REPORT OF THE SECRETARY OF THE TREASURY TO CONGRESS ON THE REMOVAL
OF THE DEPOSITS.
By the clause in the charter authorizing the Secretary of the
Treasury to remove the deposits, that officer was required to
communicate the fact immediately to Congress, if in session, if
not, at the first meeting; together with his reasons for so doing.
The act which had been done was not a "removal," in the sense of
that word; for not a dollar was taken from the Bank of the United
States to be deposited elsewhere; and the order given was not for
a "removal," but for a cessation of deposits in that institution,
leaving the public moneys which were in it to be drawn out in the
regular course of expenditure. An immediate and total removal might
have been well justified by the misconduct of the bank; a cessation
to deposit might have been equally well justified on the ground
of the approaching expiration of the charter, and the propriety
of providing in time for the new places of deposit which that
expiration would render necessary. The two reasons put together
made a clear case, both of justification and of propriety, for the
order which had been given; and the secretary, Mr. Taney, well set
them forth in the report which he made, and which was laid before
Congress on the day after its meeting. The following are extracts
from it:
"The Treasury department being intrusted with the administration
of the finances of the country, it was always the duty of the
Secretary, in the absence of any legislative provision on the
subject, to take care that the public money was deposited in
safe keeping, in the hands of faithful agents, and in convenient
places, ready to be applied according to the wants of the
government. The law incorporating the bank has reserved to him,
in its full extent, the power he before possessed. It does
not confer on him a new power, but reserves to him his former
authority, without any new limitation. The obligation to assign
the reasons for his direction to deposit the money of the United
States elsewhere, cannot be considered as a restriction of
the power, because the right of the Secretary to designate the
place of deposit was always necessarily subject to the control
of Congress. And as the Secretary of the Treasury presides over
one of the executive departments of the government, and his
power over this subject forms a part of the executive duties of
his office, the manner in which it is exercised must be subject
to the supervision of the officer to whom the constitution has
confided the whole executive power, and has required to take
care that the laws be faithfully executed.
"The faith of the United States is, however, pledged, according
to the terms of the section above stated, that the public
money shall be deposited in this bank, unless 'the Secretary
of the Treasury shall otherwise order and direct.' And as this
agreement has been entered into by Congress, in behalf of the
United States, the place of deposit could not be changed by
a legislative act, without disregarding a pledge, which the
legislature has given; and the money of the United States must
therefore continue to be deposited in the bank, until the last
hour of its existence, unless it shall be otherwise ordered by
the authority mentioned in the charter. The power over the place
of deposit for the public money would seem properly to belong
to the legislative department of the government, and it is
difficult to imagine why the authority to withdraw it from this
bank was confided exclusively to the Executive. But the terms
of the charter appear to be too plain to admit of question; and
although Congress should be satisfied that the public money was
not safe in the care of the bank, or should be convinced that
the interests of the people of the United States imperiously
demanded the removal, yet the passage of a law directing it to
be done, would be a breach of the agreement into which they have
entered.
"In deciding upon the course which it was my duty to pursue
in relation to the deposits, I did not feel myself justified
in anticipating the renewal of the charter on either of the
above-mentioned grounds. It is very evident that the bank has
no claim to renewal, founded on the justice of Congress. For,
independently of the many serious and insurmountable objections,
which its own conduct has furnished, it cannot be supposed that
the grant to this corporation of exclusive privileges, at the
expense of the rest of the community, for twenty years, can
give it a right to demand the still further enjoyment of its
profitable monopoly. Neither could I act upon the assumption
that the public interest required the recharter of the bank,
because I am firmly persuaded that the law which created this
corporation, in many of its provisions, is not warranted by the
constitution, and that the existence of such a powerful moneyed
monopoly, is dangerous to the liberties of the people, and to
the purity of our political institutions.
"The manifestations of public opinion, instead of being
favorable to a renewal, have been decidedly to the contrary.
And I have always regarded the result of the last election
of the President of the United States, as the declaration of
a majority of the people that the charter ought not to be
renewed. It is not necessary to state here, what is now a
matter of history. The question of the renewal of the charter
was introduced into the election by the corporation itself. Its
voluntary application to Congress for the renewal of its charter
four years before it expired, and upon the eve of the election
of President, was understood on all sides as bringing forward
that question for incidental decision, at the then approaching
election. It was accordingly argued on both sides, before the
tribunal of the people, and their verdict pronounced against the
bank, by the election of the candidate who was known to have
been always inflexibly opposed to it.
"The monthly statement of the bank, of the 2d September last,
before referred to, shows that the notes of the bank and its
branches, then in circulation, amounted to $18,413,287 07,
and that its discounts amounted to the sum of $62,653,359 59.
The immense circulation above stated, pervading every part of
the United States, and most commonly used in the business of
commerce between distant places, must all be withdrawn from
circulation when the charter expires. If any of the notes then
remain in the hands of individuals, remote from the branches
at which they are payable, their immediate depreciation will
subject the holders to certain loss. Those payable in the
principal commercial cities would, perhaps, retain nearly their
nominal value; but this would not be the case with the notes of
the interior branches, remote from the great marts of trade.
And the statements of the bank will show that a great part of
its circulation is composed of notes of this description. The
bank would seem to have taken pains to introduce into common use
such a description of paper as it could depreciate, or raise to
its par value, as best suited its own views; and it is of the
first importance to the interests of the public that these notes
should all be taken out of circulation, before they depreciate
in the hands of the individuals who hold them; and they ought
to be withdrawn gradually, and their places supplied, as they
retire, by the currency which will become the substitute for
them. How long will it require, for the ordinary operations
of commerce, and the reduction of discounts by the bank, to
withdraw the amount of circulation before mentioned, without
giving a shock to the currency, or producing a distressing
pressure on the community? I am convinced that the time which
remained for the charter to run, after the 1st of October (the
day on which the first order for removal took effect), was not
more than was proper to accomplish the object with safety to the
community.
"There is, however, another view of the subject, which in my
opinion, made it impossible further to postpone the removal.
About the 1st of December, 1832, it had been ascertained that
the present Chief Magistrate was re-elected, that his decision
against the bank had thus been sanctioned by the people. At
that time the discounts of the bank amounted to $61,571,625 66.
Although the issue which the bank took so much pains to frame
had now been tried, and the decision pronounced against it,
yet no steps were taken to prepare for its approaching end. On
the contrary, it proceeded to enlarge its discounts, and, on
the 2d of August, 1833, they amounted to $64,160,349 14, being
an increase of more than two and a half millions in the eight
months immediately following the decision against them. And so
far from preparing to arrange its affairs with a view to wind
up its business, it seemed from this course of conduct, to be
the design of the bank to put itself in such an attitude, that,
at the close of its charter, the country would be compelled
to submit to its renewal, or to bear all the consequences of
a currency suddenly deranged, and also a severe pressure for
the immense outstanding claims which would then be due to the
corporation. While the bank was thus proceeding to enlarge
its discounts, an agent was appointed by the Secretary of the
Treasury to inquire upon what terms the State banks would
undertake to perform the services to the government which have
heretofore been rendered by the Bank of the United States; and
also to ascertain their condition in four of the principal
commercial cities, for the purpose of enabling the department to
judge whether they would be safe and convenient depositories for
the public money. It was deemed necessary that suitable fiscal
agents should be prepared in due season, and it was proper
that time should be allowed them to make arrangements with
one another throughout the country, in order that they might
perform their duties in concert, and in a manner that would be
convenient and acceptable to the public. It was essential that
a change so important in its character, and so extensive in its
operation upon the financial concerns of the country, should not
be introduced without timely preparation.
"The United States, by the charter, reserved the right of
appointing five directors of the bank. It was intended by this
means not only to provide guardians for the interests of the
public in the general administration of its affairs, but also
to have faithful officers, whose situation would enable them to
become intimately acquainted with all the transactions of the
institution, and whose duty it would be to apprize the proper
authorities of any misconduct on the part of the corporation
likely to affect the public interest. The fourth fundamental
article of the constitution of the corporation declares that
not less than seven directors shall constitute a board for
the transaction of business. At these meetings of the board,
the directors on the part of the United States had of course
a right to be present; and, consequently, if the business of
the corporation had been transacted in the manner which the
law requires, there was abundant security that nothing could
be done, injuriously affecting the interests of the people,
without being immediately communicated to the public servants,
who were authorized to apply the remedy. And if the corporation
has so arranged its concerns as to conceal from the public
directors some of its most important operations, and has thereby
destroyed the safeguards which were designed to secure the
interests of the United States, it would seem to be very clear
that it has forfeited its claim to confidence, and is no longer
worthy of trust.
"Instead of a board constituted of at least seven directors,
according to the charter, at which those appointed by the United
States have a right to be present, many of the most important
money transactions of the bank have been, and still are, placed
under the control of a committee, denominated the exchange
committee, of which no one of the public directors has been
allowed to be a member since the commencement of the present
year. This committee is not even elected by the board, and
the public directors have no voice in their appointment. They
are chosen by thy president of the bank, and the business of
the institution, which ought to be decided on by the board of
directors, is, in many instances, transacted by this committee;
and no one had a right to be present at their proceedings but
the president, and those whom he shall please to name as members
of this committee. Thus, loans are made, unknown at the time
to a majority of the board, and paper discounted which might
probably be rejected at a regular meeting of the directors. The
most important operations of the bank are sometimes resolved
on and executed by this committee; and its measures are, it
appears, designedly, and by regular system, so arranged, as to
conceal from the officers of the government transactions in
which the public interests are deeply involved. And this fact
alone furnishes evidence too strong to be resisted, that the
concealment of certain important operations of the corporation
from the officers of the government is one of the objects which
is intended to be accomplished by means of this committee. The
plain words of the charter are violated, in order to deprive the
people of the United States of one of the principal securities
which the law had provided to guard their interests, and to
render more safe the public money intrusted to the care of the
bank. Would any individual of ordinary discretion continue his
money in the hands of an agent who violated his instructions
for the purpose of hiding from him the manner in which he
was conducting the business confided to his charge? Would
he continue his property in his hands, when he had not only
ascertained that concealment had been practised towards him,
but when the agent avowed his determination to continue in the
same course, and to withhold from him, as far as he could, all
knowledge of the manner in which he was employing his funds? If
an individual would not be expected to continue his confidence
under such circumstances, upon what principle could a different
line of conduct be required from the officers of the United
States, charged with the care of the public interests? The
public money is surely entitled to the same care and protection
as that of an individual; and if the latter would be bound,
in justice to himself, to withdraw his money from the hands
of an agent thus regardless of his duty, the same principle
requires that the money of the United States should, under the
like circumstances, be withdrawn from the hands of their fiscal
agent."
Having shown ample reasons for ceasing to make the public deposits
in the Bank of the United States, and that it was done, the
Secretary proceeds to the next division of his subject, naturally
resulting from his authority to remove, though not expressed in
the charter; and that was, to show where he had ordered them to be
placed.
"The propriety of removing the deposits being thus evident, and
it being consequently my duty to select the places to which
they were to be removed, it became necessary that arrangements
should be immediately made with the new depositories of the
public money, which would not only render it safe, but would at
the same time secure to the government, and to the community
at large, the conveniencies and facilities that were intended
to be obtained by incorporating the Bank of the United States.
Measures were accordingly taken for that purpose, and copies of
the contracts which have been made with the selected banks, and
of the letters of instructions to them from this department,
are herewith submitted. The contracts with the banks in the
interior are not precisely the same with those in the Atlantic
cities. The difference between them arises from the nature
of the business transacted by the banks in these different
places. The State banks selected are all institutions of high
character and undoubted strength, and are under the management
and control of persons of unquestioned probity and intelligence.
And, in order to insure the safety of the public money, each
of them is required, and has agreed, to give security whenever
the amount of the deposit shall exceed the half of the amount
of the capital actually paid in; and this department has
reserved to itself the right to demand security whenever it
may think it advisable, although this amount on deposit may
not be equal to the sum above stated. The banks selected have
also severally engaged to transmit money to any point at which
it may be required by the direction of this department for
the public service, and to perform all the services to the
government which were heretofore rendered by the Bank of the
United States. And, by agreements among themselves to honor each
other's notes and drafts, they are providing a general currency
at least as sound as that of the Bank of the United States,
and will afford facilities to commerce and in the business
of domestic exchange, quite equal to any which the community
heretofore enjoyed. There has not been yet sufficient time to
perfect these arrangements, but enough has already been done
to show that, even on the score of expediency, a Bank of the
United States is not necessary, either for the fiscal operations
of the government, or the public convenience; and that every
object which the charter to the present bank was designed to
attain, may be as effectually accomplished by the State banks.
And, if this can be done, nothing that is useful will be lost
or endangered by the change, while much that is desirable will
be gained by it. For no one of these corporations will possess
that absolute and almost unlimited dominion over the property
of the citizens of the United States which the present bank
holds, and which enables it at any moment, at its own pleasure,
to bring distress upon any portion of the community whenever it
may deem it useful to its interest to make its power felt. The
influence of each of the State banks is necessarily limited to
its own immediate neighborhood, and they will be kept in check
by the other local banks. They will not, therefore, be tempted
by the consciousness of power to aspire to political influence,
nor likely to interfere in the elections of the public servants.
They will, moreover, be managed by persons who reside in the
midst of the people who are to be immediately affected by their
measures; and they cannot be insensible or indifferent to the
opinions and peculiar interests of those by whom they are daily
surrounded, and with whom they are constantly associated.
These circumstances always furnish strong safeguards against
an oppressive exercise of power, and forcibly recommend the
employment of State banks in preference to a Bank of the United
States, with its numerous and distant branches.
"In the selection, therefore, of the State banks as the fiscal
agents of the government, no disadvantages appear to have been
incurred on the score of safety or convenience, or the general
interests of the country, while much that is valuable will be
gained by the change. I am, however, well aware of the vast
power of the Bank of the United States, and of its ability to
bring distress and suffering on the country. This is one of
the evils of chartering a bank with such an amount of capital,
with the right of shooting its branches into every part of the
Union, so as to extend its influence to every neighborhood.
The immense loan of more than twenty-eight millions of dollars
suddenly poured out, chiefly in the Western States, in 1831,
and the first four months in 1832, sufficiently attests that
the bank is sensible of the power which its money gives it,
and has placed itself in an attitude to make the people of
the United States feel the weight of its resentment, if they
presume to disappoint the wishes of the corporation. By a severe
curtailment it has already made it proper to withdraw a portion
of the money it held on deposit, and transfer it to the custody
of the new fiscal agents, in order to shield the community from
the injustice of the Bank of the United States. But I have not
supposed that the course of the government ought to be regulated
by the fear of the power of the bank. If such a motive could
be allowed to influence the legislation of Congress, or the
action of the executive departments of the government, there is
an end to the sovereignty of the people; and the liberties of
the country are at once surrendered at the feet of a moneyed
corporation. They may now demand the possession of the public
money, or the renewal of the charter; and if these objects
are yielded to them from apprehensions of their power, or
from the suffering which rapid curtailments on their part are
inflicting on the community, what may they not next require?
Will submission render such a corporation more forbearing in its
course? What law may it not hereafter demand, that it will not,
if it pleases, be able to enforce by the same means?"
Thus the keeping of the public moneys went to the local banks, the
system of an independent treasury being not then established; and
the notes of these banks necessarily required their notes to be
temporarily used in the federal payments, the gold currency not
being at that time revived. Upon these local banks the federal
government was thrown--_first_, for the safe keeping of its public
moneys; _secondly_, to supply the place of the nineteen millions
of bank notes which the national had in circulation; _thirdly_, to
relieve the community from the pressure which the Bank of the United
States had already commenced upon it, and which, it was known, was
to be pushed to the ultimate point of oppression. But a difficulty
was experienced in obtaining these local banks, which would be
incredible without understanding the cause. Instead of a competition
among them to obtain the deposits, there was holding off, and an
absolute refusal on the part of many. Local banks were shy of
receiving them--shy of receiving the greatest possible apparent
benefit to themselves--shy of receiving the aliment upon which they
lived and grew! and why this so great apparent contradiction? It
was the fear of the Bank of the United States! and of that capacity
to destroy them to which Mr. Biddle had testified in his answers to
the Senate's Finance Committee; and which capacity was now known to
be joined to the will; for the bank placed in the same category all
who should be concerned in the removal--both the government that
ordered it, and the local banks which received what it lost. But
a competent number were found; and this first attempt to prevent
a removal, by preventing a reception of the deposits elsewhere,
entirely failed.