four of the deposit banks were obliged to suspend specie payments. The Dry-Dock Bank, one of the government deposit banks, showed cash resources of $15,000 and outstanding loans of $313,000. Throughout the Union most of the banks ceased to redeem their notes in specie over their counters; and two failures of crops, one in 1835, and again in 1837, greatly reduced the recuperative power of the country. In a few weeks, in New York alone, the value of real estate and stocks declined at least $100,000,000. Amid this excitement and distress the third instalment was called from the banks, on July 1, 1837. About four out of nine millions of this call was received at the time, and then, later, the loss to the government from insolvent banks seems to have been only about fifty thousand dollars.

Out of a treasury balance of $46,000,000, on January 1, 1837, only $28,000,000 was turned over to the states, but the balance of $18,000,000 disappeared in the expenses of the government, so that, in October, Congress, summoned in special session, was obliged to suspend the call for the fourth instalment and to authorize the temporary issue of treasury notes; and in the next six years $47,000,000 of such notes were put forth to tide over temporary stringencies. In 1841 a bonded debt was authorized, and from that day to the present the United States has always had a public debt. In every year between 1837 and 1843, with the one exception of 1839, there was a deficit. The sale of the public

lands fell from 20,000,000 acres, in 1836, to 3,500,000 in 1838. Imports shrank in two years from $190,000,000 to $113,000,000, with a corresponding diminution of the customs duties to less than half their previous figure.'

The treasury notes were simply a palliative. What could the federal government do to relieve the community in this serious crisis? Van Buren summoned Congress in special session, September 4, 1837, and the powerful Democratic party found itself in a majority of only three for the choice of James K. Polk as speaker. Van Buren reported not only a deficit in the treasury, but serious embarrassment in some of the deposit banks and the suspension of others; and he suggested vaguely a scheme for replacing public funds in the state banks by "the establishment by law at a few important points of offices for the deposit and disbursement of . . . portions of the public revenue." He not only criticised the state banks, but he inveighed against their notes, and insisted that the country ought to have a specie currency.

Whether sound or unsound, these measures could not arrest the panic, which, after six months of terrible distress, in which a large part of all the firms that had been in business suspended payment, gradually spent its force. Notwithstanding the immense losses of 1837, the greater part of the

1 Dewey, Financial Hist. of the U. S., §§ 99–105.
Richardson, Messages and Papers, III., 336.

banks resumed, the number actually increased by more than one hundred and the bank capital by $27,000,000, while the loans were somewhat reduced. In August, 1838, specie payments were resumed by all the banks, the United States Bank of Pennsylvania being the last. In the state elections of 1838 the Democrats were in general more successful, but in the congressional elections the Whigs and Democrats were about evenly balanced.

Van Buren's plan of relief, which came to be called the Independent Treasury or the Sub-Treasury, was first suggested in 1834,' and it met the immediate danger of loss to the government by the failure of banks, and prevented speculation in money derived from government deposits. It was, furthermore, a party measure intended to prevent a return to the national bank, to which Van Buren was absolutely opposed. A bill embodying the suggestion was presented to Congress in 1837, debated for several weeks, passed by the Senate, but failed in the House; the Whigs, under the leadership of both Webster and Clay, uniting upon a revival of the United States Bank. The Democratic party was itself divided upon the currency question; the "LocoFocos," or hard-money branch, supporting the president, the "conservative" Democratic leaders uniting with the Whigs. The Whigs took advantage of this split in 1838 to elect as governor of New York the brilliant young statesman William H. Seward.

1 Debates of Congress, 23 Cong., 1 Sess., 4640.

The need of a new system was emphasized by a second crash in 1839, memorable for its effect on the United States Bank, which had financed certain unfavorable cotton speculations. October 10, 1839, the bank suspended payments; drafts on Paris to the amount of several million francs were protested; the stock fell sixteen per cent. in a day, and eventually the whole capital of $35,000,000 was a total loss. The crisis of 1839 was, however, rather a bank than a commercial panic, and the country speedily revived.

When the new Congress met in 1839 it was found that there were two sets of returns from the state of New Jersey; if the certificate of the Whig governor was accepted, a Whig speaker would be elected; and if the Democratic candidate were seated, the Democrats would control the House. The clerk of the previous House refused to insert the names of either delegation, and also refused to put any motions until the House had accepted that decision. After four days' tumult, John Quincy Adams suggested a way out of the imbroglio, and when the cry was raised, "Who will put the question?" replied, "I intend to put the question myself." The final result was that the Democratic contestants were seated, and that Hunter, a Whig, who favored the Independent Treasury, was elected speaker.1

This organization made it possible to pass the Independent Treasury bill, and thus to fulfil the

1 Follett, Speaker of the House, 52.

promise that the Democratic administration would do something to relieve the country. The president backed the project up with long and patient messages in which he again urged that nothing but specie be received and paid in public transactions. After long debates, July 4, 1840, an act was secured under which the treasurer of the United States was directed to "keep all the public monies which shall come to his hands in the Treasury of the United States"; in addition to which the mints and some of the custom-houses were also made places of local deposit. A hard-money clause was included, to take gradual effect, so that until 1843 part of the government payments could be made in bank-notes. After three years of controversy the Independent Treasury was at last realized.1

Nevertheless, the state of the government finances made a profound impression upon the people. The total revenues in 1840 were $19,000,000, as against $51,000,000 in 1836, while the expenditures were only $6,000,000 less than in that year; and when the compromise tariff should take full effect in 1842, the income would be further diminished. The general sensation of poverty was reflected in a series of startling repudiations of their debts by the states. The amount of those debts has already been stated as about $170,000,000; but six states for a time. ceased to pay interest on their debts, and three states made no further provision either for interest or 1 Kinley, Hist. of Independent Treasury, chap. ii.