Staunton spectator. [volume] (Staunton, Va.) 1849-1896, 1878-06-18

ry thing were evidences Of real pros

In the beginning of 1915 the war clos
ed, and sagaciOus statesmen like MI
Calhoun, Mr.. Clay and Mr.. Lowndes
detected the cheat, and with the view O
restoring healthy condition of affair
and the blessing of sound currency
INTRODUCED into congress bill to incor
Iporate the Second Bank of the Unitet
States. In 1916, under the lead of Mr.
Calhoun, the bill was passed and receiv
ed the sanction of Mr.. Madison.
The bank with capital of $35 ,000, 900
ltwo-fifths of which was owned by tn
government of the United States, wa.
organized early in 1916. 1t at once ad
dressed itself to the duty of restraining
the extravagent issues of the STATE
Banks, by calling on them to redeem
their notes and thus opened the way tG
the resumption of specie payments. This
compelled the State Banks to curtai
their discounts and call on their debtors
for payment.
A distressing contraction of currency
ensued and there was general shrink.
age of values, very similar to that which
we have recently witnessed. This pro-
cess of contraction continued from 1871
until about 1925. During that time the
price Of -four declined from $14 and SIS
to $3 and $3.50 per barrel.
Finally the currency was reduced
within proper limits and specie pay.
ments were resumed. From that mo-
ment business revived-bank notes were
equal to specie, because they were ex-
changeab}e for specie-gambling specu-
lations ceased, trade was established on
solid basis; entire confidence was felt
in the currency, and every farmer knew
when he sold his products that he was
getting actual money and not mere
promises to pay in exchange.
Thus the second great crisis in our f.
nancial affairs was safely passed, mainly
through the conservative agency of the
Bank of the United States, and the
whole country rapidly advanced in pros
perity until 1888.
By the terms of its charter the contin-
uance of the bank was limited TO twenty
years which expired in 1885.
THE PANIC OF 1887.
In 1882 the bank applied to congress
for renewal of its charter. The subject
was maturely considered in both houses !;
and while it was pending Mr.. George
McDuffie made amasterly report (Which
is well worthy of perusal at this day. in
which he demonstrated the utility of the
bank in regulating the currency, equal
izing exchanges and maintaining specie
payments.
After full deliberatIon, the bill rechar-
tering the bank was passed by decided
majOrities in each house; but Gen. jack
son, for reasons which it is needless to
discuss, vetoed the bill, and 1t could not
command the requisite majority of two
thirds Of each house, it failed to become
a law.
Not satisfied with having defeated the
re-charter in 1888, General Jackson or
dered the Secretary of the Treasury to
remove the deposits of government
moneys, which had, Heretofore, under
the authority of law, been kept in the
Bank of the United States, from that
bank, and to distribute them among the
State banks.
AS might have been anticipated, these
deposits gave fictitious strength to
these banks. They commenced at 0nee
liberal system of discounting on the
faith of the government deposits, thus
inverting the natural order of things,
and loaning money freely on debts aOhich
they OWed, as if they constituted actual
capital aUhich they OaOned! The Bank
of the United States, being about to ex-
nire, Was poWerless to restrain the State
banks in their mad career, and they
proceeded to the widest excesses. Then
came the "Flush Times" which have
been so graphically described by Judge
Joseph G.. Baldwin, in his admirable
book, bearing that name. The condition
of things was, in many respects, similar
to that which existed from 1911 to 1878,
and more recently in Confederate times.
In 1886 Congress, perceiving the grave
mistake which had been committed
by depositing the mopeys af the Uni
ted States in the State banks, and the
disastrous results which had flowed from
it, passed what was called the Sub
treasury Bill" By the terms of that
law the President was required to with
draw the government deposits from the
State banks, and place them In the Gus
tody of bonded officers of the govern
ment.
The passage of that law at once dis
closed the weakness of the state banks.
They had been doing business on false
principle. They were unable to meet
the demands upon them, and in May
1887, every bank south of New England,
suspended specie payments!
Then followed the old process of strin-
gent contraction, after extravagant ex-
pansion. The inflated currency. like
fnll blown bladder, prioked BY a pin,
collapsed. Nominal values s6runk to
almost nothing. Nominal fortunes
vanished like bubbles and widespread
ruin and bankruptcy were the fruits of
this mischievous policy. The disasters
which followed the Revolutionary war,
and the war of 1872, were in some mea-
sure attributable to those wars, but the
crash which came on the country in
1887, was tha resultpf partizan prejudice
ana unw1se craftsmanship.
Nor were the mischiefs of this revul-
sion confined to private citizens. The
government of the United States was re-
duced to state of insolvency. It's re-
sources were in the hands of broken
banks, and it was left without the means
OF paying its currency expenses, On the
31st of May, 1S41, 1 took my seat in
Congress, as the representative of the
Dlstvlct 0f which Augusta then consti-
tuted part, and ! remember that there
was not money enough in the treasury
of the United States to pay the members
of Congress the eight dollars per day to
which they were entitled for their SER
vices. And, worse still, when Congress
sought to borrow the insignificant sum
of five millions of dollars, to meet the
immediate wants 0fgovernment, the Ma
tional credit was SO low, that the loan
could not be effected without pledging
the proceeds of the public lands as secu-
rity for its payment.
The Wing party under the lead of Mr..
Clay, sought to give relief to the country
by the mode which had proved success
full on two former occasions, viz: the
cnarter oIa third Bank of the United
States: The two houses by respectable
majorities passed the bill, but, unfortu-
nately, John Tyler who had succeeded
to the Presidency on the death of Presi-
dent Harrison, under the influence of
bad advisers, vetoed the bill, although
he had himself been an active agent In
framing it.
All that could then be done for the
relief Of the country was to pass the
tariff OF 1912, which replenished the
Treasury, revived the public credit and
gave great impulse to industry. in ali
its departments. -
Thus. after nearly r years of travail.
the tAifd great financial difficulty was
overcome.
From 1S43 to 1861, Notwithstanding
many mistakes of policy which rotardo