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Subject Area: Economics
Subject Area: Political Theory

GALLATIN TO WM. L. MARCY, Governor of the State of New York. - 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 WM. L. MARCY, Governor of the State of New York.

New York, March 20, 1838.

Sir,—

The undersigned were appointed by the general meeting of the officers of the banks of the city of New York a committee on the subject of the resumption of specie payments. They have the honor to transmit to your Excellency copies of two reports made by them to the general meeting aforesaid, the first of which has been published, and the other, not intended for publication, refers to the measures deemed necessary on the part of the banks in order to resume with safety and with a prospect to maintain specie payments. To that report is annexed an estimate of the liabilities of the banks payable on demand, and of their cash resources as they are expected to stand in the beginning of the month of May.

From those data, and according to the belief of the undersigned, there would be no difficulty in resuming on or before the 10th of May, and in maintaining specie payments, at the same time continuing to give banking facilities to the community at least equal to the present amount of their loans and discounts, and freely though discreetly issuing their circulation, provided the resumption was general and simultaneous on the part of at least the other principal commercial cities.

It is well known that the principal difficulties to be apprehended arise from the protracted reluctance of the Philadelphia banks to fix an early day for resumption. The banks of this city sent lately delegates to Philadelphia to confer on that subject and ascertain the ultimate views of the institutions of that city; but they declined naming any day till the meeting of the general convention of banks, which takes place on the 11th of April. The Senate of Pennsylvania has subsequently negatived a resolution of the other legislative house intending to compel the banks of that State to resume specie payments on the 16th of May.

Whilst there does not as yet appear any disposition on the part of the Philadelphia or Baltimore banks to resume at the same time with or shortly after those of New York, the banks of the North-Western, Eastern, and Southern States, though generally disposed to resume, may object to doing it without the co-operation of Philadelphia and Baltimore; Charleston is uncertain; the South-Western States generally, Alabama and Mississippi decidedly opposed to an early resumption.

Should we be compelled to resume specie payments without the co-operation of the other principal commercial cities, it will place the city banks in a novel situation, calculated for that very reason to impair confidence, and in which, whether from natural causes or from design, they may, notwithstanding all the measures adopted to guard against that evil, be exposed to specie drafts from States in which banks may still refuse to pay their debts in specie.

The undersigned believe that, provided the city banks generally adopt in earnest and carry into effect the measures recommended in the second report herewith enclosed, they will be able to sustain themselves. But in case of specie demands in the manner above alluded to from quarters of the Union where specie payments shall not have been resumed, it may be justly apprehended that the city banks, after having paid, may not be able to reissue their circulation; in other words, that they may be under necessity of withdrawing their notes and reducing their discounts to a sum not much exceeding the amount of their capital and surplus. It is obvious that the contraction of their concerns within such narrow limits will greatly distress the community and paralyze the commercial affairs of this city. In short, the ability of the city banks to resume specie payments may, in case of want of co-operation on the part of the Philadelphia banks, be only a payment of former engagements, and not a resumption of banking business on its ordinary scale.

It is therefore much less with a view to the safety of the banks, than for the purpose of being enabled to continue to accommodate the commercial community and to prevent if practicable the great distress to which it may be exposed, that the undersigned think it their duty to make this communication to your Excellency, and to call your attention to the aid which under such circumstances it may be in the power of the State, and which the State may deem proper and necessary to give. The only mode which has suggested itself to their minds consists in the State interposing its credit by the issue of a stock to be loaned for the purpose aforesaid, under the direction of the governor, on such contingencies and upon such conditions as may be prescribed by the Legislature.

The undersigned believe that such stock may, by being sold or pledged, shield the banks against the apprehended foreign demand, and they place great reliance on the moral effect of the simple enactment of a law of the State authorizing that measure.

We have the honor, &c.