coinage tariffs. Such a tariff, issued in 1750, valued one ounce of
silver at six shillings and eightpence, the Spanish milled dollar at
six shillings, the guinea at twenty-eight shillings, and the English
crown at six shillings and eightpence. All foreign coins were valued
in proportion to the value of the Spanish piece-of-eight. Some of the
colonies stamped the shilling, which constituted a large part of the
money in circulation. It, however, varied greatly in value in the
different colonies. Thus, the Spanish dollar equaled five shillings
in Georgia; eight in North Carolina and New York; six in Virginia,
Connecticut, New Hampshire, Massachusetts, and Rhode Island; seven
and sixpence in Maryland, Delaware, Pennsylvania, and New Jersey;
thirty-two and sixpence in South Carolina. The Spanish dollar itself,
with which these comparisons were made, was frequently below legal
weight, and, therefore, varied in value. Where the pieces mentioned in
the tariff of 1776 were of full weight, the ratio there established was
the English ratio of one to 15.21, the ratio for bullion being nearly
the same.
After the tariff of 1776 had been in operation for six years, the
colonies began to feel keenly the difficulties caused by the variety of
coins constituting their metallic circulating medium, and the need of
a special American coinage was frequently expressed. In 1782, Robert
Morris, superintendent of finance, submitted to the Congress of the
Confederation a scheme for a national coinage and the establishment
of an American mint, which met with approval. Jefferson recommended
the decimal system, with the dollar as the unit. Neither of these
proposals was carried into effect till, in 1786, the Congress of the
Confederation chose as the monetary unit of the United States the
dollar of 375.64 grains of pure silver, which unit had its origin in
the Spanish piaster or milled dollar, then the basis of the metallic
circulation of the English colonies in America. This American dollar
was never coined, there not being at the time a mint in the United
States.
The Act of April 2, 1792, established the first monetary system of
the United States. The bases of the system were: The gold dollar,
containing 24.75 grains of pure gold, and stamped in pieces of $10,
$5, and $2.50, denominated respectively eagles, half-eagles, and
quarter-eagles; the silver dollar, containing 371.25 grains of pure
silver. A mint was established. The coinage was unlimited, and there
was no mint charge. The ratio of gold to silver in coinage was 1:15.
Both gold and silver were legal tender. The standard was double.[4]
The Act of 1792 undervalued gold, which was therefore exported. The
Act of June 28, 1834, was passed to remedy this by changing the
mint ratio between the metals to 1:16.002. The latter act fixed the
weight of the gold dollar at 25.8 grains, but lowered the fineness
from 0.916⅔ to 0.899225. The fine weight of the gold dollar was thus
reduced to 23.2 grains. The Act of 1834 undervalued silver as that
of 1792 had undervalued gold, and silver was attracted to Europe by
the more favorable ratio of 1:15½. The Act of January 18, 1837, was
passed to make the fineness of the gold and silver coins uniform. The
legal weight of the gold dollar was fixed at 25.8 grains, and its fine
weight at 23.22 grains. The fineness was therefore changed by this act
to 0.900 and the ratio to 1:15.988+. Silver continued to be exported.
The Act of February 21, 1853, reduced the weight of the silver coins
of a denomination less than $1, which the Acts of 1792, 1834, and 1837
had made exactly proportional to the weight of the silver dollar,
and provided that they should be legal tender to the amount of only
$5. Under the Acts of 1792, 1834, and 1837 they had been full legal
tender. By the Act of 1853 the legal weight of the half dollar was
reduced to 192 grains, and other fractions of the dollar in proportion.
The coinage of the fractional parts of the dollar was reserved to the
government.
[4] This was true so far as the law was concerned, but
not actually, as may be seen by reading the sentences
immediately following the above statement.
The Act of February 12, 1873, provided that the unit of value of the
United States should be the gold dollar of the standard weight of
25.8 grains, and that there should be coined besides the following
gold coins: A quarter-eagle, or two and-a-half dollar gold piece; a
three-dollar gold piece; a half-eagle, or five-dollar piece; an eagle,
or ten-dollar piece; and a double eagle, or twenty-dollar piece, all of
a standard weight proportional to that of the dollar piece. These coins
were made legal tender in all payments at their nominal value when not
below the standard weight and limit of tolerance provided in the act
for the single piece, and when reduced in weight they should be legal
tender at a valuation in proportion to their actual weight. The silver
coins provided for by the Act were a trade dollar, a half-dollar or
fifty-cent piece, a quarter-dollar, and a ten-cent piece, the weight
of the trade dollar to be 420 grains troy; the half-dollar, twelve and
a half grams; the quarter-dollar and dime, respectively, one half and
one fifth of the weight of the half-dollar. The silver coins were made
legal tender at their nominal value for any amount not exceeding $5 in
any one payment. Owners of silver bullion were allowed to deposit it
at any mint of the United States to be formed into bars or into trade
dollars, and no deposit of silver for other coinage was to be received.
Section 2 of the joint resolution of July 22, 1876, recited that the
trade dollar should not thereafter be legal tender, and that the
Secretary of the Treasury should be authorized to limit the coinage of
the same to an amount sufficient to meet the export demand for it.
The Act of March 3, 1887, retired the trade dollar and prohibited
its coinage. That of September 26, 1890, discontinued the coinage of
the one-dollar and three-dollar gold pieces. The Act of February 28,
1878, directed the coinage of silver dollars of the weight of 412½
grains troy, of standard silver, as provided in the Act of January 18,
1837, and that such coins, with all silver dollars theretofore coined,
should be legal tender at their nominal value for all debts and dues,
public and private, except where otherwise expressly stipulated in the
contract. The Secretary of the Treasury was authorized and directed
by the first section of the act to purchase from time to time silver
bullion at the market price thereof, not less than $2,000,000 worth
nor more than $4,000,000 worth per month, and to cause the same to be
coined monthly, as fast as purchased, into such dollars. A subsequent
act, that of July 14, 1890, enacted that the Secretary of the Treasury
should purchase silver bullion to the aggregate amount of 4,500,000
ounces, or so much thereof as might be offered, each month, at the
market price thereof, not exceeding $1.00 for 371.25 grains of pure
silver, and to issue in payment thereof Treasury notes of the United
States, such notes to be redeemable by the government, on demand,
in coin, and to be legal tender in payment of all debts, public and
private, except where otherwise expressly stipulated in the contract.
The act directed the Secretary of the Treasury to coin each month
2,000,000 ounces of the silver bullion purchased under the provisions
of the act into standard silver dollars until July 1, 1891, and
thereafter as much as might be necessary, to provide for the redemption
of the Treasury notes issued under the act. The purchasing clause of
the Act of July 14, 1890, was repealed by the Act of November 1, 1893.
The War Revenue Act of June 13, 1898, authorized and directed the
coinage of standard silver dollars to the amount of not less than one
and one half million dollars a month, from the bullion in the Treasury
purchased under the Act of July 14, 1890. The Act of June 9, 1879,
made the subsidiary silver coins of the United States legal tender to
the amount of $10. The minor coins are legal tender to the amount of
twenty-five cents.
The following official figures give, by periods of ten years, the
coinage of the United States from the establishment of the Mint to the
present time:—
-------------+-----------------+---------------+--------------+-
Years. | Gold. | Silver. | Minor. |
-------------+-----------------+---------------+--------------+-
1793–1799 | $696,530.00| $1,216,158.75| $50,111.42|
1800–1809 | 3,067,067.50| 3,154,687.75| 164,865.79|
1810–1819 | 2,348,915.00| 6,107,903.75| 162,534.07|
1820–1829 | 2,579,017.50| 14,787,327.65| 178,372.70|
1830–1839 | 17,745,422.50| 28,112,136.60| 334,810.21|
1840–1849 | 58,909,439.00| 22,223,733.00| 360,840.33|
1850–1859 | 352,915,059.00| 47,238,813.00| 1,135,580.03|
1860–1869 | 290,786,131.00| 13,637,607.90| 8,504,070.00|
1870–1879 | 370,718,883.50| 142,196,178.60| 2,231,009.50|
1880–1889 | 411,766,277.00| 305,869,081.20| 8,127,305.56|
1890 to June | 374,806,225.00| 136,248,501.65| 7,564,849.65|
30, 1897 | | | |
-------------+-----------------+---------------+--------------+-
|$1,886,338,958.00|$720,792,129.85|$28,814,558.26|
-------------+-----------------+---------------+--------------+-
-------------+-----------------
Years. | Total.
-------------+-----------------
1793–1799 | $1,962,800.17
1800–1809 | 6,386,621.04
1810–1819 | 8,619,561.82
1820–1829 | 17,544,717.85
1830–1839 | 46,192,369.31
1840–1849 | 81,494,012.33
1850–1859 | 401,289,443.03
1860–1869 | 312,927,808.90
1870–1879 | 515,146,071.60
1880–1889 | 725,762,663.76
1890 to June | 518,619,576.30
30, 1897 |
-------------+-----------------
|$2,635,945,646.01
-------------+-----------------
At this writing the report of the Director of the Mint has not been
published, but the coinage for the full year 1897 may be stated as
follows: gold, $76,028,484; silver, $18,486,697; and for the year 1898,
gold, $77,985,757; silver, $23,034,034. From January 1 to June 30,
1899, the coinage was: gold, $65,915,020; silver, $12,780,441.
It is sometimes thought that the silver dollars are not a full legal
tender, but this is not so. They are an unlimited legal tender for all
debts, public and private. The Treasury does not, in practice, redeem
silver dollars in gold, but successive Secretaries of the Treasury have
announced their readiness to do so, if necessary to keep the silver
dollars from depreciating,—that is, preserve their parity,—which the
law directs.
Silver certificates and gold certificates are not legal tender, but
entitle the holder to receive the kind and amount of coin named on
their face.
The value of gold bullion in a dollar of that metal is 99.991125
cents, or practically 100 cents. The value of the silver bullion in a
dollar of that metal is about 45 cents. It varies, however, with the
fluctuations in the market value of silver.
It will thus be seen that the bullion value of a silver dollar and
of a gold dollar differs greatly, but the equality of the purchasing
power of the two coins is due to the fact that the silver dollars are
receivable for public and private debts, that they are indirectly
exchangeable for gold, by depositing them in the banks, and that the
government is pledged to redeem them in gold, if necessary to preserve
their parity with gold.
[Illustration: NEW UNITED STATES MINT, PHILADELPHIA, PA.]
As early as 1826 the United States began to export domestic gold,
beginning with an export of $1,056,088 of gold coin and bullion,
and receiving an import of $678,740. Up to 1897 the grand total of
exports of gold coin and bullion amounted to $2,186,238,541, and the
total imports to $1,112,138,766, an excess of exports over imports of
$1,074,099,775. In 1898 the imports of gold coin and bullion into the
United States were $120,391,674, and the exports $15,406,391, making
the net imports $104,985,283.
From 1821 to 1897 the grand total of exports of silver coin and
bullion from the United States was $1,152,688,776, and the imports
$730,325,881, making an excess of exports over imports of $422,362,895.
In the fiscal year 1898, the silver imports were $30,927,781, and the
exports $55,105,239, making the excess of exports $24,177,458.
The total product of gold in the United States from 1792 up to 1896 was
$2,113,034,769, and of silver $1,444,970,000, making a grand total of
the precious metals of $3,558,004,769. The total value of the entire
world’s production of gold, between the years 1493 and 1896, was
$8,983,320,600, and of silver $10,556,700,800, making a grand total of
gold and silver of $19,540,021,400.
As a comparison of the money status of the United States at the
beginning and end of the century, the following figures are
interesting: In 1800 the population was 5,308,483; the estimated bank
notes outstanding, $10,500,000; the estimated specie in the country,
$17,500,000; the total money in the United States, $28,000,000;
the specie in the Treasury, $1,500,000; the money in circulation,
$26,500,000; the amount per capita, $4.99. In 1898 the population was
74,522,000; the total coin in the United States, including bullion in
the Treasury, $1,498,993,249; total paper money, $1,138,440,126; total
money of all kinds, $2,637,433,375; coin, bullion, and paper money
in the Treasury, $799,537,480; total circulation, $1,837,859,895;
circulation per capita, $24.66.
[Illustration: CARPENTERS’ HALL, PHILADELPHIA.
(First Site of First United States Bank.)]
Perhaps no law relating to the coins and currency of the United States
has been so widely discussed, or has borne more directly on the
attitude and influence of political parties than the Coinage Act of
1873. This act grew out of a proposition to revise our coinage laws,
made by John Jay Knox to the Secretary of the Treasury, in April, 1870.
Mr. Knox, in his rough draft of a bill, provided for a silver dollar
of 384 grains, to be a legal tender for sums not exceeding $5.00.
Thus, the standard silver dollar of 412½ grains was eliminated. It
did not appear in the bill as it passed the Senate, January 10, 1871,
nor in that reported to the House, March 9, 1871. The bill underwent
protracted and thorough discussion, and on May 27, 1872, was passed
in the House. As passed, it contained the original provision for
coining a silver dollar of the weight of 384 grains—twice the weight
of the silver half dollar. These dollars were to be a legal tender
for amounts not exceeding $5.00. The Senate amended this House bill,
by substituting a trade dollar of the weight of 420 grains for that
of 384 grains, at the same time preserving the legal-tender limit of
$5.00. In the amended form, it passed the Senate, January 17, 1873, and
the House, February 7, 1873, and became a law. It will be seen that
the standard silver dollar of 412½ grains was never in the bill, and
could not, therefore, have been secretly omitted, as was afterwards
charged. It was omitted from the first draft, and all through,
because none were being coined, and those that had been coined were
exported, the silver bullion in them being, at that time, worth more as
bullion than coin. By joint resolution of Congress, approved July 22,
1876, the trade dollars provided for in the act were deprived of their
legal-tender quality. It was supposed they would circulate in China,
but they proved useless even for that purpose.
III. EARLY BANKING IN THE UNITED STATES.
The first banks in the United States owed their origin to Robert
Morris and Alexander Hamilton. Morris, as early as 1763, conceived the
plan of a bank to assist in developing American trade, and in 1779,
Hamilton proposed the organization of “The Company of the Bank of the
United States.” These plans did not mature, but were followed, at the
suggestion of Thomas Paine, by an association of ninety-two subscribers
to a fund of 300,000 pounds Pennsylvania currency to support the
Revolutionary army. This association became known as the Pennsylvania
Bank. It commenced business July 17, 1780, and after a career of a
year and a half, during which time it greatly aided the government in
furnishing army supplies, its affairs were wound up.
On May 17, 1781, Hamilton presented the plan of a bank to Congress,
which was to be truly national, and “created avowedly to aid the
United States.” Its name was to be the Bank of North America, with a
subscription of $400,000 in gold and silver, and its notes, payable
on demand, to be receivable for duties and taxes in every State.
Congress approved the plan, and Morris, then Superintendent of Finance,
published it, with an address showing its advantages to the government
and people, then suffering from the ill effects of a depreciated
currency.
The Bank of North America was organized November 1, 1781, and began
business January 7, 1782. It creditably fulfilled its mission “to aid
the United States,” and, after the expiration of its charter, became
a State institution. In 1864 it entered the national banking system,
though retaining its old name. This bank was followed by the Bank of
New York, which began business June 9, 1784, and by the Massachusetts
Bank, which began business July 5, 1784.
FIRST UNITED STATES BANK.—This institution grew out of the
recommendations of Alexander Hamilton, and formed a part of his scheme
of strengthening the public credit and bringing about a closer union of
States. His plan was incorporated into a bill which passed the Senate
January 3, 1791, and the House, January 20, 1791. Washington signed it
February 25, 1791. The bill was hotly opposed as unconstitutional by
Secretary of State Thomas Jefferson, Attorney-General Edmund Randolph,
and in general by representatives from the Southern States.
The capital of the bank was fixed at $10,000,000, one fifth of which
was to be subscribed by the government. The remainder was subscribed by
individuals, and two hours after the opening of the books the capital
was oversubscribed to the amount of 4000 shares. The central bank was
located at Philadelphia, and afterwards branches were established in
New York, Boston, Baltimore, Washington, Norfolk, Charleston, Savannah,
and New Orleans. Business was first opened in Carpenters’ Hall,
Philadelphia, December 12, 1791. In July, 1797, the site was removed
to a new building on Third Street, below Chestnut, and it remained
there till the dissolution of the bank, with the exception of a brief
removal to Germantown in 1798, during the epidemic of yellow fever.
Though this bank proved a profitable enterprise for the government, it
failed to secure a renewal of its charter in 1811, chiefly because so
many of its shares had passed into foreign hands.
[Illustration: THE GIRARD BANK, PHILADELPHIA.
(Second Site of First United States Bank.)]
EARLY STATE BANKS.—From 1790 to 1811 the number of State banks
increased from four to eighty-eight; their circulation from $2,500,000
to $22,700,000; their capital from $2,500,000 to $42,610,000. In the
same time the metallic circulation of the country rose from $9,000,000
to $30,000,000. These banks failed to meet the monetary necessities
of the War of 1812, and in 1814 practically all of them south of New
England suspended specie payments. Their notes were poured out in
all denominations from six cents upward, and, with coin redemption
stopped, they depreciated rapidly. This led to great financial distress
in 1818–1820, and to excessive bank failures. The seriousness of the
general situation, and the declining credit of the government, led to
the establishment of the second Bank of the United States.
SECOND BANK OF THE UNITED STATES.—In October, 1814, Secretary Dallas
laid a report before Congress, in which he deprecated the uncertain
amount and value of the paper currency. “There exists,” he said, “at
this time no adequate circulating medium common to the citizens of
the United States. The moneyed transactions of private life are at a
stand, and the fiscal operations of the government labor with extreme
inconvenience.” He then recommended as the remedy the establishment of
a national banking institution. A bill, based upon Dallas’s plan for
such an institution, failed of passage in the House in 1814, and again
in 1815, though passed by the Senate. It was, however, finally passed
in an amended form, but was vetoed by President Madison.
On December 24, 1815, Mr. Dallas laid before Congress another plan for
a national bank. A bill was framed authorizing such an institution,
with a capital of $35,000,000, $7,000,000 of which were to be
subscribed by the government, the central bank to be at Philadelphia,
with power to establish branches, payments to be made in specie at
all times unless otherwise authorized by Congress. This bill passed
both Houses of Congress, and was signed by President Madison, April
10, 1816. When the subscription books of this bank were closed, it was
found that the subscriptions fell short of the authorized $35,000,000
by $3,000,000, which amount was taken by Stephen Girard.
The bank could not lend more than $500,000 to the government without
authority of Congress, was to be the fiscal agent of the Treasury, and
to receive deposits of public moneys. No notes of a less denomination
than $5.00 were to be issued, and the penalty for refusing to pay
notes or deposits in specie on demand was twelve per cent per annum
until paid. It began business January 7, 1817. Owing to the impending
financial crisis and bad management, the bank verged rapidly toward
insolvency, but was resuscitated under the vigorous management of a
new president, Langdon Cheves, who was elected March 6, 1819. He was
succeeded by Nicholas Biddle in 1823, who was destined to see the fall
of the great institution.
The national bank incurred the hostility of the State banks, which
called it a monster because it refused to allow the notes of the local
banks to accumulate as deposits in its branches without redemption.
Various States passed discriminating laws against it. Jackson, in his
message to Congress in 1829, attacked the constitutionality of the
law establishing it, and charged that it had “failed in the great
end of establishing a uniform and sound currency.” At this time the
Bank was an imposing institution with its capital of $35,000,000,
its public deposits of six to seven million, its private deposits of
a like amount, its circulation of $12,000,000, its annual discounts
of $40,000,000, its annual profits of over $3,000,000, its palatial
establishment in Philadelphia, its twenty-five branches throughout the
Union, its five hundred employees, its stock distributed through nearly
all parts of the world, and its notes current at par at home and abroad.