William Gouge,
A Short History

Of Banking from 1829-30 to 1832-33.

Towards the close of the year 1829, money became plenty.  For this various causes may be assigned.  One of the chief was the extensive dealings of the United States' Bank.

This institution had, early in 1823, devised a plan for extending its operations, and in that year discontinued the practice of paying out the notes of the local Banks, and renewed the practice of receiving the notes of all its branches.  But the condition of things was such, that, towards the close of the year, its circulation was diminished, instead of being increased.  It stood, in November and December, at $4,081,842, which was less than it was at any previous period, except the three months which immediately followed the first opening of the doors of the Bank at Philadelphia.

In 1824 and 1825, the Bank increased its active capital, by the sale of three or four millions of forfeited Bank stock.  It was by this operation, by adding upwards of three millions to its circulation, and by straining its credit, that it was enabled in these years to lend ten millions to Government.  A part of the plan of the Bank was to extend its dealings in domestic exchanges.  This it naturally preferred to increasing its business in other commercial securities, as on these it received only discount, whereas on bills of exchange it received both discount and premium.  Being the depository of the public funds in various parts of the Union, it possessed great advantages for dealings in exchange, especially as the greater part of the public revenues was received in those cities which had naturally the rate of exchange in their favor.  The operations of the Bank in its exchange dealings are thus described by its President.

"The crop of Tennessee is purchased by merchants who ship it to New Orleans, giving their bills founded on it to the branch of Nashville, which furnishes them with notes.  These notes are in time brought to New York for purchasing supplies for Tennessee.  They are paid in New York, and the Nashville Bank becomes the debtor of the branch at New York.  The Nashville branch repays them by drafts given to the branch at New York on the branch at New Orleans, where its bills have been sent, and the branch in New York brings home the amount by selling its drafts on the branch at New Orleans: or the New Orleans branch remits.  This very plan of circulation, is the basis of the whole interior trade of the United States."

The true basis of the interior trade of the United States, is the fertility of the soil and the industry of the people.  The sun would shine, the streams would flow, and the earth would yield her increase, if the Bank of the United States was not in existence.  What is now performed by it in the way of exchange dealings, would, if there were no corporations, be as well performed by private exchange merchants.  Perhaps they could not perform it at quite as low a rate, for they would have to provide a capital of their own, whereas the United States' Bank performs it by the control it has of the public deposits, and by means of the credit its charter gives it in different States.  Employing no capital of its own in the business – the whole affair being a mere paper transaction between the Bank and its branches, it may well afford to do it cheap.  It may, however, be questioned, if the reduction of the price of exchange below its natural rate, is an equivalent for the evils which must necessarily ensue from the substitution of the discretion of the officers of the United States' Bank and of its twenty-five branches, for the laws of nature.  Whenever and wherever the Bank of the United States reduces exchange below its natural rate, it removes the only effective check on over-trading.  This in a short time makes necessary a reduction of discounts, and thus we have in the exchange dealings of the United States' Bank a new element of commercial vicissitude.  If there were no paper money institutions, the rate of domestic exchange would be regulated by the cost of transporting specie from one part of the country to another.  This, even between the most remote parts of the Union, would not exceed two or three per cent., and it would be better to pay this percentage than to be exposed to all the evils of an interminable series of expansions and contractions.

There was, however, a serious obstacle to extending the operations of the Bank as far as was desirable.  It was physically impossible for the President and Cashier of the Parent Bank to sign all the notes wanted for the branches: and Congress, though repeatedly solicited, had refused to give authority to any other persons to sign notes for circulation.  Counsel was then taken of some distinguished legal characters, and they declared that the issue of small drafts signed by the officers of the branches, either upon one another, or upon the Parent Bank, was not prohibited by the charter.  The issue of these drafts was accordingly commenced in 1827, and a great increase of paper medium has followed.  The President of the institution has said, "If branch drafts had not been issued, no notes at all could have been issued, from the mere physical impossibility of preparing them.  But branch drafts do not increase the circulation more than branch notes would."  This is true, but the physical impossibility was made known to Congress, when application was made for authority to be given to other persons besides the President and Cashier to sign notes for circulation.

In answer to a question propounded by Mr. Camberbreleng, "In what manner can a National Bank diminish the circulation of country Banks, with which it has no transactions except by reducing its own circulation ?" the President of the Bank replied, "Very easily and very naturally.  The very increase of the circulation of a National Bank, may be the most efficient cause of the reduction of a State Bank, and in this way, a branch is near a local Bank – the branch notes are more valuable than the local notes – the local notes are exchanged for the branch notes at the branch Bank, which thus becomes the creditor of the local Bank, and makes it pay its debts, and thus reduce its circulation.  Now almost all State Banks stand in this relation to the Bank and its branches."

This is sufficient to show that the embarrasments of 1828 were produced in part by the conflicts between the United States' Bank and the local Banks for the circulation.  Encouraged by the success of its experiment, the United States' Bank took measures for extending the operations of its old branches and for establishing new ones.  It felt pretty secure in the emission of branch drafts, for they were made payable at a distance of five hundred or a thousand miles from the places in which they were issued, and though receiveable every where in payment of debts to Government, could at any time be refused to be received in payment of debts due to the Bank.  The Bank did, in deed, and still does, receive these branch drafts on deposit, at all its offices.  This was necessary to give the drafts a general circulation.  But if it should at any time become the interest of the Bank not to receive them, it has only to say so, and the merchants will, as they were in 1818-19, be denied the privilege of paying debts due to the Bank in the paper of the Bank.  A portion of the paper of each of the twenty-five offices, being distributed through each of the twenty-four States, each office may, in case of a "panic" be delivered from the effects of a "run," by a refusal to receive or to discharge any but its own drafts.

Under these circumstances the Bank increased its issues, and it is evident that after these issues were swelled to a certain amount, they afforded a basis for new issues by the State Banks.  It is well known that the country Banks of Pennsylvania discount as freely on deposits of Philadelphia notes as on deposits of specie; for, Philadelphia notes are, they say, "as good to them as specie," or even better, inasmuch as exchange is usually in favor of Philadelphia.  The Banks throughout the Union regard United States' Bank notes and drafts in much the same light as the country Banks of Pennsylvania regard Philadelphia paper; because balances are constantly accumulating against them, in the United States' Bank, through that institution's being made the depository of the public funds, and through its many extensive transactions.  The operation was briefly this:– local Bank notes which circulated freely only in the neighborhood of the Banks which issued them, were exchanged at the offices of the United States' Bank for branch drafts which were made to circulate every where.  This diminished the circulation of the State Banks, and increased that of the United States' Bank.  The circulation of the Bank of the United States being increased, a number of its notes were received by the State Banks, either on deposit or in payment of debts due to them by individuals.  The local Banks finding they had on hand a considerable amount of United States' paper, which was "as good to them as specie, or even better," began to issue their own notes more freely.  A portion of these were received by the United States' Bank, and the State Banks, on payment being required, satisfied the demand with branch drafts.  Each extension of the business of the United States' Bank in exchanges, increased its circulation of branch drafts, and each increase of branch drafts, after the new mode of operation war fairly established, enabled the State Banks to increase their issues, by providing them with means to meet such demands against them as might be made by the United States' Bank.

From the reports made to the Legislature of Pennsylvania in November, 1828, by the various Banks of the State, and by the Bank of Pennsylvania in February 1829, it appears that their circulation then amounted to 7,238,991 dollars, and their deposits to 6,221,037 dollars – total 13,460,028 dollars.  From similar reports made in November 1831, it appears that their circulation was 8,753,092, and their deposits 7,736,747 – total 16,489,839 dollars.  This shows an increase in the local Bank medium of Pennsylvania, of three millions of dollars, or about twenty-two per cent. between these dates.

Mr. Cambreleng states, that, between the 1st of January 1830 and, the 1st of January 1832, the country Banks in the State of New York had increased their circulation from 3,974,345, to 8,622,277 dollars.  The increase in 1831, in the circulation of the Banks of New York, Massachusetts, Rhode Island and Pennsylvania, not including the Banks of Philadelphia, is estimated by him at eight millions.

The gross circulation of the Bank of the United States in January 1829, was 13,391,110 dollars, and in January 1832 it was 24,630,747 dollars.  The net circulation was at the first of these periods, 11,901,656 – at the second it was 21,250,545 dollars.  The increase in the net circulation was about seventy-eight per cent.

Other causes besides the new mode of operation adopted by the United States' Bank have contributed to this increase of currency.  Multitudes of those who were ruined by the events which followed the war, had found relief in death.  Others had sought an asylum in the poor-house.  The children of others had become old enough to till, as hirelings, the farms their fathers once owned.  A new generation of business men had come on the stage of action, and the incidents of 1818-19 were fast fading from the minds of those who were then old enough to be observant of the course of affairs.  In such a country as the United States, the silent operations of society work great changes in a period of ten or twenty years.  Pernicious as the Banking system is, it cannot exhaust the natural sources of wealth, or destroy that desire in men to better their condition, which is the main spring of action.  The country was more populous and more wealthy than it was at any previous period.  It could bear more Banking, and more Banking it was made to bear.

The combined operations of these causes began to be very visible in their effects in the latter part of 1829, after the embarrassments caused by a pressure in Europe were over.  The rise of property on Market street, Philadelphia, was a subject of newspaper boast in November.

An increase of the trade with Mexico, and a decline of the trade with China, contributed to swell the amount of specie in the country.  In 1830, the exports of gold and silver were only 2,178,773 dollars, while the imports were 8,155,964.  A method adopted by the Bank of the United States, and imitated by private capitalists, of drawing bills on England to be negotiated beyond the Cape of Good Hope, was one of the causes which, in this year, diminished the export of gold and silver.  The committee of Congress say,

"this new method of dealing in bills of exchange does not economize the specie of the country at all.  It is a universal law of drawing, that funds must either go before or follow after the draft to honor it at maturity;  and whether it goes directly or circuitously, the funds to discharge it must sooner or later arrive at the place of payment.  These bills are to be paid in England, but they go round the Cape of Good Hope before they reach their place of destination.  Instead, therefore, of sending the specie directly to India and China, as formerly, who does not perceive that it must now be sent to England, the country upon which these bills are drawn, there to meet them upon the arrival at the place where they are to be paid ?  The Bank consequently becomes the shipper of the specie, to pay its bills, in place of the merchant, to purchase his merchandise in the East Indies.  It is simply and purely nothing but a change of the destination of the specie, with only the advantage of its going to London.

"The supplying of bills encourages an operation which commences and ends without the employment of any capital whatever, and is similar in character to respondentia securities.  The buyer is enabled, within the term of credit, to make the voyage, dispose of his goods, and obtain from the proceeds the funds to meet his obligation, and the Bank to transmit the same to the place upon which the bills are drawn, (which are at six months' sight,) long before they become due.  It would seem to produce a greater export of specie, eventually, than would otherwise take place, if the operations were commenced with specie, and not with bills purchased in the manner described: for the merchant, relying upon his immediate resources, would not engage to such an extent in the business, and would combine in the operation much of the produce of the country, whereas, relying upon an extensive credit, he hazards every thing on the success of the enterprize.  It is a species of speculation in trade, leading to great risks, and certainly terminating in over-trading – the evils of which the country is now sorely experiencing.  By loans of a similar character by insurance companies, providing funds for traders to China, Government has sustained more loss than in any other branches of trade."

All this is true enough, but this method of drawing bills to be negotiated beyond the Cape of Good Hope, enables the Banks to increase their issues, inasmuch as it defers the demand for specie for six months, a year, or longer.  It contributed, with other causes, to swell the amount of silver in the vaults of the Banks, in the latter part of 1829, and in 1830, and 1831.

In March 1830, the Bank of the United States had in its vaults 8,038,246 dollars, which was more than it ever had before.  In December, the Banks of the city of New York complained that they had so much specie that they did not know what to do with it.  The amount in their vaults was said to be seven millions.

Throughout 1830 and the greater part of 1831, the Banks generally extended their operations.  Money was unusually plenty, and little embarrassment was suffered, except what was produced by the action of the Banks on one another, in their struggle to determine which should circulate most paper.  The effect in Philadelphia was to raise property, in many parts of the town, as high, or nearly as high, as it was during the suspension of specie payments.  Great part of Market street was rebuilt with elegant stores.  Rents rose enormously in business places.  The trade with the Western country was increased greatly; and speculation showed its activity in a variety of forms.  In almost every part of the country, the same effects were observable, in either a greater or a less degree.

This continued till October, 1831, when "an active demand for money" began, the consequences of which have since been felt in various parts of the country in various forms.

The President of the United States' Bank, in a letter dated April 16th, 1832, addressed to Mr. Clayton, the chairman of the committee of Congress, gives the following account of the state of affairs:

"In addition to the business of domestic exchange, the amount of local loans has increased, owing to the greater demand for the use of money during the last year, and the conversion into the more active form of business of the stocks repaid by Government to the Bank.  The first grew naturally out of the state of trade.  For eighteen months, the want of employment for capital, and the derangement of industry arising from political and other causes, rendered money very abundant in France and England, the two countries whose situation so much influences our own, and produced a corresponding ease and plenty in the United States, while at the same time, the disturbed state of Europe, and the Cholera which interposed new obstacles to trade, with certain parts of it, naturally directed the manufacturers of England and France to this country, which is by far the best and safest markets for their productions.  These circumstances occasioned, during the past twelve months, an unusual importation of foreign merchandise.  While the treatment of this temporary commercial disease was in progress, the sufferers naturally looked for the cause of it every where but in themselves, and the Bank was reproached with having contributed to occasion the importations.  Without going into detail, one single fact is quite decisive on this subject.  It will be seen from the following official statement, marked B, that the large importations last year began with the month of April, and of course they must have been founded, so far back as the Bank was concerned, on the state of things in this country a month or two previous, say the month of March last.  Now, it will be seen from the state of the Bank before the committee, that, for nearly two years before the month of March last, (1831,) the local discounts of the Bank had undergone no perceptible increase – those for July 1829 being $34,196,000, and those for March 1831 being $34,220,000, an increase within that period of only 24,000 dollars."

This does not appear to be a correct mode of viewing the subject.  The exchange dealings of the Bank ought to be taken into consideration as well as the local discounts.  They contribute quite as much to credit traffic.  It is through them the Bank is able to circulate its branch drafts.  The arrival of these branch drafts in the great Atlantic cities, is, as the President of the Bank has stated elsewhere, "the signal of relief to the southern and western traders."  The receipt of them at the office at New York, was nearly twelve millions in the year 1828, and upwards of eleven millions in 1829.  The receipt of them at Philadelphia, and at the three offices of New York, Baltimore, and Boston, amounted to upwards of thirty-seven million dollars, in the two years of 1828 and 1829.  It is with these branch drafts that the southern and western merchants pay for foreign merchandise.  It is with these the importer pays the duties to the Government.  Nothing, therefore, can con tribute more efficiently to an increase of imports.

"The large importations must have been founded, so far as the Bank was concerned, on the state of things in this country a month or two previous."  This is unquestionable, and the state of things in this country was then affect ed by the new system of operations begun by the Bank in 1827.  Between the two dates mentioned in the extract, the net circulation of the United Sates' Bank was increased from 13,780,847 to 16,933,122, or about twenty-two per cent., and though the increase in the circulation of the local Banks may not have been in the same proportion, there is reason to believe it was considerable.  It may be admitted that the state of trade in Europe, and, perhaps, the Cholera, tended to swell the importations, but any disposition to over-trading thereby induced, would, if we had been without moneyed corporations and without paper money, soon have been checked by the necessity of paying cash, or at least making engagements to pay in specie. –The President of the Bank proceeds as follows:

"Without having contributed to produce them, the Bank found, about nine months ago, large importations, requiring for their diffusion through the country, increased facilities connected with Banking: having the means of giving them – being in fact created for the purpose of giving them – it gave them;  it had the means of giving, because, in the early part of the year, it had been strengthened for business, purposely, by the addition of two millions of its funds in Europe transferred home, by the repayment of about ten millions of the funded debt paid back by Government since October, 1830, making an increase of active means amounting to twelve millions.  When, in the progress of a few months, the continuance of these importations, and the revenue which had accrued on them, produced an effect in the actual state of the market, the Bank applied itself immediately to correct any disadvantages from it to the community.  The actual position of things was simply this: There were large importations requiring means of remittance to Europe to pay for them: there were large amounts of revenue to Government, amounting in New York alone, from March 1831, to March 1832, to nearly seventeen million dollars, requiring great forbearance towards the debtors.  In the mean time, the southern produce, which furnishes the greater part of the means to pay for these importations, was, owing to a great variety of causes, the state of the crops and the weather, unusually late in appearing.  This, therefore, was the condition of the country: an unusual importation, an unusual amount of debts payable to Government, and an unusual delay in receiving the ordinary means of meeting these demands.  Undoubtedly, if the Bank had chosen to adopt such a course, it would have been easy, by an immediate diminution of its loans, to place itself out of the reach of all inconvenience, but it would, at the same time, have inflicted very deep wounds on the community, and seriously endangered the revenue of Government.  These exertions of mere power have no attraction, and it was deemed a far wiser policy to deal with the utmost gentleness to the commercial community, to avoid all shocks, to abstain from countenancing all exaggerations and alarms, but to stand quietly by, and assist, if necessary, the operations of nature and the laws of trade, which can always correct their own transient excesses.  Accordingly, the whole policy of the Bank for the last six months.  [preceding April 16th, 1832,] has been exclusively protective and conservative, calculated to mitigate suffering, and yet avert danger.  The point where these importations occurred, and where the revenue was payable, was New York.  The whole force of the institution was, therefore, directed to strengthen that place, and the distant branches were directed to avoid incommoding it, and the Atlantic branches near to it, by drafts upon them, but to pay their balances to them with as little delay as the convenience of their respective localities would permit.  This is the whole policy of the Bank for the last six months.  It will be seen, therefore, that, without a diminution, there has been an actual increase of business in New York, and a large increase of the domestic bills of the branches: the increase in New York being for the purpose of protecting the interest there, and the increase of the bills being the remittances from the West and South to sustain New York and the southern Atlantic branches.  In the mean time the Bank, out of its own accumulations, and its own credits in Europe, supplied, since the first of September last, the means of remittances in its own bills to the amount of $5,295,746 52, and parted with its surplus specie to the amount of 5,000,000, making an aggregate contribution to the commerce of the country of $10,295,746.52."

The letters from the Cashier of the Bank at Philadelphia to the cashiers of the branches, in the months of October, November, December, January, and February, 1831-32, exhibit a remarkable example of the manner in which the operations of the Bank "assist the operations of nature, and the laws of trade, which can always correct their own transient excesses."  The general directions to the cashiers were to shape their business, not according to the natural demands of trade in their immediate vicinity, but according to the special demands of the Bank in New York, and other Atlantic cities.  They were to withhold local accommodations, and to purchase bills of exchange on particular places, thus increasing facilities to one class of dealers, and denying them to others, when it was as likely as not that regard to the interests of the community in the neighborhood of the offices would have required an increase of local discounts and a diminution of exchange dealings, or exchange dealings of a different character from those which were ordered.  It may be doubted if any Board of men sitting in Philadelphia, is able to direct money operations, in many and remote parts of the Union, without inflicting injury on the community, especially when that same Board has on its shoulders the additional burden of regulating the foreign exchanges of the country.  It may be doubted if the discretion of any Board, however scientific and however experienced, is an adequate substitute for "those operations of nature and laws of trade," which, if left to themselves, "can always correct their own transient excesses."

The reduction of accommodations at the Bank in Philadelphia, between the 5th of January and the 29th of March, 1832, was $1,810,408.37, including both promissory notes and bills of exchange;  at the offices at Boston, between the 5th day of January and the 29th of March, it was $167, 860 85, on a discount line of less than two and a half mil lion dollars; and at the office at Baltimore, between the 16th of January and the 2d of April, it was $123,741.63, on a discount line of little more than two million dollars.  At the office at New York, the local discounts were, as Mr. Biddle states, increased, but the dealings in exchange were diminished, so that the actual reduction of commercial accommodations at that office, was $259,305.43, be tween the 4th day of January and the 28th day of March.  At the Bank in Philadelphia, the reduction between the 5th of January and the 5th of April, fell a little short of twenty per cent. of the whole amount of accommodations.

It appears, from a letter of the Cashier of the Bank in Philadelphia, dated November 24th, 1831, that the orders issued in October were, at some of the Western offices, "unfortunately misunderstood.  At some of them, our Cashiers ceased checking altogether upon Philadelphia and New York, and at Nashville the Board refused very large amounts of prime bills upon your city, (New Orleans,) and have thus dried up a few of the rills by which the stream of exchange would have been swelled in its course towards you and thence to us."  Thus, it seems, that, in addition to the evils to which the country is exposed from the attempts of the Board at Philadelphia to control the whole course of foreign and domestic exchanges, and through them the whole train of commercial operations – attempts which, from the imperfection of human nature, must necessarily be productive of evil – we are exposed to other evils from the officers of distant branches misunderstanding directions.

Explanations of the orders of the Bank were then given to such of the branches as had misapprehended them, and it must be stated, in justice to the Cashiers of the Southern and Western offices, that they obeyed orders so well, that, though there was a reduction of dealings to the extent of two millions and a half at Philadelphia, New York, Boston, and Baltimore, there was an increase between October 1831, and March 1832, of more than a million in the net circulation of the Bank, of more than six millions in the bills of exchange, and of more than eight millions in the total of discounts and bills.

The Bank perceived in February that it was necessary to change its policy, for branch drafts came from the South and West in such quantities into the great Atlantic cities, as to threaten difficulties of another nature.  Orders were then issued to the branches to keep down their business, as well in bills of exchange as in local discounts.  Notwithstanding this direction, the bills of exchange were, by May, increased to twenty-three millions, and the aggregate of discounts and bills to seventy millions.

The immediate causes assigned for the movement in October, were directions from Government to pay off six or seven millions of the public debt.  Orders to pay off a small additional amount, only one million and three quarters, in April, are specially mentioned, in the instructions given to the southern and western branches, why they should shape their business so as to assist the principal of fices in the Atlantic cities.  If the Government had been willing to leave the national debt unpaid, and to suffer the Bank to have the public funds to trade upon, it would, perhaps, have kept on expanding.  But the Government was, very properly, desirous of discharging the national debt while it had the means: and expressed a wish in March, to pay off in July one half of the three per cents.  This rendered necessary a new movement on the part of the Bank, which is thus related by its chief officer.

"I received a letter from the acting Secretary of the Treasury, dated the 24th of March, 1832, informing me that the Government was about to issue a notice on the 1st of April, of their intention to pay on the 1st of July next, one-half of the three per cent. stock, and to do it by paying to each stockholder one-half the amount of his certificate.  He added, 'If any objection occurs to you, either as to the amount, or as to the mode of payment, I will thank you to suggest it.'

"Thus invited by the Government, in a communication marked 'confidential,' to give my opinion on a measure contemplated by the Government, I felt it my duty to express my views of its probable operation.  In my reply, therefore, dated the 29th of March, I stated, 'that so far as the Bank is concerned no objection occurs to me, it being sufficient that the Government has the necessary amount of funds in the Bank to make the contemplated payment.'  I then proceeded to observe, that in the present situation of the mercantile community, and with a very large amount of revenue, [amounting to nine millions,] to be paid before the 1st of July, the debtors of the Government would require all the forbearance and all the aid which could be given to them;  and that the payment proposed, by creating a demand for the remittance of several million dollars to the European stockholders, would tend to diminish the usual facilities to the debtors of the Government, and might endanger the punctual payment.  For this reason, I thought it for the interest of the Government to postpone the payment till the next quarter.

"After weighing the circumstances, the Government was desirous of adopting the measure;  but the difficulty I understood to be this, that the sinking fund would lose the quarter's interest, from July to October, of the sum intended to be paid in July, and that the Government did not feel itself justified in making the postponement, unless that interest could be saved; but that it would be made, provided the Bank would make the sinking fund whole on the 1st of October.  To this I said, that, as the Bank would have the use of the fund during the three months, it would consent to save the sinking fund harmless, by paying the three months' interest itself.  And so the matter stands."

It was not long, however, before the Bank discovered that it would be as inconvenient to pay the European stock holders in October, as to pay them in July.  One of the directors then made a voyage to Europe, and an arrangement was made through the medium of private Banker in London, by which the reimbursement of a portion of the three per cents. was deferred for a further period.

It is thus by means of its credit with Government, and its credit in Europe, that the Bank has sustained itself during the last six months.  And it is well for the community that the Bank enjoys this credit.  From the accounts recently published, it appears that its circulation was reduced, from March to November, more than twenty per cent.  A further diminution would, by is operation on the local Banks, have added greatly to the sufferings which the commercial community endured during the last year.  If we except the real estate held by the Bank and the specie in its vaults, all its capital and all its credit may be regarded as invested in promissory notes and bills of exchange, and it cannot pay to the public creditors the funds entrusted to it for that purpose, without making a reduction of commercial accommodations in a corresponding amount.  The reduction during the past year was quite as great as the community could bear;  and though the Government has just cause of complaint, inasmuch as the sinking fund was not made whole on the 1st of October, according to agreement, it ought, perhaps, not to be very severe in its judgment, as an attempt to fulfil the contract literally, would have occasioned a great pressure on the people.

The President of the Bank said, in his letter to Mr. Clayton in April 1832, speaking of the plan of operation adopted in October 1831, "This has given time for the operations of the laws of trade: the country is recovering from the temporary inconvenience; the over-stocked market, by checking prices, has checked farther importations; the southern crop so long delayed, is coming forward; the exportation of specie has ceased; the importations of specie, postponed by the troubles of Mexico, are resumed; and in a short time, the whole operation will rectify itself."

The inconvenience has, however, continued to the present day, and if a man of Mr. Biddle's great powers of mind, still thinks the embarrassments of the people are such as spring only from "vibrations of trade," having their origin in natural causes, and that they are in no way increased by Banking operations, it must be that his situation at the head of the Banking system, has an influence on his judgment.  He speaks of its being natural for men to look for the cause of their sufferings every where but in themselves.  With equal truth it may be affirmed that statesmen, and men whose situation gives them the power of statesmen, are apt to attribute the sufferings of the community to any cause but their own measures.

If it should still be denied that the operations of the United States' Bank in particular, and of the local Banks in general, contributed to that state of things which led to the excessive importations in the spring of 1831, it must be admitted that the subsequent measures of the Banks have contributed to produce the heavier importations of 1832.  It would be very illogical to argue that the "Cholera," when it visits the north of Europe, forces trade from it, and that when it visits the United States, it brings an increase of trade along with it.  There must be some other cause than the "Cholera" for the excessive importations of the last year.  Mr. Biddle, in the essay he published in 1828, pointed out very clearly the manner in which over-banking leads to over-trading.

In October 1829, the statements of the United States' Bank showed a total of discounts and bills of exchange of $39,960,052, and in May 1832, a total of $70,428,070.  In the short period of two years and seven months, there was an increase of $30,668,018 in the accommodations the Bank afforded to dealers.  At the same time the local Banks expanded; and if such causes will not affect trade, it is hard to say what will.

The present amount of currency would be redundant, if over-banking had not induced over-trading.  But in the present condition of things, men cannot, notwithstanding the abundance of paper money, meet their engagements with ease; and their embarrassments are, at particular times and particular places, increased by the action of the Banks on one another, and by a system of exchange dealings in which the interests of the community in one town or in one State, are made subordinate to the interest of a Banking office, perhaps five hundred or a thousand miles distant.

Such consequences are inseparable from the present system, and must not be ascribed to faults in the men who manage it.  Under another President and another Board of Directors, the Bank of the United States might not have committed precisely the same faults, but perhaps it would have committed faults which would have inflicted still greater evils on the community.  A President and Board of Directors who would refuse to take the measures necessary to raise the rate of dividends and the price of shares as high as possible, would be very unpopular with the stockholders, and would, probably, soon be dismissed from their official stations.

If the State Banks were made the depositories of the public funds, and if their notes were made receivable in payment of duties, the evils of the system would be increased.

If the Government should, after the expiration of the present charter of the United States' Bank, resolutely refuse to receive any thing but gold and silver in payment of debts, and also refuse to employ any Bank as an agent in its fiscal operations, the evils of the system would be greatly diminished.