Chapter XI

INDEPENDENT TREASURY AND HARD MONEY PAYMENTS.

These were the crowning measures of the session, and of Mr. Van Buren's administration,--not entirely consummated at that time, but partly, and the rest assured;--and constitute in fact an era in our financial history. They were the most strenuously contested measures of the session, and made the issue completely between the hard money and the paper money systems. They triumphed--have maintained their supremacy ever since--and vindicated their excellence on trial. Vehemently opposed at the time, and the greatest evil predicted, opposition has died away, and given place to support; and the predicted evils have been seen only in blessings. No attempt has been made to disturb these great measures since their final adoption, and it would seem that none need now be apprehended; but the history of their adoption presents one of the most instructive lessons in our financial legislation, and must have its interest with future ages as well as with the present generation. The bills which were brought in for the purpose were clear in principle--simple in detail: the government to receive nothing but gold and silver for its revenues, and its own officers to keep it--the Treasury being at the seat of government, with branches, or sub-treasuries at the principal points of collection and disbursement. And these treasuries to be real, not constructive--strong buildings to hold the public moneys, and special officers to keep the keys. The capacious, strong-walled and well-guarded custom houses and mints, furnished in the great cities the rooms that were wanted: the Treasury building at Washington was ready, and in the right place.

This proposed total separation of the federal government from all banks--called at the time in the popular language of the day, the divorce of Bank and State--naturally arrayed the whole bank power against it, from a feeling of interest; and all (or nearly so) acted in conjunction with the once dominant, and still potent, Bank of the United States. In the Senate, Mr. Webster headed one interest--Mr. Rives, of Virginia, the other; and Mr. Calhoun, who had long acted with the opposition, now came back to the support of the democracy, and gave the aid without which these great measures of the session could not have been carried. His temperament required him to have a lead; and it was readily yielded to him in the debate in all cases where he went with the recommendations of the message; and hence he appeared, in the debate on these measures, as the principal antagonist of Mr. Webster and Mr. Rives.

The present attitude of Mr. Calhoun gave rise to some taunts in relation to his former support of a national bank, and on his present political associations, which gave him the opportunity to set himself right in relation to that institution and his support of it in 1816 and 1834. In this vein Mr. Rives said:

"It does seem to me, Mr. President, that this perpetual and
gratuitous introduction of the Bank of the United States into
this debate, with which it has no connection, as if to alarm the
imaginations of grave senators, is but a poor evidence of the
intrinsic strength of the gentleman's cause. Much has been said
of argument _ad captandum_ in the course of this discussion. I
have heard none that can compare with this solemn stalking of
the ghost of the Bank of the United States through this hall, to
'frighten senators from their propriety.' I am as much opposed
to that institution as the gentleman or any one else is, or
can be. I think I may say I have given some proofs of it. The
gentleman himself acquits me of any design to favor the interest
of that institution, while he says such is the necessary
consequence of my proposition. The suggestion is advanced for
effect, and then retracted in form. Whatever be the new-born
zeal of the senator from South Carolina against the Bank of
the United States, I flatter myself that I stand in a position
that places me, at least, as much above suspicion of an undue
leaning in favor of that institution as the honorable gentleman.
If I mistake not, it was the senator from South Carolina who
introduced and supported the bill for the charter of the United
States Bank in 1816; it was he, also, who brought in a bill in
1834, to extend the charter of that institution for a term of
twelve years; and none were more conspicuous than he in the
well-remembered scenes of that day, in urging the restoration of
the government deposits to this same institution."

The reply of Mr. Calhoun to those taunts, which impeached his consistency--a point at which he was always sensitive--was quiet and ready, and the same that he had often been heard to express in common conversation. He said:

"In supporting the bank of 1816, I openly declared that, as a
question _de novo_, I would be decidedly against the bank, and
would be the last to give it my support. I also stated that,
in supporting the bank then, I yielded to the necessity of the
case, growing out of the then existing and long-established
connection between the government and the banking system. I
took the ground, even at that early period, that so long as
the connection existed, so long as the government received and
paid away bank notes as money, they were bound to regulate
their value, and had no alternative but the establishment
of a national bank. I found the connection in existence and
established before my time, and over which I could have no
control. I yielded to the necessity, in order to correct the
disordered state of the currency, which had fallen exclusively
under the control of the States. I yielded to what I could not
reverse, just as any member of the Senate now would, who might
believe that Louisiana was unconstitutionally admitted into the
Union, but who would, nevertheless, feel compelled to vote to
extend the laws to that State, as one of its members, on the
ground that its admission was an act, whether constitutional or
unconstitutional, which he could not reverse. In 1834, I acted
in conformity to the same principle, in proposing the renewal
of the bank charter for a short period. My object, as expressly
avowed, was to use the bank to break the connection between the
government and the banking system gradually, in order to avert
the catastrophe which has now befallen us, and which I then
clearly perceived. But the connection, which I believed to be
irreversible in 1816, has now been broken by operation of law.
It is now an open question. I feel myself free, for the first
time, to choose my course on this important subject; and, in
opposing a bank, I act in conformity to principles which I have
entertained ever since I have fully investigated the subject."

Going on with his lead in support of the President's recommendations, Mr. Calhoun brought forward the proposition to discontinue the use of bank paper in the receipts and disbursements of the federal government, and supported his motion as a measure as necessary to the welfare of the banks themselves as to the safety of the government. In this sense he said:

"We have reached a new era with regard to these institutions.
He who would judge of the future by the past, in reference
to them, will be wholly mistaken. The year 1833 marks the
commencement of this era. That extraordinary man who had the
power of imprinting his own feelings on the community, then
commenced his hostile attacks, which have left such effects
behind, that the war then commenced against the banks, I clearly
see, will not terminate, unless there be a separation between
them and the government,--until one or the other triumphs--till
the government becomes the bank, or the bank the government. In
resisting their union, I act as the friend of both. I have, as
I have said, no unkind feeling toward the banks. I am neither
a bank man, nor an anti-bank man. I have had little connection
with them. Many of my best friends, for whom I have the highest
esteem, have a deep interest in their prosperity, and, as far
as friendship or personal attachment extends, my inclination
would be strongly in their favor. But I stand up here as the
representative of no particular interest. I look to the whole,
and to the future, as well as the present; and I shall steadily
pursue that course which, under the most enlarged view, I
believe to be my duty. In 1834 I saw the present crisis. I
in vain raised a warning voice, and endeavored to avert it.
I now see, with equal certainty, one far more portentous. If
this struggle is to go on--if the banks will insist upon a
reunion with the government, against the sense of a large and
influential portion of the community--and, above all, if they
should succeed in effecting it--a reflux flood will inevitably
sweep away the whole system. A deep popular excitement is never
without some reason, and ought ever to be treated with respect;
and it is the part of wisdom to look timely into the cause, and
correct it before the excitement shall become so great as to
demolish the object, with all its good and evil, against which
it is directed."

Mr. Rives treated the divorce of bank and State as the divorce of the government from the people, and said:

"Much reliance, Mr. President, has been placed on the popular
catch-word of divorcing the government from all connection
with banks. Nothing is more delusive and treacherous than
catch-words. How often has the revered name of liberty been
invoked, in every quarter of the globe, and every age of the
world, to disguise and sanctify the most heartless despotisms.
Let us beware that, in attempting to divorce the government
from all connection with banks, we do not end with divorcing
the government from the people. As long as the people shall
be satisfied in their transactions with each other, with a
sound convertible paper medium, with a due proportion of the
precious metals forming the basis of that medium, and mingled
in the current of circulation, why should the government reject
altogether this currency of the people, in the operations of
the public Treasury? If this currency be good enough for the
masters it ought to be so for the servants. If the government
sternly reject, for its uses, the general medium of exchange
adopted by the community, is it not thereby isolated from the
general wants and business of the country, in relation to this
great concern of the currency? Do you not give it a separate, if
not hostile, interest, and thus, in effect, produce a divorce
between government and people?--a result, of all others, to be
most deprecated in a republican system."

Mr. Webster's main argument in favor of the re-establishment of the National Bank (which was the consummation he kept steadily in his eye) was, as a regulator of currency, and of the domestic exchanges. The answer to this was, that these arguments, now relied on as the main ones for the continuance of the institution, were not even thought of at its commencement--that no such reasons were hinted at by General Hamilton and the advocates of the first bank--that they were new-fangled, and had not been brought forward by others until after the paper system had deranged both currency and exchanges;--and that it was contradictory to look for the cure of the evil in the source of the evil. It was denied that the regulation of exchanges was a government concern, or that the federal government was created for any such purpose. The buying and selling of bills of exchange was a business pursuit--a commercial business, open to any citizen or bank; and the loss or profit was an individual, and not a government concern. It was denied that there was any derangement of currency in the only currency which the constitution recognized--that of gold and silver. Whoever had this currency to be exchanged--that is, given in exchange at one place for the same in another place--now had the exchange effected on fair terms, and on the just commercial principle--that of paying a difference equal to the freight and insurance of the money: and, on that principle, gold was the best regulator of exchanges; for its small bulk and little weight in proportion to its value, made it easy and cheap of transportation; and brought down the exchange to the minimum cost of such transportation (even when necessary to be made), and to the uniformity of a permanent business. That was the principle of exchange; but, ordinarily, there was no transportation in the case: the exchange dealer in one city had his correspondent in another: a letter often did the business. The regulation of the currency required an understanding of the meaning of the term. As used by the friends of a National Bank, and referred to its action, the paper currency alone was intended. The phrase had got into vogue since the paper currency had become predominant, and that is a currency not recognized by the constitution, but repudiated by it; and one of its main objects was to prevent the future existence of that currency--the evils of which its framers had seen and felt. Gold and silver was the only currency recognized by that instrument, and its regulation specially and exclusively given to Congress, which had lately discharged its duty in that particular, in regulating the relative value of the two metals. The gold act of 1834 had made that regulation, correcting the error of previous legislation, and had revived the circulation of gold, as an ordinary currency, after a total disappearance of it under an erroneous valuation, for an entire generation. It was in full circulation when the combined stoppage of the banks again suppressed it. That was the currency--gold and silver, with the regulation of which Congress was not only intrusted, but charged: and this regulation included preservation. It must be saved before it can be regulated; and to save it, it must be brought into the country--and kept in it. The demand of the federal treasury could alone accomplish these objects. The quantity of specie required for the use of that treasury--its large daily receipts and disbursements--all inexorably confined to hard money--would create the demand for the precious metals which would command their presence, and that in sufficient quantity for the wants of the people as well as of the government. For the government does not consume what it collects--does not melt up or hoard its revenue, or export it to foreign countries, but pays it out to the people; and thus becomes the distributor of gold and silver among them. It is the greatest paymaster in the country; and, while it pays in hard money, the people will be sure of a supply. We are taunted with the demand: "_Where is the better currency?_" We answer: "_Suppressed by the conspiracy of the banks!_" And this is the third time in the last twenty years in which paper money has suppressed specie, and now suppresses it: for this is a game--(the war between gold and paper)--in which the meanest and weakest is always the conqueror. The baser currency always displaces the better. Hard money needs support against paper, and that support can be given by us, by excluding paper money from all federal receipts and payments; and confining paper money to its own local and inferior orbit: and its regulation can be well accomplished by subjecting delinquent banks to the process of bankruptcy, and their small notes to suppression under a federal stamp duty.

The distress of the country figured largely in the speeches of several members, but without finding much sympathy. That engine of operating upon the government and the people had been over-worked in the panic session of 1833-'34 and was now a stale resource, and a crippled machine. The suspension appeared to the country to have been purposely contrived, and wantonly continued. There was now more gold and silver in the country than had ever been seen in it before--four times as much as in 1832, when the Bank of the United States was in its palmy state, and was vaunted to have done so much for the currency. Twenty millions of silver was then its own estimate of the amount of that metal in the United States, and not a particle of gold included in the estimate. Now the estimate of gold and silver was eighty millions; and with this supply of the precious metals, and the determination of all the sound banks to resume as soon as the Bank of the United States could be forced into resumption, or forced into open insolvency, so as to lose control over others, the suspension and embarrassment were obliged to be of brief continuance. Such were the arguments of the friends of hard money.

The divorce bill, as amended, passed the Senate, and though not acted upon in the House during this called session, yet received the impetus which soon carried it through, and gives it a right to be placed among the measures of that session.