THE SPECIE CIRCULAR.
The order for the removal of the public deposits from the Bank of the United States was dated 26 Sept. 1833. After this date the money collected from customs and other sources of revenue was. no longer paid into the Federal bank, but was deposited with selected State banks, called ((pet banks)" by the opponents of the Administration. The payment of the public debt and the great increase in the sales of public lands caused the surplus of rev enue over expenditures to increase in an un precedented manner. The Bank of the United States in its most prosperous days had never had in its vaults much over $8,000,000 of the public moneys at any one time; but by 1 Nov. 1836, State banks in 24 States with a capital of $77,576,449, held public deposits amounting to $49,377,9866 Their ordinary individual de posits at the same time were only a little over $25,000,000. That there was any very clear apprehension of the extent to which this ac cumulation of wealth would take place may be doubted, but it is certain that as early as 1f329 there were calculations made upon an antici pated surplus of revenue as an aid to party advancement, either by means of the bank or in spite of it. The financial stringency of 1834 indicated that the removal of the public funds to the State banks had seriously disturbed the usual course of loans, and the consequent suf fering started a demand for the distribution of the accumulating surplus among the several States. The State banks had thrown their in
fluence against the Federal bank in aid of the Administration, and they were allowed to reap their reward by the use of the public moneys entrusted to them as a basis of extending their loans and for enormous issues of their own notes. Banks were started for the sole pur pose of issuing notes that might be turned in at the land offices for public land. Good land office money was the test of the credit of a bank bill. Speculators thus obtained vast tracts of valuable land. The notes appeared to go through the hands of innocent third parties. When the bank failed, as it usually did, the Treasury bore the loss. Even in less flagrant cases the bank credit enabled immense territory to be held for speculation, keeping out actual settlers. Under this stipulation the receipts from the sales of public lands rose from about $5,000,000 in 1834 to $24,f300,000 in 1836. These later receipts were almost altogether in bills of State banks; and thus the consequent difficulty in securing specie, and the losses incurred from bank failures, impelled the President (Jack son) to cause the Secretary of the Treasury to issue, on 11 July 1836, the celebrated specie circular forbidding the receipt of anything but specie in payment of the public lands. He also pocketed a bill passed by ConFress to compel the receipt of the notes of specie-paying banks.