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sary to pay a high premium on loans, for our countrymen had little to lend, much of their invested capital having been rendered unproductive by the events of the war, and much of their floating capital taking a direction towards manufactures: but the principles of the financial policy which were adopted, would, in the course of a few months, have rendered it impossible to borrow money on any terms. Fifty per cent was, indeed, added to the duty on retailers, in December 1814: a duty of 20 cents a gallon was imposed on distiHed spirits: the duty on carriages was greatly increased: one per cent was added to the duty on auctions: and a direct tax of six millions was laid for 1815: but any person who candidly considers the events of the following years, will probably be convinced, that, without an increase of revenue from the customs, it would have been impossible for government to support its credit. Even so late as December 1814, it appeared to be the wish of some of the leading men in the administration, instead of depending on the real resources of the country, to depend on a bank they proposed to form, with a nominal capital of fifty millions, made up principally of public stock and treasury notes, all, then, much below par. Peace was providentially restored in an early part of 1815. On the first of January of that year, the debt of government, funded and unfunded, stood, according to the Treasury books, at 99,824,410 dollars, and there were outstanding claims against it to the amount of 30 or 40 millions more. On the 20th of February the ascertained debt was 108 millions. As the means of satisfying, or rather of deferring satisfaction of some of these claims, an act was passed on the 24th of February 1814, under the authority of which, Treasury notes to the additional amount of 7,815,391 dollars, were issued. It was provided that such of the notes of this new emission, as were of a less denomination than one hundred dollars, should bear no interest: but might be funded at seven per cent and that such as were of the denomination of one hundred dollars and upwards, should bear an interest of five and two-fifths per cent and might be funded at a rate of six per cent interest.

As a means of absorbing part of the outstanding treasury notes, issued under the authority of the different acts of 1812, 13, and 14, invitations were given for a loan of $18,452,000, subscriptions to which might be made in any treasury notes issued previous to the third of March 1815, the day of the passage of this act. In this way, were created three new denominations of stock; but which still left at the end of the year, between seventeen and eighteen millions of treasury notes unfunded, and a debt of upwards of one million dollars, obtained as a temporary loan, unsatisfied.

In the acts passed during the war for raising a revenue by internal taxation, it was provided that the taxes should not be repealed till one year after the cessation of hostilities. But it was found necessary, as will be shown hereafter, to continue these taxes for nearly three years after the return of peace: and, in addition, it was deemed expedient on the 1st of April 1815, to pass an act imposing a duty

of one dollar a ton, on pig, bar, slit, and rolled iron, manufactured in the country, one dollar and a half a ton on iron castings, one cent a pound on nails, five cents a pound on wax candles, three cents a pound on tallow candles, eight per cent ad valorem on hats, caps, and umbrellas, three per cent on paper, fifty per cent on playing and visiting cards, six per cent on saddles and bridles, beer, ale, and porter, twenty per cent on manufactures of tobacco, five per cent on boots and leather: two dollars a piece on gold watches, one dollar on silver watches, and a tax on household furniture, from one dollar to one hundred dollars, according to a graduated scale of valuation.

In consequence of this act, the amount received from internal taxes, during the year 1815, was increased to 4,600,000 dollars, and there being a small increase in the customs, the whole revenue of the government, for the year, independent of what was derived from loans and treasury notes, was a little less than 15,700,000 dollars. It being found impracticable, or deemed inexpedient, immediately to reduce the army and navy to the peace establishment, the charges on government were very heavy in this period, and the outstanding claims which were daily brought in, occasioned much embarrassment. At the end of the year, the ascertained debt, was upwards of 123 millions.

If hostile operations had been continued to this time, the confusion would have been inextricable: but the return of peace rendered it practicable to resort to all those expedients for changing the form of debt, and deferring the day of payment, which constitute so great a part of the modern art of financiering. The officers of the Treasury had free scope for exercising their abilities in this way, for the various acts we have mentioned authorising loans, and two others, one passed December 21st 1824, for a loan of six millions, and another on the 9th of January 1815, for another loan of equal amount, together with the acts respecting Treasury notes, gave them authority to borrow to almost any extent, and in almost every form, in which borrowing would seem possible.

With so much skill did they exert those powers of financial metamorphosis which the funding and Treasury note system gave them, that, though the bona fide revenue of government for the whole year, had been only 15,700,000 dollars, and though the charges of government for the same period amounted to upwards of 39 millions, there was, according to the published statements, a balance in the Treasury, on the last day of the year, of upwards of thirteen million dollars!

This balance was, unfortunately, not such as could be immediately applied where it was most wanted. Five months before the conclusion of the war, all the banks south and west of New England, excepting the old bank at Nashville, had suspended specie payments. On the return of peace, the banks in the principal cities could have resumed payments in specie without making any great sacrifices, for they had in this interval added little to their issues. If the government had been free from embarrassment, it might, by refusing to re

ceive the notes of any but specie-paying banks in discharge of duties, have induced the principal institutions to pursue the course which sound principles dictated. But the credit of government was even worse than that of the banks: and from policy or from necessity, it connived at the continued suspension of specie payments, a suspension which, it was originally understood, was not to be prolonged beyond the close of the war. Under these circumstances, the banks naturally began to increase their issues, and produced that appearance of prosperity which is one of the first effects of a plentiful emission of paper money. From the great variety of circulating medium, and the inequality of its value, some inconvenience was suffered, but no small number of men found this evil more than compensated by the rise in the price of real estate, and the briskness of nearly every description of business. If the merchant at Pittsburgh was forced to give ten per cent to have his western notes exchanged for paper current in Philadelphia, he knew how to compensate himself by putting on his goods an additional price, equivalent to the difference in the currencies. Labouring men, in many cases, sustained a real loss, from their employers paying them in notes of inferior value: but they vented all their indignation on the innocent exchange brokers. Men of business could calculate the par of exchange, and regulate their transactions accordingly. The time when they were to suffer, by the necessary reaction of the system, and the consequent fall in the price of real estate, and of nearly every other description of property, had not yet arrived.

The condition of the government was very different. It could not increase its charges for duties and taxes in each port and in each place, in proportion to the depreciation of the currency. The amount of each duty and each tax was determined by general laws, and was nominally the same throughout the country, whatever might be the difference in the currencies. The greater part of its receipts were in places where the currency was below par: and it was compelled to make many of its payments, in places where nothing was current but specie, or paper exchangeable for specie on demand. It profited in one way, as we shall show hereafter, by the abundance of circulating medium: but this profit would have been reduced to little or nothing, if it had paid the common premium of exchange. To use the language of a writer of that day, "The public treasury exhibited a phenomenon in finance. Many millions of surplus revenue, with as many different values as there were offices of collection, constantly accumulating at those ports of entry where it was least valuable, and applicable only where it was collected, while the great mass of the public debt and expenditures was at those places where least available; even the quarterly interest on the public debt, due where the currency was the most valuable, could not be discharged, but by the evidence of a new debt, in the form of seven per cent treasury notes-thus creating an

invidious distinction as well between the debtors as the creditors of the public, in many cases exceeding 20 per cent on the amount of their debts and claims respectively."

This writer, in speaking of "millions of surplus revenue," has special reference to the year 1816. It was in that year or the second year after the war, that the increased issues of paper were most effi cient in bringing both the government and the people into a state of apparently very great prosperity. The prices of nearly every kind of property being raised many per cent, most men supposed their riches to be increased in proportion. The importation and consumption of foreign commodities, were in a ratio to the supposed increase of the ability of people to pay for them: and the revenue from the customs alone, amounted in this year, to the enormous sum of thirty-six millions, being nearly five times as much as had been derived from the same source in 1815. The internal taxes, in the same year, produced upwards of five millions, the direct tax more than four millions, and the public lands more than 1,700,000, making the whole revenue for the year 1816, upwards of fortyseven millions. The revenue of this one year, exceeded the total amount of the national debt on the first of January 1812.

At the end of the year, the balance in the treasury was upwards of twenty-two millions: but such was the nature of the money of which it was composed, that the Secretary of the treasury found it necessary to borrow 500,000 dollars from the bank of the United States, in anticipation of the commencement of regular operations by that institution, to pay the quarterly interest on the public debt, due at Boston on the first of January 1817.

The public debt was, on that day, according to the Treasury statement, greater than on the first of January 1816: but this was owing to seven millions of five per cent stock having been issued as subscription to the bank of the United States: and owing to upwards of five millions of stock, issued to satisfy certain claimants to land in Mississippi, being then first introduced into the schedule. This stock, which was issued under authority of an act of 1814, bore no interest, and the principal was made reimbursable out of the proceeds of the sales of public lands in Mississippi. The old debt had, during the year, been reduced upwards of eleven millions, but, through the subscription to the bank of the United States, and the including of the Mississippi stock in the general statement, the total appeared to be increased.

$6,532,355 08 16,158,180 79

The public debt on the first of January 1817, when it was greatest according to the published statements, consisted of the following items:Six per cent and deferred stock, Three per cent stock, Six per cent (of 1796), Louisiana, six per cent, Exchanged six per cent, Six per cent stock of 1812,

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10,923,500 00

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7,810,500 99

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The withdrawal of a portion of the bank paper from circulation, in the latter part of 1816 and the beginning of 1817, as a means preparatory to the resumption of specie payments, had a tendency to lower prices, and thus make the importations less than they were in the previous year. But the withdrawal was not made to any extent except by the banks on the seaboard, and the total reduction in the amount of circulating medium, was not sufficient to change either the character or the course of trade, or to convince the majority of men of the fallacy of the principles on which they estimated their riches. The importations, though less extensive than they had been in the previous year, were very great, and the customs yielded a revenue of twenty-six millions in 1817,-a greater amount than they have yielded in any year, either before or since, always excepting the ever memorable year of 1816. In the same period, the internal taxes produced upwards of $2,600,000, the direct tax upwards of 1,800,000, and the public lands nearly two millions. The whole revenue exceeded 33 millions, which, added to the balance in the treasury on the last day of 1816, placed nearly fifty-six millions at the disposal of the officers of finance, for the service of the year 1817.

This amount could be more efficiently applied than the sums received in 1815 and 1816. By a resolution of congress, it had been provided that only specie and the notes of specie paying banks, should be received in payment of duties, after the 20th of February 1817. From that day, the serious embarrassments of the government were at an end. All the evils in subsequent years, which were the necessary, though remote effects, of the attempt made to carry on the war of 1812-14, by means of bank credits, and bank notes, fell either on the banks or on the people.

The expenditures for naval and military purposes, which exceeded 23 millions in 1815, and amounted to 20 millions in 1816, were, in 1817, reduced to

eleven millions. Through the reduction in this part of the public expenditures, and through the operation of the other causes we have alluded to, it became practicable to redeem twenty millions of the public debt, and the total amount was thus, at the end of the year, reduced to 103 millions.

The last of the internal duties which had been imposed for war purposes, ceased with the termination of this year. The act imposing duties on sundry American manufactures, had been repealed. on the 26th of February 1816. The act laying a duty on household furniture, and gold and silver watches had been repealed on the 9th of April 1816. The taxes on stills, domestic spirits, carriages, refined sugar, sales by auction, and the stamp duties were continued to the end of 1817. The duty on retailers, which had been increased fifty per cent by an act of December 23d, 1814, was by an act of December 31st, 1816, reduced to its old amount. amount. It ceased altogether, with the remaining war taxes, on the 31st of December 1817.

The direct tax imposed for 1814, was three millions: that for 1815, five millions: for 1816, three millions.

The sums received on account of the internal taxes, in the years 1814, 15, 16, and 17, amounted to 14,143,852 dollars: on account of the direct taxes, in the same years, 10,469,992 dollars. On account of the internal taxes in the three succeeding years, 1818, 19, and 20, the receipts were 1,291,133 dollars: on account of the direct taxes in the same years, 397,570 dollars. On account of the internal taxes, in the nine years from 1820 to 1829, both inclusive, 304,702 dollars: on account of the direct taxes, in the same period, 91,996 dollars: making an aggregate of 15,739,688 dollars, received on account of the internal taxes; and of 10,941,550, received on account of the direct taxes. A small part of the war taxes is yet to be collected.

By an act of the 3d of March 1817, so much of any acts as authorised the issuing or re-issuing of treasury notes, was repealed: all the treasury notes which had become, or should become, the property of the United States, were directed to be cancelled or destroyed, at such times, and under such regulations and securities as the commissioners of the sinking fund should establish. At the same time, all such acts as authorised any further loan were repealed, and the appropriation in favour of the sinking fund was increased from $8,000,000 to $10,000,000. To dwell on the modifications which this act made in the sinking fund, is unnecessary. It has not been by opening a separate account under the head of "Commissioners of the sinking fund" and entering thereunder certain debits and credits, that our national debt has been reduced to its present small amount. It has been by keeping the expenditures for a series of years below the receipts, aided in no small degree, at the commencement, by that system of measures, through which the after consequences of the financial policy of 1812-14 were thrown off the govern

ment, and thrown on the incorporated institutions and the people. "Strictly speaking," says Dr. Seybert, the essential character of a sinking fund, was not to be found in the operations of that of the United States: all its sources might vary and fail: even the application of the fund was varied with circumstances. The annual reports of the commissioners exhibit the sinking fund in the payment of the interest and charges, and the redemption of the principal of the public debt; in the reimbursement of temporary loans, and the absorption of treasury notes; in the payment of commissions and charges to agents in the United States, and in Europe; in the payment of arrearages due to the army, and in discharging the floating debt. Instead of being uniformly confined on a single line of operation, it was active in all situations as temporary circumstances indicated."

If, since the time of Dr Seybert, what is called the Sinking Fund, has been more faithfully applied to the purposes expressed by law, it has been because there has been less necessity for diverting it from its original object.

The balance in the treasury at the commencement of the year 1818, was a little less than 15,000,000 dollars. The receipts from customs during the year were 17,000,000; from the internal and direct taxes, being part of the arrears of the same, upwards of 1,200,000; from the public lands, 2,600,000; from the Bank of the United States upwards of 500,000. The whole revenue fell a little short of 21,600,000, which, with the balance in the treasury, made a sum of nearly 36,000,000 for the service of the year.

During this year a reaction commenced, the serious consequences of which were long felt by many of the people. We can but briefly describe causes and effects which it would require a volume fully to unfold.

The provisions of the charter of the United States Bank were, that its capital should be $35,000,000, of which 7,000,000 should be subscribed by the government and paid in five per cent stock. Of the remaining 28,000,000, which were to be subscribed by individuals, three-fourths were made payable in government securities.

The act was passed in April 1816, when the government securities were at a discount in the market. By creating a new use for these evidences of the public debt, it gave them a new value, and about the time the bank of the United States went into operation, the public stocks rose to par.

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The next grand operation of the treasury department, was to exchange part of the balance of 22,000,000 of the "unconvertible" notes of the state banks, for evidences of the public debt. six months after the bank opened its doors, says a writer whom we have already quoted, "the secretary of the treasury, by the magic of the fabled finger of Midas, transformed the paper deposits of the treasury into gold and silver, and redeemed from the bank 13,000,000 dollars of the funded debt, part of its capital."

The object of government in instituting the bank, was to relieve the treasury: but it hardly needs be

mentioned that the object of private men in accepting charters is their own pecuniary benefit. If no means could have been found of investing what had been given by the government in exchange for the public stocks, the net revenue of the bank would have been diminished 780,000 dollars per annum. It was natural for the directors to try to devise means to prevent the curtailment of profits, and the easy means of increasing the amount of loans to individuals as naturally suggested itself.

By the 26th of February 1818, the amount of bills discounted by the bank exceeded $42,000,000. In July of the previous year, it appears to have been less than 4,000,000. So great and so sudden an increase, was more than the commerce of the country could bear. In fact, though the business of the local banks had been considerably reduced by July 1817, there were still so many evidences of debt, of every kind, public and private, in circulation, that nothing but a voluntary surrender on the part of the directors and stockholders of one half or of three fourths of their expected profits, could have restored business to the state in which it was before the war began. It was not to make sacrifices of their own property in order to relieve the treasury department that they had subscribed to the bank established by congress: but to make profit for themselves; and they acted as is natural for men to act who adventure in banking operations.

For some time the policy of increasing the amount of loans to individuals, was such as to give every encouragement to proceed in it. In September 1817, the shares of the bank were sold at 56 per cent advance: and the apparent prosperity of the country was as great, or nearly as great, as in the remarkable year 1816. In February 1818, bank shares were at 46 per cent advance, being 10 per cent lower than in the preceding September, and other indications of a reaction were observable. By the 20th of July, the pressure on the bank was such, that the directors found it necessary to order a reduction of discounts to the amount of 5,000,000. In October, an additional reduction of 2,000,000 was ordered to be made. But these measures had not the effect anticipated. On the 1st of February 1819, serious apprehensions were entertained that the bank would be obliged to suspend specie payments, and these apprehensions were not entirely removed before the 7th of May. The bank was then considered out of danger: but, through the course which business took, the amount loaned on private security was further reduced. From Febuary 21st 1818 to December 31st 1819, the reduction of the amount of loans on private security, exceeded 12,000,000 dollars: or, was nearly equal to the amount of the public debt, forming part of the capital of the bank, which the secretary of the treasury redeemed in six months after the bank commenced operations.

Mr. Crawford, writing in 1819, said, "few instances are on record of sufferings so deep and extensive as those which have overspread the United States." The particulars of the sufferings he alludes to, would belong to a history of banking rather than to a history of finances. We can treat of

them here, so far only as they were connected with the immediate operations of government. Suffice it to state, that it was not till 1820-21, that business was brought in the middle states into the condition in which it was before the war; and that the confusion in the western, and in some parts of the southern states, was not over till 1825, or 1826.

It is not unusual to ascribe these sufferings to errors in the early administration of the Bank of the United States, in connexion with the operations of the local banks in the same period, and in previous years. But this is giving only the instrumental cause. The efficient cause is to be found in the financial policy of 1812-14-that policy which led us to attempt to carry on a war with the most powerful nation on the globe, on a revenue of twelve million dollars. Our expenditures in time of peace were eight millions, including the interest on the national debt, and with the remaining four millions we sought to defray the expense of fleets and armies. The only way in which so inconsiderable a disposable revenue could be made to serve the purposes intended, was by borrowing bank-notes and bank credit, by creating a double debt; a debt, in the first place, from the government to the banks, or the borrowers from the banks; and, in the second place, a debt from the banks to the people to whom government transferred the bank notes and bank credits. To supply the exigences of the government, and to increase their own profits, the banks issued more notes than they could redeem; and that the system should continue, it was necessary that the banks should not press the government for payment, nor the people press the banks.

The accounts which have been published of the exports of specie in the year after the war, show that the banks in the principal sea ports had the power to resume their regular course of business on the return of peace. Bank paper being in no small degree indebted for its circulating quality to the fact of its being receivable in payment of dues to government, an order to the collectors of public moneys not to receive any notes except such as could on demand be exchanged for specie, would, in one month, have overcome the reluctance of the principal institutions to resume specie payments, and the others would gradually have imitated their example. As government had, previous to the close of the war felt the inconvenience of a diversified currency, its neglect to apply so simple and so obvious a remedy, can be ascribed only to its fiscal embarrassments. Institutions which are founded for private profit, must always be expected to take advantage of so many opportunities for acquiring gain, as the policy of government will allow, or its necessities compel it to afford. They pay for their privileges, and the courts of law have, we believe, decided that charters are always to be construed in the manner most favourable to the grantees. The government's receiving "inconvertible" paper, in payment of duties, was quite as efficient a sanction of the continued suspension of specie payments, as could have been afforded by an act of Congress passed expressly with that in

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tent: and it ought to excite no surprise, that, when the practical sanction of the supreme authority was given to the use of "inconvertible" paper, the banks should greatly increase their issues. Nor did they alone profit by the "plentifulness of money.' To this cause we must attribute the net revenue of eighty millions for the years 1816 and 1817. The "inconvertibility" of the immense balances in the treasury at the end of the years 1815, 16, and 17, did, indeed, render it difficult to satisfy the public creditors in those parts of the country where specie only would be received, but, without "inconvertible paper, it would not have been easy to satisfy the public creditors in any part of the country. It was through the depreciation of the currency in the years subsequent to the war, that the government was so soon able to discharge between twenty and thirty millions of debt.

Those peculiarities in the constitution of the United States Bank, which rendered its operations less beneficial than were expected, are also to be ascribed to the embarrassments of government. It was that a large amount of government stock might be absorbed, that an institution was established with so large a capital as thirty-five millions, when there was hardly room for a bank with a capital of five millions. The charter was, as has already been observed, granted in April 1816, when government securities were below par. By converting a large portion of them into bank stock, the outstanding debt was funded on more favourable terms than would otherwise have been practicable: but by creating a bank with so large a capital, a necessity was imposed of doing a very great business, or else of making dividends much below the usual rate.

Much has been said of the manner in which the payment of the second and third instalments of the subscription was effected; but if the members of Congress did not know that the usual way of paying all instalments after the first, is by discounting the stock notes of the subscribers, they had not much acquaintance with either the theory or the history of banking. It was not, surely, to be expected, that men who associated with the professed design of making profit for themselves, and who paid a heavy bonus for their privileges, should depart from established usage, and trammel themselves with restrictions which the legislature had, either through policy or oversight, failed to im pose.

Banks being the creatures of government, if there are any faults in their constitution, the blame must be laid on the supreme authority.

A bank with a capital of about two millions in specie, twenty-one millions in evidences of public debt, and twelve millions in evidences of private debt, or stock-notes of the subscribers, was expected to perform what could have been effected only by a bank having a capital of thirty-five millions in specie, all paid in on the day on which it commenced operations. So unreasonable an expectation must necessarily have been disappointed: but, notwithstanding the manner in which the bank was constituted, the reaction which began in 1818

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