Commercial distress had now materially abated, although many of its wounds were still deep and unhealed. Before the regular session began in December, substantial progress was made towards specie payments. The price of gold in New York, which had ruled at a premium of eight and seven eighths per cent., had fallen to five. On October 20 the banks of New York, after waiting until Congress rose, to meet the wishes of the United States Bank and its associates in Philadelphia, now invited representatives from all the banks to meet in New York on November 27 to prepare for specie payment. At this meeting the New York banks proposed resumption on March 1, 1838, but they were defeated; and a resolution to resume on July 1 was defeated by the votes of Pennsylvania and all the New England States except Maine (which was divided), together with New Jersey, Delaware, Maryland, South Carolina, and Indiana. Virginia, Ohio, Georgia, North Carolina, Kentucky, and the District of Columbia, with New York, made the minority. An adjournment was taken to the second Wednesday in April, the banks being urged meanwhile to prepare for specie payments.
The fall as well as the summer elections had been most disastrous for the Democrats. New York, which the year before had given Van Buren nearly 30,000 plurality, was now overwhelmingly Whig. The Van Buren party began to be called the Loco-focos, in derision of the fancied extravagance of their financial doctrines. The Loco-foco or Equal Rights party proper was originally a division of the Democrats, strongly anti-monopolist in their opinions, and especially hostile to banks,—not only government banks but all banks,—which enjoyed the privileges then long confirmed by special and exclusive charters. In the fall of 1835 some of the Democratic candidates in New York were especially obnoxious to the anti-monopolists of the party. When the meeting to regularly confirm the nominations made in committee was called at Tammany Hall, the anti-monopolist Democrats sought to capture the meeting by a rush up the main stairs. The regulars, however, showed themselves worthy of their regularity by reaching the room up the back stairs. In a general scrimmage the gas was put out. The anti-monopolists, perhaps used to the devices to prevent meetings which might be hostile, were ready with candles and loco-foco matches. The hall was quickly illuminated; and the anti-monopolists claimed that they had defeated the nominations. The regulars were successful, however, at the election; and they and the Whigs dubbed the anti-monopolists the Loco-foco men. The latter in 1836 organized the Equal Rights party, and declared it an imperative duty of the people "to recur to first principles." Their "declaration of rights" might well have been drawn a few years later by a student of Spencer's "Social Statics." The law, they said, ought to do no more than restrain each man from committing aggressions on the equal rights of other men; they declared "unqualified hostility to bank-notes and paper money as a circulating medium," and to all special grants by the legislature. A great cry was raised against them as dangerous and incendiary fanatics. The Democratic press, except the "Evening Post," edited by William Cullen Bryant, turned violently upon the seceders. There was the same horror of them as the English at almost the very time had of the Chartists, and which in our time is roused by the political movements of Henry George. But with time and familiarity Chartism and Loco-focoism alike lost their horrid aspect. Several of the cardinal propositions of the former have been adopted in acts of Parliament without a shudder. To the animosity of the Loco-focos against special legislation and special privileges Americans probably owe to-day some part of the beneficent movement in many of the States for constitutional requirements that legislatures shall act by general laws.
The Equal Rights party, though casting but a few votes, managed to give the city of New York to the Whigs, a result which convinced the Democrats that, dangerous as they were, they were less dangerous within than without the party. The hatred which Van Buren after his message of September, 1837, received from the banks commended him to the Loco-focos; and in October, 1837, Tammany Hall witnessed their reconciliation with the regular Democrats upon the moderate declaration for equal rights. The Whigs had, indeed, been glad enough to have Loco-foco aid and even open alliance at the polls. But none the less they thought the Democratic welcome back of the seceders an enormity. From this time the Democrats were, it was clear, no better than Loco-focos, and ought to bear the name of those dangerous iconoclasts.
Van Buren met Congress in December, 1837, with still undaunted front. His first general review of the operations of the government was but little longer than his message to the extra session on the single topic of finance. He refused to consider the result of the elections as a popular disapproval of the divorce of bank and state. In only one State, he pointed out, had a federal election been held; and in the other elections, which had been local, he intimated that the fear of a forfeiture of the state-bank charters for their suspension of specie payments had determined the result. He still emphatically opposed the connection between the government and the banks which could offer such strong inducements for political agitation. He blew another blast against the United States Bank, now a Pennsylvania corporation, for continuing to reissue its notes originally made before its federal charter had expired and since returned. He recommended a preëmption law for the benefit of actual settlers on public lands, and a classification of lands under different rates, to encourage the settlement of the poorer lands near the older settlements. There was a conciliatory but firm reference to the dispute with England over the northeastern boundary. He announced his failure to adjust the dispute with Mexico over the claims which had been pressed by Jackson. The Texan cloud which six years later brought Van Buren's defeat was already threatening.
At this session the independent or sub-treasury bill was again introduced, and again a titanic battle was waged in the Senate. In this encounter Clay taunted Calhoun for going over to the enemy; and Calhoun, referring to the Adams-Clay coalition, retorted that Clay had on a memorable occasion gone over, and had not left it to time to disclose his motives. Here it was that, in the decorous fury of the times, both senators stamped accusations with scorn in the dust, and hurled back darts fallen harmless at their feet. The bill passed the Senate by 27 to 25; but Calhoun finally voted against it because there had been stricken out the provision that government dues should be paid in specie. The bill was again defeated in the House by 125 to 111. The latter vote was late in June, 1838. But while Congress refused a law for it, the independent treasury in fact existed. Under the circular issued upon the bank suspension, the collection, keeping, and payment of federal moneys continued to be done by federal officers. The absurdity of the declamation about one's blood curdling at Van Buren's recommendations, about this being the system in vogue where people were ground "to the very dust by the awful despotism of their rulers," was becoming apparent in the easy, natural operation of the system, dictated though it was by necessity rather than law. The Whigs, in the sounding jeremiades of Webster and the perfervid eloquence of Clay, were joined by the Conservatives, former Democrats, with Tallmadge of New York and Rives of Virginia at their head. They had retired into the cave of superior wisdom, of which many men are fond when a popular storm seems rising against their party; they affected oppressive grief at Van Buren's reckless hatred of the popular welfare, and accused him of designing entire destruction of credit in the ordinary transactions of business. This silly charge was continually made, and gained color from the extreme doctrines of the Equal Rights movement and the fixing of the Loco-foco name upon the Democratic party.
The sub-treasury bill was again taken up at the long session of 1839-40 by the Congress elected in 1838. Again the wisdom of separating bank and state, again the wrong of using public moneys to aid private business and speculation, were stated with perfectly clear but uninspiring logic. Again came the antiphonal cry, warm and positive, against the cruelty of withdrawing the government from an affectionate care for the people, and from its duty generously to help every one to earn his living. In and out of Congress it was the debate of the time, and rightly; for it involved a profound and critical issue, which since the foundation of the government has been second in importance only to the questions of slavery and national existence and reconstruction. In 1840 the bill passed the Senate by 24 to 18 and the House by 124 to 107. This chief monument of Van Buren's administration seemed quickly demolished by the triumphant Whigs in 1841, but was finally set up again in 1846 without the aid of its architect. From that time to our own, in war and in peace, the independence of the federal treasury has been a cardinal feature of American finance. Nor was its theory lost even in the system of national banks and public depositories created for the tremendous necessities of the civil war.[15]
By the spring of 1838 business had revived during the year of enforced industry and economy among the people. In January, 1838, the premium on gold at New York sank to three per cent.; and when the bank convention met on the adjourned day in April, the premium was less than one per cent. The United States Bank resisted resumption with great affectation of public spirit, but for selfish reasons soon to be disclosed. The New York banks, with an apology to their associates, resolved to resume by May 10, five days before the date to which the State had legalized the suspension. The convention adopted a resolution for general resumption on January 1, 1839, without precluding earlier resumption by any banks which deemed it proper. In April it was learned that the Bank of England was shipping a million sterling to aid resumption by the banks. On July 10, Governor Ritner of Pennsylvania by proclamation required the banks of his State to resume by August 1. On the 13th of that month the banks of Massachusetts, Connecticut, Rhode Island, Delaware, Maryland, Virginia, Kentucky, Missouri, Ohio, Indiana, and Illinois yielded to the moral coercion of the New York banks, and to the resumption now enforced on the Bank of the United States. By the fall of 1838 resumption was general, although the banks at the Southwest did not follow until midwinter. Confidence was so much restored that "runs" on the banks did not occur. The crisis seemed at an end; and Van Buren not unreasonably fancied that he saw before the country two years of steady and sound return to prosperity. Two such years would, in November, 1840, bring the reward of his sagacity and endurance. But a far deeper draft upon the vitality of the patient had been made than was supposed; and in its last agony, eighteen months later, Biddle's bank helped to blast Van Buren's political ambition.