Finally, Biddle so far forgot himself, in his zealous defense of the bank, as to tell the Secretary of the Treasury that the federal government had noth ing to say about the management of the bank and that he intended to run it as he pleased. Samuel D.
Ingham, Secretary of the Treasury, retorted that he had power to withdraw the government deposits and that he would do so as soon as he became convinced that the bank was exercising a political influence. This threat quieted Biddle for a while.
In 1830, Jackson recommended to Congress that a bank be established as a branch of the Treasury De partment without power to exert any undue influ ence upon the public. The proposal was voted down. In the following year he sent another message, adopt ing a milder tone. Biddle took this as an indication that he was backing down from his original position and thought the time was ripe to strike for a new charter. On the eve of a presidential campaign, it was thought that Jackson would not dare to veto the bill. The opposing party proposed to make the bank an issue in the campaign. Against the advice of friends Biddle pressed the motion for renewal and it was passed by both Houses of Congress. To Rid dle's surprise, Jackson vetoed it. An attempt to pass it over the veto failed. Nothing was left but to take the matter to the polls. Jackson was re-elected by an overwhelming majority.
The bank war continued. Early in 1833, Jackson decided to remove the government deposits. Mr. Louis McLane, Secretary of the Treasury, objected and was transferred to the State Department. The new Secretary, William J. Duane, refused to with draw the deposits and was removed from office. Roger B. Taney was next placed at the head of the Treasury Department, and he beganrto draw out the deposits and place the government funds in certain state banks.
This so weakened the position of the bank that it soon lost its prestige. With all hope for a renewal of the charter gone, the bank took out a charter in Penn sylvania. The government was paid for its stock at the rate of 115.58 and new stock was sold in its place, keeping the capital of the bank at the original figure of $35,000,000. This was too much capital for a bank with so small a territory as the bank now had and some of it was diverted into speculative ventures. The bank finally failed in 1841, and three years later Bid dle died, poor and broken-hearted.
The misfortune of the bank was that it was under private control and excited the jealousy of the admin istration. Its failure constitutes a strong argument
in favor of government control of a bank which is to have so much power. Proposals for a third bank were advanced later but they met with no success. After the Civil War, a system was established which was entirely different in character.
8. Suffolk is to be learned from a study of the state banks. One of the most inter esting developments was the Suffolk system. New England was flooded with the issues of country banks. Because of the difficulty of redemption, coun try bank notes circulated at varying rates of discount and drove better notes out of circulation. The situa tion was especially embarrassing to the Boston bank ers, who were hardly able to keep any notes in circu lation and who were constantly subjected to the in convenience of handling the notes of country banks which were deposited with them.
In 1818, the Suffolk Bank was incorporated in Bos ton, and it immediately endeavored to work out a plan by which it could make a profit from the redemption of country bank notes. It offered to make itself an agent of redemption for the country banks, agreeing to accept their notes at par provided a deposit was kept with it to pay for the trouble. At first only a small number of banks availed themselves of the privilege, but the Suffolk Bank retaliated by sending home for redemption the notes of all banks which did not adopt the plan. The final result was that all the banks in New England became members of the Suf folk system, which continued until the National Banking Act was passed.
It soon became a clearing house for bank notes and, just as the city clearing houses offset the credits and debits of the various banks against each other in such a way that only balances are paid in cash, so the Suf folk Bank canceled the bank note obligations of all New England. In 1845, the Massachusetts law was changed to provide that no bank should pay out any notes except its own, a provision which strengthened the Suffolk system because it made quick redemption necessary. All bank notes issued would circulate in the pockets and tills of the people as long as there was actual demand for them. When this demand subsided they would be deposited in a bank, and since they could not be paid out again they would be quickly redeemed at the Suffolk Bank.