William Graham Sumner

“ It is the interest of the borrowers that the bank should fail, since they could then buy its obligations at a discount and pay their own debts to the bank with them. The debtor interest, so soon as the high and correct relations of sound banking and currency operations are abandoned, is a bank-wrecking, currency-debasing interest. It is these facts which make the play of interests through and around a bank so interesting. The strongest currents of interest there are in the economic organization run through it. ”

“ Adams did not reply to Biddle, but he also wrote a public letter in July: "We are now told," said he, "that all the banks in the United States have suspended specie payments; and what is the suspension of specie payments but setting the laws of property at defiance? If the president and directors of a bank have issued a million of bills, promising to pay five dollars to the holder of each and every one of them, the suspension of specie payments is by one act the breach of a million of promises. ”

“ It is that the people at large shall continue to suffer the dishonor, the embarrassments and positive losses of a depreciated currency, in order that the debtors to the banks may make use of that currency to pay their debts. It is to tax the solvent, and enact a stop-law in favor of the. embarrassed and insolvent—it is gross favoritism—to those to whose imprudences the State is indebted for its afflictions, at the expense of rank injustice to those who have not been seduced into engagements totally beyond their power to meet. ”

“ If, at this moment, the United States Bank of Pennsylvania had been a specie-paying bank, impregnable in its banking strength and integrity, pursuing its way in the midst of the storm as a model of sound finance, its notes alone would have satisfied the requirements of the law, and would have sufficed in quantity, so that they would have become the currency of the federal Treasury ”

“ The history of the world never has recorded such base treachery and perfidy as has been committed by the deposit banks against the government, and purely with the view of gratifying Biddle and the Barings, and by the suspension of specie payments, degrade, embarrass, and ruin if they could their own country. ”

“ It is common to hear persons speak of the liberality of Mr. Biddle's bank and that the southern banks must rely upon him to enable them to resume specie payment. So far from his having given support, the banks of this State have, with one exception, suffered by their connection with him; for he has repeatedly dishonored checks with funds in his possession, and it is believed that he has bought up at a discount the notes of those banks that have confided in him, and placed them against the proceeds of sterling bills on which they had expected to check. ”

“ The committee stated that the losses of the Union Bank would be immense, and it was already evident that the State would have to pay the principal and interest of the bonds. Their argument is all directed to the point that the rest of the bonds should be withheld from the bank. They attributed the bad management of the Union Bank to the eagerness to provide "relief." "When a community, by speculation, over-trading, and inflated prices, has become deeply involved, greatly increased banking facilities only increase the violence and malignity of the disease." ”

“ A Governor, in 1854, said: "It was never intended that the people should be taxed to pay the bonds or the interest on them." This was naïvely true, but it implied that the loss, if the scheme did not succeed, was to be thrown on the purchasers of the State bonds. Fifteen hundred and thirty bonds were actually issued for the bank and five hundred more, a little later, for another branch. The latter issue was hypothecated with the North American Trust and Banking Company of New York for a loan, on which the actual amount received was $121,336. ”

“ Mississippi.—The "Free Trader" said, July, 1838: "Against the banking institutions of Mississippi we find the voice of their former warmest and most devoted friends becoming loud, indignant, and denunciatory. Every day only increases public imprecations against their unscrupulous swindling." "They [the banks of the State] must raise the value of their paper, and they must do it soon. There is no time to be lost. ”

“ The banks of Philadelphia, notwithstanding the difficulties which they had to encounter, had succeeded in keeping their currency, their deposits, their liabilities payable on demand, all which is generally called "Philadelphia funds," at a discount, compared with specie, of less than five per cent. An emission of a new species of currency is now authorized, which, being only a promise to issue a State stock to the same amount, is, on the day when it is issued, worth intrinsically no more than that stock, or less than eighty per cent. ”

“ They were obtained through a legislation partial and unjust. What right had a few hundred stockholders to make the whole people tributary to their schemes of moneyed aggrandizement? Why should the holders of these instruments be longer deceived? They possess bonds which they never can collect from the Territory. It is proper they should distinctly understand this truth. It is to their interest to take the security which the bonds and mortgages of individuals afford and relinquish 'the moonshine' in the shape of Territorial faith, which when they attempt to touch, will elude the grasp. ”

“ In March, 1840, the New York "Express" said: "The cotton business has entirely changed this year. Last year a large portion of it was in the hands of speculators, who, in many instances, with small means, were able by advances to control a large amount. The season turned disastrous and swept this class away. The facilities that were afforded by the southern banks induced large shipments, which in most cases turned out ruinous. The consequence is that the staple is now left to its own intrinsic value. Shippers buy and export as appears most for their interest. ”

“ The money has never been there, the capital has never been paid in. The hard earnings of industry, and the portions of widows and orphans who were deceived by Mr. Degrand's 'leetle word confidence,' have been actually paid in and not borrowed out by the owners of the stock; but this constitutes a small portion of the banking capital. The bulk of it has been made up of stock notes of the borrowers who got up the banks, put into its vaults bits of paper, and then drew out double or quadruple the amount in loans. ”

“ It requires more talent to sign another man's name than one's own, and the counterfeiter does at least his work in the dark, while the suspenders of specie payments brazen it in the face of day and laugh at the victims and dupes who have put faith in their promises. ”

“ In strong, sound, and well-conducted banks these interests come to harmony, and illustrate well the true relation between social antagonisms and social harmonies. It is the interest of depositors that the bank shall be as strong as possible, even to a degree which would make it impossible that it should gain anything. It is the interest of the stockholders to make the borrowers pay as much as possible and to pay to the depositors nothing. ”

“ No advance was to be made for more than twenty-five per cent in excess of the value of the cotton when it was received; all exchange to inure to the shipper, the bank taking only one and one-half per cent. commission (later one per cent.) . Advances might be made before the delivery of the cotton if the citizen was in danger of having his property sacrificed. If he will give proof of solvency, and security to deliver cotton by February 1st, to cover a bill on New York running not beyond February 10th, the bank will buy such bill. ”

“ The whigs had a majority of seven in the Senate and forty-nine in the House, and Clay made up a sweeping program of what they meant to do, in which it was assumed that the President was to take the role assigned to him. There were many reasons why this arrogant behavior of Clay was galling to Tyler, and was calculated to set a man of his abilities and character in very obstinate and resentful opposition. The first point on Clay's program was the repeal of the sub-treasury, and the second was the charter of a national bank. ”

“ They said that the Bank of the State would gain not less than $50,000 per annum. Before it adjourned, the Legislature made plans to put the State in debt $3,040,000. Its population was about 90,000. It is one of the most astonishing facts in this marvelous period that communities like Arkansas, Illinois, Indiana, and Florida should have found anybody to lend to them, even if they were foolish enough to borrow. The best defense of themselves which they could make to their creditors afterwards was: We have all been crazy together. ”

“ The amount of circulation of the safety fund banks of New York, January 1, 1839, was $19.3 millions. During the year 1839, the withdrawal of safety fund notes exceeded $7 millions, while the issue of new notes was about $6 millions, so that there was a net diminution in that year of $1.7 millions. The Comptroller said: There is a reasonable and necessary depreciation of bank note currency as it is carried away from the place of issue equal to the expense of transporting gold and silver to the same point. "Any further depreciation is unjust to the community which has to sustain it." ”

“ No bank was to have a capital of less than $100,000, consisting of specie actually paid in, nor borrow any addition to its capital, nor loan on stock, nor owe more than double its capital stock; nor make a note or security of any kind for a smaller sum than $5, which restriction the Legislature might raise to $20; nor pay more than ten per cent. dividends; any greater profits to be retained as a surplus; the stockholders were to be individually liable, upon dissolution, expiration, or forfeiture of the charter; banks were to be inspected by a Commissioner at least once a year ”

“ April 25, 1840, the Legislature, in pursuance of these suggestions passed an act providing that every bank, banking association, and individual banker, except those in New York, Albany and Brooklyn, should appoint an agent in New York City to redeem their notes at not more than one-half of one per cent. discount. If the agent of any bank should fail to redeem its notes, that bank should pay interest on the same at the rate of twenty per cent. per annum, and if the redemption was delayed over twenty days, the bank should be liable to be proceeded against by the Bank Commissioners. ”

“ She is obliged by the existing law to do what she feels to be wrong. Her natural course is to appeal to her Representatives to rectify their mistake, and not to thrust out their own State banks to be crushed by the Executive." The other States ought to tell New York that they will not unite in this forced resumption. "The banks should remain exactly as they are, prepared to resume but not yet resuming. * * * The American banks should do, in short, what the American army did at New Orleans,—stand fast behind their cotton bales until the enemy has left the country." ”

“ The attempt failed, but an article was put into the new Constitution requiring six months public notice of an intended application for the enactment or extension of a bank charter; no charter to run more than twenty years; every charter to reserve to the Legislature the right to amend or annul it, if injurious to citizens, though without injustice to corporators; no one law to create or extend the charter of more than one corporation. ”

“ May 31st, Biddle wrote another letter to Adams, saying that, since Congress had repealed the Specie Circular, he saw his way to resume and would do so. He would co-operate with the government. The leadership, however, had passed away from him, and he had to find a plausible pretext for following in a course which he had striven in vain to prevent. The associated banks of Philadelphia resolved that inasmuch as the Specie Circular had been rescinded, they would appoint a committee to confer with the banks of other States about preparations for resumption. ”

“ They are used to make one set of people believe that they are about to have their wishes gratified while, at the same time, those who seem to be committed by the resolutions to some irksome responsibility are reassured by being told that they will not really have to do anything. Of course somebody is duped. The Banks of the States were attempts to transfer this method of operation to finance, but when capital is at stake the fact that somebody has been duped means that a vulgar crime has been committed. ”

“ Four other Philadelphia banks failed at this time.
These events produced a panic. No one knew what money was. Some paid their debts with their money in haste before it should be good for nothing. Those who were not in debt lent it to their friends. There was a run, not for specie, "for none was visible, but what seems ludicrous, a run to exchange one bit of paper for another bit of paper." [200]
The "Commercial List" of Philadelphia could not quote bank notes and specie and exchange after the failure of the Pennsylvania and Girard, on account of the confusion. Specie was at ten per cent. ”

“ The practice pursued by the banks in advancing $60 a bale on cotton or $40 on the present and $20 on the coming crop is the principal cause of the great depreciation of our bank paper. Every dollar beyond the real price of the cotton was surplus and may be fairly adopted as the standard to measure the loss sustained by the country in the depreciation of the circulating medium. ”

“ Interest on the bonds deposited is to be drawn by the banks owning them unless the bonds deposited become, in the opinion of the Comptroller, inadequate security for its notes, in which case it accumulates to make the security good. The banks may surrender their notes and take up the bonds. Instead of bonds, as above, bonds and mortgages upon real estate in the State, bearing at least six per cent. interest, payable annually or semi-annually, may be deposited for one-half of the total amount deposited by any bank. ”