ence of currency. It is only because the currency is of the same denomination in both districts that, in common parlance, exchange and currency are confounded. There is no other remedy in that case but a return to specie payments.

But the true rates of exchange, that is to say, the rate at which specie, or funds equal to specie, may be transferred from one country or district to another, are necessarily governed by the relative amount of supply and demand. If a country becomes greatly indebted to another and has neither products nor specie to pay its debt, the rate of exchange may rise even above the expense and risk incident to the transportation of specie. The competition between bankers reduces it to the lowest possible amount. A banking corporation, with a very large capital and branches disseminated throughout the country, may increase the competition and be able to afford the requisite facilities on cheaper terms than private bankers. But government has no other legitimate resources for the same purpose than that portion of the balance in the Treasury which accumulated in one or more places is not immediately wanted by it in any other quarter. The necessary transfer of public moneys from the places where they are not wanted to those places where they must be expended may occasionally assist in restoring the equilibrium. But this has been and must always be done by the Treasury, without regard to the effect it may produce, and is wholly distinct from the sale or purchase of bills of exchange for other purposes than that of transmitting the public funds to the places where they are wanted.

The amount in the Treasury, beyond the immediate or proximate wants of government, will generally be too small to produce any sensible effect; at present it is a negative quantity. If government should purchase exchange beyond that amount, it must be by a dangerous additional issue of notes, payable on demand at a place where they have not sufficient funds.

But there is no necessity for such an interference on the part of government. The use of bills of exchange is coeval with the existence of commerce between different countries. That commerce between the different parts of Europe has been prodigiously increased within the last hundred years; and the ex

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changes from Leghorn to London, from Cadiz to St. Petersburg, and through all the intermediate places, have been and continue to be effected with perfect convenience and facility without the slightest interference on the part of governments, and, I may add, without the establishment of a bank of Europe.

With respect to the part of the plan which relates to the safekeeping of public moneys, as these must necessarily be collected. and ultimately disbursed by the officers of government, the question is only in reference to moneys in transitu, that is to say, which remain in the Treasury between the time of collection and that of disbursement. This resolves itself into the question whether they are safer in the hands of officers selected by government, or when secured by the capital of the banks in which they may be deposited. It has been decided in favor of the banks by all the States, partly on account of the great inconvenience of resorting to any other but the general local currency. To this the general government cannot resort universally without violating that clause of the Constitution which prescribes uniformity in the collection of imposts and other taxes.

The plan proposed is an improvement of the sub-treasury, in as far as it permits the use of the currency issued by speciepaying banks. It increases unnecessarily the number of officers beyond the number wanted for the special purpose of safe-keeping. The board of control, and most of the additional officers, may be dispensed with if the fiscal agency does not deal in bills of exchange for individual purposes. The plan does not give the security resulting from the capital of State banks; it affords no other guarantee, in reference to the public moneys, than the fidelity of the officers appointed by government.

The only apparent advantage that I can perceive is the active employment of the actual balance in the Treasury. The true remedy consists in reducing that balance to the smallest possible amount. This is generally the natural result of the operations of most governments. England always owes a much larger amount to the Bank of England than this owes to government, although the bank is always intrusted with the amount necessary to pay the interest on the public debt. The prospect of the revenue and expenditure, as contemplated in the reports of the

Treasury and of the other Departments, do not induce an apprehension of any great danger of an extraordinary accumulation in the Treasury.

Even in case of such a temporary accumulation, highly inconvenient as it must necessarily be, I think it would be safer and more consistent with the permanent interests of the community to have the money locked up rather than that it should be used by the banks and produce an unnatural expansion and that overtrading which is invariably followed by curtailment and distress. Might it not be better to use specie-paying banks only as depositories for safety and as disbursing agents, on the express condition that the public moneys should be considered as a special deposit not to be used for discounts, and to pay them a reasonable commission for their labor and risk?

I can really see no other reason for the plan proposed than the wish to be doing something on the subject of the currency. Some imprudent commitments may have taken place; expectations may have been inconsiderately raised. But can anything efficient in reality be accomplished? Without adverting either to the danger of an attempt to cure the evils of paper money by issuing more paper, and, in order that a bank of the United States may check the excessive issues of State banks, of allowing it a capital commensurate with the object, or to the general unpopularity, increased by late events, of such a bank, it is sufficient that at this time the establishment of a bank founded on individual subscriptions is impracticable. I am sure that this cannot and ought not to be attempted unless a great change should take place both in public opinion and in the money market. My own opinion respecting the most efficient remedy by Congress to the disordered state of the currency has already been publicly given. You know that it consists in the application of the bankrupt law to banking corporations or associations.

You suggested that anything I might write on the subject would, if I desired it, be deemed confidential. There is nothing in this letter that may not be freely communicated; and you are at liberty to use it as you may think proper.

I have, &c.

P.S.-You would confer a favor on me by sending me, if you can do it conveniently, the documents at large accompanying the annual reports of the several heads of Department, the estimates of appropriations for this year, and the annual statement of the commerce and navigation of the United States. I feel much less interest in the proposed fiscal agency than in the actual fiscal situation of the country, and in the measures which may be adopted equalizing after this year the receipts and expenditures and for meeting the deficiency of this year. You have in both respects more than ordinary difficulties to encounter.

NEW YORK BANK PRESIDENTS TO MICHAEL HOFFMAN.1

NEW YORK, February, 1842.

SIR, Mr. Mann has communicated to us your letter to him requesting that he should inquire whether the banks of this city were able and willing to aid by additional loans in extricating the State from its present financial embarrassments.

The banks are so deeply interested in the result; it is so essential to the public welfare, to the commerce of this city, and to their own safety that the credit of the State should be restored and its finances placed on a permanent and secure footing, that there can be no doubt of their disposition to promote those objects to the utmost of their ability. But we are compelled to say that, in our opinion, farther advances on their part to the State would, in their situation and at this time, be highly inexpedient and improper. The comptroller, in his report of the 15th instant, has justly observed that "the commissioners of the canal fund had carried to exhaustion the questionable expedient of temporary loans from banks." Believing that the great object we have all in view may be attained without recurring to that expedient, we beg leave to state somewhat at large the reasons on which our opinions are founded.

1 Chairman of the Committee of Ways and Means of the New York Assembly.

The primary duty of banks is to maintain specie payments. How this has been performed by the banks of this city and of the State is well known. They resumed alone in 1838; the resumption which ensued in other States was due to their example and influence; and they have maintained their position notwithstanding the suspensions which have since occurred.

This city is almost universally a creditor place, with respect to the country and to the other States, and has therefore little to fear from the situation or action of any other part of the Union. But, though safe in that respect, it has become the centre of all the moneyed operations of the country, and the point where almost all the balances between the United States and foreign countries are ultimately settled. The city banks must therefore always be ready to meet every extraordinary demand for specie growing out of an unfavorable rate of foreign exchanges. For that reason, seeking much more for safety than for profit, they have reduced their circulation and their discounts within very narrow limits. Yet such was the effect of the enhanced rate of foreign bills during the last summer and autumn that the specie which, in the seventeen safety fund and the three free banks of the city, amounted, on the 1st of July, 1841, to $6,082,884, was, on the 1st of January, 1842, reduced to $3,688,806; being a diminution in six months of $2,394,078, or near two-fifths. We cannot give the precise comparative statement for the four other chartered banks (Manhattan, Fulton, North River, and Chemical), but we know that the diminution was in about the same proportion. The consequence was a corresponding lessening of loans and discounts, which, together with the stocks and all other items in their possession bearing an interest, did, on the 1st of January last, amount to less than 40 per cent. beyond their capital.

It is obvious that the banks have no other means to arrest the drain of specie than the curtailment of their discounts. State stocks owned by them prove a valuable resource only when they can be readily disposed of. The process of curtailing, inconvenient and even harsh as it may be, is the only remedy, and which cannot be applied with effect except to short business paper. The banks could not make further advances to the