[O] For observations on these statements see Letter XXI., and the Notes.
[LETTER VIII.]
THE BANKS.—THE PRESERVATION OF THE UNION.
Washington, April 10, 1834.
The drama which has been passing in the United States since the opening of the session, has now reached the end of the first act. The two Houses have had under consideration the subject of the removal of the public deposits from the Bank of the United States to the local banks, by the Executive, and both of them have come to a decision. The Senate has declared, by a majority of 28 to 18, that the reasons alleged by the Secretary of the Treasury in justification of the measure, were neither satisfactory nor sufficient, and, by a majority of 26 to 20, that the conduct of the President in this matter was neither conformable to the constitution nor to the laws. This is the first instance, since the adoption of the Federal constitution, of a censure of the chief magistrate of the nation by the Senate. The House has resolved, on its part, that the charter of the Bank ought not to be renewed, that the public deposits ought not to be restored to it, and that they should remain in the safe-keeping of the local banks. The first resolve passed by a vote of 132 to 92; the majority for the two others was much less, 118 to 103, and 117 to 105. It has been resolved, by a large majority, 171 to 42, that the conduct of the Bank should be made a subject of investigation, but this majority includes many friends of the Bank.
It is to be hoped that the Bank will not be the object of this campaign; the more vigourously it is defended, the more hateful it becomes to the democracy. Those who feel an interest in their country and its institutions, ought to make an effort to turn the debate toward some other point, for both sides have become heated and exasperated in the struggle, and already violence has been threatened. The most brilliant services have been forgotten, the purest characters trampled under foot. The Globe, the avowed organ of the administration, pours forth the vilest slanders on men, such as Messrs Clay, Calhoun, and Webster, of whom any country in the world would be proud. It repeated, and unhappily it reiterates still, that the votes of, the Senate have been bought by the Bank. On the other hand, General Jackson, to whom it is impossible to deny the possession of eminent qualities, has been himself exposed to the vilest indignities; the gray hairs of that brave old man have been insulted in the most scandalous manner. Attempts have even been made to throw ridicule on his victory at New Orleans, the most brilliant affair in the American annals, as if his glory were not the common property of the country. Some hot heads have even talked of recurring to violence; commerce and enterprise have been struck numb; for want of means, the great works of Pennsylvania have been in danger of being brought to a stand. But at present there appears to be a general wish to bring back a calm; the failure of a certain number of individuals, and especially that of some banks, have proved a signal of alarm, which has recalled every one to a sense of the common danger, the general ruin that threatened the country. There has been a failure of a bank in Florida, of one in New Jersey, and of two in Maryland, one of which, that of the Bank of Maryland in Baltimore, has caused a great sensation. The leading men of all parties have set themselves in earnest to search out some means of bringing the commercial crisis to an end. There is room to hope, therefore, that the debate will lose its bitterness, and at the same time will take a wider range; instead of quarrelling about the particular question of the Bank, it were to be wished that the higher questions of political economy should be discussed, such as that of a mixed currency, in which there should be the proper mixture of paper and the metals necessary to give it stability, without keeping, as is the case in Europe, a large unproductive capital in the shape of specie; and that of a system of institutions of credit, banks of loan and discount, of deposit and exchange, powerful enough to serve as a spring and a stay to the industry of the country, and yet so balanced in respect to each other and the powers of the government, as not to be dangerous to the public liberties. A very able speech of Mr Calhoun's has already drawn the general attention to the subject of financial reform, and one of the senators friendly to the administration, Mr Benton, has embodied some of Mr Calhoun's ideas in the shape of a bill.
It is now universally agreed, that to obtain a solid and stable currency, it is necessary to keep a certain quantity of gold and silver in the country; it is seen that while there are paper dollars, the silver dollars will disappear, that ten-dollar notes necessarily expel the eagles, and that half-eagles will not stay where there are five-dollar bills. It is, therefore, proposed to abolish the issue of notes of less than ten or even twenty dollars, but all that Congress can do without the aid of a National Bank, is to prohibit the reception, by the collectors of the customs, of the bills of any bank which has in circulation notes of less than ten or twenty dollars; for Congress has no direct power over the local banks. This measure, however, would be insufficient; for the amount of money paid for customs bears a very small proportion to the whole circulation of the country, and consequently would not affect the circulation in districts remote from the sea coast. The Administration does not deny the necessity of a police for controlling and regulating the banks; it seems disposed to effect it by means of some of the local banks, which should act under the direction of the Secretary of the Treasury, and to which should be granted certain privileges, such as that of being the depositories of the public money without paying interest. But this plan has some disadvantages; it would invest the Secretary, that is the President, with a great discretionary power, which is wholly at war with the political maxims of American government. It is a received truth in the United States, that the sword and the purse ought not to be in the same hands. Beside it is doubtful whether this control would be sufficiently powerful and sufficiently enlightened, and finally it would be difficult by means of this chain of local banks to answer one of the most pressing wants of the country, facility of exchange; because they are, and must be as slightly connected with each other, as the sovereign States from which they hold their charters. To exterminate small bank-notes the surest agent would be a National Bank, and Congress has the power to establish one. This power, which is disputed because all its powers are disputed, would not be contested, if it were stipulated that the Bank should obtain the consent of each State, before establishing a branch within its limits. It would then be sufficient that the Bank should not receive the bills of any other bank, which issued notes of less than 10 or 20 dollars, or which received the bills of other banks, that issued notes less than the same minimum. In fine, a National Bank is an admirable instrument of exchange, and the most influential friends of the Administration are convinced of the necessity of an institution of the sort. I cannot believe that the President, and especially the Vice-President, are really as much opposed to one, as they have the air of being. As it is possible to conceive of a combination of circumstances, which may reconcile its existence with the interests and views of Mr Van Buren (such would be, for instance, the creation of a Bank of which the seat should be New York, instead of Philadelphia), it may be hoped that sooner or later, under one form or another, Mr Van Buren may yield to the necessity of the case. It is true that out of hatred to the present Bank, the prejudices of the multitude have been excited against the establishment of any bank at all, and it is much more easy to rouse the popular passions than to control them when once let loose; this kind of game has resulted in the self-murder of many a man's popularity. But in this matter the voice of the public interest and of individual interest will speak so loud, that it would be astonishing if it did not make itself heard by a people, so much more sensible and reflecting than most of the European people. There is, then, in short, still some chance for a Bank of the United States.
The following are the principal features, in which both parties seem to me to be at present tacitly agreed. The capital of the Bank to be about 50 millions. The shares of the present Bank, representing a capital of 35 millions, to be exchanged at par for shares in the new bank; the rest of the capital to be subscribed by the individual States, thus giving the Bank a more truly national character: The rate of discount to be reduced from 6 to 5 per cent.; Mr Forsyth, a Senator friendly to the administration, has demanded this modification: The laws relative to public and private deposits to be changed in conformity with the propositions of Mr Cambreleng: The seat of the mother bank to be transferred to New York: The operations of the Bank to be subjected to more strict regulations than those of the old Bank have been: The Bank to be required to keep on hand a larger amount of reserved profits, or some other provision borrowed from the bank of England to be adopted, in order to give more security to the institution.
It would not, probably, be impossible to unite a majority of the two Houses in favour of a plan which should embrace these features. But there is another subject about which little is said, and upon which no one has yet publicly declared himself, although there are many who have thought much about it, and it will not be easy to reconcile opinions upon it. How shall the Bank be governed? What relation shall there be between the administration of the Bank, and the Federal and State governments? How and by whom shall the President of the Bank be chosen? This subject, about which there is a total silence, appears to me to be of so vital importance, that I am convinced that what has occurred in the United States during the last six months, would never have taken place, if the nomination of the President of the Bank had been lodged with the President of the United States. In Europe and particularly in France, the government of the banks is more or less in the hands and under the control of the king and the ministers. In America, conformably with the principles of self-government, the Bank, like all the other industrial and financial institutions, has, up to this time, governed itself. The Federal government, owning one fifth of the shares, names one fifth of the directors; its powers stop there. The American axiom, which forbids the union of the sword and the purse in the same hand, is opposed to the exercise of a controlling influence over the choice of the President of the Bank by the President of the United States; and yet I am persuaded that the democratic party will not be willing to hear of a Bank, in the government of which it could not interfere.
The upper classes (bourgeoisie) are not here what they are in Europe; while in Europe they rule, here they are ruled. Democracy takes its revenge in America for the unjust contempt with which it has been so long treated in Europe. Now it is to these upper classes, that the private share-holders of the Bank belong; it is the merchants, manufacturers, and capitalists, who will always derive the most direct benefit from a National Bank, although all classes must indirectly derive great advantages from it. From the time when the upper classes sanctioned a completely universal suffrage, without making any exception in favour of natural superiority, whether industrial or scientific, from the day when they consented that number should be every thing, and knowledge and capital nothing, they have signed their own abdication. It is too late to agitate the questions, whether this is absolutely a good or an evil, or whether it is well, in the agricultural States, with a scattered population, such as Ohio, Indiana, and Illinois, and bad in large and populous cities, the seats of a vast commerce, such as Philadelphia and New York. This is a matter already settled past recall; when the sword is surrendered, the vanquished must submit to take the law from the victor. In case, then, of the creation of a new National Bank, the share-holders must consent to receive their head, either from the President and Senate, as other public functionaries are appointed, or from the House of Representatives alone, or from some other similar source. If in a new or a somewhat modified Bank, the Federal and local governments should be stockholders to a large amount, this participation of the President or the House of Representatives, or of special delegates chosen by the States, in the government of the Bank, would appear altogether natural, even in the eyes of the most exclusive partisans of self government. It remains to be seen, whether in this case, the Bank would not be more likely to become the instrument of party, a den of intrigue and corruption, a golden calf, a monster, as it is so often unjustly called, than in the present state of things.