The Middle Period, 1817-1858

by John William Burgess

CHAPTER XII.

THE BANK, THE SUB-TREASURY, AND PARTY DEVELOPMENT BETWEEN 1832 AND 1842

[Jackson and the Bank after the Election of 1832]—[The Power of the Secretary of the Treasury over the Government Deposits]—[Removal of McLane and Duane]—[Taney's Report to Congress of December 3rd, 1835]—[Abuses of Power by Jackson and Taney]—[The Senate's Censure of the President and Secretary of the Treasury]—[National Republicans Take the Name of Whigs]—[The Cardinal Doctrine of the Whigs]—[The Change of the Deposits, and the Specie Order of 1836]—[Van Buren's Election and the Panic of "'37"]—[The Sub-Treasury Idea]—[The Establishment of the Sub-Treasury System]—[The Election of 1840]—[Whig Legislative Projects in Regard to the Bank and the Tariff]—[The Party Treason of Tyler and the Whig War upon the President's Veto Power]—[The Whigs Unable to Encounter the Questions of Territorial Extension and Slavery Extension.]

When the violent agitation of the slavery question, in the middle of the fourth decade, came so suddenly upon the nation, it found the great political parties divided upon issues which partook more of the character of economic policies than that of rights, or of governmental forms and powers. It is true that the protective tariff, the Bank, and internal improvements had been denounced by some persons as unconstitutional, but neither party held this view of these subjects at the beginning of the fourth decade of the century. They were regarded by the two great parties from the point of view of economic policy, and were supported or opposed by them on the ground of conduciveness or lack of conduciveness to the public welfare. More exactly, the Bank was the chief political issue between 1832 and 1840. It was in the conflict between Congress and the President in regard to the Bank that the national Republicans took the title of Whigs, anti-prerogative men.

Jackson and the Bank after the election of 1832.

After the election of 1832 upon the Bank issue, President Jackson, naturally for him, regarded himself as the only representative of the present will of the people in the Government. The Congress, at the time of the election, was, as we know, favorable to the Bank. The newly elected members of the House of Representatives would not assemble for a year probably, and the Senate would probably sustain the Bank after that. The President, therefore, resolved to do by edict what Congress would not do by statute—destroy the Bank.

The power of the Secretary of the Treasury over the Government deposits.

The sixteenth section of the Bank Act provided that the funds of the United States should be deposited in the Bank or its branches, unless the Secretary of the Treasury should at any time otherwise order and direct. The Secretary of the Treasury was thus impliedly authorized by Congress to cease depositing these funds in the Bank or its branches at his own discretion, and was made directly responsible to Congress in the exercise of this authority, by the provision that he must report, so soon as possible, to Congress his reasons for making use of the power. The President thus had no direct authority in the matter. He could exercise only an indirect control through his power over the tenure of the Secretary. At this period in the history of the tenure of office in the United States, the power of removal was regarded as a prerogative of the President alone.

Removal of McLane and Duane.

President Jackson was within the letter of his prerogative when, in the spring of 1833, he removed Mr. McLane, and later, Mr. Duane, from the secretaryship of the Treasury. That he did this because of their refusal to be controlled by him in regard to the deposit of the funds of the United States in the Bank and its branches was, legally, no concern of anybody else.

Taney's report to Congress of December 3rd, 1835.

The new Secretary, Mr. Taney, appointed to succeed Mr. Duane, was also acting within the letter of his authority when he ceased to make deposit of the Government funds in the Bank and its branches, and reported his action to Congress at the commencement of the session following the recess of Congress during which he made this change.

Abuses of power by Jackson and Taney.

On the other hand, it was very questionable whether the President was not abusing his power of dismissal from office, in spirit, by requiring the obedience of the Secretary of the Treasury to himself in regard to a subject concerning which Congress had vested discretionary power in the Secretary, and in the use of which power Congress had made the Secretary directly and exclusively responsible to itself. And it was likewise very questionable whether the Secretary was not abusing his authority, in spirit, in ceasing, during a recess of Congress, to deposit the funds of the United States in the Bank and its branches, when, less than a year before this, Congress had made a full investigation of the condition of the Bank and had disapproved, by large majorities in both Houses, of the President's recommendation that the deposits be made elsewhere than in the Bank and its branches.

Secretary Taney, afterward Chief Justice, to whose legal opinions, therefore, great respect must be paid, contended that Congress itself could not have caused the removal of the deposits without violating the contract with the Bank, as expressed in the Bank's charter, and that the Secretary of the Treasury alone was exempted from this obligation by the provisions of the contract. The Secretary alone, he said, could, therefore, act for the welfare of the people in the matter, and by the oath which he had sworn upon the Constitution he must so act. He declared it to be his conviction that the public welfare would suffer by his continuing to deposit the funds of the Government in the Bank and its branches, and that he felt, therefore, in duty bound to make the order discontinuing the same.

The Senate's censure of the President and Secretary of the Treasury.

The Senate, however, took a different view of the subject. It considered the act of the Secretary to have been done under the order of the President, and in condemnatory resolutions held the President responsible therefor. These resolutions of censure connected the Secretary with the President, however, by declaring the reasons offered by the Secretary for the change in regard to the deposits to be "unsatisfactory and insufficient." The President made a vigorous protest against the Senate's resolution charging him with usurpation, and flung the accusation back at the body. He certainly showed that the Senate had no constitutional power to make any such charge against the President; and Senator Benton immediately gave notice that he should move the expunging of the resolutions from the journal at every session of Congress until it should be accomplished.

National Republicans take the name of Whigs.

It was in the midst of this conflict, and in consequence of it, a conflict in principle between the legislative and executive departments of the Government, in regard to the extent of their respective powers, that Mr. James Watson Webb, the editor of the New York Courier and Enquirer, began, about February, 1834, to denominate, in his newspaper articles, the opposition party to the President, led by Mr. Clay, Whigs. This title signified opposition to high executive prerogative, and approval of strong Congressional control over the President. The name was gradually substituted for that of National Republicans, as the different members and factions of the party came together upon the principle involved in the name.

The cardinal doctrine of the Whigs.

It seemed, for the moment, as if the parties had returned to the condition of bands of retainers under the lead of Clay and Jackson respectively, but this was more apparent than real. There was a real and comprehensive question at issue, one of the most fundamental questions of political science, the question of parliamentary government or presidential government in the United States. The triumph of President Jackson in this conflict—for the Bank was not rechartered, the deposits were not restored, and the President was not impeached, but the Senate's resolutions of censure were expunged—settled that question, and preserved the American system of government from further following the tendency which, from the accession of Jefferson to that of Jackson, had been slowly asserting itself, the tendency toward Congressional control over the Administration.

The original character of the Whig party explains many important things in its composition and subsequent history. In the first place, it explains why the party was composed, as to its leading element, of high-toned, courteous gentlemen—the larger part of the aristocracy of the land—since it is the instinct of the aristocracy to control the executive through the legislature. It explains further why the Whig party was unable to cope with the problem of slavery, since its fundamental principle was not a doctrine of rights, but of governmental form. It explains, lastly, why, in the development of the country's history, the defeat of the Whig party was necessary to the very existence of the country, when the great struggle should come, since its principle of Congressional control of the Administration would, if realized, have greatly weakened that executive independence, power, and unity, without which victory could hardly have been won.

The change of the deposits, and the specie order of 1836.

The failure of the Whigs in the campaign of 1836, and their momentary triumph in that of 1840, were experienced under the true issue of the Whig principle. The modification of the tariff by the Act of 1833, and the change of the place of deposit of the funds of the Government, after October 1st, 1833, from the United States Bank and its branches to certain Commonwealth banks, designated by the Secretary of the Treasury, had brought about much business embarrassment, since the one depressed the manufacturing interests, and the other forced the United States Bank and its branches to call in the loans made upon the strength of the Government's deposits. This embarrassment was greatly increased by the issue of the executive order of July 11th, 1836, directing that only specie should be taken at the land offices for public lands. At the moment there was a general speculation in Western lands, and only those banks which held Government deposits could furnish their customers with specie; the others, when called upon for gold and silver in exchange for their notes, were compelled to suspend.

The Congress, disapproving the favoritism shown by the Secretary of the Treasury, and, probably foreseeing that a financial crisis of some sort was impending, had, on June 23rd preceding, passed an Act ordering a more general distribution of the deposits than the Secretary of the Treasury had made. After the specie order, and a little experience with its effect, the demand was raised from every quarter for an immediate execution of the Act of Congress of June 23rd. The Secretary hastened to carry out the provision, with the result of driving those banks into insolvency which had been able to stand, the existing deposit banks, since they had loaned the money of the Government deposited in them, and were compelled to call in these loans in the proportion that they were called upon to give up these deposits, and were left also without the gold and silver of the Government to redeem their own notes. The sudden calling in of the loans also forced a great number of the borrowers into insolvency.

Van Buren's election and the panic of "'37."

Had the full force of the financial distress come in 1836, instead of a year later, it might have turned the election against Jackson's heir, Mr. Van Buren; but as things were, the Van Buren Administration was established, and had had an opportunity to get a little foothold, when the financial panic spread over the land. Mr. Van Buren and his advisers decided very properly not to involve the Government, but to let the people work themselves through the disaster by the natural course of business. This, as is usual in such cases, turned hosts of supporters into opponents.

The Sub-Treasury idea.

The Administration, however, pursued the even tenor of its way, and endeavored to draw the lesson of the experiences with banks as places of deposit for the funds of the Government. In his message of September 4th, 1837, President Van Buren recommended that the Government should cut loose entirely from banks, and should keep its funds in the United States Treasury, and in branches of the Treasury, under the control of the officers of the Treasury. The idea was not original with Mr. Van Buren. Mr. Gordon, of Virginia, had suggested it in the House of Representatives, during the session of 1834-35, and had offered a plan for its realization, in the form of an amendment to the bill, then before the House, for regulating the deposits. Mr. Gordon's amendment was rejected on February 11th, 1835. The significant thing about it was that the plan was then supported by Whigs almost exclusively, only one Democrat voting in favor of it. It is true that only about one-half of the Whigs in the House supported it, and that it could hardly, therefore, be called a Whig party measure in 1835. On the other hand, it was certainly then opposed by the Democratic party.

The establishment of the Sub-Treasury system.

Under these circumstances, it was a courageous thing in Mr. Van Buren to take up the idea anew and recommend it to Congress. Not until the session of 1839-40, however, was Congress brought to approve the plan and pass the law of July 4th, 1840, establishing the Sub-Treasury system for the keeping of the funds of the Government. During the discussion of the bill in Congress, its principle developed into a strict party question, the Democrats supporting it and the Whigs opposing it. The Whigs represented the scheme as an attempt to break down all the banks in the country, to keep the people's money locked up in the vaults of the Treasury, instead of maintaining it in circulation for their benefit, and to make the President the arbiter of the business of the country, and thus develop still further his autocratic power. The Whig protest was a capital piece of demagogism, and it proved immediately and immensely attractive to the people. Before the summer of 1840 wore away it was entirely clear that the people had made up their minds to try a Whig administration, and had arrived at this resolution under the issue of the financial questions.

The election of 1840.

The Whig National Convention had met in December, 1839, and had adopted no platform of principles. It had conciliated the factional differences in the Whig ranks by dropping Clay and nominating General Harrison, the military hero of the party, and the Whigs were now, therefore, free to strike any note in the campaign which would please the popular ear. The victory was a clean sweep, and the Whigs immediately set about the financial legislation, which was, as they thought, to redeem the country.

Whig legislative projects in regard to the Bank and the tariff.

They had attributed the distress in the country chiefly to the failure to re-charter the Bank and to the reduction of the tariff. Consequently, they immediately passed a bill for the incorporation of a bank, when, to their dismay and confusion, Mr. Tyler, elected Vice-President, and, upon the sudden death of Mr. Harrison, successor to the presidential office, vetoed the bill. The leaders of the party in Congress consulted with the President in regard to a bank bill which would be acceptable to him, and drafted one which followed his suggestions in all essential principles, and contained only a few divergent details, put in probably for the purpose of preserving a show of legislative independence, but the President considered these differences essential and vetoed the second bill. The bills for suspending the reductions of the duties met with the same fate, two of them being successively vetoed.

After the Bank vetoes all the members of the Cabinet, except the Secretary of State, Mr. Webster, resigned, and after the tariff vetoes Mr. Webster retired, so soon as the diplomatic negotiations with Great Britain, then in progress, permitted.

The party treason of Tyler and the Whig war upon the President's veto power.

The Whigs regarded Mr. Tyler as a traitor to the party and began a war upon the veto power of the President. They had come back again to their original principle of government—the supremacy of the legislature over the executive.

From this account, it is clearly manifest that the Whig party did not stand upon any fundamental principle which would enable it to meet successfully those questions which, after the final settlement given to the bank and tariff issues by the vetoes of President Tyler, came to the front—the questions of territorial extension and of slavery extension.

The Whigs unable to encounter the questions of territorial extension and slavery extension.

It might be thought, at first view, that the Democratic party of that day was no better prepared than the Whig party to encounter these questions, since it, too, had reached its distinctive position through its attitude in economic issues. But the strength of the Democratic party lay in the South, and the South had a strong interest in territorial extension for the purpose of slavery extension, which, so long as the Southern wing of the Democratic party ruled the party, would furnish a clear and definite aim to the policy of the party, and would, thereby, give it great advantage over the Whigs, whose Northern and Southern contingents were much more evenly balanced, and, therefore, as to these questions, less able, or, rather, entirely unable, to gain a position upon which they might make a common stand. In a word, as to the Whig party, there was, after 1842, nothing to take the place of their overthrown economic policies, while, as to the Democratic party, there was territorial extension for the sake of slavery extension. When these latter questions came to the front, therefore, they were destined, sooner or later, to disrupt the Whig party and destroy it altogether. The whole South would be for territorial extension, chiefly for the sake of slavery extension, and a large party at the North would be for territorial extension per se. The opposition to territorial extension must, therefore, become sectional, and as that opposition came chiefly from the Whig party it was the Whig party which would be degraded from its national character by this question, and then destroyed by it and its attendant question of slavery extension.