, 1858-01-22

the condition Of the banks Notwithstanding that fol
hundred millions of gold from California have Iwe,
N upon us within the last eight years, and the td
still continues to ow. Indeed such has been the cN
tayagance Of bank credits that the banks now hol,
considerable less amount of specie either in proper
ton to their cnpitl or to their circulation and depos
ties combined than they did before the discovery
gold in California. Whilst in the year ls4S their sre
ce IN proportion To their capital than eQua
TO one dollar for four and half in 1857 it does
amount TO one dollar for every six dollars and thirty
three cents OF their capital In the year ls4s the se
Gle was equal, within very small fraction to ont
dollar in five Of their circulation and dcposites in ls5
Is not equal u one dollar in seven and half Oi the
circulation and dcpisitcs.
From this statement il is easy to account for or
financial history for the last forty years. 1t has beer
hstoTy Of extray1gant expansions in the business
the country, followed by ruinous contractions. A
successive intervals the best and most enteTprisinl
men have been tempted to their ruin by excessive banh
loans OF mere paper credit exciting them to eXtraya
giant impotations Of foreign goods wild speculatOns
and ruihous and demoT1izing stock gambling. When
the crisis arrives as arrive it must the banks can eX
tend no relief 10 the people In vain struggle to re
deem their liabilities in specie they are compelled "a
contract their loans and their issues; aud at last in
the hour of distress whcn their assistance is most
needed, they and their debtors together sink iato in
sOrency.
1t is tlIis paper system OF eXtravaCant expansion
raising the nominal price Of every article far beyond
its real value when compared with the cost Of similar
articles IN countries whose circulation is wisely reg
lated, which has prevented from competing in our
own markets with foreign manufacturers has produc-
cd eEtravagant importations, and has counteraCted
the elect OF tie large incidental protection afforded
10 our domestic manufactures by the present revenue
tariff But Tor this the branches of our mlnufacturs
composed Of raw materials, the production of
cjuntry-such as cotton iron and wO0len fabrics
would not only have acquired almost exclusive posses
SION OF the home market, but would have created for
themselves foreign market throughout the world.
pCplpnhe, however, may be cur present iinan-
ea condition, we may yet indulge in bright hopes for
the fatGrc. No ether nation has ever existed which
could have endured snch violent expansions and
fractions OF paper credits without lasting nury yet
the buoyancy OF youth, the energies OF our population
and the spirit which never quails before difficulties
will enable to recover from our present fnal-
cia embarrassment, and may occasion US speedily to
forget the lesson which they have taught.
In the meantime it is the duty of the government,
by all proper means within its power to aid in alevi-
ating the suierngs Of the people occasioned by the
suspension of the banks and 10 provide against re-
cuyrence Of the same calamity. Unfortunately, in
either aspect Of the case it do but little Thanks
TO thendependent treasury the government has not
pended payment as II compelled to do by the fail
ure Of the banks in 1881 1t will continue to discharge
its liabilities to the people in gold and silver Its dis
bursement in coin Will pass into circulation and ma.
terally assist in restoring sound currency. From
its high credit, should we be compelled TO make tenn
pOrary loan il be effected advantageous terms
This, however, SHALL ii possible. lie avoided but II
not, then the amount shall lie limited to the loves
practicable sum.
udFts tndI whilst no nseIul
government works already in progress shall be sus-
pended, new works net already commenced will be
postponed If this be done without injury to the
country Those necessary fer its defence shall pro
coed as though there bad been ne crisis in none.
tary affairs.
But the federal government cannot do much to pro-
vide against recurrence Of existing evils Even il
nsurmountabe constitutional Ob ctons did not exist
against the creation Of National Bank, this would
furnish no adequate preventive security The history
of the last Bank Of the United States abundantly
proves the truth Of this assertion Such bank could
not If il would regulate the issues and credits Of
fourteen hundred State banks in such manner as to
prevent the ruinous expansions and contracticns in
our currency which afflicted the country throue eout
the existence Of the late bank secure us agunst
future suspensions. In 1925, an effort was made by
the Bank Of England to curta the Issues 0fthe
try banks under the most favorable circumstances
Tie paper currency had been expanded to a VI inous
extent, and the Bank put forth all its power>to con-
tract it in order to reduce prices aid restOrVn equ
ibrum of the foreign exchanges. II accordingly con-
menced system Of cuItailmcnt Of its loans and is
sues in the vain hope that the jontstock and private
banks Of the kingdom would be compelled To follow
its example. II found, however that 1t contracted
they expanded and at the end Of the process TO en-
ploy the language OF very high official authority,
whatever reduction ~ the pa1er circulation ef
fet ted by the Bank Of England lin lS25) was more
than made up by the issues Of the country banks
But Bank Of the United States would not IL it
could restrain the issues and loans OF the State banks
because its duty as regulator of the currency must
OltCn DC IN lnVefeSlS
of its stockholders. If we expect one agent to re-
strain control another their interests must at least
in degree be antagonisc. But the directors Of
Bank of the United States would feel the same in
tercst and the inclination with the directors of
the State banks to expand the currency to
date their favortes and friends with loans and TO de-
clare large dividends Such has been our experience
in regard to the last bank
After all, we must mainly rely upon the patriotism
and wisdom of States for the prevention and redress
of the evil. If they will afford US real specie basis
for paper circulation by Increasing the denoma
ton of bank notes first to twenty, and afterwards to
fifty dollars; If they will require that the banks shall
at all times keep on hand at least one dollar Of gold
and silver for every three dollars Of their circulation
and depo ties; and Il they will provide by selrexe-
eating enactment which nothing can arrest that the
moment they suspend they shall go into liquidation,
believe that such provisions with weekly publica-
ton by each bank Of q statement of its condition,
would go far TO against future suspensions
OF specie payment.
Congress, in my opinion, possesses the power to
pass uniform bankrupt law applicable To all banking
institutions throughout the United States, and ]
strongly recommend its exercise This would make
it the irreversibe organic law Of each banks exs-
tence, that suspension Of specie payments shall
produee its civil death. The instinct OF sefpreserva
ton would then compel it to perform its duties in
such manner as to escape the penalty and preserve
its life.
The existence of banks and the circulation 6f bank
paper are so identified with the habits Of our people,
that they cannot, at this day, be Suddenly abolished
without mrrh immediate injury to the country. If
we could coudne them to their appropriate sphere,
and prevent them from administering to the spirit Of
wild and reckless speculation by ~extravagant loans
and issues they might be continued with advantage
to the public.
But this saw after long and much reflection: il eX-
perience shall prove it to be impossible TO enjoy the
facilities which welIegulaed banks might afford,
without at the same time suffering the calamities
which the excesses Of the banks have hitherto nict
ed upon the country it would then he far the lesser
evil to deprive them altogether Of the power 70 issue
paper currency and conline thom 10 the functions
Of banks of deposite and discount
Our relations with foreign governments arc, upcn
the whole. in a satisfactory condition.
The diplomatic difficulties which eXisted between
the government Of the United States and that Of
Great Britain at the adjournment olthc last Congress
have been happily terminated hy the appointment Of
British minister to this country, who has been cor
daily received.
While It is greatly to the interest, as am convinced
it the sincere desire Of the government and people
Of the two countries to he terms Of intimate friend
shin with each other. it has been misfortune al
most always to have had some irritating il not dan
gerous, outstanding question with Great Britain.
Since the origin Of the government we have been
employed in negotiating treaties with hatpowcr, and
in their intent anal mcuuiuu