This letter was written towards the end of October, 1812. Already on the 11th of that month, as appears from a brief note written by Mr. Gallatin to the President,[117] some exchange of places had been suggested by Mr. Madison, perhaps between Eustis and Monroe, but the suggestion was condemned by Gallatin as more open to criticism than almost any other course that could be adopted. So far as can now be guessed, it is probable that Mr. Gallatin and Mr. Monroe wished to reorganize the Cabinet throughout; Mr. Monroe would then have become Secretary of War, Mr. Gallatin would have succeeded him as Secretary of State, and possibly William H. Crawford would have taken the Treasury; an arrangement which would have given great strength to the government and eliminated many causes of weakness. To this, however, Mr. Madison would not consent, probably from the belief that it would infallibly be defeated in the Senate. In this state of suspense the Administration stumbled on until the end of the year; then Dr. Eustis resigned of his own accord, and Mr. Monroe assumed temporarily the duties of his office, as he easily might, since the war had made the Department of State a sinecure. Governor Hamilton also resigned of his own accord, and immediate action by the President thus became necessary.

GALLATIN TO JEFFERSON.

Washington, 18th December, 1812.

... The series of misfortunes experienced this year in our military land operations exceeds all anticipations made even by those who had least confidence in our inexperienced officers and undisciplined men. I believe that General Dearborn has done all that was in his power. The conduct of Hull, Rensselaer, and Smyth cannot be accounted for on any rational principle. It is to be hoped that Mr. Eustis’s resignation will open brighter prospects. For, although those three disasters cannot with justice be ascribed to him, yet his incapacity and the total want of confidence in him were felt through every ramification of the public service. To find a successor qualified, popular, and willing to accept, is extremely difficult.

It was just this moment that Mr. Josiah Quincy, hottest of all Federalists, chose for his once celebrated attack on the Administration: “It is a curious fact,” he said, in his speech of 5th January, 1813, “but no less true than curious, that for these twelve years past the whole affairs of this country have been managed, and its fortunes reversed, under the influence of a Cabinet little less than despotic, composed, to all efficient purposes, of two Virginians and a foreigner.... I might have said, perhaps with more strict propriety, that it was a Cabinet composed of three Virginians and a foreigner, because once in the course of the twelve years there has been a change in one of the characters.... I said that these three men constituted to all efficient purposes the whole Cabinet. This also is notorious. It is true that during this period other individuals have been called into the Cabinet; but they were all of them comparatively minor men, such as had no great weight either of personal talents or of personal influence to support them. They were kept as instruments of the master spirits; and when they failed to answer the purpose, or became restive, they were sacrificed and provided for; the shades were made to play upon the curtain; they entered; they bowed to the audience; they did what they were bidden; they said what was set down for them; when those who pulled the wires saw fit, they passed away. No man knew why they entered; no man knew why they departed; no man could tell whence they came; no man asked whither they were gone.”

In this description there was truth as well as oratory; but Mr. Quincy did not add that this despotism had been tempered by faction to an extent which had left in it very little of the despotic. Even while Mr. Quincy was charging the mysterious three with the design of making Mr. Monroe “generalissimo” in order to perpetuate their power, the three were in a quandary, as much perplexed as any of their neighbors, and actually deciding to accept General Armstrong as the least of their evils. Not one of them had any confidence in General Armstrong; they knew him to be no friend of theirs; to belong to a family—the Clintons—which had for twenty years or thereabouts acted without reference to them; one of whose chiefs, George Clinton, had, as Vice-President, given infinite annoyance to the Administration, while another, De Witt Clinton, had, within three months, run a mad race to get himself elected President by the Federalists in opposition to Mr. Madison; they knew that Armstrong had been through life a master of intrigue, and that his ambition was only checked by his indolence; but they knew that he had ability and that he had loyally supported the government. General Armstrong, therefore, became Secretary of War, while the Navy Department was given to William Jones, of Philadelphia, an active merchant and politician, who, in other days, had served as lieutenant under Commodore Truxton.

Meanwhile, Mr. Gallatin had in his own department cares enough to occupy all his energies. When Congress met in November, 1812, the House was still less disposed to support the Secretary than it had been in the spring. Langdon Cheves, of South Carolina, was now chairman of the Committee of Ways and Means. The Presidential election was over and Mr. Madison was secure in his seat, but the House had less appetite for taxation than before; it refused even to support the Secretary in other money measures. The first trial of strength, in which Mr. Gallatin was worsted, came in an embarrassing form. When the British government on June 23, 1812, revoked its orders in council, the declaration of war being then unknown in England, great quantities of British merchandise were at once shipped to America on the faith of the Act of Congress of March 2, 1811, which promised a renewal of intercourse whenever the British orders should be revoked. Even after the declaration of war became known, these shipments continued, protected by British licenses from British cruisers. All these vessels and cargoes were of course seized on arriving in American ports. The next step was to release such property as was owned in good faith by Americans, the Treasury taking bonds to the value of the cargoes, and, owing to the great rise in prices consequent on the war, the owners made very large profits, in some cases even to the whole amount of the bonds. Mr. Gallatin, unwilling to assume the responsibility of remitting or exacting the forfeitures, referred the subject to Congress, and in doing so expressed the opinion that in the peculiar circumstances of the case a reasonable compromise would authorize the remission of one-half the forfeitures, due to the collectors, and the exaction of the other half, or its equivalent, due to the government. The amount of property involved was about $40,000,000, including the importers’ profit. Mr. Gallatin’s proposition would have assumed a forfeiture to the amount of about $9,000,000. The regular duties, if the forfeitures were wholly remitted, would amount to about $5,000,000.

On this question there arose a sharp battle in the House, and Mr. Cheves led the Federalists in a vigorous assault upon the Secretary. Perhaps this attack was more honest and less spiteful than the attacks of Mr. Giles, but it was hardly less mischievous: “I would rather see the objects of the war fail; I would rather see the seamen of the country impressed on the ocean and our commerce swept from its bosom, than see the long arm of the Treasury indirectly thrust into the pocket of the citizen through the medium of a penal law. We might suffer all these disasters and our civil liberties would yet be safe. That principle of our government would still be preserved which subjects the purse of the citizen to no authority but a law so plain that he who runs may read. How are the exigencies of the government for the next year to be supplied? That portion of them which is provided is rather the result of accident than forecast. Is the deficiency to be derived from taxes? No! I will tell gentlemen who are opposed to them, for their comfort, that there will be no taxes imposed for the next year. It was said last session that you would have time to lay them at this session, but I then said it was a mistake. You now find this to be the fact. By your indecision then, when the country was convinced they were necessary, you have set the minds of the people against taxes. But were it otherwise, you have not time now to lay them for the next year.”

Jonathan Roberts, of Pennsylvania, a member of the Committee of Ways and Means, led the debate in defence of Mr. Gallatin, but in the end Mr. Cheves, aided by the Federalists and by Calhoun, Lowndes, Macon, and other very honest men, carried his point, and the forfeitures were entirely remitted, by a very close vote of 63 to 61. Mr. Gallatin’s hold even on the Committee of Ways and Means was now lost.

At this point of the war, within four months of its declaration, the Treasury was threatened with a collapse more fatal than that which had overwhelmed the War Department. The circulating capital of the United States was concentrated in the large cities chiefly north of the Potomac, and more than one-fourth of this capital belonged to New England. Not only did New England lend no aid to the Treasury, but her whole influence was thrown to embarrass it. Of loans to the amount of $41,000,000 paid into the Treasury during the war, she contributed less than three millions. This was not all. A large importation of foreign goods into the Eastern States, and an extensive trade in British government bills of exchange, caused a drain of specie through New England to Great Britain. The specie in the vaults of the Massachusetts banks rose from $1,700,000 in June, 1811, to $3,900,000 in June, 1812, and to $7,300,000 in June, 1814, all of which was lost to the government and the Treasury. Even the most prejudiced and meanest intelligence could now understand why the destruction of the United States Bank threatened to decide the fate of the war and of the Union itself. The mere property in the bank, important as this was, counted for comparatively little in the calculation, although seven millions of foreign capital, invested in its stock, were lost to the country by its dissolution and had been remitted to Europe shortly before the war. This was the “British gold” of which Mr. Giles and Mr. Duane were so jealous, and which, had it been allowed to remain, would have probably doubled the resources of the government in fighting British armies and navies, for, setting aside the useless wealth of New England, it is doubtful whether the country contained $7,000,000 in specie in 1812 as the basis of its entire currency system. This, however, was not the most serious loss. The State banks, with a capital of something more than $40,000,000, took up the paper previously discounted by the United States Bank, to the amount of more than $15,000,000. Then came the war, and Mr. Gallatin applied every possible inducement to borrow for government the means of the State banks. Those of New York, Philadelphia, and Baltimore responded to the call; they subscribed directly to the loans, and they enlarged their discounts to such of their customers as subscribed; in doing so they necessarily exceeded their resources and were obliged to enlarge their issues of bank paper. Meanwhile, in order to fill the chasm made by the dissolution of the United States Bank, new banks were created in the States; a bank mania broke out; in four years one hundred and twenty new banks were chartered, doubling the banking capital at a time when commerce was annihilated and banks were less needed than ever. They created no new capital and withdrew what would otherwise have been lent to the government. Governor Snyder, in Pennsylvania, was forced to veto a bill making a wholesale creation of new banks. Finally, since, in the absence of a national bank, the government had no means of controlling the issues, these rapidly increased to an amount greatly in excess of the requirements, until a suspension of specie payments and hopeless confusion of the currency became inevitable. This took place in 1814, and it was Mr. Gallatin’s opinion, as it must be the opinion of every financier, that if the United States Bank had been in existence the suspension might have been delayed for a considerable time, while the terrible disorganization of the whole system of internal exchanges, by which the government was very nearly brought to a stand-still, need not have taken place at all.[118]