New York Union Committee.

Report of the Union Committee appointed by the meeting of the signers of the memorial to Congress, held on the 11th day of February, 1834, at the Merchants' Exchange, in the city of New-York online

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Online LibraryNew York Union CommitteeReport of the Union Committee appointed by the meeting of the signers of the memorial to Congress, held on the 11th day of February, 1834, at the Merchants' Exchange, in the city of New-York → online text (page 1 of 4)
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REPORT



"UNION COMMITTEE"



APPOINTED BY THE MEETING OF



THE SIGNERS OF THE MEMORIAL TO CONGRESS,



ON THE nth DAY OF FEBRUARY, 1834,

AT THE MEKCUANTS' EXCHANGE, IN THE CITY
OF NEW-YORK.



NEW-YORK:

HARPER & BROTHERS, 82 CLIFF-STREET.

1834.



k



i



• 7



REPORT, kc.



The *' Union Committee" appointed by the meeting of
•merchants and others (signers of the memorial to Congress)
held on the 11th day of February, 1834, at the Merchants'
Exchange of New- York, submit the following report : in
which as the only means in their power of inducing a recon-
sideration of the subject by the State Legislature, the Com-
mittee have imbodied their views respecting the removal of
the public deposites and a National Bank.

The Committee, anxious in the first instance to ascertain
the situation of the State Banks and of the Branch Bank in
this city, and the probable amount to which their accommo-
dations might be extended, applied to them for that purpose.
The Banks have, almost universally, cheerfully complied with
that request, although some delay has necessarily taken
place ; and the statement annexed to this report which ex-
hibits their situation on the 1st of October, 1833, and the
1st of February 1834, respectively, shows that, so far from
any curtailment having taken place, the accommodations
given by the Banks have, during that period, been increased
more than five millions, and, on the 1st of February amounted
to almost forty millions of dollars.
On the 1st of October last the loans and discounts
of the three Banks, which have since been
selected to collect the revenue of the United
States, amounted to .... 89,189,593

Those of the other 16 Banks, then in operation to 18,953,183
And those of the Branch of the United States 6,180,833

"$34^323,609



On the 1st of February last those of the three

selected Banks amounted to . . $13,769,552

Those of the 17 other city Banks then in ope-
ration to 19,494,195

And those of the Branch Bank to . . 6,458,540

^39,722,287



iiEPonr OF TUB



It was evident from tluit statement, that the City Banks
had cxtcnck'il ihfir loans and discounts to the utmost ext(Mit
consistent witli their salety. The liabiHlies of tiic eighteen
Banks of which we liave complete returns, including the
aggregate amount of tlieir circulation and public and private
deposites, and deducting that of their own notes and checks
drawn upon them, in the possession of the several Banks,
and not n^turned and exchanged till the ensuing morning,
amounted on the Isi of February last, exclusively of the bal-
ances due to Banks out of the city, to 15,500,000: and the
aggregate amount vi the sjjecie in their vaults to 1,052,000
dollars. This })ro{)ortion is known from experience to be
sufficient in ordinary times, and will prove so now, so long
as the amount of public deposites shall not be materially
diminished ; and especially at a time when there is not and
cannot be any foreign demand for specie : but this amount
of specie could not he sensibly lessened without endangering
the safety of the Banks.

Even if willing to encounter the risk of still further lessen-
ing the ratio of specie to liabilities payable on demand, it is
not in the power of the Banks to do it at pleasure ; since the
ability to extend their discounts beyond the amount of their
capital depends entirely on that of their circulation and de-
posites, and these are regulated by the wants of the commu-
nity, and not by the operations of the Banks. Should they,
by a simultaneous efl'ort, increase at this time their discounts
by two millions of dollars, they must to the same extent
issue an additional amount of bank notes, or open additional
credits on their books (commonly called deposites) in favour
of those whose notes they might discount: and by far the
greater part of this excess of issues, or book credits, beyond
the amount wanted to ellect the payments of the city, would
be almost instantaneously returned upon them, either by
translers of the surplus amount to other cities, or in soma
other way.

In the present state of public excitement and apprehen-
sion, the slightest incidents may produce fatal effects. An
unfounded alarm as to the situation of the country Banks,
has shown the necessity imposed on those of the city to hus-
band their resources. In that instance, we are gratified
to find that the measures of relief which were immediately
adoj)ted have been attended with complete success: and
that the Banks of the interior by a salutary though painful
curtailment of their issues, and by judicious measures for the
redemption of their notes, enjoy now the same confidence a?
heretofore.



UNION COMMITTEE. 9

The preceding observations arc strictly applicable to all
the City Banks which rely exclusively on their own re-
sources. The late great increase in the amount of loans
and discounts belongs almost entirely to the three Banks
selected to collect the public revenue, and is due partly to
the increase of about one million of dollars in the amount of
public deposites in this city, since the first of August last ; but
principally to the fact that the selected Banks have increased
their discounts almost to the whole extent of the public
moneys in their hands. Whether they will be able to con-
tinue their accommodations to the same amount depends on
a contingency, which it is not yet in their power to ascertain,
viz., whether their receipts derived from the United States
revenue, which may be collected during the ensuing months
at New- York, will be equal to the amount of the Treasury
drafts for the public service during the same period.

The city of New-York has had no reason to complain
of the curtailments made here in its discounts by the Bank
of the United States. Notwithstanding a decrease of more
than four millions of dollars in the amount of the public and
private deposites in the New- York Branch since the first
of August last, the loans and discounts here do not vary
essentially from the amount allowed, either on the first of
August or the first of October, 1833. But it was presumed
that the same reasons which had induced the Bank to
strengthen this important place, had lost nothing of their
force ; and it was the opinion of the Committee that the
capital of two millions and a half, originally assigned to the
Branch of this city, which is but one-fourteenth part of the
whole capital of the Bank, was much less than is now due
to the principal centre of the commerce and moneyed trans-
.actions of the country. Strong representations were there-
fore made for the purpose of obtaining from the Bank positive
assurances, that no diminution at least of their discounts, or
in the purchase of bills of exchange, should take place in this
city, and that the forbearance in calling for balances due by the
city banks, should be continued to the same extent as hereto-
fore, during the two ensuing months.

A disposition to comply with this request was early mani-
fested : but an intervening incident induced the Bank to
postpone a definitive answer, which was noti^eceived till yes-
terday. It will be seen by this, that the Bank of the United
States accedes to the course proposed by the Committee of
Correspondence, " that no diminution up to the first of May
nejvt, be made in the present amount of loans and discounts



6 IlEI'OUT OF THE

in the city and state of New- York, and, if practicalile, that
an increase be made in the line of domestic bills of exchange,
discounted at the ollice in that city, and that the Bank will
not call lor the payment of such balances as may become due
to it by the City Bixnks up to the first of May next," it being
understood that, in case the liank oi" the United States should
beconx; indebted to the City Banks, a similar forbearance on
their j)art is to be observed. The arrangement to be subject
to be changed by the Bank, in case of further hostile action
of t-lie Executive, or any unioresecn event.

Upon the whole, the Committee entertain a confident
hope that the accommodations now given by the banks will
not be lessened during the ensuing months ; but cannot hold
out the expectation of any material increase. The only
mode by which some relief can be obtained from that source,
without increasing the liabilities of the Banks payable on de-
mand, wliich suggests itself, is some uniform plan for an
increase of special depositcs, bearing a moderate rate of
interest, and not to be withdrawn before stated periods ac-
cording to agreement.

The object of this measure must not be misunderstood.
It cannot bring into action any considerable portion of inac-
tive moneyed capital, since there is hardly any which is not
at this lime actively employed, either directly, or indirectly,
as ordinary Bank deposites. Its only effect would be to sub-
stitute, for the private credit which from want of confidence
is now withdrawn, bank credit in the shape of certificates of
deposite, which the holders might negotiate. Post-notes
■would be more convenient, but seem to be forbidden by law.
That plan has been successfully ado))ted in iNIassachusetts,
and several foreign countries. The City Banks are the only
proper judges of its practicability, safety, and utility, here,
and at this time ; and they have accordingly been requested
to take it into consideration.

In other respects the Committee could recommend to
them nothing more than to take also into consideration the
propriety of the following measures :

An agreement between the several Banks, founded upon
c^juitable principles, not to demand from each other, for the
present, {)ayment in specie of the balances which may re-
spectively become due to any of them ; unless such balance
should exceed a certain sum in proportion to their respective
capitals.

A uniform and efficient plan for the redemption of coun-
try notes in tliis city, together with such means as may ha



UNION COMMITTEE. 7

devised for the purpose of facilitating, at this time, the coun-
try remittances.

An application to our representatives in Congress, urging
the necessity of j)assing immediately the bills now before
that body, for making the silver coins of Mexico and the
states of South America a legal tender, and for raising the
value of the gold coins to their market price ; suggesting, in
reference to the last subject, that, for the sake of uniformity,
and of avoiding delay, the same rule should be adopted as
in the estimation of duties on foreign importations.

An application to Congress for a moderate and permanent
appropriation, which may enable the mint to pay in American
coins, without delay or expense, for the gold and silver bul-
lion, or uncurrent foreign coins which may be brought to that
establishment.



Since it was obvious that the pressure on the money mar-
ket in this city was not due to any curtailments in the usual
accommodations by the Banks, but to an increased demand
for money, or, to speak more correctly, for credit ; the atten-
tion of the Committee was called to an investigation of the
causes to which this state of things must be ascribed.

The causes which have been suggested as more specially
affecting this city, are the effects of the Tariff, and of the pur-
chase of foreign stocks on its capital. Public opinion assigns
the removal of the Deposites, and the curtailment by the
Bank of the United States, as the general and immediate
causes of the present crisis throughout the whole country,

1. It was found impracticable during the last session of
Congress to arrange the existing differences on the subject of
the Tariff by an act that should embrace all the details per-
taining to that intricate subject. In order to remove a press-
ing and imminent danger, it became necessary to discard all
the details, and resort to a compromise embracing only gen-
eral principles. It could not but be expected that defects
might be discovered and consequences ensue, not perceived
or contemplated at the time when the act was passed. It is
believed that the great importance to one party, and the
great sacrifice required from the other, by the conversion of
duties payable at a distant day into cash, or short duties,
were not estimated at their full value. That sacrifice falls
most heavily on that city in which more than one-half of the



S nr-POKT OF THE

revenue is collected. The duties did not, under the old sys-
tem, bcciime payable till about the time wlien the importer
t\'as paid by the consumer. At present, the New-York im-
porters not only collect as heretotbre, but in fact advance to
government one-halt" of" the whole amount of duties on im-
portations, which is ultimately paid by the consumer.

Without entering into a critical analysis of the subject, it is
surtlcient to observe, that an additional amount of capital,
e(|ual to that of the duties, is now reinured, in order to carry
on the same tiuantity of business in articles on which the du-
ties are now [jayuble in cash, or at nuich shorter periods than
formerly.

The Committee are unanimous in the opinion, that the prin-
cii)les of (he Taritl" compromise ought to be strictly respected,
and no modifications pro[)osed but such as are consistent with
its true intent and s[)irit. A Warehousing System, founded
on the [)rinciple, that the time at which the duties shall be paid
shall be computed liom the time when the merchandise is
withdrawn by the importer irom the warehouse, and not from
the date of importation, the Conunittee believe to be entirely
of that character, similar to that adopted in every other com-
mercial country, and absolutely necessary for the protection
of commerce. As a bill having that object in view is now
before Congress, a sub-committee has been appointed, for
the purpose of collecting all the information connected with
the subject, and of corresponding with the representatives of
this city in that body.

2. New- York has become the principal centre -of all the
moneyed transactions of the United Stales. Large amounts
of stocks, princi{)ally I'rom the south-west, have been pur-
chased here, with a view, in a great degree, to their sale in the
English markets. This has not of late answered the expecta-
tions of the contractors. They may indeed have been ena-
bled to borrow abroad to a considerable extent on the credit
of those stocks ; but it cannot be doubted that a large amount
remains on hand, and has absorbed a corresponding portion
of the capital or credit of this city. For this there is no rem-
edy. But a si ill greater evil has grown out of the speculations
on some of those and several other stocks foreign to tlie city.
Ceasing to be legitimate investments of money, frequent and
large sales, on time, of stocks not held by the seller, and where
the principal generally remains unknown, have degenerated
into pure stock-jobbing ; a most pernicious species of gam-
bling ; the cause of artificial and sudden falls in the price of



UNION COMMITTEE. 9

Stocks, ruinous to innocent individuals, and generally to those
engaged in it ; and which has tended at this crisis to increase
the want of confidence. The Committee has thought it its
duty to pass a resolution, earnestly recommending to the Board
of Brokers to discontinue the practice, and has requested the
co-o{)eration of" the Banks to carry that measure into effect. :



In approaching the subject of the removal of the public de-
posites,the first observation that occurs is, that the measure, con-
sidered only in its connexion with the fiscal arrangements, the
currency, commerce, and public or private credit of the coun-
try, was at least wholly unnecessary and uncalled for. Ab-
staining from the discussion of any tjuestion, either concerning
the rights of the Bank, or at issue between the Administration
and that institution, or relating to the respective powers of the
executive, legislative, and judicial departments of Government,
it is only as they are of a commercial and fiscal nature that
the Committee intends to examine the reasons assigned by
the Secretary of the Treasury for the removal.

The first reason was, that, judging from the past, it w^as
highly probable that " the public deposites would always
amount to several millions of dollars ; and that it would evi-
dently produce serious inconvenience if such a large sum were
left in possession of the Bank until the last moment of its ex-
istence, and then be suddenly withdrawn, when its immense
circulation would be returning upon it to be redeemed, and
its private depositors removing their funds into other institu-
tions." It may be observed, in the first place, that no incon-
venience was felt in March, 1811, when the charter of the
former Bank of the U. States expired, from the fact, that as
late as the 1st January of that year the public monies in that
institution exceeded six millions, and on the day of the termi-
nation of the charter amounted to two and a half millions of
dollars. But the Secretary of the Treasury, in his annual re-
port on the finances, estimates " the balance that would be
left in the treasury (that is to say, the whole amount of the
public deposites) on the 31st Dec, 1834, at less than three
millions of dollars ; and that the receipts of 1835 will be less
than those of 1834." The Secretary could not, on the 2Sth
Sept., when he removed the pui)lic deposites, have been aware
that such would be the result of his further investigations, and
that since the public deposites would naturally and gradually
be lessened between the 1st of October, 1833, and the 31st

B



10 KEPORT OF Tin;

Dec, 1834, from near ten millions to less than three millions
of dollais, and would probiibly be liable to a still greater
reduction during the year 1835, it was (juite uiuiccessary to
order an iinnicdiate removal, in order to avoid tlie danger of
their magnitude in the spring of the year 183G, This single fact,
thus ollicially announced, — the natural and gradual reduction
of the i)ublic deposites, in the course of the present year, to
less than three millions of dollars, — refutes all the arguments,
of every description, urged in justification of that measure.

The second reason assigned is.howevcr, of a more coniplex
nature. The secretary is of" opinion, that the superior credit
of the notes of the Bank of the United States is occasioned
altogether by the provision in the charter to receive them in
all payments to the United States ; that they will be subject to
an immediate depreciation at the expiration of the charter,
and ought to be previously and gradually withdrawn ; and
that the same engagement in favour of the notes of any State
Bank would give them ecjual credit, and render them equally
convenient. And he considered the immediate removal of
public deposites necessary for the double purpose of prevent-
inii the inconvenience of the sudden withdrawing of the whole
circidation of the Bank of the United States, when its charter
shall expire, and of j)re[)aring in time the substitution of an
equally sound and uniform currency to be furnished by the
State Banks.

The Committee is of opinion that the superior credit enjoyed
by the notes of the Bank of the United States is due princi-
pally to the general contidence in its management and solidity;
that they have occasionally, in the interior districts of country,
a greater value than the notes of specie paying local banks,
not for local payments, but as remittances to the sea-ports ;
and that the principal etfect of their being received every-
where in payment of all debts due to the United States has
been to enable the Bank to increase the amount of its notes in
circulation. Those notes alone may, at the expiration of the
charter, experience a depreciation, which being payable at
distant places in the interior, may at that time be found in the
sea-j)orts, unless the Bank, as is probable, should find it their
interest to pay them wherever presented.

But the obvious mode to lessen the gross amount of these
notes would be a rej)eal by Congress of the provision which
makes them receivable in payment of debts due to the United
States. The removal of the public deposites, by compelling
the Bank to curtail its discounts, and only on that account, has
an immediate etlect on the amount of its private deposites, but



tJNION COMMITTEE. 11

cannot alone have the slightest on the circulation of its notes.
We find, accordingly, that while the individual depositesof the
Bank have been lessened between tlie 1st of August, 1833, and
the 1st of February, 1834, by a sum of near three millions and
a half dollars, the nett circulation, as appears by the following
table, has remained the same.

Loans and Discounts. Public Deposites. Individual Deposites. Nett Circulation,

1833, 1 Aug. $64,160,000 $7,600,000 $10,1.52,000 $18,890,000

Sep. 62,653,000 9,186,000 9,4.')7,000 18,413,000

Oct. 60,094,000 9,869,000 8,009,000 19,128,000

Nov. 57,210,000 8,232,000 7,285,000 18,518,000

Dec. 54,453,000 5,162,000 6,827,000 18,651,000

1834, Jan. 54,911,000 4,230,000 6,735,000 19,202,000

Feb. 54,843,000 3,126,000 0,715,000 19,260,000

No effect whatever has been produced by the withdrawing,
between the 1st of October and the 1st of February, public
deposites to the amount of -f 0,743,000. If the removal can
in no way lessen the circulation, it was certainly unnecessary
to resort to that measure for that purpose. But it is worthy
of notice, that at the very time, when the curtailments by the
Bank were alleged as a cause for the immediate removal of
the public deposites, the attempt should have been made to
justify that act, on the ground that it was necessary for the
purpose of lessening the Bank circulation, and thereby com-
pelling it to lessen still more the amount of its discounts.

The Committee will not discuss here either the propriety
or the practicability of the substitution, for a national, of an
Executive Bank, formed by the association of State Banks,
selected for that purpose by the Treasury. But, if, as the
secretary asserts, the privilege of being received in payment
of all debts due to the United States is sufficient to render the
notes of State Banks equally convenient, and entitled to the
same credit as those of the Bank of the United States, there
was certainly no necessity for intermediate preparation. It
was quite unnecessary to remove, for that purpose, the public
deposites, which at all events must, within a year, according
to the Treasury estimates, have been reduced gradually and
without effort to a very moderate amount. The State Bank
notes are always abundant and ready: and an act investing
them with the privilege of being received everywhere in pay-
ment of debts due to the United States, and passed the month
before the charter expired, v\ould,if theoj)inion of the Secre-
tary of the Treasury is correct, at once bring them into circu-
lation, and effect the contemplated substitution. But if pre-



1*2 nEPORT OF THE

paratioii wove requisite, the removal of the deposite? was still
uniKHTssui y. There is nolhin<T to prevent, and the proj)er
ami (^hvious mode of elVecting the object is, an early Act of
Con'Mvss to the same etfect. It is not quite certain that the
Executive is not of opinion that this may he done by his sole
authority, and \vithout any legislative san(;tion. An anxious
wisli and desij^n to concentrate all the powers of government
in that dej)arttnent, and to subject the public purse, the cur-
rency, and the commerce of the country to the will of one
man, is ai)|)arent through all the arguments and acts of the
administration in relati<jn to that subject.

The curtailment oi' its discounts by the Bank of the U.
States, during the months of August and September, Ib'.i'S,
appears to have been alleged in justilication only of the
immediate removal of th ]3eposites. Those curtailments
were evidently made in anticipation of the proposed removal,
and would have ceased, of course, had the plan been aban-
doned. But it is necessary to observe, thai the pressure,
which the secretary states to have become so intense before
the first of October in the principal commercial cities, and
the presumed curtailments by the State Banks, had no exist-
ence in the city of Aew-York. It appears by returns of the
Bank commissioners that the loans and discounts of the four-
teen city Banks, under the safety fund, amounted on the 1st
January, 1833, to 20,742,000 ; and on the 1st April ensuing
to 21,180,000 dollars. On the 1st of October of the same
year, they amounted to 21,700,000 dollars : and the increase
of capital in operation between the 1st of January and the


1 3 4

Online LibraryNew York Union CommitteeReport of the Union Committee appointed by the meeting of the signers of the memorial to Congress, held on the 11th day of February, 1834, at the Merchants' Exchange, in the city of New-York → online text (page 1 of 4)