Kitabı oku: «Thirty Years' View (Vol. II of 2)», sayfa 23

CHAPTER XXXI.
SPECIE BASIS FOR BANKS: ONE THIRD OF THE AMOUNT OF LIABILITIES THE LOWEST SAFE PROPORTION: SPEECH OF MR. BENTON ON THE RECHARTER OF THE DISTRICT BANKS

This is a point of great moment – one on which the public mind has not been sufficiently awakened in this country, though well understood and duly valued in England. The charters of banks in the United States are usually drawn on this principle, that a certain proportion of the capital, and sometimes the whole of it, shall be paid up in gold or silver before the charter shall take effect. This is the usual provision, without any obligation on the bank to retain any part of this specie after it gets into operation; and this provision has too often proved to be illusory and deceptive. In many cases, the banks have borrowed the requisite amount for a day, and then returned it; in many other cases, the proportion of specie, though paid up in good faith, is immediately lent out, or parted with. The result to the public is about the same in both cases; the bank has little or no specie, and its place is supplied by the notes of other banks. The great vice of the banking system in the United States is in banking upon paper – upon the paper of each other – and treating this paper as cash. This may be safe among the banks themselves; it may enable them to settle with one another, and to liquidate reciprocal balances; but to the public it is nothing. In the event of a run upon a bank, or a general run upon all banks, it is specie, and not paper, that is wanted. It is specie, and not paper, which the public want, and must have.

The motion of the senator from Pennsylvania [Mr. Buchanan] is intended to remedy this vice in these District banks; it is intended to impose an obligation on these banks to keep in their vaults a quantum of specie bearing a certain proportion to the amount of their immediate liabilities in circulation and deposits. The gentleman's motion is well intended, but it is defective in two particulars: first, in requiring the proportion to be the one-fourth, instead of the one-third, and next, in making it apply to the private deposits only. The true proportion is one-third, and this to apply to all the circulation and deposits, except those which are special. This proportion has been fixed for a hundred years at the Bank of England; and just so often as that bank has fallen below this proportion, mischief has occurred. This is the sworn opinion of the present Governor of the Bank of England, and of the directors of that institution. Before Lord Althorpe's committee in 1832, Mr. Horsley Palmer, the Governor of the Bank, testified in these words:

"'The average proportion, as already observed, of coin and bullion which the bank thinks it prudent to keep on hand, is at the rate of a third of the total amount of all her liabilities, including deposits as well as issues.' Mr. George Ward Norman, a director of the bank, states the same thing in a different form of words. He says: 'For a full state of the circulation and the deposits, say twenty-one millions of notes and six millions of deposits, making in the whole twenty-seven millions of liabilities, the proper sum in coin and bullion for the bank to retain is nine millions.' Thus, the average proportion of one-third between the specie on hand and the circulation and deposits, must be considered as an established principle at that bank, which is quite the largest, and amongst the oldest – probably, the very oldest bank of circulation in the world."

The Bank of England is not merely required to keep on hand, in bullion, the one-third of its immediate liabilities; it is bound also to let the country see that it has, or has not, that proportion on hand. By an act of the third year of William IV., it is required to make quarterly publications of the average of the weekly liabilities of the bank, that the public may see whenever it descends below the point of safety. Here is the last of these publications, which is a full exemplification of the rule and the policy which now governs that bank:

Quarterly average of the weekly liabilities and assets of the Bank of England, from the 12th December, 1837, to the 6th of March, 1838, both inclusive, published pursuant to the act 3 and William IV., cap. 98:

According to this statement, the Bank of England is now safe; and, accordingly, we see that she is acting upon the principle of having bullion enough, for she is shipping gold to the United States.

The proportion in England is one-third. The bank relies upon its debts and other resources for the other two-thirds, in the event of a run upon it. This is the rule in that bank which has more resources than any other bank in the world; which is situated in the moneyed metropolis of the world – the richest merchants its debtors, friends and customers – and the Government of England its debtor and backer, and always ready to sustain it with exchequer bills, and with every exertion of its credit and means. Such a bank, so situated and so aided, still deems it necessary to its safety to keep in hand always the one-third in bullion of the amount of its immediate liabilities. Now, if the proportion of one-third is necessary to the safety of such a bank, with such resources, how is it possible for our banks, with their meagre resources and small array of friends, to be safe with a less proportion?

This is the rule at the Bank of England, and just as often as it has been departed from, the danger of that departure has been proved. It was departed from in 1797, when the proportion sunk to the one-seventh; and what was the result? The stoppage of the banks, and of all the banks in England, and a suspension of specie payments for six-and-twenty years! It was departed from again about a year ago, when the proportion sunk to one-eighth nearly; and what was the result? A death struggle between the paper systems of England and the United States, in which our system was sacrificed to save hers. Her system was saved from explosion! but at what cost? – at what cost to us, and to herself? – to us a general stoppage of all the banks for twelve months; to the English, a general stagnation of business, decline of manufactures, and of commerce, much individual distress, and a loss of two millions sterling of revenue to the Crown. The proportion of one-third may then be assumed as the point of safety in the Bank of England; less than that proportion cannot be safe in the United States. Yet the senator from Pennsylvania proposes less – he proposes the one-fourth; and proposes it, not because he feels it to be the right proportion, but from some feeling of indulgence or forbearance to this poor District. Now, I think that this is a case in which kind feelings can have no place, and that the point in question is one upon which there can be no compromise. A bank is a bank, whether made in a district or a State; and a bank ought to be safe, whether the stockholders be rich or poor. Safety is the point aimed at, and nothing unsafe should be tolerated. There should be no giving and taking below the point of safety. Experienced men fix upon the one-third as the safe proportion; we should not, therefore, take a less proportion. Would the gentleman ask to let the water in the boiler of a steamboat sink one inch lower, when the experienced captain informed him that it had already sunk as low as it was safe to go? Certainly not. So of these banks. One-third is the point of safety; let us not tamper with danger by descending to the one-fourth.

When a bank stops payment, the first thing we see is an exposition of its means, and a declaration of ultimate ability to pay all its debts. This is nothing to the holders of its notes. Immediate ability is the only ability that is of any avail to them. The fright of some, and the necessity of others, compel them to part with their notes. Cool, sagacious capitalists can look to ultimate ability, and buy up the notes from the necessitous and the alarmed. To them ultimate ability is sufficient; to the community it is nothing. It is, therefore, for the benefit of the community that the banks should be required to keep always on hand the one-third of their circulation and deposits; they are then trusted for two-thirds, and this is carrying credit far enough. If pressed by a run, it is as much as a bank can do to make up the other two-thirds out of the debts due to her. Three to one is credit enough, and it is profit enough. If a bank draws interest upon three dollars when it has but one, this is eighteen per cent., and ought to content her. A citizen cannot lend his money for more than six per cent., and cannot the banks be contented with eighteen? Must they insist upon issuing four dollars, or even five, upon one, so as to draw twenty-four or thirty per cent.; and thus, after paying their officers vast salaries, and accommodating friends with loans on easy terms, still make enough out of the business community to cover all expenses and all losses: and then to divide larger profits than can be made at any other business?

The issuing of currency is the prerogative of sovereignty. The real sovereign in this country – the government – can only issue a currency of the actual dollar: can only issue gold and silver – and each piece worth its face. The banks which have the privilege of issuing currency issue paper; and not content with two more dollars out for one that is, they go to five, ten, twenty – failing of course on the first run; and the loss falling upon the holders of its notes – and especially the holders of the small notes.

We now touch a point, said Mr. B., vital to the safety of banking, and I hope it will neither be passed over without decision, nor decided in an erroneous manner. We had up the same question two years ago, in the discussion of the bill to regulate the keeping of the public moneys by the local deposit banks. A senator from Massachusetts (Mr. Webster) moved the question; he (Mr. B.) cordially concurred in it; and the proportion of one-fourth was then inserted. He (Mr. B.) had not seen at that time the testimony of the governor and directors of the Bank of England, fixing on the one-third as the proper proportion, and he presumed that the senator from Massachusetts (Mr. W.) had not then seen it, as on another occasion he quoted it with approbation, and stated it to be the proportion observed at the Bank of the United States. The proportion of one-fourth was then inserted in the deposit bill; it was an erroneous proportion, but even that proportion was not allowed to stand. After having been inserted in the bill, it was struck out; and it was left to the discretion of the Secretary of the Treasury to fix the proportion. To this I then objected, and gave my reasons for it. I was for fixing the proportion, because I held it vital to the safety of the deposit banks; I was against leaving it to the secretary, because it was a case in which the inflexible rule of law, and not the variable dictate of individual discretion should be exercised; and because I was certain that no secretary could be relied upon to compel the banks to toe the mark, when Congress itself had flinched from the task of making them do it. My objections were unavailing. The proportion was struck out of the bill; the discretion of the secretary to fix it was substituted; and that discretion it was impossible to exercise with any effect over the banks. They were, that is to say, many of them were, far beyond the mark then; and at the time of the issuing of the Treasury order in July, 1836, there were deposit banks, whose proportion of specie in hand to their immediate liabilities was as one to twenty, one to thirty, one to forty, and even one to fifty! The explosion of all such banks was inevitable. The issuing of the Treasury order improved them a little: they began to increase their specie, and to diminish their liabilities; but the gap was too wide – the chasm was too vast to be filled: and at the touch of pressure, all these banks fell like nine-pins! They tumbled down in a heap, and lay there, without the power of motion, or scarcely of breathing. Such was the consequence of our error in omitting to fix the proper proportion of specie in hand to the liabilities of our deposit banks: let us avoid that error in the bill now before us.

CHAPTER XXXII.
THE NORTH AND THE SOUTH: COMPARATIVE PROSPERITY: SOUTHERN DISCONTENT: ITS TRUE CAUSE

To show the working of the federal government is the design of this View – show how things are done under it and their effects; that the good may be approved and pursued, the evil condemned and avoided, and the machine of government be made to work equally for the benefit of the whole Union, according to the wise and beneficent intent of its founders. It thus becomes necessary to show its working in the two great Atlantic sections, originally sole parties to the Union – the North and the South – complained of for many years on one part as unequal and oppressive, and made so by a course of federal legislation at variance with the objects of the confederation and contrary to the intent or the words of the constitution.

The writer of this View sympathized with that complaint; believed it to be, to much extent, well founded; saw with concern the corroding effect it had on the feelings of patriotic men of the South; and often had to lament that a sense of duty to his own constituents required him to give votes which his judgment disapproved and his feelings condemned. This complaint existed when he came into the Senate; it had, in fact, commenced in the first years of the federal government, at the time of the assumption of the State debts, the incorporation of the first national bank, and the adoption of the funding system; all of which drew capital from the South to the North. It continued to increase; and, at the period to which this chapter relates, it had reached the stage of an organized sectional expression in a voluntary convention of the Southern States. It had often been expressed in Congress, and in the State legislatures, and habitually in the discussions of the people; but now it took the more serious form of joint action, and exhibited the spectacle of a part of the States assembling sectionally to complain formally of the unequal, and to them, injurious operation of the common government, established by common consent for the common good, and now frustrating its object by departing from the purposes of its creation. The convention was called commercial, and properly, as the grievance complained of was in its root commercial, and a commercial remedy was proposed.

It met at Augusta, Georgia, and afterwards at Charleston, South Carolina; and the evil complained of and the remedy proposed were strongly set forth in the proceedings of the body, and in addresses to the people of the Southern and Southwestern States. The changed relative condition of the two sections of the country, before and since the Union, was shown in their general relative depression or prosperity since that event, and especially in the reversed condition of their respective foreign import trade. In the colonial condition the comparison was wholly in favor of the South; under the Union wholly against it. Thus, in the year 1760 – only sixteen years before the Declaration of Independence – the foreign imports into Virginia were £850,000 sterling, and into South Carolina £555,000; while into New York they were only £189,000, into Pennsylvania £490,000; and into all the New England Colonies collectively only £561,000.

These figures exhibit an immense superiority of commercial prosperity on the side of the South in its colonial state, sadly contrasting with another set of figures exhibited by the convention to show its relative condition within a few years after the Union. Thus, in the year 1821, the imports into New York had risen to $23,000,000 – being about seventy times its colonial import at about an equal period before the adoption of the constitution; and those of South Carolina stood at $3,000,000 – which, for all practical purposes, may be considered the same that they were in 1760.

Such was the difference – the reversed conditions – of the two sections, worked between them in the brief space of two generations – within the actual lifetime of some who had seen their colonial conditions. The proceedings of the convention did not stop there, but brought down the comparison (under this commercial aspect) to near the period of its own sitting – to the actual period of the highest manifestation of Southern discontent, in 1832 – when it produced the enactment of the South Carolina nullifying ordinance. At that time all the disproportions between the foreign commerce of the two sections had inordinately increased. The New York imports (since 1821) had more than doubled; the Virginia had fallen off one-half; South Carolina two-thirds. The actual figures stood: New York fifty-seven millions of dollars, Virginia half a million, South Carolina one million and a quarter.

This was a disheartening view, and rendered more grievous by the certainty of its continuation, the prospect of its aggravation, and the conviction that the South (in its great staples) furnished the basis for these imports; of which it received so small a share. To this loss of its import trade, and its transfer to the North, the convention attributed, as a primary cause, the reversed conditions of the two sections – the great advance of one in wealth and improvements – the slow progress and even comparative decline of the other; and, with some allowance for the operation of natural or inherent causes, referred the effect to a course of federal legislation unwarranted by the grants of the constitution and the objects of the Union, which subtracted capital from one section and accumulated it in the other: – protective tariff, internal improvements, pensions, national debt, two national banks, the funding system and the paper system; the multiplication of offices, profuse and extravagant expenditure, the conversion of a limited into an almost unlimited government; and the substitution of power and splendor for what was intended to be a simple and economical administration of that part of their affairs which required a general head.

These were the points of complaint – abuses – which had led to the collection of an enormous revenue, chiefly levied on the products of one section of the Union and mainly disbursed in another. So far as northern advantages were the result of fair legislation for the accomplishment of the objects of the Union, all discontent or complaint was disclaimed. All knew that the superior advantages of the North for navigation would give it the advantage in foreign commerce; but it was not expected that these facilities would operate a monopoly on one side and an extinction on the other; nor was that consequence allowed to be the effect of these advantages alone, but was charged to a course of legislation not warranted by the objects of the Union, or the terms of the constitution, which created it. To this course of legislation was attributed the accumulation of capital in the North, which had enabled that section to monopolize the foreign commerce which was founded upon southern exports; to cover one part with wealth while the other was impoverished; and to make the South tributary to the North, and suppliant to it for a small part of the fruits of their own labor.

Unhappily there was some foundation for this view of the case; and in this lies the root of the discontent of the South and its dissatisfaction with the Union, although it may break out upon another point. It is in this belief of an incompatibility of interest, from the perverted working of the federal government, that lies the root of southern discontent, and which constitutes the danger to the Union, and which statesmen should confront and grapple with; and not in any danger to slave property, which has continued to aggrandize in value during the whole period of the cry of danger, and is now of greater price than ever was known before; and such as our ancestors would have deemed fabulous. The sagacious Mr. Madison knew this – knew where the danger to the Union lay, when, in the 86th year of his age, and the last of his life, and under the anguish of painful misgivings, he wrote (what is more fully set out in the previous volume of this work) these portentous words:

"The visible susceptibility to the contagion of nullification in the Southern States, the sympathy arising from known causes, and the inculcated impression of a permanent incompatibility of interest between the North and the South, may put it in the power of popular leaders, aspiring to the highest stations, to unite the South, on some critical occasion, in some course of action of which nullification may be the first step, secession the second, and a farewell separation the last."

So viewed the evil, and in his last days, the great surviving founder of the Union – seeing, as he did, in this inculcated impression of a permanent incompatibility of interest between the two sections, the fulcrum or point of support, on which disunion could rest its lever, and parricidal hands build its schemes. What has been published in the South and adverted to in this View goes to show that an incompatibility of interest between the two sections, though not inherent, has been produced by the working of the government – not its fair and legitimate, but its perverted and unequal working.

This is the evil which statesmen should see and provide against. Separation is no remedy; exclusion of Northern vessels from Southern ports is no remedy; but is disunion itself – and upon the very point which caused the Union to be formed. Regulation of commerce between the States, and with foreign nations, was the cause of the formation of the Union. Break that regulation, and the Union is broken; and the broken parts converted into antagonist nations, with causes enough of dissension to engender perpetual wars, and inflame incessant animosities. The remedy lies in the right working of the constitution; in the cessation of unequal legislation in the reduction of the inordinate expenses of the government; in its return to the simple, limited, and economical machine it was intended to be; and in the revival of fraternal feelings, and respect for each other's rights and just complaints; which would return of themselves when the real cause of discontent was removed.

The conventions of Augusta and Charleston proposed their remedy for the Southern depression, and the comparative decay of which they complained. It was a fair and patriotic remedy – that of becoming their own exporters, and opening a direct trade in their own staples between Southern and foreign ports. It was recommended – attempted – failed. Superior advantages for navigation in the North – greater aptitude of its people for commerce – established course of business – accumulated capital – continued unequal legislation in Congress; and increasing expenditures of the government, chiefly disbursed in the North, and defect of seamen in the South (for mariners cannot be made of slaves), all combined to retain the foreign trade in the channel which had absorbed it; and to increase it there with the increasing wealth and population of the country, and the still faster increasing extravagance and profusion of the government. And now, at this period (1855), the foreign imports at New York are $195,000,000; at Boston $58,000,000; in Virginia $1,250,000; in South Carolina $1,750,000.

This is what the dry and naked figures show. To the memory and imagination it is worse; for it is a tradition of the Colonies that the South had been the seat of wealth and happiness, of power and opulence; that a rich population covered the land, dispensing a baronial hospitality, and diffusing the felicity which themselves enjoyed; that all was life, and joy, and affluence then. And this tradition was not without similitude to the reality, as this writer can testify; for he was old enough to have seen (after the Revolution) the still surviving state of Southern colonial manners, when no traveller was allowed to go to a tavern, but was handed over from family to family through entire States; when holidays were days of festivity and expectation, long prepared for, and celebrated by master and slave with music and feasting, and great concourse of friends and relatives; when gold was kept in desks or chests (after the downfall of continental paper) and weighed in scales, and lent to neighbors for short terms without note, interest, witness, or security; and on bond and land security for long years and lawful usance: and when petty litigation was at so low an ebb that it required a fine of forty pounds of tobacco to make a man serve as constable.

The reverse of all this was now seen and felt, – not to the whole extent which fancy or policy painted – but to extent enough to constitute a reverse, and to make a contrast, and to excite the regrets which the memory of past joys never fails to awaken. A real change had come, and this change, the effect of many causes, was wholly attributed to one – the unequal working of the Federal Government – which gave all the benefits of the Union to the North, and all its burdens to the South. And that was the point on which Southern discontent broke out – on which it openly rested until 1835; when it was shifted to the danger of slave property.

Separation is no remedy for these evils, but the parent of far greater than either just discontent or restless ambition would fly from. To the South the Union is a political blessing; to the North it is both a political and a pecuniary blessing; to both it should be a social blessing. Both sections should cherish it, and the North most. The story of the boy that killed the goose that laid the golden egg every day, that he might get all the eggs at once, was a fable; but the Northern man who could promote separation by any course of wrong to the South would convert that fable into history – his own history – and commit a folly, in a mere profit and loss point of view, of which there is no precedent except in fable.