government could be furnished separately, without discount, to the mutual advantage of the government and the community? Why, let me ask, should the government be exposed to such difficulties as the present, by mingling its credit with the banks, when it could be exempt from all such by using, by itself, its own safer credit? It is time the community, which has so deep an interest in a sound and cheap currency, and the equality of the laws between one portion of the citizens of the country and another, should reflect seriously on these things, not for the purpose of oppressing any interest, but to correct gradually disorders of a dangerous character, which have insensibly, in the long course of years, without being perceived by any one, crept into the state. The question is not between credit and no credit, as some would have us believe, but in what form credit can best perform the functions of a sound and safe currency. On this important point I have freely thrown out my ideas, leaving it to this body and the public to determine what they are worth. Believing that there might be a sound and safe paper currency founded on the credit of the government exclusively, I was desirous that those who are responsible, and have the power, should have availed themselves of the opportunity of the temporary deficit of the treasury, and the postponement of the fourth instalment, intended to be deposited with the states, to use them as the means of affording a circulation for the present relief of the country and the banks, during the process of separating them from the government; and, if experience should justify it, of furnishing a permanent and safe circulation, which would greatly facilitate the operations of the treasury, and afford, incidentally, much facility to the commercial operations of the country. But a different direction was given, and when the alternative was presented of a loan, or the withholding of the fourth instalment from the states, I did not hesitate to give a decided vote for withholding it. My aversion to a public debt is deep and durable. It is, in my opinion, pernicious, and is little short of a fraud on the public. I saw too much of it during the late war not to understand something of the nature and character of public loans. Never was a country more egregiously imposed on.

Having now presented my views of the course and the measures which the permanent policy of the country, looking to its liberty and lasting prosperity, requires, I come finally to the question of relief. I have placed this last, not that I am devoid of sympathy for the country in the pecuniary distress which now pervades it. No one struggled earlier or longer to prevent it than myself; nor can any one more sensibly feel the wide-spread blight which has suddenly blasted the hopes of so many, and precipitated thousands from affluence to poverty. The desolation has fallen mainly on the mercantile class-a class which I have ever held in the highest estimation. No country ever had a superior body of merchants, of higher honour, of more daring enterprise, or of greater skill and energy. The ruin of such a class is a heavy calamity, and I am solicitous, among other things, to give such stability to our currency as to prevent the recurrence of a similar calamity hereafter. But it was first necessary, in the order of things, that we should determine what sound policy, looking to the future, demands to be done at the present juncture, before we consider the question of relief; which, as urgent as it may be, is subordinate, and must yield to the former. The patient lies under a dangerous disease, with a burning thirst and other symptoms, which distress him more than the vital organs which are attacked. The skilful physician first makes himself master of the nature of the disease, and then determines on the treatment necessary for the restoration of health. This done, he next alleviates the distressing symptoms as far as is consistent with the restoration of health, and no farther. Such shall be my course. As far as I possibly can, consistently with the views I entertain, and what I believe to be necessary to restore the body politic to health, I will do everything in my power to mitigate the present distress. Farther I cannot go. After the best reflection, I am of opinion that the government can do but litМм

tle in the way of relief; and that it is a case which must be mainly left to the constitution of the patient, who, thank God, is young, vigorous, and robust, with a constitution sufficient to sustain and overcome the severest attack. I dread the doctor and his drugs much more than the disease itself. The distress of the country consists in its indebtedness, and can only be relieved by payment of its debts. To effect this, industry, frugality, economy, and time are necessary. I rely more on the growing crop-on the cotton, rice, and tobacco of the South, than on all the projects or devices of politicians. I am utterly opposed to all coercion by this government. But government may do something to relieve the distress. It is out of debt, and is one of the principal creditors both of the banks and of the merchants, and should set an example of liberal indulgence. This I am willing to give freely. I am also prepared to vote freely the use of government credit in some safe form, to supply any deficit in the circulation, during the process of recovery, as far as its financial wants will permit. I see not what more can be safely done. But my vision may be obtuse upon this subject. Those who differ from me, and who profess so much sympathy for the public, seem to think that much relief may be afforded. I hope they will present their views. I am anxious to hear their prescriptions, and I assure them, that whatever they may propose, if it shall promise relief, and be not inconsistent with the course which I deem absolutely necessary for the restoration of the country to perfect health, shall cheerfully receive my support. They may be more keensighted than I am as to the best means of relief, but cannot have a stronger disposition to afford it.

We have, Mr. President, arrived at a remarkable era in our political history. The days of legislative and executive encroachments, of tariffs and surpluses, of bank and public debt, and extravagant expenditure, are past for the present. The government stands in a position disentangled from the past, and freer to choose its future course than it ever has been since its commencement. We are about to take a fresh start. I move off under the State Rights banner, and go in the direction in which I have been so long moving. I seize the opportunity thoroughly to reform the government; to bring it back to its original principles; to retrench and economize, and rigidly to enforce accountability. I shall oppose strenuously all attempts to originate a new debt; to create a National Bank; to reunite the political and money powers (more dangerous than Church and State) in any form or shape; to prevent the operation of the compromise, which is gradually removing the last vestige of the tariff system; and, mainly, I shall use my best efforts to give an ascendency to the great conservative principle of state sovereignty, over the dangerous and despotic doctrine of consolidation. I rejoice to think that the executive department of the government is now so reduced in power and means, that it can no longer rely on its influence and patronage to secure a majority. Henceforward it can have no hope of supporting itself but on wisdom, moderation, patriotism, and devoted attachment to the Constitution, which, I trust, will make it, in its own defence, an ally in effecting the reform which I deem indispensable to the salvation of the country and its institutions.

I look, sir, with pride to the wise and noble bearing of the little State Rights party, of which it is my pride to be a member, throughout the eventful period through which the country has passed since 1824. Experience already bears testimony to their patriotism, firmness, and sagacity, and history will do it justice. In that year, as I have stated, the tariff system triumphed in the councils of the nation. We saw its disastrous political bearings-foresaw its surpluses, and the extravagances to which it would lead-we rallied on the election of the late President to arrest it through the influence of the executive department of the government. In this we failed. We then fell back upon the rights and sovereignty of the states; and by the action of a small, but gallant state, and through the potency of its interposition, we brought the system to the ground,

sustained as it was by the opposition and the administration, and by the whole power and patronage of the government. The pernicious overflow of the treasury, of which it was the parent, could not be arrested at once. The surplus was seized on by the executive, and, by its control over the banks, became the fruitful source of executive influence and encroachment. Without hesitation, we joined our old opponents on the tariff question, but under our own flag, and without merging in their ranks, and made a gallant and successful war against the encroachments of the executive. That terminated, we part with our late allies in peace, and move forward, lag or onward who may, to secure the fruits of our long, but successful struggle, under the old Republican flag of '98, which, though tattered and torn, has never yet been lowered, and, with the blessing of God, never shall be with my consent.

XIX.

SPEECH ON HIS AMENDMENT TO SEPARATE THE GOVERNMENT FROM THE BANKS, OCTOBER 3, 1837.

Mr. PRESIDENT: In reviewing this discussion, I have been struck with the fact, that the argument on the opposite side has been limited, almost exclusively, to the questions of relief and the currency. These are, undoubtedly, important questions, and well deserving the deliberate consideration of the Senate; but there are other questions involved in this issue of a far more elevated character, which more imperiously demand our attention. The banks have ceased to be mere moneyed incorporations. They have become great political institutions, with vast influence over the welfare of the community; so much so, that a highly distinguished senator (Mr. Clay) has declared, in his place, that the question of the disunion of the government and the banks involved in its consequences the disunion of the states themselves. With this declaration sounding in our ears, it is time to look into the origin of a system which has already acquired such mighty influence; to inquire into the causes which have produced it, and whether they are still on the increase; in what they will terminate, if left to themselves; and, finally, whether the system is favourable to the permanency of our free institutions; to the industry and business of the country; and, above all, to the moral and intellectual development of the community. I feel the vast importance and magnitude of these topics, as well as their great delicacy. I shall touch them with extreme reluctance, and only because I believe them to belong to the occasion, and that it would be a dereliction of public duty to withhold any opinion, which I have deliberately formed, on the subject under discussion.

The rise and progress of the banking system is one of the most remarkable and curious phenomena of modern times. Its origin is modern and humble, and gave no indication of the extraordinary growth and influence which it was destined to attain. It dates back to 1609, the year that the Bank of Amsterdam was established. Other banking institutions preceded it; but they were insulated, and not immediately connected with the systems which have since sprung up, and which may be distinctly traced to that bank, which was a bank of deposite -a mere storehouse-established under the authority of that great commercial metropolis, for the purpose of safe-keeping the precious metals, and facilitating the vast system of exchanges which then centred there. The whole system was the most simple and beautiful that can be imagined. The depositor, on delivering his bullion or coin in store, received a credit, estimated at the standard value on the books of the bank, and a certificate of deposite for the amount, which was transferable from hand to hand, and entitled the holder to

withdraw the deposite on payment of a moderate fee for the expense and hazard of safe-keeping. These certificates became, in fact, the circulating medium of the community, performing, as it were, the hazard and drudgery, while the precious metals, which they, in truth, represented, guilder for guilder, lay quietly in store, without being exposed to the wear and tear, or losses incidental to actual use. It was thus a paper currency was created, having all the solidity, safety, and uniformity of a metallic, with the facility belonging to that of paper. The whole arrangement was admirable, and worthy of the strong sense and downright honesty of the people with whom it originated.

Out of this, which may be called the first era of the system, grew the bank of deposite, discount, and circulation-a great and mighty change, destined to ef fect a revolution in the condition of modern society. It is not difficult to explain how the one system should spring from the other, notwithstanding the striking dissimilarity in features and character between the offspring and the parent. A vast sum, not less than three millions sterling, accumulated and remained habitually in deposite in the Bank of Amsterdam, the place of the returned certifi cates being constantly supplied by new depositors. With so vast a standing deposite, it required but little reflection to perceive that a very large portion of it might be withdrawn, and that a sufficient amount would be still left to meet the returning certificates; or, what would be the same in effect, that an equal amount of fictitious certificates might be issued beyond the sum actually deposited. Either process, if interest be charged on the deposites withdrawn, or the fictitious certificates issued, would be a near approach to a bank of discount. This once seen, it required but little reflection to perceive that the same process would be equally applicable to a capital placed in bank as stock; and from that the transition was easy to issuing bank-notes payable on demand, on bills of exchange, or promissory notes, having but a short time to run. These, combined, constitute the elements of a bank of discount, deposite, and circulation. Modern ingenuity and dishonesty would not have been long in perceiving and turning such advantages to account; but the faculties of the plain Belgian was either too blunt to perceive, or his honesty too stern to avail himself of them. To his honour, there is reason to believe, notwithstanding the temptation, the deposites were sacredly kept, and that for every certificate in circulation, there was a corresponding amount in bullion or coin in store. It was reserved for another people, either more ingenious or less scrupulous, to make the change. The Bank of England was incorporated in 1694, eighty-five years after that of Amsterdam, and was the first bank of deposite, discount, and circulation. Its capital was £1,200,000, consisting wholly of government stock, bearing an interest of eight per cent. per annum. Its notes were received in the dues of the government, and the public revenue was deposited in the bank. It was authorized to circulate exchequer bills, and make loans to government. Let us pause for a moment, and contemplate this complex and potent machine, under its various character and functions.

As a bank of deposite, it was authorized to receive deposites, not simply for safe-keeping, to be returned when demanded by the depositor, but to be used and loaned out for the benefit of the institution, care being taken always to be provided with the means of returning an equal amount, when demanded. As a bank of discount and circulation, it issued its notes on the faith of its capital stock and deposites, or discounted bills of exchange and promissory notes backed by responsible endorsers, charging an interest something greater than was authorized by law to be charged on loans; and thus allowing it, for the use of its credit, a higher rate of compensation than what individuals were authorized to receive for the use and hazard of money or capital loaned out. It will, perhaps, place this point in a clear light, if we should consider the transaction in its true character, not as a loan, but as a mere exchange of credit. In discounting, the bank takes, in the shape of a promissory note, the credit of an indi

vidual so good that another, equally responsible, endorses his note for nothing, and gives out its credit in the form of a bank-note. The transaction is obviously a mere exchange of credit. If the drawer and endorser break, the loss is the Bank's; but if the Bank breaks, the loss falls on the community; and yet this transaction, so dissimilar, is confounded with a loan, and the bank permitted to charge, on a mere exchange of credit, in which the hazard of the breaking of the drawer and endorser is incurred by the Bank, and that of the Bank by the community, a higher sum than the legal rate of interest on a loan"; in which, besides the use of his capital, the hazard is all on the side of the lender.

Turning from these to the advantages which it derived from its connexion with the government, we shall find them not less striking. Among the first of these in importance is the fact of its notes being received in the dues of the government, by which the credit of the government was added to that of the Bank, which added so greatly to the increase of its circulation. These, again, when collected by the government, were placed in deposite in the Bank; thus giving to it not only the profit resulting from their abstraction from circulation, from the time of collection till disbursement, but also that from the use of the public deposites in the interval. To complete the picture, the Bank, in its capacity of lender to the government, in fact paid its own notes, which rested on the faith of the government stock, on which it was drawing eight per cent.; so that, in truth, it but loaned to the government its own credit.

Such were the extraordinary advantages conferred on this institution, and of which it had an exclusive monopoly; and these are the causes which gave such an extraordinary impulse to its growth and influence, that it increased in a little more than a hundred years-from 1694, when the second era of the system commenced, with the establishment of the Bank of England, to 1797, when it terminated-from £1,200,000 to nearly £11,000,000, and this mainly by the addition to its capital through loans to the government above the profits of its annual dividends. Before entering on the third era of the system, I pause to make a few reflections on the second.

I am struck, in casting my eyes over it, to find that, notwithstanding the great dissimilarity of features which the system had assumed in passing from a mere bank of deposite to that of deposite, discount, and circulation, the operation of the latter was confounded, throughout this long period, as it regards the effects on the currency, with the bank of deposite. Its notes were universally regarded as representing gold and silver, and as depending on that representation exclusively for their circulation; as much so as did the certificates of deposite in the original Bank of Amsterdam. No one supposed that they could retain their credit for a moment after they ceased to be convertible into the metals on demand; nor were they supposed to have the effect of increasing the aggregate amount of the currency; nor, of course, of increasing prices. In a word, they were in the public mind as completely identified with the metallic currency as if every note in circulation had laid up in the vaults of the Bank an equal amount, pound for pound, into which all its paper could be converted the moment it was presented.

All this was a great delusion. The issues of the Bank never did represent, from the first, the precious metals. Instead of the representatives, its notes were, in reality, the substitute for coin. Instead of being the mere drudges, performing all the out-door service, while the coins reposed at their ease in the vaults of the banks, free from wear and tear, and the hazard of loss or destruction, as did the certificates of deposite in the original Bank of Amsterdam, they substituted, degraded, and banished the coins. Every note circulated became the substitute of so much coin, and dispensed with it in circulation, and thereby depreciated the value of the precious metals, and increased their consumption in the same proportion; while it diminished in the same degree the supply, by