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During the first presidency of Madison, the bank-question again arose, although it was still partially clad in the old party-robe which it was soon to lose entirely. The national bank called into life by Hamilton, in 1791, presented a petition for the renewal of its twenty-year charter. Since the Republicans, who had not yet lost their old dislike of the institution, formed the majority of congress, the request was refused. At the moment the government did not need the support of the bank; the cry against the "monopoly of the money-aristocracy and the speculators" could reckon, now as twenty years before, upon a favorable reception with the masses; numerous capitalists were only waiting until this dangerous competition should be taken out of the way in order to start banks under state charters; and the constitutional objections brought forward in 1791 were again vigorously urged, especially by Clay.1 The reasons were too many for the influence of the bank to
In three years, the picture had completely changed. One of the most effectual means which the Republicans used in the struggle against the Federalists had been the constant cry against high taxes. When they came into power they had to pay some attention to this in their financial management and, owing to the general prosperity, they could easily do this without causing any immediate damaging results. After the embargo-policy had begun to weigh heavily upon the whole industrial life of the nation, the weak points of the new financial system were soon apparent. The system itself, moreover, was not so different from that of Hamilton as the earlier utterances of Jefferson and his secretary of the treasury, Gallatin, might have led people to suppose. The war destroyed the plan. The reproach of the Federalists that a contest with the greatest maritime power of the world had been entered into wholly
1 Deb. of Cong., IV., pp. 279, seq., and 311.
without preparation was truer from no point of view than from that of the finances. The heavier capitalists, who could have made the more important contributions, belonged for the most part to the dissatisfied states of the northeast, and the Republican party did not dare to vote taxes which would have laid the financial strength of the country under heavy contributions, for fear of injuring its popularity. So the government laboriously slipped along from month to month by means of small loans which were only placed with the greatest difficulty, by the issue of treasury notes, and by other palliatives. All government. securities quickly depreciated, gold and silver constantly became more scarce, paper money more abundant and more worthless, and the credit of the nation was smaller every day. The country was rich all the while, but the government was rapidly approaching bankruptcy.
Under these circumstances the project of a national bank was again brought before congress by the petition of New York. Eppes, the son-in-law of Jefferson, brought in a report as chairman of the committee on ways and means, Jan. 10, 1814, which denied to congress the power "to create corporations" within the limits of the states. without their consent. This was the first change in the party's position on the constitutional question. The original Republican doctrine was that congress could create no corporations at all. Calhoun at once sought to take advantage of this first breach made by the English cannon in the party principles. He moved the appointment of a committee to consider the propriety of founding a national bank in the District of Columbia. The motion was agreed to without opposition, but the matter ended there.
Late in the summer of the same year affairs took a new turn. After the capture of Washington (August 24), all the banks incorporated by the states, with the exception of
'Deb. of Cong., V., p. 122.
2 Ibid, V., p. 171.
those of New England, suspended specie payments.1 The fearful confusion of all financial affairs which resulted from this bore hard upon the treasury. The secretary of the treasury, Dallas, declared in a report of Oct. 17, 1814, to the committee of ways and means: "The monied transactions of private life are at a stand, and the fiscal operations of government labor with extreme inconvenience. It is impossible that such a state of things should be long endured." And the sum and substance of his reasoning was that, after all," a national bank was the "only efficient remedy." At the end of the report he touched upon the constitutional question, and came to the conclusion that "discussion" must cease and "decision" become "absolute"; that the judgment of a congress must be recognized as settling the question; and that a national bank was "necessary and proper for carrying into execution some of the most important powers constitutionally vested in the government." The man who had said, in 1791 or 1798, that a member of a Republican cabinet would ever use such language, would have been looked upon as crazy. The crown was set to this change of parts, however, by the accompanying provisions: The capital of the bank was to be fixed at $50,000,000; the United States were to subscribe $20,000,000 of this; the bank was to be obliged to loan the United States $30,000,000; of the fifteen directors, five, the president among them, were to be named by the president of the United States; the bank was not to be taxed, except on its real estate, by the general government or the different states; the obligation of redeeming its notes with specie was not to exist, but other means were to be tried in order to prevent their deprecia
1 See the details in Ingersoll, Second War between the United States and England, II., p. 251.
2 Life and Writings of A. J. Dallas, p. 236. Annals of XIII. Congress, p. 1285.
tion. Even Hamilton would scarcely have ventured to lay such a plan before congress.
Congress at once took the proposal under consideration. Dallas urged speedier action, while he laid bare the whole financial misery of the government, without regard to consequences. In a second report of Nov. 27 he said: "The dividend on the funded debt has not been punctually paid; a large amount of treasury notes have already been dishonored; and the hope of preventing further injury and reproach in transacting the business of the treasury is too visionary to afford a moment's consolation. . . .. Thus public opinion, manifested in every form and in every direction, hardly permits us, at the present juncture, to speak of the existence of public credit; and yet it is not impossible that the government, in the resources of its patronage and its pledges, might find the means of tempting the rich and the avaricious to supply its immediate wants. But when the wants of to-day are supplied, what is the new expedient that shall supply the wants of to-morrow? Jan. 17, 1815, Dallas summed up his accounts, and showed that "pressing" demands of the previous year, amounting to $13,186,929, must be satisfied, and that there were no means provided for doing so.3 In the house of representatives Hanson of Maryland illustrated this general statement by giving some particulars. He affirmed that in the state department the bills for writing materials could not be paid; that the government "was obliged to borrow pitiful sums which it would disgrace a merchant of tolerable credit to ask for"; that the paymaster could not satisfy bills for thirty dollars, etc. Grosvenor of New York added that $40,000,000 of national paper was
1 Life and Writings of Dallas, pp. 238, 239. Ibid, pp. 245, 246.
3 Ibid, p. 265.
4 Deb. of Cong., V., p. 380.
in the market and that it had sunk from eighty to sixty-five per cent.1
The necessity of creating some means of help in almost any way was plain to see from these facts. Yet the debates of congress spun out endlessly. Some Democrats remained true to the old party doctrine, and denied the right of congress to call into life a corporation of any sort whatever. With the great mass of the Democrats, as well as of the Opposition," the only question was over the details of the bill.
In the first weeks of the new year the two houses of congress finally agreed upon a bill. Madison sent it back to the senate, Jan. 30, 1815, with his veto, expressly stating that he "waived" the constitutional question.1
Three weeks later the administration was freed from its most pressing needs by the close of the war; but the deplorable condition of the finances and the disturbance of foreign exchanges still continued, and men knew no way of extricating themselves from the difficulty, except by the establishment of a national bank. Madison, in his message of Dec. 5, 1815, recommended congress to once more take the question into consideration. Calhoun, too, brought in a bill, Jan. 8, 1816, and defended it, Feb. 26, in a very long speech. He did not touch upon the constitutional question, because, as he said, it would be " useless consumption of time" to discuss that any further. Clay took a prominent part in the debates and warmly supported the establishment of a bank. He justified him
1 Ibid, V., p. 383.
2 Ibid, V., pp. 369, 401.
Webster, Works, III., pp. 35-48.
4 Statesman's Manual, I., p. 323.
"Gold and silver have disappeared entirely. . . . Since 1810 or 1811 the amount of paper in circulation had increased from eighty or ninety to two hundred millions." Calhoun, Works, II., pp. 155, 158.