Chapter XL

FIRST SESSION OF THE TWENTY-SIXTH CONGRESS: PRESIDENT'S MESSAGE.

The President met with firmness the new suspension of the banks of the southern and western half of the Union, headed by the Bank of the United States. Far from yielding to it he persevered in the recommendation of his great measures, found in their conduct new reasons for the divorce of Bank and State, and plainly reminded the delinquent institutions with a total want of the reasons for stopping payment which they had alleged two years before. He said:

"It now appears that there are other motives than a want
of public confidence under which the banks seek to justify
themselves in a refusal to meet their obligations. Scarcely
were the country and government relieved, in a degree, from
the difficulties occasioned by the general suspension of
1837, when a partial one, occurring within thirty months of
the former, produced new and serious embarrassments, though
it had no palliation in such circumstances as were alleged in
justification of that which had previously taken place. There
was nothing in the condition of the country to endanger a
well-managed banking institution; commerce was deranged by no
foreign war; every branch of manufacturing industry was crowned
with rich rewards; and the more than usual abundance of our
harvests, after supplying our domestic wants, had left our
granaries and storehouses filled with a surplus for exportation.
It is in the midst of this, that an irredeemable and depreciated
paper currency is entailed upon the people by a large portion
of the banks. They are not driven to it by the exhibition of a
loss of public confidence; or of a sudden pressure from their
depositors or note-holders, but they excuse themselves by
alleging that the current of business, and exchange with foreign
countries, which draws the precious metals from their vaults,
would require, in order to meet it, a larger curtailment of
their loans to a comparatively small portion of the community,
than it will be convenient for them to bear, or perhaps safe for
the banks to exact. The plea has ceased to be one of necessity.
Convenience and policy are now deemed sufficient to warrant
these institutions in disregarding their solemn obligations.
Such conduct is not merely an injury to individual creditors,
but it is a wrong to the whole community, from whose liberality
they hold most valuable privileges--whose rights they violate,
whose business they derange, and the value of whose property
they render unstable and insecure. It must be evident that this
new ground for bank suspensions, in reference to which their
action is not only disconnected with, but wholly independent
of, that of the public, gives a character to their suspensions
more alarming than any which they exhibited before, and greatly
increases the impropriety of relying on the banks in the
transactions of the government."

The President also exposed the dangerous nature of the whole banking system from its chain of connection and mutual dependence of one upon another, so as to make the misfortune or criminality of one the misfortune of all. Our country banks were connected with those of New York and Philadelphia: they again with the Bank of England. So that a financial crisis commencing in London extends immediately to our great Atlantic cities; and thence throughout the States to the most petty institutions of the most remote villages and counties: so that the lever which raised or sunk our country banks was in New York and Philadelphia, while they themselves were worked by a lever in London; thereby subjecting our system to the vicissitudes of English banking, and especially while we had a national bank, which, by a law of its nature, would connect itself with the Bank of England. All this was well shown by the President, and improved into a reason for disconnecting ourselves from a moneyed system, which, in addition to its own inherent vices and fallibilities, was also subject to the vices, fallibilities, and even inimical designs of another, and a foreign system--belonging to a power, always our competitor in trade and manufactures--sometimes our enemy in open war.

"Distant banks may fail, without seriously affecting those in
our principal commercial cities; but the failure of the latter
is felt at the extremities of the Union. The suspension at
New York, in 1837, was every where, with very few exceptions,
followed, as soon as it was known; that recently at Philadelphia
immediately affected the banks of the South and West in a
similar manner. This dependence of our whole banking system on
the institutions in a few large cities, is not found in the
laws of their organization, but in those of trade and exchange.
The banks at that centre to which currency flows, and where
it is required in payments for merchandise, hold the power of
controlling those in regions whence it comes, while the latter
possess no means of restraining them; so that the value of
individual property, and the prosperity of trade, through the
whole interior of the country, are made to depend on the good or
bad management of the banking institutions in the great seats
of trade on the seaboard. But this chain of dependence does not
stop here. It does not terminate at Philadelphia or New York.
It reaches across the ocean, and ends in London, the centre
of the credit system. The same laws of trade, which give to
the banks in our principal cities power over the whole banking
system of the United States, subject the former, in their turn,
to the money power in Great Britain. It is not denied that the
suspension of the New York banks in 1837, which was followed
in quick succession throughout the Union, was partly produced
by an application of that power; and it is now alleged, in
extenuation of the present condition of so large a portion of
our banks, that their embarrassments have arisen from the same
cause. From this influence they cannot now entirely escape, for
it has its origin in the credit currencies of the two countries;
it is strengthened by the current of trade and exchange, which
centres in London, and is rendered almost irresistible by the
large debts contracted there by our merchants, our banks, and
our States. It is thus that an introduction of a new bank into
the most distant of our villages, places the business of that
village within the influence of the money power in England.
It is thus that every new debt which we contract in that
country, seriously affects our own currency, and extends over
the pursuits of our citizens its powerful influence. We cannot
escape from this by making new banks, great or small, State
or National. The same chains which bind those now existing to
the centre of this system of paper credit, must equally fetter
every similar institution we create. It is only by the extent
to which this system has been pushed of late, that we have been
made fully aware of its irresistible tendency to subject our
own banks and currency to a vast controlling power in a foreign
land; and it adds a new argument to those which illustrate
their precarious situation. Endangered in the first place by
their own mismanagement, and again by the conduct of every
institution which connects them with the centre of trade in our
own country, they are yet subjected, beyond all this, to the
effect of whatever measures, policy, necessity, or caprice, may
induce those who control the credits of England to resort to.
Is an argument required beyond the exposition of these facts,
to show the impropriety of using our banking institutions as
depositories of the public money? Can we venture not only to
encounter the risk of their individual and mutual mismanagement,
but, at the same time, to place our foreign and domestic policy
entirely under the control of a foreign moneyed interest? To
do so is to impair the independence of our government, as the
present credit system has already impaired the independence of
our banks. It is to submit all its important operations, whether
of peace or war, to be controlled or thwarted at first by our
own banks, and then by a power abroad greater than themselves.
I cannot bring myself to depict the humiliation to which this
government and people might be sooner or later reduced, if the
means for defending their rights are to be made dependent upon
those who may have the most powerful of motives to impair them."

These were sagacious views, clearly and strongly presented, and new to the public. Few had contemplated the evils of our paper system, and the folly and danger of depending upon it for currency, under this extended and comprehensive aspect; but all saw it as soon as it was presented; and this actual dependence of our banks upon that of England became a new reason for the governmental dissolution of all connection with them. Happily they were working that dissolution themselves, and producing that disconnection by their delinquencies which they were able to prevent Congress from decreeing. An existing act of Congress forbid the employment of any non-specie paying bank as a government depository, and equally forbid the use of its paper. They expected to coerce the government to do both: it did neither: and the disconnection became complete, even before Congress enacted it.

The President had recommended, in his first annual message, the passage of a pre-emption act in the settlement of the public lands, and of a graduation act to reduce the price of the lands according to their qualities, governed by the length of time they had been in market. The former of these recommendations had been acted upon, and became law; and the President had now the satisfaction to communicate its beneficial operation.

"On a former occasion your attention was invited to various
considerations in support of a pre-emption law in behalf of the
settlers on the public lands; and also of a law graduating the
prices for such lands as had long been in the market unsold, in
consequence of their inferior quality. The execution of the act
which was passed on the first subject has been attended with
the happiest consequences, in quieting titles, and securing
improvements to the industrious; and it has also, to a very
gratifying extent, been exempt from the frauds which were
practised under previous pre-emption laws. It has, at the same
time, as was anticipated, contributed liberally during the
present year to the receipts of the Treasury. The passage of a
graduation law, with the guards before recommended, would also,
I am persuaded, add considerably to the revenue for several
years, and prove in other respects just and beneficial. Your
early consideration of the subject is, therefore, once more
earnestly requested."

The opposition in Congress, who blamed the administration for the origin and conduct of the war with the Florida Indians, had succeeded in getting through Congress an appropriation for a negotiation with this tribe, and a resolve requesting the President to negotiate. He did so--with no other effect than to give an opportunity for renewed treachery and massacre. The message said:

"In conformity with the expressed wishes of Congress, an
attempt was made in the spring to terminate the Florida war by
negotiation. It is to be regretted that these humane intentions
should have been frustrated, and that the efforts to bring
these unhappy difficulties to a satisfactory conclusion should
have failed. But, after entering into solemn engagements with
the Commanding General, the Indians, without any provocation,
recommenced their acts of treachery and murder. The renewal of
hostilities in that Territory renders it necessary that I should
recommend to your favorable consideration the measure proposed
by the Secretary at War (the armed occupation of the Territory)."

With all foreign powers the message had nothing but what was friendly and desirable to communicate. Nearly every question of dissension and dispute had been settled under the administration of his predecessor. The accumulated wrongs of thirty years to the property and persons of our citizens, had been redressed under President Jackson. He left the foreign world in peace and friendship with his country; and his successor maintained the amicable relations so happily established.