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Subject Area: Economics
Subject Area: Political Theory

1831: GALLATIN TO R. 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 R. WALSH, Jr.

New York, 16th February, 1831.

Dear Sir,—

I thank you for your friendly letter of the 13th. What I have been able to ascertain on the subject of reviews is sufficient to satisfy me that your editors cannot afford to pay anything like five or six dollars a page for any contribution whatever, even if the labor to compile or write the article was intrinsically worth more. Be that as it may, I precluded myself from any pecuniary advantage when I undertook to write on a subject connected with the Bank of the United States. On this point my mind is made up, and, with thanks to the gentlemen, I must decline their offer. This is an excepted case, as, so far from having the slightest objection to receiving compensation for any labor of mine, my circumstances compel me to seek for some profitable occupation. Was it otherwise, I had much rather contribute occasionally to yours than attempt to establish another review. Whether I will undertake this is extremely doubtful. It is not the drudgery I fear; to that I have been used through life, and never more than during the twelve years I was in the Treasury Department. But success appears extremely doubtful. I have not yet discovered in what quarter the indispensable assistance for some most important branches is to be found; and the limited number of readers, combined with the much greater deduction allowed here than in Europe to booksellers, renders the undertaking dangerous to any but themselves. In this instance, if done at all, I must be proprietor and editor.

I am, &c.

GALLATIN TO R. M. SHERMAN.

New York, November 17, 1831.

Dear Sir,—

I had the honor to receive your letter of 1st instant, asking my opinion respecting the plan referred to the comptroller of the State of Connecticut, by which it is intended that the banks should issue only stamped notes to an amount not greater than they shall have secured by a deposit of mortgages or public securities of certain descriptions.

This provision would clearly secure the community against any ultimate loss on bank-notes, provided proper care shall be taken that the land mortgaged is worth more than the amount of the mortgage, and provided also the public securities are valued sufficiently below the market price to cover any loss arising from the fluctuations in that price.

There is, however, a necessary consequence of that plan which deserves consideration. The aggregate of the notes issued by the several banks of Connecticut amounts to about two millions of dollars. If, in order to issue those two millions (or the amount, whatever this may be), the banks are obliged to vest an equal amount of their capital in mortgages or public stock, either an equal sum must be deducted from their ordinary loans, to the great inconvenience of the commercial and manufacturing interest, or they must increase the aggregate of their loans by an equal sum, which may be more in proportion to their capital than would consist with good management; or new banks or banking capital must be added to those now existing, to an amount sufficient to afford those new loans.

Supposing this arranged in a satisfactory manner, I do not think the contemplated provision sufficient alone to protect the public as it should be. When a corporation is created, even the stockholders are entitled to some regard, and a heavy loss, though falling exclusively on them, is still a public evil. The depositors, though less numerous than the holders of notes, are still creditors, and form always an important part of the community. Finally, the provision in question protects the holders of notes only against an ultimate loss, but neither them nor the public at large against a suspension of specie payments and the consequent temporary depreciation of the notes. Various remedies have been suggested, and several adopted by many of the States, to guard against those evils as far as practicable. I have alluded to those in my essay on currency, and will recapitulate those that appear to me most efficient.

1. Suspension and final forfeiture of the charter in the respective cases of a temporary suspension of specie payment and of real defalcation, in a manner similar to that provided by the revised statutes of this State.

2. Interest to be paid, at the rate of 12 per cent. a year, on any note, draft, or deposit not paid by the banks when demanded, as provided by the charter of the Bank of the United States.

3. Suppression of notes under five dollars, as provided by all the States south and west of New Jersey.

4. Substantial limitation of loans and notes; the first not to be at most more than double, the last not more than two-thirds of the capital. I would prefer a stricter limitation, 167 per 100, and one-half of the capital.

I will give you notice whenever the free-trade committee meets. The gentlemen who were to supply me with facts have as yet forwarded nothing.

I have the honor, &c.