A Compilation of the Messages and Papers of the Presidents. Volume 3, part 2: Martin Van Buren

by Unknown

My own views of the subject are unchanged. They have been repeatedly and unreservedly announced to my fellow-citizens, who with full knowledge of them conferred upon me the two highest offices of the Government. On the last of these occasions I felt it due to the people to apprise them distinctly that in the event of my election I would not be able to cooperate in the reestablishment of a national bank. To these sentiments I have now only to add the expression of an increased conviction that the reestablishment of such a bank in any form, whilst it would not accomplish the beneficial purpose promised by its advocates, would impair the rightful supremacy of the popular will, injure the character and diminish the influence of our political system, and bring once more into existence a concentrated moneyed power, hostile to the spirit and threatening the permanency of our republican institutions.

Local banks have been employed for the deposit and distribution of the revenue at all times partially and on three different occasions exclusively: First, anterior to the establishment of the first Bank of the United States; secondly, in the interval between the termination of that institution and the charter of its successor; and thirdly, during the limited period which has now so abruptly closed. The connection thus repeatedly attempted proved unsatisfactory on each successive occasion, notwithstanding the various measures which were adopted to facilitate or insure its success. On the last occasion, in the year 1833, the employment of the State banks was guarded especially, in every way which experience and caution could suggest. Personal security was required for the safe-keeping and prompt payment of the moneys to be received, and full returns of their condition were from time to time to be made by the depositories. In the first stages the measure was eminently successful, notwithstanding the violent opposition of the Bank of the United States and the unceasing efforts made to overthrow it. The selected banks performed with fidelity and without any embarrassment to themselves or to the community their engagements to the Government, and the system promised to be permanently useful; but when it became necessary, under the act of June, 1836, to withdraw from them the public money for the purpose of placing it in additional institutions or of transferring it to the States, they found it in many cases inconvenient to comply with the demands of the Treasury, and numerous and pressing applications were made for indulgence or relief. As the installments under the deposit law became payable their own embarrassments and the necessity under which they lay of curtailing their discounts and calling in their debts increased the general distress and contributed, with other causes, to hasten the revulsion in which at length they, in common with the other banks, were fatally involved.

Under these circumstances it becomes our solemn duty to inquire whether there are not in any connection between the Government and banks of issue evils of great magnitude, inherent in its very nature and against which no precautions can effectually guard.

Unforeseen in the organization of the Government and forced on the Treasury by early necessities, the practice of employing banks was in truth from the beginning more a measure of emergency than of sound policy. When we started into existence as a nation, in addition to the burdens of the new Government we assumed all the large but honorable load of debt which was the price of our liberty; but we hesitated to weigh down the infant industry of the country by resorting to adequate taxation for the necessary revenue. The facilities of banks, in return for the privileges they acquired, were promptly offered, and perhaps too readily received by an embarrassed Treasury. During the long continuance of a national debt and the intervening difficulties of a foreign war the connection was continued from motives of convenience; but these causes have long since passed away. We have no emergencies that make banks necessary to aid the wants of the Treasury; we have no load of national debt to provide for, and we have on actual deposit a large surplus. No public interest, therefore, now requires the renewal of a connection that circumstances have dissolved. The complete organization of our Government, the abundance of our resources, the general harmony which prevails between the different States and with foreign powers, all enable us now to select the system most consistent with the Constitution and most conducive to the public welfare. Should we, then, connect the Treasury for a fourth time with the local banks, it can only be under a conviction that past failures have arisen from accidental, not inherent, defects.

A danger difficult, if not impossible, to be avoided in such an arrangement is made strikingly evident in the very event by which it has now been defeated. A sudden act of the banks intrusted with the funds of the people deprives the Treasury, without fault or agency of the Government, of the ability to pay its creditors in the currency they have by law a right to demand. This circumstance no fluctuation of commerce could have produced if the public revenue had been collected in the legal currency and kept in that form by the officers of the Treasury. The citizen whose money was in bank receives it back since the suspension at a sacrifice in its amount, whilst he who kept it in the legal currency of the country and in his own possession pursues without loss the current of his business. The Government, placed in the situation of the former, is involved in embarrassments it could not have suffered had it pursued the course of the latter. These embarrassments are, moreover, augmented by those salutary and just laws which forbid it to use a depreciated currency, and by so doing take from the Government the ability which individuals have of accommodating their transactions to such a catastrophe.

A system which can in a time of profound peace, when there is a large revenue laid by, thus suddenly prevent the application and the use of the money of the people in the manner and for the objects they have directed can not be wise; but who can think without painful reflection that under it the same unforeseen events might have befallen us in the midst of a war and taken from us at the moment when most wanted the use of those very means which were treasured up to promote the national welfare and guard our national rights? To such embarrassments and to such dangers will this Government be always exposed whilst it takes the moneys raised for and necessary to the public service out of the hands of its own officers and converts them into a mere right of action against corporations intrusted with the possession of them. Nor can such results be effectually guarded against in such a system without investing the Executive with a control over the banks themselves, whether State or national, that might with reason be objected to. Ours is probably the only Government in the world that is liable in the management of its fiscal concerns to occurrences like these.

But this imminent risk is not the only danger attendant on the surrender of the public money to the custody and control of local corporations. Though the object is aid to the Treasury, its effect may be to introduce into the operations of the Government influences the most subtle, founded on interests the most selfish.

The use by the banks, for their own benefit, of the money deposited with them has received the sanction of the Government from the commencement of this connection. The money received from the people, instead of being kept till it is needed for their use, is, in consequence of this authority, a fund on which discounts are made for the profit of those who happen to be owners of stock in the banks selected as depositories. The supposed and often exaggerated advantages of such a boon will always cause it to be sought for with avidity. I will not stop to consider on whom the patronage incident to it is to be conferred. Whether the selection and control be trusted to Congress or to the Executive, either will be subjected to appeals made in every form which the sagacity of interest can suggest. The banks under such a system are stimulated to make the most of their fortunate acquisition; the deposits are treated as an increase of capital; loans and circulation are rashly augmented, and when the public exigencies require a return it is attended with embarrassments not provided for nor foreseen. Thus banks that thought themselves most fortunate when the public funds were received find themselves most embarrassed when the season of payment suddenly arrives.

Unfortunately, too, the evils of the system are not limited to the banks. It stimulates a general rashness of enterprise and aggravates the fluctuations of commerce and the currency. This result was strikingly exhibited during the operations of the late deposit system, and especially in the purchases of public lands. The order which ultimately directed the payment of gold and silver in such purchases greatly checked, but could not altogether prevent, the evil. Specie was indeed more difficult to be procured than the notes which the banks could themselves create at pleasure; but still, being obtained from them as a loan and returned as a deposit, which they were again at liberty to use, it only passed round the circle with diminished speed. This operation could not have been performed had the funds of the Government gone into the Treasury to be regularly disbursed, and not into banks to be loaned out for their own profit while they were permitted to substitute for it a credit in account.

In expressing these sentiments I desire not to undervalue the benefits of a salutary credit to any branch of enterprise. The credit bestowed on probity and industry is the just reward of merit and an honorable incentive to further acquisition. None oppose it who love their country and understand its welfare. But when it is unduly encouraged; when it is made to inflame the public mind with the temptations of sudden and unsubstantial wealth; when it turns industry into paths that lead sooner or later to disappointment and distress, it becomes liable to censure and needs correction. Far from helping probity and industry, the ruin to which it leads falls most severely on the great laboring classes, who are thrown suddenly out of employment, and by the failure of magnificent schemes never intended to enrich them are deprived in a moment of their only resource. Abuses of credit and excesses in speculation will happen in despite of the most salutary laws; no government, perhaps, can altogether prevent them, but surely every government can refrain from contributing the stimulus that calls them into life.