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Subject Area: Economics
Subject Area: Political Theory

GALLATIN TO WILLIS HALL. - 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 WILLIS HALL.

New York, 28th March, 1838.

Sir,—

Your letter of 3d instant did not reach me till the 10th. I laid before the committee of the city banks on the “resumption of specie payments” that paragraph in which, alluding to the issue of a State stock for that purpose, you say that if legislative aid is required, let application be made, and that if it can be shown that a law authorizing that issue is necessary to sustain the banks in case they resume specie payments, you think that it will pass.

We are unanimously of opinion that a law to that effect would be of great importance; and no other action of the Legislature that can have a salutary influence on the resumption of specie payments has suggested itself to our minds.

The object of the several propositions in reference to banking and currency, which have been agitated during the present session, is obviously to increase banking facilities, and eventually, if at all efficient and practicable, to increase the issues of paper. Whatever the effect and merit of those plans may be, the result cannot be immediate, and they cannot in the slightest degree assist in resuming and maintaining specie payments. This, however, is the immediate object which presses upon us, and to which my attention and faculties are for the present exclusively devoted. It is the only one in reference to which you first addressed me.

I can assert with perfect confidence that, in the present state of foreign exchanges and under all existing circumstances, there would not be the least difficulty in resuming specie payments without any aid from the State, or action of any kind by the Legislature, if the banks of the other great commercial cities, and principally of Philadelphia, would agree to a simultaneous, or nearly simultaneous, resumption. Both Philadelphia and Baltimore persist, however, so far as we are informed, in their opposition; and this may have an unfavorable effect on the ultimate determination of the banks of the Eastern, Southern, and North-Western States, which appear disposed to resume along with us, but may object if Philadelphia does not unite.

The banks of this State will be placed in a novel situation when resuming without the co-operation of some of the most important other places. They will be subject to specie drafts from quarters where specie payments continue to be suspended. I believe that, with all the measures of precaution which have been recommended in our second report, the city banks will be able to sustain themselves. We have done all that was in our power. But, if pressed, they may be compelled to withdraw their circulation and to curtail their banking facilities to an extent extremely injurious to the commercial concerns of this great city. It is much less in reference to the safety of the banks than in order to guard against that evil that the aid and support of the State are required.

I believe that the issue of a State stock, such as suggested in your letter, and on such conditions and restrictions as the Legislature may prescribe, will in a great degree, by its immediate convertibility (if I may coin the word) into specie, protect the banks against the effect of annoying specie drafts from other States. I rely principally on the moral influence of the mere passage of such law by the State. Writing to you, I need not expatiate on that subject, and will only say that it is the only hope now left that the Philadelphia (and particularly the United States) banks may be induced to agree to an early resumption.

But however satisfied of the soundness of those views, and of the high importance that such law should pass before the 11th of April, when the general bank convention meets, yet such is the peculiar position of the banks, and the prejudices entertained against them, that a direct application from them would not only betray a sense of weakness injurious to the resumption, but might be misconstrued and produce opposition.

I understand, however, that some of our respectable merchants friendly to the resumption of specie payments, and sensible of the difficulties attending the subject, have taken it up, and that a memorial from them, applying for legislative aid in the manner contemplated in your letter, is now prepared, and will be shortly sent to Albany.

Yours, &c.