share in the circulation, is not likely to receive the general sanction of the banks. The truth is, that the charter restrictions of some of the banks, the mutual relation and dependence of the banks of the same State, and even of the banks of different States, and the duty which the directors of each bank conceive they owe to their immediate constituents, upon points of security or emolument, interpose an insuperable obstacle to any voluntary arrangement, upon national considerations alone, for the establishment of a national medium through the agency of the State banks. It is, nevertheless, with the State banks that the measures for restoring the national currency of gold and silver must originate; for, until their issues of paper be reduced, their specie capitals be reinstated, and their specie operations be commenced, there will be neither room, nor employment, nor safety, for the introduction of the precious metals. The policy and the interest of the State banks must, therefore, be engaged in the great fiscal work, by all the means which the Treasury can employ, or the legislative wisdom shall provide.

3d. The establishment of a national bank is regarded as the best, and, perhaps, the only adequate resource to relieve the country and the Government from the present embarrassments. Authorized to issue notes, which will be received in all payments to the United States, the circulation of its issues will be co-extensive with the Union, and there will exist a constant demand, bearing a just proportion to the annual amount of the duties and taxes to be collected, independent of the general circulation for commercial and social purposes. A national bank will, therefore, possess the means and the opportunity of supplying a circulating medium of equal use and value in every State, and in every district of every State. Established by the authority of the Government of the United States, accredited by the Government to the whole amount of its notes in circulation, and entrusted as the depository of the Government with all the accumulations of the public treasure, the national bank, independent of its immediate capital, will enjoy every recommendation which can merit and secure the confidence of the public. Organized upon principles of responsibility, but of independence, the national bank will be retained within its legitimate sphere of action, without just apprehension from the misconduct of its directors, or from the encroachments of the Government. Eminent in its resources, and in its example, the national bank will conciliate, aid, and lead, the State banks in all that is necessary for the restoration of credit, public and private. And acting upon a compound capital, partly of stock, and partly of gold and silver, the national bank will be the ready instrument to enhance the value of the public securities, and to restore the currency of the national coin.

4th. The power of the Government to supply and maintain a paper medium of exchange will not be questioned; but, for the introduction of that medium, there must be an adequate motive. The sole motive for issuing Treasury notes has, hitherto, been to raise money in anticipation of the revenue. The revenue, however, will probably become, in the course of the year 1816. and continue afterwards, sufficient to discharge all the debts, and to defray all the expenses of the Government: and, consequently, there will exist no motive to issue the paper of the Government as an instrument of credit.

It will not be deemed an adequate object for an issue of the paper of the Government, merely that it may be exchanged for the paper of the banks, since the Treasury will be abundantly supplied with bank paper by the collection of the revenue; and the Government cannot be expected to render itself a general debtor, in order to become the special creditor of the State banks.

The co-operation of the Government with the national bank, in the introduction of a national currency, may, however, be advantageously employed by issues of Treasury notes, so long as they shall be required for the public service.

Upon the whole, the state of the national currency, and other important considerations connected with the operations of the Treasury, render it a duty respectfully to propose

That a national bank be established at the city of Philadelphia, having power to erect branches elsewhere, and that the capital of the bank (being of a competent amount) consist of three-fourths of the public stock, and one-fourth of gold and silver.

TREASURY DEPARTMENT, December 6, 1815.

Report of Secretary of Treasury (Alexander J. Dallas),
on National Bank



Fourteenth Congress, 1st Session

[Source: American State Papers, Finance, Vol. 3, pp. 57-61]

TREASURY DEPARTMENT, December 24, 1815.

I have the honor to acknowledge the receipt of your letter, dated the 23d instant, informing me "that the committee on so much of the President's message as relates to the national currency had determined that a national bank is the most certain means of restoring to the nation a specie circulation," and had directed you to obtain the opinion of this Department on the following points:

1st. The amount and composition of the capital of the bank. 2d. The government of the bank.

3d. The privileges and duties of the bank.

4th. The organization and operation of the bank.

5th. The bonus to be required for the charter of the bank.

6th. The measures which may aid the bank in commencing and maintaining its operations in specie.

It affords much satisfaction to find that the policy of establishing a national bank has received the sanction of the committee and the decision, in this respect, renders it unnecessary to enter into a comparative examination of the superior advantages of such an institution for the attainment of the objects contemplated by the Legislature. Referring, therefore, to the outline of a national bank, which is subjoined to this letter, as the result of an attentive consideration bestowed upon the subjects of your inquiry, I proceed, with deference

and respect, to offer some explanation of the principles upon which the system is founded.

I. It is proposed that, under a charter for twenty years, the capital of the national bank shall amount to $35,000,000; that Congress shall retain the power to raise it to $50,000,000, and that it shall consist three-quarters of public stock, and one-quarter of gold and silver.

1st. With respect to the amount of the capital. The services to be performed by the capital of the bank are important, various, and extensive. They will be required through a period almost as long as is usually assigned to a generation. They will be required for the accommodation of the Government, in the collection and distribution of its revenue, as well as for the uses of commerce, agriculture, manufactures, and the arts, throughout the Union. They will be required to restore and maintain the national currency; and, in short, they will be required, under every change of circumstances, in a season of war, as well as in the season of peace, for the circulation of the national wealth, which augments with a rapidity beyond the reach of ordinary calculation.

In the performance of these national services the local and incidental co-operation of the State banks may undoubtedly be expected; but it is the object of the present measure to create an independent, though not a discordant, institution; and while the Government is granting a monopoly for twenty years, it would seem to be improvident and dangerous to rely upon gratuitous or casual aids for the enjoyment of those benefits, which can be effectually secured by positive stipulation. Nor is it believed that any public inconvenience can possibly arise from the proposed amount of the capital of the bank with its augmentable quality. The amount may, indeed, be a clog upon the profits of the institution, but it can never be employed for any injurious purpose, (not even for the purpose of discount accommodation beyond the fair demand,) without an abuse of trust, which cannot, in candor, be anticipated, or which, if anticipated, may be made an object of penal responsibility.

The competition which exists at present among the State banks will, it is true, be extended to the national bank; but competition does not imply hostility. The commercial interests and the personal associations of the stockholders will generally be the same in the State banks and in the national bank. The directors of both institutions will naturally be taken from the same class of citizens. And experience has shown not only the policy, but the existence of those sympathies by which the intercourse of a national bank and the State banks has been, and always ought to be, regulated, for their common credit and security. At the present crisis it will be peculiarly incumbent upon the national bank, as well as the Treasury, to conciliate the State banks: to confide to them, liberally, a participation in the deposits of public revenue, and to encourage them in every reasonable effort to resume the payment of their notes in coin. But, independent of these considerations, it is to be recollected that when portions of the capital of the national bank shall be transferred to its branches, the amount invested in each branch will not, probably, exceed the amount of the capital of any of the principal State banks, and will certainly be less than the amount of the combined capital of the State banks, operating in any of the principal commercial cities. The whole number of the banking

establishments in the United States may be stated at two hundred and sixty, and the aggregate amount of their capitals may be estimated at $85,000,000; but the services of the national bank are also required in every State and Territory, and the capital proposed is $35,000,000, of which only one-fourth part will consist of gold and silver.

2d. With respect to the composition of the capital of the bank. There does not prevail much diversity of opinion upon the proposition to form a compound capital for the national bank, partly of public stock, and partly of coin. The proportions now suggested appear also to be free from any important objections. Under all the regulations of the charter, it is believed that the amount of gold and silver required will afford an adequate supply for commencing and continuing the payments of the bank in current coin; while the power which the bank will possess, to convert its stock portion of capital into bullion or coin, from time to time, is calculated to provide for any probable augmentation of the demand. This object being sufficiently secured the capital of the bank is next to be employed, in perfect consistency with the general interests and safety of the institution, to raise the value of the public securities, by withdrawing almost one-fifth of the amount from the ordinary stock market. Nor will the bank be allowed to expose the public to the danger of a depreciation, by returning any part of the stock to the market, until it has been offered, at the current price, to the commissioners of the sinking fund; and it is not an inconsiderable advantage, in the growing state of the public revenue, that the stock subscribed to the capital of the bank will become redeemable at the pleasure of the Government.

The subscription to the capital of the bank is opened to every species of funded stock. The estimate that the revenues of 1816 and 1817 will enable the Treasury to discharge the whole of the Treasury note debt, furnishes the only reason for omitting to authorize a subscription in that species of debt. Thus,

The old and new six per cent. stocks are receivable at par.

The seven per cent. stock, upon a valuation referring to the 30th of September, 1816, is receivable at 1065/100 dollars per cent.

The three per cent, stock, which can only be redeemed for its nominal or certificate value, may be estimated, under all circumstances, to be worth about sixty-two per cent. when the six per cent. stock is at par; but as it is desirable to accomplish the redemption of this stock upon equitable terms, it is made receivable at sixty-five per cent., the rate sanctioned by the Government, and in part accepted by the stockholders in the year 1807.

Of the instalments for paying the subscriptions it is only necessary to observe that they are regulated by a desire to reconcile an early commencement of the operations of the bank with the existing difficulties in the currency, and with the convenience of the subscribers. In one of the modes proposed for discharging the subscription of the Government, it is particularly contemplated to aid the bank with a medium which cannot fail to alleviate the first pressure for payments in coin.

II. It is proposed that the national bank shall be governed by twenty-five directors, and each of its branches by thirteen directors; that the President of the United States, with the advice and consent of the Senate, shall appoint five of the directors of the bank, one of

whom shall be chosen as president of the bank by the board of directors; that the resident stockholders shall elect twenty of the directors of the national bank, who shall be resident citizens of the United States, and that the national bank shall appoint the directors of each branch, (being resident citizens of the United States,) one of whom shall be designated by the Secretary of the Treasury, with the approbation of the President of the United States, to be president of the branch bank.

The participation of the President and Senate of the United States' in the appointment of directors appears to be the only feature in the proposition for the government of the national bank which requires an explanatory remark.

Upon general principles, wherever a pecuniary interest is to be effected by the operations of a public institution a representative authority ought to be recognized. The United States will be the proprietors of one-fifth of the capital of the bank, and in that proportion, upon general principles, they should be represented in the direction. But an apprehension has sometimes been expressed, lest the power of the Government thus inserted into the administration of the affairs of the bank should be employed eventually to alienate the funds, and to destroy the credit of the institution. Whatever may have been the fate of banks in other countries, subject to forms of government essentially different, there can be no reasonable cause for apprehension here. Independent of the obvious improbability of the attempt, the Government of the United States cannot, by any legislative or executive act, impair the rights, or multiply the obligations of a corporation constitutionally established, as long as the independence and integrity of the judicial power shall be maintained. Whatever accommodation the Treasury may have occasion to ask from the bank, can only be asked under the license of a law; and whatever accommodation shall be obtained must be obtained from the voluntary assent of the directors, acting under the responsibility of their trust.

Nor can it be doubted that the Department of the Government, which is invested with the power of appointment to all the important offices of the State, is a proper Department to exercise the power of appointment in relation to a national trust of incalculable magnitude. The national bank ought not to be regarded simply as a commercial bank. It will not operate upon the funds of the stockholders alone, but much more upon the funds of the nation. Its conduct, good or bad, will not affect the corporate credit and resources alone, but much more the credit and resources of the Government. In fine, it is not an institution created for the purposes of commerce and profit alone, but much more for the purposes of national policy, as an auxiliary in the exercise of some of the highest powers of the Government. Under such circumstances the public interests cannot be too cautiously guarded, and the guards proposed can never be injurious to the commercial interests of the institution. The right to inspect the general accounts of the bank may be employed to detect the evils of a mal-administration, but an interior agency in the direction of its affairs will best serve to prevent them.

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