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

by Thomas Hart Benton

"In this last account there is a charge under date of June 30, 1840, of $400,000 to 'parent bank notes account,' which has not been explained to the satisfaction of the committee. It must be also mentioned, that among the expenditures of the bank, there is entered, at various dates, commencing May 5, 1836, sums amounting in all to 618,640 dollars 15 cents, as paid on the 'receipts of Mr. N. Biddle,' of 'Mr. N. Biddle and J. Cowperthwaite,' and 'cashier's vouchers.' As the committee were unable to obtain satisfactory information upon the subject of these expenses from the books or officers of the bank, application was made by letter to Mr. N. Biddle and Mr. J. Cowperthwaite, from whom no reply has been received."

These enormous transactions generally without the knowledge of the directory, usually upon the initials of a member of the exchange committee; and frequently upon a deposit of stock in the cash drawer. Besides direct loans to members of Congress, and immense fees, there was a process of entertainment for them at immense expense—nightly dinners at hotels—covers for fifty: and the most costly wines and viands: and this all the time. Besides direct applications of money in elections, the bank became a fountain of supply in raising an election fund where needed, taking the loss on itself. Thus, in 1833, in the presidential election in Kentucky, some politicians went into the branch bank at Lexington, assessed the party in each county for the amount wanted in that county—drew drafts for the amount of the assessment on some ardent friends in the county, received the cash for the drafts from the bank, and applied it to the election—themselves not liable if the assessment was not paid, but the same to go to the profit and loss account of the bank. In such operations as all these, and these are not all, it was easy for the bank to be swallowed up: and swallowed up it was totally.

The losses to the stockholders were deplorable, and in many instances attended with circumstances which aggravated the loss. Many were widows and children, their all invested where it was believed to be safe; and an ascertained income relied on as certain, with eventual return of the capital. Many were unfortunately deceived into the purchase or retention of stock, by the delusive bank reports. The makers of these reports themselves held no quantity of the stock—only the few shares necessary to qualify them for the direction. Foreign holders were numerous, attracted by the, heretofore, high credit of American securities, and by the implications of the name—Bank of the United States; implying a national ownership, which guaranteed national care in its management, and national liability on its winding up. Holland, England, France suffered, but the English most of all the foreigners. The London Banker's Circular thus described their loss:

"The proportion of its capital held by British subjects is nearly four millions sterling; it may be described as an entire loss. And the loss we venture, upon some consideration, to say is greater than the aggregate of all the losses sustained by the inhabitants of the British Islands, from failure of banks in this country, since Mr. Patterson established the banks of England and Scotland at the close of the seventeenth century. The small population of Guernsey and Jersey hold £200,000 of the stock of this U. States Bank. Call it an entire loss, and it is equal to a levy of three or four pounds on every man, woman, and child in the whole community of those islands—a sum greater than was ever raised by taxation in a single year on any people in the whole world. Are these important facts? if facts they be. Then let statesmen meditate upon them, for by their errors and reckless confidence in delusive theories they have been produced."

The credit of the bank, and the price of stock was kept up by delusive statements of profits, and fictitious exhibition of assets and false declarations of surpluses. Thus, declaring a half-yearly dividend of four per centum, January 1st, 1839, with a surplus of more than four millions; on the first of July of the same year, another half-yearly dividend of four per centum, with a surplus of more than four millions; on the 15th of January, the same year, announcing a surplus of three millions; and six weeks thereafter, on the first of January, announcing a surplus of five millions; while the assets of the bank were carried up to seventy-six millions. In this way credit was kept up. The creating of suspensions—that of 1837, and subsequent—cost immense sums, and involved the most enormous villainy; and the last of these attempts—the run upon the New York banks to stop them again before she herself stopped for the last time—was gigantically criminal, and ruinous to itself. Mr. Joseph Cowperthwaite (perfectly familiar with the operation) describes it to the life, and with the indifference of a common business transaction. Premising that a second suspension was coming on, it was deemed best (as in the first one of 1837) to make it begin in New York; and the operation for that purpose is thus narrated:

"After the feverish excitement consequent on this too speedy effort to return to cash payments had in a good degree subsided, another crisis was anticipated, and it was feared that the banks generally would be obliged again to suspend. This was, unhappily, too soon to be realized, for the storm was then ready to burst, but, instead of meeting its full force at once, it was deemed best to make it fall first upon the banks of New York. To effect this purpose, large means were necessary, and to procure these, resort was had to the sale of foreign exchange. The state of the accounts of the bank with its agents abroad did not warrant any large drafts upon them, especially that of the Messrs. Hottinguer in Paris. This difficulty, however, it was thought might be avoided, by shipping the coin to be drawn from the New York banks immediately to meet the bills. Accordingly, large masses of exchange, particularly bills on Paris, which were then in great demand, were sent to New York to be sold without limit. Indeed, the bills were signed in blank, and so sent to New York; and although a large book was thus forwarded, it was soon exhausted, and application was made to the agent of the Paris house in New York for a further supply, who drew a considerable amount besides. The proceeds of these immense sales of exchange created very heavy balances against the New York banks, which, after all, signally failed in producing the contemplated effect. The bills not being provided for, nor even regularly advised, as had uniformly been the custom of the bank, were dishonored; and although the agent in London did every thing which skill and judgment could accomplish, the credit of the bank was gone, and from that day to the present its effects upon the institution have been more and more disastrous."

"Deemed best to make the storm fall first upon the banks of New York;" and for that purpose to draw bills without limit, without funds to meet them, in such rapid succession as to preclude the possibility of giving notice—relying upon sending the gold which they drew out of the New York banks to Paris, to meet the same bills (all the while laying that exportation of gold to the wickedness of the specie circular), and failing to get the money there as fast as these "race-horse" bills went—they returned dishonored—came rolling back by millions, protested in Paris, to be again protested in Philadelphia. Then the bubble burst. The credit which sustained the monster was gone. Ruin fell upon itself, and upon all who put their trust in it; and certainly this last act, for the criminality of its intent and the audacity of its means, was worthy to cap and crown the career of such an institution.

It was the largest ruin, and the most criminal that has been seen since the South Sea and Mississippi schemes; yet no one was punished, or made to refund. Bills of indictment were found by the grand jury of the county of Philadelphia against Nicholas Biddle, Samuel Jaudon, and John Andrews, for a conspiracy to defraud the stockholders in the bank; and they were arrested, and held to bail for trial. But they surrendered themselves into custody, procured writs of habeas corpus for their release; and were discharged in vacation by judges before whom they were brought. It has been found difficult in the United States to punish great offenders—much more so than in England or France. In the cases of the South Sea and Mississippi frauds, the principal actors, though men of high position, were criminally punished, and made to pay damages. While these delinquencies were going on in the Bank of the United States, an eminent banker of London—Mr. Fauntleroy—was hanged at Tyburn, like a common felon—for his bank misdeeds: and while some plundered stockholders are now (autumn of 1855) assembled in Philadelphia, searching in vain for a shilling of their stock, three of the greatest bankers in London are receiving sentence of transportation for fourteen years for offences, neither in money nor morals, the hundredth part of the ruin and crime perpetrated by our American bank—bearing the name of the United States. The case presents too strong a contrast, and teaches too great a lesson to criminal justice to be omitted; and here it is:

"The firm had been in existence for nearly two centuries. The two elder partners of the firm had been distinguished for munificent charities, for an advocacy of great moral reforms, and an active participation in the religious or philanthropic measures of the day. They had always been liberal givers, had presided at Exeter Hall meetings, built chapels, and generally acted the part of liberal and useful members of society; and one of them, Sir John Dean Paul, was a baronet by descent, and allied to some of the highest nobility of England. He was first cousin to the present Lord Ravensworth, the honorable Augustus and Adolphus Liddell, the rector of St. Paul's, Knightsbridge, the Countess of Hardwicke, Viscountess Barrington, Lady Bloomfield; and, above all, the honorable Mrs. Villiers, sister-in-law to the Earl of Clarendon. These connections, however, in a country where rank and social position have peculiar influence, did not save them from a criminal trial and utter disgrace. One of their customers, in obedience to what he believed to be a duty to society, having personally inquired into the affairs of the firm, proceeded to lay a criminal information against Messrs. Strahan, Paul, and Bates, which led to their indictment and subsequent trial before the criminal court. This gentleman was the Rev. Dr. Griffith, Prebendary of Rochester, a wealthy ecclesiastic and a personal friend of all the partners of the firm, with which he had been a large depositor for many years. On the twenty-fifth of October the trial came on before Mr. Baron Alderson, assisted by Baron Martin and Justice Willes. The defendants appeared in court, attended by Sir Frederick Thesiger, Mr. Ballantyne, Sergeant Byles, and other almost equally eminent counsel. The Attorney-general appeared for the prosecution, and the evidence adduced at the trial, disclosed the following facts: Dr. Griffith, the prosecutor in the proceedings, and who, at the time of the failure of the defendants, had money and securities on deposit with them to the amount of £22,000, about five years ago empowered them to purchase for him on three different occasions, Danish five per cent. bonds to the value of £5,000. The defendants purchased the bonds, upon which they regularly received the dividends, and credited Dr. Griffith with the same on their books. This continued until March, 1854, when Sir John D. Paul, to relieve the embarrassments under which the firm were laboring, sold these securities, together with others with which they were entrusted, and appropriated the proceeds, amounting to over £12,000, to the use of the firm. This, as we have stated, was no offence at common law, and the indictment was preferred upon a statutory provision found in the 7th and 8th of George IV., cap. 29. The rigid severity of the penal law in England on this subject will be better appreciated when we add, that the bonds were replaced by others of equal value, in the June following their misappropriation, just one year previous to the failure of the firm; and that the indictment only charged the defendants with misappropriating them in this single instance, although it was shown that the second set of bonds were again sold for the use of the firm in April, 1855; Dr. Griffith having, in the interval, regularly received his dividends; so that, although the firm might be perfectly solvent at this moment, the fact that they had sold the bonds in March, 1851, even if they had replaced them in June, 1854, and had credited Dr. Griffith with the dividends on them between those dates, would still render them liable to an indictment. The case, therefore, overlooking the final misappropriation of the bonds, and the failure of the firm in 1855, was narrowed down to the single issue—whether they had been sold in 1854 without the consent of Dr. Griffith."

For misappropriating sixty thousand dollars of one of their customers—using it without his consent—these three great London bankers were sentenced to fourteen years' transportation: for misappropriating thirty-five millions, and sinking twenty-one millions more in other institutions, the wrong-doers go free in the United States—giving some countenance among us to the sarcasm of the Scythian philosopher, that laws are cobwebs which catch the weak flies, and let the strong ones break through. The Judge (Mr. Baron Alderson) who tried this case (that of the three London bankers), had as much heart and feeling as any judge, or man ought to have; but he also had a sense of his own duty, and of his obligations to the laws, and to the country; and in sentencing men of such high position, and with whom he had been intimate and social, he combined in the highest degree the feelings of a man with the duties of the judge. He said to the prisoners: