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resort to less harsh means; recourse must be had to such, as will ensure a currency sound and uniform itself, and at the same time check and regulate that which will continue to constitute the greater part of the currency of the country.
"Both those advantages were anticipated in the establishment of the bank of the United States; and it appears to us, that the bank fulfils both those conditions. As respects the past, it is a matter of fact, that specie payments were restored, and have been maintained, through the instrumentality of that institution. It gives a complete guarantee, that under any circumstances, its notes will preserve the same uniformity which they now possess.
"Placed under the control of the general government, relying for its existence on the correctness, prudence, and skill with which it shall be administered, perpetually watched, and occasionally checked by both the treasury department and rival institutions; and without a monopoly, yet with a capital and resources adequate to the object for which it was established. The bank also affords the strongest security which can be given with respect to paper, not only for its ultimate solvency, but also for the uninterrupted soundness of its currency. The statements we have given of its progressive and present situation, show how far those expectations have heretofore been realized. Those statements also show that the bank of the United States wherever its operations have been extended, has effectually checked excessive issues on the part of the state banks; if not in every instance, certainly in the aggregate. They had been reduced before the year 1820 from sixty-six to less than forty millions. At that time those of the bank of the United States fell short of four millions. The increased amount required, by the increase of population and wealth during the ten ensuing years, has been supplied in a much greater proportion by that bank, than by those of the States. With a treble capital, they have added little more than eight millions to their issues. Those of the bank of the United States were nominally twelve, in reality about eleven millions greater in November, 1829, than in November, 1819. The whole amount of the paper currency has, during those ten years, increased about forty-five, and that portion which is issued by the state banks only twenty-two and a half per cent. We have indeed a proof, not very acceptable perhaps to the bank, but conclusive of the fact, that it has performed the office required of it in that respect. The general complaints on the part of many of the state banks, that they are checked and controlled in their operations by the bank of the United States, that, to use a common expression, it operates as a screw, is the best evidence that its general operation is such as had been intended. It was for that very purpose that the bank was established. We are not however, aware, that a single solvent bank has been injured by that of the United States, though many have been undoubtedly restrained in their operations much more than was desirable to them. This is certainly inconvenient to some of the banks, but in its general effects is a public benefit to the community. The best way to judge whether, in performing that unpopular duty, the bank of the United States has checked the operations of the state banks more than was necessary, and has abused, in order to enrich itself
at their expense, the power which was given for another purpose, is to compare their respective situations in the aggregate. In order to avoid any erroneous inference, we will put out of question those banks of which we could only make an estimate, and compare, with that of the United States, those only of which we have actual returns. The profits of banks, beyond the interest on their own capital, consists, in that which they receive on the difference between the aggregate of their deposits and notes in circulation and the amount of specie in their vaults. We have given the aggregate situation for the end of the year 1829 of two hundred and eighty-one banks, with a capital of 95,003,557 dollars, the deposits and circulating notes of which
Amounted together to
Deduct specie in their vaults...
Leaves for difference
Or sixty-two and one-eighth per cent. on their capital.
"The notes in circulation of the bank of the United States (adding one million for its drafts in circulation) amounted in November, 1829, to $14,042,984; and together
With the deposits to....
Leaves for the difference
Or sixty-one and one-eighth per cent. on its capital.
"It is clear that those state banks, taken in the aggregate, have no just reason to complain, since that of the United States imposes no greater restraints on them than on itself. It will also be perceived, that it had in specie more than one-fifth part of the aggregate of its notes in circulation and deposits; whilst the state banks, had little more than one-sixth, and the bank of the United States had in addition a fund of about one million of dollars in Europe. The difference would have been more striking, had we taken a view of the situation of all the state banks, including those on estimate; for the difference between the aggregate of their notes and deposits and their specie is sixty-seven and a quarter on their capital.
"The manner in which the bank checks the issues of the state banks, is equally simple and obvious. It consists in receiving the notes, of all those which are solvent, and requiring payment from time to time, without suffering the balance due by any to become too large. Those notes on hand, taking the average of the last three years and a half, amount always to about one million and a half of dollars; and the balances due by the banks in account current (deducting balances due to some) to about $900,000.
"We think that we may say, that on this operation, which requires particular attention and vigilance, and must be carried on with great firmness and due forbearance, depends almost exclusively the stability of the currency of the country.
"The principal advantages derived from the bank of the United
States, which no state bank, and as it appears to us, no bank established on different principles could afford, are, therefore; first and principally, securing with certainty an uniform, and as far as paper can, a sound currency: secondly, the complete security, and great facility it affords to government in its fiscal operations: thirdly, the great convenience and benefit accruing to the community, from its extensive transactions in domestic bills of exchange and inland drafts. We have not adverted to the aid which may be expected from that institution in time of war, and which should, we think, be confined to two objects.
"First. The experience of the last war has sufficiently proved, that an efficient revenue must be provided, before, or immediately after that event takes place. Resort must be had for that purpose to a system of internal taxation, not engrafted on taxes previously existing, but which must be at once created.
"The utmost diligence and skill cannot render such new taxes productive before twelve or eighteen months. The estimated amount must be anticipated; and advances to that extent, including at least the estimated proceeds of one year, of all the additional taxes laid during the war, may justly be expected from the bank of the United States.
"Secondly. It will also be expected, that it will powerfully assist in raising the necessary loans, not by taking up, on its own account, any sum beyond what may be entirely convenient and consistent, with the safety and primary object of the institution, but by affording facilities to the money lenders. Those who, in the first instance, subscribe to a public loan, do not intend to keep the whole, but expect to distribute it gradually, with a reasonable profit. The greatest inducements, in order to obtain loans on moderate terms, consists in the probability that, if that distribution proceeds slower than had been anticipated, the subscribers will not be compelled, in order to pay their instalments, to sell the stock, and by glutting the market, to sell it at a loss; and the assistance expected from the bank is to advance, on a deposit of the scrip, after the two first instalments have been paid, such portions of each succeeding payment, as may enable the subscribers to hold the stock a reasonable length of time. As this operation may be renewed annually on each successive loan, whilst the war continues, the aid afforded in that manner is far more useful than large direct advances to government, which always cripple the resources, and may endanger the safety of a bank.”
In 1832 a law passed both houses of Congress for a renewal of the charter of the bank of the United States; but the president, General Jackson, refused to ratify it. This power is conferred upon the President by the following article of the constitution of the United States:
Every bill that shall have passed the House of Representatives and the Senate, shall before it become a law be presented to the President of the United States. If he approves, he shall sign it; but if not, he
shall return it, with his objections, to that House in which it shall have originated, who shall enter the objections at large on their journal, and proceed to reconsider it. If after such reconsideration two-thirds of that House shall agree to pass the bill, it shall be sent, together with the objections, to the other House, by which it shall likewise be reconsidered; and if approved by two-thirds of that House, it shall become a law. But in all such cases, the votes of both Houses shall be determined by yeas and nays; and the names of the persons voting for and against the bill, shall be entered on the journal of each House respectively."
The President returned the bill to the Senate, with a very long message stating his objections. The following are extracts:
"The bill" to modify and continue" the act entitled an act to incorporate the subscribers to the bank of the United States," was presented to me on the 4th July inst. Having considered it with that solemn regard to the principles of the constitution, which the day was calculated to inspire, and come to the conclusion that it ought not to become a law, I herewith return it to the Senate, in which it originated, with my objections.
A bank of the United States is, in many respects, convenient for the government, and useful to the people. Entertaining this opinion, and deeply impressed with the belief that some of the powers and privileges possessed by the existing bank, are unauthorised by the constitution, subversive of the rights of the States, and dangerous to the liberties of the people, I felt it my duty, at an early period of my administration, to call the attention of Congress to the practicability of organizing an institution, combining all its advantages, and obviating these objections. I sincerely regret that, in the act before me, I can perceive none of those modifications of the bank charter which are necessary, in my opinion, to make it compatible with justice, with sound policy, or with the constitution of our country.
"The present corporate body, denominated the president, directors, and company of the bank of the United States, will have existed, at the time this act is intended to take effect, twenty years. It enjoys an exclusive privilege of banking under the authority of the general government, a monopoly of its favor and support, and, as a necessary consequence, almost a monopoly of the foreign and domestic exchange. The powers, privileges, and favors bestowed upon it in the original charter, by increasing the value of the stock far above its par value, operated as a gratuity of many millions to the stockholders.
"The modifications of the existing charter, proposed by this act, are not such, in my view, as make it consistent with the rights of the States, or the liberties of the people. The qualification of the right of the bank to hold real estate, the limitation of its power to establish branches, the power reserved to Congress to forbid the circulation of small notes, are restrictions comparatively of little value or importance.
All the objectionable principles of the existing corporation, and most of its odious features, are retained without alleviation.
"By documents submitted to Congress, at the present session, it appears, that on 1st of January, 1832, of the twenty millions of private stock in the corporation, $8,405,500 were held by foreigners, mostly of Great Britain. The amount of stock held in the nine Western States is $140,200, and in the four Southern States is $5,623,100, and in the Eastern and middle States about $13,522,000. The profits of the bank in 1831, as shown in a statement to Congress, were about $3,455,598 of this there accrued in the nine Western States, about $1,640,048; in the four Southern States about $352,507; and in the middle and Eastern States, about $1,463,041. As little stock is held in the West, it is obvious that the debt of the people in that section to the bank is principally a debt to the Eastern and foreign stockholders; that the interest they pay upon it, is carried into the Eastern States and into Europe; and that it is a burden upon their industry, and a drain of their currency, which no country can bear without inconvenience, and occasional distress. To meet this burden, and equalize the exchange operations of the bank, the amount of specie drawn from those States, through its branches, within the last two years, as shown by its official reports, was about $6,000,000. More than half a million of this amount does not stop in the Eastern States, but passes on to Europe, to pay the dividends to the foreign stockholders. In the principle of taxation recognized by this act, the Western States find no adequate compensation for this perpetual burden on their industry, and drain upon their currency. The branch bank at Mobile made last year $95,140; yet, under the provisions of this act, the State of Alabama can raise no revenue from these profitable operations, because not a share of the stock is held by any of her citizens. Mississippi and Missouri are in the same condition in relation to the branches at Natches and St. Louis, and such, in a greater or less degree, is the condition of every Western State. The tendency of the plan of taxation which this act proposes, will be to place the whole United States in the same relation to foreign countries which the Western States bear to the Eastern. When, by a tax on resident stockholders, the stock of this bank is made worth ten or fifteen per cent. more to foreigners than to residents, most of it will inevitably leave the country.
“Thus will this provision, in its practical effect, deprive the Eastern as well as the Southern and Western States, of the means of raising a revenue from the extension of business and the great profits of this institution. It will make the American people debtors to aliens in nearly the whole amount due to this bank, and send across the Atlantic from two to five millions of specie every year, to pay the bank dividends.
"In another of its bearings this provision is fraught with danger. Of the twenty-five directors of this bank, five are chosen by the government, and twenty by the citizen stockholders. From all voices in these elections the foreign stockholders are excluded by the charter. In proportion, therefore, as the stock is transferred to foreign holders, the extent of suffrage in the choice of directors is curtailed. Already is