THIRD ANNUAL MESSAGE.

WASHINGTON, _December 2, 1839_.

_Fellow-Citizens of the Senate and House of Representatives_:

I regret that I can not on this occasion congratulate you that the past

year has been one of unalloyed prosperity. The ravages of fire and

disease have painfully afflicted otherwise flourishing portions of our

country, and serious embarrassments yet derange the trade of many of our

cities. But notwithstanding these adverse circumstances, that general

prosperity which has been heretofore so bountifully bestowed upon us

by the Author of All Good still continues to call for our warmest

gratitude. Especially have we reason to rejoice in the exuberant

harvests which have lavishly recompensed well-directed industry and

given to it that sure reward which is vainly sought in visionary

speculations. I can not, indeed, view without peculiar satisfaction the

evidences afforded by the past season of the benefits that spring from

the steady devotion of the husbandman to his honorable pursuit. No

means of individual comfort is more certain and no source of national

prosperity is so sure. Nothing can compensate a people for a dependence

upon others for the bread they eat, and that cheerful abundance on which

the happiness of everyone so much depends is to be looked for nowhere

with such sure reliance as in the industry of the agriculturist and the

bounties of the earth.

With foreign countries our relations exhibit the same favorable aspect

which was presented in my last annual message, and afford continued

proof of the wisdom of the pacific, just, and forbearing policy adopted

by the first Administration of the Federal Government and pursued by its

successors. The extraordinary powers vested in me by an act of Congress

for the defense of the country in an emergency, considered so far

probable as to require that the Executive should possess ample means to

meet it, have not been exerted. They have therefore been attended with

no other result than to increase, by the confidence thus reposed in

me, my obligations to maintain with religious exactness the cardinal

principles that govern our intercourse with other nations. Happily,

in our pending questions with Great Britain, out of which this unusual

grant of authority arose, nothing has occurred to require its exertion,

and as it is about to return to the Legislature I trust that no future

necessity may call for its exercise by them or its delegation to another

Department of the Government.

For the settlement of our northeastern boundary the proposition promised

by Great Britain for a commission of exploration and survey has been

received, and a counter project, including also a provision for the

certain and final adjustment of the limits in dispute, is now before the

British Government for its consideration. A just regard to the delicate

state of this question and a proper respect for the natural impatience

of the State of Maine, not less than a conviction that the negotiation

has been already protracted longer than is prudent on the part of either

Government, have led me to believe that the present favorable moment

should on no account be suffered to pass without putting the question

forever at rest. I feel confident that the Government of Her Britannic

Majesty will take the same view of this subject, as I am persuaded it

is governed by desires equally strong and sincere for the amicable

termination of the controversy.

To the intrinsic difficulties of questions of boundary lines, especially

those described in regions unoccupied and but partially known, is to

be added in our country the embarrassment necessarily arising out of

our Constitution by which the General Government is made the organ of

negotiating and deciding upon the particular interests of the States

on whose frontiers these lines are to be traced. To avoid another

controversy in which a State government might rightfully claim to have

her wishes consulted previously to the conclusion of conventional

arrangements concerning her rights of jurisdiction or territory, I have

thought it necessary to call the attention of the Government of Great

Britain to another portion of our conterminous dominion of which the

division still remains to be adjusted. I refer to the line from the

entrance of Lake Superior to the most northwestern point of the Lake of

the Woods, stipulations for the settlement of which are to be found in

the seventh article of the treaty of Ghent. The commissioners appointed

under that article by the two Governments having differed in their

opinions, made separate reports, according to its stipulations, upon the

points of disagreement, and these differences are now to be submitted

to the arbitration of some friendly sovereign or state. The disputed

points should be settled and the line designated before the Territorial

government of which it is one of the boundaries takes its place in the

Union as a State, and I rely upon the cordial cooperation of the British

Government to effect that object.

There is every reason to believe that disturbances like those which

lately agitated the neighboring British Provinces will not again prove

the sources of border contentions or interpose obstacles to the

continuance of that good understanding which it is the mutual interest

of Great Britain and the United States to preserve and maintain.

Within the Provinces themselves tranquillity is restored, and on our

frontier that misguided sympathy in favor of what was presumed to be a

general effort in behalf of popular rights, and which in some instances

misled a few of our more inexperienced citizens, has subsided into a

rational conviction strongly opposed to all intermeddling with the

internal affairs of our neighbors. The people of the United States feel,

as it is hoped they always will, a warm solicitude for the success of

all who are sincerely endeavoring to improve the political condition

of mankind. This generous feeling they cherish toward the most distant

nations, and it was natural, therefore, that it should be awakened

with more than common warmth in behalf of their immediate neighbors;

but it does not belong to their character as a community to seek the

gratification of those feelings in acts which violate their duty as

citizens, endanger the peace of their country, and tend to bring upon

it the stain of a violated faith toward foreign nations. If, zealous to

confer benefits on others, they appear for a moment to lose sight of the

permanent obligations imposed upon them as citizens, they are seldom

long misled. From all the information I receive, confirmed to some

extent by personal observation, I am satisfied that no one can now hope

to engage in such enterprises without encountering public indignation,

in addition to the severest penalties of the law.

Recent information also leads me to hope that the emigrants from Her

Majesty's Provinces who have sought refuge within our boundaries are

disposed to become peaceable residents and to abstain from all attempts

to endanger the peace of that country which has afforded them an asylum.

On a review of the occurrences on both sides of the line it is

satisfactory to reflect that in almost every complaint against our

country the offense may be traced to emigrants from the Provinces who

have sought refuge here. In the few instances in which they were aided

by citizens of the United States the acts of these misguided men were

not only in direct contravention of the laws and well-known wishes of

their own Government, but met with the decided disapprobation of the

people of the United States.

I regret to state the appearance of a different spirit among Her

Majesty's subjects in the Canadas. The sentiments of hostility to our

people and institutions which have been so frequently expressed there,

and the disregard of our rights which has been manifested on some

occasions, have, I am sorry to say, been applauded and encouraged by

the people, and even by some of the subordinate local authorities, of

the Provinces. The chief officers in Canada, fortunately, have not

entertained the same feeling, and have probably prevented excesses that

must have been fatal to the peace of the two countries.

I look forward anxiously to a period when all the transactions which

have grown out of this condition of our affairs, and which have been

made the subjects of complaint and remonstrance by the two Governments,

respectively, shall be fully examined, and the proper satisfaction given

where it is due from either side.

Nothing has occurred to disturb the harmony of our intercourse with

Austria, Belgium, Denmark, France, Naples, Portugal, Prussia, Russia,

or Sweden. The internal state of Spain has sensibly improved, and a

well-grounded hope exists that the return of peace will restore to

the people of that country their former prosperity and enable the

Government to fulfill all its obligations at home and abroad. The

Government of Portugal, I have the satisfaction to state, has paid

in full the eleventh and last installment due to our citizens for

the claims embraced in the settlement made with it on the 3d of

March, 1837.

I lay before you treaties of commerce negotiated with the Kings of

Sardinia and of the Netherlands, the ratifications of which have been

exchanged since the adjournment of Congress. The liberal principles

of these treaties will recommend them to your approbation. That with

Sardinia is the first treaty of commerce formed by that Kingdom, and

it will, I trust, answer the expectations of the present Sovereign by

aiding the development of the resources of his country and stimulating

the enterprise of his people. That with the Netherlands happily

terminates a long-existing subject of dispute and removes from our

future commercial intercourse all apprehension of embarrassment.

The King of the Netherlands has also, in further illustration of

his character for justice and of his desire to remove every cause of

dissatisfaction, made compensation for an American vessel captured in

1800 by a French privateer, and carried into Curaçoa, where the proceeds

were appropriated to the use of the colony, then, and for a short time

after, under the dominion of Holland.

The death of the late Sultan has produced no alteration in our

relations with Turkey. Our newly appointed minister resident has reached

Constantinople, and I have received assurances from the present ruler

that the obligations of our treaty and those of friendship will be

fulfilled by himself in the same spirit that actuated his illustrious

father.

I regret to be obliged to inform you that no convention for the

settlement of the claims of our citizens upon Mexico has yet been

ratified by the Government of that country. The first convention formed

for that purpose was not presented by the President of Mexico for the

approbation of its Congress, from a belief that the King of Prussia,

the arbitrator in case of disagreement in the joint commission to be

appointed by the United States and Mexico, would not consent to take

upon himself that friendly office. Although not entirely satisfied with

the course pursued by Mexico, I felt no hesitation in receiving in the

most conciliatory spirit the explanation offered, and also cheerfully

consented to a new convention, in order to arrange the payments

proposed to be made to our citizens in a manner which, while equally

just to them, was deemed less onerous and inconvenient to the Mexican

Government. Relying confidently upon the intentions of that Government,

Mr. Ellis was directed to repair to Mexico, and diplomatic intercourse

has been resumed between the two countries. The new convention has, he

informs us, been recently submitted by the President of that Republic

to its Congress under circumstances which promise a speedy ratification,

a result which I can not allow myself to doubt.

Instructions have been given to the commissioner of the United States

under our convention with Texas for the demarcation of the line which

separates us from that Republic. The commissioners of both Governments

met in New Orleans in August last. The joint commission was organized,

and adjourned to convene at the same place on the 12th of October. It

is presumed to be now in the performance of its duties.

The new Government of Texas has shown its desire to cultivate friendly

relations with us by a prompt reparation for injuries complained of in

the cases of two vessels of the United States.

With Central America a convention has been concluded for the renewal of

its former treaty with the United States. This was not ratified before

the departure of our late chargé d'affaires from that country, and the

copy of it brought by him was not received before the adjournment of the

Senate at the last session. In the meanwhile, the period limited for

the exchange of ratifications having expired, I deemed it expedient, in

consequence of the death of the chargé d'affaires, to send a special

agent to Central America to close the affairs of our mission there and

to arrange with the Government an extension of the time for the exchange

of ratifications.

The commission created by the States which formerly composed the

Republic of Colombia for adjusting the claims against that Government

has by a very unexpected construction of the treaty under which it acts

decided that no provision was made for those claims of citizens of the

United States which arose from captures by Colombian privateers and were

adjudged against the claimants in the judicial tribunals. This decision

will compel the United States to apply to the several Governments

formerly united for redress. With all these--New Granada, Venezuela,

and Ecuador--a perfectly good understanding exists. Our treaty with

Venezuela is faithfully carried into execution, and that country, in

the enjoyment of tranquillity, is gradually advancing in prosperity

under the guidance of its present distinguished President, General Paez.

With Ecuador a liberal commercial convention has lately been concluded,

which will be transmitted to the Senate at an early day.

With the great American Empire of Brazil our relations continue

unchanged, as does our friendly intercourse with the other Governments

of South America--the Argentine Republic and the Republics of Uruguay,

Chili, Peru, and Bolivia. The dissolution of the Peru-Bolivian

Confederation may occasion some temporary inconvenience to our citizens

in that quarter, but the obligations on the new Governments which have

arisen out of that Confederation to observe its treaty stipulations will

no doubt be soon understood, and it is presumed that no indisposition

will exist to fulfill those which it contracted with the United States.

The financial operations of the Government during the present year have,

I am happy to say, been very successful. The difficulties under which

the Treasury Department has labored, from known defects in the existing

laws relative to the safe-keeping of the public moneys, aggravated by

the suspension of specie payments by several of the banks holding public

deposits or indebted to public officers for notes received in payment of

public dues, have been surmounted to a very gratifying extent. The large

current expenditures have been punctually met, and the faith of the

Government in all its pecuniary concerns has been scrupulously

maintained.

The nineteen millions of Treasury notes authorized by the act of

Congress of 1837, and the modifications thereof with a view to the

indulgence of merchants on their duty bonds and of the deposit banks

in the payment of public moneys held by them, have been so punctually

redeemed as to leave less than the original ten millions outstanding at

any one time, and the whole amount unredeemed now falls short of three

millions. Of these the chief portion is not due till next year, and

the whole would have been already extinguished could the Treasury have

realized the payments due to it from the banks. If those due from them

during the next year shall be punctually made, and if Congress shall

keep the appropriations within the estimates, there is every reason to

believe that all the outstanding Treasury notes can be redeemed and the

ordinary expenses defrayed without imposing on the people any additional

burden, either of loans or increased taxes.

To avoid this and to keep the expenditures within reasonable bounds is

a duty second only in importance to the preservation of our national

character and the protection of our citizens in their civil and

political rights. The creation in time of peace of a debt likely to

become permanent is an evil for which there is no equivalent. The

rapidity with which many of the States are apparently approaching

to this condition admonishes us of our own duties in a manner too

impressive to be disregarded. One, not the least important, is to keep

the Federal Government always in a condition to discharge with ease and

vigor its highest functions should their exercise be required by any

sudden conjuncture of public affairs--a condition to which we are always

exposed and which may occur when it is least expected. To this end

it is indispensable that its finances should be untrammeled and its

resources as far as practicable unencumbered. No circumstance could

present greater obstacles to the accomplishment of these vitally

important objects than the creation of an onerous national debt. Our

own experience and also that of other nations have demonstrated the

unavoidable and fearful rapidity with which a public debt is increased

when the Government has once surrendered itself to the ruinous practice

of supplying its supposed necessities by new loans. The struggle,

therefore, on our part to be successful must be made at the threshold.

To make our efforts effective, severe economy is necessary. This is the

surest provision for the national welfare, and it is at the same time

the best preservative of the principles on which our institutions rest.

Simplicity and economy in the affairs of state have never failed to

chasten and invigorate republican principles, while these have been

as surely subverted by national prodigality, under whatever specious

pretexts it may have been introduced or fostered.

These considerations can not be lost upon a people who have never been

inattentive to the effect of their policy upon the institutions they

have created for themselves, but at the present moment their force is

augmented by the necessity which a decreasing revenue must impose. The

check lately given to importations of articles subject to duties, the

derangements in the operations of internal trade, and especially the

reduction gradually taking place in our tariff of duties, all tend

materially to lessen our receipts; indeed, it is probable that the

diminution resulting from the last cause alone will not fall short of

$5,000,000 in the year 1842, as the final reduction of all duties to

20 per cent then takes effect. The whole revenue then accruing from

the customs and from the sales of public lands, if not more, will

undoubtedly be wanted to defray the necessary expenses of the Government

under the most prudent administration of its affairs. These are

circumstances that impose the necessity of rigid economy and require its

prompt and constant exercise. With the Legislature rest the power and

duty of so adjusting the public expenditure as to promote this end.

By the provisions of the Constitution it is only in consequence of

appropriations made by law that money can be drawn from the Treasury.

No instance has occurred since the establishment of the Government in

which the Executive, though a component part of the legislative power,

has interposed an objection to an appropriation bill on the sole ground

of its extravagance. His duty in this respect has been considered

fulfilled by requesting such appropriations only as the public service

may be reasonably expected to require. In the present earnest direction

of the public mind toward this subject both the Executive and the

Legislature have evidence of the strict responsibility to which they

will be held; and while I am conscious of my own anxious efforts to

perform with fidelity this portion of my public functions, it is

a satisfaction to me to be able to count on a cordial cooperation

from you.

At the time I entered upon my present duties our ordinary disbursements,

without including those on account of the public debt, the Post-Office,

and the trust funds in charge of the Government, had been largely

increased by appropriations for the removal of the Indians, for

repelling Indian hostilities, and for other less urgent expenses which

grew out of an overflowing Treasury. Independent of the redemption of

the public debt and trusts, the gross expenditures of seventeen and

eighteen millions in 1834 and 1835 had by these causes swelled to

twenty-nine millions in 1836, and the appropriations for 1837, made

previously to the 4th of March, caused the expenditure to rise to the

very large amount of thirty-three millions. We were enabled during the

year 1838, notwithstanding the continuance of our Indian embarrassments,

somewhat to reduce this amount, and that for the present year (1839)

will not in all probability exceed twenty-six millions, or six millions

less than it was last year. With a determination, so far as depends

on me, to continue this reduction, I have directed the estimates for

1840 to be subjected to the severest scrutiny and to be limited to the

absolute requirements of the public service. They will be found less

than the expenditures of 1839 by over $5,000,000.

The precautionary measures which will be recommended by the Secretary

of the Treasury to protect faithfully the public credit under the

fluctuations and contingencies to which our receipts and expenditures

are exposed, and especially in a commercial crisis like the present,

are commended to your early attention.

On a former occasion your attention was invited to various

considerations in support of a preemption law in behalf of the settlers

on the public lands, and also of a law graduating the prices for such

lands as had long been in the market unsold in consequence of their

inferior quality. The execution of the act which was passed on the first

subject has been attended with the happiest consequences in quieting

titles and securing improvements to the industrious, and it has also

to a very gratifying extent been exempt from the frauds which were

practiced under previous preemption laws. It has at the same time, as

was anticipated, contributed liberally during the present year to the

receipts of the Treasury.

The passage of a graduation law, with the guards before recommended,

would also, I am persuaded, add considerably to the revenue for several

years, and prove in other respects just and beneficial.

Your early consideration of the subject is therefore once more earnestly

requested.

The present condition of the defenses of our principal seaports and

navy-yards, as represented by the accompanying report of the Secretary

of War, calls for the early and serious attention of Congress; and, as

connecting itself intimately with this subject, I can not recommend too

strongly to your consideration the plan submitted by that officer for

the organization of the militia of the United States.

In conformity with the expressed wishes of Congress, an attempt was

made in the spring to terminate the Florida war by negotiation. It is

to be regretted that these humane intentions should have been frustrated

and that the effort to bring these unhappy difficulties to a

satisfactory conclusion should have failed; but after entering into

solemn engagements with the commanding general, the Indians, without any

provocation, recommenced their acts of treachery and murder. The renewal

of hostilities in that Territory renders it necessary that I should

recommend to your favorable consideration the plan which will be

submitted to you by the Secretary of War, in order to enable that

Department to conduct them to a successful issue.

Having had an opportunity of personally inspecting a portion of the

troops during the last summer, it gives me pleasure to bear testimony to

the success of the effort to improve their discipline by keeping them

together in as large bodies as the nature of our service will permit.

I recommend, therefore, that commodious and permanent barracks be

constructed at the several posts designated by the Secretary of War.

Notwithstanding the high state of their discipline and excellent police,

the evils resulting to the service from the deficiency of company

officers were very apparent, and I recommend that the staff officers be

permanently separated from the line.

The Navy has been usefully and honorably employed in protecting the

rights and property of our citizens wherever the condition of affairs

seemed to require its presence. With the exception of one instance,

where an outrage, accompanied by murder, was committed on a vessel of

the United States while engaged in a lawful commerce, nothing is known

to have occurred to impede or molest the enterprise of our citizens on

that element, where it is so signally displayed. On learning this daring

act of piracy, Commodore Reed proceeded immediately to the spot, and

receiving no satisfaction, either in the surrender of the murderers or

the restoration of the plundered property, inflicted severe and merited

chastisement on the barbarians.

It will be seen by the report of the Secretary of the Navy respecting

the disposition of our ships of war that it has been deemed necessary to

station a competent force on the coast of Africa to prevent a fraudulent

use of our flag by foreigners.

Recent experience has shown that the provisions in our existing laws

which relate to the sale and transfer of American vessels while abroad

are extremely defective. Advantage has been taken of these defects

to give to vessels wholly belonging to foreigners and navigating the

ocean an apparent American ownership. This character has been so well

simulated as to afford them comparative security in prosecuting the

slave trade--a traffic emphatically denounced in our statutes, regarded

with abhorrence by our citizens, and of which the effectual suppression

is nowhere more sincerely desired than in the United States. These

circumstances make it proper to recommend to your early attention a

careful revision of these laws, so that without impeding the freedom

and facilities of our navigation or impairing an important branch of

our industry connected with it the integrity and honor of our flag may

be carefully preserved. Information derived from our consul at Havana

showing the necessity of this was communicated to a committee of the

Senate near the close of the last session, but too late, as it appeared,

to be acted upon. It will be brought to your notice by the proper

Department, with additional communications from other sources.

The latest accounts from the exploring expedition represent it as

proceeding successfully in its objects and promising results no less

useful to trade and navigation than to science.

The extent of post-roads covered by mail service on the 1st of July last

was about 133,999 miles and the rate of annual transportation upon them

34,496,878 miles. The number of post-offices on that day was 12,780 and

on the 30th ultimo 13,028.

The revenue of the Post-Office Department for the year ending with the

30th of June last was $4,476,638, exhibiting an increase over the

preceding year of $241,560. The engagements and liabilities of the

Department for the same period are $4,624,117.

The excess of liabilities over the revenue for the last two years

has been met out of the surplus which had previously accumulated.

The cash on hand on the 30th ultimo was about $206,701.95, and the

current income of the Department varies very little from the rate of

current expenditures. Most of the service suspended last year has been

restored, and most of the new routes established by the act of 7th July,

1838, have been set in operation, at an annual cost of $136,963.

Notwithstanding the pecuniary difficulties of the country, the revenue

of the Department appears to be increasing, and unless it shall be

seriously checked by the recent suspension of payment by so many of the

banks it will be able not only to maintain the present mail service,

but in a short time to extend it. It is gratifying to witness the

promptitude and fidelity with which the agents of this Department

in general perform their public duties.

Some difficulties have arisen in relation to contracts for the

transportation of the mails by railroad and steamboat companies. It

appears that the maximum of compensation provided by Congress for the

transportation of the mails upon railroads is not sufficient to induce

some of the companies to convey them at such hours as are required for

the accommodation of the public. It is one of the most important duties

of the General Government to provide and maintain for the use of the

people of the States the best practicable mail establishment. To arrive

at that end it is indispensable that the Post-Office Department shall

be enabled to control the hours at which the mails shall be carried

over railroads, as it now does over all other roads. Should serious

inconveniences arise from the inadequacy of the compensation now

provided by law, or from unreasonable demands by any of the railroad

companies, the subject is of such general importance as to require

the prompt attention of Congress.

In relation to steamboat lines, the most efficient remedy is obvious

and has been suggested by the Postmaster-General. The War and Navy

Departments already employ steamboats in their service; and although

it is by no means desirable that the Government should undertake the

transportation of passengers or freight as a business, there can be no

reasonable objection to running boats, temporarily, whenever it may be

necessary to put down attempts at extortion, to be discontinued as soon

as reasonable contracts can be obtained.

The suggestions of the Postmaster-General relative to the inadequacy

of the legal allowance to witnesses in cases of prosecutions for mail

depredations merit your serious consideration. The safety of the mails

requires that such prosecutions shall be efficient, and justice to the

citizen whose time is required to be given to the public demands not

only that his expenses shall be paid, but that he shall receive a

reasonable compensation.

The reports from the War, Navy, and Post-Office Departments will

accompany this communication, and one from the Treasury Department

will be presented to Congress in a few days.

For various details in respect to the matters in charge of these

Departments I would refer you to those important documents, satisfied

that you will find in them many valuable suggestions which will be found

well deserving the attention of the Legislature.

From a report made in December of last year by the Secretary of State

to the Senate, showing the trial docket of each of the circuit courts

and the number of miles each judge has to travel in the performance of

his duties, a great inequality appears in the amount of labor assigned

to each judge. The number of terms to be held in each of the courts

composing the ninth circuit, the distances between the places at which

they sit and from thence to the seat of Government, are represented to

be such as to render it impossible for the judge of that circuit to

perform in a manner corresponding with the public exigencies his term

and circuit duties. A revision, therefore, of the present arrangement of

the circuit seems to be called for and is recommended to your notice.

I think it proper to call your attention to the power assumed by

Territorial legislatures to authorize the issue of bonds by corporate

companies on the guaranty of the Territory. Congress passed a law in

1836 providing that no act of a Territorial legislature incorporating

banks should have the force of law until approved by Congress, but acts

of a very exceptionable character previously passed by the legislature

of Florida were suffered to remain in force, by virtue of which bonds

may be issued to a very large amount by those institutions upon the

faith of the Territory. A resolution, intending to be a joint one,

passed the Senate at the same session, expressing the sense of Congress

that the laws in question ought not to be permitted to remain in force

unless amended in many material respects; but it failed in the House of

Representatives for want of time, and the desired amendments have not

been made. The interests involved are of great importance, and the

subject deserves your early and careful attention.

The continued agitation of the question relative to the best mode of

keeping and disbursing the public money still injuriously affects the

business of the country. The suspension of specie payments in 1837

rendered the use of deposit banks as prescribed by the act of 1836 a

source rather of embarrassment than aid, and of necessity placed the

custody of most of the public money afterwards collected in charge of

the public officers. The new securities for its safety which this

required were a principal cause of my convening an extra session of

Congress, but in consequence of a disagreement between the two Houses

neither then nor at any subsequent period has there been any legislation

on the subject. The effort made at the last session to obtain the

authority of Congress to punish the use of public money for private

purposes as a crime--a measure attended under other governments with

signal advantage--was also unsuccessful, from diversities of opinion in

that body, notwithstanding the anxiety doubtless felt by it to afford

every practicable security. The result of this is still to leave the

custody of the public money without those safeguards which have been for

several years earnestly desired by the Executive, and as the remedy is

only to be found in the action of the Legislature it imposes on me the

duty of again submitting to you the propriety of passing a law providing

for the safe-keeping of the public moneys, and especially to ask that

its use for private purposes by any officers intrusted with it may be

declared to be a felony, punishable with penalties proportioned to the

magnitude of the offense.

These circumstances, added to known defects in the existing laws and

unusual derangement in the general operations of trade, have during

the last three years much increased the difficulties attendant on the

collection, keeping, and disbursement of the revenue, and called forth

corresponding exertions from those having them in charge. Happily these

have been successful beyond expectation. Vast sums have been collected

and disbursed by the several Departments with unexpected cheapness and

ease, transfers have been readily made to every part of the Union,

however distant, and defalcations have been far less than might have

been anticipated from the absence of adequate legal restraints. Since

the officers of the Treasury and Post-Office Departments were charged

with the custody of most of the public moneys received by them there

have been collected $66,000,000, and, excluding the case of the late

collector at New York, the aggregate amount of losses sustained in the

collection can not, it is believed, exceed $60,000. The defalcation

of the late collector at that city, of the extent and circumstances

of which Congress have been fully informed, ran through all the modes

of keeping the public money that have been hitherto in use, and was

distinguished by an aggravated disregard of duty that broke through

the restraints of every system, and can not, therefore, be usefully

referred to as a test of the comparative safety of either. Additional

information will also be furnished by the report of the Secretary of

the Treasury, in reply to a call made upon that officer by the House

of Representatives at the last session requiring detailed information

on the subject of defaults by public officers or agents under each

Administration from 1789 to 1837. This document will be submitted to

you in a few days. The general results (independent of the Post-Office,

which is kept separately and will be stated by itself), so far as they

bear upon this subject, are that the losses which have been and are

likely to be sustained by any class of agents have been the greatest by

banks, including, as required in the resolution, their depreciated paper

received for public dues; that the next largest have been by disbursing

officers, and the least by collectors and receivers. If the losses on

duty bonds are included, they alone will be threefold those by both

collectors and receivers. Our whole experience, therefore, furnishes the

strongest evidence that the desired legislation of Congress is alone

wanting to insure in those operations the highest degree of security

and facility. Such also appears to have been the experience of other

nations. From the results of inquiries made by the Secretary of the

Treasury in regard to the practice among them I am enabled to state

that in twenty-two out of twenty-seven foreign governments from which

undoubted information has been obtained the public moneys are kept in

charge of public officers. This concurrence of opinion in favor of

that system is perhaps as great as exists on any question of internal

administration.

In the modes of business and official restraints on disbursing officers

no legal change was produced by the suspension of specie payments. The

report last referred to will be found to contain also much useful

information in relation to this subject.

I have heretofore assigned to Congress my reasons for believing that

the establishment of an independent National Treasury, as contemplated

by the Constitution, is necessary to the safe action of the Federal

Government. The suspension of specie payments in 1837 by the banks

having the custody of the public money showed in so alarming a degree

our dependence on those institutions for the performance of duties

required by law that I then recommended the entire dissolution of that

connection. This recommendation has been subjected, as I desired it

should be, to severe scrutiny and animated discussion, and I allow

myself to believe that notwithstanding the natural diversities of

opinion which may be anticipated on all subjects involving such

important considerations, it has secured in its favor as general a

concurrence of public sentiment as could be expected on one of such

magnitude.

Recent events have also continued to develop new objections to such a

connection. Seldom is any bank, under the existing system and practice,

able to meet on demand all its liabilities for deposits and notes in

circulation. It maintains specie payments and transacts a profitable

business only by the confidence of the public in its solvency, and

whenever this is destroyed the demands of its depositors and note

holders, pressed more rapidly than it can make collections from its

debtors, force it to stop payment. This loss of confidence, with its

consequences, occurred in 1837, and afforded the apology of the banks

for their suspension. The public then acquiesced in the validity of the

excuse, and while the State legislatures did not exact from them their

forfeited charters, Congress, in accordance with the recommendation of

the Executive, allowed them time to pay over the public money they held,

although compelled to issue Treasury notes to supply the deficiency thus

created.

It now appears that there are other motives than a want of public

confidence under which the banks seek to justify themselves in a refusal

to meet their obligations. Scarcely were the country and Government

relieved in a degree from the difficulties occasioned by the general

suspension of 1837 when a partial one, occurring within thirty months

of the former, produced new and serious embarrassments, though it had

no palliation in such circumstances as were alleged in justification

of that which had previously taken place. There was nothing in the

condition of the country to endanger a well-managed banking institution;

commerce was deranged by no foreign war; every branch of manufacturing

industry was crowned with rich rewards, and the more than usual

abundance of our harvests, after supplying our domestic wants, had left

our granaries and storehouses filled with a surplus for exportation.

It is in the midst of this that an irredeemable and depreciated paper

currency is entailed upon the people by a large portion of the banks.

They are not driven to it by the exhibition of a loss of public

confidence or of a sudden pressure from their depositors or note

holders, but they excuse themselves by alleging that the current of

business and exchange with foreign countries, which draws the precious

metals from their vaults, would require in order to meet it a larger

curtailment of their loans to a comparatively small portion of the

community than it will be convenient for them to bear or perhaps safe

for the banks to exact. The plea has ceased to be one of necessity.

Convenience and policy are now deemed sufficient to warrant these

institutions in disregarding their solemn obligations. Such conduct

is not merely an injury to individual creditors, but it is a wrong to

the whole community, from whose liberality they hold most valuable

privileges, whose rights they violate, whose business they derange, and

the value of whose property they render unstable and insecure. It must

be evident that this new ground for bank suspensions, in reference to

which their action is not only disconnected with, but wholly independent

of, that of the public, gives a character to their suspensions more

alarming than any which they exhibited before, and greatly increases

the impropriety of relying on the banks in the transactions of the

Government.

A large and highly respectable portion of our banking institutions are,

it affords me unfeigned pleasure to state, exempted from all blame on

account of this second delinquency. They have, to their great credit,

not only continued to meet their engagements, but have even repudiated

the grounds of suspension now resorted to. It is only by such a course

that the confidence and good will of the community can be preserved, and

in the sequel the best interests of the institutions themselves

promoted.

New dangers to the banks are also daily disclosed from the extension

of that system of extravagant credit of which they are the pillars.

Formerly our foreign commerce was principally founded on an exchange

of commodities, including the precious metals, and leaving in its

transactions but little foreign debt. Such is not now the case. Aided

by the facilities afforded by the banks, mere credit has become too

commonly the basis of trade. Many of the banks themselves, not content

with largely stimulating this system among others, have usurped the

business, while they impair the stability, of the mercantile community;

they have become borrowers instead of lenders; they establish their

agencies abroad; they deal largely in stocks and merchandise; they

encourage the issue of State securities until the foreign market is

glutted with them; and, unsatisfied with the legitimate use of their own

capital and the exercise of their lawful privileges, they raise by large

loans additional means for every variety of speculation. The disasters

attendant on this deviation from the former course of business in this

country are now shared alike by banks and individuals to an extent of

which there is perhaps no previous example in the annals of our country.

So long as a willingness of the foreign lender and a sufficient export

of our productions to meet any necessary partial payments leave the flow

of credit undisturbed all appears to be prosperous, but as soon as it

is checked by any hesitation abroad or by an inability to make payment

there in our productions the evils of the system are disclosed. The

paper currency, which might serve for domestic purposes, is useless

to pay the debt due in Europe. Gold and silver are therefore drawn in

exchange for their notes from the banks. To keep up their supply of coin

these institutions are obliged to call upon their own debtors, who pay

them principally in their own notes, which are as unavailable to them as

they are to the merchants to meet the foreign demand. The calls of the

banks, therefore, in such emergencies of necessity exceed that demand,

and produce a corresponding curtailment of their accommodations and

of the currency at the very moment when the state of trade renders it

most inconvenient to be borne. The intensity of this pressure on the

community is in proportion to the previous liberality of credit and

consequent expansion of the currency. Forced sales of property are made

at the time when the means of purchasing are most reduced, and the worst

calamities to individuals are only at last arrested by an open violation

of their obligations by the banks--a refusal to pay specie for their

notes and an imposition upon the community of a fluctuating and

depreciated currency.

These consequences are inherent in the present system. They are not

influenced by the banks being large or small, created by National

or State Governments. They are the results of the irresistible laws

of trade or credit. In the recent events, which have so strikingly

illustrated the certain effects of these laws, we have seen the bank

of the largest capital in the Union, established under a national

charter, and lately strengthened, as we were authoritatively informed,

by exchanging that for a State charter with new and unusual

privileges--in a condition, too, as it was said, of entire soundness

and great prosperity--not merely unable to resist these effects, but

the first to yield to them.

Nor is it to be overlooked that there exists a chain of necessary

dependence among these institutions which obliges them to a great extent

to follow the course of others, notwithstanding its injustice to their

own immediate creditors or injury to the particular community in which

they are placed. This dependence of a bank, which is in proportion to

the extent of its debts for circulation and deposits, is not merely on

others in its own vicinity, but on all those which connect it with the

center of trade. Distant banks may fail without seriously affecting

those in our principal commercial cities, but the failure of the latter

is felt at the extremities of the Union. The suspension at New York in

1837 was everywhere, with very few exceptions, followed as soon as it

was known. That recently at Philadelphia immediately affected the banks

of the South and West in a similar manner. This dependence of our whole

banking system on the institutions in a few large cities is not found

in the laws of their organization, but in those of trade and exchange.

The banks at that center, to which currency flows and where it is

required in payments for merchandise, hold the power of controlling

those in regions whence it comes, while the latter possess no means

of restraining them; so that the value of individual property and the

prosperity of trade through the whole interior of the country are made

to depend on the good or bad management of the banking institutions in

the great seats of trade on the seaboard.

But this chain of dependence does not stop here. It does not terminate

at Philadelphia or New York. It reaches across the ocean and ends in

London, the center of the credit system. The same laws of trade which

give to the banks in our principal cities power over the whole banking

system of the United States subject the former, in their turn, to the

money power in Great Britain. It is not denied that the suspension of

the New York banks in 1837, which was followed in quick succession

throughout the Union, was produced by an application of that power, and

it is now alleged, in extenuation of the present condition of so large

a portion of our banks, that their embarrassments have arisen from the

same cause.

From this influence they can not now entirely escape, for it has its

origin in the credit currencies of the two countries; it is strengthened

by the current of trade and exchange which centers in London, and is

rendered almost irresistible by the large debts contracted there by our

merchants, our banks, and our States. It is thus that an introduction of

a new bank into the most distant of our villages places the business of

that village within the influence of the money power in England; it is

thus that every new debt which we contract in that country seriously

affects our own currency and extends over the pursuits of our citizens

its powerful influence. We can not escape from this by making new banks,

great or small, State or national. The same chains which bind those

now existing to the center of this system of paper credit must equally

fetter every similar institution we create. It is only by the extent to

which this system has been pushed of late that we have been made fully

aware of its irresistible tendency to subject our own banks and

currency to a vast controlling power in a foreign land, and it adds

a new argument to those which illustrate their precarious situation.

Endangered in the first place by their own mismanagement and again by

the conduct of every institution which connects them with the center of

trade in our own country, they are yet subjected beyond all this to the

effect of whatever measures policy, necessity, or caprice may induce

those who control the credits of England to resort to. I mean not

to comment upon these measures, present or past, and much less to

discourage the prosecution of fair commercial dealing between the two

countries, based on reciprocal benefits; but it having now been made

manifest that the power of inflicting these and similar injuries is by

the resistless law of a credit currency and credit trade equally capable

of extending their consequences through all the ramifications of our

banking system, and by that means indirectly obtaining, particularly

when our banks are used as depositories of the public moneys, a

dangerous political influence in the United States, I have deemed it my

duty to bring the subject to your notice and ask for it your serious

consideration.

Is an argument required beyond the exposition of these facts to show

the impropriety of using our banking institutions as depositories of

the public money? Can we venture not only to encounter the risk of

their individual and mutual mismanagement, but at the same time to place

our foreign and domestic policy entirely under the control of a foreign

moneyed interest? To do so is to impair the independence of our

Government, as the present credit system has already impaired the

independence of our banks; it is to submit all its important operations,

whether of peace or war, to be controlled or thwarted, at first by our

own banks and then by a power abroad greater than themselves. I can not

bring myself to depict the humiliation to which this Government and

people might be sooner or later reduced if the means for defending their

rights are to be made dependent upon those who may have the most

powerful of motives to impair them.

Nor is it only in reference to the effect of this state of things on the

independence of our Government or of our banks that the subject presents

itself for consideration; it is to be viewed also in its relations to

the general trade of our country. The time is not long passed when a

deficiency of foreign crops was thought to afford a profitable market

for the surplus of our industry, but now we await with feverish anxiety

the news of the English harvest, not so much from motives of commendable

sympathy, but fearful lest its anticipated failure should narrow the

field of credit there. Does not this speak volumes to the patriot? Can

a system be beneficent, wise, or just which creates greater anxiety for

interests dependent on foreign credit than for the general prosperity of

our own country and the profitable exportation of the surplus produce of

our labor?

The circumstances to which I have thus adverted appear to me to afford

weighty reasons, developed by late events, to be added to those which

I have on former occasions offered when submitting to your better

knowledge and discernment the propriety of separating the custody of the

public money from banking institutions. Nor has anything occurred to

lessen, in my opinion, the force of what has been heretofore urged.

The only ground on which that custody can be desired by the banks is

the profitable use which they may make of the money. Such use would

be regarded in individuals as a breach of trust or a crime of great

magnitude, and yet it may be reasonably doubted whether, first and last,

it is not attended with more mischievous consequences when permitted to

the former than to the latter. The practice of permitting the public

money to be used by its keepers, as here, is believed to be peculiar to

this country and to exist scarcely anywhere else. To procure it here

improper influences are appealed to, unwise connections are established

between the Government and vast numbers of powerful State institutions,

other motives than the public good are brought to bear both on the

executive and legislative departments, and selfish combinations leading

to special legislation are formed. It is made the interest of banking

institutions and their stockholders throughout the Union to use their

exertions for the increase of taxation and the accumulation of a surplus

revenue, and while an excuse is afforded the means are furnished for

those excessive issues which lead to extravagant trading and speculation

and are the forerunners of a vast debt abroad and a suspension of the

banks at home.

Impressed, therefore, as I am with the propriety of the funds of the

Government being withdrawn from the private use of either banks or

individuals, and the public money kept by duly appointed public agents,

and believing as I do that such also is the judgment which discussion,

reflection, and experience have produced on the public mind, I leave the

subject with you. It is, at all events, essential to the interests of

the community and the business of the Government that a decision should

be made.

Most of the arguments that dissuade us from employing banks in the

custody and disbursement of the public money apply with equal force to

the receipt of their notes for public dues. The difference is only in

form. In one instance the Government is a creditor for its deposits, and

in the other for the notes it holds. They afford the same opportunity

for using the public moneys, and equally lead to all the evils attendant

upon it, since a bank can as safely extend its discounts on a deposit

of its notes in the hands of a public officer as on one made in its own

vaults. On the other hand, it would give to the Government no greater

security, for in case of failure the claim of the note holder would be

no better than that of a depositor.

I am aware that the danger of inconvenience to the public and

unreasonable pressure upon sound banks have been urged as objections

to requiring the payment of the revenue in gold and silver. These

objections have been greatly exaggerated. From the best estimates we may

safely fix the amount of specie in the country at $85,000,000, and the

portion of that which would be employed at any one time in the receipts

and disbursements of the Government, even if the proposed change were

made at once, would not, it is now, after fuller investigation, believed

exceed four or five millions. If the change were gradual, several

years would elapse before that sum would be required, with annual

opportunities in the meantime to alter the law should experience prove

it to be oppressive or inconvenient. The portions of the community on

whose business the change would immediately operate are comparatively

small, nor is it believed that its effect would be in the least unjust

or injurious to them.

In the payment of duties, which constitute by far the greater portion of

the revenue, a very large proportion is derived from foreign commission

houses and agents of foreign manufacturers, who sell the goods consigned

to them generally at auction, and after paying the duties out of the

avails remit the rest abroad in specie or its equivalent. That the

amount of duties should in such cases be also retained in specie can

hardly be made a matter of complaint. Our own importing merchants,

by whom the residue of the duties is paid, are not only peculiarly

interested in maintaining a sound currency, which the measure in

question will especially promote, but are from the nature of their

dealings best able to know when specie will be needed and to procure

it with the least difficulty or sacrifice. Residing, too, almost

universally in places where the revenue is received and where the drafts

used by the Government for its disbursements must concentrate, they have

every opportunity to obtain and use them in place of specie should it be

for their interest or convenience. Of the number of these drafts and the

facilities they may afford, as well as of the rapidity with which the

public funds are drawn and disbursed, an idea may be formed from the

fact that of nearly $20,000,000 paid to collectors and receivers during

the present year the average amount in their hands at any one time has

not exceeded a million and a half, and of the fifteen millions received

by the collector of New York alone during the present year the average

amount held by him subject to draft during each week has been less than

half a million.

The ease and safety of the operations of the Treasury in keeping the

public money are promoted by the application of its own drafts to the

public dues. The objection arising from having them too long outstanding

might be obviated and they yet made to afford to merchants and banks

holding them an equivalent for specie, and in that way greatly lessen

the amount actually required. Still less inconvenience will attend the

requirement of specie in purchases of public lands. Such purchases,

except when made on speculation, are in general but single transactions,

rarely repeated by the same person; and it is a fact that for the

last year and a half, during which the notes of sound banks have been

received, more than a moiety of these payments has been voluntarily made

in specie, being a larger proportion than would have been required in

three years under the graduation proposed.

It is, moreover, a principle than which none is better settled by

experience that the supply of the precious metals will always be found

adequate to the uses for which they are required. They abound in

countries where no other currency is allowed. In our own States, where

small notes are excluded, gold and silver supply their place. When

driven to their hiding places by bank suspensions, a little firmness in

the community soon restores them in a sufficient quantity for ordinary

purposes. Postage and other public dues have been collected in coin

without serious inconvenience even in States where a depreciated paper

currency has existed for years, and this, with the aid of Treasury

notes for a part of the time, was done without interruption during the

suspension of 1837. At the present moment the receipts and disbursements

of the Government are made in legal currency in the largest portion of

the Union. No one suggests a departure from this rule, and if it can now

be successfully carried out it will be surely attended with even less

difficulty when bank notes are again redeemed in specie.

Indeed, I can not think that a serious objection would anywhere be

raised to the receipt and payment of gold and silver in all public

transactions were it not from an apprehension that a surplus in the

Treasury might withdraw a large portion of it from circulation and lock

it up unprofitably in the public vaults. It would not, in my opinion,

be difficult to prevent such an inconvenience from occurring; but the

authentic statements which I have already submitted to you in regard

to the actual amount in the public Treasury at any one time during the

period embraced in them and the little probability of a different state

of the Treasury for at least some years to come seem to render it

unnecessary to dwell upon it. Congress, moreover, as I have before

observed, will in every year have an opportunity to guard against it

should the occurrence of any circumstances lead us to apprehend injury

from this source. Viewing the subject in all its aspects, I can not

believe that any period will be more auspicious than the present for the

adoption of all measures necessary to maintain the sanctity of our own

engagements and to aid in securing to the community that abundant supply

of the precious metals which adds so much to their prosperity and gives

such increased stability to all their dealings.

In a country so commercial as ours banks in some form will probably

always exist, but this serves only to render it the more incumbent on

us, notwithstanding the discouragements of the past, to strive in our

respective stations to mitigate the evils they produce; to take from

them as rapidly as the obligations of public faith and a careful

consideration of the immediate interests of the community will permit

the unjust character of monopolies; to check, so far as may be

practicable, by prudent legislation those temptations of interest and

those opportunities for their dangerous indulgence which beset them on

every side, and to confine them strictly to the performance of their

paramount duty--that of aiding the operations of commerce rather than

consulting their own exclusive advantage. These and other salutary

reforms may, it is believed, be accomplished without the violation of

any of the great principles of the social compact, the observance of

which is indispensable to its existence, or interfering in any way with

the useful and profitable employment of real capital.

Institutions so framed have existed and still exist elsewhere, giving

to commercial intercourse all necessary facilities without inflating or

depreciating the currency or stimulating speculation. Thus accomplishing

their legitimate ends, they have gained the surest guaranty for their

protection and encouragement in the good will of the community. Among

a people so just as ours the same results could not fail to attend a

similar course. The direct supervision of the banks belongs, from the

nature of our Government, to the States who authorize them. It is to

their legislatures that the people must mainly look for action on that

subject. But as the conduct of the Federal Government in the management

of its revenue has also a powerful, though less immediate, influence

upon them, it becomes our duty to see that a proper direction is given

to it. While the keeping of the public revenue in a separate and

independent treasury and of collecting it in gold and silver will have

a salutary influence on the system of paper credit with which all banks

are connected, and thus aid those that are sound and well managed, it

will at the same time sensibly check such as are otherwise by at once

withholding the means of extravagance afforded by the public funds and

restraining them from excessive issues of notes which they would be

constantly called upon to redeem.

I am aware it has been urged that this control may be best attained and

exerted by means of a national bank. The constitutional objections

which I am well known to entertain would prevent me in any event from

proposing or assenting to that remedy; but in addition to this, I can

not after past experience bring myself to think that it can any longer

be extensively regarded as effective for such a purpose. The history of

the late national bank, through all its mutations, shows that it was

not so. On the contrary, it may, after a careful consideration of the

subject, be, I think, safely stated that at every period of banking

excess it took the lead; that in 1817 and 1818, in 1823, in 1831, and

in 1834 its vast expansions, followed by distressing contractions, led

to those of the State institutions. It swelled and maddened the tides of

the banking system, but seldom allayed or safely directed them. At a few

periods only was a salutary control exercised, but an eager desire, on

the contrary, exhibited for profit in the first place; and if afterwards

its measures were severe toward other institutions, it was because its

own safety compelled it to adopt them. It did not differ from them in

principle or in form; its measures emanated from the same spirit of

gain; it felt the same temptation to overissues; it suffered from and

was totally unable to avert those inevitable laws of trade by which it

was itself affected equally with them; and at least on one occasion, at

an early day, it was saved only by extraordinary exertions from the same

fate that attended the weakest institution it professed to supervise.

In 1837 it failed equally with others in redeeming its notes (though

the two years allowed by its charter for that purpose had not expired),

a large amount of which remains to the present time outstanding. It is

true that, having so vast a capital and strengthened by the use of all

the revenues of the Government, it possessed more power; but while it

was itself by that circumstance freed from the control which all banks

require, its paramount object and inducement were left the same--to

make the most for its stockholders, not to regulate the currency of the

country. Nor has it, as far as we are advised, been found to be greatly

otherwise elsewhere. The national character given to the Bank of England

has not prevented excessive fluctuations in their currency, and it

proved unable to keep off a suspension of specie payments, which lasted

for nearly a quarter of a century. And why should we expect it to be

otherwise? A national institution, though deriving its charter from a

different source than the State banks, is yet constituted upon the same

principles, is conducted by men equally exposed to temptation, and is

liable to the same disasters, with the additional disadvantage that

its magnitude occasions an extent of confusion and distress which the

mismanagement of smaller institutions could not produce. It can scarcely

be doubted that the recent suspension of the United States Bank of

Pennsylvania, of which the effects are felt not in that State alone, but

over half the Union, had its origin in a course of business commenced

while it was a national institution, and there is no good reason for

supposing that the same consequences would not have followed had it

still derived its powers from the General Government. It is in vain,

when the influences and impulses are the same, to look for a difference

in conduct or results. By such creations we do, therefore, but increase

the mass of paper credit and paper currency, without checking their

attendant evils and fluctuations. The extent of power and the efficiency

of organization which we give, so far from being beneficial, are in

practice positively injurious. They strengthen the chain of dependence

throughout the Union, subject all parts more certainly to common

disaster, and bind every bank more effectually in the first instance

to those of our commercial cities, and in the end to a foreign power.

In a word, I can not but believe that, with the full understanding of

the operations of our banking system which experience has produced,

public sentiment is not less opposed to the creation of a national bank

for purposes connected with currency and commerce than for those

connected with the fiscal operations of the Government.

Yet the commerce and currency of the country are suffering evils from

the operations of the State banks which can not and ought not to be

overlooked. By their means we have been flooded with a depreciated

paper, which it was evidently the design of the framers of the

Constitution to prevent when they required Congress to "coin money and

regulate the value of foreign coins," and when they forbade the States

"to coin money, emit bills of credit, make anything but gold and silver

a tender in payment of debts," or "pass any law impairing the obligation

of contracts." If they did not guard more explicitly against the present

state of things, it was because they could not have anticipated that the

few banks then existing were to swell to an extent which would expel to

so great a degree the gold and silver for which they had provided from

the channels of circulation, and fill them with a currency that defeats

the objects they had in view. The remedy for this must chiefly rest with

the States from whose legislation it has sprung. No good that might

accrue in a particular case from the exercise of powers not obviously

conferred on the General Government would authorize its interference or

justify a course that might in the slightest degree increase at the

expense of the States the power of the Federal authorities; nor do

I doubt that the States will apply the remedy. Within the last few

years events have appealed to them too strongly to be disregarded.

They have seen that the Constitution, though theoretically adhered to,

is subverted in practice; that while on the statute books there is no

legal tender but gold and silver, no law impairing the obligations of

contracts, yet that in point of fact the privileges conferred on banking

corporations have made their notes the currency of the country; that the

obligations imposed by these notes are violated under the impulses of

interest or convenience, and that the number and power of the persons

connected with these corporations or placed under their influence give

them a fearful weight when their interest is in opposition to the spirit

of the Constitution and laws. To the people it is immaterial whether

these results are produced by open violations of the latter or by the

workings of a system of which the result is the same. An inflexible

execution even of the existing statutes of most of the States would

redress many evils now endured, would effectually show the banks the

dangers of mismanagement which impunity encourages them to repeat,

and would teach all corporations the useful lesson that they are the

subjects of the law and the servants of the people. What is still

wanting to effect these objects must be sought in additional

legislation, or, if that be inadequate, in such further constitutional

grants or restrictions as may bring us back into the path from which

we have so widely wandered.

In the meantime it is the duty of the General Government to cooperate

with the States by a wise exercise of its constitutional powers and

the enforcement of its existing laws. The extent to which it may do so

by further enactments I have already adverted to, and the wisdom of

Congress may yet enlarge them. But above all, it is incumbent upon us

to hold erect the principles of morality and law, constantly executing

our own contracts in accordance with the provisions of the Constitution,

and thus serving as a rallying point by which our whole country may be

brought back to that safe and honored standard.

Our people will not long be insensible to the extent of the burdens

entailed upon them by the false system that has been operating on

their sanguine, energetic, and industrious character, nor to the means

necessary to extricate themselves from these embarrassments. The weight

which presses upon a large portion of the people and the States is

an enormous debt, foreign and domestic. The foreign debt of our

States, corporations, and men of business can scarcely be less than

$200,000,000, requiring more than $10,000,000 a year to pay the

interest. This sum has to be paid out of the exports of the country,

and must of necessity cut off imports to that extent or plunge the

country more deeply in debt from year to year. It is easy to see that

the increase of this foreign debt must augment the annual demand on

the exports to pay the interest, and to the same extent diminish the

imports, and in proportion to the enlargement of the foreign debt and

the consequent increase of interest must be the decrease of the import

trade. In lieu of the comforts which it now brings us we might have

our gigantic banking institutions and splendid, but in many instances

profitless, railroads and canals absorbing to a great extent in interest

upon the capital borrowed to construct them the surplus fruits of

national industry for years to come, and securing to posterity no

adequate return for the comforts which the labors of their hands might

otherwise have secured. It is not by the increase of this debt that

relief is to be sought, but in its diminution. Upon this point there

is, I am happy to say, hope before us; not so much in the return of

confidence abroad, which will enable the States to borrow more money, as

in a change of public feeling at home, which prompts our people to pause

in their career and think of the means by which debts are to be paid

before they are contracted. If we would escape embarrassment, public and

private, we must cease to run in debt except for objects of necessity

or such as will yield a certain return. Let the faith of the States,

corporations, and individuals already pledged be kept with the most

punctilious regard. It is due to our national character as well as

to justice that this should on the part of each be a fixed principle

of conduct. But it behooves us all to be more chary in pledging it

hereafter. By ceasing to run in debt and applying the surplus of our

crops and incomes to the discharge of existing obligations, buying less

and selling more, and managing all affairs, public and private, with

strict economy and frugality, we shall see our country soon recover from

a temporary depression, arising not from natural and permanent causes,

but from those I have enumerated, and advance with renewed vigor in her

career of prosperity.

Fortunately for us at this moment, when the balance of trade is greatly

against us and the difficulty of meeting it enhanced by the disturbed

state of our money affairs, the bounties of Providence have come to

relieve us from the consequences of past errors. A faithful application

of the immense results of the labors of the last season will afford

partial relief for the present, and perseverance in the same course will

in due season accomplish the rest. We have had full experience in times

past of the extraordinary results which can in this respect be brought

about in a short period by the united and well-directed efforts of a

community like ours. Our surplus profits, the energy and industry of our

population, and the wonderful advantages which Providence has bestowed

upon our country in its climate, its various productions, indispensable

to other nations, will in due time afford abundant means to perfect the

most useful of those objects for which the States have been plunging

themselves of late in embarrassment and debt, without imposing on

ourselves or our children such fearful burdens.

But let it be indelibly engraved on our minds that relief is not to be

found in expedients. Indebtedness can not be lessened by borrowing more

money or by changing the form of the debt. The balance of trade is not

to be turned in our favor by creating new demands upon us abroad. Our

currency can not be improved by the creation of new banks or more issues

from those which now exist. Although these devices sometimes appear to

give temporary relief, they almost invariably aggravate the evil in the

end. It is only by retrenchment and reform--by curtailing public and

private expenditures, by paying our debts, and by reforming our banking

system--that we are to expect effectual relief, security for the future,

and an enduring prosperity. In shaping the institutions and policy of

the General Government so as to promote as far as it can with its

limited powers these important ends, you may rely on my most cordial

cooperation.

That there should have been in the progress of recent events doubts in

many quarters and in some a heated opposition to every change can not

surprise us. Doubts are properly attendant on all reform, and it is

peculiarly in the nature of such abuses as we are now encountering to

seek to perpetuate their power by means of the influence they have been

permitted to acquire. It is their result, if not their object, to gain

for the few an ascendency over the many by securing to them a monopoly

of the currency, the medium through which most of the wants of mankind

are supplied; to produce throughout society a chain of dependence which

leads all classes to look to privileged associations for the means of

speculation and extravagance; to nourish, in preference to the manly

virtues that give dignity to human nature, a craving desire for

luxurious enjoyment and sudden wealth, which renders those who seek

them dependent on those who supply them; to substitute for republican

simplicity and economical habits a sickly appetite for effeminate

indulgence and an imitation of that reckless extravagance which

impoverished and enslaved the industrious people of foreign lands, and

at last to fix upon us, instead of those equal political rights the

acquisition of which was alike the object and supposed reward of our

Revolutionary struggle, a system of exclusive privileges conferred by

partial legislation. To remove the influences which had thus gradually

grown up among us, to deprive them of their deceptive advantages, to

test them by the light of wisdom and truth, to oppose the force which

they concentrate in their support--all this was necessarily the work of

time, even among a people so enlightened and pure as that of the United

States. In most other countries, perhaps, it could only be accomplished

through that series of revolutionary movements which are too often found

necessary to effect any great and radical reform; but it is the crowning

merit of our institutions that they create and nourish in the vast

majority of our people a disposition and a power peaceably to remedy

abuses which have elsewhere caused the effusion of rivers of blood and

the sacrifice of thousands of the human race. The result thus far is

most honorable to the self-denial, the intelligence, and the patriotism

of our citizens; it justifies the confident hope that they will carry

through the reform which has been so well begun, and that they will go

still further than they have yet gone in illustrating the important

truth that a people as free and enlightened as ours will, whenever

it becomes necessary, show themselves to be indeed capable of

self-government by voluntarily adopting appropriate remedies for every

abuse, and submitting to temporary sacrifices, however great, to insure

their permanent welfare.

My own exertions for the furtherance of these desirable objects have

been bestowed throughout my official career with a zeal that is

nourished by ardent wishes for the welfare of my country, and by an

unlimited reliance on the wisdom that marks its ultimate decision on all

great and controverted questions. Impressed with the solemn obligations

imposed upon me by the Constitution, desirous also of laying before my

fellow-citizens, with whose confidence and support I have been so highly

honored, such measures as appear to me conducive to their prosperity,

and anxious to submit to their fullest consideration the grounds upon

which my opinions are formed, I have on this as on preceding occasions

freely offered my views on those points of domestic policy that seem

at the present time most prominently to require the action of the

Government. I know that they will receive from Congress that full and

able consideration which the importance of the subjects merits, and

I can repeat the assurance heretofore made that I shall cheerfully and

readily cooperate with you in every measure that will tend to promote

the welfare of the Union.