The act was passed in April 1816, when the go vernment securities were at a discount in the mar ket. By creating a new use for these evidences of the public debt, it gave them a new value, and about the time the bank of the United States went into operation, the public stocks rose to par.
The next grand operation of the treasury depart ment, was to exchange part of the balance of 2'2,000,006 of the " unconvertible" notes of the state banks, for evidences of the public debt. In six months after the bank opened its doors, says a writer whom we have already quoted, " the secre tary of the treasury, by the magic of the fabled finger of Midas, transformed the paper deposits of the treasury into gold and silver, and redeemed from the bank 13,000,000 dollars of the funded debt, part of its capital." The object of government in instituting the bank, was to relieve the treasury: but it hardly needs be mentioned that the object of private men in accept ing charters is their own pecuniary benefit. If no means could have been found of investing what had been given by the government in exchange for the public stocks, the net revenue of the bank would have been diminished 780,000 dollars per annum. It was natural for the directors to try to devise means to prevent the curtailment of profits, and the easy means of increasing the amount of loans to individuals as naturally suggested itself.
By the 26th of February 1818, the amount of bills discounted by the bank exceeded 542,000,000. In July of the previous year, it appears to have been less than 4,000,000. So great and so sudden an in crease, was more than the commerce of the country could bear. In fact, though the business of the lo cal banks had been considerably reduced by July 1817, there were still so many evidences of debt, of every kind, public and private, in circulation, that nothing but a voluntary surrender on the part of the directors and stockholders of one half or of three fourths of their expected profits, could have restored business to the state in which it was before the war began. It was not to make sacrifices of their own property in order to relieve the treasury department that they had subscribed to the bank established by congress: hut to make profit for themselves; and they acted as is natural for men to act who adventure in banking operations.
For some time the policy of increasing the amount of loans to individuals, was such as to give every encouragement to proceed in it. In September 1817, the shares of the bank were sold at 56 per cent advance: and the apparent prosperity of the country was as great, or nearly as great, as in the remarkable year 1816. In February 1818, bank shares were at 46 per cent advance, being 10 per cent lower than in the preceding September, and other indications of a reaction were observable. By the 20th of July, the pressure on the bank was such, that the directors found it necessary to order a re duction of discounts to the amount of 5,000,000. In October, an additional reduction of 2,000,000 was ordered to be made. But these measures had not the effect anticipated. On the 1st of February 1819, serious apprehensions were entertained that the bank would be obliged to suspend specie pay ments, and these apprehensions were not entirely removed before the 7th of May. The bank was then considered out of danger: but, through the course which business took, the amount loaned on private security was further reduced. From Feb nary 21st 1818 to December 31st 1819, the reduc tion of the amount of loans on private security, ex ceeded 12,000,000 dollars: or, was nearly equal to the amount of the public debt, forming part of the capital of the bank, which the secretary of the treasury redeemed in six months after the bank commenced operations.
Mr. Crawford, writing in 1819, said, " few in stances are on record of sufferings so deep and ex tensive as those which have overspread the United States." The particulars of the sufferings he al ludes to, would belong to a history of banking ra ther than to a history of finances. We can treat of them here, so far only as they were connected with the immediate operations of government. Suffice it to state, that it was not till 1820.21, that business was brought in the middle states into the condition in which it was before the war; and that the confu sion in the western, and in some parts of the south ern states, was not over till 1825, or 1826.