A Biography of Henry Clay, the Senator from Kentucky / Containing Also, a Complete Report of All His Speeches; Selections From His Private Correspondence; Eulogies in the Senate and House; and a Poem, by George D. Prentice, Esq.

by Unknown

Of all the faculties which I have stated of a bank, that which creates a circulation is the most important to the community at large. It is that in which thousands may be interested, who never obtained a discount, or made a deposit with a bank. Whatever a government agrees to receive in payment of the public dues is a medium of circulation; is money, current money, no matter what its form may be—treasury notes, drafts drawn at Washington, by the treasurer, on the receiver-general at New York, or, to use the language employed in various parts of this bill, ‘such notes, bills, or paper, issued under the authority of the United States.’ These various provisions were probably inserted not only to cover the case of treasury notes, but that of these drafts in due season. But if there were no express provision of law, that these drafts should be receivable in payment of public dues, they would, necessarily, be so employed, from their own intrinsic value.

The want of the community of a general circulation of uniform value every where in the United States, would occasion vast amounts of the species of draft which I have described to remain in circulation. The appropriations this year will probably fall not much short of thirty millions. Thirty millions of treasury drafts on receivers-general, of every denomination, and to any amount, may be issued by the secretary of the treasury. What amount would remain in circulation cannot be determined a priori, I suppose not less than ten or fifteen millions; at the end of another year, some ten or fifteen millions more; they would fill all the channels of circulation. The war between the government and state banks continuing, and this mammoth government bank being in the market, constantly demanding specie for its varied and ramified operations, confidence would be lost in the notes of the local banks, their paper would gradually cease to circulate, and the banks themselves would be crippled and broken. The paper of the government bank would ultimately fill the vacuum, as it would instantly occupy the place of the notes of the late bank of the United States.

I am aware Mr. President, that by the twenty-fifth section of the bill, in order to disguise the purpose of the vast machinery which we are about constructing, it is provided that it shall be the duty of the secretary of the treasury, to issue and publish regulations to enforce the speedy presentation of all government drafts for payment at the place where payable, and so forth. Now, what a tremendous power is here vested in the secretary! He is to prescribe rules and regulations to enforce the speedy presentationof all government drafts for payment at the place where payable. The speedy presentation! In the case I have supposed, a man has his ten thousand dollars, in drafts on the receiver-general at New York. The secretary is empowered to enact regulations requiring him speedily to present them, and if he do not, the secretary may order them to be paid at St. Louis. At New York they may be worth a premium of five per centum; on St. Louis, they may be liable to a discount of five per centum. Now, in a free government, who would ever think of subjecting the property or money of a citizen to the exercise of such a power by any secretary of the treasury? What opportunity does it not afford to reward a partisan, or punish an opponent? It will be impossible to maintain such an odious and useless restriction for any length of time. Why should the debtor, (as the government would be, in the case of such drafts as I have supposed,) require his creditor, (as the holder of the draft would be,) to apply within a prescribed time for his payment? No, sir; the system would control you; you could not so control the system. But if such a ridiculous restriction could be continued, the drafts would, nevertheless, whilst they were out, be the time long or short, perform the office of circulation and money.

Let us trace a little further the operation of this government bank, and follow it out to its final explosion. I have supposed the appropriation of some thirty millions of dollars annually by the government, to be disbursed in the form of drafts, issued at Washington by the treasury department, upon the depositaries. Of that amount, some ten or fifteen millions would remain, the first year, in circulation; at the end of another year, a similar amount would continue in circulation; and so on, from year to year, until, at the end of a series of some five or six years, there would be in circulation, to supply the indispensable wants of commerce and of a general medium of uniform value, not less than some sixty or eighty millions of drafts, issued by the government. These drafts would be generally upon the receiver-general at New York, because on that point, they would be preferred over all others, as they would command a premium, or be at par, throughout the whole extent of the United States; and we have seen that the secretary of the treasury is invested with ample authority to concentrate at that point the whole revenue of the United States.

All experience has demonstrated, that in banking operations, a much larger amount of paper can be kept out in circulation than the specie which it is necessary to retain in the vaults to meet it when presented for payment. The proportions which the same experience has ascertained to be entirely safe, are one of specie to three of paper. If, therefore, the executive government had sixty millions of dollars accumulated at the port of New York, in thehands of the receiver-general, represented by sixty millions of government drafts in circulation, it would be known that twenty of that sixty millions would be sufficient to retain to meet any amount of drafts, which, in ordinary times, would be presented for payment. There would then remain forty millions in the vaults, idle and unproductive, and of which no practical use could be made. Well; a great election is at hand in the state of New York, the result of which will seal the fate of an existing administration. If the application of ten millions of that dormant capital could save, at some future day, a corrupt executive from overthrow, can it be doubted, that the ten millions would be applied to preserve it in power? Again; let us suppose some great exigency to arise; a season of war, creating severe financial pressure and embarrassment. Would not an issue of paper, founded upon and exceeding the specie in the vaults, in some such proportions as experience had demonstrated might be safely emitted, be authorized? Finally, the whole amount of specie might be exhausted, and then, as it is easier to engrave and issue bank notes, than to perform the unpopular office of imposing taxes and burdens, the discovery would be made, that the credit of the government was a sufficient basis whereupon to make emissions of paper money, to be redeemed when peace and prosperity returned. Then we should have the days of continental money, and of assignats, restored! Then we should have that government paper medium which the senator from South Carolina, (Mr. Calhoun,) considers the most perfect of all currency!

Meantime, and during the progress of this vast government machine, the state banks would be all prostrated. Working well, as it may, if honestly administered, in the first period of its existence, it will be utterly impossible for them to maintain the unequal competition. They could not maintain it, even if the government were actuated by no unfriendly feelings towards them. But when we know the spirit which animates the present executive towards them, who can doubt that they must fall in the unequal contest? Their issues will be discredited and discountenanced, and that system of bankruptcy which the president would even now put into operation against them, will, in the sequel, be passed and enforced without difficulty.

Assuming the downfall of the local banks—the inevitable consequence of the operations of this great government bank; assuming, as I have shown would be the case, that the government would monopolize the paper issues of the country, and obtain the possession of a great portion of the specie of the country, we should then behold a combined and concentrated moneyed power, equal to that of all the existing banks of the United States, with that of the late bank of the United States superadded. This tremendous power would be wielded by the secretary of the treasuryacting under the immediate commands of the president of the United States. Here would be a perfect union of the sword and the purse; here would be no imaginary, but an actual, visible, tangible, consolidation of the moneyed power. Who or what could withstand it? The states themselves would become suppliants at the feet of the executive for a portion of those paper emissions, of the power to issue which they had been stripped, and which he now exclusively possessed.

Mr. President, my observation and experience have satisfied me, that the safety of liberty and property consists in the division of power, whether political or pecuniary. In our federative system, our security is to be found in that happy distribution of power which exists between the federal government and the state governments. In our monetary system, as it lately existed, its excellence resulted from that beautiful arrangement, by which the states had their institutions for local purposes, and the general government its institution for the more general purposes of the whole union. There existed the greatest congeniality between all the parts of this admirable system. All was homogeneous. There was no separation of the federal government from the states or from the people. There was no attempt to execute practically, that absurdity of sustaining, among the same people, two different currencies of unequal value. And how admirably did the whole system, during the forty years of its existence, move and work! And on the two unfortunate occasions of its ceasing to exist, how quickly did the business and transactions of the country run into wild disorder and utter confusion!

Hitherto, I have considered this new project as it is, according to its true nature and character, and what it must inevitably become. I have not examined it as it is not, but as its friends would represent it to be. They hold out the idea that it is a simple contrivance to collect, to keep, and to disburse, the public revenue. In that view of it, every consideration of safety and security, recommends the agency of responsible corporations, rather than the employment of particular individuals. It has been shown, during the course of this debate, that the amount which has been lost by the defalcation of individuals has exceeded three or four times the amount of all that has been lost by the local banks, although the sums confided to the care of individuals have not been probably one tenth part of the amount that has been in the custody of the local banks. And we all know, that, during the forty years of existence of the two banks of the United States, not one cent was lost of the public revenue.

I have been curious, Mr. President, to know whence this idea of receivers-general was derived. It has been supposed to have been borrowed from France. It required all the power of that most extraordinary man that ever lived, Napoleon Bonaparte, when he wasin his meridian greatness, to displace the farmers-general, and to substitute in their place the receivers-general. The new system requires, I think I have heard it stated, something like one hundred thousand employees to have it executed. And, notwithstanding the modesty of the infant promises of this new project, I have no doubt that ultimately we shall have to employ a number of persons approximating to that which is retained in France. That will undoubtedly be the case whenever we shall revive the system of internal taxation. In France, what reconciled them to the system was, that Napoleon first, and the Bourbons afterwards, were pleased with the immense patronage which it gave them. They liked to have one hundred thousand dependents to add strength to the throne, which had been recently constructed or reascended. I thought, however, that the learned chairman of the committee of finance must have had some other besides the French model for his receivers-general; and, accordingly, upon looking into Smith’s history of his own state, I found, that, when it was yet a colony, some century and a half ago, and when its present noble capital still retained the name of New Amsterdam, the historian says; ‘among the principal laws enacted at this session, we may mention that for establishing the revenue, which was drawn into precedent. The sums raised by it were made payable into the hands of receivers-general, and issued by the governor’s warrant. By this means the governor became, for a season, independent of the people, and hence we find frequent instances of the assemblies contending with him for the discharge of debts to private persons, contracted on the faith of the government.’ The then governor of the colony was a man of great violence of temper, and arbitrary in his conduct. How the sub-treasury system of that day operated, the same historian informs us in a subsequent part of his work. ‘The revenue,’ he says, ‘established the last year, was at this session continued five years longer than was originally intended. This was rendering the governor independent of the people. For, at that day, the assembly had no treasure, but the amount of all taxes went, of course, into the hands of the receiver-general, who was appointed by the crown. Out of this fund, moneys were only issuable by the governor’s warrant, so that every officer in the government, from Mr. Blaithwait, who drew annually five per centum out of the revenue, as auditor-general, down to the meanest servant of the public, became dependent, solely, of the governor. And hence we find the house, at the close of every session, humbly addressing his excellency, for the trifling wages of their own clerk.’ And, Mr. President, if this measure should unhappily pass, the day may come, when the senate of the United States will have humbly to implore some future president of the United States to grant it money to pay the wages of its own sergeant-at-arms, and doorkeeper.