Mr. Dallas, whose first plan for a national bank was so unceremoniously rejected, was ap pointed Secretary of the Treasury by Mr. Mad ison in February 1814. His predecessor, Mr. Gallatin, who had been appointed Commis sioner to Russia to negotiate a treaty of peace and commerce with Great Britain and treaty of commerce with Russia, left the country in May 1813, and ,the Treasury without a head.
In June the Senate refused to confirm Mr. Gallatin as commissioner, and Madison still regarded him, though absent, as head of the Treasury. Under these drcumstances Mr. Mason moved a resolution in the Senate on 24 Jan. 1814, declaring the secretaryship of the Treasury vacant, but the subject was postponed inasmuch as it was authoritatively announced that the President would appoint a secretary in a few days, which promise was fulfilled.
The Bank Commences Business.— Section 22 of its charter required the bank to com mence operations by the first Monday in April 1817. The bank went into operation on 7 Jan. 1817. This was at the worst stage of the monetary troubles, beginning with the suspen sion of specie payments in 1814 and continuing until the general crash in 1819 and 1820. At this time lands and agricultural products had fallen to one-half the prices which were readily obtainable in 1808 and 1810, and to one-third of the value they possessed when the excessive indebtedness of the people was incurred— namely, during the inflation years of the State banks. The contraction of the circulation and the general failures of the State banks began in 1818. The second United States Bank, therefore, came into existence on the very verge of a great monetary crisis. When it commenced business the first instalment of capital, amounting to $1,400,000 in specie and $7,000,000 in Untted States stocics, had been paid. The subscription had been opened 7 July 1816. The payment of the second instal ment of capital became due on 7 Jan. 1817. The law required this to be paid $10 in specie and $25 in United States stock or specie. It appears, however, that instead of requiring the stockholders to pay in this instalment from outside sources, the bank on 7 January began to discount the notes of stockholders upon the pledge of their stock to the amount required to pay the specie part, and in some cases to the full amount of both specie and United States stock required to malce up the whole instal ment. After a time discounts were made to the full value of the stock, which enabled the stockholders not only to pay up in full, but even to draw out what they had first advanced. The discounts were made in the bank's bills, which were considered equal to specie. Of the 1228,000,000 capital subscribed by individuals 7,000,000 was to have been paid in specie and 1,000,000 in United States stock. The bank appears to have actually received nearly $2,000, 000 in specie and $13,872,610 in public stocks. The difference represents about the amount made up by stocks. The banlc, therefore, was forced to import the coin it needed, and up to November 1818, had thus acquired $7,311,750 in specie at an expense of $525,297.
Speculation in Bank's The direct ors of the new institution appear to have made every effort to boom the stock in the market. Not only did they ((facilitate)) the payments of the instalments by discounting to the full amount of the stock, but they also encouraged trading in stock by authorizing the renewal.of stocic notes as they fell due and by permitting the purchaser to substitute his note, secured by the purchased stock, for that of the previous holder. Further than this, they soon began to authorize discounts on pledge of stock to its full market value. One could purchase bank shares without the advance of a cent It was only necessary to apply for a loan upon the secunty of the shares to be bought, and pay for the stock with the proceeds. When the price of shares rose sufficiently a sale could be made and the difference pocketed. It appears that the president, William Jones, and a number of directors and officers, especially those con nected with the Baltimore branch, had direct personal interest in these transactions, which they did not pretend to conceal, but considered as lawful private concerns. The stock rose as high as $156 per share in August 1818, but soon after fell to about $110. While there were no doubt gross irregularities in its management, for which the banlc was soon to suffer, it did much good even under these disadvantages. It received upon deposit from the United States Treasury the notes of State banks, and in re turn furnished a uniform currency. It trans ferred funds whenever needed, and the amount paid in in United States stocks had its effect in enhancing the credit of the government loans. It exerted sufficient influence upon the currency to make itself very unpopular with the State banlcs during the financial crisis of 1818, al though those even who were hostile to it ad mitted its policy toward the State institutions had been marked by great consideration and lenity. In •fact, on this point its enemies were obliged to fall back on the charge that by this very lenity and consideration it had led the State banks to unduly extend their business, had drawn them into temptation and made them unfit to meet the financial storm. It did not accustom the local banks to pay specie soon enough, and by putting off the evil day found them unprepared at last. Up to August 1818 the bank redeemed its notes, both of the parent bank or its branches, at any of its offices where they might be presented, but after that date redeemed its bills only at the office which put them in circulation. This change was made because the bills were largely used for purposes of remittance, and in the localities where a sound local currency was most needed the bills were gathered up and sent off, leaving the field to the inferior State bank circulation. A more important reason was that the change enabled the bank to realize a profit by the sale of its drafts. This change was persevered in and af terward afforded the basis of President Jackson's assertion that the bank did not fur nish a uniform currency.