CHAPTER V.

PROCEEDINGS AND DEBATES ON THE GRANT OF THE CHARTER OF 1816.

14TH CONGRESS, HOUSE OF REPRESENTATIVES.

1st Session.

DECEMBER 5, 1815.

Extract from the annual message of JAMES MADISON, President of the United States.

"The arrangements of the finances, with a view to the receipts and expenditures of a permanent peace establishment, will necessarily enter into the deliberations of Congress during the present session. It is true, that the improved condition of the public revenue will not only afford the means of maintaining the faith of the Government with its creditors inviolate, and of prosecuting successfully the measures of the most liberal policy, but will also justify an immediate alleviation of the burdens imposed by the necessities of the war. It is, however, essential to every modification of the finances, that the benefits of an uniform national currency should be restored to the community. The absence of the precious metals will, it is believed, be a temporary evil; but, until they can again be rendered the general medium of exchange, it devolves on the wisdom of Congress to provide a substitute, which shall equally engage the confidence, and accommodate the wants of the citizens throughout the Union. If the operation of the State banks cannot produce this result, the probable operation of a national bank will merit consideration; and if neither of these expedients be deemed effectual, it may become necessary to ascertain the terms upon which the notes of the Government (no longer required as an instrument of credit) shall be issued, upon motives of general policy, as a common medium of circulation."

DECEMBER 6, 1815.

Resolved, That so much of the President's message as relates to an uniform national currency, be referred to a select committee.

Ordered, That Mr. Calhoun, of S. C. Mr. Macon, of N. C. Mr. Pleasants, of Va. Mr. Hopkinson, of Pa. Mr. Robertson, of La. Mr. Tucker, of Va. and Mr. Pickering, of Mass. be the said committee.

DECEMBER 7, 1815.

The Speaker laid before the House a letter from the Secretary of the Treasury, transmitting his annual report on the state of the finances, of which, so much thereof as relates to a national currency, was referred to the committee on that subject.

The following are the parts of the said report alluded to, containing suggestions on the currency, and a proposition for the establishment of a bank: PROPOSITION OF MR. DALLAS, RELATING TO THE NATIONAL CIRCU

LATING MEDIUM.

The delicacy of this subject is only equalled by its importance. In presenting it, therefore, to the consideration of Congress, there is occasion for an implicit reliance upon the legislative indulgence.

By the constitution of the United States, Congress is expressly vested with the power to coin money, to regulate the value of the domestic and foreign coins in circulation, and (as a necessary implication from positive provisions) to emit bills of credit; while it is declared, by the same instrument, that “no State shall coin money, or emit bills of credit."* Under this constitutional authority, the money of the United States has been established by law, consisting of coins made with gold, silver, or copper. All foreign gold and silver coins, at specified rates, were placed, in the first instance, upon the same footing with the coins of the United States; but they ceased (with the exception of Spanish milled dollars, and parts of such dollars) to be a legal tender for the payment of debts and demands, in the year 1809.

The constitutional authority to emit bills of credit, has also been exercised in a qualified and limited manner. During the existence of the Bank of the United States, the bills or notes of the corporation were declared by law to be receivable in all payments to the United States; and the treasury notes which have been since issued for the services of the late war, have been endowed with the same quality. But Congress has never recognised, by law, the notes of any other corporation, nor has it ever authorized an issue of bills of credit to serve as a legal currency. The acceptance of the notes of banks which are not established by the federal authority, in payments to the United States, has been properly left to the vigilance and discretion of the Executive Department; while the circulation of the treasury notes, employed either to borrow money or to discharge debts, depends entirely (as it ought to depend) upon the option of the lenders and creditors to receive them.

The constitutional and legal foundation of the monetary system of the United States, is thus distinctly seen; and the power of the Federal Government to institute and regulate it, whether the circulating medium consist of coin, or of bills of credit, must, in its general policy, as well as in the terms of its investment, be deemed an exclusive power. It is true, that a system depending upon the agency of the precious metals, will be affected by the various circumstances which diminish their quantity or deteriorate their quality. The coin of a State sometimes vanishes under the influence of political alarms; sometimes in consequence of the explosion of mercantile speculations; and sometimes by the drain of an unfavorable course of trade. But, whenever the emergency occurs that demands a change of system, it seems necessarily to follow, that the authority which was alone competent to establish the national coin, is alone competent to create a national substitute. It has happened, however, that the coin of the United States has ceased to be the circulating medium of exchange, and that no substitute has hitherto been provided by the national authority. During the last year, the principal banks established south and west of New England, resolved that they would no longer issue coin in payment of their notes, or of the drafts of their customers for money received upon deposite. In this act, the Government of the United States had no participation; and yet the immediate effect of the act was to supersede the only legal currency of the nation. By this act, although no State can constitutionally emit bills of credit, corporations, erected by the several States, have been enabled to circulate a paper medium, subject to many of the practical inconveniences of the prohibited bills of credit.

It is not intended, upon this occasion, to condemn, generally, the suspension of specie payments: for appearances indicated an approaching crisis, which would, probably, have imposed it as a measure of necessity, if it had not been adopted as a measure of precaution. But the danger which originally induced, and perhaps justified the conduct of the banks, has passed away, and the continuance of the suspension of specie payments, must be ascribed to a new series of causes. The public credit and resources are no longer impaired by the doubts and agitations excited during the war by the

* Constitution, art. 1, sec. 8, 10.

+ See 2 vol. 37, 120, 158, 161: 3 vol. 7, 221, 316: 4 vol. 62, 375, 395.

See 2 vol. 161: 4 vol. 62: 8 vol. 66.

practices of an enemy, or by the inroads of an illicit commerce. Yet, the resumption of specie payments is still prevented, either by the reduced state of the national stock of the precious metals, or by the apprehension of a further reduction to meet the balances of foreign trade, or by the redundant issues of bank paper. The probable direction and duration of these latter causes, constitute, therefore, the existing subject for deliberation. While they continue to operate, singly or combined, the authority of the States, individually, or the agency of the State institutions, cannot afford a remedy commensurate with the evil, and a recurrence to the national authority is indispensable for the restoration of a national currency.

In the selection of the means for the accomplishment of this important object, it may be asked, 1st, whether it be practicable to renew the circulation of the gold and silver coins? 2dly, whether the State banks can be successfully employed to furnish a uniform currency? 3dly, whether a national bank can be employed more advantageously than the State banks for the same purpose? And 4thly, whether the Government can, itself, supply and maintain a paper medium of exchange, of permanent and uniform value throughout the United States?

1st. As the United States do not possess mines of gold or silver, the supply of those metals must, in a time of scarcity, be derived from foreign commerce. If the balance of foreign commerce be unfavorable, the supply will not be obtained incidentally, as in the case of the returns for a surplus of American exports, but must be the subject of a direct purchase. The purchase of bullion is, however, a common operation of commerce, and depends, like other operations, upon the inducements to import the article.

The inducements to import bullion arise, as in other cases, from its being cheap abroad, or from its being dear at home. Notwithstanding the commotions in South America, as well as in Europe, there is no reason to believe that the quantity of the precious metals is now (more than at any former period) insufficient for the demand throughout the commercial and civilized world. The price may be higher in some countries than in others, and it may be different in the same country at different times; but, generally, the European stock of gold and silver has been abundant, even during the protracted war which has afflicted the nations of Europe.

The purchase of bullion in foreign markets, upon reasonable terms, is then deemed practicable; nor can its importation into the United States, fail, eventually, to become profitable. The actual price of gold and silver, in the American market, would, in itself, afford, for some time, an ample premium, although the fall in the price must, of course, be proportionable to the increase of the quantity. But it is within the scope of a wise policy, to create additional demands for coin, and in that way, to multiply the inducements to import and retain the metals of which it is composed. For instance: the exces sive issue of bank paper has usurped the place of the national money; and, under such circumstances, gold and silver will always continue to be treated as an article of merchandise; but, it is hoped that the issue of bank paper will be soon reduced to its just share in the circulating medium of the country; and consequently, that the coin of the United States will resume its legitimate capacity and character. Again: The treasury, yielding from necessity to the general impulse, has hitherto consented to receive bank paper in payment of duties and taxes; but, the period approaches, when it will probably become a duty to exact the payment, either in treasury notes, or in gold or silver coin, the lawful money of the United States. Again: The institutions which shall be deemed proper, in order to remove existing inconveniences, and to restore the national currency, may be so organized as to engage the interests and enterprise of individuals, in providing the means to establish them. And, finally, such regulations may be imposed upon the exportation of gold and silver, as will serve, in future, to fix and retain the quantity required for domestic uses.

But it is further believed, that the national stock of the precious metals is not so reduced as to render the operation of reinstating their agency in the

national currency, either difficult or protracted. The quantity actually possessed by the country, is considerable; and the resuscitation of public confidence in bank paper, or in other substitutes for coin, seems alone to be wanting, to render it equal to the accustomed contribution for a circulating medium. In other countries, as well as in the United States, the effect of an excessive issue of paper money, to banish the precious metals, has been seen, and under circumstances much more disadvantageous than the present; the effect of public confidence in national institutions to recall the precious metals to their uses in exchange, has also been experienced.

Even, however, if it were practicable, it has sometimes been questioned whether it would be politic, again to employ gold and silver for the purposes of a national currency. It was long and universally supposed, that, to maintain a paper medium, without dereciation, the certainty of being able to convert it into coin, was indispensable; nor can the experiment which has given rise to a contrary doctrine, be deemed complete or conclusive. But, whatever may be the issue of that experiment elsewhere, a difference in the structure of the Government, in the physical as well as political situation of the country, and in the various departments of industry, seems to deprive it of any important influence as a precedent for the imitation of the United States. In offering these general remarks to the consideration of Congress, it is not intended to convey an opinion that the circulation of the gold and silver coins can at once be renewed. Upon motives of public convenience, the gradual attainment of that object is alone contemplated; but a strong, though respectful solicitude is felt, that the measures adopted by the Legislature, should invariably tend to its attainment.

2d. Of the services rendered to the Government by some of the State banks, during the late war, and of the liberality by which some of them are actuated in their intercourse with the treasury, justice requires an explicit acknowledgment. It is a fact, however, incontestibly proved, that those institutions cannot, at this time, be successfully employed to furnish a uniform national currency. The failure of one attempt to associate them, with that view, has already been stated. Another attempt, by their agency, in circulating treasury notes, to overcome the inequalities of the exchange, has only been partially successful. And a plan recently proposed, with the design to curtail the issues of bank notes, to fix the public confidence in the administration of the affairs of the banks, and to give to each bank a legitimate share in the circulation, is not likely to receive the general sanction of the banks. The truth is, that the charter restrictions of some of the banks, the mutual relation and dependence of the banks of the same State, and even of the banks of the different States, and the duty which the directors of each bank conceive they owe to their immediate constituents, upon points of security or emolument, interpose an insuperable obstacle to any voluntary arrangement, upon national con.. siderations alone, for the establishment of a national medium, through the agency of the State banks. It is, nevertheless, with the State banks, that the measures for restoring the national currency of gold and silver must originate: for, until their issues of paper be reduced, their specie capitals be reinstated, and their specie operations be commenced, there will be neither room, nor employment, nor safety, for the introduction of the precious metals. The policy and the interest of the State banks must, therefore, be engaged in the great fiscal work, by all the means which the treasury can employ, or the legislative wisdom shall provide.

3d. The establishment of a national bank is regarded as the best, and perhaps the only adequate resource, to relieve the country and the Goverment from the present embarrassments; authorized to issue notes, which will be received in all payments to the United States, the circulation of its issues will be co-extensive with the Union; and there will exist a constant demand, bearing a just proportion to the annual amount of the duties and taxes to be collected, independent of the general circulation, for commercial and social purposes. A national bank will, therefore, possess the means and the opportunity of supplying a circulating medium, of equal use and value in every State, and

in every district of every State. Established by the authority of the Government of the United States; accredited by the Government, to the whole amount of its notes in circulation; and entrusted as the depository of the Government, with all the accumulations of the public treasure; the national bank, independent of its immediate capital, will enjoy every recommendation which can merit and secure the confidence of the public. Organized upon principles of responsibility, but of independence, the national bank will be retained within its legitimate sphere of action, without just apprehension from the misconduct of its directors, or from the encroachments of the Government. Eminent in its resources and in its example, the national bank will conciliate, aid, and lead, the State banks, in all that is necessary for the restoration of credit, public and private. And, acting upon a compound capital, partly of stock and partly of gold and silver, the national bank will be the ready instrument to enhance the value of the public securities, and to restore the currency of the national coin.

4th. The power of the Government to supply and maintain a paper medium of exchange, will not be questioned; but, for the introduction of that medium, there must be an adequate motive. The sole motive for issuing treasury notes, has hitherto been to raise money in anticipation of the revenue. The revenue, however, will probably become, in the course of the year 1816, and continue afterwards, sufficient to discharge all the debts, and to defray all the expenses of the Government, and, consequently, there will exist no motive to issue the paper of the Government as an instrument of credit.

It will not be deemed an adequate object for an issue of the paper of the Government, merely that it may be exchanged for the paper of the banks; since the treasury will be abundantly supplied with bank paper, by the collection of the revenue, and the Government cannot be expected to render itself a general debtor, in order to become the special creditor of the State banks.

The co-operation of the Government with the national bank, in the introduction of a national currency, may, however, be advantageously employed, by issues of treasury notes, so long as they shall be required for the public service.

Upon the whole, the state of the national currency, and other important considerations connected with the operations of the treasury, render it a duty respectfully to propose,

That a national bank be established at the city of Philadelphia, having power to erect branches elsewhere, and that the capital of the bank (being of a competent amount) consist, three-fourths of the public stock, and one-fourth of gold and silver. All which is respectfully submitted.

TREASURY DEPARTMENT, December 6, 1815.

A. J. DALLAS, Secretary of the Treasury.

The Committee on a National Currency having directed their chairman to address a letter to the Secretary of the Treasury, requesting his views upon certain points relating to the currency, the Secretary, on the 24th December, 1815, addressed to Mr. CALHOUN, as chairman, the following letter:

Letter from the Secretary of the Treasury to the Chairman of the Committee, on that part of the President's message which relates to an uniform national currency; enclosing an outline of a plan for a National Bank, accompanied with some explanation of the principles upon which the system is founded.

TREASURY DEPARTMENT, December 24, 1815.

SIR: I have the honor to acknowledge the receipt of your letter, dated the 23d instant, informing me "that the committee on so much of the President's message as relates to the national currency, had determined that a National