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own contracts with others. This is, indeed, a wonderful scheme of finance. The government is to grow rich, because it is to borrow without the obligation of repaying, and is to borrow of a bank which issues paper without liability to redeem it. If this bank, like other institutions which dull and plodding common sense has erected, were to pay its debts, it must have some limits to its issues of paper, and therefore there would be a point beyond which it could not make loans to government. This would fall short of the wishes of the contrivers of this system. They provide for an unlimited issue of paper in an entire exemption from payment. They found their bank, in the first place, on the discredit of government, and then hope to enrich government out of the insolvency of their bank. With them, poverty itself is the main source of supply, and bankruptcy a mine of inexhaustible treasure. They trust not in the ability of the bank, but in its beggary; not in gold and silver collected in its vaults, to pay its debts, and fulfil its promises, but in its locks and bars, provided by statute, to fasten its doors against the solicitations and clamors of importunate creditors. Such an institution, they fatter themselves, will not only be able to sustain itself, but to buoy up the sinking credit of the government. bank which does not pay is to guarantee the engagements of a government which does not pay! “John Doe is to become security for Richard Roe.” Thus the empty vaults of the treasury are to be filled from the equally empty vaults of the bank, and the ingenious invention of a partnership between insolvents is to restore and reëstablish the credit of both.
Sir, I can view this only as a system of rank speculation and enormous mischief. Nothing in our condition is worse, in my opinion, than the inclination of government to throw itself upon such desperate courses. If we are to be saved, it is not to be by such means. If public credit is to be restored, this is not one of the measures that will help to restore it. If the treasury is exhausted, this bank will not fill it with any thing valuable. If a safe circulating medium be wanted for the community, it will not be found in the paper of such a corporation.
I wish, Sir, that those who imagine that these objects, or any of them, will be effected by such a bank as this, would describe the manner in which they expect it to be done. What is the process which is to produce these results? If it is perceived, it
can be described. The bank will not operate either by miracle or magic. Whoever expects any good from it ought to be able to tell us in what way that good is to be produced. As yet, we have had nothing but general ideas and vague and loose expressions. An indefinite and indistinct notion is entertained, nobody here seems to know on what ground, that this bank is to reanimate public credit, fill the treasury, and remove all the evils that have arisen from the depreciation of the paper of the existing banks.
Some gentlemen, who do not profess themselves to be in all respects pleased with the provisions of the bill, seem to content themselves with an idea that nothing better can be obtained, and that it is necessary to do something. A strong impression that something must be done is the origin of many bad meas
It is easy, Sir, to do something, but the object is to do something useful. It is better to do nothing than to do mischief. It is much better, in my opinion, to make no bank, than
the bill as it now is. The interests to be affected by this measure, the finances, the public credit, and the circulating medium of the country, are too important to be hazarded in schemes like these. If we wish to restore the public credit and to reëstablish the finances, we have the beaten road before us. All true analogy, all experience, and all just knowledge of ourselves and our condition, point one way. A wise and systematic economy, and a settled and substantial revenue, are the means to be relied on; not excessive issues of bank-notes, a forced circulation, and all the miserable contrivances to which political folly can resort, with the idle expectation of giving to mere paper the quality of money. These are all the inventions of a short-sighted policy, vexed and goaded by the necessities of the moment, and thinking less of a permanent remedy than of shifts and expedients to avoid the present distress. They have been a thousand times adopted, and a thousand times exploded as delusive and ruinous, as destructive of all solid revenue, and incompatible with the security of private property.
It is, Sir, sufficiently obvious, that, to produce any benefit, this bank must be so constructed as that its notes shall have credit with the public. The first inquiry, therefore, should be, whether the bills of a bank of this kind will not be immediately and greatly depreciated. I think they will. It would be a wonder if they should not. This effect will be produced by that excessive issue of its paper which the bank must make in its loan to government. Whether its issues of paper are excessive will depend, not on the nominal amount of its capital, but on its ability to redeem it. This is the only safe criterion. Very special cases may perhaps furnish exceptions, but there is, in general, no security for the credit of paper, but the ability in those who emit to redeem it. Whenever bank-notes are not convertible into gold and silver at the will of the holder, they become of less value than gold and silver. All experiments on this subject have come to the same result. It is so clear, and has been so universally admitted, that it would be waste of time to dwell upon it. The depreciation may not be sensibly perceived the first day, or the first week, it takes place. It will first be discerned in what is called the rise of specie; it will next be seen in the increased price of all commodities. The circulating medium of a commercial community must be that which is also the circulating medium of other commercial communities, or must be capable of being converted into that medium without loss. It must be able, not only to pass in payments and receipts among individuals of the same society and nation, but to adjust and discharge the balance of exchanges between different nations. It must be something which has a value abroad, as well as at home, and by which foreign as well as domestic debts can be satisfied. The precious metals alone answer these purposes. They alone, therefore, are money, and whatever else is to perform the offices of money must be their representative, and capable of being turned into them at will. So long as bank paper retains this quality, it is a substitute for money; divested of this, nothing can give it that character. No solidity of funds, no sufficiency of assets, no confidence in the solvency of banking institutions, has ever enabled them to keep up their paper to the value of gold and silver any longer than they paid gold and silver for it, on demand. This will continue to be the case so long as those metals shall continue to be the standard of value and the general circulating medium among nations.
A striking illustration of this common principle is found in the early history of the Bank of England. In the year 1697, it had been so liberal of its loans, that it was compelled to sus
pend the payment of its notes. Its paper immediately fell to a discount of near twenty per cent.
Yet such was the public opinion of the solidity of its funds, that its stock then sold for one hundred and ten per cent., although no more than sixty per cent. upon the subscription had been paid in. The same fate, as is well known, attended the banks of Scotland, when they adopted the practice of inserting in their notes a clause, giving the banks an option of paying their notes on demand, or six months after demand, with interest. Paper of this sort was not convertible into specie, at the pleasure of the holder; and no conviction of the ability of the bank which issued it could preserve it from depreciation.
The suspension of specie payments by the Bank of England, in 1797, and the consequences which followed, afford no argument to overthrow this general experience. If Bank of Eng. land notes were not immediately depreciated on that occasion, depreciation, nevertheless, did ensue. Very favorable causes existed to prevent their sudden depression. It was an old and rich institution. It was known to be under the most discreet and independent management. Government had no control over it, to force it to make loans against its interest or its will. On the contrary, it compelled the government to pay, though with much inconvenience to itself, a very considerable sum which was due to it. The country enjoyed, at that time, an extensive commerce, and a revenue of three hundred millions of dollars was collected and distributed through the bank. Under all these advantages, however, the difference of price between bank-notes and coin became at one time so great, as to threaten the most dangerous consequences. Suppose the condition of England to have been reversed. Suppose that, instead of a prosperous and increasing commerce, she had suffered the ruin of her trade, and that the product of her manufactures had lain upon her hands, as the product of our agriculture now perishes in ours. Does any one imagine that her circulating paper could have existed and maintained any credit, in such a change of her condition? What ought to surprise us is, not that her bank paper was depreciated, but that it was not depreciated sooner and lower than in fact it was. The reason can only be found in that extraordinary combination of favorable circumstances, which never existed before, and is hardly to be expected again. Much less is it to be discovered in our condition at present.
But we have experience nearer home. The paper of all the banks south of New England has become depreciated to an alarming extent. This cannot be denied. The idea that this depreciation exists only at a distance from the banks respectively is unfounded and absurd. It exists everywhere. The rates of exchange, both foreign and domestic, put this point beyond controversy. If a bill of exchange on Europe can be purchased, as it may, twenty per cent. cheaper in Boston than in Baltimore, the reason must be that it is paid for in Boston in money, and in Baltimore in something twenty per cent. less valuable than money. Notwithstanding the depression of their paper, it is not probable that any doubt is entertained of the sufficiency of the funds of the principal banks. Certainly no such doubt is the cause of the fall of their paper; because the depression of the paper of all the banks in any place is, as far as I learn, generally uniform and equal; whereas, if public opinion proceeded at all upon the adequacy or inadequacy of their funds, it would necessarily come to different results in different cases, as some of these institutions must be supposed to be richer than others.
Sir, something must be discovered which has hitherto escaped the observation of mankind, before you can give to paper intended for circulation the value of a metallic currency, any longer than it represents that currency, and is convertible into it, at the will of the holder. The paper of this bank, if you make it, will be depreciated, for the same reason that the paper of other banks that have gone before it, and of those which now exist around us, has been depreciated, because it is not to pay specie for its notes. Other institutions, setting out perhaps on honest principles, have fallen into discredit, through mismanagement or misfortune. But this bank is to begin with insolvency. It is to issue its bills to the amount of thirty millions, when every body knows it cannot pay them. It is to commence its existence in dishonor. It is to draw its first breath in disgrace. The promise contained in the first note it sends forth is to be a false promise, and whoever receives the note is to take it with the knowledge that it is not to be paid according to the terms of it.
But this, Sir, is not all. The framers of this bill have not done their work by halves. They have put the depreciation of the notes of their bank beyond all doubt or uncertainty. They