The invariable course of business between old and new countries—always showing a balance in favor of the former, and bringing the latter in debt—demonstrates, that this habit is beyond the reach of legislation.
The truth is, that new countries are deficient in capital. They are in want of all the luxuries, and many of the necessaries, to which the emigrants were accustomed at home. They, however, advance in wealth and population faster than older states, and for the advance of capital, or the credit which they require, they are able and willing to pay. Thus both parties are satisfied with their mutual relations of debtor and creditor, and find their respective interests promoted by the proper adjustment of theserelations. The same principle is equally applicable to the capital required in the new states for a circulating medium. If they can borrow at a fair rate of interest from the Atlantic cities, or from Europe, capital for this purpose, it is as advantageous a loan as if procured for any other object. It enables them to appropriate an equal amount of capital to the clearing of new towns, building better houses, improving the roads, and generally promoting the prosperity of that portion of the union. It obviates the necessity, that so often impels them to excessive issues, on a limited capital of their own, and thus lessens the danger of a derangement of the currency.
This object was effectually attained in the establishment of the United States bank. Founded upon real capital, which was large enough for its proposed ends, it furnished, through its branches, a sound paper currency to these new states; and by the supervising care of the mother bank, those branches were sufficiently guarded against the tendency to over-issues.
By the same agency, the local banks were compelled to conduct their business with prudence, and to keep their circulation within proper limits. Whenever their issues were too much augmented, the national bank interposed a direct check, in demanding the redemption of their paper; and an indirect check was also given by the superior credit of its bills, which are receivable in all places in payment of duties. Since the establishment of this bank, consequently, the business of domestic exchange has been transacted upon the basis of a sound currency, and the rate of exchange, between the western and the middle states, has been reduced to one fifth of its price before that event.
It was not, however, in this manner alone that the rate of exchange was lowered. It was equalized by the obligation assumed by the federal government to receive the notes of the United States bank in payment of duties. The revenue paid to the United States in each year, amounts to about twenty-six million dollars, of which about one half is receivable at the custom-house in New York. The exchange being always in favor of that city, whenever it became too high, remittances were made by the western merchants, in branch notes, to their New York creditors, who used those notes in paying their custom-house bonds. The exchange was thus equalized without any expense to the community, and this operation has been felt through all the branches of the domestic exchange business.
Its effect has been so great, that exchange between the different parts of the union has been generally kept below the expense of transporting the specie, and the branch notes have seldom been at a greater discount than one fourth per cent. in any part of the country. As an equivalent for these advantages, the national bank, besides a bonus paid to the government when the charter was granted, has collected the public revenue, and transported it, without expense, to any part of the union where it was wanted. It has also disbursed it, and thus formed an efficient arm of the treasury department. During the time it has been in existence, it has performed these duties without any expense to the government, and has saved it from all losses from the insolvency of state banks. As an agent of the treasury department, in collecting and disbursing the revenue, it has proved itself efficient and eminently useful; and in that point of view, the establishment of the United States bank by congress has been vindicated,as one of the means necessary and proper to carry into effect the powers constitutionally vested in the federal government. In its operation upon the federal currency of the country, however, its constitutionality is still more unquestionable. It is through a national bank alone that congress can exercise that control over the money system of the union, that is vested in it by the federal compact.
In order, therefore, to regulate the currency, and to render the taxes and duties imposed by congress uniform throughout the United States, it is absolutely necessary that a national bank should be established with sufficient capital to control the state banks, and to compel them to keep their notes equivalent to specie. It can in this manner only discharge that duty, which, for wise and salutary ends, was exclusively vested in congress, at the formation of the government. In performing these highly responsible duties, the United States bank has necessarily gone counter to the wishes of various classes of the community. By compelling the local banks to control their issues, it has diminished the dividends of the stockholders; by reducing the rate of domestic exchange, it has lessened the profits of the brokers and capitalists, carrying on that branch of business; and by increasing the value of the circulating medium, through its supervising power over the local banks, it has, in effect, reduced the price of all property for which money is exchanged. These effects, though salutary to the community, have been injurious to individual interests, which have all been arrayed in hostility to that institution. The benefits of the bank have been of too general a character, to be readily appreciated by the mass. They consist in restoring and maintaining a sound currency, and though this is as indispensable to prosperous commerce, as a pure atmosphere is to a healthy man; still no special feeling is excited in the minds of those who use the one and breathe the other with a happy forgetfulness, that adulterated coin and irredeemable paper will cause as much desolation among merchants, as a pestilential miasma in a crowded city.
The administration of the bank, however, though excellent, has not been without faults. Shortly after going into operation, its direction fell into the hands of a few speculators, who brought it to the verge of bankruptcy, and it did not escape without the loss of more than a million of dollars, and no small portion of character. In the distribution of capital, dissatisfaction had been caused by the small amount apportioned to the city of New York; and it has been, with too much reason, asserted, that the illiberal policy pursued by the present bank towards that city, originated in a jealousy of the increasing wealth and trade of the commercial metropolis of the United States. At times, too, it had indiscreetly enlarged its discounts, and in order to bring the currency within proper limits, was obliged to bear harshly upon its customers. Notwithstanding these errors, it was with no little surprise, that the public found, in the first message of general Jackson to congress, (six years before the expiration of the charter,) an expression of his opinion against the constitutionality and expediency of the United States bank, and an assertion that it had failed in the great end of establishing a uniform and sound currency. As no intimation had been given of an intention to apply for a renewal of the charter, and as no specific abuses were pointed out deserving examination, this intimation was justly regarded as an indication of a strong hostility against that institution, on the part of the president, originating in causes not open tothe public eye. The message had the effect of diminishing the value of the stock six per cent. lower than before the opening of congress. The subject, however, was referred to the committees on finance, and reports adverse to the president’s views having been brought in, the stock recovered itself, and finally attained a higher rate than the original price.
The recent history of the Banks is to be found in a condensed state, introduced without any prescribed place, among the events, as they occurred, of Jackson’s and Van Buren’s administrations, near the end of the volume.