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The History, Organization and Influence of the Independent Treasury of the United States, by David Kinley

1893; Oxford University Press; Volume: 8; Issue: 4 Linguagem: Inglês

10.2307/2140117

1538-165X

Horace White,

Fiscal Policies and Political Economy

FEW questions, unless we except that of the tariff, played so prominent a part in national politics down as late as 1840, as did that of a national bank.Its constitutionality and its expediency, its advantages and its dangers, its strength and its weakness as a government resource, were debated and re-debated, painted in dark and in light, looked at from every standpoint, held up for praise and ridicule, with a violence of partisan feeling that entered into but few others of the discussions which determined measures that were to be worked into our political life.It was a question on which parties lost and won ; a question on which great statesmen changed their opinions, and parties shifted their ground ; on which there was a flux and reflux of public opinion and governmental policy, until it was settled at last, nearly half a century ago, more as a party issue than as a question of scientific economics ; a vindication of party strength, and a necessary outcome of the drift of practical politics rather than a triumph of economic and financial truth over fallacy, or the consensus of concerted and convinced opinion as to the merits of the question." He was made Secretary of the Treasury ; and how he fulfilled the duties of such a place, at such a time, the whole country perceived with delight, and the whole world saw with admiration.He smote the rock of national resources, and abundant streams of revenue gushed forth.He touched the dead corpse of the public credit, and it sprung upon its feet."The question of rechartering the bank came up in Con- gress in 18 10, and was supported by Secretary Gallatin.The lateness of the session, however, prevented any action until the next year, when the application for a recharter was renewed.Despite the fact that " this bank, so far as we can judge from the information we have in regard to it, was soberly managed, successful, and beneficial in restraining the issues of the smaller banks," x the bill was lost under pressure from the eighty-eight State banks then in existence, fjut the sad experience of the four succeeding years taught its opponents that whatever demerits characterized the plan they had defeated, yet these were far exceeded by those of the system that replaced it.The government money had been intrusted to the State banks because, after the lapse of life of the national bank, there was no other place of deposit.By the act establishing the department of the treasury, the United States Treasury had a legal, not a substantial, existence.The use of the State, or local, banks became, then, a necessity.But they be- trayed their trust ; or, at least, they failed in the strain to which they were subjected in the trying times of the war of 181 2.In the fall of 1814 all of the banks south of New England suspended specie payments.Nearly one hundred of them had been fiduciaries of the government, and carried down with them about nine million dollars of 1 Sumner's " History of American Currency,'' p. 63. 4 THE INDEPENDENT TREASURY.its funds.The government, in order to meet its expenses, contracted loans which were placed at between eighty and ninety, and paid for in bank notes depreciated from ten to twenty per cent.The lesson was heeded, and when appli- cation was made for a charter for a second United States bank, the request met but little opposition.Even Henry Clay, who in 1811 had opposed a bank, gave the measure his support now, although he afterwards explained 1 that he did so, not because he believed in it as a good thing, but only as necessary under the conditions then existing.Accordingly, on the 10th of April, 18 16, the bank act was passed.It is interesting to notice that Madison ap- proved and signed the bill, though in 1791 he had parted political company with Hamilton on an issue identical with this, and had at that time laid down a political dogma of strict construction which his action now violated. 2 The capital was $35,000,000, one-fifth of which was to be subscribed by the government in coin or " stock ; " one- fifth was to be in specie, and the other three-fifths in specie or government stock.The bank was to pay the govern- ment a bonus of $1,500,000; it was to be the depository of the public moneys, and was required to disburse them, free of charge, in any part of the country.Five of the twenty-five directors were to be appointed by the President.The charter was, as before, for twenty years.On the 1st of January, 181 7, the bank opened for business, with the country on the brink of a great monetary crisis, but " too late to prevent the crash which followed."The management of the bank during the first two years of its existence was far from satisfactory.It aggravated the troubles of 1 Benton's " Thirty Years' View," li.ioo. 2 Benton says lie yielded to the authorities without surrendering his con- victions." Thirty Years' View,'" i. 323.In this feeling against the banks, again, experience, whether of our own country or of foreign lands, seems to count for nothing.Evidently, the existence of such a feeling, whether reasonable or not, offers fine scope for party manipulation, of which, as we shall see, the political managers of the " Bank War " were not slow to take advantage.In fact, the spirit of democratic equality and the preju- dice against banks played a large part in the famous polit- ical turmoil that resulted in the overthrow of the second United States Bank, and in the ultimate establishment of our present sub-treasury system.Doubtless it was largely the gratitude of the people for his military services, rather than any realizing sense of his administrative ability in civil affairs, that first placed Andrew Jackson in the presidential chair.It was his success in making his attack on the bank appear as a defence of the interests of the people and government against insidious assaults of the " moneyed power," which, combined with the spirit of hero-worship that exists in- tensely, though spasmodically, in popular governments, raised him to that high honor a second time.It is one of the numerous instances of the determining influence of the " shouting element " in popular politics.For Jack- son's acts during his first term, so far as they related to finance at least, can hardly be dignified by the name of a policy, or find any justification in political science or ex- perience.It is true, indeed, that in the state of affairs which prevailed at the time, his conduct was the best he could have followed for the future interests of the country.For his lack of financial ability would probably have caused disaster if he had attempted a positive, construc- tive, plan of action.It was well, therefore, that he was.IO THE INDEPENDENT TREASURY.content to destroy and leave reconstruction to more skilful hands.And yet the country owes a debt of gratitude to Presi- dent Jackson, because, even although he was swayed by the political circumstances of the period, and by his own intense personal convictions and prejudices, he yet was a veritable bulwark of popular rights against the encroach- ments of the money power which was exerted when the bank degenerated into politics.We may not credit him with a foresight of the evils that probably would have arisen had the single national bank monopoly been per- petuated ; but we may be thankful to him for rendering them impossible by destroying, for whatever reasons, the source whence these evils would have sprung.The events of what is known as the " Bank War " are familiar to all students of American history, so that a detailed account of it is not necessary.1 But it will be well, for our present purpose, to recall its main features, because it was really the first step in the logical sequence of events that led to the establishment of the Independent Treasury.As already said, the ten years following the revulsion of 1819-25 were years of almost unbroken prosperity.The bank management was sound, government credit was excellent, the public debt was rapidly reduced, and the industrial and commercial situation was healthy.The question of the continuance of the bank was not under discussion.In fact, scarcely any mention of the subject 1