BANK OF THE UNITED STATES—DELAY IN PAYING THE THREE PER CENTS—COMMITTEE OF INVESTIGATION.
The President in his message had made two recommendations which concerned the bank—one that the seven millions of stock held therein by the United States should be sold; the other that a committee should be appointed to investigate its condition. On the question of referring the different parts of the message to appropriate committees. Mr. Speight, of North Carolina, moved that this latter clause be sent to a select committee to which Mr. Wayne, of Georgia, proposed an amendment, that the committee should have power to bring persons before them, and to examine them on oath, and to call upon the bank and its branches for papers. This motion gave rise to a contest similar to that of the preceding session on the same point, and by the same actors—and with the same result in favor of the bank—the debate being modified by some fresh and material incidents. Mr. Wickliffe, of Kentucky, had previously procured a call to be made on the Secretary of the Treasury for the report which his agent was employed in making upon the condition of the bank; and wished the motion for the committee to be deferred until that report came in. He said:
"He had every confidence, both from his own judgment and from information in his possession, that when the resolution he had offered should receive its answer, and the House should have the report of the agent sent by the Secretary of the Treasury to inquire into the affairs of the bank, with a view to ascertain whether it was a safe depository for the public funds, the answer would be favorable to the bank and to the entire security of the revenue. Mr. W. said he had hoped that the resolution he had offered would have superseded the necessity of another bank discussion in that House, and of the consequences upon the financial and commercial operations of the country, and upon the credit of our currency. He had not understood, from a hasty reading of the report of the Secretary of the Treasury, that that officer had expressed any desire for the appointment of any committee on the subject. The secretary said that he had taken steps to obtain such information as was within his control, but that it was possible he might need further powers hereafter. What had already been the effect throughout the country of the broadside discharged by the message at the bank? Its stock had, on the reception of that message, instantly fallen down to 104 per cent. Connected with this proposition to sell the stock, a loss had already been incurred by the government of half a million of dollars. What further investigations did gentlemen require? What new bill of indictment was to be presented? There was one in the secretary's report, which was also alluded to in the message: it was, that the bank had, by its unwaranted action, prevented the government from redeeming the three per cent. stock at the time it desired. But what was the actual state of the fact? What had the bank done to prevent such redemption? It had done nothing more nor less than what it had been required by the government to do."
The objection to inquiry, made by Mr. Wickliffe, that it depreciated the stock, and made a loss of the difference to its holders, was entirely fallacious, as fluctuations in the price of stocks are greatly under the control of those who gamble in them, and who seize every circumstance, alternately to depress and exalt them; and the fluctuations affect nobody but those who are buyers or sellers. Yet this objection was gravely resorted to every time that any movement was made which affected the bank; and arithmetical calculations were gravely gone into to show, upon each decline of the stock, how much money each stockholder had lost. On this occasion the loss of the United States was set down at half a million of dollars:—which was recovered four days afterwards upon the reading of the report of the treasury agent, favorable to the bank, and which enabled the dealers to put up the shares to 112 again. In the mean time nobody lost any thing but the gamblers; and that was nothing to the public, as the loss of one was the gain of the other: and the thing balanced itself. Holders for investment neither lost, nor gained. For the rest, Mr. Wayne, of Georgia, replied:
"It has been said that nothing was now before the House to make an inquiry into the condition of the bank desirable or necessary. He would refer to the President's message, and to the report of the Secretary of the Treasury, both suggesting an examination, to ascertain if the bank was, or would be in future, a safe depository for the public funds. Mr. W. did not say it was not, but an inquiry into the fact might be very proper notwithstanding; and the President and Secretary, in suggesting it, had imputed no suspicion of the insolvency of the bank. Eventual ability to discharge all of its obligations is not of itself enough to entitle the bank to the confidence of the government. Its management, and the spirit in which it is managed, in direct reference to the government, or to those administering it, may make investigation proper. What was the Executive's complaint against the bank? That it had interfered with the payment of the public debt, and would postpone the payment of five millions of it for a year after the time fixed upon for its redemption, by becoming actually or nominally the possessors of that amount of the three per centum stock, though the charter prohibited it from holding such stock, and from all advantages which might accrue from the purchase of it. True, the bank had disavowed the ownership. But of that sum which had been bought by Baring, Brothers, & Co., under the agreement with the agent of the bank, at ninety-one and a half, and the cost of which had been charged to the bank, who would derive the benefit of the difference between the cost of it and the par value, which the government will pay? Mr. W. knew this gain would be effected by what may be the rate of exchange between the United States and England, but still there would be gain, and who was to receive it? Baring, Brothers, & Co.? No. The bank was, by agreement, charged with the cost of it, in a separate account, on the books of Baring, Brothers, & Co., and it had agreed to pay interest upon the amount, until the stock was redeemed.
"The bank being prohibited to deal in such stock, it would be well to inquire, even under the present arrangements with Baring, Brothers, & Co., whether the charter, in this respect, was substantially complied with. Mr. W. would not now go into the question of the policy of the arrangement by the bank concerning the three per cents. It may eventuate in great public benefit, as regards the commerce of the country; but if it does, it will be no apology for the temerity of an interference with the fixed policy of the government, in regard to the payment of the national debt; a policy, which those who administer the bank knew had been fixed by all who, by law, can have any agency in its payment. Nor can any apology be found for it in the letter of the Secretary of the Treasury of the 19th of July last to Mr. Biddle; for, at Philadelphia, the day before, on the 18th, he employed an agent to go to England, and had given instructions to make an arrangement, by which the payment of the public debt was to be postponed until October, 1833."
Mr. Watmough, representative from the district in which the bank was situated, disclaimed any intention to thwart any course which the House was disposed to take; but said that the charges against the bank had painfully affected the feelings of honorable men connected with the corporation, and injured its character; and deprecated the appointment of a select committee; and proposed the Committee of Ways and Means—the same which had twice reported in favor of the bank:—and he had no objection that this committee should be clothed with all the powers proposed by Mr. Wayne to be conferred upon the select committee. In this state of the question the report of the treasury agent came in, and deserves to be remembered in contrast with the actual condition of the bank as afterwards discovered, and as a specimen of the imposing exhibit of its affairs which a moneyed corporation can make when actually insolvent. The report, founded on the statements furnished by the institution itself, presented a superb condition—near eighty millions of assets (to be precise, $79,593,870), to meet all demands against it, amounting to thirty-seven millions and a quarter—leaving forty-two millions and a quarter for the stockholders; of which thirty-five millions would reimburse the stock, and seven and a quarter millions remain for dividend. Mr. Polk stated that this report was a mere compendium of the monthly bank returns, showing nothing which these returns did not show; and especially nothing of the eight millions of unavailable funds which had been ascertained to exist, and which had been accumulating for eighteen years. On the point of the non-payment of the three per cents, he said:
"The Secretary of the Treasury had given public notice that the whole amount of the three per cents would be paid off on the first of July. The bank was apprised of this arrangement, and on its application the treasury department consented to suspend the redemption of one third of this stock until the first of October, the bank paying the interest in the mean while. But, if the condition of the bank was so very prosperous, as has been represented, why did it make so great a sacrifice as to pay interest on that large amount for three months, for the sake of deferring the payment? The Secretary of the Treasury, on the 19th July, determined that two thirds of the stock should be paid off on the first of October; and, on the 18th of July what did the bank do? It dispatched an agent to London, without the knowledge of the treasury, and for what? In effect, to borrow 5,000,000 dollars, for that was the amount of the transaction. From this fact Mr. P. inferred that the bank was unable to go on without the public deposits. They then made a communication to the treasury, stating that the bank would hold up such certificates as it could control, to suit the convenience of the government; but was it on this account that they sent their agent to London? Did the president of the bank himself assign this reason? No; he gave a very different account of the matter; he said that the bank apprehended that the spread of the cholera might produce great distress in the country, and that the bank wished to hold itself in an attitude to meet the public exigencies, and that with this view an agent was sent to make an arrangement with the Barings for withholding three millions of the stock."
The motion of Mr. Watmough to refer the inquiry to the Committee of Ways and Means, was carried; and that committee soon reported: first, on the point of postponing the payment of a part of the three per cents, that the business being now closed by the actual payment of that stock, it no longer presented any important or practicable point of inquiry, and did not call for any action of Congress upon it; and, secondly, on the point of the safety of the public deposits, that there could be no doubt of the entire soundness of the whole bank capital, after meeting all demands upon it, either by its bill holders or the government; and that such was the opinion of the committee, who felt great confidence in the well-known character and intelligence of the directors, whose testimony supported the facts on which the committee's opinion rested. And they concluded with a resolve which they recommended to the adoption of the House, "That the government deposits may, in the opinion of the House, be safely continued in the Bank of the United States." Mr. Polk, one of the committee, dissented from the report, and argued thus against it:
"He hoped that gentlemen who believed the time of the House, at this period of the session, to be necessarily valuable, would not press the consideration of this resolution upon the House at this juncture. During the small remainder of the session, there were several measures of the highest public importance which remained to be acted on. For one, he was extremely anxious that the session should close by 12 o'clock to-night, in order that a sitting upon the Sabbath might be avoided. He would not proceed in expressing his views until he should understand from gentlemen whether they intended to press the House to a vote upon this resolution. [A remark was made by Mr. Ingersoll, which was not heard distinctly by the reporter.] Mr. P. proceeded. As it had been indicated that gentlemen intended to take a vote upon the resolution, he would ask whether it was possible for the members of the House to express their opinions on this subject with an adequate knowledge of the facts. The Committee of Ways and Means had spent nearly the whole session in the examination of one or two points connected with this subject. The range of investigation had been, of necessity, much less extensive than the deep importance of the subject required; but, before any opinion could be properly expressed, it was important that the facts developed by the committee should be understood. There had been no opportunity for this, and there was no necessity for the expression of a premature opinion unless it was considered essential to whitewash the bank. If the friends of the bank deemed it indispensably necessary, in order to sustain the bank, to call for an expression of opinion, where the House had enjoyed no opportunity of examining the testimony and proof upon which alone a correct opinion could be formed, he should be compelled, briefly, to present one or two facts to the House. It had been one of the objects of the Committee of Ways and Means to ascertain the circumstances relative to the postponement of the redemption of the three per cent. stock by the bank. With the mass of other important duties devolving upon the committee, as full an investigation of the condition of the bank as was desirable could not be expected. The committee, therefore, had been obliged to limit their inquiries to this subject of the three per cents; the other subjects of investigation were only incidental. Upon this main subject of inquiry the whole committee, majority as well as minority, were of opinion that the bank had exceeded its legitimate authority, and had taken measures which were in direct violation of its charter. He would read a single sentence from the report of the majority, which conclusively established this position. In the transactions upon this subject, the majority of the committee expressly say, in their report, that 'the bank exceeded its legitimate authority, and that this proceeding had no sufficient warrant in the correspondence of the Secretary of the Treasury.' Could language be more explicit? It was then the unanimous opinion of the committee, upon this main topic of inquiry, that the bank had exceeded its legitimate authority, and that its proceedings relative to the three per cents had no sufficient warrant in the correspondence of the Secretary of the Treasury. The Bank of the United States, it must be remembered, had been made the place of deposit for the public revenues, for the purpose of meeting the expenditures of the government. With the public money in its vaults, it was bound to pay the demands of the government. Among these demands upon the public money in the bank, was that portion of the public debt of which the redemption had been ordered. Had the bank manifested a willingness to pay out the public money in its possession for this object? On examination of the evidence it would be found that, as early as March, 1832, the president of the bank, without the knowledge of the government directors, had instituted a correspondence with certain holders of the public debt, for the purpose of procuring a postponement of its redemption. There was, at that time, no cholera, which could be charged with giving occasion to the correspondence. When public notice had been given by the Secretary of the Treasury of the redemption of the debt, the president of the bank immediately came to Washington, and requested that the redemption might be postponed. And what was the reason then assigned by the president of the bank for this postponement? Why, that the measure would enable the bank to afford the merchants great facilities for the transaction of their business under an extraordinary pressure upon the money market. What was the evidence upon this point? The proof distinctly showed that there was no extraordinary pressure. The monthly statements of the bank established that there was, in fact, a very considerable curtailment of the facilities given to the merchants in the commercial cities.
"The minority of the Committee of Ways and Means had not disputed the ability of the bank to discharge its debts in its own convenient time; but had the bank promptly paid the public money deposited in its vaults when called for? As early as October, 1831, the bank had anticipated that during the course of 1832 it would not be allowed the undisturbed and permanent use of the public deposits. In the circular orders to the several branches which were then issued, the necessity was stated for collecting the means for refunding those deposits from the loans which were then outstanding. Efforts were made by the branches of the West to make collections for that object; but those efforts entirely failed. The debts due upon loans made by the Western branches had not been curtailed. It was found impossible to curtail them. As the list of discounts had gone down, the list of domestic bills of exchange had gone up. The application before alluded to was made in March to Mr. Ludlow, of New-York, who represented about 1,700,000 of the public debt to postpone its redemption. This expedient also failed. Then the president of the bank came to Washington for the purpose of procuring the postponement of the period of redemption, upon the ground that an extraordinary pressure existed, and the public interest would be promoted by enabling the bank to use the public money in affording facilities to the merchants of the commercial cities. And what next? In July, the president of the bank and the exchange committee, without the knowledge of the head of the treasury, or of the board of directors of the bank, instituted a secret mission to England, for the purpose of negotiating in effect a loan of five millions of dollars, for which the bank was to pay interest. The propriety or object of this mission was not laid before the board of directors, and no clue was afforded to the government. Mr. Cadwalader went to England upon this secret mission. On the 1st of October the bank was advised of the arrangement made by Mr. Cadwalader, by which it was agreed, in behalf of the bank, to purchase a part of the debt of the foreign holders, and to defer the redemption of a part. Now, it was well known to every one who had taken the trouble to read the charter of the bank, that it was expressly prohibited from purchasing public stock. On the 15th October it was discovered that Cadwalader had exceeded his instructions. This discovery by the bank took place immediately after the circular letter of Baring, Brothers, & Co., of London, announcing that the arrangement had been published in one of the New-York papers. This circular gave the first information to the government, or to any one in this country, as far as he was advised, excepting the exchange committee of the bank, of the object of Cadwalader's mission. In the limited time which could now be spared for this discussion, it was impossible to go through the particulars of this scheme. It would be seen, on examination of the transaction, that the bank had directly interfered with the redemption of the public debt, for the obvious reason that it was unable to refund the public deposits. The cholera was not the ground of the correspondence with Ludlow. It was not the cholera which brought the president of the bank to Washington, to request the postponement of the redemption of the debt; nor was it the cholera which led to the resolution of the exchange committee of the bank to send Cadwalader to England. The true disorder was, the impossibility in which the bank found itself to concentrate its funds and diminish its loans. It had been stated in the report of the majority of the committee, that the certificates of the greater portion of the three per cents had been surrendered. It had been said that there was now less than a million of this debt outstanding. In point of fact, it would seem, from the correspondence, that between one and two millions of the debts of which the certificates had been surrendered, had been paid by the bank becoming debtor to the foreign holder instead of the government. The directors appear to suppose this has not been the case, but the correspondence shows that the certificates have been sent home under this arrangement. After this brief explanation of the conduct of the bank in relation to the public deposits, he would ask whether it was necessary to sustain the credit of the bank by adopting this resolution."
The vote on the resolution was taken, and resulted in a large majority for it—109 to 46. Those who voted in the negative were: John Anderson of Maine; William G. Angel of New-York; William S. Archer of Virginia; James Bates of Maine; Samuel Beardsley of New-York; John T. Bergen of New-York; Laughlin Bethune of North Carolina; John Blair of Tennessee; Joseph Bouck of New-York; John C. Brodhead of New-York; John Carr of Indiana; Clement C. Clay of Alabama; Henry W. Connor of North Carolina; Charles Dayan of New-York; Thomas Davenport of Virginia; William Fitzgerald of Tennessee; —— Clayton of Georgia; Nathan Gaither of Kentucky; William F. Gordon of Virginia; Thomas H. Hall of North Carolina; Joseph W. Harper of New Hampshire; —— Hawkins; Michael Hoffman of New-York; Henry Horn of Pennsylvania; Henry Hubbard of New Hampshire; Adam King of Pennsylvania; Joseph Lecompte of Kentucky; Chittenden Lyon of Kentucky; Joel K. Mann of Kentucky; Samuel W. Mardis of Alabama; John Y. Mason of Virginia; Jonathan McCarty of Indiana; Thomas R. Mitchell of South Carolina; Job Pierson of New-York; James K. Polk of Tennessee; Edward C. Reed of New-York; Nathan Soule of New-York; Jesse Speight of North Carolina; Jas. Standifer of Tennessee; Francis Thomas of Maryland; Wiley Thompson of Georgia; Daniel Wardwell of New-York; James M. Wayne of Georgia; John W. Weeks of New Hampshire; Campbell P. White of New-York: J. T. H. Worthington of Maryland. And thus the bank not only escaped without censure, but received high commendation; while its conduct in relation to the three per cents placed it unequivocally in the category of an unfaithful and prevaricating agent; and only left open the inquiry whether its conduct was the result of inability to pay the sum required, or a disposition to make something for itself or to favor its debtors—the most innocent of these motives being negatived by the sinister concealment of the whole transaction from the government (after getting delay from it), its concealment from the public, its concealment even from its own board of directors—its entire secrecy from beginning to end—until accidentally discovered through a London letter published in New-York. These are the same three per cents, the redemption of which through an enlargement of the powers of the sinking fund commissioners I had endeavored to effect some years before, when they could have been bought at about sixty-six cents in the dollar, and when my attempt was defeated by the friends of the bank. They were now paid at the rate of one hundred cents to the dollar, losing all the time the interest on the deposits, in bank, and about four millions for the appreciation of the stock. The attempt to get this stock redeemed, or interest on the deposits, was one of my first financial movements after I came into the Senate; and the ease with which the bank defeated me, preventing both the extinction of the debt and the payment of interest on the deposits, convinced me how futile it was to attempt any legislation unfavorable to the bank in a case which concerned itself.