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Subject Area: Economics
Subject Area: Political Theory

GALLATIN TO A. C. FLAGG, Comptroller, Albany. - 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 A. C. FLAGG, Comptroller, Albany.

Private.

New York, March 6, 1838.

Dear Sir,—

The Senate of Pennsylvania has negatived the resolution of the House of Representatives which directed the banks of that State to resume specie payments on the 16th of May next. The North-Western States have always made their resumption depend on that of Philadelphia and New York; the Eastern States may pursue the same course; Baltimore goes with Philadelphia; there is no dependence on Charleston and New Orleans; Alabama and Mississippi are against the resumption. The probability now is that we will be obliged to resume without Philadelphia and Baltimore, and perhaps alone. Shall we be able to maintain specie payments? A great and spontaneous influx of the precious metals can alone enable us to do it. Even then we will be compelled to be extremely cautious, and, whether by curtailments, by withdrawing our circulation, or by both means, there must necessarily be a great pressure on the commercial community of this city. Those difficulties we must meet; but can the Legislature assist us in any way with propriety? and should it not abstain from any measure that might impede our endeavors? 1. I object to post-notes or any similar measure which looks as an extension or partial suspension and is calculated to impair confidence; and I have not been able to discover any other mode of aiding the banks than the loan of a State stock. 2. I think that every new general plan having for object materially to change our present system is in every respect ill-timed and dangerous. I most earnestly entreat that the banks may be permitted to extricate themselves, and that the resumption should take place before any new project is entertained. Whatever and however pure may be the motives of the movers, I do confidently assert that all the plans of indefinite joint stock companies or corporations, suggested under the pretence of free banking, have originated, or will terminate, in rank speculations; and that viewed under the most favorable aspect, they will have an unavoidable tendency to increase in amount and deteriorate in quality our paper currency. At all events, no more improper time could be chosen for such total change of system than that of general excitement and during a temporary and unnatural state of things. All I ask is that the consideration of such [a] momentous subject be postponed till next winter.

There are some other partial measures to be avoided. Such is the attempt to revive the Dry Dock Bank, whose catastrophe connected with the frauds on the Mechanics’ Bank was the last drop in the bucket, and the most immediate cause of the general suspension. Let not, I beg, the city banks be encumbered with it at the time of resuming, and, if to be revived, let it wait also till next session.

It is generally believed that the attempt is now made under the auspices and for the use of the United States Bank.

We have done all we could to make all the city banks join in the measures necessary for a resumption. The Manhattan and the Union hold back. As they are both bound to the State by the stock contract, we look to you to make them perform the conditions and, like the others, agree to get and hold an amount of specie equal to 30 per cent. of their capital.

Very respectfully, yours, &c.