“This is a dashing proposition,” he wrote to Monroe;[361] “but if Congress pass it, I shall consider it sufficient evidence that their constituents generally can pay the tax. No man has greater confidence than I have in the spirit of the people to a rational extent. Whatever they can, they will. But without either market or medium, I know not how it is to be done. All markets abroad and all at home are shut to us, so that we have been feeding our horses on wheat. Before the day of collection, bank-notes will be but as oak-leaves; and of specie there is not within all the United States one half of the proposed amount of the taxes.”
This was the situation of the Virginia scheme when Dallas took the matter in hand. Immediately after entering into office, Dallas wrote to Eppes an official letter, dated October 17, expressing views wholly at variance with the Virginia plan.
“Under favorable circumstances and to a limited extent,” he said,[362] “an emission of Treasury notes would probably afford relief; but Treasury notes are an expensive and precarious substitute either for coin or for bank-notes, charged as they are with a growing interest, productive of no countervailing profit or emolument, and exposed to every breath of popular prejudice or alarm. The establishment of a national institution operating upon credit combined with capital, and regulated by prudence and good faith, is after all the only efficient remedy for the disordered condition of our circulating medium. While accomplishing that object, too, there will be found under the auspices of such an institution a safe depository for the public treasure and a constant auxiliary to the public credit. But whether the issues of a paper currency proceed from the national Treasury or from a national Bank, the acceptance of the paper in a course of payments and receipts must be forever optional with the citizens. The extremity of that day cannot be anticipated when any honest and enlightened statesman will again venture upon the desperate expedient of a tender-law.”
Without a tender-law the Virginia scheme would hardly answer the purposes required, since the government must restrain the issue of paper within a limit too narrow for usefulness. Dallas did not press this point, but developed his own scheme, which required, like that of Eppes, a duplication of taxes to produce twenty-one million dollars, and the creation of a national Bank with a capital of fifty million dollars.
Either Eppes’s or Dallas’s plan might answer the immediate object of providing a currency, and both required the exercise of implied powers by Congress. Apparently Congress had only to choose, but in truth choice was most difficult. The House readily adopted Dallas’s recommendation in principle, and voted, October 24, by sixty-six to forty, that it was expedient to establish a national Bank; but the problem of establishing a specie-paying bank without specie passed its powers. Dallas abandoned the attempt at the outset. He proposed a bank of fifty millions capital, of which forty-four millions might be subscribed in government bonds and Treasury notes, and six millions in coin. The bank was at once to lend to government thirty millions,—of course in bank-notes,—and no one denied that an immediate suspension of specie payments must follow such an issue. To any bank, strong or weak, the old Virginia influence represented by Eppes was hostile; and to a bank insolvent from the start the Federalists also were opposed.
When the bill, reported November 7, was printed, it was found to contain a provision authorizing the suspension of specie payments at the President’s discretion. The discussion began November 14, and every successive day revealed objections and increased the opposition. Calhoun complicated the subject still further by bringing forward, November 16, a plan of his own, requiring the capital to consist “one tenth in specie, and the remainder in specie or in Treasury notes to be hereafter issued,” and taking away all government control. Ingham of Pennsylvania, representing Dallas, combated Calhoun with force, but could not make his own measure agreeable to the House. His phrase in regard to the suspension of specie payments was significant. Congress, he said, would be to blame for “frantic enthusiasm” if it did not provide for the case. “It may happen, and probably will happen, that their specie payments cannot be continued, and what will then be the situation of the bank? Failing to fulfil the purposes designed, its credit is blighted, its operations are stopped, and its charter violated; and if this should take place before your Treasury notes are sold, the government will scarce obtain a moment’s relief.” That the new bank could not pay specie was obvious. The Bank of England itself could not pay specie, and had not attempted to do so for nearly twenty years.
The House in committee adopted Calhoun’s amendment by a majority of about sixty, in spite of Ingham’s opposition; and thus substituted for Dallas’s scheme a large private bank, over which the government was to exercise no control, with a capital of fifty millions, nine tenths of which were to be Treasury notes. The House then discovered so many unforeseen difficulties, that November 25 it recommitted the bill to a select committee, of which Lowndes, Calhoun, Ingham, Forsyth, and two Federalists were members.
Dallas was obliged openly to enter the lists against Calhoun, and wrote to the committee a letter, dated November 27,[363] sounding like a defiance: “The dividend on the funded debt has not been punctually paid; a large amount of Treasury notes has already been dishonored; and the hope of preventing further injury and reproach in transacting business with the Treasury is too visionary to afford a moment’s consolation.” Calhoun’s scheme, he plainly intimated, was impracticable and mischievous.
The next day, November 28, Lowndes brought back Calhoun’s bill to the House, together with Dallas’s letter, and told the House that the committee could come to no agreement. Upon this admission of helplessness, Hanson addressed the House in a speech which seemed to carry Federalist exultation to the extremest point. Protesting his anxiety to defend the country, Hanson uttered a cry of triumph over the destruction of the government:—
“Not only had government bills been dishonored and the interest of the public debt remained unpaid, but ... so completely empty was the Treasury and destitute of credit, that funds could not be obtained to defray the current ordinary expenses of the different Departments. Disgraceful, humiliating as the fact was, it ought not to be concealed from the nation, and he felt it his duty to state to the House that the Department of State was so bare of money as to be unable to pay even its stationery bill. The government was subsisting upon the drainings of unchartered banks in the District, which felt themselves compelled to contribute their means lest the rod in terrorem which was held over them should be applied, and an Act of incorporation refused.”