The close of the war found the country with a badly disordered currency and with a bankrupt treasury. Nowhere were the remedial efforts of Congress needed more. The condition of the currency was due, in part at least, to the failure of Congress in 1811 to perceive the regulative influence of a national bank. By refusing to recharter the United States Bank, Congress not only deprived the Treasury of an exceedingly valuable fiscal agent during the war, but also threw the door wide open to indiscriminate and unregulated state banking. Between 1811 and 1816 the number of these state institutions increased from eighty-eight to two hundred and forty-six, all of which exercised the right of issuing notes with little or no restriction. Inflation followed inevitably. During the blockade the banks of the Middle and Southern States suffered great distress by the constant drain of specie to New England and abroad. After the capture of Washington, practically all banks outside of New England were forced to suspend specie payments. The country experienced once more all the evils of a depreciated currency. Southern bank notes were refused for deposit in Philadelphia banks. Notes of these institutions in Philadelphia, in turn, were subject to a discount of twenty-four per cent in Boston. Uncertainty and distrust demoralized financial operations everywhere.
Wiser by the experience of five years, Congress was now disposed to establish another national bank. A first bill, however, fell short of the President's desires and was vetoed. A second bill became law on April 10, 1816. The provisions of this Bank of the United States differed in several particulars from that chartered in 1790. Its capital was three and one half times as large. One fifth of the total capital of $35,000,000 was to be subscribed by the Government, and the remainder by individuals. Five of the twenty-five directors were to be appointed by the President of the United States. The funds of the Government were to be deposited in the Bank unless the Secretary of the Treasury should otherwise direct, laying his reasons for any such change before Congress. In return for the privileges granted in the charter, the Bank was required to transfer the government funds from place to place without charge, and to pay $1,500,000 to the Government. On its side the Government agreed not to charter any other bank except in the District of Columbia. The circulation of the Bank was limited to the amount of its capital. Its notes were to be payable on demand in specie and to be receivable in all payments to the Government.
Such an institution gave promise of serving the Government as a sound fiscal agent and of assisting materially in the restoration of the currency to a specie basis. The stock was subscribed promptly by 31,334 individuals, all but three thousand of whom resided in the Middle States. New England was still reluctant to support the plans of Mr. Madison; the South had other uses for its capital. To facilitate the resumption of specie payments, Congress passed a joint resolution, that after February 20 of the following year (1817), all dues to the Government should be paid in specie, treasury notes, national bank notes, or notes of banks payable in the "said currency of the United States." This was strong medicine for the state banks. Unwilling or unable to contract their circulation and to call in their loans, the banks of the Middle States asked to have the date of resumption deferred, on the ostensible ground that the new bank could not be organized in time to assist them. The energetic Secretary of the Treasury disposed of this plea by putting the Bank in operation in January, 1817. On the date set by Congress the banks very generally resumed specie payments.
The propulsive force given to the Government by the war seemed likely to continue. The task of the National Government no longer seemed merely negative,—to "restrain men from injuring one another," in the Jeffersonian phrase,—but positive and constructive. Even Madison, in his annual message of 1815, recommended liberal provision for defense, more military academies, an improved and enlarged navy, protection to manufactures, new national roads and canals, and a national university. He gave his support to Monroe's proposal to fix the peace establishment at twenty thousand men; and he experienced the unique sensation of finding himself in advance of his party, which finally agreed upon an army of ten thousand men. Still more striking evidence of the change which had passed over the party of Jefferson was its willingness to retain the entire naval establishment and to appropriate $4,000,000 for frigates and ships-of-the-line. Clay and Calhoun, speaking for the younger Republicans, agreed that the greatest danger of the future lay in weak government. They were not in the least intimidated by the addition of $80,000,000 to the national debt as the result of war. That sum represented to their minds simply the price, none too large, of commercial and industrial independence.
These young aggressive spirits seemed at times quite indifferent to nice questions of constitutional law. Calhoun dismissed constitutional objections to a national bank with a wave of the hand: he thought discussion of such abstract themes "a useless consumption of time." On introducing his bill for internal improvements, in December, 1816, he intimated that he did not propose to indulge in metaphysical subtleties respecting the Constitution. "The instrument was not intended as a thesis for the logician to exercise his ingenuity on; ... it ought to be construed with plain good sense." If Clay exhibited more sensitiveness to constitutional limitations, it was because he had to clear himself from the charge of inconsistency. In supporting the Bank Bill in 1816 he frankly confessed that he had changed his mind on the point of constitutionality. He had believed the incorporation of a bank in 1811 unwarranted by the Constitution; but conditions had changed. What was then neither necessary nor proper was now both necessary and proper. The interpretation of the Constitution must always take existing circumstances into account. If Clay did not add to his reputation as an expounder of the Constitution by this speech, he represented admirably, nevertheless, the changes which circumstances had wrought in the convictions of his associates.
Against these new tendencies John Randolph set himself stark and grim. "The question is," said he, replying to Calhoun's new nationalism, "whether or not we are willing to become one great consolidated nation, or whether we have still respect enough for those old, respectable institutions [the States] to regard their integrity and preservation as a part of our policy." Randolph spoke for a generation which was passing away; but his words touched a responsive chord in the breast of President Madison. On March 3, 1817, as he was about to leave office, he sent to Congress a message vetoing the Internal Improvements Bill and warning his party associates of the danger of latitudinarian views of the Constitution. This message was Madison's farewell address. It was thoroughly characteristic of the man and the statesman.
The relaxing of Republican doctrines, and of party ties generally, divested the presidential election of any real political significance. The Federalists were thoroughly discredited. As a party they made no concerted effort to nominate candidates. Virtually, therefore, the selection of a President rested with the congressional caucus of the Republican party. The choice lay between two members of the President's Cabinet: James Monroe, Secretary of State, and William H. Crawford, Secretary of the Treasury. Governor Tompkins, of New York, was put forward by enthusiastic partisans from that State, but he was not a national figure in any sense and commanded no support outside of his State. Intrigue played a part in this caucus, if contemporary testimony may be believed. Tradition has it that Martin Van Buren and Peter B. Porter prevented their New York delegation from voting for Crawford and thus threw the nomination to Monroe. Governor Tompkins was the choice of the caucus for Vice-President. No one could safely affirm that these nominees were the choice of the rank and file of the party. Here and there public meetings were held to protest against the dictation of the congressional caucus; but no organized opposition developed. The campaign proved to be a tame affair. Nowhere was there a real contest. Only three States, Massachusetts, Connecticut, and Delaware, chose Federalist electors. Not a ripple of excitement stirred the public when announcement was finally made that Monroe had received 183 electoral votes and Rufus King, 34. For the fourth time a Virginian had been raised to the Presidency.
BIBLIOGRAPHICAL NOTE
Of the general histories, only that by McMaster contains any great amount of information bearing on the economic changes wrought by war and the preceding period of commercial restriction. Adams summarizes the economic results of war in a single chapter in the last volume of his work. K. C. Babcock, The Rise of American Nationality (in The American Nation, vol. 13, 1906), attempts the same task. Besides the manuals on economic history which have already been mentioned, there are several excellent volumes dealing with various phases of national life: such as, D. R. Dewey, Financial History of the United States (1903); F. W. Taussig, Tariff History of the United Stales (rev. ed., 1913); R. C. H. Catterall, The Second Bank of the United Stales (1903); J. L. Bishop, History of American Manufactures from 1608-1860 (2 vols., 1861-64); C. W. Wright, Wool-Growing and the Tariff (1910). Among the biographies of statesmen of the new generation, the best are: G. T. Curtis, Life of Daniel Webster (2 vols., 1869); W. W. Story, Life and Letters of Joseph Story (2 vols., 1851); G. Hunt, John C. Calhoun (1908).