BANKRUPT ACT FOR BANKS: MR. BENTON'S SPEECH.
The power of Congress to pass bankrupt laws is expressly given in
our constitution, and given without limitation or qualification.
It is the fourth in the number of the enumerated powers, and runs
thus: "Congress shall have power to establish a uniform rule of
naturalization, and uniform laws on the subject of bankruptcies
throughout the United States." This is a full and clear grant of
power. Upon its face it admits of no question, and leaves Congress
at full liberty to pass any kind of bankrupt laws they please,
limited only by the condition, that whatever laws are passed, they
are to be uniform in their operation throughout the United States.
Upon the face of our own constitution there is no question of our
right to pass a bankrupt law, limited to banks and bankers; but the
senator from Massachusetts [Mr. WEBSTER] and others who have spoken
on the same side with him, must carry us to England, and conduct us
through the labyrinth of English statute law, and through the chaos
of English judicial decisions, to learn what this word bankruptcies,
in our constitution, is intended to signify. In this he, and they,
are true to the habits of the legal profession--those habits which,
both in Great Britain and our America, have become a proverbial
disqualification for the proper exercise of legislative duties. I
know, Mr. President, that it is the fate of our lawyers and judges
to have to run to British law books to find out the meaning of the
phrases contained in our constitution; but it is the business of
the legislator, and of the statesman, to take a larger view--to
consider the difference between the political institutions of the
two countries--to ascend to first principles--to know the causes of
events--and to judge how far what was suitable and beneficial to
one might be prejudicial and inapplicable to the other. We stand
here as legislators and statesmen, not as lawyers and judges; we
have a grant of power to execute not a statute to interpret; and
our first duty is to look to that grant, and see what it is; and
our next duty is to look over our country, and see whether there is
any thing in it which requires the exercise of that grant of power.
This is what our President has done, and what we ought to do. He
has looked into the constitution, and seen there an unlimited grant
of power to pass uniform laws on the subject of bankruptcies; and
he has looked over the United States, and seen what he believes to
be fit subjects for the exercise of that power, namely, about a
thousand banks in a state of bankruptcy, and no State possessed of
authority to act beyond its own limits in remedying the evils of a
mischief so vast and so frightful. Seeing these two things--a power
to act, and a subject matter requiring action--the President has
recommended the action which the constitution permits, and which
the subject requires; but the senator from Massachusetts has risen
in his place, and called upon us to shift our view; to transfer our
contemplation--from the constitution of the United States to the
British statute book--from actual bankruptcy among ourselves to
historical bankruptcy in England; and to confine our legislation to
the characteristics of the English model.
As a general proposition, I lay it down that Congress is not
confined, like jurists and judges, to the English statutory
definitions, or the Nisi Prius or King's Bench construction
of the phrases known to English legislation, and used in our
constitution. Such a limitation would not only narrow us down to a
mere lawyer's view of a subject, but would limit us, in point of
time, to English precedents, as they stood at the adoption of our
constitution, in the year 1789. I protest against this absurdity,
and contend that we are to use our granted powers according to
the circumstances of our own country, and according to the genius
of our republican institutions, and according to the progress of
events and the expansion of light and knowledge among ourselves.
If not, and if we are to be confined to the "usual objects,"
and the "usual subjects," and the "usual purposes," of British
legislation at the time of the adoption of our constitution, how
could Congress ever make a law in relation to steamboats, or to
railroad cars, both of which were unknown to British legislation
in 1789; and therefore, according to the idea that would send us
to England to find out the meaning of our constitution, would not
fall within the limits of our legislative authority. Upon their
face, the words of the constitution are sufficient to justify the
President's recommendation, even as understood by those who impugn
that recommendation. The bankrupt clause is very peculiar in its
phraseology, and the more strikingly so from its contrast with
the phraseology of the naturalization clause, which is coupled
with it. Mark this difference: there is to be a uniform rule of
naturalization: there are to be uniform laws on the subject of
bankruptcies. One is in the singular, the other in the plural; one
is to be a rule, the other are to be laws; one acts on individuals,
the other on the subject; and it is bankruptcies that are, and not
bankruptcy that is, to be the objects of these uniform laws.
As a proposition, now limited to this particular case, I lay it
down that we are not confined to the modern English acceptation
of this term _bankrupt_; for it is a term, not of English, but of
Roman origin. It is a term of the civil law, and borrowed by the
English from that code. They borrowed from Italy both the name
and the purpose of the law; and also the first objects to which
the law was applicable. The English were borrowers of every thing
connected with this code; and it is absurd in us to borrow from a
borrower--to copy from a copyist--when we have the original lender
and the original text before us. _Bancus_ and _ruptus_ signifies a
broken bench; and the word _broken_ is not metaphorical but literal,
and is descriptive of the ancient method of cashiering an insolvent
or fraudulent banker, by turning him out of the exchange or market
place, and breaking the table bench to pieces on which he kept his
money and transacted his business. The term _bankrupt_, then, in the
civil law from which the English borrowed it, not only applied to
bankers, but was confined to them; and it is preposterous in us to
limit ourselves to an English definition of a civil law term.
Upon this exposition of our own constitution, and of the civil law
derivation of this term _bankrupt_, I submit that the Congress
of the United States is not limited to the English judicial or
statutory acceptation of the term; and so I finish the first point
which I took in the argument. The next point is more comprehensive,
and makes a direct issue with the proposition of the senator from
Massachusetts, [Mr. WEBSTER.] His proposition is, that we must
confine our bankrupt legislation to the usual objects, the usual
subjects, and the usual purposes of bankrupt laws in England; and
that currency (meaning paper money and shin-plasters of course), and
banks, and banking, are not within the scope of that legislation.
I take issue, sir, upon all these points, and am ready to go with
the senator to England, and to contest them, one by one, on the
evidences of English history, of English statute law, and of English
judicial decision. I say English; for, although the senator did not
mention England, yet he could mean nothing else, in his reference to
the usual objects, usual subjects, and usual purposes of bankrupt
laws. He could mean nothing else. He must mean the English examples
and the English practice, or nothing; and he is not a person to
speak, and mean nothing.
Protesting against this voyage across the high seas, I nevertheless
will make it, and will ask the senator on what act, out of the
scores which Parliament has passed upon this subject, or on what
period, out of the five hundred years that she has been legislating
upon it, will he fix for his example? Or, whether he will choose
to view the whole together; and out of the vast chaotic and
heterogeneous mass, extract a general power which Parliament
possesses, and which he proposes for our exemplar? For myself, I am
agreed to consider the question under the whole or under either of
these aspects, and, relying on the goodness of the cause, expect a
safe deliverance from the contest, take it in any way.
And first, as to the acts passed upon this subject; great is their
number, and most dissimilar their provisions. For the first two
hundred years, these acts applied to none but aliens, and a single
class of aliens, and only for a single act, that of flying the
realm to avoid their creditors. Then they were made to apply to
all debtors, whether natives or foreigners, engaged in trade or
not, and took effect for three acts: 1st, flying the realm; 2d,
keeping the house to avoid creditors; 3d, taking sanctuary in a
church to avoid arrest. For upwards of two hundred years--to be
precise, for two hundred and twenty years--bankruptcy was only
treated criminally, and directed against those who would not face
their creditors, or abide the laws of the land; and the remedies
against them were not civil, but criminal; it was not a distribution
of the effects, but corporal punishment, to wit: imprisonment and
outlawry.[1] The statute of Elizabeth was the first that confined
the law to merchants and traders, took in the unfortunate as well
as the criminal, extended the acts of bankruptcy to inability as
well as to disinclination to pay, discriminated between innocent and
fraudulent bankruptcy; and gave to creditors the remedial right to
a distribution of effects. This statute opened the door to judicial
construction, and the judges went to work to define by decisions,
who were traders, and what acts constituted the fact, or showed an
intent to delay or to defraud creditors. In making these decisions,
the judges reached high enough to get hold of royal companies, and
low enough to get hold of shoemakers; the latter upon the ground
that they bought the leather out of which they made the shoes;
and they even had a most learned consultation to decide whether a
man who was a landlord for dogs, and bought dead horses for his
four-legged boarders, and then sold the skins and bones of the horse
carcases he had bought, was not a trader within the meaning of the
act; and so subject to the statute of bankrupts. These decisions of
the judges set the Parliament to work again to preclude judicial
constructions by the precision, negatively and affirmatively, of
legislative enactment. But, worse and worse! Out of the frying-pan
into the fire. The more legislation the more construction; the more
statutes Parliament made, the more numerous and the more various
the judicial decisions; until, besides merchants and traders, near
forty other descriptions of persons were included; and the catalogue
of bankruptcy acts, innocent or fraudulent, is swelled to a length
which requires whole pages to contain it. Among those who are now
included by statutory enactment in England, leaving out the great
classes comprehended under the names of merchants and traders, are
bankers, brokers, factors, and scriveners; insurers against perils
by sea and land; warehousemen, wharfingers, packers, builders,
carpenters, shipwrights and victuallers; keepers of inns, hotels,
taverns and coffee-houses; dyers, printers, bleachers, fullers,
calendrers, sellers of cattle or sheep; commission merchants and
consignees; and the agents of all these classes. These are the
affirmative definitions of the classes liable to bankruptcy in
England; then come the negative; and among these are farmers,
graziers, and common laborers for hire; the receivers general of
the king's taxes, and members or subscribers to any incorporated
companies established by charter of act of Parliament. And among
these negative and affirmative exclusions and inclusions, there
are many classes which have repeatedly changed position, and found
themselves successively in and out of the bankrupt code. Now, in
all this mass of variant and contradictory legislation, what part
of it will the senator from Massachusetts select for his model?
The improved, and approved parts, to be sure! But here a barrier
presents itself--an impassable wall interposes--a veto power
intervenes. For it so happens that the improvements in the British
bankrupt code, those parts of it which are considered best, and most
worthy of our imitation, are of modern origin--the creations of the
last fifty years--actually made since the date of our constitution;
and, therefore, not within the pale of its purview and meaning.
Yes, sir, made since the establishment of our constitution, and,
therefore, not to be included within its contemplation; unless
this doctrine of searching into British statutes for the meaning
of our constitution, is to make us search forwards to the end of
the British empire, as well as search backwards to its beginning.
Fact is, that the actual bankrupt code of Great Britain--the one
that preserves all that is valuable, that consolidates all that is
preserved, and improves all that is improvable, is an act of most
recent date--of the reign of George IV.; and not yet a dozen years
old. Here, then, in going back to England for a model, we are cut
off from her improvements in the bankrupt code, and confined to take
it as it stood under the reign of the Plantagenets, the Tudors,
the Stuarts, and the earlier reigns of the Brunswick sovereigns.
This should be a consideration, and sufficiently weighty to turn
the scale in favor of looking to our own constitution alone for the
extent and circumscription of our powers.
[1] _Preamble to the act of 34th of_ HENRY VIII.
Whereas divers and sundry persons craftily obtained into their hands
great substance of other men's goods, do suddenly flee to parts
unknown, or keep their houses, not minding to pay or restore to any
of their creditors, their debts and duties, but at their own wills
and own pleasures consume the substance obtained by credit of other
men for their own pleasures and delicate living, against all reason,
equity, and good conscience.
But let us continue this discussion upon principles of British
example and British legislation. We must go to England for one
of two things; either for a case in point, to be found in some
statute, or a general authority, to be extracted from a general
practice. Take it either way, or both ways, and I am ready and able
to vindicate, upon British precedents, our perfect right to enact a
bankrupt law, limited in its application to banks and bankers. And
first, for a case in point, that is to say, an English statute of
bankruptcy, limited to these lords of the purse-strings: we have
it at once, in the first act ever passed on the subject--the act
of the 30th year of the reign of Edward III., against the Lombard
Jews. Every body knows that these Jews were bankers, usually formed
into companies, who, issuing from Venice, Milan, and other parts
of Italy, spread over the south and west of Europe, during the
middle ages; and established themselves in every country and city in
which the dawn of reviving civilization, and the germ of returning
industry, gave employment to money, and laid the foundation of
credit. They came to London as early as the thirteenth century,
and gave their name to a street which still retains it, as well
as it still retains the particular occupation, and the peculiar
reputation, which the Lombard Jews established for it. The first
law against bankrupts ever passed in England, was against the
banking company composed of these Jews, and confined exclusively
to them. It remained in force two hundred years, without any
alteration whatever, and was nothing but the application of the
law of their own country to these bankers in the country of their
sojournment--the Italian law, founded upon the civil law, and called
in Italy _banco rotto_, broken bank. It is in direct reference to
these Jews, and this application of the exotic bankrupt law to them,
that Sir Edward Coke, in his institutes, takes occasion to say that
both the name and the wickedness of bankruptcy were of foreign
origin, and had been brought into England from foreign parts. It
was enacted under the reign of one of the most glorious of the
English princes--a reign as much distinguished for the beneficence
of its civil administration as for the splendor of its military
achievements. This act of itself is a full answer to the whole
objection taken by the senator from Massachusetts. It shows that,
even in England, a bankrupt law has been confined to a single class
of persons, and that class a banking company. And here I would be
willing to close my speech upon a compromise--a compromise founded
in reason and reciprocity, and invested with the equitable mantle
of a mutual concession. It is this: if we must follow English
precedents, let us follow them chronologically and orderly. Let
us begin at the beginning, and take them as they rise. Give me a
bankrupt law for two hundred years against banks and bankers; and,
after that, make another for merchants and traders.
The senator from Massachusetts [Mr. WEBSTER] has emphatically
demanded, how the bankrupt power could be fairly exercised by
seizing on corporations and bankers, and excluding all the other
usual subjects of bankrupt laws? I answer, by following the example
of that England to which he has conducted us; by copying the act of
the 30th of Edward III., by going back to that reign of heroism,
patriotism, and wisdom; that reign in which the monarch acquired as
much glory from his domestic policy as from his foreign conquests;
that reign in which the acquisition of dyers and weavers from
Flanders, the observance of law and justice, and the encouragement
given to agriculture and manufactures, conferred more benefit
upon the kingdom, and more glory upon the king, than the splendid
victories of Poictiers, Agincourt, and Cressy.
But the senator may not be willing to yield to this example, this
case in point, drawn from his own fountain, and precisely up to the
exigency of the occasion. He may want something more; and he shall
have it. I will now take the question upon its broadest bottom and
fullest merits. I will go to the question of general power--the
point of general authority--exemplified by the general practice
of the British Parliament, for five hundred years, over the whole
subject of bankruptcy. I will try the question upon this basis; and
here I lay down the proposition, that this five hundred years of
parliamentary legislation on bankruptcy establishes the point of
full authority in the British Parliament to act as it pleased on
the entire subject of bankruptcies. This is my proposition; and,
when it is proved, I shall claim from those who carry me to England
for authority, the same amount of power over the subject which the
British Parliament has been in the habit of exercising. Now, what
is the extent of that power? Happily for me, I, who have to speak,
without any inclination for the task; still more happily for those
who have to hear me, peradventure without profit or pleasure;
happily for both parties, my proposition is already proved, partly
by what I have previously advanced, and fully by what every senator
knows. I have already shown the practice of Parliament upon this
subject, that it has altered and changed, contracted and enlarged,
put in and left out, abolished and created, precisely as it pleased.
I have already shown, in my rapid view of English legislation on
this subject, that the Parliament exercised plenary power and
unlimited authority over every branch of the bankrupt question;
that it confined the action of the bankrupt laws to a single class
of persons, or extended it to many classes; that it was sometimes
confined to foreigners, then applied to natives, and that now it
comprehends natives, aliens, denizens, and women; that at one time
all debtors were subject to it; then none but merchants and traders;
and now, besides merchants and traders, a long list of persons who
have nothing to do with trade; that at one time bankruptcy was
treated criminally, and its object punished corporeally, while now
it is a remedial measure for the benefit of the creditors, and the
relief of unfortunate debtors; and that the acts of the debtor
which may constitute him a bankrupt, have been enlarged from
three or four glaring misdeeds, to so long a catalogue of actions,
divided into the heads of innocent and fraudulent; constructive
and positive; intentional and unintentional; voluntary and forced;
that none but an attorney, with book in hand, can pretend to
enumerate them. All this has been shown; and, from all this, it is
incontestable that Parliament can do just what it pleases on the
subject; and, therefore, our Congress, if referred to England for
its powers, can do just what it pleases also. And thus, whether we
go by the words of our own constitution, or by a particular example
in England, or deduce a general authority from the general practice
of that country, the result is still the same: we have authority to
limit, if we please, our bankrupt law to the single class of banks
and bankers.
The senator from Massachusetts [MR. WEBSTER] demands whether
bankrupt laws ordinarily extend to corporations, meaning moneyed
corporations. I am free to answer that, in point of fact, they do
not. But why? because they ought not? or because these corporations
have yet been powerful enough, or fortunate enough, to keep their
necks out of that noose? Certainly the latter. It is the power of
these moneyed corporations in England, and their good fortune in
our America, which, enabling them to grasp all advantages on one
hand, and to repulse all penalties on the other, has enabled them
to obtain express statutory exemption from bankrupt liabilities
in England; and to escape, thus far, from similar liabilities in
the United States. This, sir, is history, and not invective; it is
fact, and not assertion; and I will speedily refresh the senator's
memory, and bring him to recollect why it is, in point of fact,
that bankrupt laws do not usually extend to these corporations.
And, first, let us look to England, that great exemplar, whose
evil examples we are so prompt, whose good ones we are so slow,
to imitate. How stands this question of corporation unliability
there? By the judicial construction of the statute of Elizabeth,
the partners in all incorporated companies were held subject to
the bankrupt law; and, under this construction, a commission of
bankrupt was issued against Sir John Wolstenholme, a gentleman of
large fortune, who had advanced a sum of money on an adventure in
the East India Company's trade. The issue of this commission was
affirmed by the Court of King's Bench; but this happened to take
place in the reign of Charles II.--that reign during which so little
is found worthy of imitation in the government of Great Britain--and
immediately two acts of Parliament were passed, one to annul the
judgment of the Court of King's Bench in the case of Sir John
Wolstenholme, and the other to prevent any such judgments from being
given in future. Here are copies of the two acts:
FIRST ACT, TO ANNUL THE JUDGMENT.
"Whereas a verdict and judgment was had in the Easter term of
the King's Bench, whereby Sir John Wolstenholme, knight, and
adventurer in the East India Company, was found liable to a
commission of bankrupt only for, and by reason of, a share which
he had in the joint stock of said company: Now, &c., Be it
enacted, That the said judgment be reversed, annulled, vacated,
and for naught held," &c.
SECOND ACT, TO PREVENT SUCH JUDGMENTS IN FUTURE.
"That whereas divers noblemen and gentlemen, and persons of
quality, no ways bred up to trade, do often put in great stocks
of money into the East India and Guinea Company: Be it enacted,
That no persons adventurers for putting in money or merchandise
into the said companies, or for venturing or managing the
fishing trade, called the royal fishing trade, shall be reputed
or taken to be a merchant or trader within any statutes for
bankrupts."
Thus, and for these reasons, were chartered companies and their
members exempted from the bankrupt penalties, under the dissolute
reign of Charles II. It was not the power of the corporations at
that time--for the Bank of England was not then chartered, and the
East India Company had not then conquered India--which occasioned
this exemption; but it was to favor the dignified characters who
engaged in the trade--noblemen, gentlemen, and persons of quality.
But, afterwards, when the Bank of England had become almost the
government of England, and when the East India Company had acquired
the dominions of the Great Mogul, an act of Parliament expressly
declared that no member of any incorporated company, chartered by
act of Parliament, should be liable to become bankrupt. This act was
passed in the reign of George IV., when the Wellington ministry was
in power, and when liberal principles and human rights were at the
last gasp. So much for these corporation exemptions in England; and
if the senator from Massachusetts finds any thing in such instances
worthy of imitation, let him stand forth and proclaim it.
But, sir, I am not yet done with my answer to this question; do
such laws ordinarily extend to corporations at all? I answer, most
decidedly, that they do! that they apply in England to all the
corporations, except those specially excepted by the act of George
IV.; and these are few in number, though great in power--powerful,
but few--nothing but units to myriads, compared to those which are
not excepted. The words of that act are: "Members of, or subscribers
to, any incorporated commercial or trading companies, established
by charter act of Parliament." These words cut off at once the
many ten thousand corporations in the British empire existing by
prescription, or incorporated by letters patent from the king; and
then they cut off all those even chartered by act of Parliament
which are not commercial or trading in their nature. This saves
but a few out of the hundreds of thousands of corporations which
abound in England, Scotland, Wales, and Ireland. It saves, or rather
confirms, the exemption of the Bank of England, which is a trader
in money; and it confirms, also, the exemption of the East India
Company which is, in contemplation of law at least, a commercial
company; and it saves or exempts a few others deriving charters of
incorporation from Parliament; but it leaves subject to the law
the whole wilderness of corporations, of which there are thousands
in London alone, which derive from prescription or letters patent;
and it also leaves subject to the same laws all the corporations
created by charter act of Parliament, which are not commercial
or trading. The words of the act are very peculiar--"charter act
of Parliament;" so that corporations by a general law, without a
special charter act, are not included in the exemption. This answer,
added to what has been previously said, must be a sufficient reply
to the senator's question, whether bankrupt laws ordinarily extend
to corporations? Sir, out of the myriad of corporations in Great
Britain, the bankrupt law extends to the whole, except some half
dozen or dozen.
So much for the exemption of these corporations in England; now
for our America. We never had but one bankrupt law in the United
States, and that for the short period of three or four years. It was
passed under the administration of the elder Mr. Adams, and repealed
under Mr. Jefferson. It copied the English acts including among the
subjects of bankruptcy, bankers, brokers, and factors. Corporations
were not included; and it is probable that no question was raised
about them, as, up to that time, their number was few, and their
conduct generally good. But, at a later date, the enactment of a
bankrupt law was again attempted in our Congress; and, at that
period, the multiplication and the misconduct of banks presented
them to the minds of many as proper subjects for the application
of the law; I speak of the bill of 1827, brought into the Senate,
and lost. That bill, like all previous laws since the time of
George II., was made applicable to bankers, brokers, and factors. A
senator from North Carolina [Mr. BRANCH] moved to include banking
corporations. The motion was lost, there being but twelve votes
for it; but in this twelve there were some whose names must carry
weight to any cause to which they are attached. The twelve were,
Messrs. Barton, Benton, Branch, Cobb, Dickerson, Hendricks, Macon,
Noble, Randolph, Reed, Smith of South Carolina, and White. The whole
of the friends of the bill, twenty-one in number, voted against
the proposition, (the present Chief Magistrate in the number,) and
for the obvious reason, with some, of not encumbering the measure
they were so anxious to carry, by putting into it a new and untried
provision. And thus stands our own legislation on this subject. In
point of fact, then, chartered corporations have thus far escaped
bankrupt penalties, both in England, and in our America; but ought
they to continue to escape? This is the question--this the true and
important inquiry, which is now to occupy the public mind.
The senator from Massachusetts [Mr. WEBSTER] says the object of
bankrupt laws has no relation to currency; that their object is
simply to distribute the effects of insolvent debtors among their
creditors. So says the senator, but what says history? What says the
practice of Great Britain? I will show you what it says, and for
that purpose will read a passage from McCulloch's notes on Smith's
Wealth of Nations. He says:
"In 1814-'15, and '16, no fewer than 240 country banks stopped
payment, and ninety-two commissions of bankruptcy were issued
against these establishments, being at the rate of one
commission against every seven and a half of the total number of
country banks existing in 1813."
Two hundred and forty stopped payment at one dash, and ninety-two
subjected to commissions of bankruptcy. They were not indeed
chartered banks, for there are none such in England, except the
Bank of England; but they were legalized establishments, existing
under the first joint-stock bank act of 1708; and they were banks of
issue. Yet they were subjected to the bankrupt laws, ninety-two of
them in a single season of bank catalepsy; their broken "promises
to pay" were taken out of circulation; their doors closed; their
directors and officers turned out; their whole effects, real and
personal, their money, debts, books, paper, and every thing, put
into the hands of assignees; and to these assignees, the holders of
their notes forwarded their demands, and were paid, every one in
equal proportion--as the debts of the bank were collected, and its
effects converted into money; and this without expense or trouble
to any one of them. Ninety-two banks in England shared this fate
in a single season of bank mortality; five hundred more could be
enumerated in other seasons, many of them superior in real capital,
credit, and circulation, to our famous chartered banks, most of
which are banks of moonshine, built upon each other's paper; and
the whole ready to fly sky-high the moment any one of the concern
becomes sufficiently inflated to burst. The immediate effect of this
application of the bankrupt laws to banks in England, is two-fold:
first, to save the general currency from depreciation, by stopping
the issue and circulation of irredeemable notes; secondly, to do
equal justice to all creditors, high and low, rich and poor, present
and absent, the widow and the orphan, as well as the cunning and the
powerful, by distributing their effects in proportionate amounts to
all who hold demands. This is the operation of bankrupt laws upon
banks in England, and all over the British empire; and it happens to
be the precise check upon the issue of broken bank paper, and the
precise remedy for the injured holders of their dishonored paper
which the President recommends. Here is his recommendation, listen
to it:
"In the mean time, it is our duty to provide all the remedies
against a depreciated paper currency which the constitution
enables us to afford. The Treasury Department, on several former
occasions, has suggested the propriety and importance of a
uniform law concerning bankruptcies of corporations and other
bankers. Through the instrumentality of such a law, a salutary
check may doubtless be imposed on the issues of paper money,
and an effectual remedy given to the citizen, in a way at once
equal in all parts of the Union, and fully authorized by the
constitution."
The senator from Massachusetts says he would not, intentionally,
do injustice to the message or its author; and doubtless he is not
conscious of violating that benevolent determination; but here is
injustice, both to the message and to its author; injustice in not
quoting the message as it is, and showing that it proposes a remedy
to the citizen, as well as a check upon insolvent issues; injustice
to the author in denying that the object of bankrupt laws has any
relation to currency, when history shows that these laws are the
actual instrument for regulating and purifying the whole local paper
currency of the entire British empire, and saving that country
from the frauds, losses, impositions, and demoralization of an
irredeemable paper money.
The senator from Massachusetts says the object of bankrupt laws has
no relation to currency. If he means hard-money currency, I agree
with him; but if he means bank notes, as I am sure he does, then I
point him to the British bankrupt code, which applies to every bank
of issue in the British empire, except the Bank of England itself,
and the few others, four or five in number, which are incorporated
by charter acts. All the joint-stock banks, all the private banks,
all the bankers of England, Scotland, Wales, and Ireland, are
subject to the law of bankruptcy. Many of these establishments are
of great capital and credit; some having hundreds, or even thousands
of partners; and many of them having ten, or twenty, or thirty, and
some even forty branches. They are almost the exclusive furnishers
of the local and common bank note currency; the Bank of England
notes being chiefly used in the great cities for large mercantile
and Government payments. These joint-stock banks, private companies,
and individual bankers are, practically, in the British empire what
the local banks are in the United States. They perform the same
functions, and differ in name only; not in substance nor in conduct.
They have no charters, but they have a legalized existence; they are
not corporations, but they are allowed by law to act in a body; they
furnish the actual paper currency of the great body of the people
of the British empire, as much so as our local banks furnish the
mass of paper currency to the people of the United States. They have
had twenty-four millions sterling (one hundred and twenty millions
of dollars) in circulation at one time; a sum nearly equal to the
greatest issue ever known in the United States; and more than equal
to the whole bank-note circulation of the present day. They are all
subject to the law of bankruptcy, and their twenty-four millions
sterling of currency along with them; and five hundred of them have
been shut up and wound up under commissions of bankruptcy in the
last forty years; and yet the senator from Massachusetts informs us
that the object of bankrupt laws has no relation to currency!
But it is not necessary to go all the way to England to find
bankrupt laws having relation to currency. The act passed in our
own country, about forty years ago, applied to bankers; the bill
brought into the House of Representatives, about fifteen years
ago, by a gentleman then, and now, a representative from the city
of Philadelphia, [Mr. SERGEANT,] also applied to bankers; and the
bill brought into this Senate, ten years ago, by a senator from
South Carolina, not now a member of this body, [General HAYNE,]
still applied to bankers. These bankers, of whom there were many
in the United States, and of whom Girard, in the East, and Yeatman
and Woods, in the West, were the most considerable--these bankers
all issued paper money; they all issued currency. The act, then, of
1798, if it had continued in force, or the two bills just referred
to, if they had become law, would have operated upon these bankers
and their banks--would have stopped their issues, and put their
establishments into the hands of assignees, and distributed their
effects among their creditors. This, certainly, would have been
having some relation to currency: so that, even with our limited
essays towards a bankrupt system, we have scaled the outworks of the
banking empire; we have laid hold of bankers, but not of banks;
we have reached the bank of Girard, but not the Girard Bank; we
have applied our law to the bank of Yeatman and Woods, but not to
the rabble of petty corporations which have not the tithe of their
capital and credit. We have gone as far as bankers, but not as far
as banks; and now give me a reason for the difference. Give me a
reason why the act of 1798, the bill of Mr. SERGEANT, in 1821, and
the bill of General HAYNE, in 1827, should not include banks as well
as bankers. They both perform the same function--that of issuing
paper currency. They both involve the same mischief when they stop
payment--that of afflicting the country with a circulation of
irredeemable and depreciated paper money. They are both culpable in
the same mode, and in the same degree; for they are both violators
of their "promises to pay." They both exact a general credit from
the community, and they both abuse that credit. They both have
creditors, and they both have effects; and these creditors have as
much right to a _pro rata_ distribution of the effects in one case
as in the other. Why, then, a distinction in favor of the bank? Is
it because corporate bodies are superior to natural bodies? because
artificial beings are superior to natural beings? or, rather, is it
not because corporations are assemblages of men; and assemblages are
more powerful than single men; and, therefore, these corporations,
in addition to all their vast privileges, are also to have the
privilege of being bankrupt, and afflicting the country with the
evils of bankruptcy, without themselves being subjected to the laws
of bankruptcy? Be this as it may--be the cause what it will--the
decree has gone forth for the decision of the question--for the
trial of the issue--for the verdict and judgment upon the claim of
the banks. They have many privileges and exemptions now, and they
have the benefit of all laws against the community. They pay no
taxes; the property of the stockholders is not liable for their
debts; they sue their debtors, sell their property, and put their
bodies in jail. They have the privilege of stamping paper money;
the privilege of taking interest upon double, treble, and quadruple
their actual money. They put up and put down the price of property,
labor, and produce, as they please. They have the monopoly of
making the actual currency. They are strong enough to suppress
the constitutional money, and to force their own paper upon the
community, and then to redeem it or not, as they please. And is it
to be tolerated, that, in addition to all these privileges, and all
these powers, they are to be exempted from the law of bankruptcy?
the only law of which they are afraid, and the only one which can
protect the country against their insolvent issues, and give a
fair chance for payment to the numerous holders of their violated
"promises to pay!"
I have discussed, Mr. President, the right of Congress to apply
a bankrupt law to banking corporations; I have discussed it on
the words of our own constitution, on the practice of England,
and on the general authority of Parliament; and on each and every
ground, as I fully believe, vindicated our right to pass the law.
The right is clear; the expediency is manifest and glaring. Of all
the objects upon the earth, banks of circulation are the fittest
subjects of bankrupt laws. They act in secret, and they exact a
general credit. Nobody knows their means, yet every body must trust
them. They send their "promises to pay" far and near. They push
them into every body's hands; they make them small to go into small
hands--into the hands of the laborer, the widow, the helpless,
the ignorant. Suddenly the bank stops payment; all these helpless
holders of their notes are without pay, and without remedy. A few
on the spot get a little; those at a distance get nothing. For each
to sue, is a vexatious and a losing business. The only adequate
remedy--the only one that promises any justice to the body of the
community, and the helpless holders of small notes--is the bankrupt
remedy of assignees to distribute the effects. This makes the real
effects available. When a bank stops, it has little or no specie;
but it has, or ought to have, a good mass of solvent debts. At
present, all these debts are unavailable to the community--they go
to a few large and favored creditors; and those who are most in
need get nothing. But a stronger view remains to be taken of these
debts: the mass of them are due from the owners and managers of
the banks--from the presidents, directors, cashiers, stockholders,
attorneys; and these people do not make themselves pay. They do
not sue themselves, nor protest themselves. They sue and protest
others, and sell out their property, and put their bodies in jail;
but, as for themselves, who are the main debtors, it is another
affair! They take their time, and usually wait till the notes are
heavily depreciated, and then square off with a few cents in the
dollar! A commission of bankruptcy is the remedy for this evil;
assignees of the effects of the bank are the persons to make these
owners, and managers, and chief debtors to the institutions, pay up.
Under the bankrupt law, every holder of a note, no matter how small
in amount, nor how distant the holder may reside, on forwarding the
note to the assignees, will receive his ratable proportion of the
bank's effects, without expense, and without trouble to himself.
It is a most potent, a most proper, and most constitutional remedy
against delinquent banks. It is an equitable and a brave remedy. It
does honor to the President who recommended it, and is worthy of the
successor of Jackson.
Senators upon this floor have ventured the expression of an opinion
that there can be no resumption of specie payments in this country
until a national bank shall be established, meaning, all the while,
until the present miscalled Bank of the United States shall be
rechartered. Such an opinion is humiliating to this government,
and a reproach upon the memory of its founders. It is tantamount
to a declaration that the government, framed by the heroes and
sages of the Revolution, is incapable of self-preservation; that
it is a miserable image of imbecility, and must take refuge in the
embraces of a moneyed corporation, to enable it to survive its
infirmities. The humiliation of such a thought should expel it
from the imagination of every patriotic mind. Nothing but a dire
necessity--a last, a sole, an only alternative--should bring this
government to the thought of leaning upon any extraneous aid. But
here is no necessity, no reason, no pretext, no excuse, no apology,
for resorting to collateral aid; and, above all, to the aid of a
master in the shape of a national bank. The granted powers of the
government are adequate to the coercion of all the banks. As banks,
the federal government has no direct authority over them; but as
bankrupts, it has them in its own hands. It can pass bankrupt laws
for these delinquent institutions. It can pass such laws either with
or without including merchants and traders; and the day for such
law to take effect, will be the day for the resumption of specie
payments by every solvent bank, and the day for the extinction of
the abused privileges of every insolvent one. So far from requiring
the impotent aid of the miscalled Bank of the United States to
effect a resumption, that institution will be unable to prevent a
resumption. Its veto power over other banks will cease; and it will
itself be compelled to resume specie payment, or die!
Besides these great objects to be attained by the application of a
bankrupt law to banking corporations, there are other great purposes
to be accomplished, and some most sacred duties to be fulfilled,
by the same means. Our constitution contains three most vital
prohibitions, of which the federal government is the guardian and
the guarantee, and which are now publicly trodden under foot. No
State shall emit bills of credit; no State shall make any thing but
gold and silver coin a tender in payment of debts; no State shall
pass any law impairing the obligation of contracts. No State shall
do these things. So says the constitution under which we live, and
which it is the duty of every citizen to protect, preserve, and
defend. But a new power has sprung up among us, and has annulled
the whole of these prohibitions. That new power is the oligarchy of
banks. It has filled the whole land with bills of credit; for it is
admitted on all hands that bank notes, not convertible into specie,
are bills of credit. It has suppressed the constitutional currency,
and made depreciated paper money a forced tender in payment of every
debt. It has violated all its own contracts, and compelled all
individuals, and the federal government and State governments, to
violate theirs; and has obtained from sovereign States an express
sanction, or a silent acquiescence, in this double violation of
sacred obligations, and in this triple annulment of constitutional
prohibitions. It is our duty to bring, or to try to bring, this
new power under subordination to the laws and the government. It
is our duty to go to the succor of the constitution--to rescue, if
possible, these prohibitions from daily, and public and permanent
infraction. The application of the bankrupt law to this new power,
is the way to effect this rescue--the way to cause these vital
prohibitions to be respected and observed, and to do it in a way to
prevent collisions between the States and the federal government.
The prohibitions are upon the States; it is they who are not to do
these things, and, of course, are not to authorize others to do what
they cannot do themselves. The banks are their delegates in this
three-fold violation of the constitution; and, in proceeding against
these delegates, we avoid collision with the States.
Mr. President, every form of government has something in it to
excite the pride, and to rouse the devotion, of its citizens. In
monarchies, it is the authority of the king; in republics, it is
the sanctity of the laws. The loyal subject makes it the point of
honor to obey the king; the patriot republican makes it his glory to
obey the laws. We are a republic. We have had illustrious citizens,
conquering generals, and victorious armies; but no citizen, no
general, no army, has undertaken to dethrone the laws and to
reign in their stead. This parricidal work has been reserved for
an oligarchy of banks! Three times, in thrice seven years, this
oligarchy has dethroned the law, and reigned in its place. Since May
last, it has held the sovereign sway, and has not yet vouchsafed to
indicate the day of its voluntary abdication. The Roman military
dictators usually fixed a term to their dictatorships. I speak of
the usurpers, not of the constitutional dictators for ten days.
These usurpers usually indicated a time at which usurpation should
cease, and law and order again prevail. Not so with this new power
which now lords it over our America. They fix no day; they limit
no time; they indicate no period for their voluntary descent from
power, and for their voluntary return to submission to the laws.
They could agree in the twinkling of an eye--at the drop of a
hat--at the crook of a finger--to usurp the sovereign power; they
cannot agree, in four months, to relinquish it. They profess to be
willing, but cannot agree upon the time. Let us perform that service
for them. Let us name a day. Let us fix it in a bankrupt law. Let
us pass that law, and fix a day for it to take effect; and that day
will be the day for the resumption of specie payments, or for the
trial of the question of permanent supremacy between the oligarchy
of banks, and the constitutional government of the people.
We are called upon to have mercy upon the banks; the prayer should
rather be to them, to have mercy upon the government and the
people. Since May last the ex-deposit banks alone have forced
twenty-five millions of depreciated paper through the federal
government upon its debtors and the States, at a loss of at least
two and a half millions to the receivers, and a gain of an equal
amount to the payers. The thousand banks have the country and
the government under their feet at this moment, owing to the
community upwards of an hundred millions of dollars, of which they
will pay nothing, not even ninepences, picayunes, and coppers.
Metaphorically, if not literally, they give their creditors more
kicks than coppers. It is for them to have mercy on us. But what
is the conduct of government towards these banks? Even at this
session, with all their past conduct unatoned for, we have passed
a relief bill for their benefit--a bill to defer the collection of
the large balance which they still owe the government. But there
is mercy due in another quarter--upon the people, suffering from
the use of irredeemable and depreciated paper--upon the government,
reduced to bankruptcy--upon the character of the country, suffering
in the eyes of Europe--upon the character of republican government,
brought into question by the successful usurpation of these
institutions. This last point is the sorest. Gentlemen speak of
the failure of experiments--the failure of the specie experiment,
as it is called by those who believe that paper is the ancient and
universal money of the world; and that the use of a little specie
for the first time is not to be attempted. They dwell upon the
supposed failure of "the experiment;" while all the monarchists of
Europe are rejoicing in the failure of the experiment of republican
government, at seeing this government, the last hope of the liberal
world, struck and paralyzed by an oligarchy of banks--seized by the
throat, throttled and held as a tiger would hold a babe--stripped
of its revenues, bankrupted, and subjected to the degradation of
becoming their engine to force their depreciated paper upon helpless
creditors. Here is the place for mercy--upon the people--upon the
government--upon the character of the country--upon the character of
republican government.
The apostle of republicanism, Mr. Jefferson, has left it as a
political legacy to the people of the United States, never to suffer
their government to fall under the control of any unauthorized,
irresponsible, or self-created institutions of bodies whatsoever.
His allusion was to the Bank of the United States, and its notorious
machinations to govern the elections, and get command of the
government; but his admonition applies with equal force to all other
similar or affiliated institutions; and, since May last, it applies
to the whole league of banks which then "shut up the Treasury," and
reduced the government to helpless dependence.
It is said that bankruptcy is a severe remedy to apply to banks. It
may be answered that it is not more severe here than in England,
where it applies to all banks of issue, except the Bank of England,
and a few others; and it is not more severe to them than it is
to merchants and traders, and to bankers and brokers, and all
unincorporated banks. Personally, I was disposed to make large
allowances for the conduct of the banks. Our own improvidence
tempted them into an expansion of near forty millions, in 1835 and
1836, by giving them the national domain to bank upon; a temptation
which they had not the fortitude to resist, and which expanded them
to near the bursting point. Then they were driven almost to a choice
of bankruptcy between themselves and their debtors, by the act which
required near forty millions to be distributed in masses, and at
brief intervals, among the States. Some failures were inevitable
under these circumstances, and I was disposed to make liberal
allowances for them; but there are three things for which the banks
have no excuse, and which should forever weigh against their claims
to favor and confidence. These things are, first, the political
aspect which the general suspension of payment was permitted to
assume, and which it still wears; secondly, the issue and use of
shinplasters, and refusal to pay silver change, when there are
eighty millions of specie in the country; thirdly, the refusal, by
the deposit banks to pay out the sums which had been severed from
the Treasury, and stood in the names of disbursing officers, and
was actually due to those who were performing work and labor, and
rendering daily services to the government. For these three things
there is no excuse; and, while memory retains their recollection,
there can be no confidence in those who have done them.