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1830: GALLATIN TO ROBERT WALSH, Jr. - Albert Gallatin, The Writings of Albert Gallatin, vol. 2 [1879]

Edition used:

The Writings of Albert Gallatin, ed. Henry Adams (Philadelphia: J.B. Lippincott, 1879). 3 vols.

Part of: The Writings of Albert Gallatin, 3 vols.

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GALLATIN TO ROBERT WALSH, Jr.

New York, 27th April, 1830.

Dear Sir,—

It is doubtful whether I will have time to prepare in season such an article in relation to currency as you desire, and still more so whether I can write anything on that subject worthy of the public and corresponding with your views. So much has been written on that question, that it does not seem to me that anything new can be advanced in support of what are admitted by almost all enlightened and disinterested men to be correct principles. The only points at all dubious, at least in my opinion, are those of local currencies, or what is commonly called “country notes,” and of the simultaneous circulation of gold and silver. Was it practicable, the following outline would appear to me preferable to any other, as combining safety, convenience, and facilities sufficient to promote industry and prudent enterprise.

1. No other but the Bank of the United States, nor any individuals, associations, or corporations, to be permitted to issue any bank-note, bills of credit, or paper in the nature of currency; but all such banks or bankers to be left, without restriction or special tax, at liberty to pursue in other respects their proper occupation, viz., to receive deposits, to discount notes, and to deal in bills of exchange or bullion; thereby assimilating them to the bankers of London and to all those of the Continent of Europe, neither of whom issues a single shilling of paper currency.

2. The Bank of the United States to issue no notes of a denomination under 100 dollars (a restriction the same as that of the Bank of France), those of a lower denomination excepted, which may be made redeemable at any of its offices where presented.

3. Gold and silver United States coins to circulate either on the new British plan of issuing silver at 10 or 15 per cent. above its intrinsic value, but not to be a legal tender for sums above ten dollars, or simultaneously for all purposes, but rating gold at its true value, which may be done so near the ratio of gold to silver (about 15.6 to 1) as to obviate every practical objection.

4. All foreign coins to be excluded; copper coins to remain as now, but not to be a legal tender for more than 50 cents.

You may perceive that I am an ultra-bullionist, which it is right you should know. But I am perfectly sensible that Congress will not attempt to prohibit the issue of notes by State banks; that we have no other security against their over-issues but State laws, which some States will not enact, and the Bank of the United States; that our reliance for a sound currency and, therefore, for a just performance of contracts rests on that institution; and that, in order to enable it to check and counteract the evil tendency of the local currencies, it must be permitted to issue notes of a smaller denomination than would otherwise be eligible. The principal object at this time is to preserve what we have, rather than to aim at what cannot be obtained. But I know too well, from sad experience, how difficult it is, without the aid of party, to carry any measure, however useful, which is opposed from sectional or interested views. And yet, though aware of the unavailing effect of argument under such circumstances, I would be disposed to contribute my mite if I thought I could add anything to what has been done by others. It is also so long since my mind was made up on the subject, that I have not lately collected any facts. The evidence reported by the committees of both Houses of Parliament previous to the resuming of specie payments in Great Britain is the last document of any importance which I read with attention. A correct statement of the amount and nature of our currency is an indispensable preliminary to any essay on the subject. The ordinary returns of the Bank of the United States and of the several State banks, of the latest dates that can be obtained, not in the aggregate for each State, but showing the situation of each bank, would be sufficient, as I am familiar with those returns. The cashiers of the several offices of the Bank of the United States might with ease procure most of them. If you can obtain these for me, I will try to write, with the understanding that, if prevented or not satisfied myself, I will put my notes in your hands to be used as you may think proper.

I have, &c.

GALLATIN TO G. C. VERPLANCK, M.C.

New York, 22d May, 1830.

Dear Sir,—

I have been much gratified by the report of the Committee of Ways and Means on the Bank of the United States, which I think to be the ablest paper that has issued from any committee of either House. The constitutional question is treated with great ability, and placed on the most solid ground that could have been selected. I would, indeed, be inclined to go farther than the committee, and to insist that the term “bills of credit,” in the Constitution, embraces every species of paper currency, and therefore precludes the issuing of bank-notes under State authority. That a purely metallic currency would be preferable to one hundred independent local paper currencies is indisputable; and, considering the perpetual tendency manifested everywhere, by every government or public institution, to abuse the power of issuing paper, it is at least doubtful whether it would not be safer to abstain altogether from using that dangerous instrument as currency. Admitting this to be impracticable, I cannot, though aware of the objections to a powerful moneyed institution, perceive any better check against over-issues, or any other security for preserving a proper standard of value, than the Bank of the United States, or at least one founded on the same principles.

There are, however, some positions in the report to which, as now informed, I cannot yield an unqualified assent. I was at the time of opinion that specie payments might have been restored in 1815, without the establishment of the bank, although that institution gave the best practicable security against a recurrence of the evil. I also think that the depreciation of a paper currency does not exclusively depend on, or always correspond with, its excess, and that this depreciation does not occasion that of a simultaneously circulating metallic currency; and, although I am an ultra-bullionist, it seems to me that the loss arising from the suspension of specie payments, which was incurred by government during the war, is overrated in the report. But on those and on some other points connected with the general question of currency to which I have paid great attention, I only wish to be enlightened; and the principal object of this letter is to request you to have the goodness to supply me, if in your power, with such further documents as may throw light on the subject. I can at present only point out the following, to which you may add such other as you may think useful and are within your reach:

1. The report itself, with the annexed tables.

2. Mr. Crawford’s report of 1820, therein alluded to.

3. The report of the committee of the Senate of this session on the Bank of the United States.

4. The reports (dates not recollected, 1813 to 1817) showing the amount respectively subscribed in the several States, &c., to the loans obtained during the war.

5. The report or reports showing the amount of Treasury notes issued during the war, their redemption by funding or payment, with the dates of such issues and redemption.

6. The late report of the Secretary of the Treasury to the Senate respecting the relative value of gold and silver.

I think that the immediate causes which produced the suspension of specie payments are not sufficiently investigated in the report. Excessive issues of bank-notes, and, perhaps, withdrawing of specie, will be the answer. But what was the cause of those excessive issues prior to the suspension of specie payments, which had not operated for the three years immediately following the dissolution of the first Bank of the United States? This is an important question, as connected with the degree of security afforded by the present bank against another suspension in time of war, and with the extent to which it may at such time afford or promote the loans wanted by government. A knowledge of the precise situation of the principal banks in June, 1812, and when they stopped paying in specie, would materially assist in discovering the immediate causes of that event.

GALLATIN TO ROBERT WALSH, Jr.

New York, 2d August, 1830.

Dear Sir,—

Yours of yesterday is received. Mr. Biddle has sent a number of most valuable documents and interesting explanations. But I am insatiable so far as relates to facts; and there are some still wanted, without which I would not venture to discuss the causes of the former suspension of specie payments, the extent of its effect on the issues of the State banks, and the efficiency of the United States Bank to prevent the recurrence of the evil. I can lay no claim to either originality of thinking or felicity of expression. If I have met with any success either in public bodies, as an executive officer, or in foreign negotiations, it has been exclusively through a patient and most thorough investigation of all the attainable facts, and a cautious application of these to the questions under discussion. On the present occasion this course appears indispensable in order to produce some effect on public opinion. I am sensible that, in several respects, all the facts are not attainable, and that we must be satisfied with an approximation. But I think that some important and which are necessary for that purpose are within our reach, and I will write at large to Mr. Biddle. But this will not in reality be productive of any delay. Long habit has given me great facility in collating, digesting, and extracting complex documents; but I am not hasty in drawing inferences; the arrangement of the facts and arguments is always to me a work of considerable labor, and, though aiming at nothing more than perspicuity and brevity, I am a very slow writer. Had all the facts been in my possession, I could not have undertaken to complete the review for your September number. Under existing circumstances it is altogether impracticable. I do not perceive that this delay can be attended with any inconvenience in reference to the object in view. The subject of the renewal of the charter will not be seriously discussed during the ensuing short session. It is very fortunate that the first blow was given in so masterly a manner and came from the quarter it did. For, next to that opposition founded on local and interested views, of which there is no hope, the banner of “State rights,” which has been raised against that of the “American system,” was the most formidable obstacle in our way. We must follow that blow, particularly as relates to the constitutional question. There is little hope of making converts, except amongst those disinterested men who from deep-rooted opinions and certain associations have had heretofore conscientious objections. I heard many in 1810 deeply regretting that they could not vote for the renewal of the charter of the former bank. With those men the utility of the United States Bank in all the fiscal operations of government is not a sufficient argument; it is the same which was urged and had been warmly opposed by Jefferson, Madison, &c., in 1791. You must prove to them the necessity of that institution for carrying into effect some provision of the Constitution. It is what has been successfully attempted by Mr. McDuffie; it is what we must illustrate and prove in the clearest possible manner. It is universally known that we had in 1815 no currency but a depreciated paper, which had not even the redeeming quality of uniform value, that the bank was recommended and its charter granted for the avowed purpose of restoring specie payments, and that they were actually restored principally if not altogether through the instrumentality of the bank. We can only enforce the argument derived from the clauses in the Constitution which relate to paper, legal tender, &c., and illustrate the general facts, by showing that the conversion of specie bank-notes into paper money proper, contrary to the clear intention of the Constitution, was principally if not entirely due to the uncontrolled issues of notes by State banks as soon as the salutary restraint of the Bank of the United States had been removed; and that the new corresponding institution not only removed the evil, but offers the best practicable remedy against its recurrence. Hence my great anxiety to obtain that information respecting the situation of the State banks in 1811, 1814, and 1816 as may enable us to demonstrate that the facts were precisely as just now stated, and thereby not merely the utility but the necessity of the bank.

I am, &c.

GALLATIN TO N. BIDDLE.

Confidential.

New York, 14th August, 1830.

Dear Sir,—

Your answers to my several inquiries have in most instances corroborated my previous opinions, and on several points thrown new light and indeed opened new views of the subject. There is but one of any importance on which I apprehend that we do not altogether agree. I think that you are too sanguine in your expectation of the ability of the Bank of the United States to sustain, under the pressure of any very difficult crisis, specie payments throughout the United States. You have managed the affairs of that institution with so much ability and success that the error, if it is one, is very natural. My own opinion is that, in the use of any paper currency, what we gain in the cheapness of the instrument we lose in security, and that, in order to combine the undeniable utility of paper with real security under adverse as well as favorable circumstances, there is no other remedy than a permanent increase of the circulating metallic currency and a corresponding diminution of the paper. And for that purpose the most simple and efficient mode is the suppression of notes of inferior denomination. To this the government of Great Britain has gradually been led by experience, and it has persevered against a most powerful opposition on the part of the country banks and all their ramifications. The result is that, on a circulation of about 58 millions sterling, they have about 28 millions in bank-notes, 22 in gold, and 8 in silver. They must necessarily give up their indefensible silver currency and substitute one corresponding with its intrinsic value, and time may suggest further improvements. With us, it seems from a first rough estimate that our currency is less than 90 millions of dollars, of which about 60 in bank-notes, 20 in silver in the vaults of the banks (but this portion is not in fact a part of the circulation, which, if the estimate is correct, amounts actually to only 70 millions), and less than 10 in silver circulating amongst the community. You very justly observe that, if the Bank of the United States was to withdraw its 5-dollar notes, the deficiency would be filled, not by gold, but by the notes of other banks,—an objection which Congress may not have the will, but has the undeniable constitutional power, to obviate by the imposition of a stamp duty. But permit me to remark that, however analogous in other respects, there is in this point of view a most essential difference between United States $5 and British £5 notes, since the admission of the first excludes, whilst the suppression of all those under £5 brings in the circulation gold coins or an equal value in silver, according to the mint regulations and circumstances of the country. You will at once perceive why I have been anxious that gold, by being rated at our mint at nearly its real value, might become part of the circulating medium; and that, whilst allowing even in prosperous times the necessity of the Bank of the United States to maintain a sound currency, I would wish, if practicable, such further restrictions on the issue of paper generally as would enable that institution at all times and under any direction to perform that office, and to afford complete security against the recurrence of a baneful and demoralizing inconvertible paper currency. The most skilfully administered bank can only be prepared to meet ordinary commercial fluctuations. But when a real and severe crisis occurs, you are perfectly aware that moral causes may increase the pressure to an extent which will baffle every calculation, for the very reason that those causes are beyond the reach of calculation. On the other hand, the example of France, under the united pressure of a double invasion, a failure of crops, large indemnities to foreign countries,—a vast portion of which was paid by the exportation of specie,—an unsettled government, and wild stock speculations, is decisive to prove with what facility a crisis is met with an abundant circulating metallic currency. We were, Mr. Baring and myself, spectators of the crisis, of which I could only see the external appearances and results, whilst he was behind the scenes and deeply interested in the event. We conferred often on the subject, and came to the same conclusions. He has ever since been an advocate in England of the simultaneous use of the two metals for the sole purpose of enlarging the basis of the metallic currency; and I beg leave to refer to his evidence before the House of Lords in March, 1819, particularly in reference to the fact that the Bank of France, in a situation nearly as critical as that of the Bank of England in February, 1797,1 was preserved by the supply afforded “through all the various small channels of circulation” of a country “every part of the circulation of which is saturated with specie.” As far as I can yet judge, the amount of the State banks’ notes now in circulation does not materially differ from what it was in 1819, whilst yours have increased from less than 3½ to near 18 millions. That increase is no more than what was wanted, that is to say, from about 45 to 60 millions, which corresponds with our increase of population; and in a country which is not in a retrograde situation the mass of exchanges and sales of commodities will, and the currency, all other things being equal, should, increase nearly in the same ratio as the population. Viewing, therefore, the currency not partially, but as a whole, your circulation has rather checked the increase than taken the place of the notes of the State banks, operating of course both ways where those banks were quite rotten. But we must expect that a corresponding gradual increase of currency will be wanted, amounting, at the same ratio, to 20 millions additional at the end of the next ten years. Now your circulation is already in the ratio of more than 50 per cent. to the amount of your capital, which exceeds the ratio not only of the Massachusetts, Rhode Island, and good city banks, but that of all the State banks taken together, this not being much above 40 per cent. Though probably practicable, and not inconsistent with the generally admitted banking principles, would it be prudent to increase your circulation much beyond its present amount? Keeping always in view ultimate security and the possibility of an extraordinary crisis, would it not be a safer course, if practicable, to supply that gradual want of an addition to the existing currency by an enlargement of the metallic currency, rather than by an increase of notes of any description?

Deeply impressed with what I consider a fundamental principle, I must necessarily advert to it whenever I treat the subject. But it does not follow that it would be proper to present it precisely in the same manner as when addressing you in confidence. The first duty is to preserve the anchor of safety to which we are now moored; and in every plan of reform it is but common wisdom to propose only that which there is a chance to obtain. Yet, and although I have heretofore always abstained from any allusion to the constitutional powers of Congress in reference to State banks, I do not know whether it may not now be proper to act on the offensive. The suggestion of a stamp duty, the animadversions on the guarantee of banknotes by a State, and thorough exposure of the country banking system, are all of that character. How far and where it may be prudent to conciliate or necessary to attack I have not sufficiently examined, and must remain for the moment subject to further consideration. But I wish to call your early attention to the imminent danger there is that the renewal of the charter may not be obtained on any terms, and to the absolute necessity of the sacrifices which will, at all events, be requisite in order to succeed.

In 1810 the weight of the Administration was in favor of a renewal, Mr. Madison having made his opinion known that he considered the question as settled by precedent, and myself an open and strenuous advocate. We had the powerful support of Mr. Crawford in the Senate, and no formidable opponent in either House but Mr. Clay, a majority of political friends in both Houses, and almost all the Federal votes on that question, with no other untoward circumstance but the personal opposition to Mr. Madison or myself of the Clintons, the Maryland Smiths, Leib, and Giles; the banking system had not yet penetrated through the country, extending its ramifications through every hamlet, and the opposition due to the jealousy or selfishness of rival institutions was confined to a few cities; yet the question was lost. Now opposition arising from interested motives pervades the whole country; in this State, for instance, amidst the unintelligible commixture and distinction of parties, the country banking interest is all-powerful on all questions connected with that subject; with a sect of politicians throughout the Union “State rights” has become a watchword; worst of all, the President has prematurely and gratuitously declared himself and given the signal of attack to his adherents; and all these, with the exception of a few friends of Mr. Calhoun, are ready to obey. I believe that all the three enlightened members of Congress for this city are of the number. The result of my personal observations last winter at Washington was unfavorable; even Mr. Ingham, a friend to the institution, seemed to me to despair, and Mr. Van Buren’s safety fund is at least a proof that his views of the banking system are not correct. Against all this we have only the experimental knowledge of what would be the result of uncontrolled State banks; and, taking in consideration all the circumstances of the case, I am clearly of opinion that, if the charter is renewed, it will not be on such terms as the bank might wish, but on the conditions which Congress may be pleased to impose, and which the bank will be compelled to accept. It was a mistake on the part of the agent of the former bank, Mr. Hollingsworth, to believe, when the discussion took place, that he could treat with Congress on equal terms. And I may add that the high dividends, extensive circulation, and flourishing situation of the bank will afford additional motives or arguments for imposing harder conditions. One of the most obvious arguments will be derived from the practice adopted by the States to tax their banks. If Massachusetts imposes one, and New York, including the safety fund, more than one, per cent. annually on the capital, why should the Bank of the United States, enjoying greater advantages, be exempted? I do believe a tax to that amount, or an equivalent, to be the minimum which will be required; and if the bank can, when paying no tax, divide 7 per cent., it will be clearly its interest to submit to the condition rather than to dissolve itself.

It must, indeed, be acknowledged that, independent of the value of the privilege to trade without incurring any greater risk than the amount of capital paid in, and setting aside the advantages derived from private and public deposits, there is a solid foundation for the claim on the part of the public to participate at least in the profits derived from the issues of a paper currency. No change may be said to be produced that affects the community by the substitution of convertible and not depreciated paper to gold and silver. In both cases the community loses (each individual in proportion to his share of it) the interest on the total amount of the circulation, and may be considered as paying an annual tax to that amount (which, being received, in the case of a metallic currency, by nobody, is a dead loss to the country); and as, in the case of such non-depreciated paper currency, the amount of the whole currency in circulation cannot be materially increased, the tax remains the same. But in this case the proceeds of that tax, or at least a considerable portion, instead of being lost to everybody, are actually received by those who have the privilege of issuing the paper; and this is in fact the principal advantage arising from the substitution of paper for gold and silver, a privilege in which there is a common, universal feeling, founded, as I think, in justice, that the community or the government has a right to participate. To what amount must be investigated; but I would think it consistent with the soundest policy at once to acknowledge the justice of the claim, and that an equivalent must be given for it. One of the advantages is that of meeting the argument that government has a right and ought to issue the paper. Admitting the principle, you have only to show that not only the object is attained in a cheaper, safer, and more efficient manner through the instrumentality of the bank, but that, in reality, government may through it also receive without risk or trouble as much profit as if issuing itself the paper.

Whether a direct tax on capital or dividends, or an equivalent by a moderate interest on public deposits, a participation in the dividends when exceeding a certain rate, or some other mode, would be preferable, should be subjects of early consideration, in order that the public mind may be prepared before the day of Congressional discussion. What I would prefer, as conferring more real benefit to the community than any payment in money, would be a reduction from 6 to 5 per cent. in the rate at which bills are discounted; but this may not be practicable; and banking left to private individuals has certainly that advantage over our system, that the rate at which they lend, varying with circumstances, always adapts itself to the state of commerce and of the money market. Here, and on the plan of an inflexible rate of discounting bills, when there is less demand for capital, banks must either lay on their oars, as your branch did at Boston at the time you mentioned, or discount doubtful paper; and when the demand becomes great they must reject good paper, or discount more than prudence would dictate. The private banker in London and everywhere on the Continent of Europe discounts, according to the plenty or scarcity of money (as it is called), at the rate of 3 or as high as 8 per cent. I have seen instances of both cases, the usury laws in the last being evaded by purchasing accommodation bills of exchange, instead of discounting notes; but this is a digression. When I alluded to the transactions in bills of exchange as perhaps affording means to give a popular equivalent, you will, I am persuaded, do me the justice to believe that I was quite aware that the principle was wrong, since it would only be transferring the legitimate profits of those operations from those who transacted them to another class of individuals who had not the slightest claim to them. And as relates to government, there is no branch of the business of which it has less reason to complain, its own part of it being done gratuituously, which is tantamount to a participation in the profits. Under whatever forms effected, the gratuitous transmission of the public moneys cannot be considered but as a purchase at par of Treasury drafts by the bank, or of bank drafts by the Treasury, to any amount, at any time, and from and on any places which may suit the convenience of the Treasury, without regard to that of the bank, or to the state of the market. (A comparative view of the amount thus transmitted for a longer period than that annexed to Mr. McDuffie’s report, and of the inland exchange purchased by the bank, which I already have, might be useful; but you have not given me a corresponding statement of the drafts sold by the bank and offices on each other and of the profits thereon.) I was therefore induced to suggest the subject: 1st, because the analogous provision of making the bank and branches’ notes payable everywhere is and always was the most popular measure within my knowledge which could be adopted, although I have always shown to the many country gentlemen who asked for it that, as an obligation, it was impossible to require it; 2d, because, having requested the President to explain to me what he meant by his assertion that the bank had failed in establishing an uniform currency, I understood his allusion to have been either to the bank and branches not receiving always other branches’ notes as cash, or to their not purchasing individual bills or selling their own drafts at par. I rather think that their refusing thus to give drafts at par was what he particularly complained of; and I attempted, though without much success, to show that par of exchange and uniform currency were two very distinct things. Now, if you reflect on the time when your charter expires, you will perceive that it may become necessary, by some modification and sacrifice, to remove that objection, however unfounded it may appear to both of us.

I have thought it useful to call your attention to those two important points, viz., the propriety of enlarging the circulating metallic currency, and the necessity of being prepared for such modifications of the charter as will give to the government a greater participation in the profits of the bank and render it in some respects more popular. There is a third point on which I do not feel myself sufficiently informed: it is the real utility of country banks to the districts in which they are situated. I have only general and vague notions on that subject. That the local currencies they issue are anomalous and insecure I am satisfied; but independent of the selfish motives of speculators in those institutions, there is a general feeling even now in their favor, which must have its foundation in some real utility. It is fully admitted that in Scotland, and strongly asserted that in England, they have contributed to promote industry and the general prosperity. To distinguish in that case between use and abuse is important, and to me difficult. It would be equally unjust and bad policy to deny, indeed, not to state, the real advantages which, under proper restraints, may attend those banks even in districts almost purely agricultural. As far as applied, and in proportion to the commercial transactions in country produce, manufactures, &c., of the district, there is no intrinsic difficulty. This seems to me to lie in the question, whether and how far bank loans may be safely made to mere farmers on the security of their real estate. The Scotch banks do it constantly. But can a line be drawn founded on any principle? To state those with sufficient precision, in a way which may indeed show where the abuse lies, would be candid and conciliatory; and I will thank you if you can assist me in that respect, either from your own knowledge or by referring me to others, or even to any work worth consulting.

I have received the returns of the cashiers from which the general statement of banks was prepared, but have as yet only given them a cursory examination. The charter of the State Bank of Alabama is in point; we want that of the State Bank of South Carolina and Tennessee. Of the last there is only an extract in your Nashville cashier’s letter, which is not sufficiently intelligible. (He says also that he has forwarded to Mr. McIlvain a report of the bank committee at the last session of the Legislature, showing the situation of the bank, which has been very loosely managed; and this report is not amongst the papers forwarded to me.) The State of South Carolina is stated in a note to be the sole owner of the bank of that name; the charter should therefore be examined.

Since writing this, I have read the printed “Reports of the Banks of Georgia,” transmitted by you to me as above. There is no doubt that the Central Bank of that State is only an annex of the Treasury. Copy of its charter is wanted. This becomes very serious; four States erecting their Treasury into banks in whose names they emit bills of credit. Have the goodness to extend the inquiry as to that point to Louisiana, Mississippi, and North Carolina.

I am going for health and relaxation to Newport, and may be absent a fortnight. On my return I will again address you. You need not in the mean while write to me.

I have the honor, &c.

15th. Mr. Hopkinson called on me last night. Being on the eve of leaving the city, I could not avail myself of your kind offer. Should I want assistance hereafter, I will let you know. I think that I will not, with respect at least to documents. I must examine them myself; the extracts I may want will not require much transcribing, and I may have the occasional assistance of my sons.

GALLATIN TO ROBERT POTTER, M.C.

New York, 3d December, 1830.

Dear Sir,—

I duly received your letter of 19th June last, and was a little startled by the request to aid you in your intended attack on the Bank of the United States, as I thought you could not have been unacquainted with the fact that I had openly and officially advocated the renewal of the charter of the former bank, and that, although there were many opponents on constitutional grounds, the question would not have then been lost had it not been for the hostility of a portion of the Republican party either to Mr. Madison or to myself. Mr. Crawford was our principal support in defence of the renewal; and, without entering into details, it is known to all that the Clinton party was extremely dissatisfied with the preference given to Mr. Madison to the exclusion of Governor Clinton, and that De Witt was in 1812 the candidate of the opposition. This has nothing to do with the present question, but may explain why the tenor of your letter surprised me. But this was not the cause of the delay in answering your queries; and, although I was not ready to do it before this time, I ought to have acknowledged the receipt of your letter, and pray you to excuse the omission.

I had engaged in researches respecting the metallic currency of the United States, which led to a conviction that the circulation of gold coins ought not to be prevented, as it now is by our mint regulations, and that they ought to be rated according to their real market value as compared with silver. I could hardly avoid in the discussion some allusion to our paper currency, but had not properly investigated a subject of which I had lost sight since 1816, when I went to France. I received simultaneously your letter and one from Mr. Walsh requesting that I would prepare an article for his Review in relation to the reports of the two committees of the last session of Congress. It was impossible to answer without writing a book, and, having some leisure and no sufficient conception of the labor the scattered materials would require in order to an analysis and condensed form, I unwittingly promised to furnish the article. It has cost me three months of tedious labor, and, as it would not have been written but for your letter, I must ask your permission to inflict on you the task of reading it, and have accordingly written to the editor to send you a copy. I had not time to revise all the calculations myself, and the person I employed made several mistakes. Although there is none that can affect the argument, I have always felt conscientious with respect to facts, and particularly statements of numbers which readers have no means to verify, and I am now employed in revising and correcting those myself, with a view to a publication in a pamphlet form, which I will transmit to you when published.

You are quite right in believing that I would feel very averse to any interference or connection with the party politics of the day; and you will easily perceive from the general tenor of my essay that I am no friend either to our banking system generally or to a paper currency of any kind. Had I my choice, I would prefer a pure metallic currency and private banking-houses, as in London and on the Continent of Europe, who might with perfect freedom receive money on deposit, discount notes, and deal in exchange, but not issue bank-notes or in any respect interfere with the currency; and I would wish that government should neither restrain them in other respects nor grant them any privilege whatever. But I am equally averse to any issues of paper money by government, and still more so to its converting the Treasury into a banking, trading company. This I think the very worst plan, in every view of the subject, that could be devised, and the remedy worse than any evils, great as they are, that may flow not only from the existing system, but from letting again the State banks run wild and suspend their payments. I have viewed the subject with a single eye to a sound currency, which to provide for appears to me a constitutional and a moral duty. Independent of every temporary party consideration, there are questions of right and wrong, of what is just or unjust, which must be settled on that principle alone. Such is the question of currency. With a debased coinage or a fluctuating depreciated paper you subvert every private and public engagement, impair the performance of every contract, make invariably the ignorant and the weak dupes of the shrewd and wary, and demoralize the whole community. What are the means to prevent this under existing circumstances? Can Congress subvert the whole of the deep-rooted banking system, sustained as it is by almost every State in the Union, and revert at this day to a metallic currency? I have no doubt of the constitutional power in that respect, and have suggested the means; but I feel equally certain that the power will not be exercised. And in that case I will congratulate you and the country if you can discover any safe means of attaining the object otherwise than through a bank of the United States organized on principles in substance similar to those of the existing institution. Certain it is that none has as yet been suggested, and, perceiving no other myself, my conclusions are in favor of the renewal of the charter. For my arguments in support of the constitutionality of the measure I must refer you to the article in the Review. With me they are conclusive, and I have no doubt on the subject; but of that all are competent to judge, and provided I shall have succeeded in bringing the facts fairly and correctly before the public, I will be satisfied that it has been a useful task. I may be allowed to add that I am no otherwise concerned in the Bank of the United States than as owner of ten shares, and that from it or any other bank I have never asked or received any favor whatever, not having even had a single note discounted in the whole course of my life.

I am, &c.

GALLATIN TO N. BIDDLE.

New York, 8th December, 1830.

Dear Sir,—

Yours of 6th instant is received. I would not in ordinary cases feel the slightest reluctance to receive compensation for my labor. This would indeed be convenient at this time, as I must withdraw to the country unless I can make some addition to my income. But the article on banks and currency makes an exception. On this I had made up my mind from the beginning. I did not write, and would not have written, and do not wish it to be supposed that I have written, for the Bank of the United States; and I necessarily must accordingly decline any compensation. So far as I am concerned, I did write, on Mr. Walsh’s invitation, on a subject of great importance, and am quite satisfied provided the bank will at its expense print and publish my corrected copy. I am confident that a moment’s reflection will satisfy you that my decision is correct as respects myself, public utility, or the bank itself. Under existing circumstances, he who happens to have drawn conclusions favorable to the renewal of the charter must have no personal interest for having come to that result, if he wishes to produce any effect.

I have the honor, &c.

I will let you know how many copies I may want of the pamphlet.

GALLATIN TO JOSIAH QUINCY.

New York, 9th December, 1830.

Dear Sir,—

I had the honor to receive your letter of 29th ult., to which the necessity of employing the whole of my time in correcting a work for the press has prevented an immediate answer. The sketch of my observations on the subject of an English college, before the late literary convention, is extremely incorrect, and in some respects perfect nonsense. I did not think it worth my while to disavow it, as a work is now in the press (not at all that above alluded to) intended to contain the speeches delivered on that occasion, and the editor afforded me the opportunity of correcting mine. As I had spoken without notes or preparation, I was obliged to recur to the sketch in the newspapers as a kind of text, and I fear, though having kept no copy I cannot positively say, that I may have suffered the word “honorable,” which I did not use, to remain as an epithet to “dismission.” With that exception, that work will be found to contain faithfully the substance of what I said. In the mean while I will, from memory, state the facts as correctly as I can.

On the first or second day of the convention the question was discussed, how far it might be beneficial and practicable to allow generally students who were considerably in advance of the rest of the class to pass into a higher one without waiting the end of the scholastic year. It was in reference to that question that the president of the meeting,—Mr. Bates, of Vermont,—after having stated some of the practical difficulties which would occur in the execution of that plan, mentioned the attempt that had been made at the Harvard University to subdivide the Freshmen class into sections according to their acquirements, the dissatisfaction which it had caused, and that the plan was abandoned. In the course of his observations he stated, as I understood him, that some of the students, either withdrawn by their parents or applying for dismission, had said, with tears in their eyes, that they saw that they had mistaken their rate of talents, and that the time they had employed in their preparatory studies was lost to them. Mr. Bates made no application of this, nor any allusion whatever to the study of the dead languages.

On the ensuing evening, wishing to bring some definite question before the meeting more intimately connected with our projected university than had been done, and particularly one embracing the difficulty of embracing and connecting together, as is intended, the study of sciences and letters carried to a higher extent than is usual in the colleges of this part of the country, with popular and general education fitted for men not designed for the liberal professions, I submitted the propriety of an English college to be attached to the university as a kind of preparatory school. As proposed by me at that time, it was to be at the same time a classical college, in which the study of the learned languages kept distinct was not to be obligatory. I have seen reasons sufficient to convince me that this mixture of young men pursuing different studies and with different objects in view would be attended with serious inconveniences, and that it would be preferable to keep the subjects distinct, not to interfere with the classical seminaries of learning as they now exist, and to make the proposition for a purely English college, in which all the branches, with the exception of the learned languages, should be taught that are usually learned in our present colleges, a separate question. In that shape it is now under the consideration of the council of our intended university.

One of my principal arguments was that, with very few exceptions in some of our cities, all our best high schools or academies, being chiefly intended to prepare boys for admission in our colleges, were in fact Latin grammar schools, in which little else was taught; that parents who did not design their children for the liberal professions had no choice and must send them to such academies; that I considered the time employed on the study of the learned languages by those who did not enter our present colleges or otherwise pursue their studies as lost to them, or at least of comparative inutility; that, with respect to them, that time would be far more advantageously employed in acquiring other knowledge useful in an active life; and that a college such as I proposed, and connected as it would soon be with corresponding preparatory schools, would satisfy the wants of a great portion of the community, and also effect the avowed object of rendering the road to science generally more accessible. It was in order to sustain my assertion that the time now consumed by boys not destined for our usual colleges on the study of the learned languages was lost to them, that I appealed to the fact which had been mentioned by Mr. Bates; and I added, not as a fact, but as an inference of mine, that the reason why those boys considered the time employed in their preparatory studies as a lost time was because those studies had consisted principally of Latin and Greek, which, unless they pursued them farther, were of no use to them.

Having but little experience in education, and no pretension whatever to profound learning, I did not take a part in the preceding discussion respecting the mode of tuition, and do not entertain the slightest hope of being able to suggest any improvement in that respect. My only object is what it professes to be, that of extending and improving English or popular education, so as to diffuse more widely than is done at present, amongst all those who are not destined for the liberal professions, some share of elementary mathematical, natural, and historical knowledge, as well as that of their own language and of its literature. It did not enter within the scope of my observations to make any allusion (the single fact above mentioned only excepted) to the Harvard University or to the studies pursued there. Had it been otherwise, I would have spoken of it not only in terms expressive of my personal regard, but with the respect justly due to the first and, in every respect, the most useful and enlarged seminary of learning of the United States.

I am, &c.

I say nothing respecting my denying to classical learning any superiority over mathematics and science. This is a matter of opinion, and is not connected with your inquiry, nor indeed necessarily with the object I have in view.

[1 ]Its ordinary circulation is 9½ to 10 millions sterling, the specie about half that sum, discounts 10 millions, capital above 2½ millions, deposits under 2½. In November, 1818, the circulation being about 9½ millions, the specie was reduced to about 1,300,000. In 1797, when the Bank of England suspended specie payments, its specie was 1,270,000; its circulation 8,640,000; deposits 3,370,000.