BANK OF THE UNITED STATES—ILLEGAL AND VICIOUS CURRENCY.
In his first annual message, in the year 1829, President Jackson, besides calling in question the unconstitutionality and general expediency of the Bank, also stated that it had failed in furnishing a uniform currency. That declaration was greatly contested by the Bank and its advocates, and I felt myself bound to make an occasion to show it to be well founded, and to a greater extent than the President had intimated. It had in fact issued an illegal and vicious kind of paper—authorized it to be issued at all the branches—in the shape of drafts or orders payable in Philadelphia, but voluntarily paid where issued, and at all the branches; and so made into a local currency, and constituting the mass of all its paper seen in circulation; and as the greatest quantity was usually issued at the most remote and inaccessible branches, the payment of the drafts were well protected by distance and difficulty; and being of small denominations, loitered and lingered in the hands of the laboring people until the "wear and tear" became a large item of gain to the Bank, and the difficulty of presenting them at Philadelphia an effectual bar to their payment there. The origin of this kind of currency was thus traced by me: It was invented by a Scotch banker of Aberdeen, who issued notes payable in London, always of small denominations, that nobody should take them up to London for redemption. The Bank of Ireland seeing what a pretty way it was to issue notes which they could not practically be compelled to pay, adopted the same trick. Then the English country bankers followed the example. But their career was short. The British parliament took hold of the fraud, and suppressed it in the three kingdoms. That parliament would tolerate no currency issued at one place, and payable at another.
The mode of proceeding to get at the question of this vicious currency was the same as that pursued to get at the question of the non-renewal of the charter—namely, an application for leave to bring in a joint resolution declaring it to be illegal, and ordering it to be suppressed; and in asking that leave to give the reasons for the motion: which was done, in a speech of which the following are some parts:
"Mr. Benton rose to ask leave to bring in his promised resolution on the state of the currency. He said he had given his notice for the leave he was about to ask, without concerting or consulting with any member of the Senate. The object of his resolution was judicial, not political; and he had treated the senators not as counsellors, but as judges. He had conversed with no one, neither friend nor adversary; not through contempt of counsel, or fear of opposition, but from a just and rigorous regard to decorum and propriety. His own opinion had been made up through the cold, unadulterated process of legal research; and he had done nothing, and would do nothing, to prevent, or hinder, any other senator from making up his opinion in the same way. It was a case in which politics, especially partisan politics, could find no place; and in the progress of which every senator would feel himself retiring into the judicial office—becoming one of the judices selecti—and searching into the stores of his own legal knowledge, for the judgment, and the reasons of the judgment, which he must give in this great cause, in which a nation is the party on one side, and a great moneyed corporation on the other. He [Mr. B.] believed the currency, against which his resolution was directed, to be illegal and dangerous; and so believing, it had long been his determination to bring the question of its legality before the Senate and the people; and that without regard to the powerful resentment, to the effects of which he might be exposing himself. He had adopted the form of a declaratory resolution, because it was intended to declare the true sense of the charter upon a disputed point. He made his resolution joint in its character, that it might have the action of both Houses of Congress; and single in its object, that the main design might not be embarrassed with minor propositions. The form of the resolution gave him a right to state his reasons for asking leave to bring it in; the importance of it required those reasons to be clearly stated. The Senate, also, has its rights and its duties. It is the right of the Senate and House of Representatives, as the founder of the bank corporation, to examine into the regularity of its proceedings, and to take cognizance of the infractions of its charter; and this right has become a duty, since the very tribunal selected by the charter to try these infractions had tried this very question, and that without the formality of a scire facias or the presence of the adverse party, and had given judgment in favor of the corporation; a decision which he [Mr. B.] was compelled, by the strongest convictions of his judgment, to consider both as extrajudicial and erroneous.
"The resolution, continued Mr. B., which I am asking leave to bring in, expresses its own object. It declares against the legality of these orders, AS A CURRENCY. It is the currency which I arraign. I make no inquiry, for I will not embarrass my subject with irrelevant and immaterial inquiries—I make no inquiry into the modes of contract and payment which are permitted, or not permitted, to the Bank of the United States, in the conduct of its private dealings and individual transactions. My business lies with the currency; for, between public currency and private dealings, the charter of the bank has made a distinction, and that founded in the nature of things, as broad as lines can draw, and as clear as words can express. The currency concerns the public; and the soundness of that currency is taken under the particular guardianship of the charter; a special code of law is enacted for it: private dealings concern individuals: and it is for individuals, in making their bargains, to take care of their own interests. The charter of the Bank of the United States has authorized, but not regulated, certain private dealings of the bank; it is full and explicit upon the regulation of currency. Upon this distinction I take my stand. I establish myself upon the broad and clear distinction which reason makes, and the charter sanctions. I arraign the currency! I eschew all inquiry into the modes of making bargains for the sale or purchase of bills of exchange, buying and selling gold or silver bullion, building houses, hiring officers, clerks, and servants, purchasing necessaries, or laying in supplies of fuel and stationery.
"1. I object to it because it authorizes an issue of currency upon construction. The issue of currency, sir, was the great and main business for which the bank was created, and which it is, in the twelfth article, expressly authorized to perform, and I cannot pay so poor a compliment to the understandings of the eminent men who framed that charter, as to suppose that they left the main business of the bank to be found, by construction, in an independent phrase, and that phrase to be found but once in the whole charter. I cannot compliment their understandings with the supposition that, after having authorized and defined a currency, and subjected it to numerous restrictions, they had left open the door to the issue of another sort of currency, upon construction, which should supersede the kind they had prescribed, and be free from every restriction to which the prescribed currency was subject.
"Let us recapitulate. Let us sum up the points of incompatibility between the characteristics of this currency, and the requisites of the charter: let us group and contrast the frightful features of their flagrant illegality. 1. Are they signed by the president of the bank and his principal cashier? They are not! 2. Are they under the corporate seal? Not at all! 3. Are they drawn in the name of the corporation? By no means! 4. Are they subject to the double limitation of time and amount in case of credit? They are not; they may exceed sixty days' time, and be less than one hundred dollars! 5. Are they limited to the minimum size of five dollars? Not at all! 6. Are they subject to the supervision of the Secretary of the Treasury? Not in the least! 7. The prohibition against suspending specie payments? They are not subject to it! 8. The penalty of double interest for delayed payment? Not subject to it! 9. Are they payable where issued? Not at all, neither by their own terms, nor by any law applicable to them! 10. Are they payable at other branches? So far from it, that they were invented to avoid such payment! 11. Are they transferable by delivery? No; by indorsement! 12. Are they receivable in payment of public dues? So far from it, that they are twice excluded from such payments by positive enactments! 13. Are the directors liable for excessive issues? Not at all! 14. Has the holder a right to sue at the branch which issues the order? No, sir, he has a right to go to Philadelphia, and sue the directors there! a right about equivalent to the privilege of going to Mecca to sue the successors of Mahomet for the bones of the prophet! Fourteen points of contrariety and difference. Not a feature of the charter in the faces of these orders. Every mark a contrast; every lineament a contradiction; all announcing, or rather denouncing, to the world, the positive fact of a spurious progeny; the incontestable evidence of an illegitimate and bastard issue.
"I have now, Mr. President, brought this branch bank currency to the test of several provisions in the charter, not all of them, but a few which are vital and decisive. The currency fails at every test; and upon this failure I predicate an argument of its total illegality. Thus far I have spoken upon the charter, and have proved that if this currency can prevail, that instrument, with all its restrictions and limitations, its jealous, prohibitory constitution, and multiplied enactments for the safety of the public, is nothing but a blank piece of paper in the hands of the bank. I will now have recourse to another class of arguments—a class extrinsic to the charter, but close to the subject—indispensable to fair examination, and directly bearing upon the illegal character of this currency.
"1. In the first place, I must insist that these orders cannot possibly serve for currency, because they are subject to the law of indorsable paper. The law which governs all such paper is too universally known to be enlarged upon here. Presentation for acceptance and payment, notice of default in either, prompt return of the dishonored paper; and all this with rigorous punctuality, and a loss of recourse for the slightest delay at any point, are the leading features of this law. Now it is too obvious that no paper subject to the law of indorsement can answer the purposes of circulation. It will die on the hands of the holders while passing from one to another, instead of going to the place of payment. Now it is incontestable that these orders are instruments negotiable by indorsement, and by indorsement alone. Whether issued under the charter, or under the general laws of the land, they are still subject to the law of indorsable paper. They are the same in either case as if drawn by one citizen upon another. And this is a point which I mean to make clear: for many worthy people believe there is some peculiar law for bank paper, which takes it out of the operation of the general laws of the land. Not so the fact. The twelfth fundamental article of the bank constitution declares that the bills or notes to be issued by the bank shall be negotiable in the same manner as if issued by a private person; that is to say, those payable to a named person or his order, by indorsement, in like manner and with the like effect as foreign bills of exchange; and those made payable to bearer shall be negotiable by delivery alone; in the same manner, we may add, as a silver dollar. So much for these orders, if drawn under the charter; if not drawn under it, they are then issued under the general law of the land, or without any law at all. Taken either under the charter or out of it, it comes to the same point, namely, that these orders are subject to the same law as if drawn by one private person upon another. This is enough to fix their character, and to condemn them as a circulating medium; it is enough for the people to know; for every citizen knows enough of law to estimate the legal value of an unaccepted order, drawn upon a man five hundred or one thousand miles off! But it has the word bearer on the back! Yes, sir, and why not on the face as easily as on the back? Our school-time acquaintance, Mr. President, the gentleman from Cork, with his coat buttoned behind, had a sensible, and, I will add, a lawful reason for arraying himself in that grotesque habiliment; but what reason can the bank have for putting bearer on the back of the order, where it has no effect upon its negotiable character, and omitting it on the face, where it would have governed the character, and secured to the holder all the facilities for the prompt and easy recovery of the contents of a paper transferable by mere delivery? The only effect of this preposterous or cunning indorsement must be to bamboozle the ignorant—pardon the low word, sir—to bamboozle the ignorant with the belief that they are handling a currency which may at any time be collected without proof, trouble, or delay; while in reality it is a currency which reserves to the bank all the legal defences which can be set up to prevent the recovery of a parcel of old, unaccepted, unpresented, unauthorized bills of exchange.
"2. I take a second exception to these orders as a currency. It is this, that being once paid, they are done with. A note transferable by delivery, may be reissued, and its payment demanded again, and so on forever. But a bill of exchange, or any paper subject to the same law with a bill of exchange, is incapable of reissue, and is payable but once. The payment once made, extinguishes the debt; the paper which evidenced it is dead in law, and cannot be resuscitated by any act of the parties. That payment can be plead in bar to any future action. This law applies to checks and orders as well as to bills of exchange; it applies to bank checks and orders as well as to those of private persons, and this allegation alone would annihilate every pretension of these branch bank orders to the character of currency.
"The bank went into operation with the beginning of the year 1817; established eighteen branches, half a dozen of which in the South and West; issued its own notes freely, and made large issues of notes payable at all these branches. The course of trade carried the branch notes of the South and West to the Northeast; and nothing in the course of trade brought them back to the West. They were payable in all demands to the federal government; merchants in Philadelphia, New-York, and Boston received them in payment of goods, and gave them—not back again in payment of Southern and Western produce—but to the collectors of the customs. Become the money of the government, the bank had to treat them as cash. The fourteenth section of the charter made them receivable in all payments to the government, and another clause required the bank to transfer the moneys of the government to any point ordered; these two clauses (the transfer clause being harmless without the receiving one contained in the fourteenth section) laid the bank under the obligation to cash all the notes of all the branches wherever presented; for, if she did not do it, she would be ordered to transfer the notes to the place where they were payable, and then to transfer the silver to the place where it was wanted; and both these operations she had to perform at her own expense. The Southern and Western branch notes flowed to the Northeast; the gold and silver of the South and West were ordered to follow them; and, in a little while, the specie of the South and West was transferred to the Northeast; but the notes went faster on horses and in mail stages than the silver could go in wagons; and the parent bank in Philadelphia, and the branches in New-York and Boston, exhausted by the double operation of providing for their own, and for Southern and Western branch notes besides, were on the point of stopping payment at the end of two years. Mr. Cheves then came into the presidency; he stopped the issue of Southern and Western branch paper, and saved the bank from insolvency! Application was then made to Congress to repeal the fourteenth section of the charter, and thus relieve the bank from this obligation to cash its notes every where. Congress refused to do so. Application was made at the same time to repeal a part of the twelfth fundamental article of the constitution of the bank, for the purpose of relieving the president and principal cashier of the parent bank from the labor of signing the five and ten dollar notes. Congress refused that application also. And here every thing rested while Mr. Cheves continued president. The Southern and Western branches ceased to do business as banks; no bank notes or bills were seen but those bearing the signatures of the president and his principal cashier, and none of these payable at Southern and Western branches. The profits of the stockholders became inconsiderable, and the prospect of a renewed charter was lost in the actual view of the inactivity and uselessness of the bank in the South and West. Mr. Cheves retired. He withdrew from an institution he had saved from bankruptcy, but which he could not render useful to the South and West; and then ensued a set of operations for enabling the bank to do the things which Congress had refused to do for it; that is to say, to avoid the operation of the fourteenth section, and so much of the twelfth fundamental article as related to the signature of the notes and bills of the bank. These operations resulted in the invention of the branch bank orders. These orders, now flooding the country, circulating as notes, and considered every where as gold and silver (because they are voluntarily cashed at several branches, and erroneously received at every land office and custom-house), have given to the bank its present apparent prosperity, its temporary popularity, and its delusive cry of a sound and uniform currency. This is my narrative; an appalling one, it must be admitted; but let it stand for nothing if not sustained by the proof.
"I have now established, Mr. President, as I trust and believe, the truth of the first branch of my proposition, namely, that this currency of branch bank orders is unauthorized by the charter, and illegal. I will now say a few words in support of the second branch of the proposition, namely, that this currency ought to be suppressed.
"The mere fact of the illegality, sir, I should hold to be sufficient to justify this suppression. In a country of laws, the laws should be obeyed. No private individual should be allowed to trample them under foot; much less a public man, or public body; least of all, a great moneyed corporation wielding above one hundred millions of dollars per annum, and boldly contending with the federal government for the sceptre of political power—money is power! The Bank of the United States possesses more money than the federal government; and the question of power is now to be decided between them. That question is wrapped up in the case before you. It is a case of clear conviction of a violation of the laws by this great moneyed corporation; and that not of a single statute, and by inadvertence, and in a small matter, which concerns but few, but in one general, sweeping, studied, and systematic infraction of a whole code of laws—of an entire constitution, made for its sole government and restraint—and the pernicious effects of which enter into the revenues of the Union, and extend themselves to every moneyed transaction between man and man. This is the case of violated law which stands before you; and if it goes unpunished, then do I say, the question of political power is decided between the bank and the government. The question of supremacy is at an end. Let there be no more talk of restrictions or limitation in the charter. Grant a new one. Grant it upon the spot. Grant it without words! Grant it in blank! to save the directors from the labor of re-examination! the court from the labor of constructions! and yourselves from the radation of being publicly trampled under foot.
"I do insist, Mr. President, that this currency ought to be suppressed for illegality alone, even if no pernicious consequences could result from its circulation. But pernicious consequences do result. The substituted currency is not the equivalent of the branch bank notes, whose place it has usurped: it is inferior to those notes in vital particulars, and to the manifest danger and loss of the people.
"In the first place, these branch bank orders are not payable in the States in which they are issued. Look at them! they are nominally payable in Philadelphia! Look at the law! It gives the holder no right to demand their contents at the branch bank, until the order has been to Philadelphia, and returned. I lay no stress upon the insidious circumstance that these orders are now paid at the branch where issued, and at other branches. That voluntary, delusive payment may satisfy those who are willing to swallow a gilded hook; it may satisfy those who are willing to hold their property at the will of the bank. For my part, I want law for my rights. I look at the law, to the legal rights of the holder, and say that he has no right to demand payment at the branch which issued the order. The present custom of paying is voluntary, not compulsory; it depends upon the will of the bank, not upon law; and none but tyrants can require, or slaves submit to, a tenure at will. These orders, even admitting them to be legal, are only payable in Philadelphia and to demand payment there, is a delusive and impracticable right. For the body of the citizens cannot go to Philadelphia to get the change for the small orders; merchants will not remit them; they would as soon carry up the fires of hell to Philadelphia; for the bank would consign them to ruin if they did. These orders are for the frontiers; and it is made the interest and the policy of merchants to leave them at home, and take a bill of exchange at a nominal premium. Brokers alone will ever carry them, and that as their own, after buying them out of the hands of the people at a discount fixed by themselves.
"This contrivance, Mr. President, of issuing bank paper at one place, payable at another and a distant place, is not a new thing under the sun; but its success, if it succeeds here, will be a new thing in the history of banking. This contrivance, sir, is of European origin. It began in Scotland some years ago, with a banker in Aberdeen, who issued promissory notes payable in London. Then the Bank of Ireland set her branches in Sligo, Cork, and Belfast, at the same work; and they made their branch notes payable in Dublin. The English country bankers took the hint, and put out their notes payable in London. The mass of these notes were of the smaller denominations, one or two pounds sterling, corresponding with our five and ten dollar orders; such as were handled by the laboring classes, and who could never carry them to London and Dublin to demand their contents. At this point the British Imperial Parliament took cognizance of the matter; treated the issue of such notes as a vicious practice, violative of the very first idea of a sound currency, and particularly dangerous to the laboring classes. The parliament suppressed the practice. This all happened in the year 1826; and now this practice, thus suppressed in England, Scotland, and Ireland, is in full operation in our America! and the directors of the Bank of the United States are celebrated, as the greatest of financiers, for picking up an illegal practice of Scottish origin, and putting it into operation in the United States, and that, too, in the very year in which it was suppressed in Great Britain!"
Leave was not given to introduce the joint resolution. The friends of the bank being a majority in the Senate, refused the motion, but felt themselves bound to make defence for a currency so illegal and vicious. Further discussion was stopped for that time; but afterwards, on the question of the recharter, the illegality of this kind of currency was fully established, and a clause put into the new charter to suppress it. The veto message put an end to the charter, and for the necessity of the remedy in that quarter; but the practice has been taken up by local institutions and private bankers in the States, and become an abuse which requires extirpation.