Lyman E De Wolf.

Money; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained online

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quote these very wrongs, as an evidence, that state-paper-
moneys are not good, and that the system re-vamped in their
hands, is the only safe remedy for the injuries they have through
it, continued, and will continue to inflict on the people.

That this paper belongs to the bank-robbery gold-base system,
and is in no sense a governmental paper-money, will sufficiently
appear by the following copy of a Continental Half Dollar.

«No. 182 Half-Dollar.

This bill of Half a Dollar shall entitle the bearer hereof to

receive gold or silver, at the rate of four shillings and six-pence

sterling, per dollar, for the said bill, according to the resolution

of the convention of Maryland, held at Annapolis, 14th day of

' August, MDCCLXXVI, 1776."


This was printed on a coarse, thick paper, and is in fact a
bungling form of a coin obligation clumsily executed. Neither
the material upon which it was printed, nor any manner of device
was provided for the prevention of counterfeiting, or against

' The following account from the wi'itings of Thomas Jefferson,
'by H. A. Washington, Vol. IX., p. 246, demonstrates the cor-
rectness of the views here presented, as to the wide-spread
prevalence of the British gold theories, as well as the reason
why the colonists did not attempt to form a paper-money, and
not only so, but it shows in connection with what has been
shown, such a condition of public sentiment, derived from the
British despotism, that it would have been impossible to have
instituted, a just paper-money system.

Mr. Jefferson says, " On the commencement of the late Revo-
lution, Congress had no money. The external commei'ce of the
States being suppressed, the farmer could not sell his produce,
and, of course could not pay a tax. Congress had no resources
then but in paper-money. Not being able to lay a tax for its


redemption, they could only promise that taxes should belaid for
that purpose so as to redeem the bills by a certain day. They
did not foresee the continuance of the war, the almost total sup-
pression of their exports, and other events, which rendered the
performance of their engagement impossible."

If then this does not demonstrate that the continental Con-
gress, although they called this national debt issue, " paper-
money," never had the idea that it was money, or that it could
have been made money, then it would be difficult to find any
language strong enough to convey such an idea. That such a
class of obligations, thus instituted, should have depreciated, is
not at all surprising ; the only surprise about it — considering the
ideas of Legislators and people concerning money, is, that it
should have circulated at all. And especially so, when we fur-
ther reflect upon the fact that the colonies had from time to time
under the influence of these prevailing ideas and previous to the
Revolution, issued large quantities of this same class of paper,
which had never been paid.

How then this continental coin debt, or in other words, how
a promise to pay coin, the country never had, had no means of
obtaining, and never made any provision to obtain, has a tend-
ency to show that a good government paper-money cannot be
instituted is a question under the facts given, we shall not attempt
to argue.

Instead of furnishing any proof against the institution of such
a system, it furnishes the very best evidence in its favor. It
demonstrates, just what the united history of English banking,
for nearly two hundred years teaches, that no corporation or
government are, or can be strong enough, and rich enough, to
institute a money and a business system, based upon gold or
silver, or on a promise to pay in these metals which has been, or
can be able, at all times to fulfill such an obligation or promise.

That the life of such a monstrosity, born of despotism, but on
free soil in a wild and sparsely populated country, should have
been shorter than the struggle for freedom is not strange, and
that it should have *' died without a groan," and as ignobly as
the " wild cat " trash which has succeeded it are continually
doing, will very readily be credited.

We have only deemed it necessary to show what the con-
tinental money was, as a full answer to all the silly arguments
against an " irredeemable paper-money," which has been raised


from that source — having as is believed, accomplished that
object, the subject of banking in the United States as illustrated
by this sketch of colonial history, will be taken up.

The first bank which was instituted in the United States, was
the Bank of North America. This bank, at the instance of
Robert Morris, Superintendent of Finance under the old Con-
gress, was incorporated by an Act of Congress, on the last day,
of the year, 1781, and by the Legislature of Pennsylvania, on
the first of April, following. It was authorized to hold property,
real and personal, to the amount of ten millions of Spanish
silver milled dollars and no more. Its capital, therefore, might
be just what the stockholders thought proper to make within this
limit ; and no restrictions whatever were imposed by law on
the extent of its issues.

The Bank went into operation, January, 178-2, with & sudscribed
capital of $400,000—^254,000 of this sum was taken by Mr.
Morris, in behalf of the General Government, and thus giving
it entire control. But this capital though subscribed, was merely
nominal. Governor Morris, speaking of this subscription, says :
" I subscribed the sum then remaining in the treasury, being
about 254,000 dollars, into the bank stock, per account of the
United States, which became thereby the principal stockholder."

William M. Gouge, in his history, in a note to this statement
says : " It may be made a question whether the whole of the
original capital of the Bank was not advanced by Government."
Thomas Paine says, in one of his tracts, " it is well known, that
the Bank originated in another Bank, called the Bank of Penn-
sylvania, which was formed in the spring of 1780. On the 17th
of June, it was resolved to open a security subscription to the
amount of 300,000 pounds, Pennsylvania currency, in real
money, the subscribers to execute bonds for the amount of their
subscription, and to form a Bank for supplying the army." He
afterwards speaks of these subscriptions being transferred to
the Bank of North America.

" From the Journals of Congress, it appears that the Board of
Treasury was directed to deposit in this Pennsylvania Bond-
Bank," bills of exchange, in favor of the directors thereof, on
the Ministers of the United States in Europe, or any of them,
and in such sums as shall be thought convenient, but not to
exceed in the whole £150,000 sterling.

The Bank probably had $70,000 with which to commence its


proper operations. On this amount, says Gouge, " it undertook
to make advances to the Government and to individuals ; but as
the experience of evils of continental money was fresh in the
minds of the people, some difficulty was encountered in giving
currency to the notes of the Bank. To remove this prejudice,
the gentlqmen who were interested in the institution, were, as we
have learned from undoubted authority, in the practice of
requesting people from the country and laboring men about
town to go to the Bank and get silver in exchange. When, on
this errand of a neighborly kindness, as they thought it, they
found a display of silver on the counter, and men employed in
raising boxes containing silver, or supposed to contain silver,
from the cellar into the banking room, or lowering them from the
banking-room into the cellar. By contrivances like these, the
Bank obtained the reputation of possessing immense wealth, but
its hollowness was several times nearly made apparent; espe-
cially on one occasion, when one of the co-partners withdrew a
deposit of some five, or six thousand dollars, when the whole
specie stock of the Bank did not probably exceed twenty
thousand dollars."

By these means, and the funds of the General Government,
the bank-notes became current. Its early dividends were from
12 to 16 per cent. The stockholders were moderately well
satisfied with this annual income as they had furnished none of
the capital, they thought it would answer, but felt a strong
desire not to extend an opportunity to others to reap such small
legislative advantages. This started the project for a new bank,
to defeat this, an increase of stock was offered, but not without
a long and loud protest against the hardship of being obliged to
receive new partners.

During the year 1V84, the Bank issued paper freely, and in
1785, a great, and the usual bank-scarcity of money followed.
Upon petitions from citizens of Chester and Bucks counties,
setting forth the character of these grievances, the Legislature on
13th September, 1785, repealed the law granting the charter.
This Repealing Act, very possibly may have been the origin, or
at least have given shape to the constitutional provision upon
that class of subjects.

The Bank, however, continued its business under the Act of
Congress. A contest was soon renewed in the Pennsylvania
Legislature for a re-charter, which was at first refused, but


public virtue is not bomb-proof against bank assaults, and in
1787, the Bank with limited powers was re-chartered and has
been continued down to the present time.

Thus banking was instituted in the United States, without any
of the pretended capital, which is described in bank charters,
except on paper, and it has been continued from that day to the
present, without any limitation or restriction other than such as
the bank interest requires. As this pretended capital which the
bank had, was only the money which passed through it, belong-
ing to the United States, it will be i*eadily perceived that bank-
interest and bank-dividends are not the rent or interest paid to
the bank for their capital, but a license granted to them by law,
whereby the public are compelled to pay so much tariff to this
special class for permitting the evidences of value to be a mono-
poly in their hands, and the amount of tariff thus imposed, above
the cost of transacting all the business at high rates, besides
official stealings, are exhibited in the annual dividends. An
annual dividend therefore, of from 12 to 16 per cent., is
under the circumstances very good evidence that banking is
instituted " to make money " without an idea of rendering any
return for such exti*aordinary privileges.

We have thus traced the outlines of the banking and money
theory, tln*ough the Colonial and Revolutionary periods of our
history far enough to show, how deeply England had imbedded
her peculiarly grasping and overreaching system, into the minds
not only of the legislative and financial classes, but that all classes,
were more or less affected with her prevailing gold and silver-
money theories. It has also been shown, that, the moment the
Revolutionary period closed, Robert Morris, who had been the
Financial Superintendent of the continental government, prepared
and obtained an Act for a Bank, without any limit to its paper-
issues — that this Bank without capital, by the aid of the govern-
ment's money, and the divers frauds copied from its P^nglish
prototype, was enabled to wring out of labor as a surplus profit
above all expenses from 12 to 16 per cent, dividends. This was
the promising origin and model design of American banking.
A system which has abstracted from American labor a larger
sum than slaveiy and war both combined. We are now to trace
its connection, and its bearing more particularly upon govern-
and people, under our present National and State constitutions
and governments. ^


An Act to incorporate the first Bank of the United States,
under the Constitution, passed the Senate, on the 20th January,
1791, and the House on the 8th February following, and on the
14th of the same month, it was signed by the President.
This Act was par excellence the model of American banking.
A more careful synopsis therefore, of some of its provisions will
be given, than would otherwise be deemed necessary.

The nominal capital of this bank was ten millions of dollars,
one-fifth part of which was subscribed by the National Govern-
ment ; but the Government having no money to pay, proposed to
borrow it from the Bank — and the Bank having no money to
lend, passed a credit of two millions on its books to the Govern-
ment on which it paid six per cent. The Government, in its
turn, received the dividends on 500 shares of stock, of 400 dol-
lars each at par value.

The residue of the capital, eight millions, subscribed by
individuals was to be paid, three-fourths in six per cent.-stock,
and one-fomth in specie, in four six-monthly instalments of five
•" hundred thousand dollars each. "No more," says Dr. Erich
Bollman, " or little more than the first installment, can ever be
considered as having been received by the Bank actually in hai*d
money. " The capital of the United States Bank, under the
Charter of April 1 0th, 1816, its first renewal, was thirty -five
millions. The Government subscribed seven millions, having no
money the Bank granted it a credit. The twenty-eight millions
of stock were subscribed for by individuals — on each share they
were to pay five dollars in gold or silver coin at the time of sub-
scribing; in six months, ten dollars, at twelve, ten dollars. "At
each of those three periods twenty-four dollars more were to be
paid on each share, either in United States stock, or in gold and
silver coin, at the option of the subscribers."

No more, or very little more than the first instalment of five
dollars on each share was paid in coin. The Directors decided,
that no more was necessary. " It is clear," says one of them,
" that the Bank having commenced business, and put its paper
in circulation, it could not enforce the specie part of the second
and third instalments in new acquisitions of specie. The
Directors acted wisely in discounting the notes ot the stock-
holders, payable in specie, sixty days after date for the payment
of the second instalment."

It is claimed by cyclopediasts, statistical, financial and other


classes of public writers in the bank-interest, that the Congres?
of the United States having experienced great difficulties in
providing requisite means for carrying on the war, were induced
to establish "The Bank of North America," and that this
rendered great aid to the Government, in closing the war.

But William M. Gouge has shown that the capture of
Cornwallis took place on the 9th of October, 1781, which, unless
historians are greatly at fault, strongly presaged an early close
of the war, besides, the Bank did not go into operation until
January Yth, 1782.

1. The whole expenditures in 1782, was only $3,600,000, and
in 1783, $3,000,000, and these amounts were raised by loans in
Europe, and by increased taxation.

2. The testimony of Robert and Governor Morris, shows that
the amount subscribed by individuals to the Bank did not exceed

3. Robert Morris, in the Pennsylvania Legislature, did not
claim that the excess of silver-money advanced by the Bank,
ever exceeded the Government deposits, $165,000, and gen-
erally not $50,000.

So that ihe aid rendered was not very essential. But a care-
ful survey of the facts leads to this conclusion, that the bank or
money-sharks followed the Government. Their exceeding
patriotism did not lead them to invest so permanently in con-
tinental money, as in preying upon the Government, making use
of the misfortunes of the country to gather out of it the material
to institute a National Bank, and afterwards the establishment
of the State Jayhawknig system, which up to our late Revolu-
tion has borne unlimited sway — accordingly it will be found :
"First, that this Bank Charter provided, that its subscribed
capital of $10,000,000, shall be payable, one-fourth in gold and
silver, and three-fourths in that part of the public debt, which
according to the loan proposed, in the fourth and fifteenth
sections of the Act, entitled an Act, making provision for the
debt of the United States, shall bear an accruing interest, at the
time of payment, of six per centum per annum, and shall also be
payable in four equal parts, in the aforesaid ratio of specie to
debt, at the distance of six calendar months from each other;
the first shall be paid at the time of subscription."

Second, that no bank should be established by any future law
of the United States, during the continuance of the corporation


thereby created, and for which the faith of the United States was

The Act was drawn by Alexander Hamilton, the great admirer
and copyist of English despotism. Every advantageous clause
of the English Act was copied, and such additions were made to
it, as would be likely to be useful to the bank-owners, or could
be rendered available in gathering into their hands the fruits of
the annual industries.

We thus see how the American banking-system was inaugu-
rated. It was born of the misfortune and miseries of war. But
why was the continental paper-money permitted to die. We
venture to suggest for the benefit of the banking advocates, that
there were stronger reasons for its sudden exit, than its being a
state-paper-money. It had then answered all the purposes of
the Revolution, which it could be made to answer. It had gone
into the hands of the industrial and business classes, who were
possessed of an unusual share of patriotism. It could not be
resurrected as a currency for the benefit of the banking-class,
any more than a dead " wild cat bank," and it furnished no six
per cent, base for " wild cat " banking.

There was therefore very good reason why it should liave
died — it accordingly did die — but there are diverse other good
reasons which could be given, that should prevent " wild cat " bank-
ers from exhuming its defunct carcass, or from exhibiting its
bloody bones either as a warning against instituting state-paper
monies, or as an admonition in favor of their wicked system,
built upon its ruins. If the Continental was worthless, it did not
further defraud or trouble the people, with baseless promises,
but the new did, and still continues to do.

But to return to the bank history — it was incorporated under
the name and style of "The President, Directors, and Com-
pany of the Bank of the United States," and to continue until
March 4th, 1811. It was located at Philadelphia with branches
at different points. It made dividends from 8 to 10 per cent,
per annum, much lower than had been made by the Bank of
North America, the decline of profits being attributable to the
creation of new banks. An application for the renewal of the
charter was made in 1808, three years before it would expire,
but this application was pressed by Mr. Gallatin, and remained
before Congress until February 5th, 1811, when a bill was brought
forward, and on the 20th was defeated. The Bank was obliged


to wind up its affairs, and it eventually paid its stockliolders
108^ per cent, on its stock.

In the war of 1812-'15, the Government was engaged in war,
and under great financial embarrassment by the bank-suspen-
sions which were then existing. In this condition of financial
affairs, Alexander J. Dallas was called to the head of the
Treasury, and under his manipulation, Congress in about a fort-
night were duly prepared to usher in a new United States Bank.
On the 20th January, 1815, a bill was passed by Congress, but
President Madison vetoed it, and on the 3d of April, a bill,
which had previously passed the House of Representatives, was
adopted by the Senate, received the signature of the President,
and became a law. The title of this institution Avas " The
President, Directors, and Company of the Bank of the United
States." Its capital was to be $35,000,000, composed 350,000
shares, $100 each, $7,000,000 of the stock was to be subscribed
by the United States, and the remaining $28,000,000, by indi-
viduals, comjDanies, or corporations. The charter was to con-
tinue in force until March 3, 1836, and to commence business so
soon as $8,400,000, exclusive of the government subscription,
was paid in. It was prohibited lending to the United States
more than $500,000, or to any State more than $50,000, or to
any foreign prince any sum whatever without the sanction of a
law previously obtained.

This Bank went into operation January Vth, 1817, with no
more than about one per cent, of its capital paid in, but through
its agency tlie other banks resumed specie- payments, and busi-
ness went on swimmingly under a " specie-basis'"

This resumption of specie-payments was secured by an agree-
ment between tlie United States Bank and the State Banks,
that the resumption of specie-payments should take place on the
20th of February on condition, among others, that the Bank of
the United States should not demand payment of any balances
of the State institutions, until that bank and its branches sliould
have discounted for individuals not having duties to pay, at
some of the principal Atlantic ports, to the amount of $6,000,000.

It will thus be seen that this clamor about specie payments, is
a question not as to the goodness of a currency, but a question
of interest to bankers and importers, in which under the banking
and gold laws, as will be seen in the sequel, the rights of the
people are sacrificed at most enormous rates.


As soon as this arrangement between the banks had been
effected every effort was put forth on the part of the oflScers of
the United States Bank to push its paper into circulation. In
the course of little more than a month, its discounts had been
extended from three to twenty millions of dollars, and by the
end of October of the same year, thirty-three millions. Its issues
seem only to have been limited by the inability ol the President
and Cashier to sign notes.

These extraordinary issues, or discounts were, to a considerable
extent, made to stockholders on a pledge of their stock at par,
without other securities, with a view to aid them in paying up
the balance of their stock. Schemers and gambling stock-job-
bers were thereby enabled without property or capital, to become
large owners and dealers in the capital stock. Not one-third of
the $7,000,000 of coin which the charter required, was ever
paid. High prices and wild speculation everywhere prevailed.
In eighteen months this gold-base and specie paying regulator,
was obhged rapidly to contract its issues. A severe money-panic
was on hand, the business of the country prostrated, and its
losses might be counted by millions. The President of the
Bank, Mr. Cheves, reported the losses of the Bank to be con-
siderably over $3,500,000, previous to March 6 th, 1819, and
besides, dividends had been made to the amount of $4,410,000.

This furnishes a specimen of "specie'' payments, and what is
meant by " strengthening the public credit " by gold-base, and
coin paying laws, viz. : an open, bare-faced robbery of the people
under color of these laws. An instance cannot be found, where
these financial disasters and direct robbery of the people, may
not be traced to these extremely partial and unjust financial laws
as the cause. Arising out of this gross bank-mismanagement in
1818, an ineffectual attempt was made to repeal the charter, but
it failed. In 1S29, President Jackson, in his annual message,
intimated that constitutional difficulties might prevent a re-charter,
and desired the early consideration of this matter by Congress.
On the 4th of July, 1832, a bill to re-charter the Bank passed by
Congress, was sent to the President, who on the 10th returned
it with his veto. A violent attempt was made to pass it over the
veto, but it failed, and on March 3d, 1836, by the limitation ol
the charter the Bank expired. It was re-chartered as a state
institution, the same year, by the Legislature of Pennsylvania,
with the same amount of capital. In 1837, it suspended specie-


payments, but finally suspended February 6th. It had sunk its
whole capital and nothing remained for the stock-holders.

While the fight against the United States Bank was purely
political yet, there is no question, but that there was a larger oppo-
silion to the Bank which sprang out of the rivalry of the State
Bank power, which was then beginning to loom up to view.
There were previous to the establishment of what is called the
*' National Banking" system, some 1,600 of these State institu-

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Online LibraryLyman E De WolfMoney; its uses and abuses, coinage, national bonds, curency, and banking, illustrated and explained → online text (page 15 of 19)