The financial crisis brought on by the quarrel between the President
and the Bank, has not become more serious; there is a great scarcity
of money, that is, a great diminution of credit, but the failures
are not yet numerous or considerable. The last arrivals from Europe
have brought us the news that several of the trades in Paris and at
Lyons have refused to work. What is taking place here in regard to the
Bank, is analogous to what is passing in France among the tailors,
bakers, and carpenters, and what occurs daily in England among the
manufacturing operatives. In Europe, and particularly in France, it
is the rising of a democracy or rather a radicalism, which is yet in
embryo, and which, if it please God, will never come to maturity. In
America, it is the despotic humour of a full grown democracy, passing
more and more into radicalism, the longer it rules without a rival and
without a counterpoise.
It seems to me improbable that the journeymen carpenters, tailors,
and bakers of Paris, should ever give the law to their masters. Among
us, the middling class (_bourgeoisie_) is beginning to feel that it
is its duty to improve the condition of the working class. It has the
authority, but it is conscious that the people has the physical force.
The people has counted its own ranks and those of the _bourgeoisie_,
but it feels that it is not enough to have the number; it sees that it
has nothing to expect from violence, and that it can back its friends
only by improved habits of order and morality. On both sides their
reciprocal rights are mutually acknowledged; each fears and respects
the other. Here, on the contrary, it is perfectly natural that the
democracy should rule the capitalists, merchants, and manufacturers;
it possesses at once the physical force and the political power; the
middling and upper classes inspire it neither with fear nor with
respect. The equilibrium is gone; there is no guarantee against the
popular caprice in the United States, but the good sense of the people;
it must be allowed that this good sense is quite extraordinary, but
it is not infallible. A popular despotism is as easily deluded by
flatterers, as any other despotism.
The Bank of the United States is at this time experiencing the truth of
this observation. I have already alluded to some of the crying abuses
which have excited a violent hatred against the banks in general,
although without the aid of the banks it would have been impossible
for the United States to have increased in population, wealth, and
territory as they have done. These abuses were and are the acts of
the local banks, and not of the Mammoth Bank. On the contrary, the
latter, by the control which it exercises over the local banks for
its own security, checks and limits these abuses, if it does not
completely prevent them. The legislatures of the different States have
been repeatedly called to deliberate on the question of abolishing
all banks and breaking up the banking system; but they have generally
thought, and justly, that the remedy would be worse than the disease.
They have attempted to cure the disorder by restrictive provisions in
the charter of new banks. The State of of New York, in 1829, embraced
the whole subject in the Safety-Fund Act, which established a mutual
supervision of the banks over each other, under the direction of the
Bank Commissioners, and creates at their common expense a safety fund,
designed to indemnify the public in case of the failure of any one
of the banks. But these measures of repression or prevention have
generally proved inefficacious, either from a defect in the means of
coercion possessed by the government, or from a reluctance to use the
powers conferred by the laws.
In their report of the 31st of January, 1833, the New York Bank
Commissioners urgently call the attention of the legislature to the
serious dangers which may result from these institutions as they are
now organized, particularly in the country, and to their excessive
issues in proportion to the small quantity of specie in their vaults.
With two millions in specie, the banks of the State had, at that time,
a circulation of above twelve millions. But this report itself proves,
that the commissioners did not dare to fulfil the duties imposed on
them by the Safety-Fund act; they had the authority to shut up the
offending banks. Their warnings have not prevented the legislature from
chartering new banks by the dozen. This year it will have to act on 105
petitions for charters, that is, eighteen more than the actual number
of banks in the State. To be sure in the present instance, the _let
alone_ principle will probably be violated, for the Governor's Message
of January 7, 1834, urges the two houses to arrest the flood. This Bank
mania, as Jefferson called it, is created by the profits of banking,
which is, and more especially was, before the institution of the Bank
of the United States, the best kind of speculation, exactly in the
ratio of the abuses attending it.[L]
In the local banks, especially in the country banks, the chief aim
of the president and directors is, at all events, come what may, to
make the semi-annual dividend as large as possible. By extending their
operations excessively, they may, if they lose the public confidence,
be driven to a failure; but in the United States the prospect of such a
disaster is much less terrible to the greater number of merchants, and
even to the smaller companies, than it is in Europe. (See _Note_ 7, at
the end of the volume.) When a bank fails, there is, indeed, a great
outcry, because the number of victims is large, and the loss extends to
all classes; for most of the bills being of the denomination of five
dollars and under, they are very generally distributed in the hands
of the labourers, as well as of the wealthier classes. But just in
proportion to the distribution of the loss over the greater number of
persons, is the quickness with which the clamor ceases. The president,
the cashier, the directors, and others principally interested, readily
find means to recover from the blow, by obtaining credit elsewhere, and
the whole affair is at an end.
The Bank of the United States, on the contrary, directed by men of
large fortune and established reputation, connected in business with
the principal houses in Europe, charged with a vast responsibility,
subject to the supervision of the Federal government, which names five
of the directors out of twentyfive, and officiously watched by an army
of journalists, is interested and obliged to follow another course.
Not that it has not committed some errors; but it paid dear for them,
and has never repeated them. Neither are its rules and regulations
perfect; the experience of twenty years will doubtless suggest some
modifications. But even its adversaries admit that it has been
admirably managed. They pretended, at first, that the public money was
not safe in its vaults, but they are at present ashamed to insist upon
this point, as the investigation made by the House of Representatives
proved the absurdity of the charge. The accusations now brought against
it are of a political character.
Politically considered, indeed, the existence of an institution
so powerful as the Bank of the United States may present some
inconveniences. The fundamental maxim of the Federal and State
constitutions is, that the supreme authority is null and void; there is
no government here in the true sense of the word; that is, no directing
power. Each one is his own master; it is self-government in all its
purity. This anomalous and monstrous development of the individual
principle is no evil here, it is even a great good at present; it
is the present stage in the progress of the United States, because
self-government is the only form of government to which the American
character, as it is, can accommodate itself. If individuality had not
free elbow-room here, this people would fall short of its destiny,
which is to extend its conquests rapidly over an immense territory,
for the good of the whole human race, to substitute, in the shortest
time possible, civilization for the solitude of the primitive forests,
over a surface ten times greater than all France, of as great average
fertility as that country, and capable, therefore, of accommodating 350
millions of inhabitants.
From these considerations it is clear, that any power whatsoever, if
possessed of great influence, and exercising it over a great space,
would be inconsistent with the political system of the country; for
this reason the Federal and State governments are in a permanent state
of eclipse. And it is furthermore evident, that the Bank, which is met
at every turn as an agent in all transactions, which governs credit,
regulates the currency, animates or checks at will the activity of
commerce by narrowing or widening the channels of circulation, the
Bank, which by its numerous branches is, like the fabled polypus,
everywhere present, the Bank with its funds, its centralisation,
its trusty creatures, is certainly an anomaly, which may become big
with danger. One might, from an abstract, theoretical point of view,
imagine cases, in which this financial colossus, seated in the heart
of a country absorbed in business, would press with a crushing weight
on the liberties of the people. If it were possible that a new Monk
should wish to restore the English rule, or that a new Bonaparte, the
saviour of the republic in another Marengo, should attempt to make
himself dictator, it would also be possible that a conspiracy between
the Bank and this Monk, or this Napoleon, might overthrow the liberties
of America. But such an event, possible to be sure in theory, (for in
theory nothing is impossible,) is, at present, wholly impracticable
in fact. Yet there are honest and enlightened men, on whom this
theoretical danger makes more impression, than the necessity of a
regulator amidst the chaos of 500 banks, or of an agent, which, by
controlling the currency, should be in financial affairs, what the vast
rivers of the country are in the system of internal communication. They
fear more, for this land of industry, from the imperceptible tyranny of
the Bank, than from a system in which there would be no check on the
cupidity of the local banks, and in which they might renew, with their
paper money, if not the _assignats_ of France, of the Continental money
of the Revolution, at least the commercial anarchy which followed the
war of 1812.
Unluckily for the United States, it is not on this high ground of
foresight, that President Jackson and his friends take their stand in
their attack on the Bank. They do not say, that it is possible that
it may some time, under a new state of things, become an instrument
of oppression; they pretend that it is so already. According to them,
it tends to nothing less than the subjugation of the country to its
rule. In his last annual message, and in an official paper read to the
cabinet on the 18th of September, 1833, the President accuses the Bank:
1. With having intrigued to bring up the question of the renewal of its
charter in Congress during the session of 1831-32, in order to reduce
him to the alternative of giving his sanction to the bill, or losing
the votes of the friends of the Bank in the approaching election,
if he refused it. He forgets that he had himself, in his message at
the opening of that session, recommended to Congress to settle the
business. 2. Of having meddled with politics in opposing his election
in 1832, and of having, with this purpose, enlarged its loans and
discounts twenty-eight and a half millions. The Bank replies that the
statement is incorrect; that its books show, that its available means
having been augmented, between January and May, 1831, ten millions,
and the requisitions of commerce having increased, it had judged
it expedient to extend its credits seventeen and a half millions,
so that the actual extension of its operations was only four and a
half millions. 3. Of having attempted to corrupt the public press,
either by printing a great number of pamphlets, or by gaining over the
newspapers. The Bank answers to this charge, that it has a perfect
right to defend itself by the press, against the continual attacks upon
it to which the press gives currency, that it may certainly be allowed
to reprint the speeches delivered in its favor in Congress, or essays
in which questions of banking are luminously treated, such as that
by the celebrated Mr Gallatin, who was twelve years Secretary of the
Treasury, and afterward minister to France. As to the vague imputation
of attempting to corrupt a press, which pours forth such a number of
journals as the press of the United States, (see _Note_ 8, at the end
of the volume,) it does not deserve a serious answer.
If a European government, from motives of this character, on facts thus
destitute of proof, should attempt to destroy an institution essential
to the prosperity of the country, the cry of despotism would be raised
on all sides. If the state were itself interested in the institution
to the amount of one fifth of its capital (7 millions of dollars),
many persons would charge such an attempt not only with violence, but
with folly. In the United States the numerical majority, which is the
majority of electors, applauded General Jackson's campaign against the
Bank almost as enthusiastically as his campaign at New Orleans. The
military success of General Jackson, his honesty, his iron firmness,
have given him an astonishing popularity. The Bank, on the contrary,
in spite of its daily services, (see _Note_ 9, at the end of the
volume,) is unpopular; it is so on account of the popular hatred of
the Banking System, on account of that jealousy, which, in a land of
perfect equality and suspicious democracy, follows in the steps of
wealth and pomp; it is so because its extensive privileges shock all
republican feelings. In the United States, in spite of the general
habits and laws of equality, there is a sort of aristocracy founded
on knowledge or on commercial distinction. This aristocracy, somewhat
prone to entertain a contempt for the vulgar multitude, causes a strong
reaction against itself in the popular mind, and as it supports the
Bank by its influence and its writings, this is enough, of itself, to
set the pure democracy against the institution. Add to this, that the
Bank, irritated by the hostile demonstrations of the administration,
has sometimes answered it by angry acts of reprisal, not grave in
themselves, but unfortunate in their consequences, and of which its
adversaries have adroitly availed themselves to excite the popular
passions. Although the Bank has the majority of the Senate in its
favor, the chances are now against it. Unless the multitude, which now
shouts HURRAH FOR JACKSON! without reflection, shall be led, between
this and March, 1836, when its charter expires, to reflect seriously on
the matter, it will disappear, until a new experience shall again prove
that it is impossible to get along without it.
Thus, at the very moment when the English Reform ministry is renewing
the charter and confirming the privileges of the Bank of England,
with the approbation of all Europe, here a compact mass, in which,
indeed, the enlightened do not form the majority, but in which,
notwithstanding, some are included, deals the death-blow to a similar
institution, tried and proved by long services. Thus, while one of the
greatest, perhaps, in an economical point of view, the very greatest
of the benefits which France could receive, would be the establishment
of a system of banks, connected with each other as the twenty branches
of the Bank of the United States are with the mother bank, America
is about to witness, if not the death, at least the suspension of
an institution, that has been fruitful of so much good, without the
slightest immediate loss of popularity by those who are doing the work
of destruction. So goes the world in the United States. The history of
this affair shows that the political springs are here wholly different
from those that operate in Europe, and that nevertheless, intrigue and
petty hate have free course here as well as elsewhere.