After failing to obtain ninety-five or even ninety as the price of his bonds, Dallas resorted to expedients best described in his own words. As he could not fund the Treasury notes at the rate he wished, he abandoned the attempt, and used the loan only to supply the local wants of the Treasury:—
“The objects of the loan being to absorb a portion of the Treasury-note debt, and to acquire a sufficiency of local currency for local purposes, the price of the stock at the Treasury was of course independent of the daily up-and-down prices of the various stock markets in the Union, and could only be affected by the progress toward the attainment of those objects. Thus while the wants of the Treasury were insufficiently supplied, offers to subscribe were freely accepted, and the parties were sometimes authorized and invited to increase the amount of their offers; but where the local funds had so accumulated as to approach the probable amount of the local demands, the price of the stock was raised at the Treasury, and when the accumulation was deemed adequate to the whole amount of the local demands the loan was closed.”[117]
Governments which insisted upon borrowing at rates higher than the money market allowed, could do so only by helping to debase the currency. Dallas’s course offered encouragement to the suspended banks alone. The schedule of his loans proved that he paid a premium to insolvency. Of all places where he most needed “a sufficiency of local currency for local purposes,” Boston stood first; but he borrowed in Boston less than one hundred thousand dollars, and this only in Treasury notes. Next to Boston stood New York; but in New York Dallas borrowed only $658,000, also in Treasury notes. In Philadelphia he obtained more than three millions, and took $1,845,000 in the depreciated local currency. In Baltimore he took nearly two millions in local currency; and in the bank paper of the District of Columbia, which was the most depreciated of all, he accepted $2,282,000 in local currency.[118] Thus the loan which he had asked Congress to authorize for the purpose of absorbing the excess of Treasury notes, brought into the Treasury only about three millions in these securities, while it relieved the banks of Philadelphia, Baltimore, and Washington of six millions of their depreciated paper, worth about eighty cents in the dollar, and provided nothing to redeem the government’s overdue bills at Boston and New York.
Had Dallas pursued a different course and funded all the overdue Treasury notes at the market rate, he might not have relieved New England, but he would have placed the government in a position to deal effectually with the suspended banks elsewhere. The immediate result of his refusal to redeem the dishonored Treasury notes was to depress their market value, and to discredit the government. Treasury notes fell to eighty-eight and eighty-seven, while the six-per-cents fell as low as eighty-one. In Washington, Baltimore, and Philadelphia Dallas obtained enough local currency to meet local obligations, and doubtless saved to the government a small percentage by thus trafficking in its own discredit; but in gaining this advantage he offered encouragement to the over-issues of the suspended banks, and he helped to embarrass the solvent banks in the chief commercial centres as well as those in New England.[119]
At the close of the year 1815 the general effect of the peace was already well defined. The Southern States were in the full enjoyment of extraordinary prosperity. The Middle States were also prosperous and actively engaged in opening new sources of wealth. Only the Eastern States suffered under depression; but there it was so severe as to warrant a doubt whether New England could recover from the shock. The new epoch of American history began by the sudden decline of Massachusetts to the lowest point of relative prosperity and influence she had ever known, and by an equally sudden stimulus to the South and West. So discredited was Massachusetts that she scarcely ventured to complain, for every complaint uttered by her press was answered by the ironical advice that she should call another Hartford Convention.
CHAPTER V.
Between 1801 and 1815, great changes in the American people struck the most superficial observer. The Rights of Man occupied public thoughts less, and the price of cotton more, in the later than in the earlier time. Although in 1815 Europe was suffering under a violent reaction against free government, Americans showed little interest and no alarm, compared with their emotions of twenty years before. Napoleon resumed his empire, and was overthrown at Waterloo, without causing the people of the United States to express a sign of concern in his fate; and France was occupied by foreign armies without rousing among Americans a fear of England. Foreign affairs seemed reduced to the question whether England would consent to negotiate a treaty of commerce.
After excluding most of the American demands, Lord Castlereagh consented to a commercial convention abolishing discriminating duties, and admitting American commerce with the East Indies. This treaty, signed July 3, seemed to satisfy American demands, and the British Ministry showed no wish to challenge new disputes. With France, the disturbed condition of government permitted no diplomatic arrangement. The only foreign country that required serious attention was Algiers; and Decatur, with a strong squadron of the new American cruisers, speedily compelled the Dey to sign a treaty more favorable to the United States than he had yet signed with any other nation. Tunis and Tripoli showed a similar disposition, and Decatur returned home in the autumn, having settled to his satisfaction all the matters intrusted to his care.
Under such circumstances, without an anxiety in regard to foreign or domestic affairs, President Madison sent his Annual Message to Congress December 5, 1815. It told a pleasant story of successful administration and of rapidly growing income; but its chief historical interest lay in the lines of future party politics that Madison more or less unconsciously sketched. The Message proved, or seemed to prove, that Madison’s views and wishes lay in the direction of strong government. He advised “liberal provision” for defence; more military academies; an improved and enlarged navy; effectual protection to manufactures; new national roads and canals; a national university; and such an organization of the militia as would place it promptly and effectually under control of the national government. Madison seemed to take his stand, beyond further possibility of change, on the system of President Washington.
Dallas’s report echoed the tone of Alexander Hamilton. Very long, chiefly historical, and interesting beyond the common, this Treasury Report of 1815 recommended a scale of annual expenditure exceeding twenty-seven millions, in place of the old scale of ten millions. The expenditure was to be but a part of the system. A protective tariff of customs duties was assumed to be intended by Congress, and a national bank was urged as the only efficient means by which the government could recover control over the currency.