormantor active, it has a value attached to it ; and although the call 
for it may vary, the reaction in its value can never be so ruinous, as in the 
case of fictitious capital. Time is required for the increase of real capi- 
tal, because it requires labor, but fictitious capital may be increased sud- 
denly, or at once, almost to any extent, and it may as suddenly disappear. 

The laborer, who lays by one hundred dollars every year from the sa- 
vings of his labor, requires two years to lay by two hundred dollars. But the 
man who passes his check or order upon a Bank, where he has no money, 
for two hundred dollars, raises this amount as it were in an instant ; and 
this fictitious capital lasts as long as the check passes from hand to hand, 
before it gets to the Bank; but as soon as it comes there and the real character 
of the check is detected, the illusion vanishes, and the last holder, having 
parted with this real capital in exchange for what proves to be fictitious, 
loses the whole. We have only to suppose a multitude of laborers, each 
requiring a year to lay by one hundred dollars, to perceive how slowly in 
comparison, real capital increases ; and we have only to imagine a state 
of great public confidence, in which a multitude of persons give their or- 
ders or checks on a Bank, or Banks, where they have no money, which 
checks are passed from hand to hand, to perceive how suddenly fictitious 
capital may be created ; and we have only to imagine further, a moment, 
when this state of confidence ceases, and each of these orders is brought 
to the Bank, upon which it is drawn, to perceive how suddenly this ficti- 
tious capital may all disappear ; and what a loss it must occasion to the 
last holders of these orders. All persons giving out promissory notes, 
and all Banks issuing bills, give orders on themselves. If they have in their 
possession the real capital to meet their notes or bills, their orders represent 
so much real capital, forthcoming whenever it is called for ; but if they have 
nothing whatever to meet their drafts, their orders, then represent nothing ; 
and whatever use may be made of them, or through whatever hands they may 
pass, they are only fictitious capital. As soon as the state of confidence 
oeases, and every note or bill is tried, that is, as soon as every order is 



brought to the point upon which it is drawn, the bubble bursts, and ruin to 
the last holders is the consequence. Whatever the number of actors may 
be, and however important may be their operations, the whole multitude 
act the part of the man, who draws a check upon a Bank where he has no 
money. The injustice and inexpediency of such a state of things are 
evident. The inexpediency appears more strongly, when we consider 
how unavoidably this real and fictitious capital become mixed together, and 
how difficult it is to distinguish between them, after they have passed from 
first hands; how much every increase of fictitious capital leads to an increase 
in the imaginary value of every article boughtor sold, and how much this in- 
crease of imaginary value leads to a further increase of fictitious capital. 

If in a community, possessing one hundred millions of capital, the pro- 
duct of labor, this capital be suddenly supposed worth two hundred mil- 
lions, although the property, by which this estimate is made be precisely 
the same as it was before, no sooner does anything happen to bring the 
matter to a test, than this imaginary one hundred millions disappears. There 
is nothing in the Bank to meet the order ; and the loss falls upon the last 
holders, who were perhaps entirely innocent of any share in promoting 
the error. Meantime the fiction has been the means of transferring pro- 
perty from one hand to another ; a few individuals may be richer for it, 
but real capital is not increased. 

We must bear in mind, however, that there is an important distinction 
between fictitious capital, and borrowed capital. Borrowed capital may be 
as real as that which is not borrowed. If the laborer, who has laid by 
one hundred dollars in silver, from the earnings of the past year, lend this 
money to his friend, to be used perhaps in his business as a grocer. This 
one hundred dollars is as much real capital after it is lent, as it was be- 
fore. It is as much real capital in the hands of the grocer, as it was in 
those of the laborer. Suppose the grocer deposit the one hundred dol- 
lars in the Bank, and allow it to remain there, it is still the same real 
capital that it was. It still represents the one hundred dollars worth of 
labor saved from the years' earnings. Suppose the Bank lend this one 
hundred dollars to a linen draper, who uses it in his trade ; it is still the 
same real capital in the hands of the linen draper, that it was at first in 
the money box of the laborer ; and yet it has been borrowed capital in the 
hands of every holder from the time it left those of the laborer. 

Real capital, however, although it may be borrowed and lent, and lent 
and borrowed again, without changing character, cannot be increased in 
amount without labor. If the grocer wish to borrow fifty dollars more 
of the laborer, he must wait till the latter has laid up so much money ; for 
if the laborer lend only his note to be paid from the earnings of the next 
six months, this note is fictitious capital, and not real, until the earnings 
have been actually laid by to meet it. As then real capital requires labor 
and time to be increased in amount, there can be no such sudden and un- 
limited increase of it, as in the case of fictitious capital ; and as, on the 
other hand, labor generally speaking, leaves its value behind it, there can- 
not be the sudden and extraordinary depreciation in real capital, to which 
fictitious capital must be subjected. At the same time real capital, wheth- 
er in the possession of a lender, or borrower, can have nothing of fraudu- 
lent character attached to it. The laborer who has laid by his money, has 
a right to lend it, and has a right to the interest paid for the use of it ; 
and the borrower has a right to all the profits gained by the use of it, after 
paying the interest. 


Fictitious capital may be created by the promises of individuals, of 
Banks, or other incorporated institutions, or of governments. If a mer- 
chant give out a note payable in six months, in expectation, that his profits 
will enable him to pay it when it becomes due ; this note is fictitious capi- 
tal till the profits be earned. If a bank, or trust company give out a note, 
or bond, to be paid by something that is to be earned, this also is fictitious 
capital till the earning is made to meet it. If the government issue its 
notes, or bonds to be paid out of the revenue of another year, this also is 
fictitious capital till the revenue accrue. If the merchant give out his 
note at six months without any expectation, or intention of paying, and 
without the ability of paying it : calculating that his credit will give cir- 
culation to the note, and enable him to raise money from it, this, it is evi- 
dent, is not only creating fictitious capital, but it is perpetrating a fraud. 
If a Bank, or trust company issue notes or bonds, merely upon the cal- 
culation that its credit will give these paper promises circulation ; and 
without the ability, or intention of paying these obligations, this also is 
not only creating fictitious capital ; but it is as much a fraud, as any that 
an individual can be guilty of, in obtaining money on false pretences. And 
if a government issue its promises to pay, without any intention of re- 
deeming these promises, this also must be a fraudulent transaction : while 
these promises remain unredeemed. Whether bearing the name of assignats 
or exchequer bills, or government bonds, or treasury notes, they are all as 
much fictitious capital, as the promises of the merchant, who gives out a 
note, which he cannot, and never intends to pay. 

Such being the nature of fictitious capital, it is easy to perceive how sud- 
denly it may be increased ; and how subject it must be, both to increase and 
to decrease, and consequently how directly it must produce a corresponding 
fluctuation in prices. If in a community possessing a real capital of one 
hundred millions of dollars, there be one hundred millions of fictitious capi- 
tal added and mixed up with the real ; the property belonging to this 
community, being precisely the same ; the prices must be doubled, or 
doubled on an average, some articles more and some less. But the whole 
property being still the same, it is evident that the representative of real 
capital has depreciated in value by being mixed with fictitious capital, pro- 
ducing the difference in price.* In other words, the currency has depre- 
ciated, what is called currency, being the money denomination by which 

* A silver dollar, for example, is a representative of so much real capital,being the 
product of a certain amount of labor which can hardly vary; or which varies very 
slowly, and almost insensibly; depending on the facility of working the mines, of 
purifying the metal, of coining and bringing the coin into market. 

If in a place where the paper currency has depreciated one half, a laborer despo- 
site one hundred silver dollars in a Bank, which pays out only paper, the laborer's rep- 
resentative of real capital, immediately loses one half of its value, and even with- 
out going to this extreme, if in consequence of excessive issues of Bank paper, (the 
Banks still paying specie,) property of various kinds, so rise in price that it requires 
a dollar and a half to purchase what a dollar did before, the silver dollar will repre- 
sent only two thirds of what it did previously. This depreciation of the represen- 
tative of real capital arising, as we may say, merely from the circumstance of its 
being found in so much bad company. The consequence of the first of these suppo- 
sitions must be, that the laborer will not again put his silver money into the Bank : 
so, from the moment a Bank stops paying out specie, specie will no mofe go in to it. 
Under the second supposition, the silver dollar will go to other places, and countries 
where there is not so much of this bad company, and where it will be able to com- 
mand its due proportion of real capital : so, whenever paper money is too abundant, 
the precious metals will disappear, being better treated where there is less deprecia- 
tion of the currency. 


property is estimated ; two hundred millions of capital, representing now no 
more property than one hundred millions did before ; the dollar therefore 
is only half of what it was. If the creation of fictitious capital be continued, 
the currency will continue to depreciate ; if this creation be from time to 
time checked, and again increased, the currency will fluctuate. 

The increase of prices, benefits comparatively a very small number of 
persons. Those who are large holders of property : the small holders are 
next benefited, and so in proportion ; but the laboring man and those who de- 
pend upon their daily, or weekly earnings, gain nothing by the rise in 
price ; on the contrary they are obliged to pay more for their food and 
clothing, and shelter, while it is a long time before the depreciation of the 
representative of capital or of currency raises the price of labor. It scarcely 
indeed does so, before a reaction takes place. When prices again fall, the 
large holder of property procured on credit is ruined ; the consequences of 
his ruin falls upon those who have trusted him ; this again brings ruin upon 
others ; and by the time the laboring man, and the mechanic can purchase 
their food and clothing on better terms, this general ruin checks the demand 
for labor, and the rate of wages falls more than the prices of the com- 
modities, for which the laborer has so much need. 

We see then, that in every point of view, while it is desirable to bring 
into active employment all the real capital to be commanded ; whether that 
real capital be in the hands of owners, or borrowers ; it is equally de- 
sirable that the creation of fictitious capital should be discountenanced and 

The point we have now to ascertain, is, in what way real capital can be 
most brought into activity, without incuring the danger of bringing ficti- 
tious capital along with it. 


Utility of Banks in collecting and bringing into use real Capital, by their 
Stocks, their Deposites, and their Circulation. 

When we speak of capital, we are apt to think only of large amounts 
of property, in the hands of single individuals, or in the possession of cer- 
tain institutions ; and it then appears to us, as if all anxiety about the em- 
ployment of capital, resulted from a disposition to make the rich richer. 
But this property in the hands of wealthy individuals, or of moneyed insti- 
tutions, as they are called, is but a part, and comparatively but a small part, 
of the capital of a country like that of the United States ; and it is just 
that part about which there is the least occasion for anxiety ^ as wherever 
money is collected together in masses, under the direction of men of wealth, 
there is no fear but (hut-it will be fully employed ; and in such cases it may 
be safely left to itself. 

The capital of a country, however, comprehends all the money that is 
in every one's pocket, arid all the property that is in every one's posses- 
sion. The poorest day laborer, who has a dollar more than is necessary 
for his immediate wants, has just this portion of the capital of the whole 
country. The shop keeper, who has ten dollars in his drawer more than 
he has immediate occasion for, has just so much spare capital unemploy- 
ed ; and the old lady, whose whole property consists of twenty dollars in 
silver change, laid up in an old stocking, is a capitalist to this amount, as 


well as the old gentleman whose hundreds of thousands may be invested 
in the stocks, and in real estate, and whose spare thousands may for weeks 
remain to his credit on the books of the bank. 

Suppose in a country where there are no Banks, ten millions of persons 
keeping their money in gold and silver by them ; including the larger sums 
which they would be disposed to lend out, if they had opportunity other 
sums which they cannot lend out, because, although not wanted immedi- 
ately, they will be wanted in a few days or weeks and smaller sums, 
wanted from day to day for the ordinary purposes of life. Suppose that 
each of these persons had, in this way, upon an average, fifty dollars in 
hard money some indeed having nothing, others having several hun- 
dreds : many having but from one to ten dollars each others twenty, 
fifty, or one hundred, &c. These ten millions of persons, with fifty dol- 
lars each, would together furnish an available capital of five hundred mil- 
lions of dollars ; and this real capital, too, being in hard money, and the 
savings of labor ; and yet this whole five hundred millions of dollars distri- 
buted, as it is, in small sums amongst so many millions of persons, is un- 
employed and unproductive. Some cannot employ their money, although 
amounting to hundreds of dollars, because they do not know how, or be- 
cause they are afraid to invest it ; with others, the amount they have is too 
small, or the time it will remain with them too short, to make it an object 
to employ it. Now, although these ten millions of persons may each of them 
think it of very little consequence whether their small savings, and money 
wanted from day to day, be improved or not, it is clear that there is here 
au immense amount of real capital, capable of being safely and profitably 
employed by thousands even of these very ten millions of persons, who 
need capital to enable them to operate to advantage in their respective 
branches of industry. To bring such capital as this into active use, is one 
of the designs of what is called the Banking System, such as it is in this 
country a purpose as conducive to the general prosperity, as it is bene- 
ficial to the multitude of individuals needing the assistance to be afforded 
them by these means. Without Banks, in the case supposed, this amount 
of five hundred millions of dollars remains dormant or idle, affording an 
instance of so much loss of power. With Banks, this amount is brought 
into active operation, millions of families are provided for, and the pros- 
perity of the country promoted ; that is, promoted, provided the system be 
not carried to an extreme, producing an artificial state of things an 
extreme only to be avoided by confining the system to its proper purpose, 
that of the employment of REAL CAPITAL. 

From what has been already stated, it will readily appear that the proper 
and lawful design of a Bank, is not to create capital where none exists 
which, in fact, would be creating only what is fictitious but to bring into 
use the capital otherwise remaining idle, and to call in such as may be 
wanted in the neighborhood of the Bank, from other places where it is not 
wanted. If Banks do more than this, if they attempt to CREATE capital, 
they go beyond the limit of their business ; they abuse the power com- 
mitted to them, and become the means of doing injury, instead of doing 
good. For this error, however, the Banking System, properly conducted, 
is not answerable. The reproach falls upon the individuals who conduct 
the business improperly. Since, however, amongst the conductors of 
Banks, there must, and always will be, persons of every variety of charac- 
ter and circumstance, the desirable object is, not to abolish the Banking 
System, but to furnish it with such checks and regulations, as may be re- 


quisite to prevent abuse of power, and to remedy errors of judgment on the 
part of any of those engaged in the management of these institutions. 

A Bank gives activity to capital, by lending out its money to those who 
employ this money in business. Here there are two parties benefited : 
the party concerned in the Bank, by receiving interest on the money lent 
and the party borrowing, by the profit made, over and above the interest 
required for the use of the money. 

There are three means by which a Bank obtains the money thus lent : 

1st. The sums contributed by subscribers, or stockholders, constituting 
what is called its capital stock. 

2d. The sums left in the Bank at different times, partly for safety, and 
partly for the convenience of those to whom they belong, which sums are 
called its deposites. 

3d. The smaller sums held in place of its own notes, or bills ; each 
Bank note being, in effect, an order given by the Bank on itself, for so 
much money which it has received, and which is to be returned when 
called for : that is, whenever the note, or order, is presented. 

The capital stock is made up partly by those who have large sums to 
contribute, and who accordingly take a large number of shares ; and partly 
by those who have only small sums to contribute, and who take but few 
shares. To accommodate more especially this latter class, Bank shares 
are usually from twenty-five to fifty dollars each. 

The larger stockholders, as they are called, are generally persons out 
of the way of business themselves, or having more money than they want 
to employ in business. They would be always ready to lend their money 
without the aid of a Bank, if they could be satisfied with the security of- 
fered ; but from the mere circumstance of being out of business, many of 
them do not know so well whom to trust, and they are timid and cautious 
in proportion, as the sums they have tp lend, are the savings of a long period 
of industry. They prefer, therefore, putting their money into the capital 
of a Bank, to be lent out by the directors these directors knowing best to 
whom money may be lent with safety ; and in case of any bad debt, the 
loss being distributed in proportion amongst a large number of stockhold- 
ers, instead of falling, as it might otherwise do, upon a single individual. 
In addition to this, where there is no Bank, the borrower and the lender 
cannot always meet each other at the right time. The man who has 
money to lend, may keep it idle on this account for weeks, or months ; 
while he who wishes to borrow it, does not know to whom to apply, or 
where to look for it. Here both parties lose : the holder of money loses 
his interest for so much time, and the business man loses the opportunity 
of making the profit he would have earned beyond the interest on the 
amount borrowed. 

This is still more the case with small stockholders. Those possessing 
one, two, three or four hundred dollars. Without a Bank they would know 
still less to whom to lend with safety ; they would be still less likely to 
meet the trust worthy borrower at the right moment ; while this borrower 
of one thousand, or perhaps two thousand dollars, would find it still more 
difficult to collect the amount from several different individuals. He 
would neither know where to look for them, nor would they know his 
credit sufficiently if they met with him. Such must be the case espe- 
cially with numbers of widows and orphans, whose property is now in- 
vested in bank stock. These small sums would frequently be idle, or be 
left in unsafe hands, if they, or their agents, were obliged to wait till the 


right person came along to borrow them. Besides this, the owner of the 
small sum has the advantage, in a Bank, of joining that small amount to a 
much larger one, and thus not only lends it when it might otherwise remain 
idle, but he obtains also for his small loan the same security as that which 
is given for the large one. 

Here then we see by the institution of a Bank, a variety of capitals, 
some larger and some smaller, collected together in a common reservoir, 
a public depot where all who need capital may make application for it. A 
Bank being a common place of meeting, where the money of the lenders 
goes to meet the wants of the borrowers, although the borrower and the 
lender are entirely unknown to each other. By this arrangement, too, the 
lender's money is not suffered to remain idle ; it is no sooner returned by 
one borrower, than it is taken by another. Thus accommodating every 
one, affording interest to one party, and profit to another ; with the advan- 
tage, too, of a mutual assurance amongst the stockholders, to provide against 
the risk of loss. 

Nor is it merely from the immediate neighborhood of a Bank, that these 
various large and small capitals may be collected. Persons in New York 
may want to borrow more than could be lent them by citizens of New York 
or of its vicinity ; but there may be others at a distance, who have their larg- 
er and their smaller sums to lend. Such lenders, indeed, cannot tell who 
they may trust with safety in New York, but they can place their money 
in the stock of a New York Bank, and it will then be lent out on the same 
security as that upon which the money of New Yorkers is lent. Thus 
capitals are brought into one state from neighboring states, to form Bank 
capital where it is most needed ; and thus not only the wealthy banker of 
Europe and Asia may invest his thousands, but the manufacturer also, or 
mechanic, of England, France, or Germany, and even of Turkey, and Chi- 
na, may invest his one, two, or five hundred dollars, in the bank stocks of 
different sections of the United States. Capital naturally flows from places 
where it is least wanted, to those where it is most wanted, provided there 
be no want of confidence, either in the liberty or security which it is to 
meet with. The small capitalist of England, or France, placing his sur- 
plus with the large capitalists of London, or Paris, and the latter in turn 
transfering his surplus to the moneyed institutions of the United States ; 
the rich banker of Europe acting as a supply engine to procure funds for 
the wants of this c6untry, leaving it to our own Banks to distribute this 
supply where it is most called for. 

We see, then, that Banks by means of their stockholders, collect a va- 
riety of large and small capitals, from their own neighborhood, and from 
distant places ; by which operation, both the owners of these capitals, and 
the borrowers of them from the Banks, are mutually benefited, and the 
power of so much capital is saved, which would otherwise be in a great 
measure lost. 

Let us now see in what manner the deposites of a. Bank are the means 
of bringing capital into employment, which might otherwise remain idle. 

Almost every member of a commercial community, has from time to 
time sums of money on hand, to be paid out at some future period, or which 
he expects will soon be called for. These sums may vary from fifty, or one 
hundred dollars, to tens of thousands ; the holder of the money may not 
be the owner of it ; he cannot purchase any thing with it, and cannot venture 
to lend it out, or he may want it to-morrow, or next day, or next 
week. With all such persons it must be a great convenience to 


place these sums in a Bank ; where the amount, great or small, will be safe, 
and whence it may be drawn out at any time, at a moment's notice. De- 
posited in a Bank, these various sums form a fund of which the Bank can 
make use, by lending out a certain portion of it. The amount in ordinary 
times, being about the same every day; for if one depositor draw out 
money, another pays it in. As we may suppose, in a town where 
there is but one Bank, unless money be sent out of the town ; the man 
who pays money, and the man who receives it, both keep their accounts 
in the same Bank, so that although one may draw, and another deposite, 
in any given day, the whole amount of deposites remains the same. In 
cities where there are several Banks, it is not precisely the same, but ex- 
perience shows what the average amount of deposites usually is, and 
what proportion of it the directors may venture to lend. Some idea may 
be formed of the importance of these deposites, from the fact, that in 1834, 
by a return made to Congress, the deposites in about four hundred Banks, 
amounted to seventy-five millions of dollars. In 1840, the amount in six 
hundred and sixty Banks, was nearly the same. In 1836 and 1837, it 
was much greater, but whether more or less, if these deposites, instead of 
being in the Banks, had remained distributed in every person's house, 
office, or store, the whole amount would have been so much idle capital ; 
whereas, in the Banks it became available capital, to be lent out to those 
who needed it. In the one case, it is so much power lost, in the other, it 
is so much power employed. 

To make the matter plainer, we may suppose, that in the United 
States, there are one million of persons, having each, on an average, 
fifty dollars, to be paid away amongst themselves in a day or two. 
Neither of these persons can use his money, because he is to have it 
for so short a time ; but as every one deposiies his money in the Banks, 
there is altogether in these Banks fifty millions of dollars, which fifty 
millions, the Banks themselves can lend ; because what one draws 
out, another puts in. By this contrivance an immense amount of capital 
is placed in such a situation that it can be actively employed ; while at the 
same time millions of persons are accommodated by the safety and con- 
venience of the arrangement ; and thousands are enabled to borrow the 
amount they need, which otherwise could not be obtained : and at the same 
time, the Bank, by receiving the interest on the proportion of its loans 
made from these deposites, is enabled to defray its own expenses, or at least 
partly enabled to do so. 

The capital thus obtained, too, is the same real capital as it would have 
been, had it remained in the owner's trunk, strong box, or safe ; for the 
circumstance of depositing it in the Bank, instead of keeping it in a house 
cannot make any difference as to the nature of the capital. The case 
supposed, being merely that of having Banks, where every man's money 
may be placed for safe keeping and convenience. 

The third means by which a Bank gives employment to capital, other- 
wise in an unproductive state, is the circulation of its own bills- Besides 
the sums of money of sufficient consequence to be lent out, or to be in- 
vested in stocks, or to be deposited in Banks for safety and convenience, 
there are, as is well known, multitudes of smaller sums, constituting what is 
called spending money, and pocket money ; sums also kept in tills of the 
shop keeper, or in the trunk of the mechanic. Sums of one, two, three, 
five, ten, twenty, and even fifty dollars, many of these sums are continu- 
ally passing from hand to hand, and form what is commonly understood by the 


circulation of the country. The small sum laid up by the laborer, to pay 
his quarter's, or monthly rent, is part of this circulation ; and so is the 
dollar paid by the house keeper to the butcher, even while it is passing 
from hand to hand in the market ; so is every sum large or small, paid by 
one person to another, while it is in the act of changing hands. 

Where there are no Bank notes, or no Bank notes sufficiently small, to 
supply the circulation, all these sums, or all these small sums, must be 
kept in gold and silver, and consequently must absorb, or take up so much 
of the real capital of the nation ; which cannot be applied to any other 
purpose, because it is wanted for these daily payments. If there be no 
Bank bills to be had less than twenty dollars, all sums smaller than this 
amount, must be kept in hard money; if none less than ten dollars, all 
smaller than this must remain in hard money. Suppose, in a country of 
ten millions of inhabitants, each person on an average, to have five dol- 
lars in this way, some may have none, some may have much more ; but 
at this rate, there will be fifty millions of dollars real capital, taken out of 
the trading capital of the country, for the purposes of circulation ; and thus 
kept as it were idle, so far as interest, or profit is concerned. As if a per- 
son had one hundred dollars in his pocket, which he might use to advan- 
tage were it his own ; but as it is not, he says, " I have this money, it is 
true, but I cannot use it because I have to pay it away to-morrow, or next 
day." So it is with these fifty millions of dollars circulation, it is all mo- 
ney that is wanted to be paid away to-morrow, or next day, and therefore 
cannot be used for other purposes. 

Now suppose a sufficient number of Banks to be established amongst 
these ten millions of persons ; each of them goes to the Bank in his 
neighborhood, leaves there his one, two, three, five, ten or twenty dol- 
lars in hard money, and takes out the small bills of the Bank in exchange. 
These bills answer all the purposes of circulation, to which the hard 
money was before applied, while the whole of these fifty millions of dol- 
lars becomes so much available capital, to be lent out by these Banks, to 
those who need it, affording an interest to the Bank, and a profit to the 
borrowers. This too, is real capital, not fictitious, for the ten dollars in the 
laborers hands, in hard money, was real capital, before he went to the 
Bank with it, arid that hard money is now in the Bank. The Bank bills 
given to the laborer in exchange, being simply so many orders of the 
Bank on itself, for the same amount in hard money, whenever called for. 
These orders pass from hand to hand, with more safety and convenience 
than specie, while the hard money they represent, is left in the institution 
to be used for the purposes of trade. 

The smaller the bills issued by the Banks, the less capital will be 
withdrawn from circulation, and the more capital the Banks will have to 
lend out. If there be no Bank bills less than five dollars, all the small 
sums under this denomination will be withdrawn from trade ; and per- 
haps the want of small bills is more sensibly felt than larger ones in pro- 
portion, as their multitude must far exceed the others. Whether more or 
less, however, whatever may be the amount of hard money required for 
circulation, it is so much real capital withdrawn from trade, and not yield- 
ing the interest and profit of which it is capable ; consequently it is so 
much power lost. Parts or portions of a dollar in hard money, we know 
from experience are indispensable,* here therefore, of two evils, we must 

* In addition to this we may remark, that the fractional parts of a dollar form 



choose the least ; but the same experience teaches us that a paper dollar, 
provided there be no ground for want of confidence in it, is as convenient 
for the purposes of circulation as a silver one. It is therefore, an im- 
portant consideration that every hard dollar in circulation, capable of 
being represented by a Bank bill, carries with it the loss of so much in- 
terest and profit, which might have been saved to the country. On the 
other hand, as capital doubles in amount, by the ordinary process of 
interest alone, in the course of ten or twelve years, we may form some 
idea of the immense advantage accruing to the United Sates, for example, 
by the invention of paper money circulation, even with all the abuses 
to which it has been subjected. 


Tendency of Banking operations to expansion, and to the creation of fic- 
titious capital. 

We have now seen in what manner a Bank, or any number of Banks, 
may be the means of bringing into use, in three different ways, that real 
capital, which for want of such institutions might remain unemployed and 

We say real capital, for to this their operations should be confined ; and 
it is important to keep this distinction continually in mind. 

If the subscribers to a Bank, instead of contributing the amount of their 
shares in hard money, or something equivalent to hard money, and capa- 
ble at any time of being exchanged for it, contribute only obligations of 
no value, and incapable of being exchanged for any amount of silver or 
gold, there is here no real capital. If the depositors of a Bank, place in 
it only pieces of paper or orders, never to be complied with, because there 
is nothing to meet them, then there is no real capital here. If those who 
obtain the bills of a Bank, give nothing in return, but promises never to be 
fulfilled, there is here also no real capital. Either of these operations 
would be fraudulent, and it is hardly possible to suppose a case, in which 
all three of these frauds might prove to have been perpetrated. Such an 
institution could hardly exist a day, but even if it did, the Banking System 
in the proper sense of the term, could no more be reproached with an 
abuse of this kind, than the East India islands could be taken to task for 
the wooden nutmegs said to be sometimes disposed of for real spices. 

The above is an extreme case, there may be others in which more or 
less of these kinds of frauds has been practiced, either intentionally or in 

Cases of intentional fraud may be rare, but as far as the creation of fic- 
titious capital is concerned, the operation is the same, whatever the inten- 
tion may have been. 

In some cases, the capital of a Bank may be partly real, and partly, 
and perhaps, almost entirely fictitious. It may have been made up of the 
promissory notes of individuals, who believed themselves able to pay, but 
who may have been deceived in the estimate of their own ability ; or it 
may have been made up of mortgages on property, supposed to have been 

suras so small, that individuals receive them without sufficient caution, and are not 
sufficiently vigilant in detecting and punishing impositions. The public therefore 
cannot countenance these fractional issues, without giving encouragement to fraudu- 
lent attempts on the currency. 


of sufficient value to cover such mortgages, when perhaps this property 
has been previously incumbered with other mortgages equal to its full 
value. Such a bank may go into operation, it may receive deposites, and 
issue its bills in exchange for good notes, and with its deposites, and the 
notes paid in it may meet its bills for a time : but having no real capital of 
its own, it will be embarrassed as soon as its bills come in before the notes, 
for which they were given out come due ; and this especially, if its de- 
positors, at the same time draw out a large part of their funds. 

A Bank with real capital, may have its deposites partly real and partly 
fictitious ; that is, they may be composed partly of specie, and bills of 
other sound Banks, and partly of bills of Banks unable to pay their notes. 
When this is the case, its own bills so far as they represent a portion of 
these deposites, represent only fictitious capital, and the Bank becomes 
embarrassed, or looses heavily as soon as it is required to pay out good 
money in return for the fictitious capital previously received on deposit. 

Again, a Bank with real capital, and good deposites, may give out its 
bills in exchange for promissory notes, at first to be esteemed good, but 
eventually proving to be of no value, when this is the case, every bill 
put into circulation, in exchange for such notes, represents only so much 
fictitious capital. Suppose that a Bank lend out the whole of its capital, 
deposites, and circulation in exchange for promissory notes of persons 
more or less unable to pay. Just in proportion, as these persons are un- 
able to pay their notes, the issues of the Bank at first apparently repre- 
senting real capital, will eventually represent only fictitious capital. 

A Bank then mus*t not only be sound, and go into operation with good faith 
in the first instance, but it must also be kept in this condition. Such an 
institution, conducted in the ordinary way, without supposing the intention 
of fraud, could not give out all its real means at once, in exchange for 
something fictitious; but there is always a tendency to this disasterous re- 
sult, and the greater the number of Banks, the greater this tendency. To 
wait till this extreme of evil is reached, must be folly. The longer the 
tendency in view, is left unchecked, the more difficult it will be to pro- 
vide a remedy ; and as the tendency is continually acting, the remedy, 
whatever it be, must be in continual operation. 

Banks being supposed to have, money at all times to lend, there is a 
continual pressure upon them, by those who want money, and generally 
those press hardest, who are to be trusted with most caution. At other 
times Banks have money to lend, when there is little call for it. The di- 
rectors are desirous of making some interest for the Bank, out of its 
funds, and this desire, leads them perhaps to place the amount on the se- 
curity of the stocks of other incorporated institutions, with the real situa- 
tion of which they are unacquainted. A period comes when money again 
is called for, and it is then found that these stocks cannot be exchanged 
for money, and the amount lent on them, or a great part of them, proves 
to be only fictitious capital. Not only this, when the Bank is called upon to 
pay specie for its bills, it must go back to the notes, and securities upon 
which it has been lending. If these prove to be worthless, or partially 
so, the stockholders suffer the loss. If these proceedings continue but 
a short time the evil may not be material ; but if there be no check ; if 
these loans have been made as if pay-day never were to come ; the stock- 
holder loses his all, and even the deposites and circulation are in danger. 

Protection therefore against the creation of fictitious capital is as ne- 


cessary for the interests of every shareholder of a Bank, as it is for the 
public welfare. 

The protection of every Bank against the insolvency of its customers, 
is to be found only in a constant trial of their ability to pay. It is impos- 
sible for the directors and officers of a Bank, to know with certainty the 
circumstances of those to whom they lend money ; or the degree of con- 
fidence to be attached to the securities they offer. It is only by testing 
the abilities of their debtors, and by testing the availability of their secu- 
rities, that the Bank can have confidence in them. This is too unpleasant 
a task, to be readily undertaken by officers and directors. Hence the ne- 
cessity of some arrangement in the Banking System, making it absolutely 
necessary for every Bank to be on the watch, that it does not trust any 
one too far, or too long. If a bank try the solvency of its borrowers, and 
test the nature of their securities, every thirty or sixty days, a tolerable de- 
degree of information may be obtained of its own real situation ; but if 
this trial be procrastinated for six or eight months, the information requi- 
red, will often come too late ; and still more so if the experiment of this 
test be further postponed. 

The tendency in the management of all Banking Institutions, is to pro- 
crastinate in this matter ; and experience teaches us, that unless they 
themselves are tried, they will not try those upon" whom they depend 
for their own solvency. If Banks be not subject to a continual test, their 
customers will not be so ; and just in proportion to the want of this test 
will be the creation of fictitious capital. On the other hand, if Banking 
Institutions are confined to their lawful and proper business ; if in pursuing 
this business, they are so subject to have their own solvency tried at all 
times, and at any time, that they must unavoidably make as continual a 
trial of the solvency of their customers ; then, whatever may be their num- 
ber, there will be no danger of the creation of fictitious capital. The cus- 
tomer will not give out his note, without having real capital to which he 
may resort for the payment of it ; and the Bank will not give out its bills 
without having the notes of customers representing 'real property, upon 
which it may fall back to meet its own engagements. 

This kind of rigor may appear odious, but it is necessary necessary 
for the security of the stockholders necessary for the protection of the 
bill holders necessary to protect the fair dealer upon real capital from 
the competition of the unfair dealer upon fictitious capital necessary to 
secure the community against the gradual creation of an artificial value in 
all kinds of property, eventually resulting in a period of public distress 
and ruin ; necessary to bring into activity all the real capital to be 
commanded by a judicious use of Banking Institutions, without involving 
the disasterous consequences of an abuse of them. 

The lawful and proper business of a Bank, is simply to lend out the 
real capital collected together by its stock, its deposities, and its circula- 
tion. It cannot even use all its deposites with safety ; nor the whole of 
its circulation ; but it may use such part of each, as experience shows, 
will not probably be called for out of the interest on the monies thus 
lent, the expenses of the Bank must be paid. The interest received on 
the amount of deposites and circulation loaned out, often doing little more 
than paying the expenses of the Bank, the dividends to the shareholders 
frequently do not exceed the legal rate of interest ; enormous profits of 
Banking business, properly so called, being entirely out of the question. 
The large stockholder, perhaps receiving no more interest, than if he had 


lent out his money himself; the principle advantage being, with the small 
share-holder, who, but for the bank, might not have been able to lend his 
money with safety at all. 

Where the number of Banks is not sufficient, the real capital to be com- 
manded will not be all taken up ; many who might use it to advantage, 
will not be able to procure it, and many who have it unemployed, will not 
obtain an interest for it. Where there are too many Banks, the deposits 
and circulation will be so much divided, that the interest derived from the 
lending of these, will not be sufficient to pay the expenses ; and the stock- 
holders may not be able to obtain so good an income with a Bank, as they 
could do without it. In either of these cases, the evil will correct itself. 
Where spare capital is unemployed, there will be a desire to establish 
more Banks ; and where Bank stock does not afford sufficient dividend, 
this desire will cease. Such, at least, is the case where all banks are re- 
stricted to their proper limits, and their proper business ; and where they 
are judiciously conducted, and confined to the employment of real capital 

But Banks are often got up, not so much for the benefit of the stock- 
holders, as for that of their officers and directors. The officers are in want 
of places and salaries, and their friends do what they can to serve them. 
The directors want the opportunity of influencing Bank favors for them- 
selves and others. Hence more Banks are frequently established than 
the circumstances of the community require. When this is the case, the 
proper business of banking is not sufficient to afford a satisfactory dividend 
to the stockholders. Here,, then, commences the inducement for an in- 
stitution to go out of its proper sphere, and engage in other operations be- 
sides those of lending its bank funds. Large stock loans are made, spec- 
ulations in stocks are entered into, and money is borrowed on one stock to 
lend on another, with the view of making a small per centage on a large 
transaction, in order to compensate for the want of income from a more 
regular banking business. In this manner, uncommon profits may occa- 
sionally be made; and undue encouragement may occasionally be given 
to the establishment of a greater number of Banks than are wanted. But 
these large transactions are frequently attended with heavy losses, and 
their result usually shows that speculative operations are not to be entered 
into, in any way, by banking institutions ; the interest of stockholders being 
generally sacrificed, to promote the private views and interests of design- 
ing or imprudent individuals possessing a certain influence in the manage- 
ment of a Bank. 

Bank officers and directors, although generally chosen, as we may sup- 
pose, for their integrity of character, must have the failings of men. They 
may be influenced not only by a regard for their own interest, but by a 
regard for the interests and opinions of others. The officers must please 
the directors, for on these they depend for their appointments and salaries. 
They must be popular, too, with the customers of the Bank ; or their want 
ot popularity may be a ground of their removal. The directors must oblige 
each other. They must literally do as they would be done by. Their time, 
too, may be short ; this year they have the opportunity of serving them- 
selves and their friends next year the management may be in other hands. 
They receive no other compensation for their services, than the Bank fa- 
cilities they may control ; and they have, besides their friends, their cus- 
tomers in business whose means they wish to increase, and whose credits 
it is their desire to sustain. As a general rule, therefore, without imply- 


ing any censure, we may lay it down as a point beyond dispute, that the 
disposition of every board of direction, as a whole, is to accommodate 
every one as far as possible ; to enlarge the issues of the Bank; to increase 
its circulation; and even, as it were, unwittingly to lend on security less 
and less undoubted. Every Bank, for example, desires to multiply the 
number of its depositors ; and depositors will not keep their accounts at a 
Bank where they cannot borrow as much as they think themselves entitled 
to, or as much as they may obtain at some other Bank. Hence, where 
there is more than one Bank, when business appears profitable, and capital 
is wanted, there is a competition in lending, which arises from the general 
competition for depositors. On the other hand, when times are less favor- 
able, prices are falling, and failures are apprehended, every influence is 
employed to help the weak, in order that the weak may be enabled to pay 
the debts daily coming due, and to enable others to hold their property 
without sacrificing, till prices again improve. 

It is easy to see that, under such circumstances, unless a Bank be daily 
in apprehension of some immediate and certain call, to test its own ability, 
there will be a disposition to lend more and more ; and to do this on security 
not always of the safest character. What is true of one Bank, in this respect, 
is equally true of all ; and what is further peculiar to the case, is that, al- 
though Banks in the neighborhood of each other, are competitiors in busi- 
ness, it is alike the interest of all to accommodate each other to show to 
each other the same kind of indulgence shown by each to its several cus- 
tomers. Suppose in a community of twenty Banks, each to have extended 
itself in the manner adverted to, till each feels an anxiety with regard to 
the solvency of a large part of its debtors. If one of the twenty be sud- 
denly and urgently pressed by the others to pay its bills in hard money, 
this Bank must stop its usual accommodations ; it must fall back upon its 
customers, and call in its loans. Suppose these customers, thus suddenly 
tried, to stop payment ; they not only owe their own Bank, but they owe 
other Banks, and the customers of other Banks ; and these customers of 
the other Banks, being disappointed in their collections, stop payment in 
consequence of the stoppage of the others. The nineteen Banks then very 
soon find that they are making bad debts themselves, by what may have 
been their effort to test the strength of another institution. It thus becomes 
unavoidably the interest of the twenty Banks to sustain each other ; and 
this so much the more, as they may have all committed the same error. 
Not one of them, therefore, would willingly be the instrument of causing 
a shock to the credit of the community, in the consequences of which they 
must all materially suffer. 

The operation will be the same, if instead of twenty Banks, there be five 
hundred. It behooves them all to be alike indulgent to each other : and 
most so, when the state of credit is most critical. Thus, as the tendency 
of each and every Bank is to expand, so the policy of all banks must be to 
countenance and sustain each other in this expansion. While, then, we 
perceive that something is necessary continually to test the credit and sol- 
vency of each Bank and its customers, we must equally perceive that this 
test is not to be expected from the voluntary action of the several Banks 
on each other ; and that especially in periods when it is most required. 

In the preceding cases, we have supposed only honest intentions on 
the part of all Bank officers and directors. If we go further, and suspect 
bad intentions in any of them, it is clear that, in proportion to the want of 
honesty and honor amongst those who possess so great a degree of power, 


the evils described must be so much the greater : and the check required, 
so much the more indispensable. 

From a slight knowledge of mankind, we are easily led to believe that 
in the community of a single state, where there are forty or fifty Banks, 
there may be some individuals amongst their conductors, not sufficiently 
under the restraint of moral and honorable principles. There may be 
some, even, disposed to create fictitious securities, in order, on the strength 
of them, to procure available funds from the Banks under their direction ; 
and there may be others disposed to turn off, upon their own institutions, 
securities in their own hands, already known to be worthless; and thus 
save themselves from loss, by sacrificing interests which, as trustees, they 
were bound in honor to protect. If some such instances may occur amongst 
the forty or fifty Banks of a single stale, how much more must there be a 
probability of like occurrences, where there are several hundreds of these 
establishments, spread over a territory of thousands of miles in extent ? 

Operation of Bank Expansion upon the Currency. 

Having noticed the tendency to expansion, in the management of Bank- 
ing Institutions, and the consequent increase in amount of Bank notes in 
circulation, let us now attend to the effect of these particulars upon the 
value of the Bank notes themselves, or upon what is called the paper cur- 
rency of the country. 

Wherever Banks are established, most of the money, in sums of fifty 
or one hundred dollars and upwards, not wanted for immediate use, is de- 
posited in a Bank, as a matter of safety and convenience. In addition to 
this, almost every one having a promissory note of another person, instead 
of waiting till the note is paid, and then depositing the money in the Bank, 
places the note itself in the Bank, either for the purpose of discount or of 
collection. Thus a very large part of the money paid in such a commu- 
nity, is paid into the Banks. Here, then, are two modes in which the 
Banks get possession alternately of the Bank bills in circulation by de- 
posits, and by the payment of promissory notes. 

The shopkeeper and the mechanic collect their small sums together, 
till they get sufficient to make a deposit, or to pay a note. In these col- 
lected sums, they have the bills of a variety of Banks. Accordingly, 
where there are a number of Banks in good repute, one Bank receives in 
deposit, or in payment of notes, the bills of several other Banks ; Bank 
A, receiving the bills of Banks B, C, D, E, &c., and the other Banks 
receive the bills of Bank A. Each Bank enjoying the benefit of the 
interest derived from the circulation of its bills, while they are in posses- 
sion of the other Banks, as much as if they were in the pockets of those 
to whom the money was originally lent. 

If, however, Bank A, receive more of the bills of Bank B, than B re- 
ceives of A's bills, the balance of the advantage on this item, is against A, 
and if A continue to receive and retain more of the bills of each of the 
other Banks, than they have of A's bills, these last may be comparatively 
crowded out of circulation ; in which case, Bank A loses the interest on 
that portion of circulation upon which it depends for paying the expenses 
of the institution ; A's bills being in time all brought in, while it continues 


to hold the bills of other Banks, from the circulation of which they reap 
the benefit. Hence, independent of any want of confidence, it becomes 
the interest of each Bank, to balance its accounts with the other Banks 

A, sending back B's bills, and receiving its own in exchange, and requiring 
the difference, if any, to be paid in specie ; and so with the others. Thus, 
as a mere matter of interest, the Banks, as far as practicable, check each 
other ; and this of course, much more, where there is a want of confidence. 

This check, however, dictated by interest and prudence, is not always 
practicable. Where there are a number of Banks in the immediate vicin- 
ity of each other, it may not be necessary for each to call upon the other 
.for its balance in specie, because what B may owe A, C may again owe 

B, and A may owe C ; so that by passing checks, or orders, one on the 
other, the difference may be finally adjusted, with a very small payment in 
hard money. 

If all the Banks, too, be within a convenient distance of each other, as 
they are in cities, this balancing of accounts is very easily performed, and 
may be effected every day. Then, daily checking each other, neither will 
go to any great excess in its issues, unless circumstances are such as to 
induce all of them to adopt a system of indulgence ; in which case, they 
may all exceed their proper limits, charging each other interest on balances 
instead of requiring immediate payment, But in proportion as Banks are 
at a greater distance from each other, more time is required, and more 
risk and expense incured, in effecting these exchanges. 

If city Banks receive the bills of distant countr)'- Banks, whether they 
effect this exchange themselves, or whether they do it through a person 
who applies himself to this kind of business, they must suffer a degree of 
loss in proportion to the time, risk and expense, already spoken of. As 
soon, then, as the city Banks find that this loss is as great, or greater, than 
the gain of interest made by the transactions proposed, they will refuse to 
receive these bills. The parties having them, are then obliged to get them 
exchanged by paying something equal to the loss of time, risk and expense, 
alluded to. Here, then, commences the difference between the value of 
the bills of distant Banks, and those of the city Banks. The process is 
the same with regard to the bills of the Banks of different states. The 
Banks of one state cannot take those of a distant state, if the loss of time, 
risk and expense, required to exchange them, be so great as to counter- 
balance the interest it derives from making loans. 

The difference in the value of Bank bills, whether between those of the 
city and country, or between those of one state and of another state, must 
depend upon a variety of circumstances. The distance, the means of 
communication, the reputation of the distant Bank, and the opportunity 
there may be of using its bills at any intermediate point. In some cases, 
Banks may take the bills of distant institutions at a lower rate. They may 
collect, as it is called, on other places ; but the result is the same ; they 
must make as much difference in the rate, as it will cost them to effect the 
exchange ; taking the time and risk, as well as the actual expense, into 
view. In general, a dealer in bills, or money changer, will be able to ef- 
fect the exchange, to a limited extent, better than a State Bank ; as his 
whole attention is applied to the business, he may have his agencies at 
certain points, and one dealer may collect for several institutions, and in- 
dividuals at the same time, which will make the expense fall so much 
lighter on the whole. Whether the difference, however, be charged by 
the Bank, or by a dealer in Bank bills, it constitutes what is called the 


rate of exchange; and whatever it may be, it is always less than it would 
cost individuals, if every person undertook to effect the exchange of his 
own money. 

Suppose, for example, a mechanic to receive one hundred dollars in 
bills of distant Banks a dealer in these bills may exchange them for one 
per cent., which is one dollar only ; whereas if the mechanic undertake to 
effect the same exchange himself, he must leave his work, he must pay 
his travelling expenses, he must lose the interest of the money till it is 
exchanged, and he must incur the risk of losing it on the way. If, then, 
he have to pay this money into the Bank, his best and only course is to 
pay the difference of exchange. So it is with every dealer or trader. 
Whatever may be said of the loss by exchange, it is, even in the best 
times, the unavoidable consequence of the distance and difficulty of com- 
munication between Banks of different cities or states ; and the loss of 
time, risk and expense, attendant on effecting these exchanges. The 
dealers, who devote themselves to the business of exchanging paper money, 
as far as they are able, perform a benefit to the community, and in some 
measure mitigate the evil ; the point of enquiry, however, is whether this 
evil may not be still more mitigated, and a still better remedy provided. 

We have now seen that Banks, under the most favorable circumstances, 
cannot receive the bills of distant institutions, when the loss incident to 
exchanging them would be too great ; and that they cannot retain these 
bills without losing the benefit of their own circulation. The operation 
being the same as that of a man's paying all his own notes, without calling 
upon others to pay the notes which he holds of theirs. Consequently, 
however fairly and judiciously Banks may be conducted, a difference of 
exchange in other words, a comparative depreciation in the value of 
Bank bills must exist ; and this in proportion to the difficulties of commu- 
nication between the several institutions from which these bills originate. 

Let us now suppose that some Banks are not so well conducted as oth- 
ers, or rather as they should be. Some of them, for instance, cause their 
bills to be circulated in distant parts of the country, purposely, that a con- 
siderable period of time may elapse before they can be brought back to 
their own Bank for specie. Some of them lend their money on doubtful 
security, perhaps on condition that they shall be thus circulated. Some 
venture to issue more of their bills in loans than it is prudent for them to 
give out ; some are on the verge of insolvency, and some are actually un- 
able to pay the notes they have out, and would be obliged to stop payment 
if a large claim were at any time to be made upon them. The real cir- 
cumstances of such Banks are rarely known. In some cases secrecy is 
purposely observed : in others there may be a difficulty of obtaining intel- 
ligence, on account of the distance, or other circumstances. In some 
cases public suspicions may go beyond the truth ; in others it may hardly 
anticipate the evil sufficiently. In all these cases, however, the hazard 
of dealing in the bills is increased, or supposed to be increased. Even 
sound institutions suffer in their reputation, in consequence of the mis- 
management of others. Here, then, want of confidence comes in to add 
to the difference of exchange, or depreciation of value arising from natural 

There is, therefore, ample foundation for a considerable difference be- 
tween the value of the bills even of Banks of the same state, where all 
the institutions are under the same state government, and where the great- 
est distance between any of them does not exceed two or three hundred 



miles. How much greater must be this depreciation where the compara- 
tive value of the bills of Banks of twenty -six different states, under dis- 
tinct governments, subject to different regulations, and some of them 1500 
or 2000 miles apart from the others. 

How much greater must be the difficulty here, in effecting frequent ex- 
changes ; in bringing home to each Bank the excess of its bills in circu- 
lation ; and of judging of all the uncertainties attending the exchanging of 
its paper. If the difference between the value of the bills of different 
banks, and between the circumstances of different sections of the country, 
were always the same, the inconvenience would not be so great. But so 
long as the exchange of bills cannot be effected rapidly, there must be a 
corresponding uncertainty as to what may take place, between the time 
when a bill is received, and the time when it may be exchanged for spe- 
cie, or the value of specie. This is the case even in cash transactions ; 
how much more must it be so where sales are effected on credit. A mer- 
chant in the city of New York, selling to a merchant in Buffalo, at six 
months' credit, not merely taking the risk of the difference between Buffalo 
money and city money at the time of sale, but also the risk of what it may 
be six months afterwards ; and another selling to a merchant in Georgia or 
Alabama, whatever the loss in exchange may be at the time, hazarding the 
still greater depreciation to be apprehended when his sale becomes due. 

We see, then, that in proportion to the relative excess in the expansion 
of Bank issues, from the moment that one Bank cannot take the bills of 
another Bank, there will be a corresponding difference of exchange, and a 
comparative depreciation of currency. 


Effects of a Depreciation of the Currency. 

Having noticed the causes unavoidably producing a difference, or de- 
preciation in the comparative value of Bank bills, let us now observe upon 
whom, and upon what, the consequence of such depreciation falls. 

Whatever be the cost of exchanging money, it must eventually be paid 
by the consumer. He has to pay at last for the loss of time, the expense, 
the actual hazard, and the supposed hazard, or apprehension of hazard, 
incured in all the money transactions connected with the purchase of the 
goods he consumes. The New York merchant, in selling to the Buffalo 
or Alabama merchant, must sell at a price sufficient to cover all the loss 
he incurs, or is apprehensive of incuring, from the depreciation of the 
money he receives, or is to receive, in payment for his merchandise. Or, 
if the Buffalo or Alabama merchant pay for his purchases in hard money, 
he must be compensated for the same cost arid hazard. If the danger 
apprehended be not so great as was supposed, the intermediate trader, 
having taken the risk, may gain by it ; but the consumer has to pay not 
only for the real, but for the supposed, hazard. The consumer, in fine, 
sustains the burthen of all want of confidence, as well as every other 
charge, intervening between the producer of the goods and himself. At 
the same time, the seller of goods, and even the money changer, may lose 
more than he anticipates. If a depreciated currency be stationary, the 
evil is not so great, but all must suffer inconvenience from the instability 


of a continually depreciating currency ; and this inconvenience must at 
last be paid for in the price of every article of necessity, comfort or 

Add to this, in what may be called the home circulation, the mechanic, 
fanner, and laborer, suffer most from this depreciation of Bank paper. 
Wherever a difference in the value of Bank bills exist, there will be two 
currencies ; one that of bankable money, as it is called, and the other of 
that which is not bankable. The latter, as we well know, although not 
receivable at the Bank, will be applied to almost all other payments : that 
is, within a certain limit of depreciation. In many cases, the best Bank 
bills will be exchanged for those of an inferior character, expressly for 
the purpose of paying debts not due to a Bank. As a general practice, 
we find that, whenever the bills of distant solvent Banks can be procured 
at a cheaper rate than the bills of nearer Banks, the worst bills, or what 
we call the out of town bills, will take the place of the best bills ; and 
will generally be used in payment of the laboring classes. The shop- 
keeper t the butcher, and the baker, can compensate themselves for the 
loss on these bills, by adding to the price of what they sell ; but the la- 
borer cannot raise the price of his day's work, to meet the depreciation of 
the paper dollar with which he is paid ; although he experiences the effect 
of this depreciation in the price of every article of food or clothing of which 
he stands in need. While, then, the whole body of the community have 
an interest, as consumers, in maintaining the stability and uniformity of 
the currency, the laboring classes have a double interest in attaining the 
same object. 

There being, under the circumstances supposed, two kinds of money in 
circulation one which the Banks will receive, and one which they will 
not receive it follows, that all of the description not so received, will re- 
main in the pockets, trunks or drawers, of those to whom it belongs, as so 
much idle capital. It will be, in this respect, with regard to this kind of 
money, as if there were no Banks. The amount of deposits in the Banks 
will be so much less, and so much power in capital will be lost. Hence, 
the greater the abundance of money in circulation not bankable, the greater 
may be the complaints of the scarcity of money in trade : and hence an 
interest which every community has in equalizing the currency. For if all 
money be bankable, all except what is wanted for daily use, will be depo- 
sited ; and the greater the amount of bank deposits, the more money these 
institutions will h'ave to lend out, and the more real capital will be brought 
into activity. 

The circulation, therefore, of bills of distant Banks, in any city or town 
where these bills cannot be taken by the Banks of that place, diminishes 
its trading capital in two ways : First, by depriving these Banks of such 
a proportion of their means as might be derived from the circulation of 
their own bills ; and secondly, by reducing the average amount of their 
deposits. It may be said, indeed, that all Banks may take the same liberty ; 
that the Banks of the East may circulate their bills at the West, and those 
of the West do the same at the East ; and so with the Banks of the North 
and South. But this mutual invasion of each other's territory, as far as 
deposits are concerned, increases the mischief, as it places in each district 
so much undepo sit able money, in the place of that which might have been 
deposited. And these efforts at distant circulation are always of the sche- 
ming order, and especially to be discountenanced ; they are indications of 
weakness, and grounds of distrust ; they must result in a depreciation of 


the bills circulated, and in augmenting that instability of the currency 
against which it is so desirable to provide. Any arrangement, then, tend- 
ing to keep the bills of all Banking Institutions within their respestive vi- 
cinities, must, in its operation, be most unquestionably equitable, and best 
calculated to promote and to secure the convenience and prosperity of the 
public. Such an arrangement gives to each institution all its just rights 
and privileges, while it guaranties to those well and properly conducted, 
the benefit to be derived from that public confidence to which they are 

Such being the consequences of a depreciated paper currency, as far as 
the general welfare is effected by them, particularly in their bearing upon 
the consumer, and upon the laboring classes, and upon the amount of 
available capital let us now look at the operation of such a state of the 
currency, in the collection of the public revenue. 

We have seen the tendency to increase, in the issues of all bank pa- 
per, if unchecked, even when the banks themselves are well conducted, 
and still more when they are badly managed. We have seen the una- 
voidable difference in the value of bank bills, arising from the loss of time, 
expense, and hazard incident to exchanging them, and we have seen how 
much this difference may be increased by any knowledge, or suspicion, 
of mismanagement on the part of those who conduct these corporations ; 
not only, too, suspicions of what may have occured, but apprehensions of 
what may occur at some future period. 

From what has been stated, it is evident that in an extensive country, 
like that of the United States, with twenty-six independent state govern- 
ments, the circumstances occasioning a difference in the comparative val- 
ue of bank bills, may vary essentially in different sections, and in different 
states. The rate of depreciation in bills of these sections and states, of 
course will vary according to these circumstances ; especially as in those 
sections of the country in which capital is most wanted, there will be the 
greatest tendency to excessive issues, and of course less of this tendency 
in sections where capital is more abundant. Accordingly, in one section, 
the bank paper dollar may be equal to a hard dollar ; in another it may 
not be equal to more than ninety-five, ninety-six or ninety-seven cents 
hard money. In other sections, it may be as low as ninety cents ; and 
if we suppose the banking business of any particular section to be very 
loosely conducted, the bills of that part of the country may not be worth 
more than seventy-five or eighty cents in specie. 

Now suppose one citizen imports goods in a section of the country 
where the bank bills are equal to specie. He pays duties on these goods 
at the rate of one hundred cents the dollar, hard money. Suppose anoth- 
er to import the same goods in a district where the paper money is only 
equal to ninety-five or ninety cents hard money. Here, this last citizen 
pays five or ten per cent, less duty than the other. So, if one purchase 
public lands, to pay, as in the first case, bank bills equal to specie, and 
another, in another state, pay for his lands in bills worth only ninety cents 
in specie, the citizen of one state would not pay so much for the public 
lands, as the citizen of another. In these cases, although the duty, 
and price, be nominally the same, the citizens of different sections 
actually pay different rates. One indeed may be able, for this reason 
alone, to sell the same kind of goods, or the same lands, at a profit, when 
another could not do it without loss. This mode of collecting the revenue, 
it is evident, is unequal and unfair. Not only so ; it is expressly in vio- 


lation of a provision of the national constitution, which requires that " all 
duties, imports, and excises, shall be uniform throughout the United 

The unavoidable tendency, then, of the issues of all State Banks, 
throughout the Union, if unchecked, is to produce unequal values of bank 
paper, in different sections of the country ; and the unavoidable conse- 
quence of these unequal values, must be, that the public burthens, if 
payment be collected in bank bills, will not be uniform throughout the 
several states. 

It follows, then, that the national government must either collect all its 
dues in hard money, or else it must establish some institution, by the 
operation of which all the issues of the various State Banks will be so 
checked, that their bills in every section of the country will be of the 
same value that is, will be always at the par of specie, or within a very 
small fraction of it. 

If there be no such institution, as the provision of the constitution, as well 
as the plain principles of equity, cannot be violated. The government must 
collect its dues in hard money, or the full value thereof. It cannot receive 
bills of Banks not worth one hundred cents to the dollar in specie, for the 
reason already given, nor, if this reason were set aside, could it receive 
depreciated paper money, and suffer the country to lose the difference be- 
tween the value of that paper, and that of gold or silver. If it receive its 
dues in specie, or the full value thereof, it must also pay out specie or the 
value thereof. The consequence must be then, that, if all the receipts 
and payments of the government be in specie, there will be so much less 
amount of Bank bills in circulation, at least in all those portions of the 
country where these bills are not equal to the par of hard money. Thence 
results a loss to the country of so much power in capital. 

We have seen that every dollar of Bank money represents, or should 
represent a hard dollar, which is left in the Bank in lieu of it, and that this 
hard dollar is so much capital which the Bank has the faculty of lending out 
for the purposes of trade. Of course every paper dollar received, and paid 
by the government, saves the use of a hard dollar, the same as in the 
transactions of individuals. If the whole amount of the money received 
and paid by the government, be in Bank bills, then the use of this amount 
in hard money is saved, leaving it in the possession of the Banks, to be 
lent out as capital. 

If on the contrary, the government resort to a system of receipts and 
payments, in hard money only, it withdraws from circulation, an amount 
of Bank bills equal to the average amount of these receipts and payments 
as they are continually going on, requiring from the Banks the same 
amount in specie : perhaps several millions of dollars. But whether 
more or less, in the mode described, crippling the Banks, at the mo- 
ment of the withdrawal, and so long as the system continues, depriving 
the country of the use of the capital to be derived from what may be call- 
ed the government portion of the circulation : a disadvantage, too, suffered 
most in those sections where the want of capital is most experienced. 

This is not all, as the dues of government cannot be collected in Bank 
bills on account of their depreciation, so neither can they be mixed, after 
collection, with this kind of money. The government agents cannot de- 
posit hard money in a bank, and take out bills of less value than the hard 
money, without actually conniving at a fraud. Hence, in those sections 
where every Bank dollar is not worth its face in specie, the money of 


government would be kept separate from the money of the Banks. The 
Banks then can no longer enjoy any advantage from government depo- 
sits ; and consequently the country loses all that power in capital, to be 
derived from the use of these deposits, when, through a Bank, or Banks, 
they are lent for the purposes of trade. 

We have seen that the various sums deposited by individuals, in the 
Banks, constitute an average amount, to be applied by the Banks on their 
own responsibility, to the wants of borrowers. So the average amount of 
public deposits, if in Bank, constitute a capital of some millions, in like 
manner, to be discounted upon for the benefit of the trading community, 
the whole capital of the Bank being held responsible to the government 
for the amount thus loaned. 

Suppose all the individuals of any given section of the country, to with- 
draw their deposits from the Banks, we may easily conceive how much 
the power of those Banks to aid their customers, must be diminished. 
The operation will be the same if the government, instead of leaving its 
money in a way to be loaned out, lock it up in safes and vaults in specie, 
such, however, must be the unavoidable consequence of the depreciation 
of bank bills, and of the instability of a paper currency. Wherever these 
exist, the revenue cannot be fairly and safely collected and preserved, 
without an entire separation of the public moneys from those employed in 
the ordinary transactions of business. 

Nor will this precaution be confined to the money operations of govern- 
ment alone. No one will put a quantity of silver and gold into a Bank to 
receive in return bills, not capable of commanding an equal quantity of 
hard money. When bank bills are considerably below par, every indi- 
vidual, as we have noticed in speaking of two currencies, keeps his silver 
and gold in his own possession, withdrawing so much real capital from 
the purposes of trade. In other words, silver and gold, as is well known, 
is hoarded and secreted in proportion as public confidence in bank paper is 

On the same principle, in a country where the currency is unstable and 
depreciated no foreign capital will remain. The merchant or banker of 
Europe, dare not allow his money to remain in America in dollars and 
cents of account, if he fear that the dollar of to-morrow will not be worth 
so much as the dollar of to-day. He may send his goods here to be 
sold, but he will not allow the amount to remain, he gets it home as soon 
as he can. He can leave nothing in American money that is, repre- 
sented by Bank money : for he says, " the currency of that country is 
growing worse and worse." 

Even the American merchant himself feels the panic. He will not 
keep his capital at home, in any thing represented by the currency of his 
own country. So long as the Bank currency around him is depreciating, and 
continually depreciating, he places his funds elsewhere, if it be only for 
safe keeping. 

Thus, with loss of confidence in bank paper, real capital takes flight 
in all directions ; and the evil is continually augmenting itself. 

To supply the absence of real capital, fictitious capital is created. 
Banks, in some instances, borrow that which is real, but they give their 
own doubtful obligations in exchange ; and the evil consequences of the 
fiction is thus shifted from one shoulder to another. In other instances, 
they may borrow, as they say, only the credit of the state, in exchange for 
the same kind of obligations; but the citizens find when it is too late, that they 


must furnish, in the shape of taxes, the real capital which the State has 
obliged itself to give away in payment for the fictitious capital thus impo- 
sed upon it. 

Here, then are the consequences of an unstable and depreciated state 
of Bank currency. The consumer suffers in the increased price of every 
article he purchases. The laboring classes suffer yet more by their ina- 
bility to raise the price of labor, in proportion to the rise in price of articles 
of consumption. The revenue must be collected and preserved in hard 
money, causing a loss of power in the use of the capital to be drawn from 
government deposits and government circulation. Private citizens with- 
draw their hard money from the Banks, and consequently from the purpo- 
ses of trade. Foreigners also withdraw their capital from the country, 
and even the capitalist at home, places his funds abroad for safe keeping. 
Fictitious capital is substituted for real. State credit is brought in to sus- 
tain this fictitious capital ; and the citizen at last is obliged to furnish in 
the shape of taxes, the real capital, for which, this State credit has been 
pledged in exchange for what eventually proves itself valueless.* 




Advantages of a National Bank. 

We have now had before us the use, and the abuse, of what is com- 
monly called the Banking System of the United States. That is, the 
operation of the Banks of the several states, without any reference to their 
connection with a national institution. 

On the one hand, we have the important advantages derived from the 
immense amount of real capital, brought into activity through the instru- 
mentality of the stocks, the deposits, and the circulation of the local or 

* To this we may add the effect of fictitious capital upon the demand lor labor. 
If A can create fifty dollars worth of fictitious capital, answering his purpose as 
well as so much real capital, without employing labor, he will do it. Hence, the 
more easily such capital is created, the \esslabor may be in request. Hence too, an 
increase of prices, arising from a depreciation in the currency, may be attended 
with a diminution in the demand for laborers, and want of employment may be 
most felt by the industrious classes,at the very moment when speculation is most rife 
amongst those who have the command of fictitious means. Pay day too must come, 
A will have his notes to pay; or if he escape, the fictitious capital he has passed 
into other hands, must at last be tested ; when perhaps parties entirely innocent will 
suffer from his imprudence. So, in a country where fifty, or one hundred millions 
of fictitious capital has been created, pay day must at last come. The test will be 
applied to every thing bearing the name of capital, and millions of individuals 
may then suffer the effects of that collapse in the price of every article which brings 
it back to its original labor value. 


State Banks : on the other hand, we have the evils of a depreciated and 
unstable currency, resulting from the unrestricted and irregular issues of 
these Banks. 

Are we to reject the advantages on account of the evils with which 
they are attended, or, shall we find a remedy for these evils, and retain all 
the advantages ? The latter course is certainly the dictate of common 
sense, nor is it a difficult course to be pursued. 

The evils in question, arising as we have seen, altogether from unre- 
stricted and irregular issues of Bank paper, nothing more, evidently, is 
requisite than the establishment of an institution by the operation of which 
throughout the country, these issues must necessarily be restricted and 
regulated. Such an institution is a NATIONAL BANK. A National Bank, 
in the common acceptation of the term. That is, a Bank of discount and 
deposit, chartered by the National Government, with branches in the 
several states. Such a Bank in fine, as those of which the country has 
already experienced the benefit at different times, for more than forty years 
of its political existence. 

Experience already warrants the assertion, that this is the remedy re- 
quired : but in order to be better satisfied on this point, let us examine into 
the nature and tendency of its operations. 

1st. A National Bank of discount, by confining each of the local Banks 
to its proper specie paying limit, preserves to the country the usefulness 
of these institutions : while it provides against the introduction of ficti- 
tious capital ; and checks that tendency to extravagant issues, which is 
the cause of depreciation and instability in a paper currency. 

2d. A National Bank, operating through its branches, diminishes 
the time, risk, and expense, incident to exchanges of Bank paper, 
and to the transmission of funds from one portion of the country to 
another : thus reducing the rate of exchange between distant States to the 
lowest possible point. 

3d. A National Bank, furnishing the government with a suitable trea- 
sury agent, for the receipt, disbursement, and safe keeping of the public 
moneys, provides by its whole capital, for the security of these funds ; with- 
out depriving the community of the trading capital to be derived from a 
judicious use of the government deposits, and of the government portion 
of the circulation ; and without affording room for the exercise of favor- 
itism, or corrupt influence, on the part of any public officers. 

4th. A National Bank, by the privileges of its charter, and by the 
confidence it affords in the general stability of our Banking System, allures 
real capital from abroad, and brings it from its lurking places at home : 
directly, through its own stock ; and indirectly, through the stocks of other 
moneyed institutions : at the same time preventing that withdrawal of such 
capital from the country, which must otherwise result from apprehensions 
of a continued depreciation of the currency. 

5th. A National Bank, by restoring the Bank paper of the several states 
to a specie basis, by equalizing the exchanges, by providing a safe 
treasury agent, and by precluding the necessity of introducing fictitious 
in the place of real capital, must render any separation of the public mo- 
neys from those of the community unnecessary ; while it enables the go- 
vernment to collect its dues in all sections of the country in the same cur- 
rency, without resorting to hard money requisitions ; so far providing, in 
the safest and most beneficial manner, for the equalization of the public 
burthens, in conformity to the express provision of the constitution to that 


Its operation upon the Local Banks. 

A National Bank of discount operates upon the currency, in proportion 
to the magnitude of its transactions, by paying out in the first instance its 
own sound currency, whether paper, or specie, and requiring in return all 
its dues to be paid either in specie or in bills of other Banks equal to 
specie. If the Banks have but little to loan out, it must have little to re- 
ceive back, and of course the effect of its operations must be small. If 
the Bank act merely as an agent in collecting the public moneys, its influ- 
ence on the currency will be no more than that of the collectors of cus- 
toms, or other government agents, in its place. The result would simply 
be, that public dues must be paid in specie, as an exception to the general 
rule ; while all other transactions of the community would be effected in 
the ordinary currency. The government may do as much as this with- 
out the intervention of a Bank : and even more readily, as it may enforce 
its own regulations. But whatever regulations the Bank may adopt, be- 
yond its agency for the government, it must make it the interest of its cus- 
tomers to observe them. 

The Bank for example, lends out its sound currency upon express con- 
dition, that the amount shall be repaid in like sound currency. No one is 
obliged to borrow on these conditions, but if he does borrow, he will con- 
form to them, because it is his interest to do so. The Bank will not re- 
ceive deposits except in specie, or Bank bills equal to specie ; it cannot 
oblige persons to make deposits, but those who do this, do it because it 
is their interest to conform to the regulation. No one complains of the 
regulation however. It is perfectly fair. We may suppose there are two 
currencies in the country, the sound, and the unsound. The Bank deter- 
mines to deal only in the first, and requires that what it receives should be 
equal to what it gives out ; and engages that what it gives out shall be 
equal to what it receives. The only question then with a customer is, 
whether it is his interest to deal with the institution on these terms. 

The Bank has money to lend, and like all other Banks, it lends in pre- 
ference to those, who make deposits with it, that is, its depositors or 
customers, and, as with all other banks, those who keep the best account, 
or have the largest average amount of deposits in Bank have the best 
chance as borrowers. It becomes the interest then of all, who have oc- 
casion to borrow money, to conform to the regulation of the Bank, and to 
keep as good an account with it in specie, or in specie bills, as they can. 

Suppose such a Bank as this to be in a city where the other Banks do 
not pay specie for their bills. No one who has specie will deposit it in 
these Banks. He has hitherto kept it in his house, or in some secret 
place ; now he deposits it in the new Bank, the bills of which he takes 
out when he wants the money, instead of specie. 5UI the specie coming 
in from different quarters, takes its place also in the same way in the new 
Bank. There are certain persons who expect to have bonds to pay 
who will require a loan from the Bank to help them. These persons open 
an account at the Bank, others look forward to loans soon to be required for 
different purposes. Each one withdraws his money from Banks which 
do not pay their bills in specie, obtains the silver and gold at some loss, 



and deposits the amount in the new Bank. He determines at the same 
time to have as little to do with the paper of the old Bank as he can. 
There are now fairly two paper currencies in the place. But the new 
Bank has money to lend, while the others have none. The new currency 
is therefore more and more sought after ; while the old is more and more 
brought back to the Banks to which it belongs. The old Banks then find- 
ing their deposits withdrawn, their circulation returning upon them, 
and their business closing of itself, become obliged, if able, to resume 
specie payment. If entirely unable, they close their concern. If they 
resume specie payments, their bills will be taken by the National Bank 
as other specie bills. As soon as this is the case, they will again circu- 
late as specie, and, confidence in the Bank returning, deposits will again 
make their appearance. 

It is evident that, in order to accomplish so much, a National Bank, or 
any of its branches, must be a Bank of discount ; and it must discount 
promissory notes, as well as bills of exchange ; for no one will keep an 
account with a Bank where the notes he has to offer cannot be discounted. 
If the Bank deal only in bills of exchange, its operations will have no 
effect upon the currency of the place, even in name, the difference be- 
tween specie bills, and those not commanding specie, being blended with 
the different rates of exchange on other places. The paper money of the 
place will still circulate in all payments except those made for govern- 
ment account, and which are required in specie. Some small improve- 
ment perhaps may take place from the sound currency given out by the 
Bank in exchange for drafts on other places ; but its action in restoring 
the currency, being just in proportion to the amount which it loans out, 
and receives back, the greater its ability and disposition to discount, the 
sooner a sound currency will take entire place of the unsound. 

We have already noticed that in a region of country where none of the 
Banks pay specie, there must be two currencies, one of hard money, and 
the other of depreciated paper. If in this region a National Bank of 
discount, or the branch of such a Bank be established, from that moment 
there will be two paper currencies in the place : one equal to specie and 
unchangeable, the other depreciated and depreciating. In the first, the 
community will have confidence ; in the last, they will have none. The 
continual effort of sellers therefore will be to make their contracts pay- 
able in the first currency. For this, a corresponding difference in price 
will be made, and all new promissory notes, acceptances, &c., will be 
made payable at the Bank or Banks paying specie. In addition to which 
a sound paper currency being provided in the place, and the law being on 
the side of specie payments, those who are able to pay, will have no pre- 
tence for offering depreciated paper, on the ground that nothing better is 
to be procured. From this time, the character of the currency in this re- 
gion is restored, a few bills of suspended Banks may be in circulation, 
but the difference between these, and those payable in specie, will be so 
great that their number must be daily less and less. The reputed cur- 
rency of the place will now be that of Bank paper equal to specie. 

This effect being produced by the loans, more especially of a National 
Bank of discount, it is evident that in order that the same effect may be 
brought about throughout all the United States, there must be a similar 
Bank or branch of a similar Bank in each of the states in the union. In 
states where all the Banks pay specie, the presence of such a Branch 
may not be needed for the restoration of the currency in that quarter ; but 

in any of those states, or sections where the Banks do not pay specie, 
without such a Bank or branch, the currency will remain depreciated, al- 
though in all others where there are branches it rnay be restored. It is 
easy to suppose that Banks, having suspended specie payments, but still 
deriving a profit from the circulation of their bills, may oppose the estab- 
lishment of a National Branch in their quarter. They will oppose it for 
the very reason, that it will introduce a currency better than their own ; 
and we may suppose these Banks to have sufficient influence with their 
respective legislatures to prevent the reception of such a Branch into the 
state, if its establishment be optional with the state. It follows therefore 
that a National Bank, in order to bring about a uniform restoration of the 
currency throughout the country, must not only be a Bank of discount 
with branches, but it must have power to establish branches in different 
states, wherever the presence of such a Bank may be requisite for the end 
in view. Without the power of discounting, the Bank cannot act effectu- 
ally upon the currency : without branches it cannot act in different quar- 
ters of the country ; and without the power to establish branches wher- 
ever the state of the currency may require it, the restoration of that which 
is most depreciated may be prevented, and the great object of establish- 
ing a uniform currency defeated. 

If on the one hand, some Banks, too far gone to be resuscitated, find 
the operation of a National Bank inconvenient, by its tending to bring 
their affairs to a close ; on the other hand, many Banks, less embarassed, 
may find a relief where they least expected it. Some of the local Banks 
have become crippled in their means, by lending their money either to 
their own states, or upon state securities. We may suppose these loans 
to be eventually good, but the money cannot be called in so as to enable 
these Banks to apply it to the payment of their own notes. Here we 
may suppose a National Bank, with anew and ample capital, and with its 
peculiar resources, capable and disposed to furnish precisely such assist- 
ance as the case requires. That is, it lends to these Banks on their own 
credit, together with the security of the same State Stocks, a sufficient 
amount in specie, or its equivalent to enable each of them to meet its bills 
in gold and silver, and thus to do at once, what otherwise it might not be 
able to accomplish in many years. 

We may now consider the currency restored, and suppose a community 
in which all the Banks pay specie for their bills. How do the operations 
of a National Bank confine the other Banks to their proper specie paying 
limits, so that they may not place themselves in the position of being 
obliged again to suspend payment ? 

We have noticed the dispositions of all Banks to extend themselves, 
unless there be some obstacle to prevent it. We have seen, too, in what 
manner a number of Banks, within a convenient distance of each other 
may check each others circulation ; and we have seen that under these 
circumstances no Bank can go beyond its proper limit, without the indul- 
gence of others. Of course it is only by an agreement for mutual accommo- 
dation that all these Banks, within a given vicinity, can allow themselves 
any such indulgence. We have seen how such an agreement rnay originate, 
each institution being fearful of pressing its neighbor, and of thus bring- 
ing about a general pressure, affecting its own debtors ; jeopardizing the 
safety of its own loans, as well as endangering the individual interests 
of its own directors or conductors. Hence the disposition amongst the 
Banks of any single state, to sustain each other in a system of postponing 


the payment of their bills in hard money. The creditor Banks being 
satisfied by receiving interest on their balances from the debtor Banks. In 
such a state of things, there is but one obstacle to a suspension of specie 
payments, which is the penalty of a forfeiture of their charters. This 
penalty, however, is a matter of state regulation. If the Banks of the 
state be able to procure indulgence from their own state governments, they 
have nothing to fear from other quarters. 

If Banks are embarrassed, it is because their debtors cannot pay them. 
If all the Banks of any particular state, or section, are obliged to suspend 
payment, it is because their debtors are so much embarrassed as to be 
unable to pay. We have only then to suppose the embarrassed debtors, 
of all the Banks of a state, to form a class sufficiently powerful and nu- 
merous, to influence a popular election, and we may be assured that their 
views will become the views of their representatives. These persons 
will desire indulgence for the Banks, in order that the Banks may indulge 
them, their will becomes the will of their representatives. The indul- 
gence to the Banks is granted, and the only obstacle to a general suspen- 
sion of payment on the part of these Banks is removed. A special law 
sanctions the measure, and its continuance becomes popular, because the 
number and influence of Bank debtors make it so. 

How is it now with the Branch of a National Bank, under similar cir- 
cumstances ; supposing one to be established ? Such a Branch receives 
daily the bills of the other Banks, as well as of its own, in payment of 
notes and drafts on deposit. The other Banks receive also the bills of 
the Branch in common with their own. Daily, or weekly, the Branch 
balances its accounts with the other Banks, and whatever difference there 
may be in its favor, the same must be paid in silver or gold. This pro- 
ceeding, regular and inevitable as it must be, probably will prevent the state 
Banks, each from going beyond its respective limits, hence the question 
of indulgence as in the previous case, may never arise. But suppose all 
the Banks of this state, to have so extended themselves as to incline them 
to agree upon a plan of not calling upon each other for balances in specie. 
They apply to the Branch Bank to come into the measure. Here, what- 
ever be the disposition of the directors and officers of this Branch, they 
cannot come in. They are merely directors of a Branch. They can 
only refer the matter to the Parent Board. The Branch has also its bal- 
ances to settle with other Branches, and those other Branches have bal- 
ances to settle with other state Banks. Beyond a certain limit of ac- 
commodation therefore the Branch cannot go. It must pursue its regular 
routine of paying specie for the notes of its own Bank ; and requiring 
specie for the notes of all others ; or, suppose the matter referred to the Pa- 
rent Board, that Board cannot refuse specie payments itself, neither can it 
authorise one of its Branches to refuse such payments ; still less can it 
authorise one of its Branches to receive the notes of other Banks, with- 
out calling on them for specie ; while it continues to pay specie itself. 
The course of the National Bank, must be such as is adapted to uniform 
action throughout the whole of the twenty-six states. It cannot make 
an exception in one state, which would give that state a preference over 

Here again these circumstances alone, may pevent matters from going 
further. The state Banks finding themselves obliged to pay specie, re- 
strict their issues, make some unusual efforts to supply themselves with 
silver and gold, and save themselves before it is too late? 


But suppose the general embarrassment to be so great amongst the debt- 
ors of the state Banks, and even of those of the Branch, that a suspen- 
sion of specie payments is called for, by the popular voice of that whole 
section of country. This popular voice furnishing an assurance to the 
state Banks, that their charters will not be forfeited by suspension ; the 
argument avails nothing with the Branch Bank or with its Parent Board. 
The National Bank has another source of authority to look up to. It de- 
rives its power from the national government, and it must have the assu- 
rance that the majority of the representatives of twenty six different states, 
together with the executive magistrate for the time being, will authorise 
its refusing to pay its bills in hard money, before it can come into any 
measure of the kind, in any part of the country. 

Such a case cannot be supposed. Nothing but the utmost punctuality 
in its payments can enable a National Bank to sustain itself, or to procure 
the protection of the national government at any time. Its very charac- 
ter and position exposes it to every possible accusation, to be grounded on 
any irregularity in its proceedings ; and such, it is desirable for the pub- 
lic good, should be the case. 

A National Bank therefore, from its organization, from its accountability 
to the national government, and from its peculiar dependence upon a pre- 
cise conformity to the provisions of its charter, must act as a check upon 
the operations of other Banks, in a way not to be compromised. This 
action too must be uniform throughout the country, because what we have 
predicated of one Branch, may be equally so of all, or of any of the others. 
If we suppose a Branch of the National Bank to be located in each of the 
twenty-six states, each Branch must operate in the manner supposed upon 
the local Banks in its neighborhood. No Branch can suspend payment 
itself, or admit of the suspension of other Banks dealing within it, with- 
out authority from the Parent Board ; and this Parent Board cannot de- 
viate from the terms and conditions of its charter, without an act of 
Congress ; and such an act cannot be passed without at least, a majority 
of both houses of the National Legislature together with the consent of 
the President. 

Here then we have, in the existence of a National Bank, both the 
means of restoring a depreciated currency, and two distinct and different 
guaranties for the maintainance of specie payments, on the part of the local 
Banks, where there was only one before. 

Operation of a National Bank upon the Domestic Exchanges. 

Having reached a state of circumstances, in which all the Banks are 
supposed to pay specie for their bills, we come now to inquire in what 
manner the operations of a National Bank tend to reduce the difference 
in the rate of exchange, between distant states, to their lowest possible 

Difference of exchange between different sections of the country, and 
difference in the value of bank notes of those sections, it must be remem- 
bered, are distinct subjects. 

Where all Banks pay specie on demand for their paper, the bills of each 
Bank will be at par in its respective locality. Where two Banks, in the 


same place, pay specie, there is no difference in the value of their bills ; 
but if one Bank pay specie, and the other does not, there will be then a 
difference in proportion to the probability of obtaining an equivalent for 
the face of the bills of the suspending Bank. So where the Banks of one 
section of the country pay specie, and those of another section do not, 
there will be the same kind of difference in the value of the bills ; but this 
is not a matter of Exchange, in the ordinary acceptation of the term. 

The Banks in New Orleans, and the Banks in New York, may both 
pay specie, and yet there will be a difference in the rate of Exchange be- 
tween the two places. In the ordinary transactions of business, this dif- 
ference of Exchange, which, as we shall see, cannot exceed a certain 
rate, is not material, because the rate of Exchange is taken into consider- 
ation and forms part of the price in the sale and purchase of goods ; but 
as the Constitution of the United States requires the payment of all dues 
to government to be the same in every part of the country, that the citizens 
of one state be not obliged to sustain any greater burthen than those of 
another, it is desirable, and it is even incumbent upon the administrators 
of government, to adopt such measures as will tend to reduce the difference 
of Exchange between different points, to the lowest possible rate. For 
this purpose, as experience has shown, nothing is so well calculated as 
the establishment of a National Bank of discount and deposit, with branch- 
es in every state. 

The difference of Exchange in contemplation, arises, in the first place, 
from the difference in the wants of the community, in respect to funds, at 
different periods of the year ; and in the second place, from the difficulty 
of transmitting these funds from the place where they are least wanted, to 
that where they are more wanted. 

At certain seasons of the year, money is wanted in the city to procure 
supplies for the country ; at other seasons, money is wanted in the country 
to pay for the produce sent to the city. So at one season, money is 
wanted at New Orleans to pay for the crops of cotton, sugar, tobacco, &c., 
collected at that place ; at other seasons of the year, money is wanted at 
New York to pay for the supplies of clothing, household stuff, &c., sent 
to New Orleans for distribution over the south-western stales. Funds 
cannot be kept in New York or New Orleans for a great part of the year, 
because they will be wanted at a certain period. This would occasion a 
loss of interest, and a loss of profit, much more important than any differ- 
ence of Exchange, besides a great inconvenience to the parties interested. 
These funds, therefore, must go and come as they are called for. Here, 
then, is the first element of the difference of Exchange, and the main 
point is to enable these funds to go and come in the cheapest, safest, and 
most expeditious manner possible, which belongs to the next subject of 

The rate of Exchange depends upon three distinct items : the expense, 
the risk, and the loss of time, incident to the transmission of funds from 
one place to another. 

The transmission of merchandize is a matter of speculation, and must 
be confined to those who are acquainted with the trade. Bank bills, and 
bills of Exchange, being out of the question, we suppose the funds in con- 
templation to be transmitted in specie. Some kinds of specie, indeed, such 
as Spanish dollars, and doubloons, are often worth more in one place than 
they are in another, but this consideration also we set aside, belonging, as 
it does, to matters of merchandize. 


We suppose, then, a merchant, or banker, in New York, wishing to 
place funds in New Orleans, in the cheapest and most sure manner. He 
sends the amount in American dollars, or eagles silver or gold of pre- 
cisely the same value in both places. In doing this, the merchant incurs, 
in the first place, the expense of transportation : 

He pays for the freight from New York to New Orleans, l per cent. 
He must next insure against the hazard of the sea, or take 

the risk himself. 

Here he pays a premium of another J " 

Again, from the time he pays for his specie in New York, 
till it goes to his credit in New Orleans, he loses the 
interest, say for thirty days, which may be put down 
also as another \ " 

To these three certain items, may be added brokerages, 
commissions, and other incidental charges, equal to a 
further quarter or \ " 

Thus we have the expense, risk, and loss of time, incident to transmit- 
ing funds, in specie, from New York to New Orleans, equal to one and a 
half or two per cent. which is the second element of Exchange, or that 
which regulates its rate. 

We now suppose the person making the remittance, to go to a dealer in 
Exchange for a bill on New Orleans. The d.ealer, in effect, makes the 
same calculation and names his price, including the profit which he pro- 
poses to make in the transaction ; and taking into consideration the ad- 
vantage he gains by having the money in New York while his bill is on 
the way to New Orleans, and while it is coming due after it gets there ; 
and on the other hand, considering the expense of commissions or agency, 
to which he may be subjected at the point upon which he draws. 

Where the business of Exchanges is in the hands of private dealers, 
each having to support his own establishment upon the profit of this bu- 
siness, it is seldom that they can afford to sell their bills so low as barely 
to cover the expense of transmitting the amount in specie. In addition to 
this, they have rarely a large amount to draw for in different places, for if 
they kept such amounts lying in the hands of distant correspondents, or 
agents, besides other hazards, they might lose more interest on their 
money, than they gained by drawing and remitting. Such persons can 
go only to a certain extent, and when called upon to furnish bills beyond 
what they have actually to draw for, if they do it at all, it must be at such 
a rate as they think will certainly cover every expense, hazard, or loss of 
time, to which they may be subjected. 

The same may be said of State Banks. If they undertake to operate 
as dealers in Exchange, they can only do it to a limited extent ; and if 
they employ agents, these agents must be paid. If they transmit specie, 
they pay the same charges as other dealers. If two or more banking es- 
tablishments interchange drafts, each establishment must support itself; 
and each gives only a limited credit to the other. The result being finally 
the same, that neither local Banks, nor individual dealers, can furnish bills, 
or will be disposed to furnish bills, at a less rate than will cover the 
freight, insurance, commissions, loss of time, &c., incident to the trans- 
portation of hard money together with at least some profit, however 
small, on the transaction. 

We will now suppose the existence of a National Bank of discount and 
deposit, with ample capital, and with the requisite number of branches. 


So long as such a Bank is drawing interest for all its means, it is imma- 
terial whether this interest be drawn by one Branch or another. What- 
ever the number of Branches, and however distant from each other they 
may be, there is, in fact, but one concern ; and for this reason also, there 
is the same confidence on the part of the Bank, in one Branch that there 
is in another. So that the objections of loss of interest and want of confi- 
dence, which might occur between distant individuals, or between distant 
local Banks, cannot occur here. 

The Branches are established in different sections of the country, prin- 
cipally for the purpose of doing the business of the government, and of 
gaining interest by lending or discounting money. Whether the busi- 
ness of Exchanges, in any particular section, be a matter of importance 
or not, the Branch must be established there. The Exchange business 
being but a secondary and incidental object; consequently the expense of 
maintaining the establishment hardly enters into a calculation of the rate 
of Exchange. The Bank has the advantage of the public deposits. Its 
bills being receivable for public dues, all over the country, it has the 
advantage of an extended circulation, which affords also to the country a 
supply of a certain amount of currency every where at par. It is able, 
therefore, to conduct the business of Exchange on lower terms than any 
other establishment, for the same reason that a line of stage coaches, paid 
for carrying the public mail, can afford to take passengers and baggage 
cheaper than coaches depending for their maintenance upon the carriage 
of passengers only. 

Then as to time, if, for example, the Branch at New Orleans have a 
surplus of funds arising from bills collected, sent out by the Branch in 
New York, that surplus may be lent out in New Orleans as well as at 
New York, being for account and benefit of the same institution and of the 
same stockholders. Or if the Branch in New York have a surplus arising 
from the bills remitted from New Orleans, the interest accruing in New 
York is for the same account. If the Branch at New Orleans be short of 
funds, in consequence of the amount remitted to New York, it may draw 
on some of the southern or western Branches. If the Branch at New 
York be short, or expect to be so, it may be supplied from some of the 
northern or eastern Branches. All of the Branches applying to the Parent 
Board, as to a common source of information, for direction as to the em- 
ployment of their surpluses, or as to the supplying of their wants. In this 
way, each Branch can conveniently wait the course of trade, to receive 
back the funds it has parted with ; while the whole country is accommo- 
dated, and no very pressing demand for Exchange or for specie, is made 
on any particular section. 

When nooftey is wanted, for example, in New Orleans, for the purchase 
of the southern crops, the Branch there may furnish the money, and take 
bills at sixty or ninety days sight, on the Branch in New York. By the 
time these bills are due, or soon afterwards, money may be wanted in 
New York, to purchase goods for New Orleans. The New York Branch 
then supplies the money, and takes bills on New Orleans. If these trans- 
actions occurred between independent establishments, or dealers in Ex- 
change, each, from want of confidence, from fear of losing interest, or 
from desire of maintaining a high reputation for punctuality and precision, 
might feel obliged, however inconvenient, to transmit its balances in silver 
and gold, at the cost of so much expense, risk, and loss of time ; causing, 
on all these occasions, a corresponding rise in the price of Exchange, or 


an increased demand for specie. Whereas, in the case supposed of a Na- 
tional Bank, with Branches, the actual transmission of specie, in most in- 
stances, is saved, and the difference of Exchange, if any, is brought down 
to a mere fraction ; the result of the combined action, or arbitration of Ex- 
changes, in the arrangement of balances of different Branches of the Bank. 
The New York Branch, for instance, being in debt to the New Orleans 
Branch the Baltimore Branch in debt to the New York Branch the 
Branch at St. Louis in debt to the Branch at Baltimore the Branch at 
Natchez to the Branch at St. Louis ; the Natchez Bank may finally be 
called upon to pay the debt of the New York Branch, to that of New 

Here, then, we see in what manner, and for what reason, a National 
Bank is capable of reducing the various Exchanges of the country to their 
lowest possible rate ; and certainly to a degree beyond that which can be 
effected through any other known instrumentality ; although, in the nature 
of things, some trifling difference in the rate of Exchange, between distant 
sections of an extensive country, at certain periods, is unavoidable. 

At the same time, the arrangement is most beneficial to the country, as 
the large resources of the Bank enable it to furnish funds, at different 
points, in anticipation of the crops coming in, or of goods about to be sup- 
plied ; thereby equalizing the rates of Exchange throughout the year; or 
at least preventing that, extreme fluctuation which must take place where 
the transmission of funds is confined altogether to particular seasons. 


Operation of a National Bank as a Fiscal Agent. 

Let us now consider the operation of a National Bank, in providing for 
the safety of the public moneys, without depriving the community of the 
advantage of capital to be derived from the use of those moneys, either 
while in the public Treasury, or while in the process of circulation. We 
are to see, at the same time, how this object is obtained without allowing 
room for the exercise of favoritism towards any particular State or Bank, 
and without involving the exercise of government influence, either in as- 
signing a place of deposit in the first instance, or in removing the public 
funds, and transfering the government agency, from one institution, or in- 
dividual, to another. 

We have seen, in the case of private Banks, that the deposits of indi- 
viduals of their surplus funds in these Banks, is a placing in the way of 
active employment, of so much real capital otherwise remaining idle, and, 
for the time being, out of reach. The operation is the same, with regard 
to the public deposits. If the government keep its money in its own 
vaults or safes, in such a way as not to admit of its being used for purposes 
of trade, it is so much idle capital, occasioning the loss of so much power 
in capital to the nation ; no one being benefited, either by the interest to 
be earned, or by the profits to be gained beyond the interest, from the 
loan of it. 

Suppose the average amount of these deposits to be ten millions of dol- 
lars, scattered throughout the twenty-six states. Here is an annual loss, 
on ten millions of dollars, of interest and profit, which would have gone 



into the pockets of the people of the country, and would have enriched 
the nation in the same degree. The wealth of the whole nation being 
made up of the riches, or property, more or less, of every individual citi- 
zen. Not only this : the unavoidable operation of the business of the va- 
rious Branches of the Bank, is to bring this capital, at proper periods, into 
all those sections of the country where it is most wanted ; like the waters 
of some ample reservoir, by a variety of conduits, seeking every where, 
and at all times, its proper level. 

At the same time, this is without hazard to the public treasury, because 
the whole capital of the Bank is answerable for the use made of the pub- 
lic moneys, by each and all of its Branches. Suppose, for instance, the 
largest amount of the public funds at any time on hand, to be ten millions 
of dollars, and the capital stock of the Bank to be thirty or forty millions ; 
here is a security for the public moneys, of three or four times the amount, 
in every event at hazard. We suppose, of course, the national govern- 
ment, in chartering a Bank, to prescribe an amount of capital amply suffi- 
cient to secure the public revenue. 

There might be, it is true, the. same active employment of this capital, 
if the same amount of deposits were divided amongst different State Banks, 
but the security to the country would not be equally good. Each Bank 
would then be answerable only for its own management of the amount 
committed to its charge. In some cases, the whole capital of such a Bank 
may not be equal to the amount of funds over which it may gain the con- 
trol ; and if a Bank furnish the additional security of individuals, besides 
the difficulty of realizing any thing from the prosecution of bonds in ccses 
of delinquency, these individuals may be the very persons who borrow 
the money of the Bank, and if the Bank be delinquent, it is because 
these borrowers are delinquent ; or they may be the large stockholders of 
the institution, whose own means depend upon the condition, and whose 
ability to respond, depends upon the solvency of the institution for which 
they become responsible. As a general rule, wealthy individuals will not 
become the bonds-men of a Bank, for the use of the public moneys, unless 
they themselves are to divide this use amongst them ; in which case the 
Bank, and its security, are one and the same thing. Besides this, how 
difficult must it be for the officers of the Treasury department, at the seat 
of government, to judge correctly, either of the solidity of the local Banks, 
or of the individual security they offer, throughout all the States of the 

With a National Bank, on the contrary, the government looks to the 
whole capital for the security of every Branch, while it has, by charter, 
the right of inspection and examination, and, to a certain degree, of con- 
trol, over all its proceedings, so far, at least, as may be necessary for the 
security of all the public funds committed to its charge. Such a provi- 
sion, in the nature of the case, cannot exist in an equal degree, with State 
Banks, They may agree to submit to such an investigation, but this be- 
ing but a voluntary act, can be depended upon only so long as it is not their 
interest to avoid a scrutiny ; being, as they must be, independent of the 
national government, and depending only upon that of their respective 
states for the continuance of their existence or their privileges. A Na- 
tional Bank, on the contrary, is the creature of the national government. 
To that it is responsible, and on that it depends ; and hence the peculiar 
security offered by its capital. Not only that its nominal amount shall 
be amply sufficient, but that Congress and the Executive have, at all times, 


the right to be satisfied that this security is real, available, and undimin- 

But besides the difference of security, it is important, for the liberties 
of the country, that there be no room for making the use of the public 
moneys a source of government patronage. 

The use of capital is a privilege equal to the grant of as much money 
as this capital may be supposed capable of yielding, by interest or profit, 
in the period during which its use is enjoyed. If the use of the public 
deposits be distributed amongst the different State Banks, at the will of 
those who administer the government, these persons will enjoy a power 
of patronage equal to the granting of so much money as the interest and 
profit to be derived from these deposits may be supposed to yield. If, for 
example, the sum of six hundred thousand dollars were placed at the dis- 
position of the President of the United States, to distribute in donations to 
whom he pleased, every one would consider this a very dangerous power; 
and if the President has the power of distributing the use of ten millions 
of dollars, the simple interest of which alone for one year is six hundred 
thousand dollars, is not the power equally dangerous ? How much more, 
then, when we consider the anticipations of profit, in which every one in- 
dulges, who has the proposed use of capital before him. The power to 
influence on the one hand, and the temptation to corruption on the other, 
being in proportion rather to the prospect, than to the certainty, of profit. 
Banks, as mere corporate bodies, it is true, are not the subjects of tempta- 
tion ; but it must be remembered that the public moneys distributed amongst 
Banks, at the pleasure of a public officer, are, in fact, distributed amongst 
the directors, customers, and stockholders, of those Banks, and it is upon 
these that the influence of this government patronage must unavoidably 

If certain State Banks throughout the twenty-six United States, be se- 
lected by Congress as public agents, then the halls of the national legisla- 
ture becomes scenes of intrigue and cabal, for the division of this descrip- 
tion of spoils ; and Senators and members of Congress will be elected ac- 
cording as this, or that, Bank makes the most efforts in favor of the mem- 
ber pledged to support its claims. If the selection be left to the President, 
or to the Treasury Department, which, in effect, must be the same thing, 
he will have so much pecuniary power put into his hands to enable him 
to secure his own re-election ; and, if he aim at it, even to perpetuate 
his enjoyment of office. He will give the use of this public capital to 
such sections of the country, and to such Banks, and through them to such 
individuals and transfer their use from one section to another, and from 
one Bank to another, or from one set of individuals to another in such 
way as will best promote his own views : either in punishing those who 
do not gratify his wishes, or in rewarding, and even bribing, those most 
officious in promoting his designs. 

In the case of a National Bank, on the other hand, there is no room for 
the process of favoritism here supposed. Such an institution is chartered 
expressly to receive and disburse the public moneys. The use of the 
public deposits, therefore, must be given to such a Bank by the act of in- 
corporation, before it is known who the stockholders, directors, or officers, 
are to be. The stock is afterwards subscribed for, and sold, in open mar- 
ket ; and the shareholders are under no obligation to the government, or 
to any member of the government, for the number of shares they obtain, 
nor for any benefit they afterwards receive from these shares. The privi- 


leges of the Bank are fixed by law, and cannot be changed, except by law, 
so long as the institution complys with all the conditions of its charter. 
The officers, directors, and customers, are, therefore, entirely independent 
of the administrators of government, so far as any opportunity for favorit- 
ism or patronage is in question. The Bank receives the public deposits, 
because the government is pledged to place them with that institution ; 
and they cannot be removed without a breach of public faith ; still less 
can they be transferred from one place to another, or from one set of indi- 
viduals to another, to answer any electioneering purpose. At least, such 
a violation of public decency must call down upon the offender an almost 
universal sentiment of reprobation : a burst of indignation which few can- 
didates for public favor would venture to encounter. 

If, instead of leaving the public moneys in the ordinary way of deposits 
in certain Banks, the officers of the Treasury receive from those Banks 
their own notes, or bills, or other paper obligations, and lock them up in 
vaults or safes, this amount, whatever it may be, is so much added to the 
circulation of those Banks, with the assurance that it will not be brought 
back upon them for a certain period. Here, then, is another opportunity 
for favoritism : for if those who administer the government, may choose 
what bank notes they will receive and lock up, and what they will refuse, 
they have the power of giving just so much use of capital to those Banks, 
and to those individuals, whom they wish to favor ; to which dangerous 
influence, is to be added the hazard of so much bank paper, which may 
prove a partial, or total, loss to the Treasury. 

The direction to a public officer, to keep the funds of government out 
of trade, and out of a Bank, will answer no purpose as security, unless he 
keep these funds absolutely in silver and gold, in a vault by themselves ; 
for if such an officer, having five hundred thousand dollars of the public 
money on hand, keep the amount in certain Bank notes, of five, ten, 
twenty, or one hundred dollars each, he trusts that Bank just as much as 
if he took one bank note, or check, for the whole amount ; in fact, just as 
much as if he allowed the Bank to pass the whole five hundred thousand 
dollars to his credit, with the bare understanding that it should be forth- 
coming when called for. 

So in regard to what we have already termed the government portion 
of the circulation. We have seen that every dollar held by the people in 
paper, either in their shops or houses, or pockets, or as it may be passing 
from hand to hand, leaves a dollar of real capital in the Bank, which is 
capable of being loaned out and actively employed. The money put in 
circulation by the agents of the government, has the same faculty, in this 
respect, as that in the hands of private citizens. If then government offi- 
cers, by employing certain Banks as their agents, put the bills of those 
Banks into circulation, and keep them so, in preference to the bills of other 
Banks, here is again an opportunity for government patronage, and another 
means of giving the use of a certain amount of capital to certain institu- 
tions, accompanied with the risk of the paper of these institutions, so long 
as it may be under the direction of such government officers. 

This room for patronage, both in respect to the use of capital derived 
from the public deposits and from government circulation, can only be 
avoided (without a National Bank) by a hard money system ; in which 
case, as we have seen, the whole use of this capital must be lost to the 

With a National Bank, on the contrary, as in the case of the deposits 


so in that of the circulation there can be no room for favoritism. The 
circulation obtained by a Bank, as an agent of government, is assigned to 
it before the stockholders or conductors are known. The shareholders 
receive the benefit of it, as a matter of law : a right for which they can be 
under no obligation to any department of government, and a privilege of 
which they have no reason to fear the privation. Here, there is no room 
for bribery, or corruption, or patronage ; while the large capital of the 
Bank affords full security for the bills held, and the Bank itself assumes 
the hazard of the bills of all other institutions, passing through its agency 
for account of government. At the same time, the trading capital, afforded 
by the average amount of these deposits, and of this government circula- 
tion, through the instrumentality of the Branches of the Bank, is diffused 
over the whole country is beneficially felt in every channel of trade 
and affords to the general mass of national wealth, all that increased ac- 
cumulation which its interest or profit is capable of yielding. 


Operation of a National Bank, in bringing forward a supply of Real 


We are now to consider the advantage accruing to the country from 
the additional real capital brought,' as we may say, into market through the 
agency of a National Bank, both at home, and from abroad ; as well from 
subscriptions to its own stock, as from the confidence, its operations are 
calculated to inspire in the stability of other moneyed institutions. 

We have supposed, throughout these remarks, the national institution 
required to be a Bank of discount ; because, without the power of dis- 
counting both bills and notes in the common sense of the term, it can ef- 
fect nothing of importance, either in restoring or regulating the currency. 
We have supposed also, its Capital Stock, to be ample, that the several 
Branches may discount largely and liberally, and even lend to some of the 
Local Banks on such undoubted security as they may be able to furnish ; 
and also to afford to the country adequate security for the amount of 
public and private deposits, and its own issues. We must further suppose 
that the privileges offered by the charter are such as to induce capitalists, 
both of our own and of other countries, to invest their funds in the stock 
of the institution. For it is idle to suppose, that the mere passing of an 
act to incorporate a Bank, will bring forward the funds necessary to make 
up the capital ; and perhaps the opposers of such an institution can adopt 
no surer method, for preventing its going into operation, than that of di- 
minishing its priviliges, and restricting its operations. 

Presuming the advantages offered by the charter of a National Bank to 
be such as to induce both American and foreign capitalists to invest their 
money in the stock, the benefit thence accruing to the country, is that of 
a greater competition in the business of lending money ; enabling the bor- 
rower to obtain it more easily, and on better terms. 

In all kinds of business, every man wishes to prevent others, as far as 
possible, from coming into competition with him. If there be but one 
person having a certain article to sell, he may ask what price he pleases. 
If there be two, or more, there is so much probability that one will sell 
lower than the other. The more persons there are to sell any given 


article, and the more there is of it to be sold, the sooner it will reach its 
lowest possible price. Suppose a country where there is but one person, 
who sells grain, no other person's grain being allowed to come into the 
place ; the people of this country must give whatever price this seller 
may ask. But suppose the law to be altered, and other farmers or dealers 
in the neighborhood to be allowed to bring in their grain : if these others 
be disposed to sell their grain lower, the price falls. This competition 
with traders of other districts brings down the price of wheat, and bread 
becomes so much cheaper. The first dealer, who lately sold at such high 
prices is very much vexed, no doubt, at the change ; and supposing him 
to be a farmer, if he hired his farm, and cannot now give as much rent as 
he did before, his landlord is as much vexed as he is ; but the people of 
the place have every reason to be satisfied, for the new competition hav- 
ing cheapened the article of bread, every one is able to live so much the 
better for it. 

The operation is the same with capital. If there be but one person in 
a place, having money to lend, he will demand what rate of interest he 
pleases. If there be several persons to lend, some will sooner or later 
take less interest than others, rather than incur the risk of having their 
money lie idle. The more lenders of money there are, the lower must be 
the rate of interest. 

Suppose a country where there is only a certain set of persons, and a 
certain number of institutions having the power to lend money. These 
lenders finding out by experience how much their capital is wanted, and 
knowing the certainty of lending it at a particular rate, may agree together 
not to lend below that rate. Some may demand more, but none will ask 
less, and so long as all that is to be lent, can be lent at the rate supposed, 
these lenders have no occasion to reduce their price. Now suppose an 
agent of a number of wealthy capitalists in a distant country, to come into 
this place with a large amount of money to lend, the owners of this money 
being willing to lend at a much lower rate than that which had previously 
been established. Here is a new competition in the business of lending 
money. The price of interest falls, and the use of capital is obtained 
much easier than it was before. The old lenders no doubt regret the 
change, they cry out against the introduction of foreign capital, but every 
one who has occasion to borrow money, rejoices at it. So long as the 
borrower procures his money easier, and at a lower rate, and can make 
so much the more profit out of it, what reason has he to regret that this 
money has been brought within his reach from distant parts ? Shall a 
borrower refuse to make a profit on capital offered to him on loan because 
the interest to be paid for it, goes into the pocket of a foreigner ? And 
why should a borrower be compelled to pay seven per cent, per annum, in- 
terest, to a countryman, when he can obtain the use of the same money 
from a foreign lender for four or five per cent. 

A National Bank of discount stands precisely in the position of the 
agent here supposed. Its peculiar advantages induce persons, both at 
home and abroad, to invest their money in its stock. Thus bringing 
in foreign capital from all directions, and introducing a competition in the 
business of lending money, which did not before exist. This competition 
is the very opposite of what is called a monopoly. 

Monopoly consists in confining the enjoyment of any privilege to a 
limited number of persons or institutions. If all the business of banking 
in a state, be confined by law, to one hundred Banks, these one hundred 


Banks enjoy a monopoly of the banking business. If, on the contrary, 
the business be thrown open to all ; or all are admitted to the exercise of 
the privilege upon the same terms, there is no monopoly, for the competi- 
tion is unrestricted. If the business of banking be confined in any country, 
as in the United States, to the State Banks alone, then these State Banks 
have a monopoly of it, but if a National Bank with its Branches come into 
competition with the state Banks, this monopoly is destroyed. So, if there 
were no Bank, or Banks, except the National, with its Branches, then this 
National Bank would enjoy a monopoly ; but if the state Banks, come into 
competition with the National Bank, this circumstance destroys the mono- 
poly. If in any state, acts of incorporation for Banks, are granted only to 
individuals of a certain party, then that party may be said to possess a mo- 
nopoly of this corporation granting power ; but if such charters be granted 
to all persons on equal terms, then there is no monopoly for the competi- 
tion is free. The term Bank monopolies therefore, sometimes so incon- 
siderately used, is altogether inapplicable, except when there is a restric- 
tion on the competition in the business of banking. The operation of a 
National Bank, then, so far from being that of a monopoly, is an element 
of that competition in the business of lending money, without which, a 
Bank monopoly might be said in some degree to exist. 

Through the agency of a National Bank, foreign capital comes into 
competition with domestic capital, and the price of interest is kept down 
if not reduced. The old money lenders, and the state Banks may regret 
this competition, but every one who borrows money, finds a benefit from 
it. True, a certain amount of interest, in the form of dividends, may be 
paid to foreigners ; but the profit which is the compensation of industry, 
and enterprise, and the emolument of labor goes to enrich the country. 

Foreigners lend their money, in the way supposed, merely because they 
cannot get so good an interest at home ; and we use it, because it enables 
us to borrow cheaper and easier than we could do otherwise. Capital is 
more plenty, and the use of it is at a lower price in the old countries than 
it is with us, and it is sent to this country to be lent out here on the same 
principle that we send or would send our wheat and flour to Great Britain 
to be consumed there. Capital seeks employment as water seeks its level ; 
and thus the rate of interest between old countries and new, is gradually 
equalized to the advantage of both. Not, perhaps, that the old countries 
are so much richer, but because their wealth is collected into larger masses, 
and held by fewer hands. It is more difficult for one person to find em- 
ployment for two millions of dollars, than it is for twenty persons to em- 
ploy the same amount profitably, if equally divided between them, or near- 
ly so. Besides this, in the old countries, if the capital be more, the en- 
terprise is less ; the distance between the wealthy classes and the work- 
ing classes is greater ; and the capitalist and the operative are more es- 
tranged from each other. 

A Bank of the United States, may be considered a kind of vehicle by 
which capital is brought to us from secret recesses, and from distant coun- 
tries, to be employed or not at the hazard of those who send it. If we do 
not want it, we shall not borrow it, nor pay interest for it ; and if we pay 
interest for it, it is because we find our advantage in borrowing it. 

But it is not only through the instrumentality of its own stock, that a 
National Bank is the means of bringing capital into the market. We have 
seen that such an institution must operate on other moneyed institutions, 
so as to secure their soundness and stability, by regulating their issues, 


and preventing a too great expansion of their engagements. In doing this, 
confidence is given to the community in those institutions themselves. 
Capitalists will more readily invest their money in the stocks of state 
Banks, when they see these institutions under such restriction as will ef- 
fectually prevent the conductors of them from abusing their powers. 
Shareholders of Bank stocks are generally satisfied with dividends equal 
to the legal rate of interest, provided these be accompanied with a persua- 
sion of security and certainty in their investments. Their interest 
requires nothing more than the proper legitimate business of banking, and 
whatever may have been the wild aspirations of some conductors of Banks, 
it has been rarely the case, that the stockholders have been benefited by 
them. On the contrary, while those who have the management of Banks, 
in many instances may go out of the usual routine of their business, to 
promote their own private views ; the stockholder, with scarcely a possi- 
bility of being benefited by a speculative operation, is sure to feel the full 
burthen of the loss, in the event of a disasterous result. Hence when 
banking institutions are without a check, when these directors, or officers 
may extend their issues without limitation, the confidence of the prudent 
stockholder is lost, he withdraws his capital from the institution. The 
chance of an increased dividend being no temptation to him ; he prefers 
placing his funds where they will be safer, even if the prospect of pos- 
sible profit be less. 

Suppose a country, where there are several hundred Banks, all without 
any other check, or restraint, than that of the degree of discretion to be 
found amongst their directors and officers. It is evident that whatever the 
condition of these institutions may really be, the confidence of the public 
will be shaken. The stockholder will manifest his want of confidence by 
selling out ; the depositor by diminishing the amount he keeps on hand ; 
and the public by carrying back every bill to its proper Bank as fast as 
possible. Whatever course capital may take, it will fly from these insti- 
tutions. It will sooner seek a place of safety in foreign countries, with 
the prospect only of a low rate of interest, than abide the issue of such_a 
state of moneyed affairs. 

Suppose on the contrary, amidst such a state of things a National Bank, 
properly so called, to be established. Its operations unavoidably checking 
what may be called, any tendency to a monetary licentuousness, the con- 
fidence of capitalists is restored, they reinvest their money in the stocks 
of the local Banks, because they can depend upon their better man- 
agement. Their dividends may be smaller, but they will be regular 
and sufficient. The depositor leaves his surplus in the Bank without fear \ 
and the public keep that amount in circulation, in bank paper, without 
fear, which before, was so hastily exchanged for gold and silver. Even 
the foreigner who had withdrawn his money from the state Banks, now 
remits it again to the country, to be again invested in their stocks ; not 
because he believes the character of the people to be changed, but because 
he knows the circumstances of the country to be changed. The opera- 
tion of a National Bank securing to him the stability of other moneyed in- 
stitutions, and thus restoring his confidence. 

This is not a mere matter of theory, experience has shown us that, with 
the operation of a National Bank, confidence in other Banking Institutions 
has been unbounded : without such a Bank this confidence has gradually 
disappeared, giving place to a panic fear, and a general withdrawal of real 
capital. Such then being the operation of a National Bank, directly, by 


its own stock, and indirectly by the confidence it procures in the opera- 
tions of other moneyed institutions ; bringing new supplies of real capi- 
tal into market ; increasing the competition in lending, and keeping down 
the rate of interest, there can be no question of the public policy to be 
pursued in respect to it. 

In every country the borrowers constitute the great mass of the people. 
In nons perhaps, more than in the United States, not on account of the 
poverty of the inhabitants, but on account of the room for enterprise and 
industry afforded them. Capital is more in demand here, because more 
can here be done with it. The working classes are borrowers, not be- 
cause they are poor, but because by their industry and enterprise, with the 
liberty of employment so abundantly enjoyed, they can all of them obtain 
a profit from capital, over and above the interest they pay for it. What- 
ever therefore, diminishes the rate of interest on capital, and facilitates 
the acquisition of the use of it, is of advantage to the laboring classes, 
and through them, proportionally beneficial to the country ; because it is 
principally by the additional value, exclusive of the accumulation of 
interest, given to property, by labor well bestowed, that the country is 


The operation of a National Bank in meeting the constitutional requisition ; 
that " all duties, imposts, and excises shall be uniform throughout the 
United States" (See Constitution, Art. 1, Sect. 8, last clause.) 

We have seen in the course of the preceding remarks, that where the 
paper currency of the country is dependant upon the management of state 
Banks, unchecked by the regulation of a National Bank, there must be a 
depreciation in the value of Bank bills : greater or less, in proportion as 
the Banks of one section are managed, with more or less prudence, than 
those of another. Consequently if duties and taxes be paid in the ordin- 
ary paper currency of these different sections, the citizens of that part of 
the country where Bank paper is most depreciated, will pay less duty 
than those of other portions where there is little or none of this deprecia- 
tion ; in which case, the revenue suffers an actual loss, and the duties and 
taxes are not uniform. This is not merely a matter of argument, it is 
something which has actually occurred. Previous to the charter of the 
last United States Bank, and subsequent to the expiration of that charter, 
this state of things has actually existed.* The only remedy for this evil, 
without a National Bank, is, as we have also seen, a resort to hard money 
requisitions, and an entire separation of the public moneys from those of 
the community. This remedy too, we have tried, and we have found it 
worse than the disease. For although the government may collect its re- 
venue in this way without loss, the nation must lose the benefit to be derived 

* Soon after the late war with England, there being then no National Bank, the 
paper currency of Maryland being about twenty per cent, lower than of Massachu- 
setts; certain merchants of Boston, imported their goods into Baltimore, that they 
might enjoy the privileges of a citizen of Maryland, by paying their bonds for duties 
in the depreciated bank paper of that city. 


from the use of all the real capital afforded by the government deposits 
and circulation. 

There has been, it is true, another expedient resorted to. Government 
has on former occasions, as at the period already adverted to, issued its 
own bills, termed treasury notes. But this was only making two paper 
currencies instead of one. The treasury notes proving to be nearly as 
various, fluctuating and unstable in their value, as the Bank bills of that 
period ; being only something not quite so bad as Bank bills, and not so 
good as specie. Besides this, it is evident, that the payment of all dues 
to government in gold and silver; or gold, silver, and treasury notes, can 
have no favourable operation, nor produce any good effect upon the Bank 
currency of the country. It did not formerly it cannot do so at any time. 
Confidence in Bank paper cannot, and never has been restored by it : and 
so long as this confidence is wanting, the public moneys must continue 
separated from thosfr of the community ; and so much available capital 
must be drawn from employment. 

It is a common error to suppose that government is called upon, in such 
a predicament as this, to create a currency to create something which is 
to take the place between gold and silver on the one hand, and the paper 
of the state Banks on the other. We have already noticed that it is one 
thing to regulate, and quite another thing to create currency. The regu- 
lation of the paper currency of a country, by bringing all Bank bills to a 
specie basis, and restraining all Bank issues to the representation of real 
capital, has a happy effect in restoring confidence to the community ; and 
in bringing other real capital from its hiding places. The creation of a 
new paper currency, in the midst of another paper currency already de- 
preciated, only makes bad worse. An issue of treasury notes for ex- 
ample, receivable in payment of government claims for revenue, being in 
fact, only so much fictitious capital till that revenue becomes due. Sup- 
pose the United States government to issue treasury notes at this time, 
based upon the revenue to be received. This is only creating a collateral 
paper currency in addition to that with which the country is already flood- 
ed : making the artificial value of property already existing still more arti- 
ficial. A proceeding favorable indeed, to the purposes of speculators, but 
very far from favoring the laboring classes of the community. 

But suppose the government to borrow in the first instance several mil- 
lions of dollars, in specie, in order to enable it to redeem its treasury 
notes at sight, at any and every point where they may be presented ; as a 
Bank without capital might commence business by borrowing money, per- 
haps at a disadvantage, in order to enable it to pay its own bills.* In the 
first place, the specie thus taken up by the government, is an abstraction 
of so much real capital, a great part of which must be kept idle ; and if 
by this arrangement, the treasury notes are every where equal to specie, 
the same difficulty still remains. The treasury notes as well as the silver 
and gold must be kept separate from the Bank paper around it. Govern- 
ment vaults and safes must still be used. The Banks will still continue 
their unrestricted issues. Public confidence must be still wanting, and 
real capital whether in the hands of government, or in those of individuals, 
will continue to seclude itself as it were, for safety. 

* Such conduct in a Bank would be considered supremely ridiculous, how far it 
may be esteemed otherwise in a government, must be left for its advocates to de- 


If instead of this, the treasury notes be not redeemable every where 
with specie ; being good only for payments to the government, and that 
only when those payments are due ; in some parts of the country they 
must be even more depreciated than Bank paper, in others, less, but every 
where they only add to the general confusion, enabling the citizens of one 
part of the country to pay their duties and taxes at a lower rate than those 
of another part. 

We have now to suppose the existence and operation of a National 
Bank. Here again, we are not dependent merely upon theory. The ex- 
periment has been tried. Tried, too, more than once, and always with 
success. We have no occasion to seek out a new state of things, we 
have only to go back to that organization of the Banking System which 
prevailed a few years since, and with which the country has been perfectly 
familiar. The problem to be solved by the opposers of a National Bank, 
being not how to make the state of the country better than it was ten years 
ago, but how to make it as good without the same means. By the opera- 
tions of a National Bank, the issues of all Banks being brought down to 
a specie basis, the exchanges equalized, public confidence restored, real 
capital introduced in the place of fictitious, and a safe and proper agent 
provided for the treasury, any separation of the public moneys from those 
of the community becomes unnecessary. The citizens of every section 
and state in the country are enabled to pay their dues to the government 
in the bills of their respective Banks upon equal terms, without hazard or 
disadvantage to the public interests, and without that inconvenience and 
loss of power in capital, which unavoidably results from a hard money 

In this way a National Bank of discount with branches, provides for the 
collection and safe keeping of the revenue, and for the uniformity of the 
public burthens, in the easiest, safest and most reasonable manner ; or, to 
use the expression of the Supreme Court upon the subject, " in the man- 
ner most beneficial to the people." And it is because such an institution 
effects this, which cannot be effected in any other way, that it is necessary 
and proper, and being so, its incorporation is constitutional. 

We do not say that it is impossible to collect the revenue without a Na- 
tional Bank. We know that it is possible to collect it under a specie cir- 
culation in gold and silver, m et armis, by force and arms, if not otherwise : 
but this is not effecting the purposes of government, " in the manner most 
beneficial to the people." We know the inconvenience of a hard money 
collection, we know the impossibility of collecting in depreciated paper 
with uniformity in the payment, and without loss to the government, and 
we know the perfect inefficiency of treasury note issues in supplying the 
place of a well regulated Bank currency. On the other hand, we know- 
by forty years experience, how easily all difficulties are surmounted through 
the agency of a National Bank. We have seen during that period, two 
such institutions successively incorporated and in operation for twenty 
years each, receiving and paying the public moneys without the loss or 
even a serious apprehension of the loss of a single dollar to the govern- 
ment, without depriving the country of the use of capital derived from the 
government deposits or circulations, with almost a perfect equalization of 
the exchanges, and as perfect a uniformity in payment of taxes and du- 
ties : while on the contrary, no sooner has the country been deprived of 
the operations of a National Bank, than we have seen fluctuations, and in- 
equalities immediately taking place, driving the administrators of gorern- 


merit to the alternative, of collecting and keeping the revenue, either unequal- 
ly and disadvantageously in paper money, or harshly and distressingly, alto- 
gether in specie ; and we now witness a period when for want of such a 
Bank, confidence at home and abroad, is withdrawn and withdrawing from 
all our moneyed institutions, real capital is flying for protection and secu- 
rity to other countries ; and the government is more and more involved in 
the necessity of separating the public moneys from those of the commu- 
nity, and of creating an artificial currency, almost as fluctuating, and as 
subject to depreciation as the paper currency by which it is surrounded. 

Experience and theory here go hand in hand, we have only to enquire, 
what was the state of our moneyed institutions during the operation of our 
two several National Banks, what was then the state of public confidence 
in the stability of the paper currency ? and how the revenue was then 
collected uniformly throughout the United States ? and this too, without a 
separation of the government moneys from those of the people. 

The facts are all such as to corroborate the arguments here made use of 
in favor of a National Bank, similar to those of which we have heretofore 
enjoyed the benefit. 

NOTE. It is not designed to enter into a legal argument here, as to the right of 
Congress to establish a National Bank. Two such Banks, as almost every one 
knows, have been successively in operation in this country ; each for the term of 
twenty years ; and not long after the incorporation of the last of these two Banks, 
the question of the constitutionality of its charter, was carried up to the Supreme 
Court of the United States, the authority of which court, according to the Constitu- 
tion, (Art. 3, Sec. 2,) being decisive in all matters of the kind. The trial was of the 
most important character that could be selected, as it was an issue between a sover- 
eign State on the one side, and the National Bank on the other, the argument 
on both sides being conducted by perhaps the most able legal counsel at that time to 
be procured. 

The following decision of the Bench, delivered by Judge Marshall, himself a 
Constitutional veteran, set the matter at rest, with regard to that Bank, (4 Whea- 
ton, 424) : 

" After the most deliberate consideration, it is the unanimous and decided opinion 
of this Court, that the act to incorporate the Bank of the United States, is a law made 
in pursuance of the Constitution, and is a part of the supreme law of the land." 

This opinion was given in the year 1819, that Bank having been chartered 
April 10, 1816. The only remaining inquiry is, then, whether the circumstances 
of the present period, are such that the incorporation of a National Bank would be as 
constitutional now, as it was then. 

Admitting the power of Congress to establish a Bank, to rest principally on the 
provision (Constitution, Art. 1, Sec. 8,) to make all laws which shall be necessary and, 
proper for carrying into execution the express powers before granted, the main ques- 
tion presented to those who are scrupulous on this point, is whether a law establish- 
ing a National Bank be at this lime necessary and proper for carrying into effect any 
of the powers expressly granted to Congress. Whether, for example, a National 
Bank be necessary and proper now, to enable Congress " to lay and collect taxes, du- 
ties, &c.," in such a manner as that " all duties, imports and excises, shall be uniform 
throughout the United States." 

In coming to a decision on this point, we are to adopt the rule of construction, laid 
down by the Supreme Court of the United Stales, in the case above refered to, that 
the words necessary and proper, do not imply an absolute necessity. We have only 
to inquire whether a law establishing a National Bank, (of discount, with Branches,) 
be reasonably necessary and proper, for the purpose in contemplation, so as to enable 
the government to accomplish that purpose inthe safest, most convenient, and most 
equitable manner; (see opinion of the court, 4 Wheaton, 412424.) It is not requi- 
site to show that it is impossible to collect the revenue without such a National Bank. 
All that the Constitution requires, is to show that such an institution is reasonably 
necessary and proper, or appropriate ,to the wants of the government in this respect - t 
necessary and proper, because the matter in hand can be accomplished better ia 
this than in any other way. 


On this point we are to bring to bear our experience and observation of the diffi- 
culties and disadvantages arising from a collection of public dues in hard money, on 
the one hand, and in paper money, without a National Bank, on the other : subjecting 
the nation, in fehe first case, to an immense loss of available capital, and in the last, 
to the unconstitutional mode of levying duties and taxes unequally in different 
portions of the country. 

How far such a Bank as is under contemplation, may be necessary and proper to 
meet the wants of the government, must, in the nature of things, be a matter about 
which the legislative branch of the government only can decide, at the time of pass- 
ing the act of incorporation. 

Upon this point, the following opinion of the Supreme Court, in the case before 
cited, is abundantly explicit : 

" We think the sound construction of the Constitution, must allow to the national 
legislature that discretion, with respect to the means by which the powers it confers 
are to be carried into execution, which will enable that body to perform the high 
duties assigned to it, in the manner most beneficial to the people " 

And again, (page 423): "The time has passed away when it can be necessary to 
enter into any discussion in order to prove the importance of this instrument, [a Na- 
tional Bank,] as a means to effect the legitimate objects of the government." 

." But, were its necessity less apparent, none can deny its being an appropriate 
measure ; and if it is, the degree of its necessity, as has been very justly observed, is 
to be discussed ia another place. Should. Congress, in the execution of its powers, 
adopt measures which are prohibited by the Constitution or should Congress, under 
the pretext of executing its powers, pass laws for the accomplishment of objects not 
entrusted to the government it would become the painful duty of this tribunal, 
should a case requiring such a decision come before it, to say that such a law was 
not the law of the land. But where the law is not prohibited, and is really calculated 
to effect any of the objects entrusted to, the government, to undertake here to inquire 
into the degree of its necessity, would be to pass the line which circumscribes the 
judicial department, and to tread on legislative ground. This court disclaims all 
pretensions to such power." 

It has been accordingly twice decided by Congress, as is evidenced by the acts of 
incorporation of 1791, and 1816, approved by the Chief Magistrates then in the presi- 
dential chair, that a National Bank of discount, with Branches, was necessary. We 
have then only to ask, whether the institution be not as reasonably necessary and 
proper now, as it was at the two periods when the two former Banks were incorpo- 
rated. If it be so, and Congress decide that it be so, then there can be no question as 
to the constitutionality of the law giving it existence ; and the people having (by 
their representatives) decided in favor of the necessary and proper character of the 
institution, the act of incorporation is the evidence itself of this decision, and thus 
bears testimony to its own constitutionality. 

It is in this view, especially, that it becomes important for the people to inquire, for 
themselves, how, and in what manner, a National Bank is a suitable instrument of 
government, and in what manner its operations are beneficial to the country which 
is the inquiry we have here been endeavoring to pursue. 





Parties having an Interest in Opposition to all Banks, or any new Bank. 

The advantage of Banks generally, and the usefulness of a National 
Bank being such as have been here set forth, let us inquire what class of 
persons may be supposed to object to either one or the other ; and what 
objections they may reasonably urge. 

The operation of a Bank, as we have seen, is to bring into market cap- 
ital otherwise lying dormant ; thus enabling the borrower to obtain money 
more easily, and reducing the rate of interest. 

If, in a certain city, there be no Bank, all the business of lending money 
will be in the hands of a few rich men, or of those whom they may em- 
ploy as agents. These persons very naturally object to the establishment 
of a Bank. They think there is no need of more capital. They think the 
rate of interest low enough already, and they will probably exclaim against 
the Banking System, as calculated to encourage trading on what they call 
false capital* They will maintain that no one should trade, who has not 
money of his own, enough and to spare, unless perhaps he borrow of them 
at the price they ask. Their interest is, as they may think, to keep all 
the lending business in their own hands ; and hence they may object to a 
Bank, or Banks. [But what have the people to do with such objections as 
these ? 

Banks raise, as we have seen, capital, and real capital, too, from their 
circulation. The rich money-lender may jeer at this circulation, and cry 
out against shin plasters, and those who issue them ; but the mechanic, 
the farmer, the trader, the borrowers of the capital thus raised, have no 
reason to declaim against Banks. A Bank raises capital from the propor- 
tion of its deposits, lent out at simple interest. The money-lender may 
call this loaning the property of others, and think that borrowers would 
do better to pay him a higher rate of interest, because he lends his own 
money ; but the borrower from the Bank has no reason to complain ; and 
so long as depositors are willing to allow their money to be used in this 
way, no one can have reason to be dissatisfied, except the rich money- 
lender, who finds the Bank a competitor in his business, and actually 
lending lower than he does. 

So long as Banks deal only with real capital, the laboring classes must 
be benefited by their operations. They have only to be watchful, that a 

* See distinction drawn between fictitious and borrowed capital, page 10- 


Bank does not introduce fictitious capital into circulation ; because this 
is, in effect, a fraud upon the public, necessarily resulting in disaster, 
from the operation of which the laboring classes are least to bfc benefited, 
and first to suffer inconvenience. 

If there be but one Bank in a place, that institution may have reason to 
object to the establishment of another Bank ; for the new Bank may take 
away part of the deposits, and occupy part of the circulation of the old Bank, 
and the opportunities for lending money may be divided. The same with 
any number of Banks in one location ; they will regard every new estab- 
lishment as operating against them as an interloper creeping into their 
place, and diminishing their profits. No one wants a new competitor in 
his business ; and as the rich man objects to the establishment of any 
Bank, where he is, so any Bank, or Banks, already established, may ob- 
ject to the coming in of a new Bank. But what objection can the people, 
or can borrowers, have to such an additional establishment ? Every new 
Bank bringing in new capital, and more money to lend ; and the stock- 
holders taking the risk whether the business be profitable or not, those 
who are likely to borrow, cannot object. The laboring classes can have 
no interest in objecting; for the more capital, the greater the prospect of 
employment. The people cannot object, provided only, that these institu- 
tions, for the reasons already given, be prevented from introducing ficti- 
tious capital. 

It is, indeed, a matter of surprise, that Banks, properly conducted, ever 
should have been considered hostile to the interest of the poorer and la- 
boring classes, the fact being well known, that by means of bank shares, 
the smallest capitalists may place their few hundred dollars in a way to 
obtain a safe and profitable income from the amount, while the industrious 
workman, or the enterprizing trader, through the same means, is able to 
obtain so much the more easily, the use of the small additional capital, at 
any time required to fulfill his engagements. 

Rich men may borrow of rich men. He who wishes to borrow his ten 
or twenty thousand dollars, and has abundant security to offer for it, may 
make arrangements for a loan with his wealthy neighbor; but the laboring 
man, the artizan, the mechanic, the house-keeper, the small trader, will 
not be able to borrow his two or three, or five hundred dollars, without a 
Bank. So, without a Bank, the small trader can scarcely obtain credit, 
because his note cannot be discounted as it would be by an institution, 
preferring, perhaps, the discounting of notes of small amount, and requiring 
only a good reputation on the part of the promiser. Even the day-laborer, 
where there are no Banks, may find half his time unemployed, and his 
daily pay reduced, because there is not capital enough within reach of the 
enterprizing contractors, upon whom he depends for occupation. Banks, 
therefore, so far from being engines, or organs, of the rich, are just the in- 
stitutions of which the rich only have reason to complain. They are, in 
fact, inventions enabling the poor to do wtihout the rich ; and it is for this 
reason that they are most useful in countries of which the population is 
composed principally of the middling classes ; enterprizing and industri- 
ous, but in want of capital. 

These classes, then, not only have no reason to object to the establish- 
ment of Banks, but they have great reason to advocate their existence, 
and even to favor their multiplication, provided they are subject to such a 
check as will prevent their creating fictitious capital. 



Interests opposed to a National Bank the case 0/RiCH MEN, and 

Let us now suppose a National Bank to be about being organized, cal- 
culated precisely as we have represented it to be, to bring forward new- 
supplies of real capital, to equalize the Exchanges, and to regulate the 
issues of other Banks ; what class of persons may reasonably object to 
such an institution, and what objections may they urge ? 

The rich man may object, as we suppose him to have done before, and 
for the same reasons. Tell him that a National Bank will bring new cap- 
ital into the country ; he will say there is capital enough here already. 
He will be for prohibiting the introduction of foreign capital, and may talk 
of the duty of encouraging our own capitalists, and the patriotism of fos- 
tering and using only our own means. Tell him that the operations of a 
National Bank will tend to keep down the interest of money. He will 
say, " this is the very thing 1 am afraid of." He thinks the rate of interest 
already too low. He wants no Banks to come into competition with him 
in the business of lending, and least of all a National Bank. Tell him 
that such an institution will prevent other Banks from extending their busi- 
ness, and multiplying their issues, beyond their proper limits. He is per- 
haps at this time a holder of bank stock, and is afraid that his dividends 
will be diminished. Or tell him that a National Bank will prevent the 
moneyed institutions of the country, generally, from creating fictitious 
capital, and giving an artificial value to every kind of property. He may 
consider this as operating particularly against his own interests. He has 
immense property to sell, and comparatively nothing that he is obliged to 
purchase. What he has to dispose of will sell at so much higher prices, 
in proportion as the currency is depreciated. His property will be doubled, 
trebled, quadrupled, according as the Banks are allowed to extend them- 
selves without limit, and he trusts to his own sagacity to make sales at 
high prices, in time to place his money in something not liable to suffer 
by the subsequent reaction. He has every thing to gain by a derange- 
ment of the currency, and nothing, as he thinks, to lose by it. Tell him 
that a National Bank will bring the paper currency to its proper level, and 
prices of all kinds to their proper and proportional specie standard : he 
will prefer having his large estates remain at their existing high valuation, 
although he knows this value to be in a great degree fictitious. What 
desire can he have to regulate the currency? " Let well alone," he will 
say, " I am satisfied with things as they are." 

The position of the people must certainly be very different from this. 
The rich man, especially if he be at the same time a great speculator, may 
object with some reason to a National Bank ; but the laboring man, the 
artizan, and small capitalist, have all a different interest to provide for. 
How small, then, must be the number of objectors, on this score, in com- 
parison with the great mass of the people. 

The dealer in Bank Bills, and in domestic exchanges may object to the 
establishment of a National Bank. He wants no competition, like the 
Branch of a National Bank, to take part of his business out of his hands. 


He wants no equalization of the currency, bringing the Bank bills of Ala- 
bama and Georgia, almost to a level with those of New York. He will 
call this taking the bread out of his mouth. Confusion and instability iu 
the currency, are the elements of his harvest. The profits of his busi- 
ness are to be estimated in proportion to the inequalites and uncertainties 
of the rates of exchange. Tell him that a United States Bank, such as 
it should to be, will collect money from all parts, and in all parts of the 
country cheaper and quicker, than it could be collected in any other way ; 
and you will represent it to him, as of all things, one of the last establish- 
ments for him to promote. The dealer in exchanges, and the changer of 
paper money, we admit, may have some reason to object, but what have 
the people to do with their objections ? 

If the greatest difference between the values of the bills of different 
Banks, or between the values of the Bank, money of different states, do 
not exceed one per cent., the exchanger of this money cannot make a 
profit in any case exceeding one per cent., but if the difference be ten or 
fifteen per cent., there is so much more room, and so much better chance 
for him to make two or three per cent., or more, instead of one. 

If there be but one person in a town, whose business it is to exchange 
Bank bills, he will ask his own prices, and make so much better profit, he 
will not of course, wish another person to take up the business in his 
neighborhood ; so if there be several engaged in the same business, although 
the rates may be reduced by competition, none of these persons would 
wish to have a Bank established in their neighborhood, especially if the 
Bank effected these exchanges at a lower rate than they could. 

Suppose in each of these twenty-six United States, one hundred per- 
sons, whose business it is to deal in the bills of exchange and Bank paper 
of the different states. Here will be twenty-six hundred persons in the 
whole country, having the reason just given, for opposing the establishment 
of a National Bank. The greater the difference in exchanges, the bet- 
ter for them. A National Bank diminishes the difference ; leaving 
them room perhaps, for scarcely more 'than one quarter or one half per 
cent, profit. " What's the use of a National Bank ?" they will say, " We 
can manage the exchanges :" " Let trade regulate itself." What's the use 
of canals ? the waggoner may say, with as much reason. Leave the trans- 
portation of goods to us. What's the use of railroads ? says the stage 
coach driver, " Leave the carriage of passengers to us : we can manage it : 
let trade regulate itself." But the merchant who has sold his goods to 
dealers in distant sections of the country, sees the use of equalizing 
and giving stability to the exchanges ; and the dealer, who comes 
from a distant state, to purchase goods, and is obliged to change his money 
at a loss of five, ten, or fifteen per cent., sees the use of a National Bank. 

The exchanger of money is able to make a mystery of his art. He ob- 
tains the best information he can as to the state of the several Banks ; 
and as to the changes expected to take place in their management. The 
dealer in merchandize cannot obtain this information. His ignorance 
subjects him to anxiety, and he sells his bills at the best price he can ob- 
tain, and the greater the depreciation in the bills he has, the more he is at 
the mercy of the exchanger. 

Nor is the seller or buyer of goods the only party concerned in this 
loss. The consumer has eventually to pay for it. The loss in exchanging 
money being as direct a charge upon the goods consumed as the expen- 
ses of transportation. Every one who eats, and drinks, and wears clothes, 



and needs the shelter of a house, having the same kind of interest in 
equalizing the currency, by the aid of a National Bank, that he has in fa- 
cilitating the transportation of merchandize, by the aid of rail roads and 
canals. While then the interest of the twenty-six hundred persons, en- 
gaged in changing money, may be opposed to the establishment of a Bank, 
the interest of ten millions of consumers, and of hundreds of thousands 
of traders, throughout the country, is directly and urgently in favor of it. 


Case of Sellers of Foreign Exchange. 

There are certain objectors, few in number, but of a very respectable 
class, who have really no disposition to oppose the establishment of a Na- 
tional Bank, provided it does not deal in foreign bills of exchange. 

If a National Bank with its immense capital, sell its own bills, or bills 
with its own endorsement, these bills of course will generally command a 
preference over those of individuals, or of private banking institutions. 
These last, being known to be good only to comparatively a small number 
of persons, while the bills of a National Bank are known, or believed to 
be good by all persons, almost in all parts of the world. Such was the 
case with the bills of the late United States Bank, properly so called ; and 
such no doubt would be the case with any other National Bank properly 
organized and conducted. 

This preference however, after all, is in general, but a mere matter of a 
quarter or half per cent, difference, affecting more the vanity or mercan- 
tile pride of the individual drawer of bills, than his real iaterest. The 
Bank too, in consequence of its extensive arrangements, may sometimes 
be able to sell bills lower than other drawers, and sometimes its opera- 
tions in this portion of trade may interfere with the interests of those who 
derive an emolument from the business of buying and selling foreign ex- 
change ; but if the seller of private bills be aggrieved, the buyer of ex- 
change it is to be remembered, is benefited ; and the lower foreign exchange 
is obtained, the lower goods may be imported, and the cheaper the consu- 
mer will be supplied. It is only, however, a portion of the sellers of for- 
eign bills, who have reason to complain ; for a large part of the drawers 
and sellers are accommodated by it ; being enabled to sell their exchange to 
the Bank, at times when perhaps they could not dispose of it otherwise, 
without some undesirable hazard, or, without a sacrifice in price. The 
operations of the Bank tending to moderate the action of the market ; pre- 
venting the rate of exchange from rising too high at one time, and from 
falling too low at another. These two extremes being equally undesirable, 
as it is the same with exchange as with the necessaries of life. Too high 
a rate must be followed by an inordinate supply, reducing the rate too 
low ; and too low a rate, being inevitably followed by a scarcity which again 
causes an unreasonable increase of price. 

The operation of foreign exchange is the same, in this respect, as that 
of domestic already alluded to. If the products of this country could be 
sent abroad, precisely at the time, when, and in proportion as, those of 
other countries are brought this way ; so that every one thousand dollars 
worth of cotton, or flour, or tobacco, could meet its exact amount in dry 
goods, hardware, &c., there would be little or no accomodation required in 
bills of exchange ; but we know that the crops of this country must be 

shipped at a certain season ; and we know that the goods we import must 
be procured at certain other seasons. The proceeds therefore of our cot- 
ton, or flour, might not be wanted to pay for the foreign goods imported 
against them, till six or eight months after the crop is brought in. The 
grower would then be obliged to wait this period for his money, were it 
not for this process by which through bills of exchange, these two 
amounts are made to meet each other. The planter draws upon his fac- 
tor, allowing ample time for the sale or shipment of his cotton ; obtains 
the money for his draft, and is then in funds for his crop, as soon as it is 
grown. The factor waits for the moment of demand, and sells the cotton 
on credit to the shipping merchant, whose note he gets discounted in time 
to meet his acceptance of the planter's draft. The shipping merchant 
again having credit, waits till the proper time for shipping, and then draws 
his foreign bill of exchange, so as to leave ample time for it to meet the 
proceeds of the cotton. But the shipper of cotton at Mobile, or New 
Orleans, meets with no one there in want of a bill of exchange to remit 
for foreign goods. If there be a Branch Bank at either of these places, 
dealing in foreign bills of exchange, he sells his bills to this Branch, and 
receives the money in time to pay the note given for the cotton. The 
Branch at New Orleans sends the bills to the Branch at New York, here 
the bill is kept till it is wanted, and called for ; that is, till remittances are 
wanted to meet the dry goods, &c., ordered. The time elapsing between 
the coming in of a crop, and the moment when its amount is wanted, to 
pay for the foreign product, in return, is thus divided between the several 
parties. All are accommodated with funds, while all are enabled to wait 
the proper time, either for selling or buying ; and this with the smallest 
possible loss of time or expense. The case is the same, if the process 
be reversed. If the goods imported, be brought in first, the importer looks 
to the coming crop for the means of meeting a remittance. He applies to 
the planter, whose crop has not yet gone to the shipping port. The factor 
has not received the cotton to be sold, and the shipping merchant cannot 
yet buy the cotton upon which he should draw. The importer then ap- 
plies to the Branch Bank in his neighborhood. The Bank has no bills 
at the moment, but it will have a supply when the crops come in, and are 
sold, in the meantime it has an ample credit abroad. The Bank there- 
fore furnishes the importer in advance with those funds, which are to come 
out of the next crop some months afterwards. Having done this, the 
Bank is so much more disposed to buy the bills of the shipping merchants, 
and the shipping merchant is so much better enabled to pay the factor, 
and the factor so much more ready to accommodate the planter. Either 
way the process is calculated to make the greatest possible saving of time 
and expense, while it brings the wants of the consumer of foreign pro- 
ducts, and the wants of the producer of domestic products, to meet each 
other in respect to time, as it were, half way. Who are the parties most 
benefited. Evidently, those at the two extremes. Every facility, and every 
saving of time, and expense in the intermediate stages of this process 
being calculated to enable the planter to obtain a better price for his cot- 
ton, and the consumer to obtain his goods at lower rates.* 

* The American grower of cotton, for example, whose products are sent to Eng- 
land, being in this matter, at one extreme, and the American consumer of English 
goods, being at the other 'extreme. The American consumer depending upon the 
American producer, to pay for what he consumes ; and the American producer de- 
pending upon the American consumer for the pay of what he produces, it becomes 
the interest of these two parties to diminish all intermediate charges or expenses. 


If there were no United States Bank and Branches, the process would 
be nearly the same, except that what we have supposed to be done by a 
Branch Bank, would be done by individual merchants, or Bankers, who 
could not do it generally speaking, with the same ease or to the same ex- 
tent ; and who could not afford to do it, and would not be willing to do it 
without some additional charge, which a Branch Bank would not make. 
Whatever this additional charge be, and whatever additional loss of time 
there may be, this charge, and this loss is so much to be divided between 
the parties at the two extremes. The producer having so much less to 
receive for his crop, and the consumer so much more to pay for the foreign 
articles of which he makes use. We have then only to compare the num- 
ber of individuals losing a commission or per centage, by this competition 
of a National Bank, on the one side, with the number of producers and 
consumers benefited by it on the other. 

It may be admitted, however, that for the purpose of regulating the cur- 
rency, and of performing the duties of a government agent, it is not di- 
rectly necessary that the Bank should be a dealer in foreign exchange. It 
is one thing to equalize the exchanges between the several United States, 
and another thing to equalize the exchange between the United States and 
foreign countries. It may not be directly necessary indeed, that a National 
Bank should be a dealer or speculator in any thing. The Bank may col- 
lect drafts, and discount their amount, and charge its per centage for col- 
lecting to meet the difference of exchange and expense, leaving it for or- 
dinary competition to reduce this per centage to its lowest rate. In such 
case, if the stockholder do not gain as he might do, by buying and selling, 
he will not on the other hand, incur the chance of loss. So in the case of 
foreign exchange, the Bank may discount, and collect it, or sell it, 
charging only the interest, and the actual expense, or loss incurred, but 
this would not meet the objection of its opposers here : the objection in 
the case supposed, being not that the Bank makes a profit by foreign ex- 
changes, but that it does the business cheaper than individuals can do it ; 
and so prevents them from making their usnal profit out of it. 

On the other hand, although it may not be directly necessary for the Bank 
to deal in foreign exchange, it may be indirectly so. If this privilege 
like others already mentioned, be necessary to induce capitalists to sub- 
scribe for its stock ; this might be a sufficient reason. For a National 
Bank can effect none of the purposes for which it is required, without an 
ample capital, and it cannot obtain this capital, unless its charter afford 
sufficient inducements to prompt those, who have money to spare, to invest 
it in the stock. 

Independent of this, there is a further reason, why the Bank should pos- 
sess the faculty of dealing in foreign exchanges. We have seen that 
there must be a certain lapse of time between the period, when foreign 
products are taken up for this country, and a period when the crops 
of this country reach the point where they meet these products. There 
are periods when in the natural course of trade, there may be neither 
produce nor exchange going forward to meet the foreign imports 
coming this way. At these moments to supply the deficiency, ship- 
ments of specie must be resorted to. Large shipments of specie call- 
ed for unexpectedly, produce embarrassment and alarm, on the part of 
the local Banks, frequently indeed unnecessary. This alarm often be- 
comes a panic, the paper currency is affected, and the whole community 
is inconvenienced. At such a moment a National Bank, with a large 


credit abroad, is able to furnish an amount of exchange in anticipation of 
of the next crop. This exchange goes forward instead of the specie that 
would otherwise be sent. The expense, and loss of time, incident to 
transporting the precious metals, is saved to the country ; the inconve- 
nience of a pressure is saved to the local Banks ; the paper currency is 
not affected ; and no panic or alarm occurs. Meantime the Bank is able 
to wait till the crops come in, and are sent forward, when it purchases the 
bills of shippers to reimburse the amount previously drawn for, in antici- 
pation. The whole community are thus accommodated ; and even the indi- 
vidual dealears in foreign exchange, who have had some reason to com- 
plain of this competition, rind an important advantage in the arrangement. 
Their own operations being carried on with so much the greater facility, 
while the supply of foreign exchange, afforded by such an institution, 
modifies the call for specie, for even the most distant quarters of the 
world ; insuring greater confidence in the local Banks, and more stability 
in the currency. 

It is not for the interest of the stockholders of a Bank, however, that it 
should be allowed to speculate in any thing. Its proper business is strictly 
and simply that of lending money ; and its dealing in foreign and domestic 
Exchange, is only one form of this business of lending. If it lend money 
on bills of exchange, it must have the means of getting this money back ; 
and this is to be done by drawing its own bills, or selling those in its pos- 
session. The Bank, in the mean time, charging no more than sufficient 
to cover the extra expense and loss of time to whieh it may be exposed. 
If the Bank cannot draw and sell its bills, it cannot lend money on bills. A 
Branch, for example, cannot, in such case, lend money at Charleston, 
Savannah, or New Orleans, on the bills of shippers of cotton, and remit 
those bills to the Bank at New York, to be there sold or remitted, and 
drawn for. This business will then be done through the intervention of 
third persons, and it is evident how very small" must be the number of per- 
sons thus benefited by the restriction on the Bank, in comparison with the 
number of those to whom it is an occasion of serious inconvenience and 

NOTE. Keeping in view the position, that the proper business of a Bank, and es- 
pecially of a National Bank, is that of lending money only, all objections to such a 
National Institution, arising from the supposition of its engaging in speculations, are 
set aside. They do not belong to the case. A National Bank is not necessarily 
a dealer or speculator, and it is no difficult matter so to frame its charter as 
to prevent such an abuse of its powers; while the restriction, the stronger it is, 
will be the more fully satisfactory to those who subscribe to its stock the sharehold- 
ers aiming especially at a safe investment of their capital, with moderate but regular 


Interests of State or Local Banks, in opposition to a National Bank. 

The officers, directors, and stockholders, of State or Local Banks, may 
object to the establishment of a National Bank. 

These persons may suppose it to be for the interest of their institutions, 
to monopolize the banking business as far as they can. They have the 
same general objection to a National Bank, which we have supposed rich 
men to have to them. They want no more competition in the business of 


lending money. They, too, will say there is capital enough in the country 
their capitals are enough. 

Besides this, wherever a National Bank, or one of its Branches, is es- 
tablished, it must take up some of the deposits and circulation of the other 
Banks. The several Banks of a city cannot, for this reason, look with a 
favorable eye upon the introduction of a Branch Bank ; and the more 
money this Branch has to lend, the worse they think it will be for them. 
Those who make their deposits in the Branch, finding a preference on 
that account in obtaining loans, withdraw their deposits in whole or in part 
from the State Banks, to place them in the National Bank ; and if they 
borrow money of the Branch, they will receive the amount, or a large part 
of it, in the bills of the National Institution ; and as these get into circu- 
lation, they must occupy the place, in some degree, of the bills of the other 

As, then, the profits of a Bank are in proportion to the amount of its de- 
posits and circulation, and as the establishment of a National Bank of dis- 
count, with Branches, may be supposed in this way to diminish the profits 
of the State Banks, these have here some reason for objecting to the es- 
tablishment of such an institution. But what have the people to do with 
this objection ? What have the laboring classes to do with it ? The great 
mass of the people can have no direct interest in bank stocks ; and even 
the interest of the stockholders themselves, is small, in the matter of their 
profits, in comparison with that which they have in the general prosperity 
of the country in the stability of all kinds of property in the regulation 
of the currency and in the reduction of the exchanges, as owners, as 
buyers and sellers, and as consumers. The disadvantage, too, which 
holders of bank stock might, in the case supposed, experience from a di- 
minution of their dividends, must be more than compensated by the secu- 
rity given to their investments in the several Banking Institutions in which 
they are interested. 

But some of the Banks have another interest at stake in this matter, 
distinct from, and even opposed to, the interest of the people. 

These are the Banks inclined, or Urged, to extend themselves improp- 
erly. The officers are disposed to lend largely, that, their customers being 
accommodated, they may themselves be the more popular, and their insti- 
tution appear in a more flourishing condition. Some, too, may have their 
own speculations, or those of their friends, to favor. The directors are, 
for the most part, in business. They wish to borrow more and more. 
They receive no compensation, except the loans they procure from their 
Banks. Every thousand dollars a director is able to borrow, may afford 
him a certain per centage of profit ; and the only pay he receives is this 
profit on the amount of capital thus at his disposal. A director may not 
borrow because he is needy, but because the more he borrows, the greater, 
he supposes, will be the profits of his business. He has besides, in his 
ordinary dealings, his set of customers, to whom he sells, whose credit it 
is his interest to sustain, and to whom it is desirable for him to grant facil- 
ities, that they may give the better prices for the goods he sells them. He 
may be a commission merchant, too, and the greater advances he can 
make, the greater the amount of consignments he may receive. 

The same may be the case with the customers of a Bank ; their ac- 
counts are valuable, because they keep large balances in the Bank to their 
credit ; and it is necessary to acceed to their demands, or they will with- 
draw their accounts, and go to some other Bank, where they expect more 

accommodation. Or perhaps they are stockholders, and may use their 
influence at the next election, in favor of a board more disposed to meet 
their wishes. Some borrowers, too, obtain money from their Banks, on 
condition of circulating the bills in distant parts of the country, from 
whence they cannot be expected to return very speedily. 

The conductors and customers of Banks, thus influenced, wish to be 
unshackled in their proceedings. They are for the largest liberty, particu- 
larly for themselves. They profess to see no use in a National Bank. 
They scoff at the idea of a great regulator, as they call it. Represent to 
them a National Bank acting as a check upon other Banks, and they ex- 
claim against it as a MONSTER. They will vociferate about state rights; 
as if state rights consisted in the right of State Banks to issue paper money 
never to be redeemed. Their cry is give, give. Let them be told that their 
Bank cannot lend all they ask for, because it has to check with the Branch 
of the National Bank in its neighborhood, and will be called upon to fur- 
nish specie for any excess of its own bills, already perhaps exceeding their 
proper limits. Who wants to be hampered in this way ? they say. " Down 
with monopoly down with the monster." Their language and their opin- 
ion, perhaps, may be that their city, or their town, would be the greatest 
in the world, if it were not, as they say, for the United States Bank. 

This is perfectly natural. It is perfectly natural that such Banks, and 
such persons, should be opposed to any thing like a check or regulator. 
But these persons are not the people. They are not even the majority of 
the borrowers at their own Banks. It will generally be found that Banks 
thus over urged, are so by a small number of large borrowers persons of 
grasping, monopolizing views, distinct from the numerous class of small 
traders, to whom Banks, in general, are most useful. 

Banking Institutions, satisfied with business to the extent of their 
means, and never issuing bills or obligations beyond their ability to re- 
deem, have nothing to apprehend from the restrictive operation of a Na- 
tional Bank. No more than an individual who never signs a note, or 
contracts a debt, beyond his ability and inclination to pay, has any thing 
to fear from the process of the law. A National Bank, in checking the 
issues of State Banks, can go no farther than calling upon each to pay its 
own debts; and this is no more than they are bound, upon every principle 
of justice and equity, to do. But this, the objectors may say, is just what 
they wish to provide against,,. Our Banks, they may say, are not always 
able to pay .their notes ; and when this is the case, they do not wish their 
inability to be known. If they cannot pay, the longer they can keep their 
weakness concealed, the better for them and for us. We shall be able to 
borrow so much the more, and so much the longer, without being called 
upon ourselves, and betraying our weakness. 

But what have the people, especially the laboring classes, to do with 
objections of this kind ? Suppose that of seven hundred and fifty Banks 
in the United States, five hundred are conducted in this way ; and that of 
these five hundred, fifty of the directors and customers of each, urge the 
objections above alluded to. Here we have, in all the United States, 
twenty-five thousand persona objecting to a certain public institution, be- 
cause it interferes with their private interests ; while on the other hand, 
there are more than fifteen millions of persons whose interests imperatively 
require the establishment of this very institution. 

Let us suppose a case. A few persons, having a powerful influence 
with certain Banks, enter into a speculation in wheat, flour, &c. They 


buy up these articles as far as their ordinary means, and credit, will ex- 
tend. Having bought, in the first instance, in expectation of a rise, they 
must now buy to make their own expectations good. There is no National 
Bank to operate as a check upon other Banks. These institutions are, 
therefore, abundantly liberal. Credit is unbounded. Most of the bread 
stuffs of the country are bought up, or are in the hands of those who think 
they may as well profit by what is going on, as the speculators themselves. 
The warehouses of the city are full, as well as the granaries in the towns 
and villages ; and multitudes of stacks of grain are to be met with all 
over the country. Still there is a great talk of scarcity, and almost a fam- 
ine is apprehended. But the higher the prices rise, the higher these 
holders expect the prices will rise. Every thing now depends upon the 
Banks. There is yet some months before another crop can come in. As 
long as the Banks do not call upon the borrowers, these borrowers will 
not be obliged to sell any part of the stock they have accumulated. The 
distress with the poorer classes increases the prices of wheat, and flour, 
and corn, are doubled but speculators are not obliged to sell, and there- 
fore will not sell. Riots ensue, and even the warehouses are sacked by 
the populace for bread. 

In the midst of this state of things, supplies come in from abroad. Our 
speculators cannot control the foreign market, as they have done their 
own ; a different class of sellers spring up ; competition takes place, and 
prices fall. Speculators and other traders are ruined ; and even the farmer, 
who has been hoarding up his crop, is obliged to sell at last at less than 
the ordinary price, with the loss perhaps of a year's toil and pains and 
anxiety, in attempting to sustain a monopoly. Thus we find the distress 
of consumers, and the ruin of speculators, and the heavy loss of others, all 
originating with the too abundant liberality of a few unrestrained Banking 
Institutions. Had the Banks in question been otherwise situated had 
they been subject to the check of a National Bank these speculators 
could not have counted upon such extraordinary facility. This monopoly 
of bread stuffs would not have taken place, the trader would not have been 
ruined ; the farmer would not have been subjected to loss or inconve- 
nience ; and the poor would not have been distressed for the want of 
bread. The case supposed, is but an example of many of a similar char- 
acter, all tending to show the necessity of a National Bank, to protect the 
mass of the people, as consumers, from extravagant prices and even to 
protect the reckless or imprudent speculator against himself. 

There may be other Banking Institutions, though few in number, with 
which there is a further objection to a National Bank. 

As it is advantageous to every Bank to increase the number of its depos- 
itors, so it may be desirable with any of them to become the agents of 
government, and thereby to obtain a share of the public deposits, and a 
share of the government circulation. 

A large proportion of the State Banks are not so situated as to expect 
these privileges ; but some may expect them, so long as there is no National 
Institution established for this purpose. When a National Bank is in op- 
eration, the moneys belonging to the nation, or what are called the govern- 
ment deposits, are placed of course with that Bank, or with its Branches. 
These Branches receiving the funds of government wherever collected, 
and paying the debts contracted by government, wherever due, have the 
opportunity of putting into circulation the bills of the Bank, as well as the 


advantage of discounting upon a proportion of the government deposits at 
any time on hand. 

If there be no National Bank, these public moneys, unless the hard 
money system be adopted, will be distributed amongst certain State Banks, 
affording them the opportunity of using the government funds, and of issu- 
ing their own bills in payment of government debts increasing their cir- 
culation, and augmenting their ability to lend to their particular customers. 
The stockholders of such Banks may be benefited by the increased profits 
of their institutions, provided this money be employed with good faith, 
and loaned on good security. The officers will be benefited by the in- 
creased business and greater popularity of their institutions ; affording 
them better salaries, and procuring them greater influence with the com- 
munity. The directors and large borrowers of these Banks will be bene- 
fited, as they think, in proportion as the loan of these public moneys is 
divided amongst them. It is perfectly natural for persons thus interested, 
to be opposed to the establishment of a National Bank ; but how many 
persons are there of this description throughout the country ? 

Without a National Institution, for receiving, keeping, and paying 
the public moneys, this charge might devolve upon one, two, or three 
Banks in each State. We may suppose, therefore, fifty Banks to be thus 
privileged, in the whole country. Many others may aspire to the ap- 
pointment ; but of the whole eight hundred Banks in the United States, 
not more than fifty can have in reality this interest at stake. To each of 
these Banks we may allot one hundred persons officers, directors, and 
heavy borrowers who may be supposed to divide the spoils between 
them ; for smaller customers will scarcely perceive the difference, in the 
accommodation they obtain. There are, then, five thousand persons, in 
the whole nation, who may be supposed to have a direct interest, of the 
kind here alluded to, in opposing the establishment of a National Bank. 
These persons will maintain that a Government Bank, or a Fiscal Agent, 
of any kind, is unnecessary. Their Banks can keep the government de- 
posits, and receive and pay out the public moneys ; and they will do it 
without asking a compensation ? These persons may be loud talkers, and 
stirring politicians, because their private interests excite them to action. 
But what is the interest of these five thousand persons, or even fifty 
thousand, if there were so many, in comparison with the opposite interest 
of the seventeen millions constituting the whole population of the country. 

As to the stockholders of these fifty Banks, experience, as well as 
common sense, shows us that wherever, and whenever, a Bank has a 
larger amount of money to loan out, than its position in the community 
renders expedient, extraordinary hazards are incured ; and it is the stock- 
holders who have to take these hazards. Where a local Bank has a large 
amount of public moneys to loan out, its bad debts more than equal the 
extra amount of interest collected. The interest of the permanent stock- 
holder is, therefore, decidedly opposed to the enjoyment of any extraor- 
dinary powers on the part of the conductors of his institution : for his 
whole investment may be swept away, or nearly so, by the too great fa- 
cility with which borrowers are accommodated.* 

* We say the permanent stockholder, because, as to the mere contractor to buy 
or sell stocks, it may be as much for his interests at one time to ruin an institution, 
as at another to promote its success. He contracts to deliver stock at some future 
period at a certain price, it is then desirable for him to injure the institution, in its 
circumstances, in its character, or both, in order that within the appointed time he 


There may be other Banks in some parts of the country, having sus- 
pended specie payments, without a prospect of ever being able to resume 
them, which enjoy a credit from the mere circumstance that, as none of 
the surrounding Banks pay specie, the difference between those having 
means, and those having none, cannot be tested. The introduction of a 
National Bank would speedily make this difference known ; a better paper 
currency would be introduced, to which their own circulation must give 
place ; their deposits would be withdrawn, and their affairs would neces- 
sarily be brought to a close. The customers of these Banks very naturally 
argue, that if the institutions to which they are in debt are constrained to 
close their concerns, the accommodation they have hitherto obtained must 
cease, and they themselves must liquidate their affairs, and perhaps betray 
their own insolvency. 

On the other hand, there may be some individuals connected with spe- 
cie paying Banks, who presume upon the superior solidity of these estab- 
lishments calculating that the more confusion and uncertainty there is in 
the paper currency generally, and the greater the want of confidence in 
other institutions, the greater the advantage resulting to their own. Such 
persons have no objection to the rigid action of a National Bank. They 
wish to see all weaker institutions taken out of the way. The smaller 
the number of Banks remaining, the better for them. They favor, therefore, 
the passage of a National Bankrupt Law, to act upon all State Institutions. 
Something that will destroy without building up something that will 
remove one kind of competition, without substituting another in its place. 
The proposition at the same time meeting the argument in favor of efforts 
for a National Bank, that something must be done ; while it opposes these 
efforts by making, what might be called in military tactics, a skilful di- 
version. Even statesmen, from portions of the country where Banks enjoy 
the highest credit, may make similar calculations ; but these are not cal- 
culations for the general good. They are local and individual reasons, 
operating either very partially, or only with the few. The question the 
people have to consider is, how much these local and individual objections 
are to weigh, when balanced with the interest of the whole nation. 

may purchase the stock he has to deliver at a price so much lower. Such an indi- 
vidual compasses sea and land to obtain his object, and if, perchance, he has 
engaged in this manner to deliver the stock of a National Institution, however con- 
vinced he may be that its existence is essential to the welfare of the country, he will 
join any party in destroying it, in order to make a few thousand dollars upon his 
contract, and this object being accomplished he must afterwards maintain his repre- 
sentations with pertinacity in order to justify the course pursued. Certainly the in- 
terests of such persons are not to be taken into consideration in weighing the ad- 
vantages to the country of a National Bank. 

NOTE. Amongst other objections to a National Bank it has been urged that it is a 
Monopoly, an objection already partially noticed, [Sect. V. Part II.] 

The only view in which it can be thus considered, is that of its being the deposi- 
tory of the public moneys, and its acting as the Fiscal Agent of the government, in 
which capacity it may be said to monopolize the advantages incident to the dis- 
charge of its peculiar functions. 

In this respect the National Treasury may be called a monopoly, for the Bank is 
only the agent of the treasury, with the difference that by means of its numerous 
Branches it diffuses the use of the public funds over the whole union ; while it 
guarantees the treasury from any loss resulting from their employment. 

The opposite of a monopoly is sometimes equally participated in by all. To avoid any 
monopoly of the advantages in question, the use of the public moneys must be equally 
divided amongst all the citizens. For if any number of these citizens less than the 


whole, enjoy the privilege of paying and receiving the public funds, this number 
must possess a monopoly. But the state Banks say " This is absurd we ought to be 
the depositories of the government money." In that case the state Banks will pos- 
sess a monopoly ; and as there are eight hundred or one thousand of these Banks, 
they must all enjoy an equal share of the public moneys, or else there will be a mo- 
nopoly by some, not enjoyed by the others. Is the use of the public treasure then 
to be divided amongst these eight hundred or one thousand Banks 1 This again, it 
will be said, is absurd. Suppose we select two Banks in each state : making about 
fifty state Banks, agents of the government. These fifty Banks will then enjoy a 
monopoly of these privileges, whatever they n?ay be. In such case, will not the 
other seven hundred and fifty Banks have reason to complain 1 A monopoly of some 
kind, therefore, we see in the nature of things is unavoidable. The question then is 
whether it be not better to give it to a National Bank, chartered by Congress, 
paying a bonus to the Nation for its privileges, accountable to the nation for its 
conduct, possessing ample capital, acting through its branches in all the states, 
and yielding to the nation a portion of its profits than to give this monopoly to a 
certain number of state Banks, or banking associations, paying no bonus to the 
nation, not being accountable, or amenable, to the national government, having 
insufficient capitals, not responsible for each other, and yielding no share of their 
profits to the public treasury. 

In the incorporation of a National Bank, the capital stock is thrown into the mar- 
ket, free for the subscription of all, its privileges being fully made known, and any 
one being permitted to subscribe for any amount, from one share upwards; whatever 
the monopoly may be, all have the opportunity of coming in for a share of it, who 
choose to do so an arrangement as near to an equal distribution of privileges to 
every citizen as can be attained. On the other hand, if there be no such Bank in- 
corporated, the public moneys, unless locked up in sub-treasury vaults, or something 
of the same kind, must be distributed at the will of the President, to such Banks as 
he may see fit to favor, thus, in fact, enabling this officer, whoever he may be, to 
grant a monopoly to whom he pleases which, in fact, would be the result, although 
the operation may be indirectly performed through the Treasury Department, and 
the grant made to certain incorporated state institutions. 

The use of the public moneys cannot be divided amongst all the citizens, nor 
shared amongst al) the State Banks. It cannot be given to any number of Banks 
without giving reason to others to complain. It cannot be left at the disposition of 
the president, without giving him a monopoly, and thus endangering the liberties of 
the country ; and it cannot be locked up in 'sub-treasury vaults, or in the vaults of 
a Fiscal Agent, without the loss of so much useful capital to the nation, and'proving 
a monopoly of the worst kind. If then, a National Bank be a monopoly, it is cer- 
tainly less exceptionable than any other. 

Let the people enquire who it is that complains of this monopoly. They will 
not find that they themselves have any reason to make this complaint. They will 
not find that a large majority even of the Banks, look upon the matter in this light. 
But they may find that certain individuals, and certain Banks, are forward to cry 
out against a National Bank, as a monopoly, because apparently it keeps, as they 
suppose, the money of the nation from coming under their own control. 


Objection arising from a supposed hostility of the PEOPLE to a National 
Bank, and to all Banks. 

We have now taken a view of the several interesfs opposed to the es- 
tablishment of Banks generally, and of a National Bank particularly. 

We have seen that it is only the rich money lender, or his agent, who 
can have a real interest opposed to the operation of Banks. The rich 
man may naturally wish to monopolize the business of lending money : 
and the agent may wish all borrowers to obtain the supply of their wants 
through him. If it be found, in fact, that neither the rich man, nor the 
agent, do object to Banks, it is because they have long since learned that 
their opposition would be entirely useless. They, therefore, are obliged 
to conform to the existing state of things, the one investing some of his 


spare funds in stocks ; and the other dealing in stocks, instead of dealing 
in the lending of money. 

We have seen it to be the interest of the people, especially of the labor- 
ing and enterprising classes, and of all consumers, to promote the estab- 
lishment of Banks, properly regulated; on account of the real capital, they 
are capable of bringing into market ; and on account of the effect of their 
competition in keeping down the rate of interest. On the other hand, we 
have noticed some of the disasterous consequences of a want of this pro- 
per regulation ; as it is exhibited in the creation, expansion, and sudden 
dissolution of fictitious capital ; and we have seen in what manner a Na- 
tional Bank is calculated to effect, and to maintain the regulation required, 
so as to preserve to the country all the advantage of the local Banking 
System, without the hazard of its abuses. 

We have been thus led to search for the interests, supposed to be in op- 
position to the establishment of a national institution apparently so de- 

We have seen that rich money lenders, and their agents may have the 
same interest in opposing the establishment of a National Bank, that they 
have had to the operation of all Banks. They want nothing to keep down 
the interest of money, or to bring more real capital into market. 

We have seen that dealers in Bank bills, and in domestic exchan- 
ges, do not want a national institution ; either to bring all these bills to a 
specie standard, or to bring the exchanges as near as possible to a level. 

We have seen that the state Banks may be opposed to the establish- 
ment of a National Bank of discount with Branches : 

1st. On the general ground, that it is not for their interest to have such 
an institution coming into competition with them. 

2nd. That many of them may be opposed to any measure restricting 
their own issues, and limiting their operations. 

3d. That some of them may have the expectation of being themselves 
the agents of government, and of having the use of the public moneys, so 
long as no National Bank is incorporated. 

4th. That some of them may be actually insolvent, and if so, they may 
object to a National Bank, because its operations will tend to lead them 
to a more speedy liquidation of their affairs. 

5th. That others enjoying a reputation for superior solidity, may be 
said to reap a harvest from the want of confidence under which more 
feeble institutions are laboring. 

We have seen that, of these State Banks, the officers, directors, stock- 
holders, and many of the customers may all be supposed to have a com- 
mon interest, connected with that of their respective corporations, in op- 
posing the establishment of a National Bank. Many of them having 
really no objection to such an institution, provided its powers be restricted 
in that particular, which may have a bearing upon their respective con- 
cerns ; while others, secretly opposed to such an establishment, on ac- 
count of its interference with their speculations, and its apprehended di- 
munition of their property : in theory at last, admit the necessity of a Na- 
tional Bank for the public welfare ; and content themselves with throwing 
only such obstacles in the way as may preclude, for the present, the pos- 
sibility of its going into effective operation.* 

* There are many individuals' who do not openly oppose the establishment of a 
National Banking Institution, but their influence is employed to defeat every mea- 
sure calculated to give effect to its operation. They are advocates for such an act 


In all this examination, there has not appeared a single objection, either 
to the establishment of state Banks, properly regulated, or to that of a Na- 
tional Bank, properly incorporated, which can be traced to the interest of 
the people that is, to the interest of the mass of the whole nation ; nor 
does the examination itself suggest the possibility of such an objec- 
tion. On the contrary the laborer, the mechanic, the small trader, the 
artizan, the farmer, the manufacturer, the merchant, all of small capi- 
tal, and the whole multitude of consumers, have a direct and impera- 
tive interest in favor of State Banks, and of a National Bank, and of a 
National Bank especially, in order that the State Banks themselves 
may be regulated and sustained ; that all their usefulness may be preser- 
ved to the community, while the evils attending any abuse of their powers 
are properly guarded against. 

How then is it, that, for the past few years, a certain opposition to Banks 
generally, and to a National Bank in particular, is supposed to have been 
made by the People of the United States ? The people of a country, the 
circumstances of which call more particularly for the aid of these institu- 
tions, and to the circumstances of which this aid is more peculiarly adapt- 
ed than it is to those of any other country ? How is it that this opposi- 
tion has been supposed to be popular ? What interest have the laboring 
classes in this opposition ? How is it that a National Bank, and that even 
all Banks, have been decried, by those who profess themselves the mouth- 
piece of the people ? How is this, when of all institutions, Banks are 
most decidedly of a democratic character ; and of all Banks, a National 
Bank has more claims for popularity on the poor, than on the rich ; upon 
the industrious and enterprising operative, than upon the large capitalist, 
and great money operator, or ambitious speculator. 

To explain this mystery, for such it is, we must suppose a case, by way 
of illustration. 

We suppose then a state of things, in which there are three or four hun- 
dred State Banks scattered over the United States, we suppose at the same 
time a National Bank of discount and deposit, with Branches in the 

of incorporation as will either nullify the powers of the proposed Bank, as will so 
strip it of privileges, as to prevent the subscription to the stock necessary to carry 
it into operation. From those who possess, or hope to possess, the use of the pub- 
lic deposits, and the advantages of the government circulation, there is no quarter 
to be expected. They object even to the establishment of a Fiscal Agent, as much as 
they do to a sub-treasury system. Others, having no expectations of this kind, ad- 
mit, as a matter of theory, the necessity of a National Bank, provided it be strictly 
a Government Bank as they term it, confined to the duty of receiving, holding, and 
paying out the Government moneys. For then it can act no more than a sub-treas- 
ury system upon the paper circulation of the country. Or, they will not object to 
a Government Bank, provided it be not allowed to discount notes, because in such 
cases it will obtain no private deposits, and will issue its bills only in payment of 
government debts : which bills it must soon receive back again in payment of gov- 
ernment dues. It will then neither come into competition with other Banks, nor 
interfere with their circulation. Some are willing to have a National Bank provi- 
ded its capital be small, because with a small capital distributed over an immense 
country its competition with other institutions must be feeble, and its operation on 
the currency of little importance. Others are willing to have a Bank provided it 
has no power to establish Branches ; because they trust to the legislatures of their 
own States, to exclude those branches from sections, where, perhaps, they are most 
needed, and thus exempt their own Banks from the required action of such an insti- 
tion. Others would limit the extent of dividends, or the power of discounting, or 
the rate to be charged on bills of exchange ; because they know that the more the 
Bank is hampered in this respect, the less probability there is that the stock will be 
taken up, and so long as it is not, they will be able to keep things as they are. 


several states, to be in operation ; and the exchanges between the most 
distant points of the country, including the differences in the value of the 
paper of these several Banks, to be brought so nearly to an equality, that 
the greatest difference may not exceed one per cent. 

We suppose these State Banks of course to be all paying specie for 
their bills ; and the National Bank, with its Branches, so operating amongst 
them, that no one of them can extend its issues beyond a certain limit, 
without having the surplus of its bills brought back upon it with a demand 
for specie. 

We suppose this operation of the National Bank, tending as it must, to 
keep the State Banks within certain limits, to prevent them from lending 
their money so freely as they might otherwise do ; and consequently, to 
cause occasional disappointments to their directors, and inconvenience to 
many of their heavy borrowers. The rigid operation of such an institu- 
tion bearing hard on some individuals, in some instances, although 

" It is a wholesome rigor in the main-" 

Wherever a Branch of this Bank is established, we may suppose it to 
be looked upon by other Banks in its vicinity with no very favorable eye. 
It is a stranger, a sort of interloper, but worse than all, a regulator, and 

" 'Ere felt the halter draw 
With good opinion of the law T f 

Accordingly in such places, the Bank is an unpopular institution : not 
with the people, or with the laboring classes, for they have nothing to do 
with it ; but with those immediately connected with the local Banks, re- 
stricted by it in their operations. 

Wherever a Branchmay be located, too, as the Parent Board is in another 
city, we may suppose it to be regarded as belonging to that city, rather 
than to the place in which it operates, thus giving occasion to some local 
invidious comparisons. At any rate, it is a competitor, and were it out of 
the way, other Banks in the place would have more deposits, a larger share 
of the circulation, and do a better business. 

The Branch too, not only operates upon the Bank in its own vicinity, but 
these Banks being again thus acted upon, operate upon other Banks through- 
out the state, and throughout the surrounding country. Whatever incon- 
venience therefore may be suffered, from the occasional wholesome and 
proper check received by some of these Banks in their disposition to ex- 
pand, the odium is thrown upon the National Bank. 

We may suppose one of these Branches to be located in a large and pow- 
erful state, in which there may be perhaps nearly one hundred other 
Banks, established in the principal towns or counties. The influence of 
these Banks may be supposed to be in proportion to the number and wealth 
of their directors, stockholders, and customers ; and to have a powerful 
effect in carrying any of the elections of the state. 

The Branch Bank in question we suppose to be in a city, on the sea- 
board, where a large part of the national revenue is collected. The ave- 
rage amount of this revenue on hand, from the peculiar circumstances of 
the time being immensely large ; and the reasoning being very natural, 
that if there were no such Branch in the way, the advantage of the 
whole of these public deposits would be enjoyed by some of the state 
Banks. We may suppose some of these state Banks to have special 


reasons for expecting this peculiar favor, provided the existing National 
Bank could be divested of its chartered privileges. In this event, the 
efficient conductors, and heavy borrowers of these institutions, would 
come in for an increased amount of accommodation. 

Reasons of this kind operating together, render the National Bank 
throughout the country, particularly obnoxious to a ceriain class of very 
influential persons ; and this especially, in the city and state alluded to. 
This class of persons we may suppose, to belong to the ruling party in 
political matters ; and to have the advantage of possessing in a peculiar 
manner the ear of the people. Of course their electioneering influence 
must be of the last importance. 

Suppose also, at this time, a number of persons to be resident in the 
capital of the state ; whose position at the seat of government, together 
with their high standing and reputation for wealth, renders them pe- 
culiarly powerful with the executive and legislative departments. These per- 
sons have a large interest in banking institutions, and their past success 
encourages them to believe that they may further advance their fortunes 
by a certain monopoly of state banking power. Accordingly, scarcely a 
charter for a moneyed institution is to be obtained without their consent, 
while the control they have over numbers of state institutions, from the 
influence they are supposed to possess at the seat of state government, 
enables them to perform a very important part in promoting the designs of 
any candidate for political preferment. The interest of these persons, and 
of their friends, in local Banks, in different parts of the state, and their de- 
sire to give the operations of their institutions free scope, begets in them 
a sort of hostility to the existence of a National Bank ; as well on ac- 
count of its regulating action on other Banks, as on account of its enjoy- 
ing the use of the public moneys, which, but for this circumstance, might 
be elsewhere distributed. These persons have accordingly an object to 
accomplish, in return for which, they have a political influence to give. 
The same views, and the same circumstances, operating in a similar man- 
ner in other parts of the country. 

We now suppose in this state, and at this period, an individual to have 
made his appearance, of considerable talent, and of great ambition. He 
has already distinguished himself in the councils of the state of which he 
is a native. He is a Senator : but he aims at becoming the chief magis- 
trate of the commonwealth, and subsequently of the whole union. An 
honorable ambition. An object, perfectly unexceptionable, provided the 
mode of its attainment be equally so. This person has also his purpose 
to obtain ; and his influence to give in return, for the services he may 

The continued operation of a National Bank, and even the enjoyment 
of its existing chartered rights, depending, from a coincidence of circum- 
stances in a great measure upon the course pursued by this distinguished 
individual, in respect to it. 

These two parties may be supposed to meet. The object of one, is 
the attainment of wealth, through a combination of banking operations ; 
that of the other, is the attainment of the highest honor in the gift of the 
people. The purpose of one party is to remove an obstacle to the un- 
limited action of its banking operations, and to obtain for its Banks the 
use of a portion of the public moneys. The purpose of the other, is to 
make use of the local banking interests and influence, to secure the grati- 
fication of ceriain political ambition. In other words, the wish of the 


first, is to put down the existing United States Bank, and to prevent the 
incorporation of any other like institution. The design of the last, is to 
gain possession of the Presidental chair, by making electioneering capital 
of this local and individual opposition to a National Bank. 

When two such interests call for co-operation, an understanding is soon 
brought about. Accordingly we may suppose it to be agreed, on the part 
of the candidate for the presidency, that every effort shall be made to de- 
prive the existing United States Bank, as far as possible, of its privileges, 
and to oppose the continuance of such a corporation. On the other part, 
that every effort shall be made to elevate this distinguished individual in 
public office, until he arrives at the highly honorable position to which he 

The plan is a feasible one. The same reasons, making the removal of 
the National Bank desirable with the State Banks of one section of the 
country, making it equally so with those of other sections. The putting 
down of the UNITED STATES BANK, being popular with certain State Banks. 
These institutions, through their most active conductors, operate upon the 
mind of their customers, while the customers severally operate upon the 
minds of those dependent upon them, or with whom they have more or 
less interchange of sentiment. The borrowers of local Banks, being told 
that they cannot obtain all they ask for, on account of the operations of 
the National Bank, are easily led to look upon this institution as the 
greatest obstacle to their prosperity. They regard it as a monster. They 
describe it as such, to those around them. They invoke the aid of their 
friends and acquaintance, to put down the monster; and multitudes, having 
themselves nothing to do with Banks, are led to believe from these rep- 
resentations, that the existing National Bank is indeed something of a 
peculiarly destructive character ; and that any other institution of the kind 
must be equally so. The public mind is thus brought into a state of in- 
flamability, under an impression of the existence of some inconvenience 
of which the people in fact have never been in the slightest degree sensi- 
ble. The whole spirit of hostility originating with comparatively a small 
number of persons, having a particular pecuniary interest at stake. 

A point, however, is gained. A watchword is created ; a powerful 
party is wrought upon to adopt this watchword ; and the people the la- 
boring classes are persuaded that their interests have been studied in the 
whole matter. The downfall of a National Bank now becomes popular with 
two very different classes at once. With certain bank directors and rich 
men, because the institution is supposed to interfere with their moneyed 
concerns ; and with a portion of the laboring classes, and even of the 
poor, because this measure is supposed to promote the success of the po- 
litical party to which they are attached. The people having been per- 
suaded to believe this, by the very bank directors and rich men who have 
planned the whole campaign for their private purposes. 

Opposition to a National Bank being now the measure of a party, there 
is a mutual action and reaction in favor of it. The watchword sustains the 
party, and the party sustains the watchword ; and adopted, as it is, it now 
becomes the railway upon which the Presidential candidate alluded to, is 
to hazard his career. 

Some difficulties, however, remain to be removed. There is still a 
very general persuasion in the public mind, that without a National Bank, 
the bills issued by the several State Banks will be so rapidly multiplied, 
as unavoidably to be followed by a depreciation of their value that the 

73 I 

issues of some Banks will become so large as to render the holi 
their paper unsafe for the public, and in case of their insolvency, tot 
an undesirable odium upon the reputed instruments of the generl 

To meet this difficulty, a friend of the Governor's (for the fortunate 
Senator may now be supposed to have advanced thus far in his projected 
career) suggests the plan of obliging each of the Banks of the State to 
contribute annually a certain amount, to meet the defalcation of any Bank 
becoming insolvent. Able, sound, and well conducted institutions, are 
thus to provide for the deficiency of the weak, unsound, or badly conduct- 
ed. Banks best deserving of credit, promoting the circulation of the bills 
of institutions least deserving of confidence ; and this, too, at the expense 
of good Banks, which, by the same measure, lose the benefit of so much 
circulation of their own. The injustice of the principle is evident ; but 
the anxiety of some persons to establish new Banks, and of others, con- 
ductors of Banks, whose charters are about to expire, to retain their posi- 
tion, induces them to accede to the proposition. In truth, there is no 
alternative. The measure has been resolved upon in conclave, by those 
without whose consent neither a new act of incorporation can be obtained, 
nor an old charter renewed. A Safety Fund is thus proposed to be introduced 
for theoperation of a National Bank, the essential difference consistingin this, 
that whereas the tendency of a National Bank is to restrict the operations 
of other Banks, each, to its proper limit, in proportion to its strength, the 
tendency of the Safety Fund is to uphold and extend the operations of the 
institutions having least ability and credit of their own. The superior 
ingenuity of the contrivance, however, is much lauded ; and it is even 
seriously suggested, that if all the Banks throughout the United States, 
would thus contribute to sustain the credit of institutions unable to sustain 
themselves, there would be no need of a National Bank ! 

Meantime the distinguished individual already alluded to, has made 
another step in the career of political advancement. He is now, we are 
to suppose, Vice-President of ths United States. The sphere of his in- 
fluence is transferred from the capital of his own State, to that of the 
whole nation. He is within a step of the object of his ambition, but the 
most arduous part of his engagement is yet to be performed ; and his suc- 
cess is not secure without obtaining the ear, and the good will, of the ac- 
tual incumbent of the Presidential chair. The popularity of this incum- 
bent, at the same time, being so great as almost to confer upon him, in 
effect, the nomination of a successor. 

Here are two objects to be attained. The Anti-National Bank party is 
to be satisfied, and the favor of the ruling Chief Magistrate is to be gained. 
To unite these two objects, however, is not a difficult task ; part of the 
popularity of this Chief Magistrate, amongst the advocates for the unlim- 
ited freedom of State Banks, taking its rise from his supposed hostility to 
this, with them, very unpopular institution. 

The President we may suppose to be a man far advanced in age, of 
strong passions and prejudices, and of more military than financial talent; 
one who has never been convinced of the necessity of a National Bank, 
or of the advantage of a well balanced Banking System perhaps having 
never entered into a practical examination of the subject. Possibly he 
may have, too, some old grudge against the conductors of the existing 
Bank, whose political views he believes to differ from his own. He is 
fond of glory. The Bank is represented as a monster. The destroying 



of such a monster is set before him as a Herculean task a work, the 
achievement of which will hand his name down to posterity, with the 
same kind of renown as that gained by certain heroes of antiquity, so re- 
markable for ridding the earth of serpents, dragons and hydras. 

The jealousy of the aged chieftain, perhaps, too, may have been roused 
by an artful suggestion of the inquiry which is the greatest man, the 
Head of the Nation, or the Head of the National Bank? He is made to 
believe that he ought to have the nomination of the principal officers of 
the Branches that his influence over the institution shouldbe such as not 
to permit of a separation of the purse and the sword ; and his wishes be- 
ing thwarted in this respect, in one or two instances, he is persuaded that 
the disappointment arises altogether from the personal hostility of the en- 
emies of his glory. He is thus, as it were, by an almost magical and un- 
seen hand, led to vow eternal hatred to the Bank ; as the child of the 
Carthagenian was led by its parent to swear eternal enmity to the Ro- 

The charier of the Bank is about to expire. An act renewing this 
charter passes both Houses of Congress ; but it receives the President's 
veto. He has Constitutional scruples against the incorporation of a Na- 
tional Bank, at the same time he has a plan in his pocket for making one 
after his own heart a plan of which we may suppose it to be known at 
least, that it never could be passed by an American Legislature. This 
opposition of the President, sustained as it may be, by the influence of 
certain State Banks, and of those whose private interests are opposed to 
any National Bank forbids the expectation that the institution actually 
in operation, will be allowed a new term of existence, or that any other of 
the kind will be permitted to go into operation. 

But this is not enough ; the institution still performs its most useful and 
important functions that of restricting and regulating the issues of other 
Banks. The conductors of some of these Banks, finding this operation 
more and more an obstacle to the accomplishment of their enterprizes, are 
impatient of the restraint ; the managers of others are equally impatient, 
for a division of the use, and perhaps of the abuse, of the large amount of 
public money, known to be in possession, on deposit, or so coming into 
possession, of the United States Bank. Perhaps at this juncture, the en- 
joyment of such an advantage is the greatest crime of which the Bank is 
considered culpable ; at any rate, by divesting it of this privilege, two 
purposes are accomplished. Its salutary operation on other Banks is 
crippled, and the spoils are divided among the victors. We may suppose, 
accordingly, representations to be made to the head of the nation, that the 
removal of the public deposits from the National Bank to certain other 
Banks, however unjust it may be admitted to be, will be a popular measure. 
We may suppose, for example, a letter to be written signed by some 
twelve or fourteen bank directors of one or two of the principal seaports, 
expressing this opinion, and purporting itself to be the voice of the people, 
as if the people had had any thing to do, either with the letter, or with the 
views of its signers. , 

The idea of popularity thus suggested, and the reputed splendor of 
glorification attending the destruction of a monster, induced the veteran 
chief to take upon himself the responsibility of carrying out the views of 
those who thus make him the instrument of their purposes. 

His first step, however, is to accomplish his designs legitimately. The 
public treasure is believed to be, as he represents it, unsafe in the Na- 


tional Bank. A friend of his own is appointed by the Treasury Depart- 
ment, to examine into the affairs of the Bank. Contrary to expectation, 
he reports his conviction of the soundness of the institution, and of the 
perfect safety of the government funds. A committee of investigation is 
appointed by Congress ; the result is the same. The public moneys are 
pronounced to be safe, and the removal of them on the score of security 
is necessarily relinquished. The Secretary of the Treasury is applied 
to. He demurs at sanctioning a proceeding so much in derogation of his 
duty as a public officer. The Cabinet are consulted. The Cabinet can- 
not be brought into the President's views, and all the heads of depart- 
ments having come in as a unit, are obliged to go out as a unit. A new- 
Secretary of the Treasury being appointed, he also is called upon to re- 
move the public moneys from the place of deposit assigned by law and 
he, too, gives his reasons for refusing compliance with a requisition, as 
uncalled for by the circumstances, and as unjust towards the institution, 
as it is inconsistent with a faithful performance of his public duties. He 
is obliged, of course, to resign. Another Secretary is appointed, and this 
time, we may presume, with the express understanding that he is to per- 
form the act required, right or wrong. He becomes, then, the tool of 
arbitrary power, and is rewarded, perhaps, for his subserviency, and gross 
violation of every principle of equity, by an appointment to the highest 
seat in the judiciary of the nation a seat designed only for those most 
distinguished for independence of spirit, and for a scrupulous adherence 
to the dictates of justice. 

The government moneys we may now suppose to be removed to certain 
State Banks, replenishing the pockets and favoring the speculations of the 
knowing ones, who have, as it were by the aid of a magician's power, or 
a Harlequin's wand, effected this important transposition. 

Here is an admitted abuse of power, to be sheltered only from the in- 
dignation of the people, by taking refuge in the unpopularity of the party 
wronged, and by summoning to the aid of the wrong-doer the private in- 
terests benefited by this most egregious breach of public faith. The 
minds of the people, therefore, especially of the laboring classes, are to be 
prejudiced not only against the Bank, but against any National Bank. A 
certain act of wrong is required to be done by those in power, as a con- 
dition of being sustained themselves ; and a clamor is raised amongst the 
people by these wrong-doers, against the injured party, in order that the 
people may not examine into the character and causes of the acts. 

The people might inquire, why the public treasure was removed from 
the place of safety appointed by the law ; and if they did inquire, they 
would find that it was not because their interests were consulted. They 
might inquire, for whose benefit it was that these moneys were removed 
to other Banks ; and if they did inquire, they would not find that it was 
for the benefit of the people, or of the laboring classes ; or even for the 
benefit of any very large number of citizens. They would find the whole 
advantage gained, to be divided amongst a few of their most wealthy fel- 
low citizens. They would not find that this removal of the deposits was 
to benefit the poor; it could only benefit the rich. 

The people might ask, too, why the United States Bank was thus dealt 
with, or why any National Bank met with so much opposition, and they 
would find that no reason could be furnished, with which they had any 
concern. They might inquire amongst themselves, which of them could 
trace any loss or inconvenience to the operations of a National Bank 


and they would not find that they had either individually, or collectively, 
any cause of complaint. On the contrary, they would h'nd that so far as 
their interests were concerned, they were essentially benefited by the in- 
stitution. In a pecuniary point of view, by the sound paper currency se- 
cured to them through the restraining power of a National Bank upon 
other Banks and in a political point of view, by the security it afforded 
to their liberties restraining the Executive arm of government, by its 
separation of the power of the purse from that of the sword. 

The people would find the only grounds of complaint to be those con- 
nected with the immediate interests of comparatively a few Banks, and of 
comparatively a very small number of individuals ; individuals, too, whose 
circumstances were not such as to call for the aid or sympathy of the 

To prevent the people from making these inquiries, and these discove- 
ries, a HUE AND CRY is industriously raised against a National Bank, as if 
the people had been already convinced that such an institution was not 
even entitled to the protection of the laws. 

But why, it may be asked, has there been & popular objection, as some 
have represented, throughout the country, not only against a National 
Bank, but against all Banks ? Why have the conductors of all Banks 
been stigmatized by professed organs of the people's voice, as Bank Bar- 
ons, and the bills of all such institutions, as Bank rags? 

Since the establishment of a well-regulated Banking System is so emi- 
nently beneficial to the people, and to the working classes, how is it they 
have been led to believe it to be for the interest of the rich to sustain the 
Banks, and for the interest of the poor to abolish them : and hence, to 
consider any effort in favor of Banks, (State or National,) as a contest of 
the rich against the poor ? How is it that the people, or any of them, 
especially of the laboring classes, have been led to denounce the whole 
credit system, when it is especially the poor, and not the rich, who need 
credit, and when credit is most beneficial to the working classes, the in- 
dustrious, and the enterprising ? 

To understand this matter, we must suppose our case a little further. 

We suppose, then, the object of the State Bank party, as before 
hinted at, to be attained. The United States Bank, with its Branches, is 
demolished. Its doom is sealed, and a guarantee is given that no other 
is to appear in its place. It is even prematurely deprived of its peculiar 
powers. The goverment deposits are removed, and it is no longer an 
agent for receiving and paying the public moneys. Its conductors, and 
its shareholders, or those who manage for them, finding no hope to remain 
of its resuscitation, procure its conversion into a STATE INSTITUTION. It 
ceases to operate either in regulating the issues of other Banks, or in 
equalizing the currency. In fine, it becomes itself one of these very 
State Banks, which need so much a National Regulator. With this dif- 
ference, that its enormous capital, and the unusual license of its State 
charter, make it now not only a MONSTER, but an unchained monster, 
amongst the other moneyed institutions of the country. 

The State Banks, released from their former restraint, freely issue their 
bills. They accommodate each other, and each accommodates its partic- 
ular circle of borrowers. Loans are made with the greatest facility, al- 
though not always with the greatest equality or prudence. Some custom- 
ers being much more favored than others. Money appears to be abundant ; 


and in proportion to its abundance, the demand for it increases ; prices 
rise, and high prices require more means ; for if prices be doubled, it re- 
quires twice the amount of capital to purchase the same quantity of mer- 
chandize, or of produce. High prices, too, foster the spirit of speculation, 
for the mere circumstance, that they have risen, generates the belief that 
they will still rise. Meantime, all who have influence with the Banks, 
use this influence to the utmost. Every director of a bank is treated with 
liberality by his colleagues, because each of these colleagues expects to 
require the same liberality in his turn. 

But this is not equally the case with all Banks, nor in all parts of the 
United States. In the old states there is more real capital already accumu- 
lated ; it is more equally distributed, and there is comparatively less oppor- 
tunity for using it to advantage. Along the Atlantic border, therefore, the 
Banks, especially to the north and east, expand less than they do in the 
new states. Towards the south and west, capital seems to promise 
greater profit ; there, too, there are more of the adventurous and enterpri- 
sing, who need capital ; and there, accordingly, the Banks are more ur- 
gently called upon ; while different interests combine in prompting them 
to yield more freely to the applications they receive. Where there is 
less real capital, also, in proportion to the call for it, there is the greater 
tendency to the creation of something fictitious, to answer the same pur- 
pose, if it be only for a time. 

In proportion to the increasing issues of the Banks, their paper money 
depreciates. If this were uniformly the case, the change would hardly 
be noticed ; prices would be said to rise ; when, in fact, it is only that 
which represents value, which has depreciated. The Banks, however, 
being more liberal in some portions of the country than in others, we see 
that one paper dollar in one state, will not do so much as another paper 
dollar will do in another state ; and we then begin to detect the deprecia- 
tion in the value of the Bank bill. Some Banks having issued more bills, 
in proportion to the real capital represented, than they should have done, 
the consequence is, that each of these bills represents less real capital than 
it professes to represent. And the Banks in some states or sections of the 
country, having been led to pursue this course more than they have in 
others, the consequence of this, also, is that the paper currency of some 
sections of the country, differ in value from that of other sections, a 
dollar bill of the Banks of one state, being really worth one hundred 
cents, in hard money ; while that of the Banks in another state, may 
really be worth only ninety cents, hard money. Hence, if the govern- 
ment collect the public revenue, or the payment of the public lands, in 
the paper currency of some states, it must lose the difference arising 
from the depreciation of this currency, when it pays its own debts in 
other states. Besides, as there is no legal tender of payment except gold 
or silver, even the United States government cannot oblige any one, in 
any of the states, to receive payment for services, or claims, in anything 
but gold or silver. While, then, it might collect its dues in the deprecia- 
ted Bank paper of a certain state, it would be under the necessity of pay- 
ing even members of Congress from that state, as well as other public 
functionaries, in hard money. Not only this ; if the citizens of some 
states may pay their duties, or pay for their lands, in the depreciated paper 
currency of their section of the country, while the citizens of others are 
paying the same dues in bank paper, equal to specie, the public burdens 


are not equally distributed. The requisition of the Constitution that duties 
and taxes shall be equal in all the states, will not be complied with. 

What is to be done ? This derangement, and this difficulty, evidently 
arises from the want of a NATIONAL BANK. It will not do to confess the 
error ; still less will it do to disappoint the expectations of those to whom 
the pledge is supposed to have been given, that no National Bank shall be 
allowed to exist. The only course to be pursued to save the treasury, and 
to equalize the public burdens, is to require the payment of all duties and 
purchases of lands, in hard money. 

Here, again, is another difficulty. When the hard money is received, 
how is it to be kept distinct and seperate from the paper money with which 
it is surrounded ? The silver and gold of the nation cannot be deposited 
in the Banks, for then the depreciated paper of the Banks might be paid 
out in return for it ; and if Banks cannot be trusted to pay their own bills 
in specie, how can they be trusted with returning the government specie 
for specie, when called upon ? Or how can they be expected to pay the 
checks of the government in silver and gold, when they cannot pay their 
own debts in any thing but depreciated paper. 

In those parts of the country where the bills of the Banks have not 
depreciated, these questions may not be agitated ; but if the funds of the 
government are deposited in the Banks of some of the states, and not in 
those of other States, here is a new cause of complaint, and a new ground 
for sectional jealousy. On the other hand, if the silver and gold of gov- 
ernment be left in Banks, which pay out only their own depreciated pa- 
per, then these Banks enjoy an advantage of which other Banks are de- 
prived, for they may buy up their own bills, at a discount, with the very- 
specie funds which the government has extorted from citizens to deposit 
with them. 

With the hard money system, then, what may be called a sub-treasury 
system, must be introduced. Government moneys, and government re- 
ceipts and payments, must be separated ; must be preserved from the 
contamination incident to mingling with the currency of the nation. The 
public dues must be collected in gold and silver in all the states, and when 
collected they must be kept in vaults and safes, also in gold and silver, 
till they are paid out in coin. 

Here is a change of system evidently to be attended with great pecu- 
niary loss, and inconvenience to the country. The withdrawal of gov- 
ernment funds from all banks is a withdrawal of so many millions of real 
capital from daily use ; and the receipts and payments of government 
being altogether in gold and silver, there is here further withdrawal of 
so many millions of real capital to be derived from this circulation, which 
might be also in daily use, if these receipts arid payments were made in 
Bank paper; leaving the gold and silver to be employed for the purposes 
of trade. That such a measure should be unpopular with all of the 
Banks, and with all connected with them, was to be anticipated. That 
it should be so, especially with those Banks, or their conductors, who had 
been encouraged to look upon the public deposits, and the government 
agency, as part of the spoils of victory, for which they had labored, and 
to which they were entitled, is not to be wondered at. How, then, is 
such a course to be justified, defended, palliated ? How are those who 
adopt it, to be shielded from the odium to which they must be inevitably 
exposed 1 Especially, how is this to be done without a confession of 
past errors ? 


The same step must be again taken as on the former occasion. The 
party aggrieved, must be misrepresented in the public eye. Popular pre- 
judices must be excited against all Banks ; all advocates of Banks must 
be denounced ; and all Bank bills must be spoken of as " rags," mere 
rags. All efforts to obtain a wholesome Banking System must be again 
represented as a contest of the rich against the poor. It is thus attempted 
to give a certain lone to public opinion, to silence the voice of common 
sense. A tone which popular opinion, of itself, never could adopt ; for 
perhaps no course could be pursued more calculated to make the rich, 
richer, and the poor, poorer, than that which we have supposed to have 
been so pertinaciously pursued, by those directing the efforts mad, first, 
to the destruction of the National Bank ; and afterwards, to that of all 

The case we have imagined, is a difficult one indeed, for the sagacious 
manager, who, with a skill worthy of a better cause, may be supposed to 
have been pulling the wires of all this machinery. He has done his 
part, the monster is destroyed, the public deposits have been removed. 
Certain State Banks have enjoyed a monopoly of the government agency, 
at least for a time ; certain political friends have had the use of govern- 
ment moneys : and He too has received his reward. By the aid of those 
who, from their connection with these state Banks, were led to yield him 
their best services, his highest ambition has been gratified. But he is still 
pledged to maintain the course he has pursued ; that is, he is pledged, 
come what will, to prevent the re-existence of a National Bank. 

The position however, in which he is placed, obliges him to use his 
power against the friends to whom he owes his elevation. There is no 
other alternative. A National Bank on the one hand, or a hard currency 
and sub-treasury system on the other. The last operates indeed more se- 
verely on the state Banks, than a National Bank could have done. But he 
must go forward. The same legal advisers formerly engaged in drawing up 
special pleas to justify a breach of public faith towards the late national 
institution, if they are now keepers of his conscience, may as dexterous- 
ly show him how his own plighted faith to his state Bank friends may 
be preserved, while he is aiming a most fatal blow at their prosperity. They 
may show him, how a pledge to destroy the adversary of his friend, does 
not prevent him from destroying the friend also. His scruples are over- 
come. " He kicks the ladder down by which he had ascended," hoists 
the sub-treasury standard, and joins in the popular cry of his own crea- 
tion : Down with the Banks. 

When the government deposits were removed, as we have supposed, 
from the National Bank to other Banks ; and when these other Banks 
were made, the agents of government for paying and receiving, there was 
a withdrawal of so many millions of dollars from one channel of circu- 
lation to be directed into other channels ; producing distress in one case ; 
and superabundance, for the most part untimely, in another. This may be 
supposed to have operated of course unfavorably, and hardly, upon the 
customers of the National Bank, and those dependent upon them, yet af. 
least it may have been a subject of rejoicing with the customers of the 
other Banks. But when the hard money, and sub-treasury system is adopt- 
ed, there is a withdrawal of so many millions, deposit and circulation, 
from active employment altogether. No Bank has the deposits, and no 
Bank gives out its bills in lieu of specie, in payment of public debts, conse- 
quently, there is here an entire diminution of the capital in trade, which 


does good to no one. No one has cause of rejoicing at it, while the spasm 
which this contraction occasions, is a cause of suffering to all. 

Not only this, when a specie circular is issued by government, requiring 
all its dues to be paid in hard money, the parties having to pay, resort im- 
mediately to the Banks for the specie required. The Banks have re- 
course to their customers, and the customer of the Bank falls back upon 
all who are in debt to him. The Banks, perhaps, apprehending more 
than they have occasion to fear, and not knowing who will pay, and who 
may disappoint them, call for three or four times the amount absolutely 
necessary, the borrowers of the Bank are equally alarmed, and press in 
proportion upon all indebted to them. As the pressure increases, disap- 
pointments, and complaints, and excuses are multiplied, and in proportion 
to these, confidence and credit diminishes. A panic ensues, and with the 
appearance of panic, all confidence disappears. 

In the condition of unlimited extension in which we have supposed the 
Banks all over the country to have placed themselves, in consequence of 
their freedom from restraint ; and with the increase of their numbers 
which may have doubled during the period in contemplation, it is easy to 
imagine the sudden, and almost universal insolvency into which the whole 
community must be plunged by such a panic, such loss of confidence, and 
such general embarrassments. A state of distress follows, in which all 
may be supposed to be convinced of the error in the administration of 
public affairs, by which this distress has been brought about. To meet 
the case, public opinion, or rather the opinions of a portion of the public, 
must be wrought upon : and it is for this end, that this pretended voice of 
the people is raised, and still continued against what are called Bank rags, 
and Bank barons. 

We have supposed the preceding circumstances, in order to account 
for the manner in which a prejudice has been created in the minds of 
some, both against a National Bank, and against all Banks. This preju- 
dice is called an objection of the people. Let the people judge whether it 
is their objection or not. Let the people judge for themselves, how near- 
ly the circumstances detailed, resemble those which have actually taken 
place in this country within a year. And let the laboring classes espe- 
cially enquire, what they have gained, either by the hard money currency, 
or by the sub-treasury system : and what objection they can now have, 
either to a National Bank, or to a well regulated system of state Banks, 
checked and balanced by a National Bank. 


Objections arising from the management of the late United States Bank. 
Stock speculation Fluctuations in trade Expansion and reaction. 

The partial distress occasioned by the sudden rise and fall of the 
stock of this Bank, soon after its first going into operation, in what has 
been called " the Baltimore Speculation," is alleged in proof of the abuse 
to which the powers of a National Bank must always be liable. 

By the act of incorporation, the directors possessed the power of lend- 
ing the money of the Bank upon the securities of its own stock. A few 
individuals taking advantage of this circumstance, engaged in. a specu- 


lation of buying up the shares, by borrowing of the Bank itself, to the ex- 
tent of their purchases. The higher the price quoted in the market, the 
more money the Bank lent upon the stock ; and the more money the 
Bank was known to lend upon this security, the higher the price rose. If 
the Bank lent the par value, purchasers were willing to give more than 
par. If the Bank lent twenty-five per cent, more than par, purchasers 
would give still more. Every one calculating, that by paying the small 
difference between what the Bank lent, and the price of the shares, he 
should make a profit on the whole amount of his purchase. If the stock 
rose five per cent., a thousand dollars in this way might procure him the 
advantage of this five per cent, upon ten thousand, being a profit of five 
hundred dollars, upon the one thousand cash investment. The speculation 
was commenced and carried on chiefly by some of the directors of the prin- 
cipal Branches, the Bank lending perhaps one hundred and twenty-five or 
one hundred and thirty upon its own slock, not really worth at the time, 
one hundred. If the Bank, however, lent so much, other persons would 
lend still more. Some, because they really thought the securities good, 
and others, because they wished to produce a certain effect upon the mar- 
ket. Private lenders, however, generally required some individual secu- 
rity besides the stock, to guard against a fall ; but the Bank lent or may 
have been made to lend to some of its own directors on the security of 
the stock alone. The price of the shares rose to one hundred and fifty 
or one hundred and sixty. A few knowing ones, who sold out in time, 
made a profit, but at length the bubble burst. The Bank in some cases 
was left in the lurch, and sustained a heavy loss, and numbers of 
speculators, or rather stock-jobbers, with those who hadunwearily placed 
confidence in them, were ruined. All this however resulted from an 
abuse of power, of which the directors of any banking institution, with 
the same privileges, might have been guilty. Similar mismanagement hav- 
ing indeed occurred in state institutions, as in the conspiracy cases in the 
city of New York, some years since. The difference being only this, 
that as the capital of the Bank was very large, these speculations were 
large, and the disasterous result in the same proportion. The whole, how- 
ever, of this misconduct, with its consequences, might have been provi- 
ded against, by a clause in the act of incorporation, now common in the 
charters of our state Banks, prohibiting the institution from lending upon 
the security of its own stock; at least from lending beyond a certain pro- 
portion of its par value. 

In the getting up of moneyed institutions, there are always certain per- 
sons, who take shares, and seek to become directors, for no other purpose 
than that of speculating upon the rise of the stock. These knowing ones 
subscribe talk much of the immense advantages of the institution pro- 
cure the insertion of newspaper paragraphs, to the same etTect ; and hav- 
ing created an imaginary value, sell out, resign, and care no more about 
the matter, except to pocket their differences. This perhaps they have a 
right to do, but the institution itself should not be made to become a party 
to their operations ; and to provide against this, must be the care of legis- 
lators, in drafting the statute by which the Bank is incorporated. 

The fluctuations in trade, during the twenty years term of the Bank, 
have also, by some, been charged to the management of its conductors. 
Very few however, urge this objection seriously. 



There are certain fluctuations in trade, and in the money market, neces- 
sarily arising, as it is easy to perceive from the nature of things. 

The manufacturer having sold his years' stock of goods to advantage, 
is encouraged next year, to manufacture a greater quantity. His neighbor 
does the same, for he has done equally well. The two have no under- 
standing together, as to the increase about to be made by each. Mem- 
bers of any and every branch of trade may combine to restrict each other 
as to price ; but they never restrict each other as to the quantity to be 
produced. The farmer may bind himself not to sell his wheat for less 
than he did the previous year : but he will not agree that his land shall 
not yield more wheat next year than it did the last. What is true of these 
persons, is equally true of all others. All having done well one year, are 
encouraged to manufacture or produce more next year, consequently this 
next year, there may be more goods than are wanted, and it is a losing year. 
All are now discouraged, and all again restrict their operations. And as 
manufacturers restrict their operations, the raw material, brought forward 
to meet their expected wants, proves to be too abundant. Thence fol- 
lows a losing season for producers. So it is with communities, or nations. 
Three, four, or five years of good business, lead to a too rapid increase 
of engagements, on one hand, and of production on the other. The sup- 
ply exceeds the demand, or the ability to remunerate, and then follows a 
period of embarrassment. Such changes we find have occurred in this 
country every five, six, or seven years. When they do occur, corres- 
ponding fluctuations take place in the money market. The pressure for 
money, however, or the want of this pressure, is the effect, and not the 
cause of these fluctuations in trade. The operations of a National Bank 
are no more chargeable with these changes, than the rise and fall of the 
mercury in the thermometer are chargeable with the changes of the wea- 
ther. These fluctuations would have taken place had there been no United 
Stales Bank in existence ; and the probability is, that the action and reaction 
would have been much greater, if, during the same period, the state Banks 
had not been checked in their issues, and in their disposition to expand, 
by the regular and inflexible action of a National Bank. 

When the charter of the late United States Bank was about expiring, 
and the conductors of the institution were anxious to obtain a renewal of 
its privileges, they may well be supposed to have pursued a course calcu- 
lated to render the corporation popular with the commercial public. They 
could not do otherwise. At such a time, it was to be expected that they 
would make their greatest efforts to accommodate all applying to them for 
aid, in order to furnish as little ground of complaint as possible. But, 
with all this disposition on the part of officers, and directors, the Bank 
could not go beyond its proper limits. It was obliged to retain a certain 
amount of specie in its vaults ; and was obliged to hold itself prepared for 
any demand made upon it. And this especially, with the knowledge that 
there were not wanting, those who were ready to put its strength to the 
test whenever an opportunity presented itself. Probably to the borrowers 
of the Bank, its liberality did not appear equal to their wants. Others, 
however, opposed to the institution, complain that it did at this time 
enlarge its issues beyond measure ; and that it lent one year, some mil- 
ilions more than it had ever done before. This being put forth as an ob- 
jection : the power of such a corporation, enabling it, they say, to make 


money scarce, or plenty, according as it may be expedient to influence the 
public mind for political or party purposes. 

In reply to this objection, let us bear in mind that the proper business 
of a Bank being that of lending money, it is the direct, and imperative duty 
of its conductors, to keep every dollar of its available means employed, 
drawing interest as far as possible. The Bank ought to lend always as 
much as it can lend, and it can at no time do more. It would be absurd 
to suppose, that such an institution would keep several millions of dollars 
idle for a certain period, in order to make money scarce : and it is equal- 
ly absurd to suppose that having lent to the extent of its ability, it could 
go still further in order to make money plenty. 

Accordingly, if there were any time, when the directors of the late 
National Bank lent more than they did at another, it was not because their 
disposition to lend was greater ; but because more was called for. If 
they lent less than their means, it was because less was called for : the 
opportunities for using money advantageously, not being so great or so nu- 
merous. It is to be remembered, too, that money is not always most 
plenty, when the Banks lend most. More money may then be called for, 
and obtained, from the Banks, because the prospects of profit are more 
encouraging. In such times, directors and others, who have most influ- 
ence with their respective institutions, borrow all they can. Those who 
do not occupy the same favorable position will not be able to borrow so 
easily. The discount line of the Banks may then be larger than usual, 
while money with a certain class of borrowers, is much scarcer; and the 
rate of interest in the market much higher. So when a Bank lends less, 
it may be because privileged persons care less about borrowing. Others 
who have no particular influence with the institution, then borrow more 
easily ; and money is said to be plenty, although the discount line of the 
Bank may be less than usual. 

Whatever the disposition of the conductors of the late National Bank 
might have been they could not scatter its money amongst the voters at 
the polls, or amongst the people individually. Neither could they so 
order the circumstances of any, as to make them desirous of borrowing. 
The several Branches could only lend to those who asked ; and those who 
asked, were only those who thought they could employ the money advan- 
tageously ; and those who thought this, were led to it, at the period in 
question, by the peculiarly prosperous appearance of the times; prompting 
every one, as it did, to think that what was purchased one month, could 
certainly be sold the next at a profit. 

Whatever the expansion of the United Sates Bank may have been at 
this time, however, it was no more than in proportion to that of all the 
state Banks. If the Bank lent twenty millions more than it had done at 
any previous time, this twenty millions was to be divided amongst twenty- 
six different states ; and was after all equal only to about four or five per 
cent, of the whole amount loaned by all the Banks together. The great 
rise in prices at this peiiod, could not therefore have been caused by the 
increased loans of the United States Bank ; for this would not have justi- 
fied a rise of more than about five per cent. Neither could this expansion 
have caused the expansion of all the other Banks ; on the contrary, it is 
certain that the amount of state Bank loans would have been much more 
increased than it was, if there had been no National Bank in operation : 
the operation of the United States Bank on the other Banks, in the na- 
ture of the case, unavoidably tending to check the spirit of speculation. 


In confirmation of this, we find that no sooner was this national institu- 
tion taken out of the way, than the State Banks generally multiplied their 
loans, and were themselves multiplied in number, till the increase in the 
amount of Bank loans instead of twenty millions, was upwards of two 
hundred millions of dollars. The Banks in the meantime having nearly 
doubled in number.* 

What then were the circumstances leading the United States Bank, as 
well as the state Banks, to augment its loans, about the time of its apply- 
ing for the renewal of its charter ? What led the customers of the Bank 
to call for an increased amount of discounts ? As the expansion of the 
Bank was not the cause, but the effect of a spirit of speculation, from 
which the call for this expansion originated, what were the circumstances 
giving birth to this spirit ; and by which it was particularly fostered at 
this period ? 

We have already noticed, that there always have been, and will be fluc- 
tuations in the demand for money, as in the demand for goods ; proceed- 
ing from what may. be called ordinary or natural causes. But there are 
also at times, extraordinary or artificial causes, combining with the ordinary, 
increasing the demand for money, and so increasing the discounts of the 

For some years previous to the period under consideration, the circum- 
stances of the country had been unusually prosperous. The currency 
was well regulated ; the domestic exchanges were almost upon a level ; 
the moneyed institutions of all the states, bore a character of almost un- 
questioned stability; and private credit was rarely impeached. The 
profits of capital had been liberal and regular ; the inducements to borrow 
from the Banks, not from want, but from the prospect of pecuniary advan- 
tage, were sufficient to occasion a gradual increase of the demand for 
loans. Bank facilities were desirable ; Bank capital was reasonably 
profitable ; and its safety beyond suspicion. The public treasury was 
overflowing ; and although there was a considerable amount of the Na- 
tional Debt unpaid, there were abundant means not only to pay the inter- 
est, but a great part of the principal. It was at the same time regarded 
by the capitalist as an eligible investment of his money, and the prospect 
of its being speedily paid off, was, with the holders, rather a subject of 

About this time, the destruction of the power of the United States 
Bank, to which we have before alluded, was determined upon, by certain 
parties having a peculiar interest in accomplishing this most injudicious 

* By a report of the Secretary of the Treasury, of 3d of March, 1841, it appears 
that between the years, 1834 and 1836, while the United States Bank was closing its 
concerns, more than two hundred new state Banks went into operation. During ihe 
same period, the augmentation of the Joans of all the state Banks together, was 
equal to two hundred millions of dollars ; or about one hundred percent, on the 
whole amount of loans and discounts of 1830, when a National Bank was in full 

In 1830, including the issues of the United States Bank, the amount of circulation 
was forty millions more than the specie in the Bank vaults. In 1837, without the 
United States Bank, the circulation was one hundred and four millions more than 
the specie in the vaults. 

In 1830, the amount of bills out, and deposits in all the banks, was less than one 
hundred and sixteen millions. In 1837, the amounts of bills out, and deposits was 
something more than two hundred and seventy-six millions; no National Bank 
being then in operation. This estimate too being exclusive of banks and institutions 
with banking privileges, which at that time had not reported to the Treasury De- 


measure.* Amongst other difficulties in the way of the project, was the 
circumstance that the Bank performed for government, the functions of a 
Loan Office ; paying the interest of the public debt, at such points as were 
required, free of expense ; this being one of the conditions upon which 
it was entitled to the use of the public moneys. 

The immediate paying off of the public debt would, therefore, accom- 
plish two purposes. It would suddenly deprive the Bank of a large por- 
tion of the government deposits, and thus diminish its ability to act as a 
check upon the local Banks ; and it would meet the argument in favor of 
sustaining the institution, and continuing its privileges, derived from its 
performance of these Loan Office duties. 

To accomplish this object, the chief magistrate of the nation was to be 
persuaded, that this measure, also, would particularly redound to his per- 
sonal glory. 

Whether the funds to meet the amount of the debt had accumulated, 
or not, under a previous administration ; or whether this accumulation 
were the result, or riot, of past years of national prosperity, was a matter 
of indifference ; the glorification was to consist in the fact that the whole 
remainder of the national debt was paid during the term of the then ruling 

The argument, of course, was sufficient, and the step was determined 
upon. The knowing ones were apprized of the purposes of the adminis- 
tration. All the national stocks then below par were bought up ; and the 
government soon afier paid off the whole at the highest possible rate. 
Stocks paying an interest only of three per cent, per annum, and selling 
at eighty or eighty-five per cent, being paid off at the full rate of one hun- 
dred. The opposers of the Bank gained their point ; rich men became 
richer ; the President was glorified, and the people paid the expense. 

But this was not all. The contemplated paying off of this amount, 
having been made known, speculators, or those who had the disposition to 
speculate, naturally made the calculation, that here was a large amount of 
capital about being withdrawn from the public funds, which those to whom 
it belonged must be anxious to invest in something else. Hence, there 
would be an increased demand for all objects of investment, affording a 
chance of profit. Real estate must rise, local stocks must rise, property 
all over the country must rise, and public lands must rise. The idea once 
current, all who had money or credit, employed their means to the utmost 
in purchasing lots, lands, and stocks. The national debt was paid off, 
but the speculations, made in anticipation of the effect of this payment, 
probably exceeded ten times the amount. Large sums were deposited in 
different state Banks, which thus unusually supplied, lent out the amount 
received, with more than ordinary freedom. Purchases were eagerly 
made, and prices continued to rise ; the first speculators made money, 
and consequently went on to make new purchases. Others, encouraged 
by their success, followed in the same career. As prices rose, more 
money was called for ; as it now required more capital to purchase the 
same quantity of any kind of property. This caused a demand upon the 
Banks for all that they could spare, and produced a proportional demand 
upon the United States Bank ; which, especially at this crisis, could not 

* The measure was particularly injudicious because it had the effect of diverting 

much real sound capital (35 millions,) from its regular and wholesome channels 

* circulation, either to be withdrawn altogether from the country, or to be directed 
to unwonted channels, tending to hazardous and precarious investments. 


be more backward than others in supplying the calls of all applicants, to 
the extent of its ability. Thus originated the much talked of expansion of 
this institution, which was said to be for party effect, when, in fact, it was 
but the effect of the impulse given to the spirit of speculation, by the 
sudden payment of the whole of the national debt, in the manner, and for 
the reasons represented. 

Meantime, the ball having been set in motion, continued to roll. Spec- 
ulation still went on, credit being yet unimpaired ; prices continued to rise, 
and, consequently, more money was called for. Here, then, a check was 
perceived. Not from a change in the disposition of the conductors of any 
of the Banks, but from the nature of the case. The state Banks, as well 
as the National Bank, had all gone to the extent of their means in real 
capital; and while the national institution continued in operation, they 
could not create fictitious capital to supply the demand for real. A partial 
reaction took place, and the national Bank was charged with calling in 
this year, instead of letting out, as it had done the year before ; whereas 
the disposition of the officers and directors of the Bank, arid especially 
of its several branches, could not have changed : the reaction arising 
only from the nature of circumstances, over which they could have no 
control ; and the whole amount called in by the Bank, being but a trifling 
per centage upon the aggregate amount of Bank loans throughout the 

What was to be done ? More capital was wanted, and the foreign 
stockholders of the United States Bank, being about, as was supposed, to 
withdraw their capital from the country, so many more new Banks must 
be incorporated to supply the deficiency ; and as almost every new Bank 
seemed to suppose itself called upon to supply the place of the late Na- 
tional Bank, they must each have adequate means. Banking institutions 
are accordingly incorporated, with capitals, not merely of one to five mil- 
lions of dollars, but with liberty to increase to fifty millions ; as if to as- 
sure the people that they should find no deficiency of Banking capital in 
consequence of the destruction of the national institution, then just com- 
pelled to close its concerns. To supply the new Banks with means, fic- 
titious capital was created : the capital stocks being paid in, or secured 
to be paid, by the hypothecation of bonds and mortgages, state stocks, 
and the stocks of other corporations. Available means being wanted, 
agents were employed to take these securities to Europe, and borrow as 
much as possible upon them. Money was thus obtained. All the Banks 
enjoyed for a season, an equal degree of credit, and their bills were issued 
in abundance ; the management of some of them, however, being much 
more judicious and circumspect than that of others. Meantime, the late 
United States Bank becomes metamorphosed to a state institution ; having 
its old capital, with a new charter, and new privileges. Its course differ- 
ing from the other new Banks only in this, that having thirty-five millions 
of real capital in possession, it exchanged this real capital for fictitious, 
apparently with as little loss of time as possible. 

There is now, however, no national check or regulator. The Banks 
are multiplied, and their issues, in various forms, increased. Wild lands 
are bought up in all parts of the country, and railroads, turnpikes, and 
canals, are projected and commenced, to give a reputation of value to 
these lands ; and the Banks lend their bills, bonds, and credit, on the se- 
curity of these railroad, canal, and turnpike stocks; some of the directors 
being themselves, perhaps, speculators in these almost newly discovered 


territories. The greater the amount of loans made in this way, the liigher 
the supposed value of this kind of property ; and the greater, of course, 
the supposed responsibility of those who possess it. Their credit with the 
Banks, and the liberality of their Banks in lending them, are unbounded. 
As fictitious capital, however, abounds, real capital disappears ; and gold 
and silver seem to be taking refuge in other countries. To stop the emi- 
gration of one, at least, of the precious metals, the administrators of gov- 
ernment raise the price of gold by law. But the law cannot regulate the 
comparative quantities of gold and silver in market, any more than it can 
the comparative quantities of butter and cheese. As silver and gold dis- 
appear, the Banks are charged with circulating too many small bills. Ef- 
forts are made to prevent the issuing of Bank bills under five dollars, and 
Banks are even encouraged to expect the favor of government, on condi- 
tion that they issue no bills less than ten dollars. This only increases the 
evil, for in proportion as the small bills are redeemed by the banks, so 
much real capital is taken out of active employment. A specie circular with- 
a demand for hard money, not from a national Bank, but from the national 
government, at length makes its appearance. All parties are roused to a 
sense of their condition ; professed insolvency spreads over the country ; 
the Banks suspend specie payments, and a general explosion takes place. 
In all this action and reaction, the late United States Bank had no con- 
cern, except that of the experience afforded by these circumstances, and 
by its own past history, showing that if such a National Institution had 
continued to exist, with its accustomed operations, these transactions would 
not, and could not, have occurred. 

This will appear still more strongly, in noticing the direct effect of the 
removal of the government deposits from the place assigned for their 
keeping by law, to the possession of certain State Institutions, and from 
these to others. 

In the irrigation of cultivated fields, water distributed in judicious and 
moderate quantities to different portions of the soil, affords due nourish- 
ment to the plants and assists their growth ; but if thrown too abund- 
antly into particular portions of land, it overwhelms, deluges and destroys 
all around it. So State Banks, when judiciously supplied with pecuniary 
means, act the part of irrigating channels, in furnishing capital, as it is 
wanted, in their respective vicinities. If these Banks be suddenly pro- 
vided with an unusual addition to their means more than their customers 
are able to employ to advantage, and more than is required by the position 
in which the institutions are placed this over whelming surplus is pushed 
out wherever it can be located, wanted or not wanted, into extraordinary 
employment. The Bank lends, for fear its money should remain unem- 
ployed, without due regard to security ; and those who borrow, engage in 
unaccustomed enterprizes, merely because they can do it with so much 
facility a ground of enterprize usually leading to a disastrous result. 

As was to be expected, the enormous amount of government funds on 
hand at the time of their removal from the National Bank, was deposited, 
or was being deposited, with those State Banks of which the conductors 
and customers were supposed to be most favorable to the existing admin- 
istration of government. It was reasonable to suppose that under such 
circumstances, these funds would be distributed in loans without sufficient 
regard to security, and too much with the view of gaining friends for the 
political party then in power. 


Whether this apprehension were well founded or not, the jealousy by 
which it may have been dictated, was a legitimate element of republican- 
ism. It being the very essence of republicanism to oppose especially the 
augmentation of Executive power. Accordingly, this position of the pub- 
lic moneys gave rise to the passage of what is usually called the distribu- 
tion act, as the only means of providing against the evil apprehended. A 
remedy the more sure, inasmuch as there were collateral reasons in favor 
of the adoption of the measure, operating with members of the legislature 
of all parties. By this act, these funds of the National Government were 
divided amongst the several Stales ; the consequence of which arrangement 
was, that the amounts in, or coming into, the several Banks, favored by 
the National Government, must, at the time appointed, be again removed 
into other Banks, patronized by the different State Administrations. 

The measure was deemed hostile to the partizans of the National ru- 
lers, and it therefore seemed desirable with them to render it as obnoxious 
as possible : throwing the odium of every inconvenience arising from its 
operation, upon those from whom it originated. The State Banks them- 
selves, or most of them, knowing the uncertain tenure by which they held 
these funds, would have lent them out cautiously ; but they were directed 
and urged, as it is said, by the organs of government, to lend these moneys 
liberally, and to give to their friends all possible accommodation. This 
undesirable supply of capital was thus hastily pushed into positions where 
it was not wanted, leading those who were prevailed upon to borrow it t 
into a snare, and eventually overwhelming and suffocating the unhappy 
borrower, with the very abundance of means with which he had been so- 
gratuitously deluged. Here, then, was an aggravating cause fomenting, 
in the first instance, the spirit of speculation, and augmenting the bitterness 
of the retribution with which it was speedily followed. 

The United States Bank of Pennsylvania. 

The extraordinary result of the affairs of the United States Bank of 
Pennslyvania, the conductors of which proposed to make it a substitute for 
a National Bank, has been represented as indicative of the unsound con- 
dition, and mismanagement, of the late United States Bank, previously 
under the direction of the same conductors : warranting the objection, as 
it is urged, that the powers of any National Bank must be subject at all 
times to similar abuse. 

To judge of the weight of this objection, we must see in what the two 
institutions are alike, and in what they differ. 

The Pennsylvania Bank resembles the late National Bank, in having 
the name and style of The United States Bank with the difference, that 
its proper style is the United States Bank of Pennsylvania. A difference 
by many not sufficiently noticed ; and consequently, by many, these two 
different, and entirely distinct, institutions, have been regarded as one and 
the same. 

The Pennsylvania Bank resembles also the late National Bank, a 
having been presided over by the person previously President of the 
late United States Bank. It had also several of the same directors, offi- 
cers, tellers and clerks. It had the same capital, and nearly the same 


shareholders except that the proportion of the late National Bank be- 
longing to the Nation, was sold by the Government to this Pennsylvania 

As to the name or style, it is evidently a matter of little importance. A 
Bank might assume the style of the BANK OF THE WORLD ; and yet every 
one would know that it was no more the Bank of the whole world, than 
any other Bank. There is a Bank in New York called the City Bank, 
but every one knows that it is no more the Bank of the City, than any 
other Bank in Wall street. There is another styled the State Bank, and 
another the Bank of America ; but the first is no more supposed to be the 
Bank of the State, than the other is the Bank of the whole American con- 
tinent. There are other Banks in different States, styled The National 
Bank; but it is very well known, that not one of them is a Bank of the 
Nation, or such a National Bank as the circumstances of the country re- 
quire. So it should be borne in mind, that the United States Bank of 
Pennsylvania, is no more a Bank of the United States, in consequence of 
its name, than the North American Trust and Banking Company, of New 
York, is an institution of this northern continent, including the British 

So far as the names of Banks are adopted merely for the purpose of 
distinction, no exception can be taken. If adopted to impose upon the 
understanding of the ignorant, in this, or in any other country, the practice 
belongs to a class of frauds too contemptible to be noticed. In either 
case, the giving of the name of the United States Bank, to the Pennsyl- 
vanian institution, is no reason whatever for identifying it with the late 
United States Bank, properly so called. 

The same individual who had been president of the United States Bank, 
became president of the United States Bank of Pennsylvania ; but he had 
nothing in himself enabling him to carry the National character of the old 
corporation, into the new one. He resigned his place in one institution, 
in order to be appointed to a similar place in another. He shifted his 
command, but, unlike the Hero of the Lakes, he could not carry his flag 
with him. He was obliged to sail under different colors. He merely 
acted the part of a private citizen, having his own interest in view. As 
an officer of the old Bank, wiih a liberal salary, and occupying a highly 
respectable position, it was desirable for him that this institution should be 
continued in existence. Finding this to be impracticable, his next effort 
was to procure a charter from his own State for a new Bank, with the same 
amount of capital, and to prevail upon the stockholders of the old Bank, to 
transfer their funds from the National to the State Institution. Possessing 
the confidence of these stockholders, he accordingly procured their powers 
of attorney to effect this operation, at the same time being furnished with 
their proxies, to vote for such directors as he might see fit, which of course 
was to be done with an eye to his own subsequent election as President 
of this new State Bank. All this was a matter of arrangement with indi- 
viduals, respecting their own private property, over which they only had 
the control. 

If the Legislature of Pennsylvania, in granting this new charter, acted 
injudiciously, or imprudently, or granted too unlimited privileges, that had 
nothing to do with the charter of the old United States Bank ; or if the 
stockholders of the old Bank, in thus assenting to the arrangement of the 
individual proposed to be at the head of the institution, and in thus giving 
him their powers of attorney, misplaced their confidence, that also had 



nothing to do with the charter, or the character, or the merits, of the old 
Bank. The proceeding was simply this, that the individuals holding 
shares in the National Bank, converted their interest, by general consent, 
into so many shares of a State Bank. 

The new institution being now organized, and in operation, it remained 
only to purchase from the Government of the United Stetes, the shares 
held by the Nation in the old institution. This was done on terms highly 
favorable to the country. Not. a dollar, it is believed, was lost to the 
public Treasury in the whole of the transaction. 

The United States Bank of Pennsylvania, thus becoming the proprietor 
of all the shares of the late National Bank, became, consequently, the 
possessor of all the assets, or property, of that institution ; and these as- 
sets constituted its capital for subsequent operation. That is, the notes, 
and bills, and bonds, and real estate, of the old Bank, and of all its 
Branches, became the property of the new State Bank, and subject to its 
management. From this time, if there was any mismanagement of this 
property, or any misapplication of the funds resulting from the sales of it, 
this misapplication, or mismanagement, was effected under the authority 
of the charter of the State of Pennsylvania*, and by direction of officers 
appointed by the stockholders of this new State Institution. 

Thus we see how, with nearly the same name, or style, the same Pres- 
ident, several of the same directors, and nearly all the same private 
shareholders with the possession of the same assets, or property, and 
the same amount of capital the United States Bank of Pennsylvania was, 
and is, nevertheless, an institution entirely distinct from the late United 
States Bank. The two institutions, so far from being mixed, or amalga- 
mated, actually pursuing each its distinet and respective operations at the 
same time. One under a new President, and some of its old directors, 
closing up its affairs ; the other, with the Ex-President, and a newly or- 
ganized Board of Directors, pursuing its course as a State institution. 
An institution with an immense capital indeed, and what was called a 
most liberal charter but still, merely a State institution. 

We shall now see in what these two corporations differed essentially 
from each other. 

The late United States Bank was chartered by an act of Congress, ap- 
proved by the President of the United States. The United States Bank 
of Pennsylvania, was chartered by an act of the Legislature of that State, 
approved by the Governor. The stockholders of the late United States 
Bank, paid to the Nation a bonus of one million and a half of dollars, in 
consideration of the privileges granted by its charter, the use of the public 
deposits, and the advantages of the government circulation. The stock- 
holders of the United States Bank of Pennsylvania, paid to that State a 
bonus of five millions of dollars, (besides stipulating to make some heavy 
loans for certain public improvements,) for no other privilege than that of 
a charter giving the conductors of the company an unusual degree of 

The late National Bank possessed the power of establishing Branches 
in any, or all, of the different States, and thus of transacting its business 
on equal terms with other Banks, in all parts of the country. 

The State Bank possessed no such power, being obliged to confine most 
of its business to its own State ; and elsewhere acting by such agents as 
it was able to employ, in the same manner as a private individual 
might do. 


The National Bank possessed a capital of thirty-five millions of dollars, 
employed by means of its Branches, in all parts of the United States. 
Any surplus not wanted in one position, being easily transferred to another, 
where it might be more desirable. Thus having no stagnant capital to be 
forced into any unwarrantable employment, lest the interest upon it should 
be lost. 

The State Bank possessed the same thirty-five millions of capital at its 
outset, but all to be employed by one Board of Directors, in one State ; 
except such part as might be confided to distant agents. This immense 
amount of capital for a single State Bank, (so much beyond the wants of 
its own vicinity,) rendering it necessary for the Board to invent unusual 
modes of investment ; and thence so much the more easily prompting to 
loans on securities which, under other circumstances, might have been 

The new institution thus situated, it is easy to conceive of the tempta- 
tion placed before its conductors controling, as they did, such an over- 
whelming amount of capital to enter into large speculations, and engage- 
ments, for their own account. Knowing the facility with which they 
could supply themselves with funds, and perhaps actually considering 
themselves to be promoting the interests confided to their care, by engag- 
ing to pay interest for immense amounts which, but for their enterprize, 
might remain unprofitably idle. 

The late National Bank, besides its capital, from which only compara- 
tively a small bonus was to be deducted, had the use of the government 
deposits, as well as the use of large private deposits of individuals keeping 
accounts with all its Branches. It had also, as agent of the government, 
the privilege, and faculty, of circulating its notes in all the States in pay- 
ment of public debts, which gave these notes also unusual currency for 
other purposes. The interest on the additional available capital furnished 
by these items, being more than sufficient to pay the expenses of the in- 
stitution, remunerate the bonus, and leave a fair semi-annual interest for 
the stockholders, its conductors had no occasion to resort to unusual 
modes of investment. The legitimate business for a Bank, of lending 
money by discounting notes, and dealing in bills of exchange, being all 
that was required to keep the entire means of the institution employed. 

The State Bank, on the contrary, had its capital diminished in the out- 
set, by the payment of a bonus 'disproportionately large. It had further to 
lend certain large sums at an unusual low rate of interest ; while on the 
other hand, it had no advantage of any public deposits, or government 
circulation : the private deposes of the Bank being confined to the cus- 
tomers of a single ciiy, and the circulation of its bills, in the ordinary way, 
being of a very limited character. Its expenses, therefore, were to be 
paid out of the interest accruing from the remainder of its capital ; making 
it evident that without resorting to some unusual operation, with a view 
to profit, there was little^chance for the shareholders of obtaining even a 
fair interest on the whole thirty-five millions of capital. 

To make the difference more sensible, we suppose, for example, a Na- 
tional Bank of discount, with twenty Branches, having the use of the public 
moneys, and the use of the deposits of those who keep an account with 
its several Branches, together with the use of the capital derived from its 
circulation, both for government, and for ordinary purposes. Its capital 
stock being thirty-five millions, its additional capital for lending purposes, 
derived from the sources above mentioned, may be put down at thirty-five 


millions more, including the average amount of government deposits. It 
would thus, doing the ordinary business oflending money, be able to obtain 
an interest of six per cent, upon seventy millions of dollars ; equal to 
twelve per cent, on its capital stock of thirty-five millions. Leaving 
ample means for the payment of all expenses, and yielding a fair dividend 
to the stockholders, without resorting to any extraordinary enterprizes. 

We will now suppose a state Bank with the same capital stock of thirty- 
five millions of dollars ; with no other deposits than those of its custom- 
ers in one city ; and no circulation except a share of that which is com- 
mon to all state Banks. Its additional capital, derived from these sources, 
must evidently be very small, perhaps one or two millions of dollars. 
After paying a bonus of five millions of dollars, it will have, therefore, 
but about thirty-one or thirty -two millions of dollars to lend ; out of which 
the expenses of the institution, and its agencies, are to be paid ; leaving 
no probability of dividing more than a small interest on the whole thirty- 
five millions of capital stock. In order then to make up for the want of 
additional capital, and .to do something to meet expenses, the credit of the 
Bank must be used ; and the ingenuity of its conductors must be exer- 
cised in devising new modes of Banking. 

Money may be obtained in the old countries, on good security, at the 
rate perhaps of four per cent, per annum. At home the Bank may 
lend it out at six per cent, per annum. We may suppose our State 
Bank now to be involved in two opposite difficulties. Its immense capi- 
tal is too large for its location, it can lend but a small part of it in the 
ordinary business of Banking; and yet if it do not lend more than its 
capital stock, it cannot give a dividend to its shareholders equal to the 
interest. To obviate the first difficulty, the Bank goes out of ils usual 
course, and places its moneys in state stocks, railroad, canal, and turnpike 
stocks, and other Bank stocks ; or it lends to States, Banks, and other par- 
ties ; taking these stocks as security. In addition to which, certain con- 
ductors of the institution, borrow of the Bank, on security of large ship- 
ments of produce, made, or being made, to certain ports in Europe. 

All the means to be derived from the capital stock of the Bank being 
thus employed, to meet the second difficulty, the securities thus received 
for loans in this country, are forwarded to Europe, where a large portion 
of the amount lent upon them, if not the whole, is reborrowed at a low 
rate of interest ; the amount thus borrowed abroad, being remitted, or 
drawn for, is again lent out at home, by the Bank, at the American rate 
of interest, perhaps upon more of the same kind of securities. More of 
these securities are again sent to Europe ; more money is borrowed on 
them at the low rate, and being alike remitted, or drawn for, is lent out 
again in this country, at the higher rate. All this appears a very favorable 
operation ; the Bank, perhaps, making a profit of two per cent clear, 
merely for placing itself between the American borrower, and the Euro- 
pean lender. This two per cent, of course, will go far towards making 
up any deficiency there may be in the dividends expected on the capital 
stock, after paying expenses. 

The Bank may, in this way, have lent seventy or eighty millions of dol- 
lars, which is as much as the old National Bank could have done with all 
its advantages. Meantime, however, the securities received by the Bank, 
and transmitted to Europe, are becoming more and more doubtful. Some 
of the states, perhaps, threaten to repudiate their debts ; the railways, 
canals, and turnpikes, do not appear to be wanted, or are left unfinished, 
for want of further means. The holders of the securities in Europe, be- 


come uneasy, and sacrifice them at half of the nominal value, to reimburse 
the loans made. The property shipped shares a similar fate ; and yields 
but about half the amount advanced upon it by the Bank ; which, thus 
losing thirty or forty millions of dollars by the securities, upon which it 
had made its loans, loses, in effect, its entire capital. The whole of this 
disastrous result being directly traceable to the two peculiarities alluded 
to : viz. the throwing of an overwhelming amount of capital into the 
confined position of a single State Bank ; and the necessity, under which 
such a Bank must labor, of doing something, out of the ordinary course 
of its business, to compensate for the want of a proportional amount of 
deposits, and circulation ; in order that it may pay expenses, reimburse 
the amouut of bonus paid, and yield a fair dividend of interest to its 
shareholders. The capital, in the case supposed, designed for twenty-six 
states, being forced into the vaults of a single Bank ! A capital, which 
might have been subdivided, and lent out under the direction of the conduc- 
tors of twenty-six branches, being placed altogether at the discretion, and 
under the management of, perhaps, a single individual ! The whole of 
these transactions, with their unfortunate results, being the very opposite 
of any thing which could have occurred in the management of a National 
Bank of discount, with its proper number of branches. 

Whatever the securities may have been, the very extent of the loans 
made upon them by the United States Bank of Pennsylvania, is a proof 
of the soundness of the condition of the National Bank, from which this 
state institution derived its means in the first instance. It was with the 
assets, or property, of the United States Bank, properly so called, that the 
United States Bank of Pennsylvania, was enabled to pay its enormous 
bonus, and to make its large loans, on the credit of state stocks. But if 
any doubt remained upon this point, it must be amply met by referring to 
the repeated investigations made into the condition of the institution 
about the time of the removal of the deposits. Investigations made by an 
adverse party, with every disposition to detect wrong, if wrong were to be 
met with ; and yet all resulting in a report favorable to the character of 
the institution for soundness and stability. So much so, that even when 
the fate of the Bank was known, and the certainty of the liquidation of 
its affairs was fully before the public, the price of the stock in the market 
fully indicated the undiminished confidence of the shareholders ; while 
the price, at which the government held the shares of stocks belonging to 
the nation, was an evidence of the good opinion entertained by the con- 
ductors of the administration themselves, of the value of the assets. 

In addition to this, the late National Bank was so restricted by its char- 
ter, that its conductors could not have fallen into the mistakes to which 
the same individuals were subject in the management of the state institu- 
tion. Five of the directors of the parent board were appointed by gov- 
ernment ; certain changes were periodically to be made in the direction ; 
no loan was to be made, even to the United States government, exceeding 
half a million of dollars ; and no Joan to any state exceeding fifty thou- 
sand dollars ; the Secretary of the Treasury was authorized to call for 
statements weekly, with the right to inspect general accounts. Penalties 
for dealing in goods not permitted, were to be enforced to three times the 
amount : one half payable to the informer ; and penalties, for loans not 
permitted, to three times the amount : one fifth payable to the informer. 
The Bank was amenable to Congress, and subject to the examination of 
committees of either branch of the Legislature. Its privileges, and its 


charter, being liable to forfeiture, for any abuse of its powers ; while in 
Congress, it had the representatives of twenty-six states to meet as judges ; 
all coming from districts, where other Banks, and other interests, were 
fully disposed to prefer any well-founded accusations, against an institu- 
tion acting so powerfully as a check upon their own operations. 

The State Bank, on the contrary, enjoyed the advantage, if it may be 
called such, of a charter, of which it was boasted that it permitted any 
thing, and every thing. The corporation was accountable only to the 
Legislature of its own state, of which it was a large creditor. It had 
here, too, an interest in common with other Banks of the same state ; and 
several important works of internal improvement were dependant upon its 
Joans. Where the National Bank would have stood alone in petitioning 
for exemption from penalty, in case of a suspension of specie payments, 
this State Bank enjoyed the co-operation of all the moneyed institutions 
around it. Accordingly, we find, that the united influence of all these 
state institutions, and of the individuals dependant upon them, was too 
powerful not to secure for them the immunity desired. 

Here, indeed, as we have before intimated, is the peculiar advantage of 
a National Bank, such as it should be, in its operation upon the Bank cur- 
rency of the country ; that standing alone, with little or no hope of indul- 
gence from the national government, it is under the necessity of being 
rigorous towards itself ; and being so, it is unavoidably rigid in its require- 
ments of others ; and this is the kind of rigor so indispensable, as a pre- 
ventative, for insuring the sound and healthy condition of all the moneyed 
institutions of the country. 

So far, then, from the possibility, or probability, that the late United 
States Bank was subject to the same mismanagement, or that any National 
Bank could be subject to the abuse of power witnessed in the manage- 
ment of the State Institution alluded to, as well as of many other state in- 
stitutions, there can be no doubt, that if a National Bank, such as the 
country had seen in operation for forty years, had continued to exist while 
this Pennsylvania United States Bank, with other State Banks, was plung- 
ing itself into difficulties, the abuses and mismanagement in question, 
never would have occurred to such a lamentable extent : as every state 
institution of the kind, imprudently conducted, would then have received 
a timely check to its issues, arresting its hazardous proceedings at their 


Other Objections : want of Suitable Conductors. Banks Regulating them- 
selves. Corrupt Influence. 

It has been said, that " a National Bank is a good thing, provided an- 
gels can be procured to conduct it." 

We have seen that such an institution is much less liable to mismanage- 
ment than a state corporation ; and we might reply to the objection, that 
if State Banks were all under the direction of angels, such a regulator as 
a National Bank would be unnecessary. 

All state institutions, however, being under the conduct not of angels, 
but of men, governed and stimulated by a regard to their own pecuniary 
interests, a National Bank becomes the more necessary to counterbalance 


and provide against the abuses to which the powers of state corporations 
are liable ; it being only those disposed to abuse these privileges, which 
can have reason to object to the counterpoise thus provided. 

Human motives being such as they are, and all moneyed institutions 
being directed by persons having a regard mainly to their own pecuniary 
interests, the evil, whatever it may be, resulting from these circumstances, 
is to be remedied by a judicious balancing of the interests of one class 
of persons with those of another. Where there is a tendency to expan- 
sion on one side, it must be met by something which in its own nature has 
an equal tendency to restraint. In this matter, so deeply interesting to 
the national welfare, it is as unreasonable for those restrained to object to 
the regulating operation of a National Bank, as it would be for the wheels 
of a time-piece to object to the action of the pendulum. 

The objection to a National Bank, that it must be governed by men, 
and not angels, might with equal force be urged against all the institutions 
of government. The executive, the legislative, the judicial powers, are 
all in the hands of men, subject to the influence of selfish passions and 
motives ; and it is for this reason, that the use of power in one department 
is required to counterbalance its use, and to provide against its abuse in 

Kgain it is said by a certain class, as already noticed, that trade should 
regulate itself. " Leave every Bank," they say, " to pursue its own course, 
and suffer the consequences of its own folly ; the evil will prove its own 

This objection might be urged with greater propriety, if, in the matter 
of Banks, trade were left, or had been left to regulate itself in the first in- 
stance. If Banks were not incorporated institutions. If they were not 
creatures of legislation. If those concerned in Banks were not exempt- 
ed from personal responsibility. If the stockholders, directors and offi- 
cers of these corporations were liable in their persons and property. If 
they were jointly and severally held, for all the engagements of their in- 
stitutions, on the ordinary principles of copartnership. In such case, they 
might perhaps, like other establishments in trade, be left to themselves ; 
but then the peculiar advantages set forth, as arising from the invention of 
incorporated Banks, would be lost to the people and to the country.* The 
principle of free trade, then having been once encroached upon, by ex- 
onerating the parties interested in a Bank, from individual liability, the 
evils resulting from this first encroachment must be provided against by 
some counteracting check. 

Persons acting on their own responsibility, liable in their persons and 
property, act so much the more cautiously. Release them from these conside- 
rations of restraint, and the same individuals may conduct very differently. 
The incorporation of moneyed institutions is attended with some evil, but 
it is also productive of great benefit. The course of wisdom is to provide 
against the evil that the good may be preserved. Where no ox is, the crib 
is clean ; but much increase is by the strength of the ox. 

Suppose all incorporated moneyed institutions to be left to themselves. 
Managed as they are, by persons released from all personal liability, ex- 
cept for technical crime, the probability is, that in a few years the confi- 

* See Section III. Part I. 


dence of the public, and of the capitalist, large and small, would be en- 
tirely withdrawn from them. Those already in existence, would use 
themselves up, and no new ones, or comparatively none would go into ope- 
ration. This may be called the remedy ; but this is a remedy at the ex- 
pense of the whole subject, it is the same kind of remedy as that which 
death brings to the suffering dyspeptic. It is as if a farmer were to kill 
his oxen to save himself the trouble of cleansing their stalls. 

The argument that trade should regulate itself, might as reasonably be 
applied to merchants individually as to Banks. The merchant, it may be 
said, will suffer the consequences of his own folly, and therefore he should 
not be subject to a suit at law. In this way the whole community, as to money 
matters, may be reduced to a state of anarchy. The shareholders of in- 
corporated Banks, and those who have placed confidence in these institu- 
titutions, may suffer the consequences of the folly, or of the imprudence 
of the directors ; but these directors themselves escape, provided no 
crime, in the eye of the law, can be alleged against them. If the Banks 
then are left to themselves, that is, without a check upon their corporate 
operations, the stockholders, and the public are left unprotected against 
every thing but actual crime : the case being even worse than that, in 
which the private trader is exempt from the course of the law.* 

If instead of this, the State Banks are kept in check by the operation of 
a National Institution, the same cause protects the innocent shareholder from 
suffering for the weakness or incompetency of those to whose manage- 
ment the affairs of his institution have been entrusted. Experience hav- 
ing already taught us, that of the immense amount of losses suffered by 
the stockholders of various State Banking corporations within a few years, 
almost the whole amount would have been saved, had there been no lapse 
of time during which these institutions were without the check of a Na- 
tional Bank of discount and deposit ; and however unwelcome such a 
check may appear to the conductors of institutions, desirous of a certain 
latitude of proceeding, we find that in effect, it is no more unwelcome than 
the various regulations of State Legislation substituted for it. 

In the State of New York, for instance, in place of the regulating ope- 
rations of a National Bank, all the Banks of the State are required to pay 
a certain annual tax to meet the defalcation of any single Bank. They 
are required to exhibit the state of their affairs periodically to commis- 
sioners appointed by the government ; and they are required to make such 
returns to the State Legislature at the close of every year, as not only to 
subject them to great inconvenience ; but such as usually, to produce at 
this period a species of collapse in all pecuniary concerns throughout the 
State. All which was unnecessary during the existence of the late Na- 
tional Bank, and that of its predecessor ; and would be again unnecessary 
if a similar National Institution were again in operation. 

* Such is, in some measure, the principle upon which banking associations are 
now organized in the State of New York. The public are supposed to be protected 
against loss from the circulation of these associations, by certain securities deposited 
to secure the payment of their bills. But the stockholders are without any security 
except that of the good character and ability of the managers of their property. 
If the institution prove to be in good and able hands, all may go well, but if other- 
wise, the stockholder loses every thing. The result of this experiment must be that 
with some few exceptions, confidence will be withdrawn, and capital will seek em- 
ployment where it finds more security. 


Some objectors to a National Bank, have made use of an argument, 
which if it prove anything, proves too much. 

The large resources of such an institution, are said to enable its con- 
ductors to exercise an improper influence in the National Legislature. In 
other words, may enable it to bribe members of Congress. And it is even 
maintained by some, that such corruption was practised amongst the ef- 
forts made to obtain a renewal of the charter of the late Bank, in the way 
of granting loans, if not in that of gratuities. The suspicion itself is un- 
worthy of being entertained, not so much on account of the Bank as on ac- 
count of the estimation in which the representatives of the people should be 
held. But admitting that there were any foundation for such apprehension, 
how much more reason is there to dread the employment in this way, of the 
united power of several hundred State Banks. If there be danger in trusting 
the representatives of the people, to the influence of twenty directors of a 
National Bank, with a capital of thirty-five millions of dollars, how much 
more danger must there be in exposing them to the influence of fifteen or 
twenty thousand directors, and officers of seven or eight hundred State 
Banks, with an aggregate capital of three hundred and fifty or four hun- 
dred millions of dollars ; making loans perhaps to the extent of five hun- 
dred millions. We have seen, that if it were for the interest of the con- 
ductors of the late United States Bank to have their charter renewed, there 
is equal reason to believe, that the parties connected with the State Banks, 
or a great number of them, deemed it for the interest of their institutions 
to prevent this renewal. And we know how much easier it must be to 
collect a large amount for promoting a common object from a great number 
of establishments, and individuals, than to obtain a much smaller amount 
from a single institution, especially, where secrecy is required in view of 
anticipated examinations. In the way of loans too, there can be no doubt 
that the State Banks have a much better opportunity of accommodating a 
large number of individuals in public life, than a National Bank with all 
its Branches could have. 

We have then the fact before us, that the late United States Bank not- 
withstanding all its imputed powers of influence could not obtain a ma- 
jority of two thirds in Congress ; although more than a majority of the 
whole number were in favor of its continued existence ; neither could it 
operate a change on the mind of the individual occupying the Presidential 
chair, or of his confidential advisers. On the other hand, the issue was 
precisely such as to meet trie views of the State Banks, whose united mo- 
ney power was more than ten times that of the National Bank. 

It would be just as reasonable, therefore, to suppose members, who 
voted on the side of the State Banks, subject to corruption from that quar- 
ter ; as to suspect those who voted in favor of a National Bank. And 
there is just as much ground for apprehension, that several hundred State 
Banks, with their hundreds of millions of capital, might operate upon the 
mind of a chief magistrate to obtain his veto ; as there is to fear, that a 
single National Bank, whose concerns are all subject to the inspection of 
government officers, and of committees of Congress, might employ any 
considerable portion of its funds, in obtaining from the National Legisla- 
ture,' by bribery, any indulgences not otherwise to be procured. Especi- 
ally when it was so well known that all these efforts could and would be 
rendered abortive by the opposition of a single person for conciliating, whose 
good will, no efforts had been made. Certainly if bribery were the course 
to be pursued in a case like this, it would be much more rational for a 



body of men to address themselves to the individual possessing the 
greatest power, especially if the pecuniary circumstances of this indi- 
vidual were not very independent, than to waste efforts upon two or three 
hundred members of a Legislature, whose purchased favor after all might 
prove entirely unavailing. 

Objections of this kind are arguments in favor of a National Bank, as 
they show the expediency of maintaining a balance of power between op- 
posite moneyed interests ; each jealously disposed to watch the operations 
of the other. 


We have now seen the use of capital, and the importance of economi- 
sing this use ; the inactivity of capital being equal to the loss of so much 
power. We have seen the use of Banks, in giving the requisite activity to 
dormant capital, by their stocks, by their deposits, and by their paper cir- 
culation ; arid we have seen the necessity of confining the action of these 
institutions to the employment of real capital, in opposition to the employ- 
ment of that fictitious capital, which if unchecked, they must be the means 
of creating. 

We have noticed the difference between real and fictitious capital ; and 
the mischief arising from an accumulation of the latter wherever it is pro- 
duced. And we have thence seen the necessity of restricting the opera- 
tions of all Banks to their proper specie paying limits. 

We have seen too, that without such restriction, fictitious capital will 
not only be created, and become a source of common disaster, but that it 
will accumulate in some sections of the country much more than in others ; 
giving rise to inequalities in the currency, ami consequent instability in 
the exchanges : thence involving the government in the predicament of 
adopting on the one hand a hard money system, necessarily depriving the 
country of the use of so much capital, or on the other, of collecting the 
public dues in bank paper, variously depreciated, with certain loss to the 
treasury, while the public burthens, in opposition to an express provision 
of the constitution, fall unequally upon the citizens of different states. 

We have seen that the sufe guard against the tendency of Banks to 
create fictitious capital, and the tendency of this fictitious capital to pro- 
duce unequal depreciations of the paper currency, is to be found in the opera- 
tion of a NATIONAL BANK of discount and deposit, of sufficient capital, with 
Branches in the several states. Such an institution, aided by its operation 
as an agent for the public treasury, and by its faculty of discounting notes 
and bills, acting as a check upon the issues of other Banks in all parts of 
the country : the faculties of discounting, and of establishing Branches ', 
being essential to its efficiency. 


We have seen that this operation of a National Bank cannot prejudice 
the rights, or abridge the legitimate privileges of any well conducted money- 
ed institution : while it enables the government safely to collect its revenue 
in Bank paper ; and as safely to keep the moneys accruing from that revenue, 
in a place assigned by law : without the necessity of abstracting so much 
capital from circulation, or of confining the amounts, whether in paper or 
in the precious metals, in vaults and safes : and thus too, without affording 
to any administrators of the government, the opportunity of influencing 
wealthy and powerful portions of the community by indirect loans, or pre- 
mises of such loans ; an influence unavoidably incident to a distribution 
of the public deposits amongst various favored institutions. 

We have on the other hand, examined the objections made to the es- 
tablishment of a National Bank, and even to the existence of all Banks, 
and we have seen that none of them can be founded in a regard for the 
well being or prosperity of the laboring classes. 

The rich capitalist and his agent, as we have aeen, may object to all 
Banks, and especially to a National Bank, for it is their interest to keep 
the business of money lending to themselves. 

The dealer in exchanges, or in Bank bills may very well object to the 
operation of a National Bank, for he wants no institution to sell bills 
cheaper than he can do himself; and the greater the difference there is 
in the currency, and the more instability and confusion there is in the do- 
mestic exchanges, the better for his trade. 

State Banks may not want a National Bank ; especially a Bank of dis- 
count, with Branches. They do not want the competition of snch an in- 
stitution. They may fear that it will lessen their own deposits, and their 
own circulation, and perhaps take away some of their best customers. 
Some of them do not like the idea of restriction. They do not wish to be 
checked. They do not wish to be regulated. Many individuals, too, 
connected with these Banks, may object. It may interfere with their 
speculations. They cannot monopolize so much ; nor hold their monopo- 
lized produce so long. Great capitalists may object. They want high 
prices even at the expense of a depreciated currency. Banks recklessly 
managed, and moneyed institutions already insolvent, may object. For 
the action of a National Bank upon them, must necessarily test their 
soundness, and expose their mismanagement. A few Banks, too, may 
object, because they hope to obtain the use of the public moneys them- 
selves, and to be themselves employed in their several districts as agents 
of the Government. 

We have inquired how it is that a mistaken apprehension has been 
formed of the character and operations of a National Bank, amongst a 
certain portion of the people ; and how it is that this misconception has 
led to an equal prejudice against all Banks, and all moneyed corporations; 
and we have traced this prejudice to a certain systematic arrangement, in 
which the interests of a powerful Bank party on the one side, and those 
of an aspiring candidate for office on the other, were the only interests 
consulted. The case, indeed, is a supposed one ; but, whether supposed 
or real, of the correctness of the application every one can judge. That 
many of the most active opposers of a National Bank, are equally opposed 
to a hard money, and to a Sub-Treasury, system, is notorious ; and it is 
for the people to inquire why this is so. 

We have seen that the ruinous speculation which took place soon after 
the establishment of the late United States Bank, confined as it was to the 


scheming operations of a few individuals, arose from a defect in the char- 
ter of the Bank, easily provided against upon any future occasion. We 
have also seen that the strange mismanagement of the existing United 
States Bank of Pennsylvania, so called, was almost an unavoidable conse- 
quence of the fact, that this institution was merely a State Bank, abso- 
lutely incumbered with the immense resources of the late National Bank, 
for which it was a pretended substitute ; while, like other local institu- 
tions, it was free from the operation of any existing National Regulator, to 
check the imprudence or extravagance of its conductors. The absence 
of such a Regulator operating the ruin of that State Institution, as it has 
done the ruin of multitudes of others, differing from it only in the magni- 
tude of their capitals and resources. 

Finally, we have seen the futility of the very feeble objections to a Na- 
tional Bank, drawn from a mistaken view of it as a monopoly from the 
difficulty of procuring suitable conductors and from the danger of its 
supposed influence upon any of the organs of Government. 

We have now, we may say, the whole subject before us. 

Without a National Bank, such as we have described, and such as the 
country has been perfectly familiar with, the funds of the Government 
become a means of perpetuating the political power of a few designing 
men ; and of enabling a small number of individuals to profit by the use of 
an extraordinary amount of capital, at the public expense. 

Without such a Bank, the taxes, duties, and sales of public lands, must 
be paid in different States in bank money at unequal rates ; unless re- 
course be had to a hard money system, depriving every branch of industry 
of a large part of the available capital upon which it is dependant. 

Without such a National Bank, the issues of the State Banks, and 
Banking associations, already nearly one thousand in number, cannot be 
restrained within a specie paying limit; and without such restraint, the 
operations of most of them, progressing from one degree of excess to 
another, must terminate in discredit and insolvency. 

Without such a National Institution, the advantages of capital brought 
into use through the instrumentality of Banks, are lost. For without Bank 
capital, and Bank facilities, the young and the industrious, and all in mod- 
erate circumstances, will be unable to purchase on credit, because their 
notes can no longer be discounted. 

Without a National Bank, the sound State Banks cannot introduce their 
paper into circulation. The mechanic and th^ laborer will be paid in de- 
preciated bank notes, the worst bills being the most circulated, and the 
most unprincipled conductors of the worst Banks most benefited. 

In fine, without a National Bank, the rich may become richer, and the 
poor will certainly become poorer ; while the whole country must witness 
the results of reckless speculation in one class, and of despairing idleness 
in another. 

On the other hand. With a National Bank, possessing the requisites 
supposed, local Banks capable of being restored, may be assisted. A 
paper currency equal to specie will circulate through the Nation ; and the 
enchanges between the different States will be equalized. The local 
Banks worthy of credit, will be enabled to retain the full benefit of their 
respective powers ; each performing its functions in its peculiar sphere 
each enjoying its share of paper circulation, and of public confidence. 

With such a National Bank, the public burthens will fall equally in all 
the different States, because in all, the revenue will be paid in bank paper 


of equal value, without hazard to the Government, and without loss to the 
country. Real capital, now giving way to fictitious, will come out of its 
hiding places, as if no longer fearful of contamination ; and real capital, 
procured at the lowest rate of interest, will be brought from distant places 
and countries, where it is less wanted, to every region of our territory 
where there is a demand for it. 

With a National Bank, the South and West will be supplied with new 
means ; while the North and East are benefited, in proportion as their 
Southern and Western customers are in better circumstances. The con- 
fidence of the wealthy, both at home and abroad, in our various moneyed 
and manufacturing institutions, will revive. The stocks of these will again 
become desirable objects of investment ; and this accession of real capital 
will give a new, but not imaginary, value to objects of enterprize, now 
languishing from want of pecuniary support. 

In fine, with a National Bank, the public moneys will be safe. Safe 
from peculation, and safe from corrupt abuse ; while the real capital they 
afford, will circulate, free from the bias of political favoritism, in every 
channel of industry throughout the Nation. 

Fellow citizens It is for you to judge of the correctness of this com- 
parison. It is for you, too, to take into consideration the private interests 
operating upon the minds of objectors to a National Bank. It is for you 
to compare these interests with the objections made. When called upon 
to oppose the incorporation of such a National Institution, or to put down 
the State Banks, or to array yourselves in a pertinatious hostility to all 
Banks, it is for you to inquiry into the peculiar circumstances, and private 
reasons, of the individuals making this call upon you. Place their motives, 
such as you have reason to suppose them, by the side of their objections. 
Inquire in what respect their circumstances differ from yours, and how far 
their interests should operate upon your minds. Judge of their arguments 
as you would of the testimony of a witness upon the stand, for whose 
prejudices and private feelings, and peculiar relations, you felt yourselves 
called upon to make suitable allowance. 

The subject is with you. I do not ask your acquiescence in my opin- 
ions. I ask only your patient, fair, investigation of the whole matter : 
discussed upon its own merits, apart from all party, or political associa- 
tions: aided only by the comparison, which the recollections of many of you 
will enable you to make, between the present state of the country, and its 
state during the greater part of that period when a National Bank was in 
full operation. 

If you have hitherto acted under mistaken apprehensions, I ask only a 
magnanimous expression of your change of opinion. If, after mature 
consideration, you come to the conclusion that a National Bank of discount 
and deposit, with Branches in the several States, is essential to the pros- 
perity of the country, I ask, for your country's sake, that you unite with 
one voice to demand of your rulers, the incorporation of such an institu- 



FOR some years previous to the closing of the operations of the late 
United States Bank, the greatest difference of exchange charged on inland 
bills discounted by the Branch in New York, was J per cent. The ex- 
change on places north and east of the District of Columbia, inclusive, was 
at par. On New Orleans, Mobile, and seaports in North and South Caro- 
lina, I to J per cent. On other places, varying only from \ to ^ per cent. 

The following are rates of exchange quoted at New York, 5th Febru- 
ary, 1842: 

Bills on Philadelphia, 6 and 6i dis. 

Bills on Baltimore, . 3| and 

Bills on Richmond, 8-J and 

Bills on North Carolina, 5 

Bills on Charleston, 1 

Bills on Savannah, 

Bills on Augusta, 4 

Bills on Columbus, 16 and 17 dis. 

Bills on Macon, 13 and 14 dis. 

Bills on Mobile, 14 andH^dis. 

Bills on New Orleans, 6^ and 6f dis. 

Bills on Louisville, 11 and 12 dis. 

Bills on Nashville, 15 and 18 dis. 

Bills on Natchez, 25 and 30 dis. 

Bills on St. Louis, 14 and 15 dis. 

Bills on Cincinnati, 13J and 14 dis. 

Bills on Michigan, 9 and 10 dis. 

The following are the different rates of discount on bank bills : 
On bills of good Banks in the State, \ to 1^ per cent. ; on bills of 
doubtful Banks, 20, 25, 37, 40, and 50, per "cent. On bills of Banks in 
New Jersey, from i to 7 per cent. Pennsylvania, 7 to 10 per cent. 
Delaware, 8 to 10. Maryland, 5. District of Columbia, 5. Virginia, 
8. North Carolina, 6. South Carolina, 3 to 4J. Georgia, 10. Alabama. 
20. Louisiana, 10 to 25. Kentucky, 12. Ohio, 20. Indiana, 17. Illi- 
nois, 20 to 25. 




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Section 1. Use and Importance of Money Capital, . . 5 

Sect. 2. Discrimination to be made between real and fictitious capital, 8 
Sect. 3. Utility of Banks in collecting and bringing into use real capital, 
by their Stocks, their Deposits, and their Circulation, . . 12 

Sect. 4. Tendency of Banking operations to expansions, and to the cre- 
ation of fictitious capital, . ..... 18 

Sect. 5. Operation of Bank expansion upon the currency, . 23 

Sect. 6. Effects of a depreciation of the currency, . . 24 


Sect. 1. Advantages of a National Ipank, .... 31 

Sect. 2. Its operation upon the ^jftcal Banjos, ... 33 

Sect. 3. Operation of a National 1 Barvk upon ff^c, domestic exchanges, 37 
Sect. 4. Operation of a National Bank as a*Fiscal Agent, . 41 

Sect. 5. Operation of a National Ba l nk in bringing forward a supply of 

real capital. . . . - ' ; . . ! j 45 

Sect. 6. Operation of a National Bank in meeting the constitutional 

requisitions, &c. . 49 


Sect. 1. Parties having an interest in opposition to all Banks, or any 
new Bank. . . . . . . -...-.' ' : ' 54 

Sect. 2. Interests opposed to a National Ifenk-^TSe\case of rich men, 
and money dealers. . . . V ' '*< * ' '56 

Sect. 3. Case of sellers of foreign exchange. . " . . 58 

Sect. 4. Interests of State or Local Banks, in opposition to a National 
Bank ....;... 61 

Sect. 5. Objection arising from a suppospd hostility of the people to a 
National Bank, and to all Banks. . .... 67 

Sect. 6. Objection arising from the management of the late United 
States Bank Stock speculation Fluctuations in trade Expansion and 
reaction. .......... 80 

Sect. 7. The United States Bank of Pennsylvania. . . 88 

Sect. 8. Other objections ! Want of suitable conductors Banks regu- 
lating themselves Corrupt influence. ..... 94 

CONCLUSION. ......... 98 

Appendix 201 





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LD 21-100m-9,'47(A5702sl6)476 

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