Chapter LXXV

BANK OF THE UNITED STATES--DELAY IN PAYING THE THREE PER CENTS--COMMITTEE OF INVESTIGATION.

The President in his message had made two recommendations which concerned the bank--one that the seven millions of stock held therein by the United States should be sold; the other that a committee should be appointed to investigate its condition. On the question of referring the different parts of the message to appropriate committees. Mr. Speight, of North Carolina, moved that this latter clause be sent to a select committee to which Mr. Wayne, of Georgia, proposed an amendment, that the committee should have power to bring persons before them, and to examine them on oath, and to call upon the bank and its branches for papers. This motion gave rise to a contest similar to that of the preceding session on the same point, and by the same actors--and with the same result in favor of the bank--the debate being modified by some fresh and material incidents. Mr. Wickliffe, of Kentucky, had previously procured a call to be made on the Secretary of the Treasury for the report which his agent was employed in making upon the condition of the bank; and wished the motion for the committee to be deferred until that report came in. He said:

"He had every confidence, both from his own judgment and from
information in his possession, that when the resolution he had
offered should receive its answer, and the House should have the
report of the agent sent by the Secretary of the Treasury to
inquire into the affairs of the bank, with a view to ascertain
whether it was a safe depository for the public funds, the
answer would be favorable to the bank and to the entire security
of the revenue. Mr. W. said he had hoped that the resolution
he had offered would have superseded the necessity of another
bank discussion in that House, and of the consequences upon the
financial and commercial operations of the country, and upon
the credit of our currency. He had not understood, from a hasty
reading of the report of the Secretary of the Treasury, that
that officer had expressed any desire for the appointment of any
committee on the subject. The secretary said that he had taken
steps to obtain such information as was within his control, but
that it was possible he might need further powers hereafter.
What had already been the effect throughout the country of the
broadside discharged by the message at the bank? Its stock had,
on the reception of that message, instantly fallen down to 104
per cent. Connected with this proposition to sell the stock,
a loss had already been incurred by the government of half a
million of dollars. What further investigations did gentlemen
require? What new bill of indictment was to be presented? There
was one in the secretary's report, which was also alluded to
in the message: it was, that the bank had, by its unwaranted
action, prevented the government from redeeming the three per
cent. stock at the time it desired. But what was the actual
state of the fact? What had the bank done to prevent such
redemption? It had done nothing more nor less than what it had
been required by the government to do."

The objection to inquiry, made by Mr. Wickliffe, that it depreciated the stock, and made a loss of the difference to its holders, was entirely fallacious, as fluctuations in the price of stocks are greatly under the control of those who gamble in them, and who seize every circumstance, alternately to depress and exalt them; and the fluctuations affect nobody but those who are buyers or sellers. Yet this objection was gravely resorted to every time that any movement was made which affected the bank; and arithmetical calculations were gravely gone into to show, upon each decline of the stock, how much money each stockholder had lost. On this occasion the loss of the United States was set down at half a million of dollars:--which was recovered four days afterwards upon the reading of the report of the treasury agent, favorable to the bank, and which enabled the dealers to put up the shares to 112 again. In the mean time nobody lost any thing but the gamblers; and that was nothing to the public, as the loss of one was the gain of the other: and the thing balanced itself. Holders for investment neither lost, nor gained. For the rest, Mr. Wayne, of Georgia, replied:

"It has been said that nothing was now before the House to
make an inquiry into the condition of the bank desirable or
necessary. He would refer to the President's message, and to
the report of the Secretary of the Treasury, both suggesting
an examination, to ascertain if the bank was, or would be in
future, a safe depository for the public funds. Mr. W. did not
say it was not, but an inquiry into the fact might be very
proper notwithstanding; and the President and Secretary, in
suggesting it, had imputed no suspicion of the insolvency of
the bank. Eventual ability to discharge all of its obligations
is not of itself enough to entitle the bank to the confidence
of the government. Its management, and the spirit in which it
is managed, in direct reference to the government, or to those
administering it, may make investigation proper. What was the
Executive's complaint against the bank? That it had interfered
with the payment of the public debt, and would postpone the
payment of five millions of it for a year after the time fixed
upon for its redemption, by becoming actually or nominally the
possessors of that amount of the three per centum stock, though
the charter prohibited it from holding such stock, and from all
advantages which might accrue from the purchase of it. True, the
bank had disavowed the ownership. But of that sum which had been
bought by Baring, Brothers, & Co., under the agreement with the
agent of the bank, at ninety-one and a half, and the cost of
which had been charged to the bank, who would derive the benefit
of the difference between the cost of it and the par value,
which the government will pay? Mr. W. knew this gain would be
effected by what may be the rate of exchange between the United
States and England, but still there would be gain, and who was
to receive it? Baring, Brothers, & Co.? No. The bank was, by
agreement, charged with the cost of it, in a separate account,
on the books of Baring, Brothers, & Co., and it had agreed to
pay interest upon the amount, until the stock was redeemed.

"The bank being prohibited to deal in such stock, it would
be well to inquire, even under the present arrangements with
Baring, Brothers, & Co., whether the charter, in this respect,
was substantially complied with. Mr. W. would not now go into
the question of the policy of the arrangement by the bank
concerning the three per cents. It may eventuate in great public
benefit, as regards the commerce of the country; but if it does,
it will be no apology for the temerity of an interference with
the fixed policy of the government, in regard to the payment of
the national debt; a policy, which those who administer the bank
knew had been fixed by all who, by law, can have any agency in
its payment. Nor can any apology be found for it in the letter
of the Secretary of the Treasury of the 19th of July last to Mr.
Biddle; for, at Philadelphia, the day before, on the 18th, he
employed an agent to go to England, and had given instructions
to make an arrangement, by which the payment of the public debt
was to be postponed until October, 1833."

Mr. Watmough, representative from the district in which the bank was situated, disclaimed any intention to thwart any course which the House was disposed to take; but said that the charges against the bank had painfully affected the feelings of honorable men connected with the corporation, and injured its character; and deprecated the appointment of a select committee; and proposed the Committee of Ways and Means--the same which had twice reported in favor of the bank:--and he had no objection that this committee should be clothed with all the powers proposed by Mr. Wayne to be conferred upon the select committee. In this state of the question the report of the treasury agent came in, and deserves to be remembered in contrast with the actual condition of the bank as afterwards discovered, and as a specimen of the imposing exhibit of its affairs which a moneyed corporation can make when actually insolvent. The report, founded on the statements furnished by the institution itself, presented a superb condition--near eighty millions of assets (to be precise, $79,593,870), to meet all demands against it, amounting to thirty-seven millions and a quarter--leaving forty-two millions and a quarter for the stockholders; of which thirty-five millions would reimburse the stock, and seven and a quarter millions remain for dividend. Mr. Polk stated that this report was a mere compendium of the monthly bank returns, showing nothing which these returns did not show; and especially nothing of the eight millions of unavailable funds which had been ascertained to exist, and which had been accumulating for eighteen years. On the point of the non-payment of the three per cents, he said:

"The Secretary of the Treasury had given public notice that the
whole amount of the three per cents would be paid off on the
first of July. The bank was apprised of this arrangement, and
on its application the treasury department consented to suspend
the redemption of one third of this stock until the first of
October, the bank paying the interest in the mean while. But, if
the condition of the bank was so very prosperous, as has been
represented, why did it make so great a sacrifice as to pay
interest on that large amount for three months, for the sake of
deferring the payment? The Secretary of the Treasury, on the
19th July, determined that two thirds of the stock should be
paid off on the first of October; and, on the 18th of July what
did the bank do? It dispatched an agent to London, without the
knowledge of the treasury, and for what? In effect, to borrow
5,000,000 dollars, for that was the amount of the transaction.
From this fact Mr. P. inferred that the bank was unable to go
on without the public deposits. They then made a communication
to the treasury, stating that the bank would hold up such
certificates as it could control, to suit the convenience of
the government; but was it on this account that they sent their
agent to London? Did the president of the bank himself assign
this reason? No; he gave a very different account of the matter;
he said that the bank apprehended that the spread of the cholera
might produce great distress in the country, and that the
bank wished to hold itself in an attitude to meet the public
exigencies, and that with this view an agent was sent to make an
arrangement with the Barings for withholding three millions of
the stock."

The motion of Mr. Watmough to refer the inquiry to the Committee of Ways and Means, was carried; and that committee soon reported: _first_, on the point of postponing the payment of a part of the three per cents, that the business being now closed by the actual payment of that stock, it no longer presented any important or practicable point of inquiry, and did not call for any action of Congress upon it; and, _secondly_, on the point of the safety of the public deposits, that there could be no doubt of the entire soundness of the whole bank capital, after meeting all demands upon it, either by its bill holders or the government; and that such was the opinion of the committee, who felt great confidence in the well-known character and intelligence of the directors, whose testimony supported the facts on which the committee's opinion rested. And they concluded with a resolve which they recommended to the adoption of the House, "That the government deposits may, in the opinion of the House, be safely continued in the Bank of the United States." Mr. Polk, one of the committee, dissented from the report, and argued thus against it:

"He hoped that gentlemen who believed the time of the House, at
this period of the session, to be necessarily valuable, would
not press the consideration of this resolution upon the House
at this juncture. During the small remainder of the session,
there were several measures of the highest public importance
which remained to be acted on. For one, he was extremely anxious
that the session should close by 12 o'clock to-night, in order
that a sitting upon the Sabbath might be avoided. He would not
proceed in expressing his views until he should understand from
gentlemen whether they intended to press the House to a vote
upon this resolution. [A remark was made by Mr. Ingersoll, which
was not heard distinctly by the reporter.] Mr. P. proceeded.
As it had been indicated that gentlemen intended to take a
vote upon the resolution, he would ask whether it was possible
for the members of the House to express their opinions on this
subject with an adequate knowledge of the facts. The Committee
of Ways and Means had spent nearly the whole session in the
examination of one or two points connected with this subject.
The range of investigation had been, of necessity, much less
extensive than the deep importance of the subject required;
but, before any opinion could be properly expressed, it was
important that the facts developed by the committee should be
understood. There had been no opportunity for this, and there
was no necessity for the expression of a premature opinion
unless it was considered essential to whitewash the bank. If
the friends of the bank deemed it indispensably necessary, in
order to sustain the bank, to call for an expression of opinion,
where the House had enjoyed no opportunity of examining the
testimony and proof upon which alone a correct opinion could
be formed, he should be compelled, briefly, to present one or
two facts to the House. It had been one of the objects of the
Committee of Ways and Means to ascertain the circumstances
relative to the postponement of the redemption of the three
per cent. stock by the bank. With the mass of other important
duties devolving upon the committee, as full an investigation
of the condition of the bank as was desirable could not be
expected. The committee, therefore, had been obliged to limit
their inquiries to this subject of the three per cents; the
other subjects of investigation were only incidental. Upon
this main subject of inquiry the whole committee, majority as
well as minority, were of opinion that the bank had exceeded
its legitimate authority, and had taken measures which were in
direct violation of its charter. He would read a single sentence
from the report of the majority, which conclusively established
this position. In the transactions upon this subject, the
majority of the committee expressly say, in their report, that
'the bank exceeded its legitimate authority, and that this
proceeding had no sufficient warrant in the correspondence of
the Secretary of the Treasury.' Could language be more explicit?
It was then the unanimous opinion of the committee, upon this
main topic of inquiry, that the bank had exceeded its legitimate
authority, and that its proceedings relative to the three per
cents had no sufficient warrant in the correspondence of the
Secretary of the Treasury. The Bank of the United States, it
must be remembered, had been made the place of deposit for the
public revenues, for the purpose of meeting the expenditures
of the government. With the public money in its vaults, it was
bound to pay the demands of the government. Among these demands
upon the public money in the bank, was that portion of the
public debt of which the redemption had been ordered. Had the
bank manifested a willingness to pay out the public money in
its possession for this object? On examination of the evidence
it would be found that, as early as March, 1832, the president
of the bank, without the knowledge of the government directors,
had instituted a correspondence with certain holders of the
public debt, for the purpose of procuring a postponement of its
redemption. There was, at that time, no cholera, which could be
charged with giving occasion to the correspondence. When public
notice had been given by the Secretary of the Treasury of the
redemption of the debt, the president of the bank immediately
came to Washington, and requested that the redemption might
be postponed. And what was the reason then assigned by the
president of the bank for this postponement? Why, that the
measure would enable the bank to afford the merchants great
facilities for the transaction of their business under an
extraordinary pressure upon the money market. What was the
evidence upon this point? The proof distinctly showed that there
was no extraordinary pressure. The monthly statements of the
bank established that there was, in fact, a very considerable
curtailment of the facilities given to the merchants in the
commercial cities.

"The minority of the Committee of Ways and Means had not
disputed the ability of the bank to discharge its debts in
its own convenient time; but had the bank promptly paid the
public money deposited in its vaults when called for? As early
as October, 1831, the bank had anticipated that during the
course of 1832 it would not be allowed the undisturbed and
permanent use of the public deposits. In the circular orders to
the several branches which were then issued, the necessity was
stated for collecting the means for refunding those deposits
from the loans which were then outstanding. Efforts were made by
the branches of the West to make collections for that object;
but those efforts entirely failed. The debts due upon loans made
by the Western branches had not been curtailed. It was found
impossible to curtail them. As the list of discounts had gone
down, the list of domestic bills of exchange had gone up. The
application before alluded to was made in March to Mr. Ludlow,
of New-York, who represented about 1,700,000 of the public debt
to postpone its redemption. This expedient also failed. Then
the president of the bank came to Washington for the purpose of
procuring the postponement of the period of redemption, upon
the ground that an extraordinary pressure existed, and the
public interest would be promoted by enabling the bank to use
the public money in affording facilities to the merchants of
the commercial cities. And what next? In July, the president of
the bank and the exchange committee, without the knowledge of
the head of the treasury, or of the board of directors of the
bank, instituted a secret mission to England, for the purpose
of negotiating in effect a loan of five millions of dollars,
for which the bank was to pay interest. The propriety or object
of this mission was not laid before the board of directors, and
no clue was afforded to the government. Mr. Cadwalader went to
England upon this secret mission. On the 1st of October the
bank was advised of the arrangement made by Mr. Cadwalader,
by which it was agreed, in behalf of the bank, to purchase
a part of the debt of the foreign holders, and to defer the
redemption of a part. Now, it was well known to every one who
had taken the trouble to read the charter of the bank, that it
was expressly prohibited from purchasing public stock. On the
15th October it was discovered that Cadwalader had exceeded his
instructions. This discovery by the bank took place immediately
after the circular letter of Baring, Brothers, & Co., of London,
announcing that the arrangement had been published in one of
the New-York papers. This circular gave the first information
to the government, or to any one in this country, as far as he
was advised, excepting the exchange committee of the bank, of
the object of Cadwalader's mission. In the limited time which
could now be spared for this discussion, it was impossible
to go through the particulars of this scheme. It would be
seen, on examination of the transaction, that the bank had
directly interfered with the redemption of the public debt, for
the obvious reason that it was unable to refund the public
deposits. The cholera was not the ground of the correspondence
with Ludlow. It was not the cholera which brought the president
of the bank to Washington, to request the postponement of the
redemption of the debt; nor was it the cholera which led to
the resolution of the exchange committee of the bank to send
Cadwalader to England. The true disorder was, the impossibility
in which the bank found itself to concentrate its funds and
diminish its loans. It had been stated in the report of the
majority of the committee, that the certificates of the greater
portion of the three per cents had been surrendered. It had
been said that there was now less than a million of this
debt outstanding. In point of fact, it would seem, from the
correspondence, that between one and two millions of the debts
of which the certificates had been surrendered, had been paid by
the bank becoming debtor to the foreign holder instead of the
government. The directors appear to suppose this has not been
the case, but the correspondence shows that the certificates
have been sent home under this arrangement. After this brief
explanation of the conduct of the bank in relation to the public
deposits, he would ask whether it was necessary to sustain the
credit of the bank by adopting this resolution."

The vote on the resolution was taken, and resulted in a large majority for it--109 to 46. Those who voted in the negative were: John Anderson of Maine; William G. Angel of New-York; William S. Archer of Virginia; James Bates of Maine; Samuel Beardsley of New-York; John T. Bergen of New-York; Laughlin Bethune of North Carolina; John Blair of Tennessee; Joseph Bouck of New-York; John C. Brodhead of New-York; John Carr of Indiana; Clement C. Clay of Alabama; Henry W. Connor of North Carolina; Charles Dayan of New-York; Thomas Davenport of Virginia; William Fitzgerald of Tennessee; ---- Clayton of Georgia; Nathan Gaither of Kentucky; William F. Gordon of Virginia; Thomas H. Hall of North Carolina; Joseph W. Harper of New Hampshire; ---- Hawkins; Michael Hoffman of New-York; Henry Horn of Pennsylvania; Henry Hubbard of New Hampshire; Adam King of Pennsylvania; Joseph Lecompte of Kentucky; Chittenden Lyon of Kentucky; Joel K. Mann of Kentucky; Samuel W. Mardis of Alabama; John Y. Mason of Virginia; Jonathan McCarty of Indiana; Thomas R. Mitchell of South Carolina; Job Pierson of New-York; James K. Polk of Tennessee; Edward C. Reed of New-York; Nathan Soule of New-York; Jesse Speight of North Carolina; Jas. Standifer of Tennessee; Francis Thomas of Maryland; Wiley Thompson of Georgia; Daniel Wardwell of New-York; James M. Wayne of Georgia; John W. Weeks of New Hampshire; Campbell P. White of New-York: J. T. H. Worthington of Maryland. And thus the bank not only escaped without censure, but received high commendation; while its conduct in relation to the three per cents placed it unequivocally in the category of an unfaithful and prevaricating agent; and only left open the inquiry whether its conduct was the result of inability to pay the sum required, or a disposition to make something for itself or to favor its debtors--the most innocent of these motives being negatived by the sinister concealment of the whole transaction from the government (after getting delay from it), its concealment from the public, its concealment even from its own board of directors--its entire secrecy from beginning to end--until accidentally discovered through a London letter published in New-York. These are the same three per cents, the redemption of which through an enlargement of the powers of the sinking fund commissioners I had endeavored to effect some years before, when they could have been bought at about sixty-six cents in the dollar, and when my attempt was defeated by the friends of the bank. They were now paid at the rate of one hundred cents to the dollar, losing all the time the interest on the deposits, in bank, and about four millions for the appreciation of the stock. The attempt to get this stock redeemed, or interest on the deposits, was one of my first financial movements after I came into the Senate; and the ease with which the bank defeated me, preventing both the extinction of the debt and the payment of interest on the deposits, convinced me how futile it was to attempt any legislation unfavorable to the bank in a case which concerned itself.