The Madisonian. [volume] (Washington City [i.e. Washington, D.C.]) 1837-1845, 1842-02-19
CURRENCY REPORT.

Governments have generally seen that the fac
ulty Of issuing paper to circulate as money
should not be conceded 10 persons engaged In the
business OF trade for if II were issuing bills at dis
erection, they might engross directly an indefinite
amount of the property Of the community. Accord
ngIy, the privilege has usually been granted only
TO persons companies engaged IN the business OF
lending money. But the persons constituting the
company or controlling its affairs, may themselves be
borrowers and then the restriction becomes a nu-
gatory one for in that they create a currency
to use il in trade themselves which is not the least
frequent of excessive bank issues and has led
to the opinion, entertained by many, that mas
much as the business of trading and issuing paper
currency should be separated for the reason that
of lending money, and of issuing paper currency
ought not TO be intrus,ed TO the same hands.
In case, however, the Government itself be bor-
rover, and does not choose TO issue paper OF It's own
to circulate money IL may, and often does, attain
the end by the establishment of bank OF issues
for the very purpose of arranging lis debts antci-
pating its revenues. Hence, the origin, IN many
cases, of the direct association between governments
and banks,
So that in all communities, and in every form in
which currency exists whether coined money or
as paper representative of IL, and whether this be
issued by banks by public authority directly, the
question of the currency Of the country and that OF
its fiscal affairs are inseparable facts.
And next To taxation itself, the question OF the ma
terial in which shall be levied whether in kind
equivalent, and if so, whether in coin or not is
the important of all. The question of the place
and agent of deposite or transmission rs one OF con-
venience, security, use that of the standard and
material of payment is of the substance of the
thing
These general results applicable to all systems OF
finance, derived from the common experience OF
Europe and America. In the United States the APP
plicaton of them depends on the peculiar form and
organization of our Government.
Our political institutions the work of compact
and consent. To the Federal Government belongs
all such legislative and admins trative power, and
such only, the Constitution defines all functions
of Government not thereby granted to the Union,
remaining to the separate States or to the People
thereof and the States themselves possessing many of
the substantive powers of political sovereignty.
Among the substantive powers of political sove-
reignty exercised (whether rightfully not by each
of the States, is that of authorizing and regulating,
by means of chartered instruments of their own the
issue of bank paper to circulate currency.
The faculty Of issuing paper to circulate as curren
cy is no more necessary incident OF the faculty to
receive money in deposite, and to loan it in the dis
of notes and purchase of bills, than it is neces
sary incident of the faculty to buy and sell merchan
disc. A bank having authority to issue bills, after
purchasing bills with (that is, loaning OUT the whole
of its ca tal, proceeds to purchase other bills with
its own promises to pay Thus it does more business
than if rigidy confined to its capital it could, and
makes an interest on its credit promises as
well as on its capital. The real operation would be
the same if a merchant had the same authority. Yet
by the practice in the United States not generally
in other countres the two faculties of loaning money
and of issuing currency conjoined IN the banks
of the States.
1t may well be doubted whether the bills SO issued
by the banks of the States, and constituting curren
cy, not bills of credit within the meaning of the
prohibition Of the Constitution.
Historically, it is demonstrabe that the expression
" bills of credit applied in all the period anterior
the adoption of the Constitution, to these bills of
banks There were two forms of bills of credit, re-
cognised in legislation, speech and writing, namely,
government bills of credit and " bank bills of
credit"
1t seems difficult to conceive how these two species
fthe GENERIC thing to be considered far
different that should be constitutional and the
other not To be legal tender is not of the essence
of either; that u.s. each had been issued extensively
without being declared legal tender; and in all
other respects they in effect and mischefthe same;
tending in the same way to excess, alike usurping the
place of money producing the same disorders in the
currency and having the same deleterious influence
over the relations of labor and property.
And it would seem to be strange anomaly of the
fundamental law, or if not anomaly, then oversight
to provide that State shall not issue bills of credit by
the instrumentaty of legal person called its trea-
surer" but may by of legal person called its
"bank - in other words that it cannot, and yet that
it can be the dervative of the issue of bills OF
credit
Nor does it vary the principle to enact that the bank
shall consist in part in whole, of incorporated pr
vate stock This appears by the practical fact of The
times. Most the banks in the U ned States, south
of New York, have ceased to pay their bills In cash
large part ofthem having failed to make any effective
redemption for the space Of more than four years
Their bills ale an irredeemabe paper currency. And
their continued irredeemaby has been legalized by
State Legislatures in many instances, as the means
of procuring to the of the State Government On
issue of bills of credit with which to deray the charges
of the State instead of evying taxes on the inhabi
tants for that purpose. The State cannot issue bills
of credit by its treasurer but it can and does by Its
banks; which is great cause of the existing dis
orders in the currency of the United States
Thus, of the sovereign function to make, ISSUE and
regulate money Cor its substitute, the State Govern
mens (wheher by usurpation or constllutionalIy is
immateria to the result possess part in common
with the Federal Government.
And this is the radical difficulty in the whole mat
ter of the currency. For if,he States have the power
SO to issue bank bills of credit then the Federal Go
vernment cannot (by any direct leglslaton) proven
their issue, and of cannot by any direct egs
ation) apply to the inherent chronic disease
the paper circulation of the United States. Whether
it may administer any indirect remedy will be seer
hereafter.
1t is of the power and duty of the Federal Govern
ment in the first place, to provide for itself safe ant
suitable fiscal agent to receive keep and dsburse tn
public moneys. This it does under the tax power ant
other powers of the Constitution.
The Federal Government has, in the second place
under more than clause Of the Constitution, Ger
tain powers to exert and duties to discharge concern
ing the currency of the United States.
In what way shall Congress exercise these power
and discharge these duties
If the duty of the Federal Government CONSISTED
only in doing what is absolutely necessary for sel
in fiscal point of view, and stopped there, the ques
ton might be easily answered. But, in tn
opinion of the Committee, the Federal Government
should consider, not only what is for the convent
of ITSELF but also incidentally what is for the con
venience and welfare of the people of the United
States
In the first place, then, what cannot and what can
the Federal Government at this time do to remed,
and relieve the currency difficulties of the Unitet
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