The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, 1839-10-19

/. one most curou.ly connected with the history OF
lions, and one unfortunately which 10 requires deep
penetration TO deyelope clearly. Few OF the eotem-
porary historians Of past ages have known anything of
political economy, and consequently have not been sna
bled TO trace tho effects flowing from this system
Now, we can only trace out the connection between
and effect by accurate observation OF all tho
facts which have come down 10 us, however scanty
they may be.
Ii Is said by some that this scheme Of collecting
the revenue in specie, will have tendency TO check
the banks and consequently will prevent entirely
those vacillations in trade which will give US re-
dundant revenue, one year, and deficient one the
next; and this effect will flow from the artificial de-
mand created for specie. To this answer-that
believe the banking system would be in state OF
constant insecurity which would either break The
banks or prevent them from attaining the great ends
OF their establishment. For we must never forget,
that all banking depends on moral probability, re-
suting from confidence aBnihilae the latter and The
system perishes Hence one Of the dangers result
ing from the Legislation Of half enlightened men, in
regard 10 this subject They are sure TO think that
every restriction, every clog which can be devised,
should be thrown upon The banks; not rejecting,
that when they are tied down and trammeed, they
cease 10 produce good. But in The second place,
suppose the banks could stand against the operations
OF the Sub-treasury scheme then let us see how
they would be effected In times Of high prosperity,
when confidence was great, government would col
ect in specie; this specie would be deposited with
the sub-treasurers, or be exchanged Tor notes by
those OHlceTS, agents, etc, among whom u was us
bursed Now, the moment there should come re-
vusIon in trade, and confidence should be destroyed
the stream would continue 10 flow from the banks,
but irouid moi return. Thus, suppose the revenue
$40, 600 900 In times OF inflated prosperity, when
the system ought If possible, to check the banks,
they would be bat liltle affected because OF the ge-
neral confidence. Twenty millions Of dollars would
return. But let pressure come, and twenty nil-
lions would be poured out, not to return until con,
fdence was restored. And what, let me ask, would
he The chance Of a restoration confidence. win
so awful drain on the systeml Thus you see that
this system would affect the banks least when The
spirit OF speculation was highest; and would fall on
them with irresistible gravity when the hour OF
pressure came. Every man who knows any Thing
OF banking must know that this result Is greaty 70
be deprecated. .
You may ask, whether | do not consider thai all
these evils would not flow from The special deposl1
| system? answer that do not rightly comprehend
that plan. II the deposie is TO be made IN the notes
of specie paying banks and the identical notes are
| again TO be paid out, then say, that although the
system would be greatly preferable 10 the Sub-trea-
sury, vet that il must be fraughl with mischief II
would be better than the other system, because you
dispense with the payment in specie; which forms
the lesser portion oil the circulating medium al the
same time that IL is the basis on which the value OF
the other portion Is established. But the scheme
would labor under this dsadvontage-il would pro-
duce all the mischief of the boarding scheme
With large surplus revenue, II would produce the
most tremendous oscillations in the currency, and
think, would endanger the whole banking system
Suppose you should have such surplus as we late
lv had (and insist on testing every scheme BY that
state of things, which has thrown so much odium
on the State bank system,) this forty millions would
have been put on special deposite. That being
done, The banks whose notes were thus boarded,
either stop their issues for fear of those hoard
ed notes. they would go on TO issue II they stop
ped issuing, there would be an enormous deficiency
| in the circulating medium and consequently, there
| would be great many pressures. II they continu-
ed to ISSUE which would be the probable result they
might prevent the pressure for the present. by sup
plying the deficiency occasoned by the hoard, But
the very first great disbursement which should be
made by the government, would produce vastly
redundant currency, which would, in the end, en-
danger the whole banking system. Now, all these
evils are reduced 10 minimum on the State bank
deposite system; fol, if you have small revenue
annually collected, and annually disbursed, then
there is no stimulous given TO overradng. Ii your
revenue becomes enormous then, although the banks
will be stimulated, YET the natural regulator will
soon operate on them, and prevent an expansion in
proportion to the revenue. But on the other two
plans, the fluctuations will be entirely without the
control of the natural regulator; which after all Is
the only one that can regulate properly The operations
Of the banking system One Of the great objections
have TO United States Bank is, that it is an arti-
fetal regulator, which may interfere too much with
the more wholesome operations OF the natural regu-
lator. Now, you will readily perceive from The
views which have presented, that it necessarily
follows that the magnitude of the government de-
posites, which most persons think the source OF dan
ger In the ordinary deposite system, is the very rea
son why that system should be preferred to either of
the others la some respects too the great deposit
tors are be preferred tohe small ones. The great
depostors have II in their power, If they will only
manage judiciousy, to steady the system. Your
little depositors are always merciless in panic.
The Rothschilds and the Bari1gs are the men TO
sustain bank in crisis. When the Bank OF Eng
lend was pressed so hard in 1925, the company of
Rothschilds did every thing 10 sustain, while the
liule deposioTs and the little note holders do
ing every thing in their power 10 break it. 1t is
true, II the government Of the United States should
withdraw its deposites injudiciously especially du-
ring money pressure, the evil may be greatly aug
mented but, on the other hand, by judcious man
agement it may greatly alleviate it, There are
some advantages which government deposes pre-
sent for banking, yielded by no others. They are
made with regularity. II put thousand dollars
in bank to-day, perhaps, on the morrow, may make
a contract, which may cause me 10 withdraw the
money. But the withdrawal of government depo.
sites may almost always be foreseen and provided
for The money is generally appropriated by action
of Congress, or according to a prescribed system
Our treasurer Of the Asylum here never finds
difficulty in making any payments although 1he ap-
preparation OF the ASYLUM is $l3,OOO. And the
reason is, he can ascertain in advance, with some
precision, the amount TO be disbursed by him; and
he knows precisely when he is TO receive the appro-
pralion. The truth is, that one Of the greatest adj
vantages Of banks Results from the fact, that they
bring into action every portion Of The capital OF
| a country A has $4,000 which he will use one
month hence, he can make no profit on the money
himself in that short lime, but if he deposes it in
bank boarding is prevented, and the country reaps
the benefit Let not then the government Of the
United States in this civilized age this age of credit
and commercial activity confess itself unable to
take of its funds, on any other principle than
the one which prevails among barbarians-that OF
boarding.
As TO the relative safety OF the funds in the Sub
treasury and in the banks, think there can be no
doubt; and even supposing the amount collected to
be safer in gold and silver than in any other form,
yet the constant pressures which would ensue, would
diminish the revenue infinitely more, by drying up
its sources than occasional losses by bank failures
could do. And after all, what would be the dread
ful consequences of an occasional loss of a few
thousands or even few millions, of the revenue Of
the General Government Such losses might not
A., , p,,to