Chapter XVII

PENNSYLVANIA BANK OF THE UNITED STATES. ITS USE OF THE DEFUNCT NOTES OF THE EXPIRED INSTITUTION.

History gives many instances of armies refusing to be disbanded, and remaining in arms in defiance of the authority which created them; but the example of this bank presents, probably, the first instance in which a great moneyed corporation refused to be dissolved--refused to cease its operations after its legal existence had expired;--and continued its corporate transactions as if in full life. It has already been shown that its proviso charter, at the end of a local railroad act, made no difference in its condition--that it went on exactly as before. Its use of the defunct notes of the expired institution was a further instance of this conduct, transcending any thing conceived of, and presenting a case of danger to the public, and defiance of government, which the President had deemed it his duty to bring to the attention of Congress, and ask a remedy for a proceeding so criminal. Congress acted on the recommendation, and a bill was brought in to make the repetition of the offence a high misdemeanor, and the officers and managers of the institution personally and individually liable for its commission. In support of this bill, Mr. Buchanan gave the fullest and clearest account of this almost incredible misconduct. He said:

"The charter of the late Bank of the United States expired, by
its own limitation, on the 3d of March, 1836. After that day,
it could issue no notes, discount no new paper, and exercise
none of the usual functions of a bank. For two years thereafter,
until the 3d of March, 1838, it was merely permitted to use its
corporate name and capacity 'for the purpose of suits for the
final settlement and liquidation of the affairs and accounts
of the corporation, and for the sale and disposition of their
estate, real, personal, and mixed; _but not for any other
purpose, or in any other manner, whatsoever_.' Congress had
granted the bank no power to make a voluntary assignment of its
property to any corporation or any individual. On the contrary,
the plain meaning of the charter was, that all the affairs of
the institution should be wound up by its own president and
directors. It received no authority to delegate this important
trust to others, and yet what has it done? On the second day
of March, 1836, one day before the charter had expired, this
very president and these directors assigned all the property
and effects of the old corporation to the Pennsylvania Bank of
the United States. On the same day, this latter bank accepted
the assignment, and agreed to 'pay, satisfy, and discharge all
debts, contracts, and engagements, owing, entered into, or
made by this [the old] bank, as the same shall become due and
payable, _and fulfil and execute all trusts and obligations
whatsoever arising from its transactions, or from any of them_,
so that every creditor or rightful claimant shall be fully
satisfied.' By its own agreement, it has thus expressly created
itself a trustee of the old bank. But this was not necessary to
confer upon it that character. By the bare act of accepting the
assignment, it became responsible, under the laws of the land,
for the performance of all the duties and trusts required by
the old charter. Under the circumstances, it cannot make the
slightest pretence of any want of notice.

"Having assumed this responsibility, the duty of the new
bank was so plain that it could not have been mistaken. It
had a double character to sustain. Under the charter from
Pennsylvania, it became a new banking corporation; whilst,
under the assignment from the old bank, it became a trustee
to wind up the concerns of that institution under the Act of
Congress. These two characters were in their nature separate
and distinct, and never ought to have been blended. For each of
these purposes it ought to have kept a separate set of books.
Above all, as the privilege of circulating bank notes, and thus
creating a paper currency is that function of a bank which most
deeply and vitally affects the community, the new bank ought
to have cancelled or destroyed all the notes of the old bank
which it found in its possession on the 4th of March, 1836, and
ought to have redeemed the remainder at its counter, as they
were demanded by the holders, and then destroyed them. This
obligation no senator has attempted to doubt, or to deny. But
what was the course of the bank? It has grossly violated both
the old and the new charter. It at once declared independence
of both, and appropriated to itself all the notes of the old
bank,--not only those which were then still in circulation, but
those which had been redeemed before it accepted the assignment,
and were then lying dead in its vaults. I have now before me
the first monthly statement which was ever made by the Bank to
the Auditor-general of Pennsylvania. It is dated on the 2d of
April, 1836, and signed J. Cowperthwaite, acting cashier. In
this statement, the Bank charges itself with 'notes issued,'
$36,620,420 16; whilst, in its cash account, along with its
specie and the notes of State banks, it credits itself with
'notes of the Bank of the United States and offices,' on hand,
$16,794,713 71. It thus seized these dead notes to the amount
of $16,794,713 71, and transformed them into cash; whilst
the difference between those on hand and those issued, equal
to $19,825,706 45, was the circulation which the new bank
boasted it had inherited from the old. It thus, in an instant,
appropriated to itself, and adopted as its own circulation,
all the notes and all the illegal branch drafts of the old
bank which were then in existence. Its boldness was equal to
its utter disregard of law. In this first return, it not only
proclaimed to the Legislature and people of Pennsylvania that
it had disregarded its trust as assignee of the old Bank, by
seizing upon the whole of the old circulation and converting it
to its own use, but that it had violated one of the fundamental
provisions of its new charter."

Mr. Calhoun spoke chiefly to the question of the _right_ of Congress to pass a bill of the tenor proposed. Several senators denied that right others supported it--among them Mr. Wright, Mr. Grundy, Mr. William H. Roane, Mr. John M. Niles, Mr. Clay, of Alabama, and Mr. Calhoun. Some passages from the speech of the latter are here given.

"He [Mr. Calhoun] held that the right proposed to be exercised
in this case rested on the general power of legislation
conferred on Congress, which embraces not only the power of
making, but that of repealing laws. It was, in fact, a portion
of the repealing power. No one could doubt the existence of the
right to do either, and that the right of repealing extends
as well to unconstitutional as constitutional laws. The case
as to the former was, in fact, stronger than the latter; for,
whether a constitutional law should be repealed or not, was a
question of expediency, which left us free to act according to
our discretion; while, in the case of an unconstitutional law,
it was a matter of obligation and duty, leaving no option; and
the more unconstitutional, the more imperious the obligation
and duty. Thus far, there could be no doubt nor diversity of
opinion. But there are many laws, the effects of which do not
cease with their repeal or expiration, and which require some
additional act on our part to arrest or undo them. Such, for
instance, is the one in question. The charter of the late bank
expired some time ago, but its notes are still in existence,
freely circulating from hand to hand, and reissued and banked
on by a bank chartered by the State of Pennsylvania, into whose
possession the notes of the old bank have passed. In a word,
our name and authority are used almost as freely for banking
purposes as they were before the expiration of the charter
of the late bank. Now, he held that the right of arresting
or undoing these after-effects rested on the same principle
as the right of repealing a law, and, like that, embraces
unconstitutional as well as constitutional acts, superadding, in
the case of the former, obligation and duty to right. We have an
illustration of the truth of this principle in the case of the
alien and sedition acts, which are now conceded on all sides to
have been unconstitutional. Like the act incorporating the late
bank, they expired by their own limitation; and, like it, also,
their effects continued after the period of their expiration.
Individuals had been tried, convicted, fined, and imprisoned
under them; but, so far was their unconstitutionality from being
regarded as an impediment to the right of arresting or undoing
these effects, that Mr. Jefferson felt himself compelled on that
very account to pardon those who had been fined and convicted
under their provisions, and we have at this session passed, on
the same ground, an act to refund the money paid by one of the
sufferers under them. The bill is limited to those only who
are the trustees, or agents for winding up the concerns of the
late bank, and it is those, and those only, who are subject to
the penalties of the bill for reissuing its notes. They are,
_pro tanto_, our officers, and, to that extent, subject to our
jurisdiction, and liable to have their acts controlled as far
as they relate to the trust or agency confided to them; just
as much so as receivers or collectors of the revenue would be.
No one can doubt that we could prohibit them from passing off
any description of paper currency that might come into their
hands in their official character. Nor is the right less clear
in reference to the persons who may be comprehended in this
bill. Whether Mr. Biddle or others connected with this bank
are, in fact, trustees, or agents, within the meaning of the
bill, is not a question for us to decide. They are not named,
nor referred to by description. The bill is very properly drawn
up in general terms, so as to comprehend all cases of the kind,
and would include the banks of the District, should Congress
refuse to re-charter them. It is left to the court and jury,
to whom it properly belongs, to decide, when a case comes up,
whether the party is, or is not, a trustee, or agent; and, of
course, whether he is, or is not, included in the provisions
of the bill. If he is, he will be subject to its penalties,
but not otherwise; and it cannot possibly affect the question
of the constitutionality of the bill, whether Mr. Biddle, and
others connected with him, are, or are not, comprehended in its
provisions, and subject to its penalties."

The bill was severe in its enactments, prescribing both fine and imprisonment for the repetition of the offence--the fine not to exceed ten thousand dollars--the imprisonment not to be less than one nor more than five years. It also gave a preventive remedy in authorizing injunctions from the federal courts to prevent the circulation of such defunct notes, and proceedings in chancery to compel their surrender for cancellation. And to this "complexion" had the arrogant institution come which so lately held itself to be a _power_, and a great one, in the government--now borne on the statute book as criminally liable for a high misdemeanor, and giving its name to a new species of offence in the criminal catalogue--_exhumer and resurrectionist of defunct notes_. And thus ended the last question between the federal government and this, once so powerful moneyed corporation; and certainly any one who reads the history of that bank as faithfully shown in our parliamentary history, and briefly exhibited in this historic View, can ever wish to see another national bank established in our country, or any future connection of any kind between the government and the banks. The last struggle between it and the government was now over--just seven years since that struggle began: but its further conduct will extort a further notice from history.