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have made assurance doubly sure. In addition to excessive issues of paper, and the failure to make payments, both which they provide for by law, they make the capital of the bank to consist principally of public stock. If this stock should be sold as in the former Bank of the United States, the evil would be less. But the bank has not the power to sell it, and, for all purposes of enabling it to fulfil its engagements, its funds might as well be at the bottom of the ocean as in government stocks, of which it cannot enforce payment, and of which it cannot dispose. The credit of this institution is to be founded on public funds, not on private property or commercial credit. It is to be a financial, not a commercial bank. Its credit can hardly, therefore, be better at any time than the credit of the government. If the stocks be depreciated, so of course must every thing be which rests on the stocks. It would require extraordinary ingenuity to show how a bank, which is founded on the public debt, is to have any better reputation than the debt itself. It must be some very novel invention which makes the superstructure keep its place after the foundation has fallen. The argument seems to stand thus. The public funds, it is admitted, have little credit; the bank will have no credit which it does not borrow of the funds; but the bank will be in full credit.
If, Sir, we were in a temper to learn wisdom from experience, the history of most of the banks on the continent of Europe might teach us the futility of all these contrivances. Those institutions, like this before us, were established for purposes of finance, not purposes of commerce. The same fortune has happened to them all. Their credit has sunk. Their respective governments go to them for money when they can get it nowhere else; and the banks can relieve their wants only by new issues of their own paper. As this is not redeemed, the inva- . riable consequence of depreciation follows; and this has sometimes led to the miserable and destructive expedient of depreciation of the coin itself. Such are the banks of Petersburg, Copenhagen, Vienna, and other cities of Europe; and while the paper of these government banks has been thus depressed, that of other banks existing in their neighborhood, unconnected with government, and conducting their business on the basis of commercial credit, has retained a value equivalent to that of coin.
Excessive issues of paper, and a close connection with govern
ment, are the circumstances which of all others are the most certain to destroy the credit of bank paper. If there were no excessive issues, or, in other words, if the bank paid its notes in specie on demand, its connection with government and its interest in the funds would not, perhaps, materially affect the circulation of its paper, although they would naturally diminish the value of its stock. But when these two circumstances exist in the condition of any bank, that it does not pay its notes, and that its funds are in public stocks, and all its operations intimately blended with the operations of government, nothing further need be known, to be quite sure that its paper will not answer the purpose of a creditable circulating medium.
I look upon it, therefore, Sir, as certain, that a very considerable discount will attach itself to the notes of this bank the first day of their appearance; that this discount will continue to increase; and unless Congress should be able to furnish some remedy which is not certain, the paper, in the end, will be worth nothing. If this happens, not only will no one of the benefits proposed be obtained, but evils of the most alarming magnitude will follow. All the horrors of a paper-money system are before us. If we venture on the present expedient, we shall hardly be able to avoid them. The ruin of public affairs and the wreck of private property will ensue.
I would ask, Sir, whether the friends of this measure have well considered what effect it will produce on the revenue of the country? By the provisions of this bill, the notes of this bank are to be received in payment of all taxes and other dues to government. They cannot be refused on account of the depreciation of their value. Government binds itself to receive them at par, although it should be obliged immediately to pay them out at a discount of a hundred per cent. It is certain, then, that a loss in the revenue will be sustained, equal to any depreciation which may take place in this paper; and when the
shall come to nothing, the revenue of the country will come to nothing along with it. This has happened to other countries where this wretched system has been adopted, and it will happen here. The Austrian government resorted to a similar experiment in a very critical period of its affairs, in 1809, the year of the last campaign between that country and France previous to the coalition. Pressed by the necessities of the occasion, the gove ernment caused a large quantity of paper to be issued, which was to be received in imposts and taxes. The paper immediately fell to a depreciation of four for one.
The consequence was, that the government lost its revenue, and with it the means of supplying its armies and defending its empire. Is this government now ready, Sir, to put its resources all at hazard, by pursuing a similar course? Is it ready to sacrifice its whole substantial revenue and permanent supplies to an ill-contrived, ill-considered, dangerous, and ruinous project, adopted only as the means of obtaining a little present and momentary relief?
It ought to be considered, also, what effects this bank will produce on other banking institutions already existing, and on the paper which they have issued. The aggregate capital of these institutions is large. The amount of their notes is large, and these notes constitute, at present, in a great portion of the country, the only circulating medium, if they can be called a circulating medium. Whatever affects this paper, either to raise it or depress it lower than it is, affects the interests of every man in the community. It is sufficient on this point to refer to the memorial from the banks of New York. That assures us, that the operation of such a bank as this bill would establish must be to increase the difficulties and distress which the existing banks now experience, and to render it nearly impossible for them to resume the payment of their notes. This is what every man would naturally expect. Paper already depreciated will necessarily be sunk still lower, when another flood of depreciated paper is forced into circulation.
Very recently this government refused to extend the charter of the Bank of the United States, upon the ground that it was unconstitutional for Congress to create banks. Many of the State banks owe their existence to this decision. It was an invitation to the States to incorporate as much banking capital as would answer all the purposes of the country. Notwithstand. ing what we may now see and hear, it would then have been deemed a gross imputation on the consistency of government, if any man had expressed an expectation, that in five years all these constitutional scruples would be forgotten, all the dangers to political liberty from moneyed institutions disregarded, and a bank proposed upon the most extraordinary principles, with an unprecedented amount of capital, and with no obligation to fulfil its contracts. The State banks have not forced themselves in the way of government. They were established, many of them at least, when government had declared its purpose to have no bank of its own. They deserve some regard on their own account, and on account of those particularly concerned in them. But they deserve much more consideration, on account of the quantity of paper which is in circulation, and the interest which the whole community has in it.
Let it also be recollected, Sir, that the present condition of the banks is principally owing to their advances to government. The treasury has borrowed of the banks, or of those who themselves borrowed of the banks, till the banks have become as poor, and almost as much discredited, as the treasury itself. They have depreciated their paper, nearly ruined themselves, and brought the sorest distress on the country, by doing that on a small scale which this bank is to perform on a scale vastly larger. It is almost unpardonable in the conductors of these institutions, not to have foreseen the consequences which have resulted from the course pursued by them. They were all plain and visible. If they have any apology, it is that they were no blinder than the government, and that they yielded to those who would take no denial. It will be altogether unpardonable in us, if, with this as well as all other experience before us, we continue to pursue a system which must inevitably lead us through depreciation of currency, paper-money, tender-laws, and all the contemptible and miserable contrivances of disordered finance and national insolvency, to complete and entire bankruptcy in the end.
I hope the House will recommit the bill for amendment.
THE LEGAL CURRENCY.*
A BILL reported by Mr. Calhoun for the restoration of the currency was rejected in the House of Representatives on the 25th of April, 1816. On the 26th, Mr. Webster introduced three resolutions having the same object in view; and in support of them made the following speech. The first two, being declaratory of principles only, were withdrawn at the request of several gentlemen, who were in favor of the third resolution, which contained Mr. Webster's plan for restoring the currency
It provided that the Secretary of the Treasury should adopt such measures as he might deem necessary, to cause, as soon as might be, all sums of money due to the United States “to be collected and paid in the legal currency of the United States, or treasury-notes, or notes of the Bank of the United States, as by law provided and declared, or in notes of banks which are payable and paid on demand, in the said legal currency of the United States”; and it directed that, after the 20th of February next ensuing, nothing else should be received in payment of the public dues.
This resolution was received with great favor by the House, and passed through all the stages of legislation on the same day (the 26th of April) by a majority of more than two thirds. It was approved by President Madison on the 30th, and was completely successful in restoring a sound currency.
MR. SPEAKER, — I have felt it to be my duty to call the attention of the House once more to the subject of the collection of the revenue, and to present the resolutions which are
A Speech delivered in the House of Representatives of the United States, on the 26th of April, 1816, on the Collection of the Revenue in the Legal Currency of the Country.