THE CONSTITUTIONAL TREASURY.

THE question of the currency is one of the most important, the most difficult, that can claim the action of government or the attention of the people.

Without a good system of currency, enterprise loses its inducements, business becomes confused, and industry fails to receive its just reward.

In the currency of a country every man's interest is involved, and as it is regulated by government, as a question it is frequently made an engine of political influence. Its peculiar power is well understood by politicians. If times are prosperous, credit is given to the government for judicious management, even though government has done nothing to make If times are adverse or disastrous, then the government is made responsible for the folly of the people, or their institutions; and many are ready to unite in opposition to all its measures, though the subject of the currency may not be involved in any one of them.

them so.

A good system may be badly managed, or a bad system may be well managed, and both appear equally successful. A good system may be perverted, or subjected to extraneous influences. It becomes, therefore, a matter of great importance that a system should be as free as possible from all these contingent relations. That it should be independent in its operations of those circumstances of interest, excess of transaction, or adverse results of trade, of which this country has no

occasion to be advised. That its safeguards should be within itself, standing as a whole, in relation to the people.

As yet such a system has not been reached. The different States have different banking systems, and with what success they have managed their affairs may be inferred from the fact that in fifty years. from 1789 to 1841-395 banks failed, involving a total loss to the country of nearly $400,000,000.*

These systems in the different States have diversity of merit; but the greatest source of difficulty in all failures of banks, has been found to be in their mismanagement. There is one feature, however, which is common to them all. They admit a specie basis of silver and gold. This, then, is the only true standard known to, or that can be recognized by, our general government.

It is true, at one period there was an United States Bank, an institution which appeared to accommodate the whole country. It was chartered, however, with no peculiar provisions not adopted by the State banks. It had a large capital, and it had its branches. Its basis, and its mode of doing business were nearly the same as those of the State institutions. It was

* In 1841, the secretary of the treasury, the Hon. Levi Woodbury, made an able report on "the losses by the general government, and by the people of the United States, from the use of banks and bank paper," from which we take the following

SUMMARY.

Losses by bank failures,

Losses by suspension of specie payments by banks;
consequent depreciation on their notes,

Losses by destruction of bank notes by accident,
Losses by counterfeit bank notes, beyond losses by coin,
Losses by fluctuations in bank currency affecting prices,
extravagance in living, sacrifices of property, and by
only a part of the other incidents to the banking sys-
tem, not computed above, at least,

Aggregate, computed,

$108,882,721

95,000,000

7,121,332 4,444,444

150,000,000

$365,451,497

exposed to the same errors, to the same dangers, to the same temptations. It had no vital conservative principle of its own. It was in the hands of men to be managed for safety and for interest. These two conditions are not always compatible with each other. The conditions of safety may not always conduce to our interests, and it is certain that our supposed interests do not always lead to safety. The system of discount is a system of credit. It is the assumption of risk, for an interest, and therefore subject to the contingencies of trade. It is more than this; the prevailing system of discount is a powerful stimulant to trade, and perhaps to this source more than to any other, are attributable the great evils of over-trading and speculation of the present day. The trader is induced to sell on credit, and to obtain discounts on all his transactions. In this way he makes a large capital out of his sales, although his real capital may be a small one. He trusts a customer a certain amount for a commission, and on a certain term of time, but he instantly parts with the bill of his customer to a bank, and pays interest, realizing ready money for a new transaction. This, often repeated, is called "good business." The debts are transferred to the banks, and they become parties to the sales and risks, for interest.

The objection to this system of discount is, that it tempts men to speculate beyond their means. What tempts one, tempts all; and the aggregate of transactions soon exceeds the capacity of the currency of the country, and failures become inevitable. If it were required that every man should give direct security for loans, as such, and if every trader who gave credit were required to wait for payments from his customers, business would become more permanent. Sales would be less, but profits would be more. Risks would be lessened, and failures could seldom happen.

But this is not the present condition of things. The banks are involved in the business of the country. They are subject not only to the disasters of mismanagement, but to the frauds, errors, and follies of the whole trading and speculating com

munity. They part with a portion of their power of self-protection whenever they assume a risk. They may exercise their best judgment, their nicest prudence, but neither good judgment or prudence will prevent the errors of others.

At one time, there was no man in the country more respected for his sound judgment and financial skill, than Nicholas Biddle, president of the United States Bank, chartered by the State of Pennsylvania. That he had as much ability to manage a bank well, as any other man, we have no doubt. His operations were great, because his means were great; and though similar mistakes in less degree had been committed by others, thousands of times, his errors were called great errors because connected with great sums. He was made to believe that he possessed more power than he really did possess; and it is easy to see, that after this step was gained, it led to another and a more fatal one. He was asked to give more aid than he was able to give. Others were made to believe that he had the power, and he adopted the error, and attempted to execute financial impossibilities. In the end, he alone was unjustly held responsible. The results are before the world. The bank committed its errors, and lost its power. It failed. The government of the bank, doubtless, had its share of error in its operations; but the actual causes of its failure were with those who subjected the institution to transactions that were inevitably ruinous in their nature. It is true, the bank had the power to negative a proposition, but it must be remembered that even this is often mastered by superior influence, or superior interests. This bank differed from other banks only in the extent of its capital. It was no safer because it was large. If it had more means it was subjected to more risks, and in no way was it exempted from the penalties of error, fraud, or mismanagement.

It was an extraordinary foresight in President Jackson, that the former Bank of the United States, by his firmness and influence, failed to obtain a renewal of its charter. But for his firmness and unexampled integrity it would have been

continued, perhaps, even to this day. He saw in it elements not warranted by the Constitution, and such as were dangerous to the best interests of the country. It was liable to great abuses; it became the agent of political power, and in the end it even attempted to master the government itself. Its friends were indignant at its fall, but that indignation gave way to calm reflection, and, after a ruinous experiment to establish a similar one under a State charter, they have become persuaded that the people can prosper in the absence of a United States Bank.

When the charter of this bank expired, our government was compelled to rely upon the State banks as places of deposit of the public funds. This was a necessity rather than a choice. The consequences were bad for government and fatal to some of the banks. It could not well be otherwise, in the nature of things. New transactions, risks, and temptations were multiplied beyond the wants of the communities in which the bunks were located, and losses followed. The experiment furnished another striking example, tending to prove that the government ought not to rely for the safety of its funds upon banks.

It soon became a leading question with government, what system should be adopted for the collection, disbursement, and safe keeping of the public moneys.

In 1840, a sub-treasury was established, but it was repealed by the whigs in 1841.

The present constitutional treasury was established in 1846, and it commenced its operations in January, 1847.

It takes the standard of all the banks, and receives and pays nothing but specie.* It is made strictly the agent of the gov

* "If Congress were to pass forty statutes on the subject," said Mr. Webster, in 1816, "they could not make the law more imperative than it now is, that nothing should be received in payment of duties to the government but specie. The whole strength of the government, I am of opinion, should be put forth to compel the payment of the duties and taxes to the government in the legal currency of the country."