It was now felt that, to restore order in the bosom of this chaos, there was needed a regulating power, capable of commanding confidence, with ample funds to enable it to pay out specie freely, and whose presence and, in case of necessity, whose authority, should serve to recall the local banks to their duty. In 1816, the present Bank of the United States was, therefore, chartered by Congress for a term of 20 years, with a capital of 35 millions, and it went into operation on the 1st of January, 1817. The seat of the mother-bank is Philadelphia, and it has 25 branches scattered over the Union. By its interference and assistance specie payments were resumed by the New York, Philadelphia, Baltimore, Richmond, Norfolk Banks on the 20th February, 1817, and in course of time all the other Banks followed the example. This resumption of specie payments was, first for the banks and then for individuals, the signal, the occasion, the rule of a general settling up of old accounts. As there had been much prodigality, unsuccessful speculations, and dead loss, accumulated through a period of 20 years, there was now a complete breaking up; many banks failed or suspended their operations, and from 1811 to 1830, 165 banks were reduced to one or the other of these alternatives. This state of things lasted three years; they were three years of crisis, three years of suffering for industry, that is, for the people of the United States; for this people is identified with its commerce. The trials of this period have left a deep and lasting impression. Hatred of speculators and of the Banking system has taken root in the hearts of the mass of the people, and now springs up in hostility to the Bank of the United States, which, in the eyes of the multitude, is the representative of the system, although it is itself innocent of the mischief, and can alone prevent its recurrence.
The antipathy of the greatest number against the banks has then a reasonable cause, but it is not, therefore, any the less blind and unjust. They see nothing but abuses, and shut their eyes against the advantages. The great extension of credit, which resulted from the great number of banks, and from the absence of all restraint on their proceedings, has been beneficial to all classes, to the farmers and mechanics not less than to the merchants. The banks have served the Americans as a lever to transfer to their soil, to the general profit, the agriculture and manufactures of Europe, and to cover their country with roads, canals, factories, schools, churches, and, in a word, with every thing that goes to make up civilization. Without the banks, the cultivator could not have had the first advances, nor the implements necessary for the cultivation of his farm, and if the credit system has given facilities for stock-jobbing to speculators, it has also enabled him, although indirectly, to buy at the rate of one, two, or three dollars an acre, and to cultivate lands, which are now, in his hands, worth tenfold or a hundred fold their first cost. The mechanics who attack the banking system, forget that they owe to it that growth of manufacturing industry, which has raised their wages from one dollar to two dollars a day. They forget that it furnishes the means by which many of their number raise themselves to competence or wealth; for in this country every enterprising man, of a respectable character, is sure of obtaining credit, and thenceforth his fortune depends upon his own exertions.[K]
At the end of 1819, commerce revived, the financial system of the United States seemed settled on a sure basis. Since that time, some shocks have been felt, as in 1822, and in 1825, the latter the reaction of the great English crisis, but in both cases the storm soon passed away. The root of the evil was struck on the day that the Bank of the United States went into operation. This great establishment, which committed some errors at first and paid the penalty, has for a long time been conducted with the most consummate prudence. Most of the leading commercial men, that is to say, most of the talents, of the country are attached to it as directors, and its foreign correspondents or associates are the houses whose credit is most firmly established, such as the Barings of London, and the Hottinguers of Paris. It exercises the necessary control over all the local banks, obliges them to restrain their emissions by calling upon them for specie, or by refusing to receive their bills when the issues are excessive. It was by its agency that the currency of the United States was established on so large a basis, that, in 1831, the banks were able, without any effort, to discount the amount of 800,000,000 dollars, in the principal cities of the Union, or 1,100,000,000 for the whole country.
Now, this state of prosperity seems to be coming to an end. Here, in New York, the banks have ceased to discount, and on good paper, for two or three months, 15, 18, and 24 per cent. per annum have been paid, the usual rate of the Bank of the United States, and of most of the local banks, being 6 per cent. At Philadelphia, 18 per cent. per annum has been given on excellent paper at short dates. At Baltimore, merchants of great wealth have been obliged to stop payment. Nobody buys; nobody can sell. Orders for foreign goods are held back; and as every body here is engaged in business, this state of things threatens all interests, is the subject of all conversations, of all writing, and of all thoughts. God grant that the sight of the impending danger may calm the passions, and that the good sense of the community may banish empty prejudices and false fears! God grant that both parties may forget their mutual animosities in their anxiety for the common welfare! This should be our prayer, not only for the sake of the destinies of this great nation, but also because our silk manufacturers and the owners of our vineyards, will pay a part of the expenses of the campaign against the banks in general, which the radical party is about to open, by a mortal contest, with the Bank of the United States.
FOOTNOTES:
[G] The maximum of the discounts of the Bank of France was in 1810, when it amounted to 710 million francs. In 1813, they were 640 millions, in 1826, 689 millions; at these two periods the Bank made a great effort to sustain commerce. It had less courage in the crisis of 1831-32.
[H] The Americans have retained the English word farmer, which properly signifies one who cultivates a hired soil, fermier, although among them the cultivators are proprietors.
[I] The number of banks at that time.
[J] There was more paper in circulation in 1816 than in 1834, when the extent and value of business were very much greater.