William Graham Sumner

“ When a bank was established in a country town it became the current fashion to get a loan and undertake some enterprise. The need for a loan did not arise from a growth of affairs up to the point where a need of more capital was experienced. Not every man is fit to have credit. It is far from being a blessing to every one. An education in the use of capital is needed before one is fit to use credit. ”

“ Congress has power to charter a national bank as one means of carrying on the fiscal operations of the national government; the States cannot by taxation impede Congress in the exercise of any of its constitutional powers; if the end is legitimate and within the scope of the Constitution, any means may be employed which are appropriate and not prohibited. It remained uncertain whether the operations of discount and deposit were included under the affirmation of this decision. ”

“ February 13, 1817, Crawford wrote to the president of the Mechanics' Bank of New York: "The Secretary of the Treasury will always be disposed to support the credit of the State banks and will invariably direct transfers from the deposits of the public money in aid of their legitimate exertions to maintain their credit; but as the proposition of the Bank of the United States excludes the deai of pressure on its part, no measure of that nature appears to be necessary at this time." ”

“ Let us suppose, and after what we know of banks, we may suppose anything! a majority of the board at Philadelphia, only thirteen men, resolve to get rich, or if rich, to get richer. They agree among themselves that the Bank shall lend to each of them, the moderate sum of $200,000, as a permanent accommodation for twelve months. Well, the amount being passed to their credit, they issue a peremptory order to the officers of the Bank, and its offices, that they shall not issue any more of their own notes. ”

“ Niles became convinced that there was such a scheme, and in the following April he said: "To speak plainly, let who be offended that may, let any power be exerted against us that can, we express an entire conviction of the belief that certain great proprietors of the stock of the Bank of the United States, with other speculators having a powerful influence on money affairs, aided perhaps by certain officers of government, are enrolled for a common exertion to bring about a suspension of specie payment by the establishment of a paper medium." ”

“ The men who formed the bank, and gave their stock notes for the stock, borrowed the circulation as soon as it was printed, and had the advantage of holding it in the first hand; hence Niles says, apropos of the City Bank of Baltimore, in which all the officials, except one clerk and the porter, had taken out loans amounting to $426,083, and where, if the loans to the directors were included, the whole group had borrowed $100,000 more than the whole capital: "This is the great principle of modern banking; a cheat, a bubble, a machine for the exclusive benefit of a few scheming men." ”

“ The State banks, anxious to retrieve lost time and make a good dividend, do the same thing, and money becomes instantly plenty. Property speedily assumes a price beyond what it had before its fall; the house or piece of land, which sold, 'a little month ago' for $1,000, is valued at $1,500, and the gentlemen speculators then sell; offering to purchasers assistance from the Bank, if needful to make a good bargain for themselves. ”

“ Langdon Cheves of South Carolina was elected president March 6, 1819. In September, 1822, he laid before the stockholders at their triennial meeting an exposition of the state of the Bank as he found it, and a history of the steps by which he restored it. "It was not" he says, "until the moment I was about to commence my journey to Philadelphia, that I was apprised by a friend, who had been a member of the preceding Board, that he feared that, in a few months the Bank would be obliged to stop payment." "In Philadelphia it was generally expected." ”

“ The system was not even honest gambling. It was gambling in which one party had never put up any stakes. The banks had adopted all sorts devices to avoid any risk of being obliged to redeem their issues, and had indeed employed in banking, devices which belong only to gambling. Then when the trouble came, they "suspended"—that is to say, they withdrew from the performance of their obligations while insisting on the payment of debts to them. The Vincennes Bank of Indiana issued notes payable nine months after date at Vevay. ”

“ After speaking of the distress in England, April 10, 1819, Niles goes on to describe the condition of things here: "From all parts of our country we hear of a severe pressure on men of business, a general stagnation of trade, a large reduction in the price of staple articles. Real property is rapidly depreciating in its nominal value, and its rents or profits are exceedingly diminishing. Many highly respectable tradesmen have become bankrupt, and it is agreed that many others must go." ”

“ August 7th Niles says: "It is estimated that there are 20,000 persons daily seeking work in Philadelphia; in New York, 10,000 able-bodied men are said to be wandering the streets looking for it; and if we add to them the women who desire something to do, the amount cannot be less than 20,000." October 23d, he said that there were 7,288 persons idle in Baltimore. In the report of a Committee on Manufactures of the city of Philadelphia, quoted by him on that date, it is stated that trades which employed 9,672 persons in 1816, employed only 2,137 in 1819. ”

“ Therefore, in July, 1816, half the capital was paid back to the stockholders in specie. Still it suffered from the annoyance of unemployed capital. "To employ it in discounting commercial paper, experience had shown was not sagacious, as the bank's credit, which cost nothing, already supplied all the demands of trade." It therefore lent $25,000 of its remaining capital on mortgage in 1821. The remaining capital was $100,000, of which one quarter was thus invested. Subsequently a large part of the remaining $75,000 was lent on mortgage. [40]
The banks brought loans to every man's door. ”

“ August 28th, it was resolved to take no branch notes save at the branch which issued them; but the use of branch drafts was extended, with the same effect. They led to the device of drawing and re-drawing between the branches what were called "race horse bills," which combined the qualities of accommodation paper and endless renewals. They tended to draw the capital of the Bank away from the sounder and more conservative branches to the weaker and more reckless ones. ”

“ He made known to the Secretary the position of the Bank, and asked that notice should be given in advance of Treasury drafts, and also information of probable disbursements at designated places. He also asked for the use of a ship of war to bring specie from the West Indies, and for advance information of intention to pay the Louisiana debt. The Bank had three grievances: 1.—The receipt of notes for duties issued by other branches than the one at the place of receipt. 2.—The obligation to pay Treasury drafts on demand at any place. ”

“ By continuing the curtailments, restraining the southern and western branches, collecting bank balances, demanding time for the transfer of government funds, paying debentures in the same currency in which duties were paid, and obtaining a loan in Europe of $2.5 millions, Cheves claimed to have "lifted the Bank, in the short space of seventy days, from the extreme prostration which has been described, to a state of safety and even some degree of power." The Dividend Committee, in 1822, found that the aggregate of the losses was $3,743,899. ”

“ It is a singular fact, which conclusively shows the pressure of the times, that our master mechanics, even of the most necessary callings, such as shoemakers, hatters, and tailors, are not doing more than one-half or two-thirds of the business which they did three or four years ago. ”

“ The quotations at Baltimore in August were, in the local currency: Specie at a small premium; Boston, one or two discount; Massachusetts country banks, one to eight discount according to their repute in the city; Rhode Island and Connecticut, two to six discount; New Jersey, "specie paying," one or two discount; Philadelphia, par to a quarter premium; country notes, from one to sixty discount; "specie paying," one to five discount; Delaware, "specie paying," one discount; the rest eight to fifty; Maryland country notes, "specie paying," three to six discount; others, twelve to forty ”

“ South Carolina, eight to ten discount; Georgia, seven to eight discount; old banks of Tennessee and Kentucky, fifteen discount, nominal; new ones, twenty to twenty-five; Ohio, the best, ten discount, generally fifteen to twenty, many forty to fifty; the rest of the Mississippi Valley, fifteen to sixty discount. [17]
Adams' notes in his Diary, June 10, 1819, a conversation with Crawford about the "operations of the Bank and the gigantic frauds practicing upon the people by means of these institutions. The banks are breaking all over the country ”