John Lowell declared[15] that “the banks are at their wits’ end to lend their capital, and money is such a drug ... that men against their consciences, their honor, their duty, their professions and promises, are willing to lend it secretly to support the very measures which are intended and calculated for their ruin.” To avoid the temptation of lending money to support Madison’s measures, many investors bought British government bills of exchange at twenty to twenty-two per cent discount. These bills were offered for sale in quantities at Boston; and perhaps the most legitimate reason for their presence there was that they were taken by New England contractors in payment for beef and flour furnished to the British commissariat in Canada.
While New England thus made profits from both sides, and knew not what to do with the specie that flowed into her banks, the rest of the country was already insolvent, and seemed bent on bankruptcy. In March, 1814, the legislature of Pennsylvania passed a bill for the creation of forty-one new banks. March 19 Governor Snyder vetoed it.[16]
“It is a fact well ascertained,” said Governor Snyder, “that immense sums of specie have been withdrawn from the banks in Pennsylvania and certain other States to pay balances for British goods which Eastern mercantile cupidity has smuggled into the United States. The demand for specie has in consequence been and is still so great that the banks in Philadelphia and in some other parts have stopped discounting any new paper. I ask a patriotic legislature, Is this an auspicious era to try so vast an experiment? Shall we indirectly aid our internal and external enemies to destroy our funds and embarrass the government by the creating of forty-one new banks which must have recourse for specie to that already much exhausted source? Is there at this time an intelligent man in Pennsylvania who believes that a bank-note of any description is the representative of specie?”
The Pennsylvania legislature instantly overrode Governor Snyder’s veto and chartered the new banks, which were, according to the governor, insolvent before they had legal existence. In ordinary times such follies punished and corrected themselves in regular course; but in 1814 the follies and illusions of many years concentrated their mischiefs on the national government, which was already unequal to the burden of its own. The war was practically at an end as far as the government conducted it. The army could not show a regiment with ranks more than half full.[17] The first three months of the year produced less than six thousand recruits.[18] The government could defend the frontier only at three or four fortified points. On the ocean, government vessels were scarcely to be seen. The Treasury was as insolvent as the banks, and must soon cease even the pretence of meeting its obligations.
The Secretary of the Treasury, authorized by law to borrow twenty-five millions and needing forty, offered a loan for only ten millions shortly before Congress adjourned. In Boston the government brokers advertised that the names of subscribers should be kept secret,[19] while the Boston “Gazette” of April 14 declared that “any man who lends his money to the government at the present time will forfeit all claim to common honesty and common courtesy among all true friends to the country.” The offers, received May 2, amounted to thirteen millions, at rates varying from seventy-five to eighty-eight. Jacob Barker, a private banker of New York, offered five million dollars on his single account. The secretary knew that Barker’s bid was not substantial, but he told the President that if it had been refused “we could not have obtained the ten millions without allowing terms much less favorable to the government.”[20] The terms were bad at best. The secretary obtained bids more or less substantial for about nine millions at eighty-eight, with the condition that if he should accept lower terms for any part of the sixteen millions still to be offered, the same terms should be conceded to Barker and his associates. The operation was equivalent to borrowing nine millions on an understanding that the terms should be fixed at the close of the campaign. Of this loan Boston offered two millions, and was allotted about, one million dollars.
The event proved that Campbell would have done better to accept all solid bids without regard to rate, for the government could have afforded to pay two dollars for one within a twelve-month, rather than stop payments; but Campbell was earnest to effect his loan at eighty-eight, and accordingly accepted only four million dollars besides Barker’s offer. With these four millions, with whatever part of five millions could be obtained from Barker, with interest-bearing Treasury notes limited to ten million dollars,[21] and with the receipts from taxes, the Treasury was to meet demands aggregating about forty millions for the year; for the chance was small that another loan could succeed, no matter what rate should be offered.
For this desperate situation of the government New England was chiefly responsible. In pursuing their avowed object of putting an end to the war the Federalists obtained a degree of success surprising even to themselves, and explained only by general indifference toward the war and the government. No one could suppose that the New England Federalists, after seeing their object within their grasp, would desist from effecting it. They had good reason to think that between Madison’s obstinacy and their own, the national government must cease its functions,—that the States must resume their sovereign powers, provide for their own welfare, and enter into some other political compact; but they could not suppose that England would forego her advantages, or consent to any peace which should not involve the overthrow of Madison and his party.
In such conditions of society morbid excitement was natural. Many examples in all periods of history could be found to illustrate every stage of a mania so common. The excitement of the time was not confined to New England. A typical American man-of-the-world was Gouverneur Morris. Cool, easy-tempered, incredulous, with convictions chiefly practical, and illusions largely rhetorical, Morris delivered an oration on the overthrow of Napoleon to a New York audience, June 29, 1814.
“And thou too, Democracy! savage and wild!” began Morris’s peroration,—“thou who wouldst bring down the virtuous and wise to the level of folly and guilt! thou child of squinting envy and self-tormenting spleen! thou persecutor of the great and good!—see! though it blast thine eyeballs,—see the objects of thy deadly hate! See lawful princes surrounded by loyal subjects!... Let those who would know the idol of thy devotion seek him in the island of Elba!”
The idea that American democracy was savage and wild stood in flagrant contrast to the tameness of its behavior; but the belief was a part of conservative faith, and Gouverneur Morris was not ridiculed, even for bad taste, by the society to which he belonged, because he called by inappropriate epithets the form of society which most of his fellow-citizens preferred. In New England, where democracy was equally reviled, kings and emperors were not equally admired. The austere virtue of the Congregational Church viewed the subject in a severer light, and however extreme might be the difference of conviction between clergymen and democrats, it was not a subject for ridicule.