Report of Secretary of Treasury (Alexander J. Dallas), on Public Credit



[Source: American State Papers, Finance, Vol. 2, pp. 866-869]

TREASURY DEPARTMENT, October 17, 1814.

I have the honor to acknowledge the receipt of your letter, dated the 14th inst.; and, aware of the necessity for an early interposition of Congress on the subject to which it relates, I proceed, at the moment of entering upon the duties of office, to offer to the consideration of the Committee of Ways and Means, an answer on the several points of their inquiry.

Contemplating the present state of the finances, it is obvious, that a deficiency in the revenue, and a depreciation in the public credit, exist, from causes which cannot in any degree be ascribed, either to the want of resources, or to the want of integrity in the nation. Different minds will conceive different opinions in relation to some of those causes; but it will be agreed on all sides, that the most operative have been the inadequacy of our system of taxation to form a foundation for public credit; and the absence even from that system of the means which are best adapted to anticipate, collect, and distribute the public revenue. The wealth of the nation, in the value and products of its soil, in all the acquisitions of personal property, and in all the varieties of industry, remains almost untouched by the hand of Government; for, the national faith, and not the national wealth, has hitherto been the principal instrument of finance. It was reasonable, however, to expect, that a period must occur in the course of a protracted war, when confidence in the accumulating public engagements could only be secured by an active demonstration, both of the capacity and the disposition to perform them. In the present state of the treasury, therefore, it is a just consolation to reflect, that a prompt and resolute application of the resources of the country will effectually relieve from every pecuniary embarrassment, and vindicate the fiscal honor of the Government. But it would be vain to attempt to disguise, and it would be pernicious to palliate the difficulties which are now to be overcome. The exigencies of the Government require a supply of treasure for the prosecution of the war, beyond any amount which it would be politic, even if it were practicable, to raise by an immediate and constant imposition of taxes. There must, therefore, be a resort to credit, for a considerable portion of the supply. But the public credit is at this juncture so depressed, that no hope of adequate succor, on moderate terms, can safely rest upon it. Hence, it becomes the object first and last in every practical scheme of finance, to re-animate the confidence. of the citizens, and to impress on the mind of every man, who, for the public account, renders services, furnishes supplies, or advances money, a conviction of the punctuality as well as of the security of the Government. It is not to be regarded, indeed, as the case of preserving a credit which has never been impaired, but rather as the case of rescuing from reproach a credit over which doubt and apprehension (not)

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the less injurious, perhaps, because they are visionary) have cast an inauspicious shade. In the former case, the ordinary means of raising and appropriating the revenue, will always be sufficient; but in the latter case, no exertion can be competent to attain the object, which does not quiet, in every mind, every fear of future loss or disappointment, in consequence of trusting to the pledges of the public faith.

The condition of the circulating medium of the country, presents another copious source of mischief and embarrassment. The recent exportations of specie have considerably diminished the fund of gold and silver coin; and another considerable portion of that fund has been drawn, by the timid and the wary, from the use of the community, into the private coffers of individuals. On the other hand, the multiplication of banks in the several States has so increased the quantity of paper currency, that it would be difficult to calculate its amount; and still more difficult to ascertain its value, with reference to the capital on which it has been issued. But the benefit of even this paper currency is in a great measure lost, as the suspension of payments in specie, at most of the banks, has suddenly broken the chain of accommodation that previously extended the credit and the circulation of the notes which were emitted in one State into every State of the Union. It may, in general, be affirmed, therefore, that there exists, at this time, no adequate circulating medium, common to the citizens of the United States. The moneyed transactions of private life are at a stand; and the fiscal operations of the Government, labor with extreme inconvenience. It is impossible that such a state of things should be long endured; but, let it be fairly added, that, with legislative aid, it is not necessary that the endurance should be long. Under favorable circumstances, and to a limited extent, an emission of treasury notes would, probably, afford relief; but treasury notes are an expensive and precarious substitute, either for coin or for bank notes, charged as they are with a growing interest, productive of no countervailing profit or emolument, and exposed to every breath of popular prejudice or alarm. The establishment of a national institution, operating upon credit combined with capital, and regulated by prudence and good faith, is, after all, the only efficient remedy for the disordered condition of our circulating medium. While accomplishing the object, too, there will be found, under the auspices of such an institution, a safe depository for the public treasure, and a constant auxiliary to the public credit. But whether the issues of a paper currency proceed from the national treasury, or from a national bank, the acceptance of the paper in a course of payments and receipts must be forever optional with the citizens. The extremity of that day cannot be anticipated, when any honest and enlightened statesman will again venture upon the desperate expedient of a tender law.

From this painful, but necessary development of existing evils, we pass, with hope and confidence, to a more specific consideration of the measures from which relief may be certainly and speedily derived. Remembering always that the objects of the Government are to place the public credit upon a solid and durable foundation; to provide a revenue commensurate with the demands of a war expenditure; and to remove from the treasury an immediate pressure, the following propositions are submitted to the committee, with every sentiment of deference and respect.


I. It is proposed, that, during the war, and until the claims contemplated by the proposition are completely satisfied, or extinct, there shall be annually raised by taxes, duties, imposts, and excises, a fund for these purposes:



II. It is proposed, that, during the war, and until the claims contemplated by the preceding proposition are completely satisfied, or other adequate funds shall be provided and substituted by law, there shall be annually raised, by the means here specified, the following


** *

III. It is proposed that a national bank shall be incorporated for a term of twenty years, to be established at Philadelphia, with a power to erect offices of discount and deposite elsewhere, upon the following principles:

1. That the capital of the bank shall be fifty millions of dollars, to be divided into 100,000 shares of 500 dollars each. Three-fifths of the capital, being 60,000 shares, amounting to 30,000,000 of dollars, to be subscribed by corporations, companies or individuals: and twofifths of the capital, being 40,000 shares, amounting to 20,000,000 of dollars, to be subscribed by the United States.

2. That the subscriptions of corporations, companies, and individuals, shall be paid for in the following manner.

One-fifth part, or $6,000,000, in gold or silver coin.

Four-fifth parts, or 24,000,000, in gold or silver coin, or in six per cent. stock issued since the declaration of war, and treasury notes, in the proportion of one-fifth in treasury notes, and three-fifths in six per cent stock.

3. That the subscriptions of corporations, companies, and individnals, shall be paid at the following periods:

20 dollars on each share, to be paid at the time
of subscribing, in gold or silver coin

40 dollars on each share, to be paid in gold or
silver coin, one month after the subscrip-


2, 400, 000

40 dollars on each share, in two months after
the subscription, in gold or silver coin_-_

2, 400, 000

6, 000, 000

100 dollars___.
100 dollars on each share, in gold or silver coin,
or in six per cent. stock, or in treasury
notes, according to the preceding appor-
tionment, to be paid at the time of sub-

150 dollars on each share, to be paid in like man-
ner, in two months after subscribing.

150 dollars on each share, to be paid in like man-
ner, in three months after subscribing-_-_

500 dollars___

6, 000, 000

9, 000, 000

9, 000, 000

$30, 000, 000

4. That the subscription of the United States shall be paid in six per cent. stock, at the same periods, and in the same proportions, as the payments of private subscriptions, in stock and treasury notes.

5. That the United States may substitute six per cent. stock, for the amount of the treasury notes subscribed by corporations, companies, and individuals, as the notes respectively become due and payable.

6. That the bank shall loan to the United States $30,000,000, at an interest of six per cent. at such periods, and in such sums, as shall be found mutually convenient.

7. That no part of the public stock, constituting a portion of the capital of the bank, shall be sold during the war, nor at any subsequent time, for less than par; nor at any time to an amount exceeding one moiety, without the consent of Congress.

8. That provision shall be made for protecting the bank notes from forgery; for limiting the issue of bank notes; and for receiving them in all payments to the United States.

9. That the capital of the bank, its notes, deposites, dividends, or profits (its real estate only excepted) shall not be subject to taxation by the United States, or by any individual State.

10. That no other bank shall be established by Congress, during the term for which the national bank is incorporated.

11. That the national bank shall be governed by fifteen directors, being resident citizens of the United States and stockholders. The President of the United States shall annually name five directors, and designate one of the five to be the president of the bank. The other directors shall be annually chosen by the qualified stockholders, in person or by proxy, if resident within the United States, voting upon a scale graduated according to the number of shares which they respectively hold. The cashier and other officers of the bank to be appointed as is usual in similar institutions.

12. That the directors of the national bank shall appoint seven persons, one of whom to preside, as the managers of each office of discount and deposite, and one person to be the cashier.

13. That the general powers, privileges, and regulations of the bank, shall be the same as are usual in similar institutions; but with this special provision, that the general accounts shall be subject to the inspection of the Secretary of the Treasury.

It is proper to accompany these propositions with a few explanatory remarks.

3. In making a proposition for the establishment of a national bank, I cannot be insensible to the high authority of the names which have appeared in opposition to that measure upon constitutional grounds. It would be presumptuous to conjecture that the sentiments which actuated the opposition have passed away; and yet it would be denying to experience a great practical advantage, were we to suppose that a difference of times and circumstances would not produce a corresponding difference in the opinions of the wisest, as well as of the purest men. But, in the present case, a charge of private opinion is not material to the success of the proposition for establishing a national

bank. In the administration of human affairs, there must be a period when discussion shall cease and decision shall become absolute. A diversity of opinion may honorably survive the contest; but, upon the genuine principles of a representative government, the opinion of the majority can alone be carried into action. The judge, who dissents from the majority of the bench, changes not his opinion, but performs his duty, when he enforces the judgment of the court, although it is contrary to his own convictions. An oath to support the constitution and the laws, is not, therefore, an oath to support them under all circumstances, according to the opinion of the individual who takes it, but it is, emphatically, an oath to support them according to the interpretation of the legitimate authorities. For the erroneous decisions of à court of law, there is the redress of a censorial, as well as of an appellate jurisdiction. Over an act, founded upon an exposition of the constitution, made by the legislative department of the Government, but alleged to be incorrect, we have seen the judicial department exercise a remedial power. And even if all the departments, legislative, executive, and judicial, should concur in the exercise of a power, which is either thought to transcend the constitutional trust, or to operate injuriously upon the community, the case is still within the reach of a competent control, though the medium of an amendment. to the constitution, upon the proposition, not only of Congress, but of the several States. When, therefore, we have marked the existence of a national bank for a period of twenty years, with all the sanctions of the legislative, executive, and judicial authorities; when we have seen the dissolution of one institution, and heard a loud and continued call for the establishment of another; when, under these circumstances, neither Congress nor the several States have resorted to the power of amendment; can it be deemed a violation of the right of private opinion, to consider the constitutionality of a national bank, as a question forever settled and at rest?

But, after all, I should not merit the confidence, which it will be my ambition to acquire, if I were to suppress the declaration of an opinion, that, in these times, the establishment of a national bank will not only be useful in promoting the general welfare, but that it is necessary and proper for carrying into execution some of the most important powers constitutionally vested in the Government.

Upon the principles and regulations of the national bank, it may be sufficient to remark, that they will be best unfolded in the form of a bill, which shall be immediately prepared. A compound capital is suggested, with a design equally to accommodate the subscribers, and to aid the general measures for the revival of public credit; but the proportions of specie and stock may be varied, if the scarcity of coin should render it expedient; yet not in so great a degree as to prevent an early commencement of the money operations of the institution.

I have the honor to be, very respectfully, sir, your most obedient servant, A. J. DALLAS. J. W. EPPES, Esq. Chairman of the Committee of Ways and Means.

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