The Journal of Banking
by William M. Gouge,

Vol. I., No. 13,
Philadelphia, Wednesday, December 22, 1841.

The President's Message.

On the 4th of December, the first regular session of the Twenty-Seventh Congress commenced;  and on the 7th, the President sent in his message.  From it we extract such passages as relate to banking and currency.

"At your late session, I invited your attention to the condition of the currency and exchanges, and urged the necessity of adopting such measures as were consistent with the constitutional competency of the Government, in order to correct the unsoundness of the one, and, as far as practicable, the inequalities of the other.  No country can be in the enjoyment of its full measure of prosperity, without the presence of a medium of exchange, approximating to uniformity of value.  What is necessary as between the different nations of the earth, is also important as between the inhabitants of different parts of the same country.  With the first, the precious metals constitute the chief medium of circulation, and such also would be the case as to the lest, but for inventions comparatively modern, which have furnished, in place of gold and silver, a paper circulation.  I do not propose to enter into a comparative analysis of the merits of the two systems.  Such belonged more properly to the period of the introduction of the paper system.  The speculative philosopher might find inducements to prosecute the inquiry;  but his researches could only lead him to conclude, that the paper system had probably better never have been introduced, and that society might have been much happier without it.  The practical statesman has a very different task to perform.  He has to look at things as they are, to take them as he finds them, to supply deficiencies, and to prune excesses as far as in him lies.  The task of furnishing a corrective for derangements of the paper medium with us, is almost inexpressibly great.  The power exerted by the States to charter banking corporations, and which, having been carried to a great excess, has filled the country with, in most of the States, an irredeemable paper medium, is an evil which, in some way or other, requires a corrective.  The rates at which bills of exchange are negotiated between different parts of the country, furnish an index of the value of the local substitute for gold and silver, which is, in many parts, so far depreciated as not to be received, except at a large discount, in payment of debts, or in the purchase of produce.  It could earnestly be desired that every bank, not possessing the means of resumption, should follow the example of the late United States Bank of Pennsylvania, and go into liquidation, rather than by refusing to do so, to continue embarrassments in the way of solvent institutions, thereby augmenting the difficulties incident to the present condition of things.  Whether this Government, with due regard to the rights of the States, has any power to constrain the banks, either to resume specie payments, or to force them into liquidation, is an inquiry which will not fail to claim your consideration.  In view of the great advantages which are allowed the corporators, not among the least of which is the authority contained in most of their charters, to make loans to three times the amount of their capital, thereby often deriving three times as much interest on the same amount of money, as any individual is permitted by law to receive, no sufficient apology can be urged for a long-continued suspension of specie payments.  Such suspension is productive of the greatest detriment to the public by expelling from circulation the precious metals, and seriously hazarding the success of any effort that this Government can make, to increase commercial facilities, and to advance the public interests.

This is the more to be regretted, and the indispensable necessity for a sound currency becomes the more manifest, when we reflect on the vast amount of the internal commerce of the country.  Of this we have no statistics nor just data for forming adequate opinions.  But there can be no doubt but that the amount of transportation coastwise by sea, and the transportation inland by railroads and canals, and by steamboats and other modes of conveyance over the surface of our vast rivers and immense lakes, and the value of property carried and interchanged by these means, form a general aggregate, to which the foreign commerce of the country, large as it is, makes but a distant approach.

"In the absence of any controlling power over this subject, which, by forcing a general resumption of specie payments, would at once have the effect of restoring a sound medium of exchange, and would leave to the country but little to desire, what measure of relief, falling within the limits of our constitutional competency, does it become this Government to adopt ?  It was my painful duty, at your last session, under the weight of most solemn obligations, to differ with Congress on the measures which it proposed for my approval, and which it doubtless regarded as corrective of existing evils.  Subsequent reflection, and events since occurring, have only served to confirm me in the opinions then entertained and frankly expressed.

"I must be permitted to add, that no scheme of governmental policy, unaided by individual exertions, can be available for ameliorating the present condition of things.  Commercial modes of exchange, and a good currency, are but the necessary means of commerce and intercourse, not the direct productive sources of wealth.  Wealth can only be accumulated by the earnings of industry and the savings of frugality;  and nothing can be more ill judged than to look to facilities in borrowing, or to a redundant circulation, for the power of discharging pecuniary obligations.  The country is full of resources, and the people full of energy;  and the great and permanent remedy for present embarrassments must be sought in industry, economy, the observance of good faith, and the favorable influence of time.

"In pursuance of a pledge given to you in my last message to Congress, which pledge I urge as an apology for adventuring to present you the details of any plan, the Secretary of the Treasury will be ready to submit to you, should you require it, a plan of finance which, while it throws around the public treasure reasonable guards for its protection, and rests on powers acknowledged in practice to exist from the origin of the Government, will, at the same time, furnish to the country a sound paper medium, and afford all reasonable facilities for regulating the exchanges.  When submitted, you will perceive in it a plan amendatory of the existing laws in relation to the Treasury Department --subordinate in all respects to the will of Congress directly, and the will of the people indirectly-- self-sustaining, should it be found in practice to realize its promises in theory, and repealable at the pleasure of Congress.  It proposes, by effectual restraints, and by invoking the true spirit of our institutions, to separate the purse from the sword, or more properly to speak, denies any other control to the President over the agents who may be selected to carry it into execution, but what may be indispensably necessary to secure the fidelity of such agents;  and, by wise regulations, keeps plainly apart from each other, private and public funds.  It contemplates the establishment of a board of control, at the seat of Government, with agencies at prominent commercial points, or wherever else Congress shall direct, for the safe-keeping and disbursement of the public moneys, and a substitution, at the option of the public creditor, of treasury-notes, in lieu of gold and silver.  It proposes to limit the issues to an amount not to exceed $15,000,000, without the express sanction of the legislative power.  It also authorizes the receipt of individual deposits of gold and silver to a limited amount, and the granting certificates of deposit, divided into such sums as may be called for by the depositors.  It proceeds a step further, and authorizes the purchase and sale of domestic bills and drafts, resting on a real and substantial basis, payable at sight, or having but a short time to run, and drawn on places not less than one hundred miles apart;  which authority, except in so far as may be necessary for Government purposes exclusively, is only to be exerted upon the express condition that its exercise shall not be prohibited by the State in which the agency is situated.  In order to cover the expenses incident to the plan, it will be authorized to receive moderate premiums for certificates issued on deposits, and on bills bought and sold;  and thus, as far as its dealings extend, to furnish facilities to commercial intercourse at the lowest possible rates, and to subduct from the earnings of industry the least possible sum.  It uses the State banks at a distance from the agencies, as auxiliaries, without imparting any power to trade in its name.  It is subjected to such guards and restraints as have appeared to be necessary.  It is the creature of law, and exists only at the pleasure of the Legislature.  It is made to rest on an actual specie basis, in order to redeem the notes at the places of issue;  produces no dangerous redundancy of circulation;  affords no temptation to speculation;  is attended by no inflation of prices;  is equable in its operation makes the treasury-notes (which it may use along with certificates of deposit, and the notes of specie-paying banks) convertible at the place where collected, receivable in payment of Government dues;  and without violating any principle of the constitution, affords the Government and the people such facilities as are called for by the wants of both.  Such, it has appeared to me, are its recommendations;  and, in view of them, it will be submitted, whenever you may require it, to your consideration.

"I am not able to perceive that any fair and candid objection can be urged against the plan, the principal outlines of which I have thus presented.  I cannot doubt but that the notes which it proposes to furnish, at the voluntary option of the public creditor, issued in lieu of the revenue, and its certificates of deposit, will be maintained at an equality with gold and silver everywhere.-- They are redeemable in gold and silver on demand, at the places of issue.  They are receivable everywhere in payment of Government dues.  The treasury-notes are limited to an amount of one fourth less than the estimated annual receipts of the Treasury;  and, in addition, they rest upon the faith of the Government for their redemption.  If all these assurances are not sufficient to make them available, then the idea, as it seems to me, of furnishing a sound paper medium of exchange, may be entirely abandoned.

"If a fear be indulged that the Government may be tempted to run into excess, in its issues at any future day, it seems to me that no such apprehension can reasonably be entertained, all confidence in the representatives of the States and of the people, as well as of the people themselves, shall be lost.  The weightiest considerations of policy require that the restraints now proposed to be thrown around the measure should not for light causes be removed.  To argue against any proposed plan its liability to possible abuse, is to reject every expedient, since everything dependant on human action is liable to abuse.  Fifteen millions of treasury-notes may be issued as the maximum;  but a discretionary power is to be given to the board of control under that sum, and every consideration will unite in leading them to feel their way with caution.  For the first eight years of the existence of the late Bank of the United States, its circulation barely exceeded $4,000,000;  and for five of its most prosperous years, it was about equal to $16,000,000.  Furthermore, the authority given to receive private deposits to a limited amount, and to issue certificates in such sums as may be called for by the depositors, may so far fill up the channels of circulation as greatly to diminish the necessity of any considerable issue of treasury notes.  A restraint upon the amount of private deposits has seemed to be indispensably necessary, from an apprehension, thought to be well founded, that in any emergency of trade, confidence might be so far shaken in the banks as to induce a withdrawal from them of private deposits, with a view to insure their unquestionable safety when deposited with the Government, which might prove eminently disastrous to the State banks.  Is it objected that it is proposed to authorize the agencies to deal in bills of exchange ?  It is answered, that such dealings are to be carried on at the lowest possible premium;  are made to rest on an unquestionably sound basis;  are designed to reimburse merely the expenses which would, otherwise devolve upon the Treasury;  and are in strict subordination to the decision of the Supreme Court in the case of the Bank of Augusta against Earle, and other reported cases;  and thereby avoids all conflict with State jurisdiction, which I hold to be indispensably requisite.  It leaves the banking privileges of the States without interference;  looks to the Treasury and the Union;  and, while furnishing every facility to the first, is careful of the interests of the last.  But above all, it is created by law, is amendable by law, and is repealable by law;  end, wedded as I am to no theory, but looking solely to the advancement of the public good, I shall be among the very first to urge its repeal, if it be found not to subserve the purposes and objects for which it may be created.  Nor will the plan be submitted in any overweening confidence in the sufficiency of my own judgment, but with much greater reliance on the wisdom and patriotism of Congress.  I cannot abandon this subject without urging upon you, in the most emphatic manner, whatever may be your action on the suggestions which I have felt it my duty to submit, to relieve the Chief Executive Magistrate, by any and all constitutional means, from a controlling power over the public Treasury.  If, in the plan proposed, should you deem it worthy of your consideration, that separation is not as complete as you may desire, you will, doubtless, amend it in that particular.  For myself, I disclaim all desire to have any control over the public moneys, other than what is indispensably necessary to execute the laws which you may pass."


What the President proposes, is, briefly, a Government Bank of deposit, issue and exchange.

---[Object all you want, Mr. Gouge, with all due respect, your religion is blinding you;  the United States was in great need of such bank, from day one;  it should have been part of the Treasury Department, just as ports, harbours, ships are part of the Navy Department (and not farmed out to privateers).  Until the discoveries in Nevada and California, the United States was short of specie;  if 100million bank notes could maintain their parity, so could 100million Treasury notes which are always at par for payment to the general government.]

Against the issue and exchange features of the scheme, the following, among other objections, may be urged.

1st. Through the issue of $15,000,000 in Treasury notes, the national debt will be increased to this amount.  Our national debt is already greater than it ought to be in time of peace.

2nd. These Treasury notes will, in so far an they serve as a circulating medium, drive real money out of the country.  Our true policy should be to increase the amount of gold and silver coin in circulation, not to diminish it. ---[Until you find new deposits, it is really hard to increase that which is of finite supply]

3rd. Extravagance in appropriations, and prodigality in expenditure, are sure to follow when Government can raise ways and means without either imposing taxes or paying interest.

4th. This new Government paper will, like all other Government paper, depreciate in value.  This is not matter of conjecture, it is matter of certainty.  It is quite possible to fancy a system, by which the redemption of Government paper may keep pace with its issue, and the paper be thus kept at par with specie, but it is not possible, as human nature is at present constituted, to find agents who will, through a series of years, consistently carry out the principles of such a system. ---[in the 1840s and 1850s 'specie-paying' banks circulated 300million of their notes!!....]

5thly. Under our present system, though we have a very unsound circulating medium, we have a sound standard of value.  So long an this continues, we have a test of the varying value of our paper currencies, and some guide in making contracts.  But let Government once begin to receive inconvertible paper, whether issued by itself or by a corporation, and our standard of value will be gone.  Then the evils we endure, will be increased five fold, yea ten fold.

6thly. Half the evils society suffers, arise from the attempts of Government to do that which ought to be done by individuals.  The regulation of weights and measures, and among other measures, measures of value, is one of the attributes of sovereignty;  but not the regulation of the prices of bills of exchange, or of other commodities.  Government has, properly speaking, nothing more to do with regulating the prices of bills of exchange, than the prices of beef or of butter, of corn or of cotton.  Let our measures of value, length, weight, and capacity, be properly adjusted, and the rates of bills of exchange and of all other commodities, will be much better regulated by free competition than they can be by Governmental enactments.

7thly. Supposing it possible to carry on the exchange operations of the country, by means of such governmental agencies as are here proposed, an immense amount of capital would be required.  As we have now no "surplus revenue," this capital must be borrowed, and thus make another addition to the national debt.  For a time, indeed, as Government has a credit every where, it might sustain its exchange operations by a species of kiting.  But before long, the kite strings would break, and the kites come to the ground.

8thly. This union of the fiscal concerns of the United States with the private concerns of individuals, would be sure to derange both.  It is a union of bank and state, of the very worst kind.

9thly. As the notes of banks would be received in payments for Government bills of exchange, the risque of loss to Government from stoppages of specie payments by the banks, would be increased greatly.

10th. If Government takes upon itself the management of the exchange business of the country, an immense increase of Governmental patronage will be the consequence.

11th. Immense losses will be sustained, through the purchase of bad bills of exchange by the Governmental agents.

12th. Great favoritism will be shown in dealings in real bills of exchange.

13th. Under this system, there will be drawing and redrawing, such as the world never saw before.

As the President states "that he is wedded to no theory, but looks solely to the advancement of the public good," it may be hoped that he will abandon the paper money and exchange parts of the scheme, as soon as he shall have weighed the various and important objections that can be brought against them.

The United States Bank.

On the 14th of December, the Grand Jury made the following presentment to the Court of General Sessions of the county of Philadelphia.

To the Honorable Court of General Sessions, the Grand Jury for the County of Philadelphia respectfully submit to the court, on their solemn oaths and affirmations, the following statement of their proceedings:

On the 12th day of November, 1841, a paper containing charges of a criminal nature against certain individuals, and which is hereto annexed, (marked B,) was presented to the Grand Inquest, now inquiring for the city of Philadelphia, by a responsible citizen, who pledges himself to make good his charges and be the prosecutor. An accusation coming in such a shape, the Grand Jury felt it to be an imperative duty to investigate, and accordingly subpœnas were issued for all the persons named as witnesses by the persons making the accusation, and for such others who in the course of the examination were found to be cognizant of any material fact having relation to the charge.

A full and searching inquiry has been instituted, and the deliberate opinion of the Grand Jury is, that certain officers connected with the United States Bank have been guilty of a gross violation of the laws, colluding together to defraud those stockholders who had trusted their all to be preserved by them. And that there is good ground to warrant a prosecution of such persons for serious criminal offences; which the Grand Jury do now present to the Court, and ask that the Attorney General be directed to send up, for the action of the Grand Jury, bills of indictment against:

First, Nicholas Biddle, Samuel Jaudon, John Andrews, and others (to the jury unknown,) for entering into a conspiracy to defraud the stock-holders of the United States Bank, of the sum or sums of 400,000 dollars in the year 1836. And endeavoring to conceal the same by a fraudulent and illegal entry in 1841.

To sustain the above, endorsed Austin Montgomery, (Captain Henry Mallory,) Henry Horn as accusers, Moses Kempton, Edward Cole, James S. Newbold, Joshua Lippincott, Jonathan Patterson, Thomas Taylor and William Drayton as witnesses.

The Grand Jury, on their solemn oaths and affirmations, do further ask that a bill of indictment be sent to them against, second, Nicholas Biddle, Joseph Cowperthwaite, Thomas Dunlap, and others (to the Jury unknown,) for entering into a conspiracy to defraud, &c. the stockholders of the Bank of the United States, during the years 1836, 1837, 1838, 1839 and 1840, by which the stockholders have been defrauded out of the sum or sums of money exceeding 300,000 dollars.

To sustain this bill endorse the same accusers as in the first case.

As witnesses, Moses Kempton, Edward Coles, James S. Newbold, Joshua Lippincott, Jonathan Pattereon, Thomas Taylor, William Drayton, Joseph Cabot, Rodney Fisher, Richard Price, and George Handy.

The Grand Jury, on their solemn oaths and affirmations, do further ask for a bill of indictment against Alexander Lardner, Thomas Dunlap, Richard Price, Lawrence Lewis, and George Handy, and others (to the jury unknown,) for feloniously, &c, conspiring to cheat and defraud the stockholders of the United States Bank of Pennsylvania of the sum or sums of about 130,000 dollars, in the year 1840.

To sustain this charge, the same accusers as on the others, and as witnesses Moses Kempton, Edward Coles, James S. Newbold, Joshua Lippincott, Jonathan Patterson, and Thomas Taylor.

With respect, &c.,
T.B. Town, Foreman.
Grand Jury Room, Philadelphia,
December 10th, 1841.


I charge Nicholas Biddle, Joseph Cowperthwaite, Thomas Dunlap, Samuel Jaudon, and John Andrews, with fraud and theft in taking and using for their own benefit, and accommodating their friends, the money belonging to the stockholders of the United States Bank, which they were liberally paid to guard, and not to abuse.

My proof is the report of the investigating committee made to the stockholders in April, 1841. --As to the idea of the above being a breach of trust only, 'tis not so, --'tis too idle and insulting to be pretended or entertained for one moment -- away with it then, and forever-- these men were servants and paid for their services; so are your family domestics to whom you give in charge your plate, and other valuables. But if they appropriate it, or them, to themselves, they are unhesitatingly charged with and proceeded against as for theft, and why not N. Biddle among the rest ?

Austin Montgomery.

So soon as the clerk had concluded the reading of the presentment, the Attorney General, Ovid F. Johnson, Esq., made a motion that the names of all the persons contained in the document be called. This was accordingly done, but no one answered in person. John M. Read, Esq., made a few remarks relating to the motion in question, which were accompanied by a motion to quash the presentment. Mr. Read represents Mr. Biddle.

H.M. Phillips, Esq., made a similar motion on the part of Mr. Andrews. The matter was then continued.

On Wednesday the argument was continued. Mr. Read, the counsel of Nicholas Biddle, contended that the Grand Jury had no right to inquire into any thing but what had been placed in their charge by the Court, and what they knew of their own knowledge; and consequently they had no right to call witnesses and swear them relative to a matter of which they themselves were in ignorance.

The Attorney General, Mr. Johnson, contended, on the contrary, that if the Grand Jury had received their information from such names as they were willing to vouch for, it was of their own knowledge.

The Court then adjourned.



We were much struck with a remark made by a gentleman some years ago, that the Bank of Virginia was the State of Virginia.  The supreme power has passed from the people of that Commonwealth into the bands of a corporation, and the Legislature and the Governor are little more than instruments for carrying into effect the behests of a board of Directors.  "When I was a member of the Senate of Virginia," said Col. ******, and any measure was brought before us, I used to ask 'What does Dr. Brockenbrough (the President of the Bank of Virginia) think of it ?  It is no matter what Nicholas Biddle thinks of it.  He is so far off that we need not regard him.  But what are Dr. Brockenbrough's views respecting it.'"

The Bank of Virginia is still, it seems, the State of Virginia;  or, what amounts to the same thing, has power to direct the political action of the State.  This is evident from the message of Lieutenant Governor Rutherford.  He cannot urge a resumption of specie payments at an early day, because the State owes the banks some three hundred and fifty thousand dollars, which it is not convenient just now to pay.  Many members of the Legislature will also, as in Pennsylvania, and in other States, find in their own relations with the banks, sufficient reasons why the strict requirements of justice should not be exacted from these institutions.


From the message of Governor Corwin to the Legislature, it appears that the funded debt of the State has been increased in the last year about $1,800,000.  Besides this, the debt due for labor done, and an additional debt which must be incurred in order to complete works which have been begun, will make together about $1,350,000.

The amount paid into the Treasury from the canals during the present year, is $484,758.18.  The Governor speaks of the suspension of specie payments by the banks as a great evil;  but doubts "if this unhappy state of things admits of any permanent remedy, without important changes in our existing commercial relations with foreign countries."  Herein the Governor falls into great error, not seeing that it is altogether owing to excess of paper issues, that there is an excessive importation of foreign goods, and a corresponding export of specie.

The Legislature has important business before it, as the charters of twenty-four out of the thirty-seven banks in the State, expire in January, 1843.

Some of the citizens of Wayne county have presented a petition praying for an examination of the affairs of the German Bank of Wooster.  They say, "Up to the time of closing business on Saturday, the fourth of September last, Mr. Bentley, the cashier of said bank, continued to assure its note-holders that it was perfectly safe, that the resources of the bank were amply sufficient to meet all its liabilities;  and until the same period, its officers continued issuing its notes and increasing their circulation, particularly along a large portion of the Ohio Canal;  in consequence of which almost the entire farming portion of this community have received it in exchange for their produce -- while on Monday, the sixth of the same month, they closed their doors and declared themselves unable to redeem one dollar of their money."


This state has undertaken to make 1189 miles of canal and rail-road.  On these works it has expended $8,164,528;  but to complete them, it must swell the total to $19,914,424.  Only 281 miles of canal and rail-road appear to be in a condition to be used.

The present debt of the State, funded and floating, is estimated by the Governor at $15,088,146.  This includes a suspended debt of $3,381,000, that being the amount of bonds out of which the State has been outwitted by banks and brokers.

The greater part of the revenue of this State is paid in State Treasury notes, "and," says the Governor, "the amount of these notes still in circulation must prevent us, for several years, from deriving any available means from the collection of taxes, with which to liquidate any part of the interest on the State debt."

The Governor professes to regard suspension of specie payments as a great evil;  but seems to think a resumption, unless effected with great caution, would produce still greater evils.  "The suspension," he says, "is but one of the many consequences which have flowed from over banking, over trading, and from wild and reckless speculation."

This is true.  Suspension is but one of the many consequences of banking on improper principles, and for many of the evils consequent on the folly of past years, there is no remedy.  They must be endured.  But so long as the banks continue in a state of suspension, they are laying the foundation of new evils in future years.  They ought not, while in this condition, to be allowed "to take advantage of their own wrong."  They ought not, till they resume specie payments and prove that they can sustain them, be allowed to make dividends, or loans and discounts to officers and stockholders.