Martin Van Buren

by Edward Morse Shepard

Roads, canals, river improvements, preceded, attended, followed these sudden settlements, this vast and jubilant movement of population. There was an extraordinary growth of "internal improvements." In his message of 1831, Jackson rejoiced at the high wages earned by laborers in the construction of these works, which he truly said were "extending with unprecedented rapidity." The constitutional power of the federal government to promote the improvements within the States became a serious question, because the improvements proposed were upon so vast a scale. No single interest had for fifteen years before 1837 held so large a part of American attention as did the making of canals and roads. The debates of Congress and legislatures, the messages of presidents and governors, were full of it. If the Erie Canal, finished in 1825, had rendered vast natural resources available, and had made its chief builder famous, why should not like schemes prosper further west? The success of railroads was already established; and there was indefinite promise in the extensions of them already planned. In 1830 twenty-three miles had been constructed; in 1831 ninety-four miles; and in 1836 the total construction had risen to 1273 miles.

The Americans were then a far more homogeneous people than they are to-day. The great Irish, German, and Scandinavian immigrations had not taken place. Our race diversities were, with exceptions, unimportant in extent or lost in the lapse of time, the diversities merely of British descendants. Nor were there the extremes of fortune or the diversities of occupation which have come with the growth of cities and manufacturing interests. The United States were still a nation of farmers. The compensations and balances, which in the varying habits and prejudices of a more varied population tend to restrain and neutralize vagaries, did not exist. One sentiment seized the whole nation far more readily than could happen in the complexity of our modern population and the diversity and rivalry of its strains. Not only did this homogeneity make Americans open to single impulses; but there was little essential difference of environment. They all, since the later days of Monroe's presidency, had lived in the atmosphere of official delight and congratulation over the past, and of unrestrained promise for the future. All, whether in the grain fields at the North or the cotton fields at the South, had behind them the Atlantic with traditions or experiences of poverty and oppression beyond it. Every American had, in his own latitude, since the ampler opening of roads and waterways, and the peaceful conquest of the Appalachian mountain ranges, seen to the west of him fertility and promise and performance. And the fertility and promise had, since the second English war, been no longer in a land of hardship and adventure remote and almost foreign to the seaboard. Every American under Jackson's administration had before him, as the one universal experience of those who had taken lands at the West, an enormous and certain increase of value, full of enchantment to those lately tilling the flinty soil of New England or the overused fields of the South. If new lands at the West could be made accessible by internal improvements, the succession of seed time and harvest had for a dozen years seemed no more certain than that the value of those lands would at once increase prodigiously. So the American people with one consent gave themselves to an amazing extravagance of land speculation. The Eden which Martin Chuzzlewit saw in later malarial decay was to be found in the new country on almost every stream to the east of the Mississippi and on many streams west of it, where flatboats could be floated. Frauds there doubtless were; but they were incidental to the honest delusion of intelligent men inspired by the most extraordinary growth the world had seen. The often quoted illustration of Mobile, the valuation of whose real estate rose from $1,294,810 in 1831 to $27,482,961 in 1837, to sink again in 1846 to $8,638,250, not unfairly tells the story. In Pensacola, lots which to-day are worth $50 each were sold for as much as lots on Fifth Avenue in New York, which to-day are worth $100,000 apiece. Real estate in the latter city was assessed in 1836 at more than it was in the greatly larger and richer city of fifteen years later. From 1830 to 1837 the steamboat tonnage on the Western rivers rose from 63,053 to 253,661. From 1833 to 1837 the cotton crop of the newer slave States, Tennessee, Alabama, Mississippi, Louisiana, Arkansas and Florida, increased from 536,450 to 916,960 bales, while the price with fluctuations rose from ten to twenty cents a pound. Foreign capital naturally enough came to share in the splendid money-making. From 1821 to 1833 the annual import of specie from England had averaged about $100,000, in the last year being only $31,903; but in 1834 it became $5,716,253, in 1835 $914,958, and in 1836 $2,322,920, the entire export to England of specie for all these three years being but $51,807, while the average export from 1822 to 1830 had been about $400,000; and its amount in 1831 had been $2,089,766, and in 1832 $1,730,571. From 1830 to 1837, both years inclusive, although the imports from all countries of general merchandise exceeded the exports by $140,700,000, there was no counter movement of specie. The imports of specie from all countries during these years exceeded the exports by the comparatively enormous sum of $44,700,000. The foreigners therefore took pay for their goods, not only in our raw materials, but also in our investments or rather our speculations, and sent these vast quantities of moneys besides. So our good fortune fired the imaginations of even the dull Europeans. They helped to feed and clothe us that we might experiment with Aladdin's lamp.

The price of public lands was fixed by law at $1.25 an acre; and they were open to any purchaser, without the wholesome limits of acreage and the restraint to actual settlers which were afterwards established. Here then was a commodity whose price to wholesale purchasers did not rise, and the very commodity by which so many fortunes had been made. In public lands, therefore, the fury of money-getting, the boastful confidence in the future of the country, reached their climax. From 1820 to 1829 the annual sales had averaged less than $1,300,000, in 1829 being $1,517,175. But in 1830 they exceeded $2,300,000, in 1831 $3,200,000, in 1832 $2,600,000, in 1833 $3,900,000, and in 1834 $4,800,000. In 1835 they suddenly mounted to $14,757,600, and in 1836 to $24,877,179. In his messages of 1829 and 1830 Jackson not unreasonably treated the moderate increase in the sales as a proof of increasing prosperity. In 1831 his congratulations were hushed; but in 1835 he again fancied, even in the abnormal sales of that year, only an ampler proof of ampler prosperity. In 1836 he at last saw that tremendous speculation was the true significance of the enormous increase. Prices of course went up. Everybody thought himself richer and his labor worth more. A week after Van Buren's inauguration a meeting was held in the City Hall Park in New York to protest against high rents and the high prices of provisions; and with much discernment the cry went up, "No rag money; give us gold and silver!"

There is no longer dispute that the prostration of business in 1837, and for several years afterward, was the perfectly natural result of the speculation which had gone before. The absurd denunciations of Van Buren by the most eminent of the Whigs for not ending the crisis by governmental interference are no longer respected. But it is still fancied that the speculation itself was caused by one financial blunder, and the crisis immediately occasioned by another financial blunder, of Jackson. It is not improbable that the deposits of treasury moneys in fifty state banks[12] instead of in the United States Bank and its twenty and more branches, which began in the fall of 1833, aided the tendency to speculation. But this aid was at the most a slight matter. The impression has been sedulously created that these state banks, the "pet banks," were doubtful institutions. There seems little reason to doubt that in general they were perfectly sound and reputable institutions, with which the government moneys would be quite as safe as with the United States Bank. It is clear that if the latter Bank were not to be rechartered, the deposits should, without regard to the accusations of political meddling brought against it, have been removed some time in advance of its death in March, 1836. At best it is matter of doubtful speculation whether the United States Bank under Biddle's direction would, in 1834, 1835, and 1836, while the government deposits were enormously increasing, have behaved with much greater prudence and foresight than did the state deposit banks. So far as actual experience helps us, the doubt might well be solved in the negative. The United States Bank, when its federal charter lapsed, obtained a charter from Pennsylvania, continuing under the same management; and is said, and possibly with truth, to have entered upon its new career with a great surplus. But it proved no stronger than the state banks in 1837; it obstructed resumption in 1838; it suspended again in 1839, while the Eastern banks stood firm; and in 1841 it went to pieces in disgraceful and complete disaster.

The enormous extension of bank credits during the three years before the break-down in 1837 was rather the symptom than the cause of the disease. The fever of speculation was in the veins of the community before "kiting" began. Bank officers dwelt in the same atmosphere as did other Americans, and their sanguine extravagance in turn stimulated the universal temper of speculation.

When the United States Bank lost the government deposits, late in 1833, they amounted to a little less than $10,000,000. On January 1, 1835, more than a year after the state banks took the deposits, they had increased to a little more than $10,000,000. But the public debt being then paid and the outgo of money thus checked, the deposits had by January 1, 1836, reached $25,000,000, and by June 1, 1836, $41,500,000. This enormous advance represented the sudden increase in the sales of public lands, which were paid for in bank paper, which in turn formed the bulk of the government deposits. The deposits were with only a small part of the six hundred and more state banks then in existence. But the increase in the sales of public lands was the result of all the organic causes and of all the long train of events which had seated the fever of speculation so profoundly in the American character of the day. To those causes and events must ultimately be ascribed the extension of bank credits so far as it immediately arose out of the increase of government deposits. Nor is there any sufficient reason to suppose that if the deposits, instead of being in fifty state banks, had remained in the United States Bank and its branches, the tendency to speculation would have been less. The influences which surrounded that Bank were the very influences most completely subject to the popular mania.

But the increase of government deposits was only fuel added to the flames. The craze for banks and credits was unbounded before the removal of the deposits had taken place, and before their great increase could have had serious effect. Between 1830 and January 1, 1834, the banking capital of the United States had risen from $61,000,000 to about $200,000,000; the loans and discounts of the banks from $200,000,000 to $324,000,000; and their note circulation from $61,000,000 to $95,000,000. The increase from January 1, 1834, to January 1, 1836, was even more rapid, the banking capital advancing in the two years to $251,000,000, the loans and discounts to $457,000,000, and the note circulation to $140,000,000. But there was certainty of disaster in the abnormal growth from 1830 to 1834. The insanity of speculation was in ample though unobserved control of the country while Nicholas Biddle still controlled the deposits, and was certain to reach a climax whether they stayed with him or went elsewhere.

It is difficult rightly to apportion among the statesmen and politicians of the time so much of blame for the mania of speculation as must go to that body of men. They had all drunk in the national intoxication over American success and growth. But if we pass from the greater and deeper causes to the lesser though more obvious ones, it is impossible not to visit the greater measure of blame upon the statesmen who resisted reduction of taxation, which would have left money in the pockets of those who earned it, and not collected it in one great bank with many branches or in fifty lesser banks; upon the statesmen who insisted that the government ought to aid commercial ventures by encouraging the loans to traders of its own moneys held in the deposit banks; upon the statesmen who promoted the dangerous scheme of distributing the surplus among the States instead of abolishing the surplus. As the condemnation of public men in the wrong must be proportioned somewhat to the distinction of their positions and the greatness of their natural gifts, this larger share of blame must go chiefly to Daniel Webster and Henry Clay. At the head of their associates, they had resisted the reduction of taxation. In his speech on the tariff bill of 1832 Clay said, with the exuberance so delightful to minds of easy discipline, that our resources should "not be hoarded and hugged with a miser's embrace, but liberally used." They insisted upon freely lending the public moneys. In his speech on the distribution of the surplus, Webster urged that the number of the deposit banks "be so far increased that each may regard that portion of the public treasure which it may receive as an increase of its effective deposits, to be used, like other moneys in deposit, as a basis of discount, to a just and proper extent." The public money was locked up, he declared, instead of aiding the general business of the country. Nor after this was he ashamed in 1838 to condemn Jackson's secretary of the treasury for advising the new deposit banks, as he had himself thus advised them, "to afford increased facilities to commerce." If, indeed, Congress would not take steps to keep a government surplus out of the banks and in the pockets of producers, the secretary ought not to have been harshly judged for advising that the money go out into commerce rather than lie in bank vaults.

The distribution of the surplus among the States by the law of 1836 was the last and in some respects the worst of the measures which aided and exaggerated the tendency to speculation. By this bill, all the money above $5,000,000 in the treasury on January 1, 1837, was to be "deposited" with the States in four quarterly installments commencing on that day. According to the law the "deposit" was but a loan to the States; but, as Clay declared, not "a single member of either House imagined that a dollar would ever be recalled." It was in truth a mere gift. Clay's triumphant ridicule of the opposition to this measure has already been mentioned. Webster in sounding periods declared his "deep and earnest conviction" of the propriety of the stupendous folly. He did not, indeed, defend the general system of making the federal government a tax-gatherer for the States. But this one distribution would, he said in his speech of May 31, 1836, "remove that severe and almost unparalleled pressure for money which is now distressing and breaking down the industry, the enterprise, and even the courage of the commercial community." The Whig press declared that a congressman who could for mere party reasons vote against a measure which would bring so much money into his State, must be "far gone in political hardihood as well as depravity;" and that "to the Republican-Whig party alone are the States indebted for the benefits arising from the distribution." William H. Seward, two years before and two years later the Whig candidate for governor of New York, said the proposal was "noble and just." The measure passed the Senate with six Democratic votes against it, among them the vote of Silas Wright, then probably closer than any other senator to Van Buren. Jackson yielded to the bill what in his message in December of the same year he called "a reluctant approval." He then gave at length very clear reasons for his reluctance, but none for his approval. He declared that "improvident expenditure of money is the parent of profligacy," and that no intelligent and virtuous community would consent to raise a surplus for the mere purpose of dividing it. In his first message, indeed, Jackson had called the distribution among the States "the most safe, just, and federal disposition" of the surplus. But his views upon this, as upon other subjects, had changed during the composition of the Democratic creed which went on during the early years of his administration. His second message rehearsed at length the objections to the distribution, though affecting to meet them. In his third message he recommended the abolition of unnecessary taxation, not the distribution of its proceeds; and in 1832 he made his explicit declaration that duties should be "reduced to the revenue standard." Benton says it was understood that in 1836 some of Van Buren's friends urged Jackson to approve the bill, lest a veto of so popular a measure might bring a Democratic defeat. There must have been some reason unrelated to the merit of the measure. But whatever the opinions of Van Buren's friends, he took care before the election to make known unequivocally, in the Sherrod Williams letter already quoted, his dislike of this piece of demagogy. From the passage of the deposit bill in June, 1836, until the crash in 1837, this superb donation of thirty-seven millions was before the enraptured and deluded vision of the country. Over nine millions a quarter to be poured into "improvements" or loaned to the needy,—what a delightful prospect to citizens harassed by the restraints of prudent, fruitful industry! The lesson is striking and wholesome, and ought not to be forgotten, that it was when the land was in the very midst of these largesses that the universal bankruptcy set in.

During 1835 and 1836 there were omens of the coming storm. Some perceived the rabid character of the speculative fever. William L. Marcy, governor of New York, in his message of January, 1836, answering the dipsomaniac cry for more banks, declared that an unregulated spirit of speculation had taken capital out of the State; but that the amount so transferred bore no comparison to the enormous speculations in stocks and in real property within the State. Lands near the cities and villages of the State had risen several hundred per cent. in value, and were sold, not to be occupied by the buyers, but to be sold again at higher prices. The passion for speculation prevailed to an extent before unknown, not only among capitalists, but among merchants, who abstracted capital from their business for land and stock speculations and then resorted to the banks. The warning was treated contemptuously; but before the year was out the federal administration also became anxious, and the increase in land sales no longer signified to Jackson an increasing prosperity. The master hand which drew the economic disquisition in his message of 1836 pointed to these sales as the effects of the extension of bank credit and of the over-issue of bank paper. The banks, it was declared, had lent their notes as "mere instruments to transfer to speculators the most valuable public land, and pay the government by a credit on the books of the banks." Each speculation had furnished means for another. No sooner had one purchaser paid his debt in the notes than they were lent to another for a like purpose. The banks had extended their business and their issues so largely as to alarm considerate men. The spirit of expansion and speculation had not been confined to deposit banks, but had pervaded the whole multitude of banks throughout the Union, and had given rise to new institutions to aggravate the evil. So Jackson proceeded with his sound defense of the famous specie circular, long and even still denounced as the causa causans of the crisis of 1837.