1833] Removal of the Deposits 405 leading issues in the campaign of 1832. It seems extraordinary that a man of Clay's political experience should have hazarded victory or defeat on such an unpopular issue. Jackson asserted with truth that the Bank was an “unAmerican monopoly." It was entirely unlike the national banks of to-day, as a national bank can now be organized by any set of men who can find enough money to deposit the necessary bonds with the government. The people sympathized most warmly with Jackson on this as on other issues. 291. Removal of the Deposits, 1833. — One of the chief arguments in favor of the establishment of the Second Bank, as of the earlier one, was the facilities it gave for the collections and disbursements of the government. The revenues, as collected, were deposited in the Bank or its branches, and payments were made by drafts on the institution. This business was done by the Bank for nothing, as the balances kept by the government enabled it to make large sums of money by loans. Apart from constitutional and political grounds, and granting the solvency of the Bank, the arrangement was most advantageous to the government, which saved all the money afterwards used in the construction of vaults, the payment of custodians, and the charges of transportation; it was advantageous to the people, as the money paid to the government was not withdrawn from circulation and locked up, millions at a time, in the government vaults; and it was advantageous to the Bank, as it gave it a larger amount of business. The disadvantage was overbalancing; at any time the Bank might exercise an overwhelming power in politics, controlling elections by money and starving its financial opponents into subjection by the manipulation of exchanges and rates of interest. There is no doubt of the reality of these dangers, nor is there any doubt that the Bank had taken part in the campaign of 1832. The charter of the Bank authorized the Secretary of the Treasury to deposit the revenues of the government with other banks at his discretion, stating his Removal of 1833. United 132-170. The Senate Jackson. Nos. 64, 68. Speculative mania, 1837. reasons for so doing to Congress; this clause had been inserted to enable the government to deposit funds in state banks at points where the United States Bank had no branch. Jackson determined to use it to secure the withdrawal of all the government funds from the Bank. It was some time, however, before he could find a secretary who would do his bidding. At last he found such a man in Roger B. Taney of Maryland. The so-called "removal of the deposits" extended over a period of six months, and was not so much a removal as a refusal to deposit more funds with the Bank to replace those drawn out in the ordinary course of business. The public funds were then deposited in certain specified state banks, popularly known as the "pet banks." The loss of so large a proportion of its deposits compelled the United States Bank to adopt severe measures to protect its credit and to meet the government drafts. It called in large sums of money which were on loan, and this action brought about a dangerous scarcity of money before affairs settled down on the new basis. The Senate was still in the hands of Jackson's enemies. Under the lead of Clay and Webster, it passed a vote censuring the President for what he had done. To this Jackson replied in a letter. He protested against the action of the Senate in censuring the President, which could only be done by impeachment. He declared that the chief magistrate was entitled to interpret the Constitution for himself, and that he was not bound by the decisions of the Supreme Court, as each department of the government was independent of the other two departments. Two years later Jackson's party obtained control of the Senate, and the vote of censure was crossed out of the Journal of that body. 292. Distribution of the "Surplus," 1837. — Historical students seem to be fairly well agreed that the check placed on the power of the United States Bank by the removal of the deposits was in itself a wise action, apart from the constitutional and political questions involved. The mode and 1837] Distribution of the " Surplus" 407 time chosen for the accomplishment of this purpose, however, were most unfortunate. The one institution which possessed the ability to set bounds to reckless inflation and speculation was deprived of a great part of its power to do good, and nothing was put in its place. The government, so far from putting a check on the speculative frenzy which had taken possession of the people, actually increased it. Then, at last, becoming alarmed, Jackson interfered in his masterful way and gave the signal for widespread financial disaster. " On the first day of January, 1835, the last installment of Surplus the national debt was paid; the government owed nothing deposited' with the and was collecting about thirty-five millions per year more states. than it could reasonably spend on objects which the strict constructionists of the Jacksonian school regarded as within the scope of the powers of the federal government under the Constitution. Moreover, the revenue could not be diminished, because it was collected in pursuance to the Compromise Tariff Act of 1833, which could not be disturbed without a breach of faith and without bringing on a political crisis that no one desired to see. At the present time, the government can hoard its surplus revenues in the vaults at Washington and the great financial centers; but the independent treasury system was not then invented. No one thought of depositing more money with the "pet banks," which already held eleven millions. They were mostly situated in the speculative regions of the South and West, where democratic banks were abundant; for, curiously enough, the administration that had objected to the Bank of the United States as a political institution — and it was not at the time the objection was made — saw nothing inconsistent in depositing the nation's money in banks. which were political machines and little else. After various attempts to relieve the treasury, Calhoun came forward with a proposition to loan without interest the surplus funds to the states, in proportion to their representation in Congress. The money was said to be "deposited" to avoid the con Paper money. Jackson's specie circular, 1836. Schouler's United States, IV, 257. stitutional objection that Congress had no power to raise money by general taxation to pay over to the states. Three quarterly payments were made; then the crash came, and the government found itself obliged to borrow money to pay current expenses. 293. The Specie Circular, 1836. The distribution of the surplus was the last thing needed to induce the states, especially the newer ones, to plunge into all sorts of extravagant expenditures. Especially they loaned their credit to speculative ventures, and piled up vast debts without a thought of the future. This speculative fever was only a reflection of what was everywhere going on: land in the Eastern cities was rising in price by leaps and bounds; the public lands in the West were being acquired by speculators, the sales increasing from three million dollars in 1831 to twenty-five millions in 1836. The government, at that time, issued only gold and silver. The administration had endeavored to meet the legitimate demand for a larger circulating medium to carry on the business of the country by increasing its output of gold and silver coins, mostly the former, and by making certain arrangements with the deposit banks, confining their circulation to bills of twenty dollars and over, and providing that they should keep a specie reserve of one third of the amount of their circulation. These measures had slight effect; "wild-cat" banks increased enormously, and the flood of "rag-money" poured forth by them effectually destroyed whatever good the government measures might have done under ordinary circumstances. Jackson, against the advice of his cabinet, resolved to see to it that the government no longer received anything save gold and silver and notes of specie-paying banks in payment for the public lands, and issued a circular to this effect, hence called the "specie circular." This order affected the banks in the newer states at once and disastrously. In the end it helped greatly to destroy credit everywhere. Loaning rates increased in some cases to as high as twentyfour per cent. Before the full results of his financial policy 1840] Independent Treasury Act 409 were apparent, Jackson retired from office, and, confident that the "specie circular" would restore prosperity, handed over the government to his friend and successor, Martin Van Buren. elected 294. The Independent Treasury Act, 1840. Martin Van Martin Buren was regarded by his contemporaries as a self-seeking Van Buren office-monger, and was held responsible for many of the President, evil proceedings of "Jackson's reign." This was natural 1836. enough; for Van Buren, who was not popular with the people, secured the Jacksonian vote by pledging himself to carry on the Jacksonian policy. But he was no mere politician; indeed, during the critical years of his presidency he showed himself to be a man of principle, able to withstand popular clamor and to bear the strain of the unmerited distrust of his fellow-men. The reproach that has been cast upon him of being the author of the system of proscription of one's political opponents, which so unhappily mars Jackson's reputation, does not appear to be well founded. It is probable that Van Buren regarded that system as unjustifiable and did something to mitigate its severity. treasury Schouler's United Jackson was scarcely out of office when the panic came. The All the state banks suspended specie payment, and many independent of them failed, among others, the "pet banks," with scheme, their nine millions of government money. Van Buren set 1840. himself to invent a plan which would separate the financial business of the government from the financial institutions States, IV, of the country. This was the "independent treasury" 276-290, 324. scheme, or the " subtreasury" plan, as it is more often called. According to this device, which became law in 1840, the government built great vaults at Washington, New York, Boston, Charleston, and St. Louis. At these places, and at the mints in Philadelphia and New Orleans, government officials were to receive and pay out the government funds. 295. The Election of 1840. During the preceding decade, the opponents of Jackson had become welded into a |