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effects may readily be traced to the causes above referred to. The public revenues, on being removed from the then Bank of the United States, under an order of a late President, were placed in selected state banks, which, actuated by the double motive of conciliating the government and augmenting their profits to the greatest possible extent, enlarged extravagantly their discounts, thus enabling all other existing banks to do the same. Large dividends were declared, which, stimulating the cupidity of capitalists, caused a rush to be made to the legislatures of the respective states for similar acts of incorporation, which, by many of the states, under a temporary infatuation, were readily granted, and thus the augmentation of the circulating medium, consisting almost exclusively of paper, produced a most fatal delusion.
An illustration, derived from the land sales of the period alluded to, will serve best to show the effect of the whole system. The average sales of the public lands, for a period of ten years prior to 1834, had not much exceeded $2,000,000 per annum. In 1834 they attained, in round numbers, to the amount of $6,000,000. In the succeeding year of 1835 they reached $16,000,000. And in 1836 they amounted to the enormous sum of $25,000,000. Thus crowding into the short space of three years upwards of twenty-three years' purchase of the public domain. So apparent had become the necessity of arresting this course of things, that the executive department assumed the highly-questionable power of discriminating in the funds to be used in payment by different classes of public debtors - a discrimination which was doubtless designed to correct this most ruinous state of things by the exaction of specie in all payments for the public lands, but which could not at once arrest the tide which had so strongly set in. Hence the demands for specie became unceasing, and corresponding prostration rapidly ensued under the necessities created with the banks to curtail their discounts, and thereby to reduce their circulation. I recur to these things with no disposition to censure preexisting administrations of the government, but simply in exemplification of the truth of the position which I have assumed. If, then, any fiscal agent which may be created
shall be placed, without due restrictions, either in the hands of the administrators of the government or those of private individuals, the temptation to abuse will prove to be resistless. Objects of political aggrandizement may seduce the first, and the promptings of a boundless cupidity will assail the last. Aided by the experience of the past, it will be the pleasure of Congress so to guard and fortify the public interests, in the creation of any new agent, as to place them, so far as human wisdom can accomplish it, on a footing of perfect security. Within a few years past, three different schemes have been before the country. The charter of the Bank of the United States expired by its own limitations in 1836. An effort was made to renew it, which received the sanction of the two houses of Congress; but the then President of the United States exercised his veto power, and the measure was defeated. A regard to truth requires me to say that the President was fully sustained in the course he had taken by the popular voice. His successor in the chair of state unqualifiedly pronounced his opposition to any new charter of a similar institution; and not only the popular election which brought him into power, but the elections through much of his term, seemed clearly to indicate a concurrence with him in sentiment on the part of the people. After the public moneys were withdrawn from the United States Bank, they were placed in deposit with the state banks, and the result of that policy has been before the country. To say nothing as to the questions whether that experiment was made under propitious or adverse circumstances, it may safely be asserted that it did receive the unqualified condemnation of most of its early advocates, and, it is believed, was also condemned by the popular sentiment. The existing sub-treasury system does not seem to stand in higher favor with the people, but has recently been condemned in a manner too plainly indicated to admit of a doubt. Thus, in the short period of eight years, the popular voice may be regarded as having successively condemned each of the three schemes of finance to which I have adverted. As to the first, it was introduced at a time (1816) when the state banks, then comparatively few in number, had been forced to
suspend specie payments, by reason of the war which hal previously prevailed with Great Britain. Whether, if the United States Bank charter, which expired in 1811, had been renewed in due season, it would have been enabled to continue specie payments during the war and the disastrous period to the commerce of the country which immediately succeeded, is, to say the least, problematical; and whether the United States Bank of 1816 produced a restoration of specie payments, or the same was accomplished through the instrumentality of other means, was a matter of some difficulty at that time to determine. Certain it is that, for the first years of the operation of that bank, its course was as disastrous as for the greater part of its subsequent career it became eminently successful. As to the second, the experiment was tried with a redundant treasury, which continued to increase until it seemed to be the part of wisdom to distribute the surplus revenue among the states, which, operating at the same time with the specie circular, and the causes before adverted to, caused them to suspend specie payments, and involved the country in the greatest embarrassment. And, as to the third, if carried through all the stages of its transmutation, from paper and specie to nothing but the precious metals, to say nothing of the insecurity of the public moneys, its injurious effects have been anticipated by the country in its unqualified condemnation. What is now to be regarded as the judgment of the American people on this whole subject, I have no accurate means of determining, but by appealing to their more immediate representatives. The late contest, which terminated in the election of General Harrison to the Presidency, was decided on principles well known and openly declared ; and, while the sub-treasury received in the result the most decided condemnation, yet no other scheme of finance seemed to have been concurred in. To you, then, who have come more directly from the body of our common constituents, I submit the entire question, as best qualified to give a full exposition of their wishes and opinions. I shall be ready to concur with you in the adoption of such system as you may propose, reserving to myself the ultimate power of rejecting any measure
which may, in my view of it, conflict with the constitution, or otherwise jeopard the prosperity of the country power which I could not part with even if I would, but which I will not believe any act of yours will call into requisition
I cannot avoid recurring, in connection with this subject, to the necessity which exists for adopting some suitable measure whereby the unlimited creation of banks by the states may be corrected in future. Such result can be most readily achieved by the consent of the states, to be expressed in the form of a compact among themselves, which they can only enter into with the consent and approbation of this government - a consent which, in the present emergency of the public demands, may justifiably be given by Congress in advance of any action by the states as an inducement to such action upon terms well defined by the act of tender. Such a measure, addressing itself to the calm reflection of the states, would find in the experience of the past and the condition of the present, much to sustain it. And it is greatly to be doubted whether any scheme of finance can prove for any length of time successful while the states shall continue in the unrestrained exercise of the power of creating banking corporations. This power can only be limited by their consent.
With the adoption of a financial agency of a satisfactory character, the hope may be indulged that the country may once more return to a state of prosperity. Measures auxiliary thereto, and, in some measure, inseparably connected with its success, will doubtless claim the attention of Congress. Among such, a distribution of the proceeds of the sales of the public lands, provided such distribution does not force upon Congress the necessity of imposing upon commerce heavier burdens than those contemplated by the act of 1833, would act as an efficient remedial measure by being brought directly in aid of the states. As one sincerely devoted to the task of preserving a just balance in our system of government, by the maintenance of the states in a condition the most free and respectable, and in the full possession of all their power, I can no otherwise than feel desirous for their emancipation from the situation to which the pressure on their finances now subjects them. And,
while I must repudiate as a measure founded in error, and wanting constitutional sanction, the slightest approach to an assumption by this government of the debts of the states, yet I can see, in the distribution adverted to, much to recommend it. The compacts between the proprietor states and this government expressly guaranty to the states all the benefits which may arise from the sales. The mode by which this is to be effected addresses itself to the discretion of Congress, as the trustee for the states; and its exercise, after the most beneficial manner, is restrained by nothing in the grants or in the constitution, so long as Congress shall consult that equality in the distribution which the compacts require. In the present condition of some of the states, the question of distribution may be regarded as substantially a question between direct and indirect taxation. If the distribution be not made in some form or other, the necessity will daily become more urgent with the debtor states for a resort to an oppressive system of direct taxation, or their credit, and necessarily their power and influence, will be greatly diminished. The payment of taxes, after the most inconvenient and oppressive mode, will be exacted in place of contributions for the most part voluntarily made, and therefore comparatively unoppressive. The states are emphatically the constituents of this government; and we should be entirely regardless of the objects held in view by them in the creation of this government if we could be indifferent to their good. The happy effects of such a measure upon all the states would immediately be manifested. With the debtor states it would effect the relief, to a great extent, of the citizens from a heavy burden of direct taxation, which presses with severity on the laboring classes, and eminently assist in restoring the general prosperity. An immediate advance would take place in the price of the state securities, and the attitude of the states would become once more, as it should ever be, lofty and erect. With states laboring under no extreme pressure from debt, the fund which they would derive from this source would enable them to improve their condition in an eminent degree. So far as this government is concerned, appropriations to domestic objects, approaching in amount the revenue derived from the land sales, might