NOTE 6--page 38.
All the banks in the United States, like the Bank of France in Paris,
are at once banks of discount and loan, and banks of deposit and
circulation. Almost the whole currency of this country consists of
paper-money, the metals being chiefly in the the vaults of the banks,
which cannot dispense with them, because their bills are payable on
demand in gold and silver.
The old Bank of the United States, founded in 1791, had a capital of
ten million dollars, the Federal government holding one fifth of the
stock. The present Bank was incorporated in 1816, with the right of
establishing any number of branches. The Bank of England also has
branches in Manchester, Birmingham, Liverpool, Leeds, Gloucester,
Bristol, Hull, Newcastle, Norwich, Swansea, and Exeter. The Bank of
France has but two branches, one at St. Etienne and the other at
Rheims, both established since 1836.
The capital of the Bank of the United States is 35,000,000, in 350,000
shares of 100 dollars each. That of the Bank of England is 11,000,000
pounds, divided into shares of one hundred pounds; and that of the Bank
of France is 90,000,000 francs, in shares of 1000 francs, of which
22,100 are held by the Bank itself. The United States' Bank stock was
at a premium of 25 to 30 per cent. before General Jackson began his war
upon it, that of the Bank of France is at an advance of 129 percent.,
and that of the Bank of England at 116 per cent. advance.
The operations of the Bank of the United States consist in discounting
commercial paper with two names, in making advances upon public stock
and other securities, and in trading in the precious metals. The
Bank of France discounts commercial paper with three names, or with
two names and a deposit of Bank stock as collateral security. It is
at present authorised to advance four-fifths on public stock on the
sole guarantee of the depositor. It also makes advances on deposits
of bullion and foreign coins, charging a commission of one eighth for
forty-five days, or one per cent. a year. The commercial attributes of
the Bank of England are still more limited than those of the Bank of
France. It makes no advances on public securities, except while the
transfer books are closed, which occurs for a certain period in London.
The Bank of the United States discounts at the rate of six per cent.;
the Bank of France at four per cent.; and the Bank of England at
different rates, but rarely at less than four per cent., which is high
in London. In 1836, the rate was advanced to four and a half and five
per cent. The Bank of the United States effects foreign and domestic
exchanges; the Bank of England only domestic exchange, which it does
without charge for those who have an account open with it; and the Bank
of France operates neither.
The circulation of the Bank of the United States has varied within late
years from ten to twenty millions; in October 1835, it was twentyfive
millions, consisting chiefly of five and ten dollar notes. Of late
years the circulation of the Bank of England has amounted to about
100 million dollars. Since 1830, the Bank of France has usually had a
circulation of forty millions, so that the two last institutions play
a more important part as banks of circulation, than the first. In the
United States, the five or six hundred local banks, whose aggregate
circulation is five or six times greater than that of the United
States' Bank, perform this service. This coëxistence of more than five
hundred distinct currencies is the great defect in the financial system
of this country. The joint-stock banks, which have been of late much
multiplied in England, tend to introduce the same confusion into that
country.
The Bank of the United States has generally in its vaults about ten
millions in specie, but during the struggle with General Jackson, it
had, at times, a sum equal to its bills in circulation, or from sixteen
to eighteen millions. The Bank of England endeavours to keep on hand
from forty to fifty millions, but it sometime sinks as low as thirty.
The Bank of France always has at least twenty and sometimes more than
forty millions; in 1832, it had fifty-three millions, or more than its
whole paper circulation.
The Bank of the United States does not discount notes of above four
months' date, although this restriction is voluntary; the great mass of
its discounts is on paper of two months date. The Banks of France and
England cannot discount bills of more than 90 days date.
The bills of the United States Bank circulate throughout the Union;
the revenue officers are obliged to receive them on the same footing
as specie. The Bank, in return, is obliged to redeem them in specie
on demand, under penalty of paying interest on the sum demanded at
the rate of 12 per cent. per annum, and of forfeiting its charter. It
is not, however, bound to redeem the bills of the branches, except
at their respective counters, although it does so in fact. The bills
of the Bank of England are a legal tender in England, and with the
exception of those of the branches, are redeemable in gold and silver
only in London. The bills of the Bank of France are current only in
Paris, and are not there a legal tender.
The Bank of the United States and the Bank of France only issue bills
payable to bearer; the Bank of England has a certain amount of Bank
post-bills, or bills payable to order at seven days sight, being
equivalent to about one tenth or one twelfth of its whole circulation.
The Bank of the United States receives deposits, on which it pays no
interest. The Scotch banks pay interest on deposits at the rate of 2 to
2-1/2 per cent. The Banks of England and France do not pay interest on
deposits, but the latter gets bills on Paris cashed for its depositors
without charge.
The number of accounts current opened by the Bank of the United States
is indefinite; in that country and Scotland almost all persons have
an account with the banks, and are thus freed from the necessity of
keeping any considerable sums on hand. They hardly keep enough in
the house to defray the expenses of the household for a few days,
and payments are made by checks on a bank. The banks are, therefore,
the cashiers of the whole community. This concentration of the whole
disposable fund of the country in the banks, gives them the means of
extending their operations greatly, and renders the capital, which
would otherwise be scattered about and lie idle, active and productive.
The dividends of the Bank of the United States have been regularly at
the rate of seven per cent.; those of the Bank of France vary from
eight to ten on the original capital; those of the Bank of England
are at present eight per cent. on the nominal capital, which is
the original capital successively modified by acts of parliament.
Independently of the ordinary dividends, which were originally seven
per cent., afterwards rose to ten, and are now eight, the Bank of
England has made several extraordinary dividends, and it increased
the nominal capital on which the dividends are paid, twentyfive per
cent. in 1816. Mr McCulloch makes the total sum of the extraordinary
dividends and of the reserved profits carried to the extension of
the capital, from 1799 to 1832, eighty-two millions, which with the
reimbursements required by the new charter, amounts to one hundred
and five millions. The Bank of France has divided beyond its ordinary
dividends, the sum of four and a half millions.
The Bank of the United States, previous to 1834, was charged with
the keeping of the public moneys, which were remitted to it by the
collectors and receivers and of which it was the legal depository,
with the transfer of funds for the service of the Treasury, and with
the payments on the public debt and of pensions. It is forbidden to
lend more than 500,000 dollars to the Federal government, and more
than 50,000 to any State. In this respect it differs from the Banks
of France and England, which make, and especially once made, enormous
advances to the state. This is the principal object of the Bank of
England, the whole capital of which is lent to the government at the
rate of three per cent. Besides this the Bank of England receives the
Exchequer Bills, and the Bank of France the Treasury Certificates
(_bons du Tresor_), which bear a low rate of interest. These banks have
made inconceivable loans to the state in time of war; in 1814, the
advances of the Bank of England amounted to 165 millions, inclusive
of the public deposits, which sometimes amounted to 60 millions.
The Bank of France, however, has at present little connexion with
the government, and has, therefore, greatly extended its commercial
operations. In 1836, it had on hand notes to the value of 27 million
dollars, without reckoning four millions advanced on deposits of public
funds; from 1830 to 1835 the amount had not exceeded seventeen millions.
The local or State banks in the United States are organized on
principles analogous to those of the National Bank. They are
incorporated companies, receiving their corporate privileges from the
States, and, therefore, confined to the limits of the State. Sometimes
their bills are not current out of the town or county in which they
are situated. They are institutions of credit and circulation almost
exclusively for the use of merchants. Not having the resource of
exchanges, and rarely having any deposits, they aim to enlarge their
profits, by extending their circulation through excessive discounts
and loans, which often floods the country with an excess of paper
money. Their capitals seldom exceed one million dollars, and are often
much less; but several have lately been established in the South with
capitals of from three to ten millions.
In England the private bankers have the right of emitting bills payable
to bearer, except, if there are less than six partners in the house,
within the distance of sixty miles of London; in point of fact there
are none issued within that space. The bills issued by private bankers
amount to about 8,500,000 pounds. In Paris, the Bank of France has the
exclusive privilege of issuing bills payable to bearer.
The joint stock banks in England are not chartered companies, nor are
they under any control. All the partners are personally responsible.
These country banks are very numerous, and they offer, perhaps, less
security than the American State banks. In all times of crisis, in
1792-93, 1814-15-16, 1825-26, many of them have become bankrupts or
suspended payment; in 1816, 240 were obliged to take one of these
alternatives. In 1809 their issues amounted to 24 million pounds; in
1821-23, they had fallen eight millions, and in 1825, had again risen
to fourteen millions. Since the suppression of notes of less than
five pounds, they have been much reduced. At present (1836), these
institutions are becoming multiplied to such a degree as to inspire
serious alarm in prudent men.
NOTE 7--page 49.
_Failures in the United States._
It would be excessively unjust to the Americans not to acknowledge that
they are improving daily in respect to failures. In a new country it is
natural that a failure should be little thought of, because every thing
is necessarily an experiment, and all speculation is a game of hazard.
The public is very indulgent on this point, because it considers a
failure what it really is, nineteen times out of twenty, a misfortune
and not a fraud. The bankrupt is looked upon as a wounded soldier, who
is to be treated with sympathy, and not with contempt. Congress has
the power of passing a bankrupt law, but it has not yet exercised
this power, and the different States have made temporary provisions
for the case, which treat the insolvent debtor with great indulgence,
discharging him from any further obligation towards his creditors on
his giving up all his property for their benefit. It is felt that too
much severity in regard to failures would have the tendency to check
the spirit of enterprise, which is the life of the country. None of
those rigourous provisions which disgrace French legislation and
endanger the interests of creditors, exist here; and if the lenity of
the laws is sometimes abused, the inconvenience is much less than that
caused by the harshness of ours.
In the large maritime towns, however, it is felt, that if bankruptcy
is not a disgrace, it is at least a private and public calamity, which
is to be averted by every exertion. The history of the great fire in
New York in 1835 affords ample proof of this. The amount of the loss
exceeded fifteen millions, and the insurance companies found themselves
unable to meet their engagements. On the receipt of the news in Europe,
there was not a merchant who did not tremble for his American debts;
for in Europe, in general, and in France, in particular, such an
event would have deprived the sufferers of all credit, of all means
of repairing their losses. In France the singular custom prevails
of offering you credit, if you do not need it; but if you stand in
want of it, you will get none. In the United States, on the contrary,
immediately after this disaster, the President of the United States
Bank hastens to place two millions at the disposal of the New York
merchants, and the banks in general give out that they shall discount
the paper of the sufferers in preference.
Although the sphere of the public authorities in the United States is
very narrow, the corporation of New York and the State government,
rivalled each other in offers of assistance; the former offered an
advance of six millions, not to individuals, as was done in France in
1830, but to the insurance companies, whose ruin would have led to a
general bankruptcy; it thus strengthened the hands of commerce, by
relieving its citadel. Even Congress, which is not allowed to take a
step out of its little district, and is scarcely permitted to notice
what is going on beyond the Capitol, was moved, and extended the term
of payment of custom dues. The result of this admirable co-operation
of individuals, companies, and public authorities was to prevent any
considerable failures.
The Americans have a courage in presence of commercial disasters, like
that of the soldier on the field of battle. In a critical juncture,
they face bankruptcy, as old grenadiers march upon a battery under a
fire of grape-shot. If it is true that commerce is to supplant war in
the future, it must be confessed that the Americans are more advanced
on the march than we are; for they have applied all their energies and
qualities to commerce, whilst we still devote ours to war. They have
discovered a new sort of courage which produces and enriches; we shine
only by that courage which perishes or destroys.
The merit of this new spirit does not belong exclusively to the
Americans; they had the germ in their blood, and have received the
gift from the mother country. At the period of the late calamity,
the English were no more subject to a panic terrour than their
New York descendants.--It is within my knowledge, that American
merchants established in Paris and having houses in the United States,
having applied to London bankers for a continuation of credit, were
immediately assured, that not only the former amount of credit should
be continued, but that they should be allowed an unlimited credit in
order to enable them to repair their losses. Some French bankers, on
the contrary, similarly situated, hastened to cut off the credit they
had previously given.
In a country organized for commerce, and having the proper institutions
of credit, the money and merchandise of the merchant, are not his
only capital; the most valuable part of his capital consists of his
experience, his correspondents and connexions, the weight of his name.
This constitutes a moral capital, which conflagrations cannot destroy,
nor accidents of any kind injure. In New York, by the aid of this
moral capital, on which a high value is set in commercial countries,
a merchant who has not property to the amount of more than 50,000
dollars, operates as if he had five or six times as much. In Paris,
the same man, with the same fortune, would operate with only about
twice as much. Thus the wealth of the United States increases in a much
faster ratio than in France.
NOTE 8--page 54.
The American newspapers are very numerous, but in consequence of their
great number their circulation is comparatively small. There are few
daily papers, whose circulation exceeds 2,000, and not one, which
exceeds 4,000; that of most of the newspapers is not more than 400 or
500. The American newspapers have little resemblance to the French and
English. They are chiefly mere advertising sheets; they do not direct
public opinion, they follow it. This local character does not allow
of their having much influence out of their particular district. In
New York, only the city newspapers are read; in New Orleans, those
of New Orleans are the only ones generally seen; whilst in France
those of Paris, and in England those of London are read every where.
The Globe and the National Intelligencer of Washington are, however,
pretty generally circulated. Newspapers in the United States are not
powers, they are mere instruments of publicity within the reach of all.
They are consulted for the news, not for opinions. The profession of
a writer does not stand so high in England as in France, and is less
honourable in the United States, than in England. With the exception of
a very few newspapers, at the head of which are the New York American
edited by Charles King, and the Philadelphia National Gazette, edited
by Robert Walsh, the American press occupies a low rank in the social
scale.
Notwithstanding their large size, the American newspapers are
low-priced; the cause is plain enough; the profits are derived chiefly
from advertisements, and the expenses of editing are inconsiderable,
as there is generally but one editor. There is no stamp duty; but the
postage on them is higher than in France.[EH] The circulation of some
of the French newspapers exceeds 10,000; and some cheap publications
have lately had a circulation of 90,000 or 100,000.
NOTE 9--page 53.
In 1832, the transfer of funds between different points of the Union,
or between the Union and foreign countries, effected by the Bank of the
United States, amounted to 255 millions, of which 241,718,710 was for
domestic, and 13,456,737 for foreign transactions. The Bank received
only 217,249 dollars for commissions on this vast sum.
NOTE 10--page 64.
_Specie and Paper Money._
The quantity of gold and silver coined in France with the new die,
amounted, up to 1836, to about 750 million dollars, of which three
fourths were in silver. It is not probable that more than one fourth of
that sum has been melted and exported; there would then remain about
550 millions. A part of this immense sum is out of circulation, and is
buried in the coffers of individuals or in the pockets of the poor, who
do not dare trust their savings to any person or institution.
In the United States, in 1834, the 405 local banks from which official
or semi-official statements had been received, had 65 million dollars
paper in circulation, and 14,250,000 dollars in specie in their
vaults. There were beside, 101 banks, estimated to have in circulation
12,650,000 dollars of paper, and 2,825,000 dollars in specie on hand.
The Bank of the United States had at that time a circulation of
10,300,000 dollars, and specie to the amount of 13,865,000 dollars. The
whole currency of the United States, exclusive of the small amount of
specie in the hands of individuals, amounted, therefore, to 88 millions
in paper and specie. At this time, the banks had withdrawn a large
amount of their bills from circulation, their issues before the war
on the Bank having exceeded 100 millions. Since 1834, the amount of
specie in the United States has been considerably increased, several of
the States having prohibited the emission of bills of less than five
dollars, a measure, which would tend to promote the use of the metals.
The following statement, showing the quantity of paper money in
circulation in the United Kingdom at the end of 1833, is chiefly from
McCulloch's Dictionary of Commerce.
Of Bank of England £19,500,000
Of Branches of do. 3,300,000
Of Private Bankers 8,500,000
Of English Country Banks 1,500,000[EI]
Of Scotch Banks 2,000,000
Of Irish Banks 7,500,000
-----------
Total 42,300,000
At the same time the amount of the precious metals in circulation
and in the banks, was estimated at 45,800,000 pounds, of which seven
millions were in silver.
NOTE 11[EJ]--page 96. _Cherokees and other Indians._ Omitted.
NOTE 12[EJ]--page 98. _Public Lands._ Omitted.
NOTE 13[EJ]--page 119. _Temperance Societies._ Omitted.
NOTE 14--page 132.
_Cotton Manufacture._