It is not unusual to ascribe these sufferings to errors in the early administration of the Bank of the United States, in connexion with the operations of the local banks in the same period, and in pre vious years. But this is giving only the instru mental cause. The efficient cause is to be found in the financial policy of 1812-14--that policy which led us to attempt to carry on a war with the most powerful nation on the globe, on a revenue of twelve million dollars. Our expenditures in time of peace were eight millions, including the interest on the national debt, and with the remaining four millions we sought to defray the expense of fleets and armies. The only way in which so incon siderable a disposahle revenue could be made to serve the purposes intended, was by borrowing bank-notes and bank credit, by creating a double debt; a debt, in the first place, from the govern ment to the banks, or the borrowers from the banks; and, in the second place, a debt from the banks to the people to whom government trans ferred the bank notes and bank credits. To sup ply the exigences of the government, and to 1:t crease their own profits, the banks issued more notes than they could redeem; and that the system should continue, it was necessary that the banks should not press the government for payment, nor the people press the banks.
The accounts which have been published of the exports of specie in the year after the war, show that the banks in the principal sea-ports had the power to resume their regular course of business on the return of peace. Bank paper being in no small degree indebted for its circulating quality to the fact of its being receivable in payment of dues to government, an order to the collectors of public moneys not to receive any notes except such as could on demand be exchanged for specie, would, in one month, have overcome the reluctance of the principal institutions to resume specie payments, and the others would gradually have imitated their example. As government had, previous to the close of the war felt the inconvenience of a di versified currency, its neglect to apply so simple and so obvious a remedy, can be ascribed only to its fiscal embarrassments. Institutions which are founded for private profit, must always be expected to take advantage of so many opportunities for ac quiring gain, as the policy of government will allow, or its necessities compel it to afford. They pay for their privileges, and the courts of law have, we believe, decided that charters are always to be construed in the manner most favourable to the grantees. The government's receiving " incon vertible" paper, in payment of duties, was quite as efficient a sanction of the continued suspension of specie payments, as could have been afforded by an act of Congress passed expressly with that in tent: and it ought to excite no surprise, that, when the practical sanction of the supreme authority was given to the use of " inconvertible" paper, the banks should greatly increase their issues. Nor
did they alone profit by the " plentifulness of money." To this cause we must attribute the net revenue of eighty millions for the 'years 1816 and 1317. The'' inconvertibility " of the immense ba lances in the treasury at the end of the years 1815, 16, and 17, did, indeed, render it difficult to satisfy the public creditors in those parts of the country where specie only would be received, but, without " inconvertible " paper, it would not have been easy to satisfy the public creditors in any part of the country. It was through the depreciation of the currency in the years subsequent to the war, that the government was so soon able to discharge between twenty and thirty millions of debt.
Those peculiarities in the constitution of the United States Bank, which rendered its operations less beneficial than were expected, are also to lie ascribed to the embarrassments of government. It was that a large amount of government stock might he absorbed, that an institution was estab lished with so large a capital as thirty-five millions, when there was hardly room for a bank with a capital of five minims. The charter was, as has already been observed, granted in April 1816, when government securities were below par. By con verting a large portion of them into bank stock, the outstanding debt was funded on more favourable terms than would otherwise have been practicable: but by creating a bank with so large a capital, a ne cessity was imposed of doing a very great business, or else of making dividends much below the usual rate.
Much has been said of the manner in which the payment of the second and third instalments of the subscription was effected; but if the members of Congress did not know that the usual way of pay ing all instalments after the first, is by discounting the stock notes of the subscribers, they had not much acquaintance with either the theory or the history of banking. It was not, surely, to be ex pected, that men who associated with the pro fessed design of making profit for themselves, and who paid a heavy bonus for their privileges, should depart from established usage, and trammel them selves with restrictions which the legislature had, either through policy or oversight, failed to im pose.
Banks being the creatures of government, if there are any faults in their constitution, the blame must be laid on the supreme authority.