CHAPTER CXLIII.
RECHARTER OF THE DISTRICT BANKS—SPEECH OF MR. BENTON: THE PARTS OF LOCAL AND TEMPORARY INTEREST OMITTED.
"Mr. Benton rose to oppose the passage of the bill, notwithstanding it was at the third reading, and that it was not usual to continue opposition, which seemed to be useless, at that late stage. But there were occasions when he never took such things into calculation, and when he continued to resist pernicious measures, regardless of common usages, as long as the forms of parliamentary proceeding would allow him to go on. Thus he had acted at the passing of the United States Bank charter, in 1832; thus he did at the passing of the resolution against President Jackson, in 1834; and thus he did at the passing of the famous land bill, at the present session. He had continued to speak against all these measures, long after speaking seemed to be of any avail; and, far from regretting, he had reason to rejoice at the course that he had pursued. The event proved him to be right; for all these measures, though floated through this chamber upon the swelling wave of a resistless and impatient majority, had quickly run their brief career. Their day of triumph had been short. The bank charter perished at the first general election; the condemnatory resolution was received by the continent in a tempest of execration; and the land bill, that last hope of expiring party, has dropped an abortion from the Senate. It is dead even here, in this chamber, where it originated—where it was once so omnipotent that, to speak against it, was deemed by some to be an idle consumption of time, and by others to be an unparliamentary demonstration against the ascertained will of the House. Yet, that land bill is finished. That brief candle is out. The Senate has revoked that bill; has retracted, recanted, and sung its palinode over that unfortunate conception. It has sent out a committee—an extraordinary committee of nine—to devise some other scheme for dividing that same money which the land bill divides! and, in doing so, the Senate has authentically declared a change of opinion, and a revocation of its sentiments in favor of that bill. Thus it has happened, in recent and signal cases, that, by continuing the contest after the battle seemed to be lost, the battle was in fact gained; and so it may be again. These charters may yet be defeated; and whether they will be or not, is nothing to me. I believe them to be wrong—greatly, immeasurably wrong!—and shall continue to oppose them without regard to calculations, or consequences, until the rules of parliamentary proceeding shall put an end to the contest. Mr. B. said he had moved for a select committee, at the commencement of the session, to examine into the condition of these banks, and he had done so with no other object than to endeavor to provide some checks and guards for the security of the country against the abuses and excesses of the paper system. The select committee had not been raised. The standing Committee on the District of Columbia had been charged with the subject; and, seeing that they had made a report adverse to his opinions, and brought in a bill which he could not sanction, it would be his part to act upon the meagre materials which had been placed before the Senate and endeavor to accomplish as a member of that body, what could have been attempted, with better prospects of success, as a member of a committee which had had the management of the subject.
"Mr. B. said he had wished to have been on a select committee for the charter of these banks; he wished to have revived the idea of a bank without circulation, and to have disconnected the government from the banking of the district. He had failed in his attempt to raise such a committee; and, as an individual member of the Senate, he could now do no more than mention in debate the ideas which he would have wished to have ripened into legislation through the instrumentality of a committee.
"Mr. B. said he had demonstrated that no bank of circulation ought to be authorized in this district; and, he would add, that none to furnish currency, except of large notes, ought to be authorized any where; yet what are we doing? We are breeding six little corporations at a birth, to issue $2,250,000 of paper currency: and on what terms? No bonus; no tax on the capital; none on the circulation; no reduction of interest in lieu of bonus or tax; no specie but what the stockholders please to put in; and no liability on the part of the stockholders for a failure of these corporations to redeem their notes and pay their debts. This is what we are doing; and now let us see what burdens and taxes these six corporations will impose upon the business part of the community—the productive classes among which they are to be perpetuated. First, there is the support of these six corporation governments; for every bank must have a government, like a State or kingdom; and the persons who administer these corporation governments must be paid, and paid by the people, and that according to the rates fixed by themselves and not by the people. Each of these six banks must have its president, cashier, clerks, and messengers; its notary public to protest notes; and its attorney to bring suits. The aggregate salaries, fees, and perquisites, of all these officers of the six banks will be the first tax on the people. Next comes the profits to the stockholders. The nett profits of banks are usually eight to ten per cent. at present; the gross profits are several per cent. more; and the gross profits are what the people pay. Assuming the gross profits to be twelve per cent., and the annual levy upon the community will be about $270,000. The third loss to the community will be on the fluctuations of prices of labor and property, and the rise and fall of stocks, from the expansions and contractions of currency, produced by making money plenty or scarce, as it suits the interest of the bank managers. This item cannot be calculated and depends entirely upon the moderation and consciences of the Neptunes who preside over the flux and reflux of the paper ocean; and to whom all tides, whether of ebb or flow, and all conditions of the sea, whether of calm or storm, are equally welcome, equally auspicious, and equally productive. Then come three other heads of loss to the community, and of profit to the bank: loss of notes from wear and tear, counterfeits imposed upon the people for good notes, and good notes rejected by the banks for counterfeits; and then the loss to the holders from the stoppage and failure of banks, and the shaving in of notes and stocks. Such are the burdens and taxes to be imposed upon the people to give them a paper currency, when, if the paper currency were kept away, and only large notes used, as in France, they would have a gold and silver currency without paying a tax to any body for it, and without being subject to any of the frightful evils resulting from the paper system.
"Objecting to all banks of circulation, but not able to suppress them entirely, Mr. B. suggested some ameliorations in the charters proposed to be granted to render them less dangerous to the community. 1. The liability of the stockholders for all the debts of the institution, as in the Scottish banks. 2. The bank stock to be subject to taxation, like other property. 3. To issue or receive no note of less than twenty dollars. 4. The charters to be repealable at the will of Congress: and he gave reasons for each of these improvements; and first for the liability of the stockholders. He said:
"Reasons for this liability were strong and palpable. A man that owes should pay while he has property to pay with; and it is iniquitous and unjustifiable that a bank director, or stockholder, should riot in wealth while the business part of the community should hold the bank notes which they have put into circulation, and be able to get nothing for them after the bank had closed its doors. Such exemptions are contrary to the rights of this community, and one of the great causes of the failure of banks. A liability in the stockbrokers is one of the best securities which the public can have for the correct management and solvency of the institution. The famous Scottish banks, which, in upwards of one hundred years' operations, had neither once convulsed the country with contractions and expansions, nor once stopped payment, were constituted upon this principle. All the country banks in England, and all the bankers on the continent of Europe, were liable to a still greater degree; for in them each stockholder, or partner, was liable, individually, for the whole amount of the debts of the bank. The principle proposed to be incorporated in these charters strikes the just medium between the common law principle, which makes each partner liable for the whole debts of the firm; and the corporation principle in the United States, which absolves each from all liability, and leaves the penniless and soulless carcase of a defunct and eviscerated bank alone responsible to the community. Liability to the amount of the stock was an equitable principle, and with summary process for the recovery of the amounts of notes and deposits, and the invalidity of transfers of stock to avoid this liability, would be found a good remedy for a great evil. If the stockholders in the three banks which stopped payment in this city during the panic session had been thus liable, the notes would not have been shaved out of the hands of the holders; if the bank which stopped in Baltimore at the same time, had been subject to this principle, the riots, which have afflicted that city in consequence of that stoppage, would not have taken place. Instead of these losses and riots, law and remedy would have prevailed; every stockholder would have been summoned before a justice of the peace—judgment granted against him on motion—for the amount held by the complainant; and so on, until all were paid, or he could plead that he had paid up the whole amount of his stock."
The evil of small notes he classed under three general heads: 1. The banishment of gold and silver. 2. Encouragement to counterfeiting. 3. Throwing the burthens and losses of the paper system upon the laboring and small-dealing part of the community, who have no share in the profits of banking, and should not be made to bear its losses. On these points, he said:
"The instinct of banks to sink their circulation to the lowest denomination of notes which can be forced upon the community, is a trait in the system universally proved to exist wherever banks of circulation have been permitted to give a currency to a country; and the effect of that instinct has always been to banish gold and silver. When the Bank of England was chartered, in the year 1694, it could issue no note less than £100 sterling; that amount was gradually reduced by the persevering efforts of the bank, to £50; then to £20; then to £15; then to £10; at last to £5; and finally to £2 and £1. Those last denominations were not reached until the year 1797, or until one hundred and three years after the institution of the bank; and as the several reductions in the size of the notes, and the consequent increase of paper currency took place, gold became more and more scarce; and with the issue of the one and two pound notes, it totally disappeared from the country.
"This effect was foretold by all political economists, and especially by Mr. Burke, then aged and retired from public life, who wrote from his retreat, to Mr. Canning, to say to Mr. Pitt, the Prime Minister, these prophetic words: 'If this bill for the one and two pounds is permitted to pass, we shall never see another guinea in England.' The bill did pass, and the prediction was fulfilled; for not another guinea, half guinea, or sovereign, was seen in England, for circulation, until the bill was repealed two and twenty years afterwards! After remaining nearly a quarter of a century without a gold circulation, England abolished her one and two pound notes, limited her paper currency to £5 sterling, required all Bank of England notes to be paid in gold, and allowed four years for the act to take effect. Before the four years were out, the Bank of England reported to Parliament that it was ready to begin gold payments; and commenced accordingly, and has continued them ever since.