Front Page Titles (by Subject) LETTER V.: MOVEMENT OF PARTIES.—BANK QUESTION. - Society, Manners and Politics in the United States
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LETTER V.: MOVEMENT OF PARTIES.—BANK QUESTION. - Michel Chevalier, Society, Manners and Politics in the United States 
Society, Manners and Politics in the United States: Being a Series of Letters on North America, translated from the third Paris edition (Boston: Weeks, Jordan & Co., 1839).
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MOVEMENT OF PARTIES.—BANK QUESTION.
Philadelphia, Jan. 5, 1834.
Of all the cities of the Union, the peaceful Philadelphia is the most disturbed by the Bank question, because it is the seat of the mother bank. The State of Pennsylvania also, of all the States, suffers the most from the financial crisis, because it is the most deeply in debt, and is obliged to borrow more, either to finish its canals and railroads, or to pay the interest on its existing debt. Conceive of the situation of a State, whose population amounts to only 1,500,000 souls, loaded with a debt of twenty and a half millions, whose ordinary expenditures are less than 600,000 dollars, but which must raise one million to pay interest already accrued, and nearly two millions and a half, for the next summer, under penalty of seeing her great works, executed at an enormous expense, go to ruin, and who knows not whither to turn. This is not all; some old loans must be reimbursed next May, or in three months, and, to crown the whole, the capitalists who contracted last year for a loan of three millions, to be employed on the public works, are, in consequence of the present crisis, unable to fulfil their contracts. The local banks, which are bound by their charters to lend the State at the rate of 5 per cent., rather stand in need of assistance themselves. To these public embarrassments is added the private distress, and thus this country, which Cobbett, who always shows talent, and occasionally gleams of good sense, dubs the Anti-Malthusian, exhibits for the present the spectacle of a superabundance of labourers. In the manufacturing districts of Pennsylvania, many of the operatives are without work.
The condition of the rest of the country is not, in general, any more favorable. I am very ready to believe that the Anti-Jackson newspapers, for so they call themselves, exaggerate the distress: but making all due allowance for rhetorical flourishes, it is still undeniable that there is much distress, especially among the commercial class. Bare figures are more eloquent than the best advocates of the Bank, and it is a notorious fact, that excellent paper has been discounted at the rate of 18 per cent. per annum, and at even higher rates, in New York, Philadelphia, and Baltimore. The price currents and the state of the stock-market, show a general fall in prices of 15, 20, 30, and even 40 per cent. Thus far the efforts of the President to fell the hydra of the moneyed aristocracy, the Mammoth, the Monster, have had no other effect than to blast credit and the commercial prosperity of the country; for the Bank has been administered with so much ability, especially since the presidency of Mr Biddle, one of the most distinguished men in the country, that notwithstanding the abrupt removal of the public deposits, notwithstanding the unexpected and unfair assaults upon some of the branches, particularly that of Savannah* , it is beyond comparison the most solvent and safe of all the financial institutions in the Union. At this critical moment it has as much specie (ten millions) as all the other 500 banks taken together, and I know from good authority, that many Jackson men (this is the epithet adopted by themselves), have been very glad to be sprinkled with a few drops of the venom of this dangerous reptile.
If what is now taking place in this country were to occur in any European monarchy, those persons who insist upon all nations having a government cast in the republican mould, whatever may be the condition of their territory and population, their wealth and knowledge, their character and manners, would not fail to make it the text of their harangues against monarchical governments; holding up to view the picture of an unparallelled commercial prosperity, checked of a sudden by the caprice of the sovereign, they would prove that such is one of the unavoidable consequences of an opposition between the interest of the ruler and the welfare of the nation; they would demonstrate by geometrical syllogisms, that it is the essence of monarchy to place authority in the hands of the weak and the foolish, who, to gratify their personal malice, would not hesitate to hazard the happiness of millions. They would raise the cry of secret influence, of intrigue, which, according to them, is one of the attributes of monarchies. Unluckily for this theory, it is belied by facts under my own eyes, in the most thorough and flourishing republic that has ever existed. The selfishness of royalty, or more correctly speaking of courts, has hitherto begot much mischief and will continue to do so in future; but it has met with its match in the bosom of republics, and above all under a system of absolute equality, which distributes political power in absolutely equal quantities to the intelligent and the ignorant, to the most eminent merchant and author, and the brutal and drunken peasant of Ireland, who is but just enrolled in the list of citizens. An absolute people, as well as an absolute king, may reject for a time the lessons of experience and the councils of wisdom; a people as well as a king, may have its courtiers. A people on the throne, whose authority is limited by no checks, may blindly and recklessly espouse the quarrels of the minions of the day; let those who doubt it come here and see it. Ignorance of the true interests of the country is not the exclusive prerogative of monarchies. The official papers of the Federal Executive in the affair of the Bank, so far as concerns a knowledge of the principles of government and the springs of the public welfare, are on a level with the measures of the government of Spain or Rome. And yet this Executive is the creature of the popular choice in the largest sense. It is not merely in monarchies, that a dancer is to be seen in the post that belongs to a mathematician. The camarilla! Never have I heard it so much talked about, as since I have been in this country. It is here called the Kitchen Cabinet, and admitting a fourth of what is said by the opposition to be true, it is difficult not to believe that its influence upon public affairs is greater than that of the ministerial cabinet.
But to return to the Bank. Congress met on the 3d of December; and most of the State Legislatures are now in session. Every where, and above all in Congress, the great, not to say the only question agitated, is that of the Bank. The subject of the discussions is the removal of the public deposits, which the President has withdrawn from the Bank after a military fashion, having previously, in the same spirit, removed from office the Secretary of the Treasury, Mr Duane, who, although opposed to the Bank, considered the President’s course illegal and rash. Thus far, the manifestations of public opinion and the deliberative assemblies are extremely various and discordant. In New Jersey, a small and unimportant State, the Assembly has adopted, by a large majority, resolutions approving the acts of the administration, and instructing its delegates in Congress to support the President; notwithstanding which, Mr Southard, one of the Senators from that State, has made an excellent speech on the other side of the question. The Assembly of New York, the first State in wealth and population, has adopted similar resolutions by a vote of 118 to 9. Some persons to be sure, assert that this is because New York would like to have the Mother Bank.* The youthful State of Ohio, whose growth borders on the miraculous (it now contains eleven hundred thousand inhabitants, although but 50 years ago it had not six thousand), Ohio, the Benjamin of the democracy, has strongly expressed the same wishes. The little State of Maine has done the same. The administration party lately had a brilliant opportunity of displaying its sympathies and its hatred. The 8th of January, the anniversary of the battle of New Orleans, was celebrated by innumerable public dinners, at each of which numerous toasts were drank. President Jackson was the hero, and the Bank was the scape-goat, of the day. It would be impossible to imagine the flood of accusations, insults, and threats, which was poured upon it, mingled with jests in the taste of the country upon Mr Biddle; thus, at one of these dinners, the Bank was toasted, as being governed by Young Nick according to the principles of Old Nick.
But the population of New England, particularly that of Massachusetts, is opposed to the administration. In Virginia the same opinions seems to prevail, and it is the same with several of the old Southern States. The merchants and manufacturers of New York. Philadelphia, Baltimore, Boston, and a hundred other places, have held meetings and adopted resolutions, strongly censuring the conduct of the government towards the Bank, and accusing it of having caused the present crisis. Most of the Philadelphia Banks have petitioned in favor of the Bank. Several Banks at Boston and in Virginia have refused to take the public money in deposit; those of Charleston have been unanimous in this measure. The majority of persons of intelligence, experience, and moderation, and most of the merchants and manufacturers, are in favour of the Bank. The country, particularly in the Middle and Western States, and the operatives in the towns, go for General Jackson.
In Congress the majority of the Senate is friendly to the Bank, and the majority of the House is on the side of the Administration. The superiority in debate belongs to the defenders of the Bank. In the Senate, the three greatest statesmen in the country, Messrs Clay, Webster, and Calhoun, are on this side of the question, and the speeches of Messrs Clay and Calhoun have made a strong impression. In the House Mr Binney, of Philadelphia, and Mr McDuffie have pleaded the same cause with ability. On the other side there has been more highflown declamation than reasoning. I have been struck with the resemblance between most of the speeches and newspaper essays directed against the Bank, and our republican tirades of 1791 and 1792. There are the same declamatory tone, the same swollen style, the same appeal to the popular passions, with this difference, that the allegations made here are vague, empty, and indefinite, while with us fifty years ago the grievances were real. Most generally the pictures presented in these declamations, are fantastical delineations of the moneyed aristocracy overrunning the country with seduction, corruption, and slavery in its train; or of Mr Biddle aiming at the crown. Amidst this swarm of speeches and essays, one hardly ever meets with any indications of serious study or a tolerable knowledge of the subject; but I have been struck with the speech of Mr Cambreleng, who has put forth some prudent suggestions as to the reforms required in the present system of banking. For it must be confessed, that this animosity of the President and the body of the people against the Bank of the United States, blind and unreasonable as it is, is founded on a real necessity, namely, that of a complete reorganization of the banking system. When Congress renewed the charter of the Bank of the United States without modification, in 1832, it committed an error. It should have seized this opportunity to place the currency of the country on a more solid basis; and if General Jackson had abode by the terms of his veto message, in which he declared that he was not opposed in principle to the establishment of a National Bank, but that the present Bank could not be retained without some modification, he might have become the benefactor of his country. He would not, indeed, have received Cobbett’s congratulations, but he would have obtained the approbation of all statesmen and men of sense in the Old and the New World. However, whatever his friends may say, as the President did not foresee the distress, which has befallen American commerce, and as nobody can doubt his patriotism, we need need not yet despair of seeing him adopt this wise course.
The present crisis abundantly proves the wretched condition of the currency, for the original cause of it was quite slight; it was merely the transfer from the vaults of one bank to those of another of ten millions, an inconsiderable sum relatively to the amount of the business of the country. If the local banks, in spite of the control exercised by the Bank of the United States, had not previously passed all bounds, they would have been able, when the Bank of the United States was obliged to contract its discounts by the withdrawing of the public money, to have enlarged their own in the same proportion, since those same funds were transferred to their vaults. But the framework of these banks is so badly put together, that it shakes at the slightest breath. The slight motion in the political and commercial atmosphere caused by the President’s blow at the Bank, in removing the public deposits, was enough to make them totter. They are like a colossus with clay feet, which should have feet of gold, or in other words, specie in their vaults.
The proportion of metals, of which we have an excess in France, is here extremely small. In many States, among others New York, there is an enormous quantity of bills of one, two, and three dollars. In South Carolina there are 25 cent, and even 12 1-2 cent bills. In Pennsylvania, Virginia, and some other States, there are none of less than five dollars. The Bank of the United States emits none of less than that sum; but this minimum is too low. Most political economists, and particularly the English, lay it down as an axiom, that the most perfect money is paper; this is true, if we suppose a nation in which any disturbance of industry, in consequence or apprehension of war, from foolish speculations, from glut or panic, is impossible. In such a land of cockayne, such a terrestrial paradise, an unshaken confidence would prevail in all transactions, and consolidate all interests. The metals would only serve to strike medals and to preserve inscriptions intended to commemorate this ineffable bliss. Paper would there be on a par with gold, and even higher, as some English writers have maintained it should be. I do not know if there will ever be a nation in such a state of heavenly happiness; but I doubt it, because in the world of finance, as well as in the world of passion, I consider the Tender River a fable, and pastorals a sport of fancy; but it is very evident that no such people exists now, or will for some time to come. Now in the United States, the present banking system, like that of England from 1797 to 1821, or even 1825, is founded on this theory of the most perfect money. It is provided, indeed, that the banks shall pay gold for their paper on demand; but by the side of this clause, which tends to keep a certain quantity of the metals in the country, is inserted another, which neutralises it; it is the power of emitting bills in any number, and of the sum of 1, 2, 3, or 5 dollars. In prosperous times, the emission of paper is abundant, indefinite; as the necessity of a metallic standard ceases to be felt, in proportion to the confidence which prevails, the metals disappear before the excess of paper; there is scarcely any left in the country. Since I have been in the United States, I have not seen a piece of gold except in the mint. No sooner is it struck off, than the gold is exported to Europe and melted down. When a crisis comes on, the demand for the precious metals increases rapidly, because every one attaches more value to a positive standard than to paper, and the later the application of the remedy for the scarcity of metals, the longer does the crisis last, and the more serious does it become.
In a new country, where capital cannot, of course, be abundant, for capital of all kinds, whether of articles of food or precious metals, is the accumulated produce of labour, it is natural, that the proportion of paper money should equal and surpass that of metallic money. The existence of paper money is even a great benefit to any country. In France we have the enormous sum of 600 million dollars in specie; (see Note 10 , at the end of the volume); in the United States 40 millions are sufficient for all the transactions of a commerce nearly as extensive as our own. In England the amount of specie at present does not exceed 220 millions, mostly in gold. Bank notes in circulation, which constitute the rest of the currency, amount at this time, in the United States, to 100 million, that is, two and a half times the amount of specie; in England to about the same as the specie, which gives for the whole circulation of
If we had in France the industrial habits of the English and Anglo-Americans, 200 millions of circulating medium, half in paper and half in specie, would probably be sufficient for our operations; but considering our commercial inferiority, suppose that we should require 300 millions, of which two thirds should be metallic, and one third paper, it would follow that we might advantageously employ 400 millions, which are now unproductive in the form of specie, and which add nothing to our pleasures, our comfort, or our industrial capacity. But if we might expect great benefit from banks of circulation and the paper which they would issue, it is evident that the Americans, in the present stage of their wealth, and considering their actual capital, would find their advantage in putting some check upon themselves in this matter. It might then be proper to raise the minimum of bills of the Bank of the United States to 10, 15, or 20 dollars, as in England there is no paper less than the five pound note. The National Bank, if it were powerful enough, would keep the local banks in check, and for this reason it is expedient to increase the capital. There would then be specie enough in the country for all purposes less than the paper minimum, and in case of any disturbance, the currency would be less readily deranged.
Nor is this the only point in which the charter of the Bank of the United States requires modification: its relations with the Federal government, as well as with the State governments, need to be modified: and some projects worthy of consideration, in this view, have been broached. It would also, probably, be expedient, as Mr Cambreleng has remarked, to change the rules and regulations relating to private and public deposits, and to provide that in future they should bear interest as they do in the Scotch banks. If this system were adopted by all the American banks, they would gain in solidity, and they would embrace the interest of all classes, and become provident institutions for the general good; while at present their direct profits, the dividends, fall exclusively to the shareholders, who belong to the wealthier classes; a fact which contributes not a little to their unpopularity. Finally, it would be proper to consider to what degree the immediate advantages of credit might be extended to mechanics and farmers. In this respect the banks are yet absolutely aristocratical institutions, the Americans having preserved in banking almost all the usages of their ancestors, the English. The American banks are now chiefly devoted to the use of speculators and merchants.
In the midst of so many contradictions, it is difficult to foresee what will be the issue of the struggle. The friends of the Administration maintain that President Jackson and Vice President Van Buren are not only opposed to the Bank as it is, but to any National Bank, and that they will never yield. The Globe, the avowed organ of the President, has told Mr Clay, that unless he can find a Brutus (to assassinate General Jackson,) the Bank will neither have the deposits nor a new charter. We may doubt, however, whether the President’s mind is so decisively made up, and after all a majority of both houses can set at nought the veto. As to the Vice President, whom his opponents call the cunning Van Buren, as he aspires to succeed the President, many persons declare that his object is to gain the vote of the powerful State of New York, by transferring thither the seat of the Mother Bank, but that he is too enlightened seriously to wish the destruction of an institution fraught with so much good to the country.
However this may be, it would be surprising if the present crisis were not followed, sooner or later, by a reaction in favour of the Bank of the United States with suitable modifications, or of another National Bank, which, as Mr Webster observed, would amount to the same thing, if the shareholders of the present Bank are not sacrificed. The jealous democracy of this country has this advantage over other democracies, that in the main it has much good sense; the recollection of old sufferings caused by the abuses of the banking system, and a jealousy of all pretensions to superiority, have led it to give ear to much noisy declamation about the aristocracy of money, particularly when it has been mixed up with flattery of itself. It may have been led astray for a moment, when its own prerogatives were the subject of discussion, as those sovereigns who assert the divine right of kings, take fire in respect to theirs. Proud of its gigantic labours, it may have been tempted to believe, that to it everything was possible and easy, that it had only to frown to cause the Bank to crumble into the dust at its feet, without being itself shaken by the shock. But facts, positive, inexorable facts now bear witness that it was mistaken, that it has trusted too much to its powers and its star, that the agency of the Bank of the United States is indispensable. The influence of facts has spread step by step even to the country people, who no longer find buyers of their produce. The argument is palpable and effectual; passion cannot long blind men of sense to such facts, for men of sense are those who do not give themselves up implicitly to abstractions, and who admit that every theory which is point blank against fact, is false or incomplete. This is the reason why good sense is worth to the full as much in politics, as talents.
It is worth while to observe here, that all the political difficulties in which the United States have become involved, and which have threatened the existence of the Union itself, have been settled by means of what are here called compromises, and in France justes-milieux. Thus was ended the serious dispute on the Missouri question, which had well nigh set the Union in a flame. It was made a question whether Missouri should be received into the Confederacy with a constitution sanctioning the institution of slavery. After a long and ineffectual debate, Mr Clay moved that Missouri should be admitted unconditionally, but that, at the same time, it should be declared that in future no new State lying north of 36° 30′ of latitude, should be admitted into the Union with this institution; this proposition was received with general favour, and the admission of Missouri was carried. In the next session, however, a new quarrel arose between the North and the South, more violent and bitter than the former, in relation to an article in the constitution of Missouri, prohibiting any free man of colour from entering the State. Another compromise, proposed by Mr Clay, finally settled the whole question in 1821, after it had kept the country in a flame for three years. In 1833, another compromise was made in respect to the tariff, the honour of which also belongs to Mr Clay. This question will sooner or later be settled in the same manner: the Union cannot do without a National Bank, and it will have one.
There are some lucky persons who succeed in everything, and there are some lucky nations with whom everything turns out well, even those events which seemed about to bury them in ruins. The United States is one of these privileged communities. When Villeroi came back to Versailles, after his defeat, Louis XIV. said to him, “Marshal, nobody is lucky at our time of life.” Charles V. also, as he grew old, said that fortune was like a woman, and preferred young men to old ones. Louis and Charles were right so far as this, that when a man, young or old, has finished his mission, foresight, ability, and perseverance profit him little; he fails in whatever he undertakes, whilst he who has a mission yet to fulfil, takes new strength from the most violent blows. This is true of nations as well as of individuals. The American people is a young people, which has a mission to perform; nothing less than to redeem a world from savage forests, panthers, and bears. It moves with mighty strides towards its object, for it has not, like the nations of Europe, the burden of a heavy past on its shoulders. It may be checked in its career for a time by the present crisis, but it will come out of it safe and sound, and more healthy than when it entered it. It will come out with increased resources, with a reformed banking system, and according to all appearances, even with an improved National Bank. May the nations of Europe not have to wait long for institutions, which have so powerfully assisted England and America in their progress!
[* ] The Savannah branch had out only 500,000 dollars in bills. The collector of the port accumulated them, as they were received for customs duties, and one day a broker presented himself at the counter with 380,000 dollars in bills, for which he demanded specie; but the disappearance of the bills of the branch from circulation had not been unnoticed, and funds had been provided for any exigency. Payment was, therefore, instantly made, and the broker, not knowing what to do with so much specie, was obliged to request the cashier to receive it in deposit.
[* ] New York is the chief seat of commerce, but Philadelphia is more central, and is, besides, the city of American capitalists. The removal to New York would also require the transference of the mint and some other public offices to that city, at great expense.
[Note 10—page 64.]Specie and Paper Money.
The quantity of gold and silver coined in France with the new die, amounted, up to 1836, to about 750 million dollars, of which three fourths were in silver. It is not probable that more than one fourth of that sum has been melted and exported; there would then remain about 550 millions. A part of this immense sum is out of circulation, and is buried in the coffers of individuals or in the pockets of the poor, who do not dare trust their savings to any person or institution.
In the United States, in 1834, the 405 local banks from which official or semi-official statements had been received, had 65 million dollars paper in circulation, and 14,250,000 dollars in specie in their vaults. There were beside, 101 banks, estimated to have in circulation 12,650,000 dollars of paper, and 2,825,000 dollars in specie on hand. The Bank of the United States had at that time a circulation of 10,300,000 dollars, and specie to the amount of 13,865,000 dollars. The whole currency of the United States, exclusive of the small amount of specie in the hands of individuals, amounted, therefore, to 88 millions in paper and specie. At this time, the banks had withdrawn a large amount of their bills from circulation, their issues before the war on the Bank having exceeded 100 millions. Since 1834, the amount of specie in the United States has been considerably increased, several of the States having prohibited the emission of bills of less than five dollars, a measure, which would tend to promote the use of the metals.
The following statement, showing the quantity of paper money in circulation in the United Kingdom at the end of 1833, is chiefly from McCulloch’s Dictionary of Commerce.
At the same time the amount of the precious metals in circulation and in the banks, was estimated at 45,800,000 pounds, of which seven millions were in silver.