The Journal of Banking
by William M. Gouge,

Vol. I., No. 12,
Wednesday, December 8, 1841.

The Treasury System.

The Treasury Department of the United States Government is in a most shameful condition.  In its present condition, it is a disgrace to American statesmanship, and is by far the most bitter fruit of our party divisions.  If our financial system be not soon placed on a solid constitutional basis, consequences the most fatal to the peace and durability of the republic must inevitably ensue. --Should war overtake the nation before a proper settlement of the Treasury question is made, the union of the States must be endangered, and the national arm paralyzed from the want of a common measure to test that uniformity of "duties, imposts, and excises throughout the United States" which the constitution requires.  For how can the citizens of Massachusetts, or of any other specie paying state be expected to pay their contributions in par currency, when the citizens of all the Southern and South Western States can pay nothing but paper in different states of depreciation.  I need say nothing further, and can say nothing stronger to convince any reflecting mind of the absolute necessity of a speedy settlement of the Treasury question, or rather questions, for there is more than one of vital importance.  The Government has got to decide where and how the national money is to be kept, and who shall keep it: nay, what constitutes the national money itself is still practically an open question.  Not that there is any doubt as to the constitutional injunctions in relation to these matters, or still less as to the law at present on the statute book, imperfect as it may be;  but by a course of vicious and illegal practice, a financial chaos has been produced, which requires a thorough and radical reorganization of the system.  The legislator has a great task before him, no less than the reconstruction of the most important, as it unquestionably is the most delicate organ of the national government.

At the present moment, we have, strictly speaking, no treasury.  The question now presents itself as it did to the Statesman of 1789;  but since that time we have a world of experience which must not be overlooked.  With this experience, and with an eye steadily directed both to the object in view, and the principles laid down in the constitution, it will not be difficult to arrive at a satisfactory conclusion.  The times are highly favorable to this result.  Public opinion, as most decidedly expressed in the late elections, has cleared away what has heretofore been the great stumbling block in financial matters --the National Bank question.  It may now be taken as settled that the people will no longer suffer their money to be kept by a company of merchants.  The two vetoes were, in fact, but the mere expression of the public will --and what is truly ridiculous, they expressed the secret wishes of a large number of members of Congress, who had given their votes for a bank.

It may be said, too, that the State Bank scheme is even more obnoxious to public opinion.  Such is the miserable condition of these institutions, that, south of New York, it would be difficult to find any bank that could give the securities demanded by the old law.

In order to arrive at a right understanding of this matter, our Legislators must look back upon the former condition of the Treasury, both as regards the law and the practice, and ascertain precisely what is its present situation.  One of the first acts passed by the Federal Government, was the act to establish a Treasury Department.  In considering this act, and the practice under it, I shall confine myself to the mode therein laid down, for keeping the public money, as this is the principal, although by no means the only defect of our present system.  This act declares in so many words, "that it shall be the duty of the Treasurer [of the United States] to receive and keep the moneys of the United Slates, and to disburse the same."  "For the faithful performance of the duties of his office;"  and for the fidelity of the persons to be by him employed, "he shall give bond with sufficient sureties in the sum of 150,000 dollars."  He is also bound by the same act "to submit to the Secretary of the Treasury, the Comptroller, or either of them" the inspection of the moneys in his hands.  From these extracts from the law, it is quite clear that the intention of Congress was, that the Treasurer should, either by himself or those employed by him, have the actual possession of the public money.  The keeping intended by the act was a visible and tangible keeping, and not a mere account keeping, which latter duty he is also by the same act obliged to fulfil.  This scheme for the Treasury would seem to have been framed upon the model of the Tresor Royal of the French.  It was enacted in 1789, one year after the French system was organized, the Treasurer performing the functions of the French "Directeur du Tresor," while the Secretary of the Treasury corresponded to the head of the French finances, whether called Controleur General, or, as afterwards, Minister des finances.

The French system was, however, complete in its details, whether or not made so by the original edict I do not know;  but the American law provided only for the appointment of the keeper in chief, with a power in him to employ others in the trust. --Had the moneys of the United States been handed over to the United States Treasurer, as by law they ought to have been, it would have been for him so to organize his Treasury as not to incur the responsibilities attached to his office.  It is, however, doubtful, considering the nature and extent of the trusts that would be thus thrown upon the persons employed by the Treasurer, whether any one would have been willing to incur the risk;  and it is therefore probable, had the Congressional Treasury gone into effect, that the details of the French system, which you in other words call the double lock and key and joint responsibility system, would have received the sanction of Congress.  Some such arrangement must undoubtedly have been made, as absolutely necessary to carry out the intention of Congress, which clearly was to have the revenue of the United States received, kept and disbursed by the Treasurer and his deputies in coined money.  If such was this Congressional scheme for keeping the public money, it is much to be regretted that an attempt was not made to put it into practice.  Being founded on a solid basis, and its errors admitting of an easy corrective, we should now, in all probability, be in possession of an institution which could fulfil all the great objects of a national Treasury.

[To be continued.]

[So much of the law for the establishment of a Treasury Department as prescribes the duty of the Treasurer, should be either repealed or enforced: and so also should so much of another law of 1789 as declares that all duties shall be paid in "gold and silver coin only."  There should be no dead laws in our statute book.

New legislation is not absolutely necessary to give us a constitutional treasury.  All that is necessary is to carry into effect the laws of 1789, according to their true spirit and intent.  The defects in these acts can be supplied by means of Treasury Orders.  The Surveyor at each port of entry, can be made a check on the Collector, and the Register at each Land Office, a check on the Receiver.

The present administration has facilities which the last did not possess, for carrying the acts of 1789 into effect.  When the banks broke in 1837, the Treasury Department was living in lodgings, where it had no conveniences for keeping the public money.  Now there is at Washington, a most excellent Treasury building, and a very secure vault, with every convenience requisite for the receipt, keeping, and disbursement of the public funds.  Most of the Land offices, and Custom Houses, have also been supplied with the means of keeping safely the public money.

What is of still more importance, an act has been passed which makes it a criminal offence in any public officer, to apply the public funds to any other than public purposes.  Till the act of July 4th, 1840, was passed, it was their practice to employ the public funds in their possession in their private speculations, or to lend them to their friends: and if any of the funds were not forthcoming when called for, the government had no remedy but in the long and tedious process of a civil suit.  While such was the law and the practice, the Government would have been exposed to risk of great losses, if it had attempted to enforce the acts of 1789.  But this risk no longer exists.  Any public officer who applies but one dollar of the public money to his private use, is liable to be punished with fine and imprisonment, and if a suitable example be made of the first offender, our history will not hereafter contain many instances of peculation.

We hope that one of the first moves of the friends of sound currency and sound credit in Congress, will be to bring forward a resolution declaring that the acts of 1789 ought to be enforced.  And if the paper money men prevent the passage of such a resolution, we hope the President will, notwithstanding, take the necessary measures to have the existing laws carried into effect.]

From the New York New Era.
The Wall Street Chorus.

Give me a Bank -- a paper Bank,
The best machine for saving labor,
For who would toil and sweat himself,
When there's a chance to sweat his neighbor.

Away, now, with your power-looms,
Revolving Jacks, and spinning Jennies;
Contrivances for packing wool
Can't match the Banks for picking pennies.

"Ex nihil nihil fit," was once
A maxim much in vogue with some;
But few indeed can now maintain
That "nothing can from nothing come."

For though the ancients could convert
Their gold to rags, (as we are told,)
Yet we, in times more civilized
Can make from rags the best of gold.

All hail, then, glorious alchemy,
That can from nothing something make !
What pity things created thus,
Their primal form are prone to take.

So let us have a Bank, my boys !
A fortune thus we all may win:
Like lilies of the valley live,
Who "toil not, neither do they spin!"

With paper, then, all debts we'll pay,
And should our credit once get low,
It never comes amiss to say,
"The Government has made it so!"

"The Sub-Treasury System."

In perusing the chapter on "The Fiscal Concerns of the Union," which will be found in a subsequent part of this number, the reader will bear in mind that it was first published in February, 1833, eight months before "the removal of the deposits," and four or five years before the question of separating Bank and State became the dividing line of parties.  Perhaps he will read it with more interest, when informed that it was, as we believe it was, the first formal proposition of a question which has since been the subject of so much controversy.  Incidentally it had been alluded to by many: but so completely had the affairs of Bank and State become entangled, that no one previously seemed to think it was worth while to submit for consideration a plan by which bank agency in fiscal concerns might be dispensed with, and to offer a formal argument in support of such a plan.  We have sometimes regarded with astonishment the excitement produced by a question, which eight or ten years ago engaged the attention of only a few Political Economists.

"A Tract for the Times."

It has often struck us with surprise that our paper money banking system should attract so little attention from the religious world.  It is difficult for us to conceive of any thing more deleterious to morals, or more destructive to human happiness: yet the clergy, generally, are silent respecting it, or if they speak at all, they speak on the wrong side of the question.

Some of them, however, seem to be at last approaching the outworks of the system.  The September number of the Christian Examiner, published at Boston, has an excellent article on the United States Bank;  and the Western Episcopal Observer, published at Cincinnati and Louisville, contains a truly orthodox sermon on the text, "OWE NO MAN ANY THING."  It is the production of the Rev. John T. Brooke, Rector of Christ Church, Cincinnati, and had been published in pamphlet form, previous to its appearance in the Observer.

After a suitable exordium, Mr. Brooke proceeds to speak, "I. Of debts of wilful dishonesty. --II. Of debts of avaricious speculation. --III. Of debts of vanity. --IV. Of debts of imprudence," and makes some very judicious observations under each of these heads.

This is, however, only fighting with vices in the abstract: and "fighting with vices in the abstract, is," as Dr. Johnson says, "very safe fighting, but it is fighting with shadows."  If the Church wishes to put an end, or greatly to diminish, "debts of wilful dishonesty, debts of avaricious speculation, debts of vanity, and debts of imprudence," it must bring its heavy artillery to bear on our paper money banking system.

Buenos Ayres.

We well remember the time when it was proclaimed with a flourish of trumpets, "that the good effects of establishing a bank had already been experienced at Buenos Ayres."  We noted this in the book of memory, and some years afterwards, in looking through the New York Christian Advocate, found a letter from a Methodist missionary in South America, stating that in no country had paper money produced more pernicious effects than in Buenos Ayres.

But the paper money evil is one that will not cure itself.  Recent files of Buenos Ayres papers, deposited at our Exchange, mention that for weeks in succession, no sales had been made of either dollars or doubloons.  Under such circumstances, there is no way of testing the value of the paper currency, but by the rates of foreign exchange.  On England, exchange is quoted at 2¾d per dollar.  If we make due allowance for the balance of payments in favor of England, we shall find that each dollar of Buenos Ayres paper currency, is equivalent to about five cents in United States silver currency.

New South Wales.

The Botany Bay gentlemen seem to know one another too well, to be willing to trust one another.  They have a number of banks among them, but from the accounts published in the London Journal of Commerce, the amount of specie in their vaults appears, with one or two exceptions to exceed the amount of notes in circulation.

On nearly all deposits they pay interest: and yet they contrive to make enormous dividends. --Their principal profits appear to be derived from borrowing at a low rate of interest, and lending at a high.


South Carolina.

Governor Richardson, in his message to the Legislature says some good things, but suggests that as the charters of the present banks expire, "the whole banking capital should be merged into one system, proportionally controlled by the stockholders and the Representatives of the people."  This would greatly increase the evils of the system. --If paper-money banking is to be perpetual, let the policy of Rhode Island be adopted, and charters granted to all who apply for them.  An open monopoly is at all times to be preferred to a close one.


The majority of the people of this State have, at the last election, resolved to repudiate the bonds for five million dollars granted to the Union Bank.

First, because the law under which the bonds were issued, was a violation of the Constitution of the State.

Secondly, because the provisions of the law were utterly disregarded, both by the Commissioners who sold the bonds, and the officers of the United States Bank who were the purchasers.

They admit the moral obligation to redeem the bonds, but affirm that that rests on the Union Bank, and not on the people of the State.

Governor McNutt has addressed a letter on the subject to the editor of the Richmond Inquirer. --In it he says-- "a demand will probably be made on the Government of the United States for the payment of the bonds.  This will raise an exciting and perplexing question.  The State has defined her position, and will maintain it, be the consequences what they may.  I firmly believe four-fifths of the people of the State prefer going to war in lieu of paying the bonds.  The Whig candidates for Governor and members of the Legislature, generally, pledged themselves to oppose any bill intended to tax the people, to pay either the principal or interest of these bonds.  But for this and national politics, the State would have been almost unanimous in opposing the payment of the bonds."



The debt of this State, incurred for internal improvements, is upwards of eight millions of dollars.  Besides this, there is what is called the suspended debt, consisting of bonds pawned to raise money to pay interest, and bonds out of which the Commissioners were outwitted, by banks and brokers, amounting to four millions more.

This makes a total of twelve millions incurred for internal improvements, and all the improvements made, would not, it is said, if sold, bring one million dollars --nay, not one half, of that sum.

Besides this, Indiana has incurred a debt in the creation of bank stock.


A correspondent of the Public Ledger gives the following account of the condition of affairs in Michigan.

"Currency and the credit system have been completely and successfully revolutionized in Michigan.  Perhaps no State in this Union had so debased a currency as Michigan, and in none was the credit system so grossly abused.  Scarcely a shopkeeper or tradesman escaped destruction from its effects.  Extremes provoke radical remedies.  The people assembled in township and county meetings throughout the State.  To cure the evil, they resolved to sell their wheat and other products for specie only, counting, as specie, notes of banks paying coin.  "The Macon Specific" worked like a charm.  The shinplasters flew back to the issuers, and their place is now filled by specie, which is quite abundant, and by the notes of New York banks that pay in coin.  Those who predicted ruin to trade and all manner of evil, from what they honestly considered a radical and a destructive measure, were amazed to find that all kinds of industry, and every description of business, which so lately appeared as cheerless and lifeless as their forests in winter, suddenly put forth the green leaf and flourished in a healthy luxuriance before unknown.

"The reform in the credit system, made perfect what the improved currency had begun.  The custom of giving loose and open credits, so hazardous and destructive to all tradesmen, was by common consent abolished.  The wealthiest man might send to a store a common order for a small matter, and it would surely be dishonored.  The method adopted is this.  Let me recommend it to Pennsylvania.

"Any Person known to be good for the amount, may obtain an open credit on the shopkeepers' books by making a specific arrangement.  He is required to agree in writing to make payment in cash or produce at stated prices, on a day fixed by agreement.  This plan saves the merchant all the trouble and delay of collection, and when he is ready to purchase a new stock of goods he is prepared with cash or convertible products, which are equally available in the New York market.

"The people of Michigan understand the philosophy of banking exactly.  They can see very clearly that all privileges given to any set of men to make artificial money, and to charge interest upon it, the same as upon real money, is a gross fraud upon the industrious classes, robbing them of exactly so much of their hard earnings to enrich a set of scheming aristocrats who infest every country, and by specious reasoning impose enormous taxes upon the producing classes, for which the lazy rascals return no equivalent."


The United States Bank.

The Grand Jury of the Court of General Sessions is now engaged in making an inquisition into the affairs of this bank.  It is hoped it will be thorough and rigid.

"St. G.T. Campbell, as counsel for the judgment creditors of this bank, has" says a city paper, "attached the debts due by Messrs. Webster, Biddle, and Riddle, and also the $90,000 which it is alleged were deposited in the hands of Messrs. Handy, Lewis, and others, with the view of improperly influencing Governor Porter.  In this case, the defendants are required to answer under oath."

A great many suits have lately been instituted against the debtors to this bank.

Judge Este, of the Superior Court at Cincinnati, has decided that United States bank notes are not, under the law of Ohio, a legal tender for debts due to the bank.  This decision is of a favorable character for the trustees under the assignment for debts due by the U.S. Bank to the banks of Philadelphia.  The property in Ohio held by those trustees, is estimated at one million dollars.

Among the securities which the Bank of the United States pledged in Europe, were bonds of the Ohio Life and Trust Company, to the amount of one million dollars.  These were lately offered for sale in New York, and bought up by the said Life and Trust Company for fifty cents in the dollar.

On the night of December 1st, the following stocks, part of the property of the United States Bank, were disposed of by auction at the Philadelphia Exchange, at the following prices:

4020 shares of capital stock of the Cumberland Valley Rail-Road, in one lot $200.00
3030 shares of capital stock of the Sunbury and Erie Rail-Road, 130.00.
3030 do. do. Franklin Rail-Road Company, 140.00
2000 do. do. Wrightsville, York, and Gettysburg Rail-Road, 200.00

These stocks, which cost the bank more than six hundred thousand dollars, sold under the hammer for $670!  They were bought up by Mr. Hemphill, as was understood, for the bank.