Thirty Years' View (Vol. 1 of 2) / or, A History of the Working of the American Government for Thirty Years, from 1820 to 1850

by Thomas Hart Benton

"The encouragement of counterfeiting was the next great evil which Mr. B. pointed out as belonging to a small note currency; and of all the denominations of notes, he said those of one and two pounds in England (corresponding with fives and tens in the United States), were those to which the demoralizing business of counterfeiting was chiefly directed! They were the chosen game of the forging depredator! and that, for the obvious reasons that fives and tens were small enough to pass currently among persons not much acquainted with bank paper, and large enough to afford some profit to compensate for the expense and labor of producing the counterfeit, and the risk of passing it. Below fives, the profits are too small for the labor and risk. Too many have to be forged and passed before an article of any value can be purchased; and the change to be got in silver, in passing one for a small article, is too little. Of twenty and upwards, though the profit is greater on passing them, yet the danger of detection is also greater. On account of its larger size, the note is not only more closely scrutinized before it is received, and the passer of it better remembered, but the circulation of them is more confined to business men and large dealers, and silver change will not be given for them in buying small articles. The fives and tens, then, in the United States, like the £1 and £2 in England, are the peculiar game of counterfeiters, and this is fully proved by the criminal statistics of the forgery department in both countries. According to returns made to the British Parliament for twenty-two years—from 1797 to 1819—the period in which the one and two pound notes were allowed to circulate, the whole number of prosecutions for counterfeiting, or passing counterfeit notes of the Bank of England, was 998: in that number there were 313 capital convictions; 530 inferior convictions; and 155 acquittals: and the sum of £249,900, near a million and a quarter of dollars, was expended by the bank in attending to prosecutions. Of this great number of prosecutions, the returns show that the mass of them were for offences connected with the one and two pound notes. The proportion may be distinctly seen in the number of counterfeit notes of different denominations detected at the Bank of England in a given period of time—from the 1st of January, 1812, to the 10th of April, 1818—being a period of six years and three months out of the twenty-two years that the one and two pound notes continued to circulate. The detections were, of one pound notes, the number of 107,238; of two pound notes, 17,787; of five pound notes, 5,826; of ten pound notes, 419; of twenty pound notes, 54. Of all above twenty pounds, 35. The proportion of ones and twos to the other sizes may be well seen in the tables for this brief period; but to have any idea of the mass of counterfeiting done upon those small notes, the whole period of twenty-two years must be considered, and the entire kingdom of Great Britain taken in; for the list only includes the number of counterfeits detected at the counter of the bank; a place to which the guilty never carry their forgeries, and to which a portion only of those circulating in and about London could be carried. The proportion of crime connected with the small notes is here shown to be enormously and frightfully great. The same results are found in the United States. Mr. B. had looked over the statistics of crime connected with the counterfeiting of bank notes in the United States, and found the ratio between the great and small notes to be about the same that it was in England. He had had recourse to the most authentic data—Bicknell's Counterfeit Detector—and there found the editions of counterfeit notes of the local or State banks, to be eight hundred and eighteen, of which seven hundred and fifty-six were of ten dollars and under; and sixty-two editions only were of twenty dollars and upwards. Of the Bank of the United States and its branches, he found eighty-two editions of fives; seventy-one editions of tens; twenty-six editions of twenties; and two editions of fifties; still showing that in the United States, as well as in England, on local banks as well as that of the United States, the course of counterfeiting was still the same; and that the whole stress of the crime fell upon the five and ten dollar notes in this country, and their corresponding classes, the one and two pound notes in England. Mr. B. also exhibited the pages of Bicknell's Counterfeit Detector, a pamphlet covered over column after column with its frightful lists, nearly all under twenty dollars; and he called upon the Senate in the sacred name of the morals of the country—in the name of virtue and morality—to endeavor to check the fountain of this crime, by stopping the issue of the description of notes on which it exerted nearly its whole force.

"Mr. B. could not quit the evils of the crime of counterfeiting in the United States without remarking that the difficulty of legal detection and punishment was so great, owing to the distance at which the counterfeits were circulated from the banks purporting to issue them, and the still greater difficulty (in most cases impossible) of getting witnesses to attend in person, in States in which they do not reside, the counterfeiters all choosing to practise their crime and circulate their forgeries in States which do not contain the banks whose paper they are imitating. So difficult is it to obtain the attendance of witnesses in other States, that the crime of counterfeiting is almost practised with impunity. The notes under $20 feed and supply this crime; let them be stopped, and ninety-nine hundredths of this crime will stop with them.

"A third objection which Mr. B. urged against the notes under twenty dollars was, that nearly the whole evils of that part of the paper system fell upon the laboring and small dealing part of the community. Nearly all the counterfeits lodged in their hands, or were shaved out of their hands. When a bank failed, the mass of its circulation being in small notes, sunk upon their hands. The gain to the banks from the wear and tear of small notes, came out of them; the loss from the same cause, falling upon them. The ten or twelve percent. annual profit for furnishing a currency in place of gold and silver (for which no interest would be paid to the mint or the government), chiefly falls upon them; for the paper currency is chiefly under twenty dollars. These evils they almost exclusively bear, while they have, over and above all these, their full proportion of all the evils resulting from the expansions and contractions which are incessantly going on, totally destroying the standard of value, periodically convulsing the country; and in every cycle of five or six years making a lottery of all property, in which all the prizes are drawn by bank managers and their friends.

"He wished the basis of circulation throughout the country to be in hard money. Farmers, laborers, and market people, ought to receive their payments in hard money. They ought not to be put to the risk of receiving bank notes in all their small dealings. They are no judges of good or bad notes. Counterfeits are sure to fall upon their hands; and the whole business of counterfeiting was mainly directed to such notes as they handle—those under twenty dollars.

"Mr. B. said he here wished to fix the attention of those who were in favor of a respectable paper currency—a currency of respectable-sized notes of twenty dollars and upwards—on the great fact, that the larger the specie basis, the larger and safer would be the superstructure of paper which rested upon it; the smaller that specie basis, the smaller and more unsafe must be the paper which rested on it. The currency of England is $300,000,000, to wit: £8,000,000 sterling (near $40,000,000) in silver; £22,000,000 sterling (above $100,000,000) in gold; and about £30,000,000 sterling (near $150,000,000) in bank notes. The currency of the United States is difficult to be ascertained, from the multitude of banks, and the incessant ebb and flow of their issues; calculations vary; but all put the paper circulation at less than $100,000,000; and the proportion of specie and paper, at more than one half paper. This is agreed upon all hands, and is sufficient for the practical result, that an increase of our specie to $100,000,000, and the suppression of small notes, will give a larger total circulation than we now have, and a safer one. The total circulation may then be $200,000,000, in the proportions of half paper and half specie; and the specie, half gold and half silver. This would be an immense improvement upon our present condition, both in quantity and in quality; the paper part would become respectable from the suppression of notes under twenty dollars, which are of no profit except to the banks which issue them, and the counterfeiters who imitate them; the specie part would be equally improved by becoming one half gold. Mr. B. could not quit this important point, namely, the practicability of soon obtaining a specie currency of $100,000,000, and the one half gold, without giving other proofs to show the facility with which it has been every where done when attempted. He referred to our own history immediately after the Revolution, when the disappearance of paper money was instantly followed, as if by magic, by the appearance of gold and silver; to France, where the energy of the great Napoleon, then first consul, restored an abundant supply of gold and silver in one year; to England, where the acquisition of gold was at the rate of $24,000,000 per annum for four years after the notes under five pounds were ordered to be suppressed; and he referred with triumph to our own present history, when, in defiance of an immense and powerful political and moneyed combination against gold, we will have acquired about $20,000,000 of that metal in the two concluding years of President Jackson's administration.

"Mr. B. took this occasion to express his regret that the true idea of banks seemed to be lost in this country, and that here we had but little conception of a bank, except as an issuer of currency. A bank of discount and deposit, in contradistinction to a bank of circulation, is hardly thought of in the United States; and it may be news to some bank projectors, who suppose that nothing can be done without banks to issue millions of paper, to learn that the great bankers in London and Paris, and other capitals of Europe, issue no paper; and, still more, it may be news to them to learn that Liverpool and Manchester, two cities which happen to do about as much business as a myriad of such cities as this our Washington put together, also happen to have no banks to issue currency for them. They use money and bills of exchange, and have banks of discount and deposit, but no banks of circulation. Mr. Gallatin, in his Essay upon Currency, thus speaks of them:

"'There are, however, even in England, where incorporated country banks issuing paper are as numerous, and have been attended with the same advantages, and the same evils, as our country banks, some extensive districts, highly industrious and prosperous, where no such bank does exist, and where that want is supplied by bills of exchange drawn on London. This is the case in Lancashire, which includes Liverpool and Manchester, and where such bills, drawn at ninety days after date, are indorsed by each successive holder, and circulate through numerous persons before they reach their ultimate destination, and are paid by the drawee.'

"Mr. B. greatly regretted that such banks as those in Liverpool and Manchester were not in vogue in the United States. They were the right kind of banks. They did great good, and were wholly free from mischief. They lent money; they kept money; they transferred credits on books; they bought and sold bills of exchange; and these bills, circulating through many hands, and indorsed by each, answered the purpose of large bank notes, without their dangers, and became stronger every time they were passed. To the banks it was a profitable business to sell them, because they got both exchange and interest. To the commercial community they were convenient, both as a remittance and as funds in hand. To the community they were entirely safe. Banks of discount and deposit in the United States, issuing no currency, and issuing no bank note except of $100 and upwards, and dealing in exchange, would be entitled to the favor and confidence of the people and of the federal government. Such banks only should be the depositories of the public moneys.

"It is the faculty of issuing paper currency which makes banks dangerous to the country, and the height to which this danger has risen in the United States, and the progress which it is making, should rouse and alarm the whole community. It is destroying all standard of value. It is subjecting the country to demoralizing and ruinous fluctuations of price. It is making a lottery of property, and making merchandise of money, which has to be bought by the ticket holders in the great lottery at two and three per cent. a month. It is equivalent to the destruction of weights and measures, and like buying and selling without counting, weighing, or measuring. It is the realization, in a different form, of the debasement and arbitrary alteration of the value of coins practised by the kings of Europe in former ages, and now by the Sultan of Turkey. It is extinguishing the idea of fixed, moderate, annual interest. Great duties are thus imposed upon the legislator; and the first of these duties is to revive and favor the class of banks of discount and deposit; banks to make loans, keep money, transfer credits on books, buy and sell exchange, deal in bullion; but to issue no paper. This class of banks should be revived and favored; and the United States could easily revive them by confiding to them the public deposits. The next great duty of the legislator is to limit the issues of banks of circulation, and make them indemnify the community in some little degree, by refunding, in annual taxes, some part of their undue gains.

"The progress of the banking business is alarming and deplorable in the United States. It is now computed that there are 750 banks and their branches in operation, all having authority to issue currency; and, what is worse, all that currency is receivable by the federal government. The quantity of chartered bank capital, as it is called, is estimated at near $800,000,000; the amount of this capital reported by the banks to have been paid in is about $300,000,000; and the quantity of paper money which they are authorized by their charters to issue is about $750,000,000. How much of this is actually issued can never be known with any precision; for such are the fluctuations in the amount of a paper currency, flowing from 750 fountains, that the circulation of one day cannot be relied upon for the next. The amount of capital, reported to be paid in, is, however, well ascertained, and that is fixed at $300,000,000. This, upon its face, and without recourse to any other evidence, is proof that our banking system, as a whole, is unsolid and delusive, and a frightful imposition upon the people. Nothing but specie can form the capital of a bank; there are not above sixty or seventy millions of specie in the country, and, of that, the banks have not the one half. Thirty millions in specie is the extent; the remainder of the capital must have been made up of that undefinable material called 'specie funds,' or 'funds equivalent to specie,' the fallacy of which is established by the facts already stated, and which show that all the specie in the country put together is not sufficient to meet the one fifth part of these 'specie funds,' or 'funds equivalent to specie.' The equivalent, then, does not exist! credit alone exists; and any general attempt to realize these 'specie funds,' and turn them into specie, would explode the whole banking system, and cover the country with ruin. There may be some solid and substantial banks in the country, and undoubtedly there are better and worse among them; but as a whole—and it is in that point of view the community is interested—as a whole, the system is unsolid and delusive; and there is no safety for the country until great and radical reforms are effected.