William Gouge,
A Short History

Of Banking from 1818-19 to 1819-20.

A committee of Congress, which had been appointed on the 30th of November, 1818, to investigate the affairs of the United States' Bank, arrived in Philadelphia on the 6th of December, and left it on the 26th.  Some investigations were subsequently made of the state of the branches at Richmond and Washington; and on the 16th of January, 1819, the committee made a report, giving an account of the operations of the Bank, and concluding with a declaration that it had violated its charter, in four particulars, viz:  in purchasing two millions of public debt;  in not requiring the stockholders to pay the second and third instalments of the stock in coin and funded debt;  in paying dividends to stockholders who had not completed their instalments;  and in suffering certain individuals, under pretext of their being attorneys for others, to give more votes for directors than the charter allowed.

Mr. Spencer, the chairman of the committee, offered a resolution to cause a scire facias to be sued out, to call on the corporation of the United States' Bank, to show cause why its charter should not be forfeited, unless the Bank would consent to certain alterations in the act of incorporation.  Mr. Trimble offered a resolution to cause a scire facias to be issued immediately.  Mr. Johnson offered a resolution to repeal the charter of the Bank.

After debate, Mr. Trimble's resolution was rejected on the 24th of February, 39 members voting in its favor, and 116 against it.  Mr. Johnson's resolution was supported by 30 members, and opposed by 121;  and Mr. Spencer, discovering by these votes the disposition of the House, withdrew his resolution.

"We learn," says Mr. Niles, "that about forty members are stockholders – some of them heavily so: we hope that none of them voted in their own case.  The great danger of incorporations is, that the chief members of them are our governors, judges, and legislators;  and thus their individual interests may be placed between the people and the justice that they claim."54

The Bank was in more danger from its own operations, than from any proceedings of Congress.  On the receipt in Philadelphia of the report of the committee, the stock fell to 93, and Mr. William Jones, the President, soon after fled in affright from the institution.  Mr. Cheves, of South Carolina, was invited to take his place, and Mr. James C. Fisher, of Philadelphia, served as President pro tempore.

Three years afterwards Mr. Cheves gave the stock holders an exposition of the state of the Bank, from which exposition we shall make a copious extract.

"The institution commenced active Banking operations about 1st of January, 1817, and in the course of the year established eighteen branches.  The report of the committee of Congress made in December, 1818, has made you so fully acquainted with many of the details of the previous management, that I mean to do little more in relation to the period which preceeded 1819, than present the results, as they will be exhibited in the state of the Bank when I came into it.

"The Bank immediately on its commencement did a very extensive business, imported vast sums of specie, paid its notes and those of the offices, without reference to the places where they were payable, at the Bank, and all the principal offices north of the Potomac, while they were, under the charter, necessarily received every where in payments of debts to the Government of the United State: and drafts were given without limit, on the parent Bank and northern offices, by the western offices, at or at a premium merely nominal.  As soon as the notes of the southern and western offices were paid or received by the Bank and northern offices, they were returned to them and re-issued in perpetual succession.  An accompanying exhibit will show the enormous amount of the notes of the southern and western offices, which became chargeable on the Bank, directly and indirectly, through the northern offices.55  The result was, that the Bank and the great northern offices were drained of their capital, and on the 20th of July, 1818, only eighteen months after the the institution began its operations, it was obliged to commence a rapid and heavy curtailment of the business of the Bank and its offices.  During all this time, it had the advantage of immense Government deposits.  At the moment that curtailments were ordered, the Government deposits in the Bank and its branches, including the deposits of public officers, amounted to eight millions of dollars, and they had been larger at preceeding periods.  Curtailments were ordered from time to time, at the southern and western offices, to the amount of seven millions of dollars, and at the parent Bank to the amount of two millions, though at the latter they were made to the amount of 3,600,000, and upwards, between the 30th of July, 1818, and the lst of April, 1819.  No curtailments were ordered at the offices of New York and Boston, because there was no room for them, yet necessity obliged them to reduce their business very much.  The curtailments at all points within the above mentioned dates, being eight months, were 6,530,159 dollars 49 cents.  Yet after these immense and rapid curtailments, the most sensible and vital points (Philadelphia, New York, and Boston) were infinitely in worse condition than when the remedy was devised.

"An accompanying exhibit will show the distribution of the capital at the close of this important period.56  At that moment the discount line of the important office at Boston, was only 94,584 dollars 37 cents.  And when in this wretched state, the southern and western circulation was pouring in upon these weak points, and the Government at liberty, according to the practice of the time, to draw on either office or the Bank for the gross amount of its deposits, throughout the whole establishment, whether North, South, East or West.  The southern and western offices were not restrained from issuing their notes, which they did most profusely.  The curtailments, in many in stances, resulted merely in a change of debts bearing interest, for debts due by local Banks, or the notes of local Banks, on neither of which was interest received.  The western offices curtailed their discounted paper, but they purchased what were called race horse bills, to a greater amount than their curtailments.  The Bank itself continued, during the whole period, to purchase and collect drafts on the southern and even western offices, though almost the whole of the active capital already lay in those quarters of the Union, and though the great object of the curtailments was to draw funds from these points.  The debt due in Kentucky and Ohio, instead of being reduced, was within this period actually increased upwards of half a million of dollars.  An accompanying exhibit will show, that, instead of getting relief from the southern and western offices generally, where curtailments had been ordered, the Bank was still further exhausted by the intervening operations.

"At the commencement of this period, (a period commencing with the order for curtailments, and ending March, 1819,) the Bank was indebted to Baring, Brothers & Co., Reed, Irving & Co., Adams, Robertson & Co., and Thomas Wilson & Co., the sum of 1,586,345 dollars 47 cents, growing principally, if not entirely, out of its specie operations.  Of this sum the greater part was paid during this period.  It had, however, contracted new debts with Baring, Brothers & Co., and Thomas Wilson & Co., of which there remained due, including any balance which may have been due on the former accounts, the sum of 876,648 dollars: and within the same period it had disposed of 2,270,926 dollars 65 cents of its funded debt, furnishing, by these compound operations, ways and means, in addition to its curtailments, to the amount of 1,561,229 dollars 13 cents, and making, with these curtailments, a reduction in the productive capital of the Bank, within the period of eight months, of eight millions of dollars and upwards.

"At the close of this period, the discounts on personal security at Philadelphia, had been so long the subject of curtailment, that but a small portion of them admitted of further reduction, and, after great efforts, a rule had been established to reduce the discounts which had been granted on the stock of the Bank, at the rate of five per cent. every 60 days.  The latter constituted the bulk of the discounted paper, and so small a reduction afforded no relief against a great and immediate demand.  Even this small reduction was the subject of loud, angry, and constant remonstrances among the borrowers, who claimed the privileges and the favors which they contended were due to stockholders, and sometimes succeeded in communicating their sympathies to the Board.  All the funded debt which was valuable had been disposed of, and the proceeds exhausted.  The specie in the vaults at the close of the day, on the 1st of April, 1819, was only 126,745 dollars 28 cents, and the Bank owed to the city Banks, deducting balances due to it, an aggregate balance of 79,125 dollars 99 cents.

"It is true there were in the Mint 267,978 dollars 9 cents, and in transitu from Kentucky and Ohio overland 250,000 dollars: but the Treasury dividends were payable on that day to the amount of near 500,000 dollars, and there remained at the close of the day more than one half of the sum subject to draft, and the greater part of the sum which had been drawn during the day remained a charge upon the Bank, in the shape of temporary deposits which were almost immediately withdrawn.  Accordingly, on the 12th of the same month, the Bank had, in its vaults but 71,522 dollars 47 cents, and owed to the city Banks a balance of 196,418 dollars 47 cents;  exceeding the specie in its vaults 124,895 dollars 19 cents.  It must again be remarked, that it had yet the sum before mentioned in the Mint, as well as the sum in transitu from Ohio and Kentucky – this last sum (250,000 dollars) arrived very seasonably on the next day, or a day or two thereafter.  The Bank in this situation, the office at New York was little better, and the office at Boston a great deal worse.  At the same time the Bank owed to Baring, Brothers & Co. and Thomas Wilson & Co., nearly 900,000 dollars, which it was bound to pay immediately, and which was equivalent to a charge upon its vaults to that amount.  It had, including the notes of the offices, a circulation of six million dollars to meet, to which were to be added the demands of depositors, public and private, at a time, too, when the scarcity of money called forth every disposable dollar, and therefore created demands upon the Bank for an unusual portion of the ordinary deposits and circulation.

"The sums which were collected daily on account of the revenue, in branch paper, were demandable the next day in Philadelphia, and, at the same time, at every office of the establishment, at the discretion of the officers of Government.  The revenue was principally paid in branch paper, as well at Boston and New York as at Philadelphia, and while the duties were thus paid at one counter, in branch paper, the debentures, which amounted to one million of dollars every three months, were demanded and paid at the other, in specie or its equivalent – money of the place.  Many additional details, increasing the difficulties of the moment, might be added.  The southern offices were remitting tardily, and the western not at all.  All the resources of the Bank would not have sustained it in this course and mode of business another month !!  Such was the prostrate state of the Bank of the nation, which had, only twenty-seven months before, commenced business with an untramelled active capital of twenty-eight millions of dollars.

"But it would have been fortunate for the Institution if its danger had ceased here.  There still remained in some of the trusts of the Bank, some of the men who had contributed most to involve it in this state of things.  As I must be brief, and the subject is very extensive, I will advert only to the principal instance of the misfortune and profligacy to which I allude.

"In the office at Baltimore of which James A. Buchanan was President, and J.W. M'Culloh was Cashier, there were near three millions of dollars discounted or appropriated, without any authority, and without the knowledge of the Board of the office, or that of the parent Bank !  S. Smith and Buchanan, of which firm J.A. Buchanan was a member, James W. M'Culloh and George Williams (the latter a member of the parent Board by the appointment of Government,) had obtained of the parent Bank discounts, in the regular and accustomed manner, to the amount of 1,957,700 dollars, on a pledge of 18,290 shares of stock of the Bank.  These men, without the knowledge of either Board, and contrary to the resolves and orders of the parent Bank, took out of the office at Baltimore, under the pretence of securing it by pledging the surplus value of the stock, already pledged at the parent Bank for its value and more, and other like surpluses over which the Bank had no control, the sum of 1,540,000 dollars: this formed a part of the sum before stated to have been discounted by the President and Cashier of the office, without authority.  When this stupendous fraud was discovered, attempts were immediately made to obtain security;  and it was obtained nominally to the amount of 900,000 dollars.  It was probably really worth 500,000 dollars.

"The losses sustained at the office at Baltimore alone, the great mass of which grew out of this fraud and others closely connected with it, have been estimated at the immense sum of 1,671,221 dollars 87 cents.  The aggregate of the losses of the Institution, growing out of the operations which preceded the 6th of March, 1819, exceeded considerably 3,500,000 dollars.  The dividends during the same time amounted to 4,410,000.  Of this sum, 1,348,553 dollars 98 cents were received as the interest on the public debt held by the Bank, which leaves, as the entire profits on all the operations of Banking, the sum of 3,061,441 dollars 2 cents, which is less by at least half a million of dollars, than the losses sustained on the same business ! !

"When I was invited, and consented to fill the station I now hold, I was alike ignorant and inapprehensive of the situation in which I have just described the Bank, (truly, I believe,) to have been.  I was at the moment remotely situated from the scenes of its active business, and its import ant transactions.  I had held, it is true, shortly before, to oblige my friends, a place in the board of the office at Charleston, at which I occasionally attended, and from what I saw there, as well as from the public facts concerning the transactions of the Bank, I was satisfied that there was a great want of financial talent in the management of it.  But I had not the faintest idea that its power had been so completely prostrated, or that it had been thus unfortunately managed or grossly defrauded.  I never imagined that when it had, at so much expense and loss, imported so many millions of specie, they had been entirely exhausted, and were not yet paid for: nor that the Bank was on the point of stopping payment.  It was not until the moment I was about to commence my journey to Philadelphia, that I was apprized by a letter from a friend, who had been a member of the preceding Board, that he feared, in a few months, the Bank would be obliged to stop payment.

"This was, indeed, appalling news.  When I reached Washington, I received hourly proofs of the probability of this event.  In Philadelphia it was generally expected.  My memory deceives me if I found any one in or out of the Bank , who entertained a sanguine belief of its being able to sustain its payments much longer.  On the contrary, there was, (I think it cannot be forgotten,) a public and general expectation that the nation was about to suffer the calamity of a currency composed entirely of irredeemable paper.  The evil which thus threatened the country, is not at all to be compared with a suspension of sound currency in times of war and great national emergencies.  The former can only be conceived by a people who have suffered under a paper currency in profound peace.  What a train of evils does it produce ?  The destruction of public and private credit, the national torpor, the individual ruin, the disgraceful legislation, and the prostration of the morals of the people, of which you may discover within your own territories some examples, will give you some, but a faint idea of the calamity which was about to fall on the country.

"Thus stood the Bank at the organization of the present administration.  I was elected and took my seat as President of the Board on the 6th of March, 1819.  But some time, of course, was necessary to look into the state of the Bank before measures of relief could be projected.  Its danger, however, was too manifest and too pressing to allow much time for this purpose.  The principal errors which produced the danger were fortunately of easy discovery, and to them the proper remedy was immediately applied.  The southern and western offices were immediately directed not to issue their notes, and the Bank ceased to purchase and collect exchanges on the South and West.  A special meeting of the Board was called, which the non resident directors were summoned to attend, for the 9th of April, (the next month,) and a correspondence with the Secretary of the Treasury was commenced, entreating his forbearance and his aid.  To this officer I should be ungrateful and unjust, if I were not publicly to acknowledge my obligations, and those of the Bank, for the countenance and support he afforded to both in this struggle.

"At a meeting of the directors on the 9th of April, which was very full, the state of the Bank was submitted to them, a select committee appointed, to whom the subject of its difficulties was referred, and after very mature deliberation that committee made a report, which was unanimously agreed to.  The principal means of relief proposed and agreed to were:

1.  To continue the curtailments previously ordered.

2.  To forbid the offices, at the South and West, to issue their notes when the exchanges were against them.

3.  To collect the balances due by local Banks to the offices.

4.  To claim of the Government the time necessary to transfer funds from the offices where money was collected to those where it was to be disbursed, as well as like time (until the difficulties of the Bank were removed,) to transfer funds to meet the notes of offices paid in the Bank or other offices than those where they were payable according to their tenor.

5.  To pay debentures in the same money in which the duties on which the debentures were secured, had been paid.

6.  To obtain a loan in Europe for a sum not exceeding 2,500,000 dollars, for a period not exceeding three years.

"These measures, simple and obvious as they are, and some of them so strangely overlooked so long, lifted the Bank in the short space of seventy days, (from the 6th of March to 17th of May,) from the extreme prostration which has been described, to a state of safety, and even in some degree of power, enabled it to cease its curtailments, except at points where it had an excess of capital, to defy all attacks upon it, and to sustain other institutions which wanted aid, and were ascertained to be solvent: above all, to establish the soundness of the currency, which had just before been deemed hopeless;  and in a single season of business (the first) to give to every office as much capital as it could advantageously employ."

The Bank was saved, and the people were ruined.  For a time, the question in Market street, Philadelphia, was, every morning, not who had broken the previous day, but who yet stood.  In many parts of the country, the disstress was as great as it was in Philadelphia, and in others it was still more deplorable.

"From all parts of our country" says Mr. Niles,57 "we hear of a severe pressure on men in 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 traders have become bankrupts, and it is agreed that many others must "go": the Banks are refusing their customary accomodations: confidence among merchants is shaken, and three per cent. per month is offered for the discount of promissory notes, which a little while ago were considered as good as "old gold," and whose makers have not since suffered any losses to render their notes less valuable than heretofore."

Four months afterwards, he 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 about 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: in Baltimore there may be about 10,000 persons in unsteady employment, or actually suffering because they cannot get into business.  We know several decent men, lately "good livers," who now subsist on such victuals as two years ago they would not have given to their servants in the kitchen." –Weekly Register, Aug. 7, 1819.

A committee appointed by a meeting of the citizens of Philadelphia, on the 21st of August, to inquire into the situation of the manufacturers of the city and its vicinity, reported, on the 2d of October, that in thirty mechanical and manufacturing branches of trade, which they enumerated, which gave employment to 9188 persons in 1814, and to 9672, in 1816, there were but 2137 persons employed in 1819.

A committee of the citizens of Pittsburg, who made report on the 24th of December, stated that certain manufacturing and mechanical trades in their city and its vicinity, which employed 1960 persons in 1815, employed only 672, in 1819.58

"Never," said the Frankford (Ky.) Argus,59 "within the recollection of our oldest citizens, has the aspect of the times, as it respects property and money, been so alarming  Already has property been sacrificed in considerable quantities, in this and the neighboring counties, for less than half its value  We have but little money in circulation, and that little is daily diminishing by the universal calls of the Banks  Neither lands, negroes, or any other article, can be sold for half their value in cash, while executions to the amount of many hundreds of thousands of dollars, are hanging over the heads of our citizens  What can be done ?  In a few months no debt can be paid, no money will be in circulation to answer the ordinary purposes of human life  Warrants, suits, and executions, will be more abundant than Bank notes;  and the country will present a scene of scuffling for the poor remnants of individual fortunes, which the world has not witnessed."

A Kentuckian, writing in the Edwardsville (Ill.) Spectator, confirmed this gloomy account.60

"It has always," he said, "been my opinion, that of all evils which can be inflicted on a free State, Banking establishments are the most alarming  They are the vultures that prey upon the vitals of the Constitution, and rob the body politic of its life-blood  Look now at Kentucky !  What a spectacle does she present!  Nothing is to be seen but a boundless expanse of desolation !  Wealth impoverished, enterprize checked, commerce at a stand, the currency depreciated, all that was promotive of individual wealth, and all that was indicative of State prosperity and advancement, plunged into the great vortex of irremediable involvement  What incentive, now, has the farmer to industry and exertion ?  How fruitless would be the effort of the merchants, to raise from their torpidity the fallen energies of the State !"

A writer in the Kentucky Gazette, quoted by Niles on the 9th of October, observed:

"Slaves which sold some time ago, and could command the most ready money, have fallen to an inadequate value  A slave which hires for 80 or 100 dollars per annum, may be purchased for 300 or 400  A house and lot on Limestone street, for which $15,000 had been offered some time past, sold under the officer's hammer for $1,800  A house and lot which, I am informed, was bought for $10,000, after 6,000 had been paid by the purchaser, was sold under a mortgage for $1,500, leaving the original purchaser (besides his advances) $3,500 in debt  A number of sales, which excited at the same time astonishment and pity, have occurred in this town  Comparison of local sufferings should not be indulged in, but I am told that Lexington is less afflicted than almost any other part of the State."

Bankruptcies for large amounts were of frequent occurrence  Mention is made, among others, of the bankruptcy of a merchant-tailor in the little town of York, Pennsylvania, who failed for the sum of eighty-four thousand dollars.61

This was, indeed, an important affair in a town containing but 3,000 or 4,000 inhabitants;  but it sunk into insignificance when compared with some of the failures in the large cities.  "So extensive were these among the merchants of the cities east of Baltimore, that it seemed to be disreputable to stop payment for less than 100,000 dollars: the fashionable amount was from 2 to 300,000 dollars;  and the tip-top quality, the support of whose families had cost them from 8 to 12,000 dollars a year, were honored with an amount of debt exceeding 500,000 dollars, and nearly as much as a million of dollars  The prodigality and waste of some of these were almost beyond belief: we have heard that the furniture of a single parlor possessed (we cannot say belonging) to one of them, cost 40,000 dollars  So it was in all the great cities –dash, dash, dash– venders of tape and bobbins transformed into persons of high blood, and the sons of respectable citizens converted into knaves of rank – through speculation, and the facilities of the abominable paper system." –Ibid June 5th.

"I am told that one merchant, who lately failed to the eastward, yet lives in a house for which, and its furniture, he was offered 200,000 dollars in real money and refused it."

"Scenes of speculation are revealed and revealing that sober people had no idea of  Their effect penetrates through all classes of society  The day-laborer feels it, and suffers, because Mr. Highflyer could sign his name prettily, and thereby cause his paper to pass through some of the Banks  The farmer who improved his plantation by building a costly dwelling on credit, is compelled to sell both farm and dwelling to pay the debts incurred in erecting the house ! – a pipe of wine, or a Cashmere shawl, compels some merchants to stop payment !  I have heard of one man who failed for more than $500,000, whose private wine vault, as it stood at the time of his bankruptcy, was estimated to have cost him $7,000  This is said to have happened in the sober city of Philadelphia.

"Twenty or thirty years ago, if a man failed for 100,000 dollars, the people talked as fearfully about it as about that time the old women did of the fulfilment of 'Love's prophecies,' who had determined that the world should come to an end before the close of the last century  But now, through the blessings of the  'paper system,' the facilities which it afforded, and the speculations it nourished, it is not decent for a man to break for less than 100,000;  and if a person would be thought a respectable bankrupt, he ought to owe two or three hundred thousand or more  If with this extent of credit it should appear that he had not been worth one cent for twenty years, and was not entitled to be trusted for a pair of shoes, so much the better ! –it is evidence of his qualities as a financier  And if, out of other peoples' money, he has given his wife 50,000 or 60,000 dollars, it shows his prudence in 'providing for his family.'

"The Federal Gazette of the 18th instant, contains six solid, formidable columns of advertisements, by order of the commissioners for conferring the benefit of the 'insolvent laws' of Maryland –in all about sixty– which gives the names, perhaps, of nearly one-third of the persons who are 'going through our mill' just at this time;  several of whom are those that lately counted their affairs by hundreds of thousands, or by millions of dollars; who erected palaces, and furnished them with a degree of magnificence superior to that which many German princes aspired to – who still live in splendid affluence, and indulge themselves in the most luxurious viands – their wives and children, or some kind relative, laving been made rich through their swindlings of the people."62

On the 9th of December, a committee of the Senate of Pennsylvania was appointed to inquire into the causes and extent of the public distress, and on the 29th of January, 1820, the committee made a report, through Mr. Raguet, their chairman, in which they said–

"In the performance of a duty of such high importance as that which has been intrusted to your committee, they have felt it incumbent on them to enter at large into the investigation of the subject contemplated by their appointment, in order that the people of the present day may be correctly informed as to the extent and causes of the evil by which they are oppressed, and that the records of the House may be furnished with a document, which may afford evidence at a future day of the miseries which it is possible to inflict upon a people by errors in legislation, and by the bad administration of incorporated institutions.

"In ascertaining the extent of the public distress, your committee has had no difficulties to encounter  Members of the Legislature from various quarters of the State, have been consulted in relation to this subject, and their written testimony in answer to interrogatories submitted to them by the committee, has agreed, with scarcely a single exception, on all material points  With such a respectable weight of evidence, added to that which has been derived from the prothonotaries, recorders and sheriffs of the different counties, from an intercourse with numerous private citizens residing in different parts of the State, as well as from the various petitions presented to the Legislature, your committee can safely assert, that a distress unexampled in our country since the period of its independence, prevails throughout the commonwealth  This distress exhibits itself under the varied forms of–

"1.  Ruinous sacrifices of landed property at sheriff's sales, whereby, in many cases, lands and houses have been sold at less than a half, a third, or a fourth of their former value, thereby depriving of their homes, and of the fruits of laborious years, a vast number of our industrious farmers, some of whom have been driven to seek, in the uncultivated forests of the West, that shelter of which they have been deprived in their native State.

"2.  Forced sales of merchandise, household goods, farming stock, and utensils, at prices far below the cost of production, by which many families have been deprived of the common necessaries of life, and of the implements of their trade.

"3.  Numerous bankruptcies and pecuniary embarrassments of every description, as well among the agricultural and manufacturing, as the mercantile classes.

"4.  A general scarcity of money throughout the country, which renders it almost impossible for the husbandman or other owner of real estate to borrow at a usurious interest, and where landed security of the most indubitable character is offered as a pledge  A similar difficulty of procuring on loan had existed in the metropolis previous to October last, but has since then been partially removed.

"5.  A general suspension of labor, the only legitimate source of wealth, in our cities and towns, by which thousands of our most useful citizens are rendered destitute of the means of support, and are reduced to the extremity of poverty and despair.

"6.  An almost entire cessation of the usual circulation of commodities, and a consequent stagnation of business, which is limited to the mere purchase and sale of the necessaries of life, and of such articles of consumption as are absolutely required by the season.

"7.  A universal suspension of all large manufacturing operations, by which, in addition to the dismissal of the numerous productive laborers heretofore engaged therein, who can find no other employment, the public loses the revenue of the capital invested in machinery and buildings.

"8.  Usurious extortions, whereby corporations instituted for Banking, Insurance, and other purposes, in violation of law, possess themselves of the products of industry without granting an equivalent.

"9.  The overflowing of our prisons with insolvent debtors, most of whom are confined for trifling sums, whereby the community loses a portion of its effective labor, and is compelled to support families by charity, who have thus been deprived of their protectors.

"10.  Numerous law suits upon the dockets of our courts and of our justices of the peace, which lead to extravagant costs and the loss of a great portion of valuable time.

"11.  Vexatious losses arising from the depreciation and fluctuation in the value of Bank notes, the impositions of brokers, and the frauds of counterfeiters.

"12.  A general inability in the community to meet with punctuality the payment of debts even for family expenses, which is experienced as well by those who are wealthy in property, as by those who have hitherto relied upon their current receipts to discharge their current engagements.

"With such a mass of evils to oppress them, it cannot be wondered at that the people should be dispirited, and that they should look to their representatives for relief  Their patient endurance of suffering, which can only be imagined by those who have habitually intermingled with them at their homes and by their firesides, merits the commendation of the Legislature, and prefers a powerful claim to their interference.

"Having thus enumerated the most prominent features of the general distress, your committee will proceed to point out the cause which in their opinion has occasioned it  That cause is to be found chiefly in the abuses of the Banking system, which abuses consist, first, in the excessive number of Banks, and, secondly, in their universal bad administration  For the first of these abuses the people have to reproach themselves, for having urged the Legislature to depart from that truly republican doctrine which influenced the deliberations of our early assemblies, and which taught that the incorporation of the moneyed interest, already sufficiently powerful of itself, was but the creation of an odious aristocracy, hostile to the spirit of free government, and subversive of the rights and liberties of the people  The second abuse, the mismanagement of Banks, is to be ascribed to a general ignorance of the true theory of currency and Banking, and to the avarice of speculators, desirous of acquiring the property of others by an artificial rise in the nominal value of stock, and by the sharing of usurious dividends.

"In order that this subject may be clearly understood, your committee have thought that the following concise history of Banking in Pennsylvania would be acceptable."

The committee then give a short history of Banking in Pennsylvania, and of the operations of the United States' Bank, up to July, 1818, after which they remark

"This unwise procedure of replunging the people into the debts from which they had been partially extricated, and of involving others who had hitherto escaped, was continued for a time, but the dreadful day of retribution at length arrived  The Bank, (i.e. the U.S. Bank,) discovered almost too late, that its issues had been extended beyond the limits of safety, and that it was completely in the power of its creditors  It also foresaw that the payment of that portion of the Louisiana debt, redeemable on the 21st of October, 1818, which was held by foreigners, might occasion a demand for a considerable amount of coin, that the enhanced prices of China, India, and other goods, occasioned by the depreciation of the currency from the over issues of itself and the State Banks, would lead to a demand for specie, and that as it was professedly a specie Bank, and liable, under a penalty of twelve per cent. per annum, to pay its notes on demand, the same delicacy and forbearance would not be exercised towards it as to the State Banks  These considerations compelled it to seek its own safety, and from that moment a system of reduction commenced  This reduction operating upon the State Banks, which had not profited by the opportunity afforded them of contracting their loans whilst the other was extending, obliged them also to diminish their transactions, and a general curtailment ensued which has not yet had its consummation  The severity of the second pressure commenced in the city in October, 1818, and was continued without intermission for a year;  at the expiration of which time it is said that the reductions made there by the National Bank alone have exceeded seven millions of dollars, and those by the other Banks probably two or four more  The reductions of the country Banks during the three last years, may be inferred from the following statement, which exhibits the amount of their notes in circulation at four different periods.

November 1st, 1816 $4,756,460
1817   3,782,760
1818   3,011,153
1819   1,318,976

"From the foregoing history it will be seen, what influence has been produced upon the affairs of the community by the operation of the Banking system  Real property has been raised in nominal value, and thousands of individuals have been led into speculation, who without the facility of Bank loans would never have been thus seduced  The gradual nominal rise in the price of land, has produced an artificial appearance of increasing wealth, which has led to the indulging of extravagance and luxury, and to the neglect of productive industry  Foreign importations and domestic consumptions have thus been carried to an extent far beyond what the actual resources of the country and people would justify, and in pursuing a shadow, the community has lost sight of the substance."

A similar Committee of Investigation, appointed by the House of Representatives, on the 13th of December, 1819, made report through their chairman, Mr. Wm. J. Duane, on the 28th of January, 1820, that,

"As to the extent of the distress, it might be answered, in the language of the resolutions under which your Committee act, that it is general: it extends, indeed, to the pursuits and habitations of the former capitalist, as well as to those of the more humble farmer and mechanic: there is no part of the commonwealth into which calamity has not penetrated, or in which numerous victims have not been found  But with regard to the extent of the loss which the State has suffered from the destruction of capital, the emigration of our citizens to the wilderness, the stagnation of business, the deterioration of landed property, and the prostration of manufactories, and above all, in the change of the moral character of many of our citizens by the presence of distress, your committee are utterly unable to decide: the extent of the mischief, they believe, defies scrutiny and surpasses the power of calculation.

"From the numerous petitions which have been presented at the present session, your committee quote the following extracts, which describe scenes of distress such as have been seldom, if ever, before beheld on this side of the Atlantic:

Sundry citizens of Northumberland county declare–

"The currency is so diminished as scarcely to suffice for the transaction of the most ordinary business: the produce of the country has met with an unprecedented reduction: the greater part of the citizens of this once flourishing commonwealth, even with the utmost economy and industry, are scarcely able to obtain sufficient articles to sustain life: real and personal property are daily sacrificed, and become the prey of speculators: debts are unpaid, creditors are dissatisfied, and the prisons are crowded with honest but unfortunate persons, whose wives and children must be a burden on the township, or suffer for want of the mere necessaries of life."

Sundry citizens of Wayne county represent–

"From the fall of every kind of produce, the scarcity of the circulating medium, and other causes, the general distress in our part of the State hath become so great and alarming, as to call for the attention and wisdom of the Legislature  Our most industrious citizens are no longer able to meet their engagements, but their hard-earned property is daily sacrificed at a nominal value, and falling into the hands of a few speculators."

Sundry inhabitants of Pike county assert–

"At no time, since the Revolution, has greater distress been felt than at the present moment  We consider the Banking system to have been the principal cause: instead of becoming, as was predicted, blessings to the people, Banks have become like the scorpions among the children of Israel, perfect beasts of prey  The property of the great portion of our industrious people is brought to sale at one fourth of its value, and struck off to speculators, leaving honest creditors unpaid, and families reduced to beggary."

Sundry inhabitants of Huntingdon county represent–

"That the mass of the people are utterly unable, at once, to pay their debts: that their property is selling at such rates, that even the fees of law-officers are not realized: that the industrious are impoverished, whilst the speculating part of the community are daily growing more wealthy: that the evil is only beginning, and demands legislative interposition."

A memorial from sundry citizens of the western parts of the State, asserts–

"That embarrassment is universal: that the sordid and avaricious are acquiring the sacrificed property of the liberal and industrious: that so much property is exposed to sale under execution, that buyers cannot be had to pay more for it than the fees of offices: that those mischiefs, instead of diminishing, are daily increasing, and that over trading and the facility of getting credit have produced these effects."

The petition of the inhabitants of Fayette county represents–

"That the fictitious capital and boundless credit extended by Banking, the almost universal spirit of speculation, the prostration of manufactures by the mistaken policy of the National Government, the introduction of luxuries and extravagancies, and a reduction of exports, have produced a long train of calamities: that industry is paralized – that the precious metals have vanished – that the Banks are tottering – that litigation is unprecedented in extent, and ruinous in its effects – that many merciless creditors, not content with plunging unfortunate debtors into the most abject poverty, frequently take from them the whole of that property to themselves, which in better times would pay the sums due to all, leaving the unfortunate debtor in jail, and his family in misery.

"These are but a few of the extracts, which might be presented to the House and placed upon the journal: but these are deemed sufficient, accompanied by the remark, that these representations are not only supported by all the other petitions presented at this session, but by the testimony of the members of the Legislature, coming themselves from all quarters of the State."

The committee then give a short sketch of the commercial history of the country, after which, they say–

"In defiance of all experience, and in contempt of warnings almost prophetic, which were given to them at the time, the people of Pennsylvania, during an expensive war, and in the midst of great embarrassments, established forty-one new Banks, with a capital of seventeen and a half millions dollars, and authority to issue Bank notes to double that amount !  In consequence of this most destructive measure, the inclination of a large part of the people, created by past prosperity, to live by speculation and not by labor, was greatly increased: a spirit in all respects akin to gambling, prevailed;  a fictitious value was given to all descriptions of property: specie was driven from circulation, as if by common consent, and all efforts to restore society to its natural condition were treated with undisguised contempt."

These remarks are followed by a short view of operations subsequent to the war, after which, the Committee declare–

"A new measure, however, remained to be adopted, that was really to close the last scene in the drama of error: the currency had already nearly vanished, but was temporarily restored on the seaboard  The enormity of fictitious credit began to be felt: the abusive extent of paper issues was about to effect its own remedy in the State, when Congress created a corporation, with authority to circulate up wards of one hundred millions of a new paper medium – a corporation spreading its branches over the Union with the baneful influence of the fabled Upas.

"Awakened by the quick succession of events so disastrous, from the dream of perpetual prosperity under which they had so long been entranced, the people now find themselves involved in distresses, against which no provision had been made, and from which, they allege, they can find no refuge but in legislative interference."


54.   Weekly Register, February 27, 1819.

55.   The total was $14,893,661, or $20,422,642.96, if we include 5,528,981.96 of post notes which issued by the parent Bank, and destroyed because they were used in the Southern and Western States, in lieu of Bank notes.

56.   The office at New York had a capital of 245,000 dollars : that at Richmond, 1,760,502, Baltimore, 5,646,000, Cincinnati, 2,400,000, Louisville, 1,129,000, Lexington, 1,500.000, &c.

57.   Weekly Register, April 10, 1819.

58.   See the documents appended to the Report of the Senate of Pennsylvania.

59.   See Weekly Register, June 7th. [1819]

60.   See Niles, September 11th, 1819.

61.   Weekly Register, November 9th [1819].

62.   Weekly Register, June 12, August 14, October 23.