Thirty Years' View (Vol. II of 2)

In the progress of the bill Mr. Buchanan proposed an amendment, the effect of which would be to change the essential character of the so called, deposit act, and convert it into a real distribution measure. By the terms of the act, it was the duty of the Secretary of the Treasury to call upon the States for a return of the deposit when needed by the Federal Treasury: Mr. Buchanan proposed to release the Secretary from this duty, and devolve it upon Congress, by enacting that the three instalments already delivered, should remain on deposit with the States until called for by Congress. Mr. Niles saw the evil of the proposition, and thus opposed it:

"He must ask for the yeas and nays on the amendment, and was sorry it had been offered. If it was to be fully considered, it would renew the debate on the deposit act, as it went to change the essential principles and terms of that act. A majority of those who voted for that act, about which there had been so much said, and so much misrepresentation, had professed to regard it – and he could not doubt that at the time they did so regard it – as simply a deposit law; as merely changing the place of deposit from the banks to the States, so far as related to the surplus. The money was still to be in the Treasury, and liable to be drawn out, with certain limitations and restrictions, by the ordinary appropriation laws, without the direct action of Congress. The amendment, if adopted, will change the principles of the deposit act, and the condition of the money deposited with the States under it. It will no longer be a deposit; it will not be in the Treasury, even in point of legal effect or form: the deposit will be changed to a loan, or, perhaps more properly, a grant to the States. The rights of the United States will be changed to a mere claim, like that against the late Bank of the United States; and a claim without any means to enforce it. We were charged, at the time, of making a distribution of the public revenue to the States, in the disguise and form of a deposit; and this amendment, it appeared to him, would be a very bold step towards confirming the truth of that charge. He deemed the amendment an important one, and highly objectionable; but he saw that the Senate were prepared to adopt it, and he would not pursue the discussion, but content himself with repeating his request for the ayes and noes on the question."

Mr. Buchanan expressed his belief that the substitution of Congress for the Secretary of the Treasury, would make no difference in the nature of the fund: and that remark of his, if understood as sarcasm, was undoubtedly true; for the deposit was intended as a distribution by its authors from the beginning, and this proposed substitution was only taking a step, and an effectual one, to make it so: for it was not to be expected that a Congress would ever be found to call for this money from the States, which they were so eager to give to the States. The proposition of Mr. Buchanan was carried by a large majority – 33 to 12 – all the opponents of the administration, and a division of its friends, voting for it. Thus, the whole principle, and the whole argument on which the deposit act had been passed, was reversed. It was passed to make the State treasuries the Treasury pro tanto of the United States – to substitute the States for the banks, for the keeping of this surplus until it was wanted – and it was placed within the call of a federal executive officer that it might be had for the public service when needed. All this was reversed. The recall of the money was taken from the federal executive, and referred to the federal legislative department – to the Congress, composed of members representing the States – that is to say, from the payee to the payor, and was a virtual relinquishment of the payment. And thus the deposit was made a mockery and a cheat; and that by those who passed it.

In the House of Representatives the disposition to treat the deposit as a contract, and to compel the government to deliver the money (although it would be compelled to raise by extraordinary means what was denominated a surplus), was still stronger than in the Senate, and gave rise to a protracted struggle, long and doubtful in its issue. Mr. Cushing laid down the doctrine of contract, and thus argued it:

"The clauses of the deposit act, which appertain to the present question, seem to me to possess all the features of a contract. It provides that the whole surplus revenue of the United States, beyond a certain sum, which may be in the Treasury on a certain day, shall be deposited with the several States; which deposit the States are to keep safely, and to pay back to the United States, whenever the same shall be called for by the Secretary of the Treasury in a prescribed time and mode, and on the happening of a given contingency. Here, it seems to me, is a contract in honor; and, so far as there can be a contract between the United States and the several States, a contract in law; there being reciprocal engagements, for a valuable consideration, on both sides. It is, at any rate, a quasi-contract. They who impugn this view of the question argue on the supposition that the act, performed or to be performed by the United States, is an inchoate gift of money to the States. Not so. It is a contract of deposit; and that contract is consummated, and made perfect, on the formal reception of any instalment of the deposit by the States. Now, entertaining this view of the transaction, I am asked by the administration to come forward and break this contract. True, a contract made by the government of the United States cannot be enforced in law. Does that make it either honest or honorable for the United States to take advantage of its power and violate its pledged faith? I refuse to participate in any such breach of faith. But further. The administration solicits Congress to step in between the United States and the States as a volunteer, and to violate a contract, as the means of helping the administration out of difficulties, into which its own madness and folly have wilfully sunk it, and which press equally upon the government and the people. The object of the measure is to relieve the Secretary of the Treasury from the responsibility of acting in this matter as he has the power to do. Let him act. I will not go out of my way to interpose in this between the Executive and the several States, until the administration appeals to me in the right spirit. This it has not done. The Executive comes to us with a new doctrine, which is echoed by his friends in this House, namely, that the American government is not to exert itself for the relief of the American people. Very well. If this be your policy, I, as representing the people, will not exert myself for the relief of your administration."

Such was the chicanery, unworthy of a pie-poudre court – with which a statute of the federal Congress, stamped with every word, invested with every form, hung with every attribute, to define it a deposit – not even a loan – was to be pettifogged into a gift! and a contract for a gift! and the federal Treasury required to stand and deliver! and all that, not in a low law court, where attorneys congregate, but in the high national legislature, where candor and firmness alone should appear. History would be faithless to her mission if she did not mark such conduct for reprobation, and invoke a public judgment upon it.

After a prolonged contest the vote was taken, and the bill carried, but by the smallest majority – 119 to 117; – a difference of two votes, which was only a difference of one member. But even that was a delusive victory. It was immediately seen that more than one had voted with the majority, not for the purpose of passing the bill, but to gain the privilege of a majority member to move for a reconsideration. Mr. Pickens, of South Carolina, immediately made that motion, and it was carried by a majority of 70! Mr. Pickens then proposed an amendment, which was to substitute definite for indefinite postponement – to postpone to a day certain instead of the pleasure of Congress: and the first day of January, 1839, was the day proposed; and that without reference to the condition of the Treasury (which might not then have any surplus), for the transfer of this fourth instalment of a deposit to the States. The vote being taken on this proposed amendment, it was carried by a majority of 40: and that amendment being concurred in by the Senate, the bill in that form became a law, and a virtual legalization of the deposit into a donation of forty millions to the States. And this was done by the votes of members who had voted for a deposit with the States; because a donation to the States was unconstitutional. The three instalments already delivered were not to be recalled until Congress should so order; and it was quite certain that it never would so order. At the same time the nominal discretion of Congress over the deposit of the remainder was denied, and the duty of the Secretary made peremptory to deliver it in the brief space of one year and a quarter from that time. But events frustrated that order. The Treasury was in no condition on the first day of January, 1839, to deliver that amount of money. It was penniless itself. The compromise act of 1833, making periodical reductions in the tariff, until the whole duty was reduced to an ad valorem of twenty per cent., had nearly run its course, and left the Treasury in the condition of a borrower, instead of that of a donor or lender of money. This fourth instalment could not be delivered at the time appointed, nor subsequently; – and was finally relinquished, the States retaining the amount they had received: which was so much clear gain through the legislative fraud of making a distribution under the name of a deposit.

This was the end of one of the distribution schemes which had so long afflicted and disturbed Congress and the country. Those schemes began now to be known by their consequences – evil to those they were intended to benefit, and of no service to those whose popularity they were to augment. To the States the deposit proved to be an evil, in the contentions and combinations to which their disposition gave rise in the general assemblies – in the objects to which they were applied – and the futility of the help which they afforded. Popularity hunting, on a national scale, gave birth to the schemes in Congress: the same spirit, on a smaller and local scale, took them up in the States. All sorts of plans were proposed for the employment of the money, and combinations more or less interested, or designing, generally carried the point in the universal scramble. In some States a pro rata division of the money, per capite, was made; and the distributive share of each individual being but a few shillings, was received with contempt by some, and rejected with scorn by others. In other States it was divided among the counties, and gave rise to disjointed undertakings of no general benefit. Others, again, were stimulated by the unexpected acquisition of a large sum, to engage in large and premature works of internal improvement, embarrassing the State with debt, and commencing works which could not be finished. Other States again, looking upon the deposit act as a legislative fraud to cover an unconstitutional and demoralizing distribution of public money to the people, refused for a long time to receive their proffered dividend, and passed resolutions of censure upon the authors of the act. And thus the whole policy worked out differently from what had been expected. The States and the people were not grateful for the favor: the authors of the act gained no presidential election by it: and the gratifying fact became evident that the American people were not the degenerate Romans, or the volatile Greeks, to be seduced with their own money – to give their votes to men who lavished the public moneys on their wants or their pleasures – in grain to feed them, or in shows and games to delight and amuse them.

CHAPTER XI.

INDEPENDENT TREASURY AND HARD MONEY PAYMENTS

These were the crowning measures of the session, and of Mr. Van Buren's administration, – not entirely consummated at that time, but partly, and the rest assured; – and constitute in fact an era in our financial history. They were the most strenuously contested measures of the session, and made the issue completely between the hard money and the paper money systems. They triumphed – have maintained their supremacy ever since – and vindicated their excellence on trial. Vehemently opposed at the time, and the greatest evil predicted, opposition has died away, and given place to support; and the predicted evils have been seen only in blessings. No attempt has been made to disturb these great measures since their final adoption, and it would seem that none need now be apprehended; but the history of their adoption presents one of the most instructive lessons in our financial legislation, and must have its interest with future ages as well as with the present generation. The bills which were brought in for the purpose were clear in principle – simple in detail: the government to receive nothing but gold and silver for its revenues, and its own officers to keep it – the Treasury being at the seat of government, with branches, or sub-treasuries at the principal points of collection and disbursement. And these treasuries to be real, not constructive – strong buildings to hold the public moneys, and special officers to keep the keys. The capacious, strong-walled and well-guarded custom houses and mints, furnished in the great cities the rooms that were wanted: the Treasury building at Washington was ready, and in the right place.

This proposed total separation of the federal government from all banks – called at the time in the popular language of the day, the divorce of Bank and State – naturally arrayed the whole bank power against it, from a feeling of interest; and all (or nearly so) acted in conjunction with the once dominant, and still potent, Bank of the United States. In the Senate, Mr. Webster headed one interest – Mr. Rives, of Virginia, the other; and Mr. Calhoun, who had long acted with the opposition, now came back to the support of the democracy, and gave the aid without which these great measures of the session could not have been carried. His temperament required him to have a lead; and it was readily yielded to him in the debate in all cases where he went with the recommendations of the message; and hence he appeared, in the debate on these measures, as the principal antagonist of Mr. Webster and Mr. Rives.

The present attitude of Mr. Calhoun gave rise to some taunts in relation to his former support of a national bank, and on his present political associations, which gave him the opportunity to set himself right in relation to that institution and his support of it in 1816 and 1834. In this vein Mr. Rives said:

"It does seem to me, Mr. President, that this perpetual and gratuitous introduction of the Bank of the United States into this debate, with which it has no connection, as if to alarm the imaginations of grave senators, is but a poor evidence of the intrinsic strength of the gentleman's cause. Much has been said of argument ad captandum in the course of this discussion. I have heard none that can compare with this solemn stalking of the ghost of the Bank of the United States through this hall, to 'frighten senators from their propriety.' I am as much opposed to that institution as the gentleman or any one else is, or can be. I think I may say I have given some proofs of it. The gentleman himself acquits me of any design to favor the interest of that institution, while he says such is the necessary consequence of my proposition. The suggestion is advanced for effect, and then retracted in form. Whatever be the new-born zeal of the senator from South Carolina against the Bank of the United States, I flatter myself that I stand in a position that places me, at least, as much above suspicion of an undue leaning in favor of that institution as the honorable gentleman. If I mistake not, it was the senator from South Carolina who introduced and supported the bill for the charter of the United States Bank in 1816; it was he, also, who brought in a bill in 1834, to extend the charter of that institution for a term of twelve years; and none were more conspicuous than he in the well-remembered scenes of that day, in urging the restoration of the government deposits to this same institution."

The reply of Mr. Calhoun to those taunts, which impeached his consistency – a point at which he was always sensitive – was quiet and ready, and the same that he had often been heard to express in common conversation. He said:

"In supporting the bank of 1816, I openly declared that, as a question de novo, I would be decidedly against the bank, and would be the last to give it my support. I also stated that, in supporting the bank then, I yielded to the necessity of the case, growing out of the then existing and long-established connection between the government and the banking system. I took the ground, even at that early period, that so long as the connection existed, so long as the government received and paid away bank notes as money, they were bound to regulate their value, and had no alternative but the establishment of a national bank. I found the connection in existence and established before my time, and over which I could have no control. I yielded to the necessity, in order to correct the disordered state of the currency, which had fallen exclusively under the control of the States. I yielded to what I could not reverse, just as any member of the Senate now would, who might believe that Louisiana was unconstitutionally admitted into the Union, but who would, nevertheless, feel compelled to vote to extend the laws to that State, as one of its members, on the ground that its admission was an act, whether constitutional or unconstitutional, which he could not reverse. In 1834, I acted in conformity to the same principle, in proposing the renewal of the bank charter for a short period. My object, as expressly avowed, was to use the bank to break the connection between the government and the banking system gradually, in order to avert the catastrophe which has now befallen us, and which I then clearly perceived. But the connection, which I believed to be irreversible in 1816, has now been broken by operation of law. It is now an open question. I feel myself free, for the first time, to choose my course on this important subject; and, in opposing a bank, I act in conformity to principles which I have entertained ever since I have fully investigated the subject."

Going on with his lead in support of the President's recommendations, Mr. Calhoun brought forward the proposition to discontinue the use of bank paper in the receipts and disbursements of the federal government, and supported his motion as a measure as necessary to the welfare of the banks themselves as to the safety of the government. In this sense he said:

"We have reached a new era with regard to these institutions. He who would judge of the future by the past, in reference to them, will be wholly mistaken. The year 1833 marks the commencement of this era. That extraordinary man who had the power of imprinting his own feelings on the community, then commenced his hostile attacks, which have left such effects behind, that the war then commenced against the banks, I clearly see, will not terminate, unless there be a separation between them and the government, – until one or the other triumphs – till the government becomes the bank, or the bank the government. In resisting their union, I act as the friend of both. I have, as I have said, no unkind feeling toward the banks. I am neither a bank man, nor an anti-bank man. I have had little connection with them. Many of my best friends, for whom I have the highest esteem, have a deep interest in their prosperity, and, as far as friendship or personal attachment extends, my inclination would be strongly in their favor. But I stand up here as the representative of no particular interest. I look to the whole, and to the future, as well as the present; and I shall steadily pursue that course which, under the most enlarged view, I believe to be my duty. In 1834 I saw the present crisis. I in vain raised a warning voice, and endeavored to avert it. I now see, with equal certainty, one far more portentous. If this struggle is to go on – if the banks will insist upon a reunion with the government, against the sense of a large and influential portion of the community – and, above all, if they should succeed in effecting it – a reflux flood will inevitably sweep away the whole system. A deep popular excitement is never without some reason, and ought ever to be treated with respect; and it is the part of wisdom to look timely into the cause, and correct it before the excitement shall become so great as to demolish the object, with all its good and evil, against which it is directed."

Mr. Rives treated the divorce of bank and State as the divorce of the government from the people, and said:

"Much reliance, Mr. President, has been placed on the popular catch-word of divorcing the government from all connection with banks. Nothing is more delusive and treacherous than catch-words. How often has the revered name of liberty been invoked, in every quarter of the globe, and every age of the world, to disguise and sanctify the most heartless despotisms. Let us beware that, in attempting to divorce the government from all connection with banks, we do not end with divorcing the government from the people. As long as the people shall be satisfied in their transactions with each other, with a sound convertible paper medium, with a due proportion of the precious metals forming the basis of that medium, and mingled in the current of circulation, why should the government reject altogether this currency of the people, in the operations of the public Treasury? If this currency be good enough for the masters it ought to be so for the servants. If the government sternly reject, for its uses, the general medium of exchange adopted by the community, is it not thereby isolated from the general wants and business of the country, in relation to this great concern of the currency? Do you not give it a separate, if not hostile, interest, and thus, in effect, produce a divorce between government and people? – a result, of all others, to be most deprecated in a republican system."

Mr. Webster's main argument in favor of the re-establishment of the National Bank (which was the consummation he kept steadily in his eye) was, as a regulator of currency, and of the domestic exchanges. The answer to this was, that these arguments, now relied on as the main ones for the continuance of the institution, were not even thought of at its commencement – that no such reasons were hinted at by General Hamilton and the advocates of the first bank – that they were new-fangled, and had not been brought forward by others until after the paper system had deranged both currency and exchanges; – and that it was contradictory to look for the cure of the evil in the source of the evil. It was denied that the regulation of exchanges was a government concern, or that the federal government was created for any such purpose. The buying and selling of bills of exchange was a business pursuit – a commercial business, open to any citizen or bank; and the loss or profit was an individual, and not a government concern. It was denied that there was any derangement of currency in the only currency which the constitution recognized – that of gold and silver. Whoever had this currency to be exchanged – that is, given in exchange at one place for the same in another place – now had the exchange effected on fair terms, and on the just commercial principle – that of paying a difference equal to the freight and insurance of the money: and, on that principle, gold was the best regulator of exchanges; for its small bulk and little weight in proportion to its value, made it easy and cheap of transportation; and brought down the exchange to the minimum cost of such transportation (even when necessary to be made), and to the uniformity of a permanent business. That was the principle of exchange; but, ordinarily, there was no transportation in the case: the exchange dealer in one city had his correspondent in another: a letter often did the business. The regulation of the currency required an understanding of the meaning of the term. As used by the friends of a National Bank, and referred to its action, the paper currency alone was intended. The phrase had got into vogue since the paper currency had become predominant, and that is a currency not recognized by the constitution, but repudiated by it; and one of its main objects was to prevent the future existence of that currency – the evils of which its framers had seen and felt. Gold and silver was the only currency recognized by that instrument, and its regulation specially and exclusively given to Congress, which had lately discharged its duty in that particular, in regulating the relative value of the two metals. The gold act of 1834 had made that regulation, correcting the error of previous legislation, and had revived the circulation of gold, as an ordinary currency, after a total disappearance of it under an erroneous valuation, for an entire generation. It was in full circulation when the combined stoppage of the banks again suppressed it. That was the currency – gold and silver, with the regulation of which Congress was not only intrusted, but charged: and this regulation included preservation. It must be saved before it can be regulated; and to save it, it must be brought into the country – and kept in it. The demand of the federal treasury could alone accomplish these objects. The quantity of specie required for the use of that treasury – its large daily receipts and disbursements – all inexorably confined to hard money – would create the demand for the precious metals which would command their presence, and that in sufficient quantity for the wants of the people as well as of the government. For the government does not consume what it collects – does not melt up or hoard its revenue, or export it to foreign countries, but pays it out to the people; and thus becomes the distributor of gold and silver among them. It is the greatest paymaster in the country; and, while it pays in hard money, the people will be sure of a supply. We are taunted with the demand: "Where is the better currency?" We answer: "Suppressed by the conspiracy of the banks!" And this is the third time in the last twenty years in which paper money has suppressed specie, and now suppresses it: for this is a game – (the war between gold and paper) – in which the meanest and weakest is always the conqueror. The baser currency always displaces the better. Hard money needs support against paper, and that support can be given by us, by excluding paper money from all federal receipts and payments; and confining paper money to its own local and inferior orbit: and its regulation can be well accomplished by subjecting delinquent banks to the process of bankruptcy, and their small notes to suppression under a federal stamp duty.

The distress of the country figured largely in the speeches of several members, but without finding much sympathy. That engine of operating upon the government and the people had been over-worked in the panic session of 1833-'34 and was now a stale resource, and a crippled machine. The suspension appeared to the country to have been purposely contrived, and wantonly continued. There was now more gold and silver in the country than had ever been seen in it before – four times as much as in 1832, when the Bank of the United States was in its palmy state, and was vaunted to have done so much for the currency. Twenty millions of silver was then its own estimate of the amount of that metal in the United States, and not a particle of gold included in the estimate. Now the estimate of gold and silver was eighty millions; and with this supply of the precious metals, and the determination of all the sound banks to resume as soon as the Bank of the United States could be forced into resumption, or forced into open insolvency, so as to lose control over others, the suspension and embarrassment were obliged to be of brief continuance. Such were the arguments of the friends of hard money.

The divorce bill, as amended, passed the Senate, and though not acted upon in the House during this called session, yet received the impetus which soon carried it through, and gives it a right to be placed among the measures of that session.

CHAPTER XII.

ATTEMPTED RESUMPTION OF SPECIE PAYMENTS

The suspension of the banks commenced at New York, and took place on the morning of the 10th of May: those of Philadelphia, headed by the Bank of the United States, closed their doors two days after, and merely in consequence, as they alleged, of the New York suspension; and the Bank of the United States especially declared its wish and ability to have continued specie payments without reserve, but felt it proper to follow the example which had been set. All this was known to be a fiction at the time; and the events were soon to come, to prove it to be so. As early as the 15th of August ensuing – in less than one hundred days after the suspension – the banks of New York took the initiatory steps towards resuming. A general meeting of the officers of the banks of the city took place, and appointed a committee to correspond with other banks to procure the appointment of delegates to agree upon a time of general resumption. In this meeting it was unanimously resolved: "That the banks of the several States be respectfully invited to appoint delegates to meet on the 27th day of November next, in the city of New York, for the purpose of conferring on the time when specie payments may be resumed with safety; and on the measures necessary to effect that purpose." Three citizens, eminently respectable in themselves, and presidents of the leading institutions – Messrs. Albert Gallatin, George Newbold, and Cornelius W. Lawrence – were appointed a committee to correspond with other banks on the subject of the resolution. They did so; and, leaving to each bank the privilege of sending as many delegates as it pleased, they warmly urged the importance of the occasion, and that the banks from each State should be represented in the proposed convention. There was a general concurrence in the invitation; but the convention did not take place. One powerful interest, strong enough to paralyze the movement, refused to come into it. That interest was the Philadelphia banks, headed by the Bank of the United States! So soon were fallacious pretensions exploded when put to the test. And the test in this case was not resumption itself, but only a meeting to confer upon a time when it would suit the general interest to resume. Even to unite in that conference was refused by this arrogant interest, affecting such a superiority over all other banks; and pretending to have been only dragged into their condition by their example. But a reason had to be given for this refusal, and it was – and was worthy of the party; namely, that it was not proper to do any thing in the business until after the adjournment of the extra session of Congress. That answer was a key to the movements in Congress to thwart the government plans, and to coerce a renewal of the United States Bank charter. After the termination of the session it will be seen that another reason for refusal was found.

CHAPTER XIII.

BANKRUPT ACT AGAINST BANKS

This was the stringent measure recommended by the President to cure the evil of bank suspensions. Scattered through all the States of the Union, and only existing as local institutions, the federal government could exercise no direct power over them; and the impossibility of bringing the State legislatures to act in concert, left the institutions to do as they pleased; or rather, left even the insolvent ones to do as they pleased; for these, dominating over the others, and governed by their own necessities, or designs, compelled the solvent banks, through panic or self-defence, to follow their example. Three of these general suspensions had occurred in the last twenty years. The notes of these banks constituting the mass of the circulating medium, put the actual currency into the hands of these institutions; leaving the community helpless; for it was not in the power of individuals to contend with associated corporations. It was a reproach to the federal government to be unable to correct this state of things – to see the currency of the constitution driven out of circulation, and out of the country; and substituted by depreciated paper; and the very evil produced which it was a main object of the constitution to prevent. The framers of that instrument were hard-money men. They had seen the evils of paper money, and intended to guard their posterity against what they themselves had suffered. They had done so, as they believed, in the prohibition upon the States to issue bills of credit; and in the prohibition upon the States to make any thing but gold and silver a tender in discharge of debts. The invention of banks, and their power over the community, had nullified this just and wise intention of the constitution; and certainly it would be a reproach to that instrument if it was incapable of protecting itself against such enemies, at such an important point. Thus far it had been found so incapable; but it was a question whether the fault was in the instrument, or in its administrators. There were many who believed it entirely to be the fault of the latter – who believed that the constitution had ample means of protection, within itself, against insolvent, or delinquent banks – and that, all that was wanted was a will in the federal legislature to apply the remedy which the evil required. This remedy was the process of bankruptcy, under which a delinquent bank might be instantly stopped in its operations – its circulation called in and paid off, as far as its assets would go – itself closed up, and all power of further mischief immediately terminated. This remedy it was now proposed to apply. President Van Buren recommended it: he was the first President who had had the merit of doing so; and all that was now wanted was a Congress to back him: and that was a great want! one hard to supply. A powerful array, strongly combined, was on the other side, both moneyed and political. All the local banks were against it; and they counted a thousand – their stockholders myriads; – and many of their owners and debtors were in Congress: the (still so-called) Bank of the United States was against it: and its power and influence were still great: the whole political party opposed to the administration were against it, as well because opposition is always a necessity of the party out of power, as a means of getting in, as because in the actual circumstances of the present state of things opposition was essential to the success of the outside party. Mr. Webster was the first to oppose the measure, and did so, seeming to question the right of Congress to apply the remedy rather than to question the expediency of it. He said:

"We have seen the declaration of the President, in which he says that he refrains from suggesting any specific plan for the regulation of the exchanges of the country, and for relieving mercantile embarrassments, or for interfering with the ordinary operation of foreign or domestic commerce; and that he does this from a conviction that such measures are not within the constitutional province of the general government; and yet he has made a recommendation to Congress which appears to me to be very remarkable, and it is of a measure which he thinks may prove a salutary remedy against a depreciated paper currency. This measure is neither more nor less than a bankrupt law against corporations and other bankers.

"Now, Mr. President, it is certainly true that the constitution authorizes Congress to establish uniform rules on the subject of bankruptcies; but it is equally true, and abundantly manifest that this power was not granted with any reference to currency questions. It is a general power – a power to make uniform rules on the subject. How is it possible that such a power can be fairly exercised by seizing on corporations and bankers, but excluding all the other usual subjects of bankrupt laws! Besides, do such laws ordinarily extend to corporations at all? But suppose they might be so extended, by a bankrupt law enacted for the usual purposes contemplated by such laws; how can a law be defended, which embraces them and bankers alone? I should like to hear what the learned gentleman at the head of the Judiciary Committee, to whom the subject is referred, has to say upon it. How does the President's suggestion conform to his notions of the constitution? The object of bankrupt laws, sir, has no relation to currency. It is simply to distribute the effects of insolvent debtors among their creditors; and I must say, it strikes me that it would be a great perversion of the power conferred on Congress to exercise it upon corporations and bankers, with the leading and primary object of remedying a depreciated paper currency.

"And this appears the more extraordinary, inasmuch as the President is of opinion that the general subject of the currency is not within our province. Bankruptcy, in its common and just meaning, is within our province. Currency, says the message, is not. But we have a bankruptcy power in the constitution, and we will use this power, not for bankruptcy, indeed, but for currency. This, I confess, sir, appears to me to be the short statement of the matter. I would not do the message, or its author, any intentional injustice, nor create any apparent, where there was not a real inconsistency; but I declare, in all sincerity, that I cannot reconcile the proposed use of the bankrupt power with those opinions of the message which respect the authority of Congress over the currency of the country."

The right to use this remedy against bankrupt corporations was of course well considered by the President before he recommended it and also by the Secretary of the Treasury (Mr. Woodbury), bred to the bar, and since a justice of the Supreme Court of the United States, by whom it had been several times recommended. Doubtless the remedy was sanctioned by the whole cabinet before it became a subject of executive recommendation. But the objections of Mr. Webster, though rather suggested than urged, and confined to the right without impeaching the expediency of the remedy, led to a full examination into the nature and objects of the laws of bankruptcy, in which the right to use them as proposed seemed to be fully vindicated. But the measure was not then pressed to a vote; and the occasion for the remedy having soon passed away, and not recurring since, the question has not been revived. But the importance of the remedy, and the possibility that it may be wanted at some future time, and the high purpose of showing that the constitution is not impotent at a point so vital, renders it proper to present, in this View of the working of the government, the line of argument which was then satisfactory to its advocates: and this is done in the ensuing chapter.

CHAPTER XIV.

BANKRUPT ACT FOR BANKS: MR. BENTON'S SPEECH

The power of Congress to pass bankrupt laws is expressly given in our constitution, and given without limitation or qualification. It is the fourth in the number of the enumerated powers, and runs thus: "Congress shall have power to establish a uniform rule of naturalization, and uniform laws on the subject of bankruptcies throughout the United States." This is a full and clear grant of power. Upon its face it admits of no question, and leaves Congress at full liberty to pass any kind of bankrupt laws they please, limited only by the condition, that whatever laws are passed, they are to be uniform in their operation throughout the United States. Upon the face of our own constitution there is no question of our right to pass a bankrupt law, limited to banks and bankers; but the senator from Massachusetts [Mr. Webster] and others who have spoken on the same side with him, must carry us to England, and conduct us through the labyrinth of English statute law, and through the chaos of English judicial decisions, to learn what this word bankruptcies, in our constitution, is intended to signify. In this he, and they, are true to the habits of the legal profession – those habits which, both in Great Britain and our America, have become a proverbial disqualification for the proper exercise of legislative duties. I know, Mr. President, that it is the fate of our lawyers and judges to have to run to British law books to find out the meaning of the phrases contained in our constitution; but it is the business of the legislator, and of the statesman, to take a larger view – to consider the difference between the political institutions of the two countries – to ascend to first principles – to know the causes of events – and to judge how far what was suitable and beneficial to one might be prejudicial and inapplicable to the other. We stand here as legislators and statesmen, not as lawyers and judges; we have a grant of power to execute not a statute to interpret; and our first duty is to look to that grant, and see what it is; and our next duty is to look over our country, and see whether there is any thing in it which requires the exercise of that grant of power. This is what our President has done, and what we ought to do. He has looked into the constitution, and seen there an unlimited grant of power to pass uniform laws on the subject of bankruptcies; and he has looked over the United States, and seen what he believes to be fit subjects for the exercise of that power, namely, about a thousand banks in a state of bankruptcy, and no State possessed of authority to act beyond its own limits in remedying the evils of a mischief so vast and so frightful. Seeing these two things – a power to act, and a subject matter requiring action – the President has recommended the action which the constitution permits, and which the subject requires; but the senator from Massachusetts has risen in his place, and called upon us to shift our view; to transfer our contemplation – from the constitution of the United States to the British statute book – from actual bankruptcy among ourselves to historical bankruptcy in England; and to confine our legislation to the characteristics of the English model.

As a general proposition, I lay it down that Congress is not confined, like jurists and judges, to the English statutory definitions, or the Nisi Prius or King's Bench construction of the phrases known to English legislation, and used in our constitution. Such a limitation would not only narrow us down to a mere lawyer's view of a subject, but would limit us, in point of time, to English precedents, as they stood at the adoption of our constitution, in the year 1789. I protest against this absurdity, and contend that we are to use our granted powers according to the circumstances of our own country, and according to the genius of our republican institutions, and according to the progress of events and the expansion of light and knowledge among ourselves. If not, and if we are to be confined to the "usual objects," and the "usual subjects," and the "usual purposes," of British legislation at the time of the adoption of our constitution, how could Congress ever make a law in relation to steamboats, or to railroad cars, both of which were unknown to British legislation in 1789; and therefore, according to the idea that would send us to England to find out the meaning of our constitution, would not fall within the limits of our legislative authority. Upon their face, the words of the constitution are sufficient to justify the President's recommendation, even as understood by those who impugn that recommendation. The bankrupt clause is very peculiar in its phraseology, and the more strikingly so from its contrast with the phraseology of the naturalization clause, which is coupled with it. Mark this difference: there is to be a uniform rule of naturalization: there are to be uniform laws on the subject of bankruptcies. One is in the singular, the other in the plural; one is to be a rule, the other are to be laws; one acts on individuals, the other on the subject; and it is bankruptcies that are, and not bankruptcy that is, to be the objects of these uniform laws.

As a proposition, now limited to this particular case, I lay it down that we are not confined to the modern English acceptation of this term bankrupt; for it is a term, not of English, but of Roman origin. It is a term of the civil law, and borrowed by the English from that code. They borrowed from Italy both the name and the purpose of the law; and also the first objects to which the law was applicable. The English were borrowers of every thing connected with this code; and it is absurd in us to borrow from a borrower – to copy from a copyist – when we have the original lender and the original text before us. Bancus and ruptus signifies a broken bench; and the word broken is not metaphorical but literal, and is descriptive of the ancient method of cashiering an insolvent or fraudulent banker, by turning him out of the exchange or market place, and breaking the table bench to pieces on which he kept his money and transacted his business. The term bankrupt, then, in the civil law from which the English borrowed it, not only applied to bankers, but was confined to them; and it is preposterous in us to limit ourselves to an English definition of a civil law term.

Upon this exposition of our own constitution, and of the civil law derivation of this term bankrupt, I submit that the Congress of the United States is not limited to the English judicial or statutory acceptation of the term; and so I finish the first point which I took in the argument. The next point is more comprehensive, and makes a direct issue with the proposition of the senator from Massachusetts, [Mr. Webster.] His proposition is, that we must confine our bankrupt legislation to the usual objects, the usual subjects, and the usual purposes of bankrupt laws in England; and that currency (meaning paper money and shin-plasters of course), and banks, and banking, are not within the scope of that legislation. I take issue, sir, upon all these points, and am ready to go with the senator to England, and to contest them, one by one, on the evidences of English history, of English statute law, and of English judicial decision. I say English; for, although the senator did not mention England, yet he could mean nothing else, in his reference to the usual objects, usual subjects, and usual purposes of bankrupt laws. He could mean nothing else. He must mean the English examples and the English practice, or nothing; and he is not a person to speak, and mean nothing.

Protesting against this voyage across the high seas, I nevertheless will make it, and will ask the senator on what act, out of the scores which Parliament has passed upon this subject, or on what period, out of the five hundred years that she has been legislating upon it, will he fix for his example? Or, whether he will choose to view the whole together; and out of the vast chaotic and heterogeneous mass, extract a general power which Parliament possesses, and which he proposes for our exemplar? For myself, I am agreed to consider the question under the whole or under either of these aspects, and, relying on the goodness of the cause, expect a safe deliverance from the contest, take it in any way.

And first, as to the acts passed upon this subject; great is their number, and most dissimilar their provisions. For the first two hundred years, these acts applied to none but aliens, and a single class of aliens, and only for a single act, that of flying the realm to avoid their creditors. Then they were made to apply to all debtors, whether natives or foreigners, engaged in trade or not, and took effect for three acts: 1st, flying the realm; 2d, keeping the house to avoid creditors; 3d, taking sanctuary in a church to avoid arrest. For upwards of two hundred years – to be precise, for two hundred and twenty years – bankruptcy was only treated criminally, and directed against those who would not face their creditors, or abide the laws of the land; and the remedies against them were not civil, but criminal; it was not a distribution of the effects, but corporal punishment, to wit: imprisonment and outlawry.[1 - Preamble to the act of 34th of Henry viii.Whereas divers and sundry persons craftily obtained into their hands great substance of other men's goods, do suddenly flee to parts unknown, or keep their houses, not minding to pay or restore to any of their creditors, their debts and duties, but at their own wills and own pleasures consume the substance obtained by credit of other men for their own pleasures and delicate living, against all reason, equity, and good conscience.] The statute of Elizabeth was the first that confined the law to merchants and traders, took in the unfortunate as well as the criminal, extended the acts of bankruptcy to inability as well as to disinclination to pay, discriminated between innocent and fraudulent bankruptcy; and gave to creditors the remedial right to a distribution of effects. This statute opened the door to judicial construction, and the judges went to work to define by decisions, who were traders, and what acts constituted the fact, or showed an intent to delay or to defraud creditors. In making these decisions, the judges reached high enough to get hold of royal companies, and low enough to get hold of shoemakers; the latter upon the ground that they bought the leather out of which they made the shoes; and they even had a most learned consultation to decide whether a man who was a landlord for dogs, and bought dead horses for his four-legged boarders, and then sold the skins and bones of the horse carcases he had bought, was not a trader within the meaning of the act; and so subject to the statute of bankrupts. These decisions of the judges set the Parliament to work again to preclude judicial constructions by the precision, negatively and affirmatively, of legislative enactment. But, worse and worse! Out of the frying-pan into the fire. The more legislation the more construction; the more statutes Parliament made, the more numerous and the more various the judicial decisions; until, besides merchants and traders, near forty other descriptions of persons were included; and the catalogue of bankruptcy acts, innocent or fraudulent, is swelled to a length which requires whole pages to contain it. Among those who are now included by statutory enactment in England, leaving out the great classes comprehended under the names of merchants and traders, are bankers, brokers, factors, and scriveners; insurers against perils by sea and land; warehousemen, wharfingers, packers, builders, carpenters, shipwrights and victuallers; keepers of inns, hotels, taverns and coffee-houses; dyers, printers, bleachers, fullers, calendrers, sellers of cattle or sheep; commission merchants and consignees; and the agents of all these classes. These are the affirmative definitions of the classes liable to bankruptcy in England; then come the negative; and among these are farmers, graziers, and common laborers for hire; the receivers general of the king's taxes, and members or subscribers to any incorporated companies established by charter of act of Parliament. And among these negative and affirmative exclusions and inclusions, there are many classes which have repeatedly changed position, and found themselves successively in and out of the bankrupt code. Now, in all this mass of variant and contradictory legislation, what part of it will the senator from Massachusetts select for his model? The improved, and approved parts, to be sure! But here a barrier presents itself – an impassable wall interposes – a veto power intervenes. For it so happens that the improvements in the British bankrupt code, those parts of it which are considered best, and most worthy of our imitation, are of modern origin – the creations of the last fifty years – actually made since the date of our constitution; and, therefore, not within the pale of its purview and meaning. Yes, sir, made since the establishment of our constitution, and, therefore, not to be included within its contemplation; unless this doctrine of searching into British statutes for the meaning of our constitution, is to make us search forwards to the end of the British empire, as well as search backwards to its beginning. Fact is, that the actual bankrupt code of Great Britain – the one that preserves all that is valuable, that consolidates all that is preserved, and improves all that is improvable, is an act of most recent date – of the reign of George IV.; and not yet a dozen years old. Here, then, in going back to England for a model, we are cut off from her improvements in the bankrupt code, and confined to take it as it stood under the reign of the Plantagenets, the Tudors, the Stuarts, and the earlier reigns of the Brunswick sovereigns. This should be a consideration, and sufficiently weighty to turn the scale in favor of looking to our own constitution alone for the extent and circumscription of our powers.

But let us continue this discussion upon principles of British example and British legislation. We must go to England for one of two things; either for a case in point, to be found in some statute, or a general authority, to be extracted from a general practice. Take it either way, or both ways, and I am ready and able to vindicate, upon British precedents, our perfect right to enact a bankrupt law, limited in its application to banks and bankers. And first, for a case in point, that is to say, an English statute of bankruptcy, limited to these lords of the purse-strings: we have it at once, in the first act ever passed on the subject – the act of the 30th year of the reign of Edward III., against the Lombard Jews. Every body knows that these Jews were bankers, usually formed into companies, who, issuing from Venice, Milan, and other parts of Italy, spread over the south and west of Europe, during the middle ages; and established themselves in every country and city in which the dawn of reviving civilization, and the germ of returning industry, gave employment to money, and laid the foundation of credit. They came to London as early as the thirteenth century, and gave their name to a street which still retains it, as well as it still retains the particular occupation, and the peculiar reputation, which the Lombard Jews established for it. The first law against bankrupts ever passed in England, was against the banking company composed of these Jews, and confined exclusively to them. It remained in force two hundred years, without any alteration whatever, and was nothing but the application of the law of their own country to these bankers in the country of their sojournment – the Italian law, founded upon the civil law, and called in Italy banco rotto, broken bank. It is in direct reference to these Jews, and this application of the exotic bankrupt law to them, that Sir Edward Coke, in his institutes, takes occasion to say that both the name and the wickedness of bankruptcy were of foreign origin, and had been brought into England from foreign parts. It was enacted under the reign of one of the most glorious of the English princes – a reign as much distinguished for the beneficence of its civil administration as for the splendor of its military achievements. This act of itself is a full answer to the whole objection taken by the senator from Massachusetts. It shows that, even in England, a bankrupt law has been confined to a single class of persons, and that class a banking company. And here I would be willing to close my speech upon a compromise – a compromise founded in reason and reciprocity, and invested with the equitable mantle of a mutual concession. It is this: if we must follow English precedents, let us follow them chronologically and orderly. Let us begin at the beginning, and take them as they rise. Give me a bankrupt law for two hundred years against banks and bankers; and, after that, make another for merchants and traders.

The senator from Massachusetts [Mr. Webster] has emphatically demanded, how the bankrupt power could be fairly exercised by seizing on corporations and bankers, and excluding all the other usual subjects of bankrupt laws? I answer, by following the example of that England to which he has conducted us; by copying the act of the 30th of Edward III., by going back to that reign of heroism, patriotism, and wisdom; that reign in which the monarch acquired as much glory from his domestic policy as from his foreign conquests; that reign in which the acquisition of dyers and weavers from Flanders, the observance of law and justice, and the encouragement given to agriculture and manufactures, conferred more benefit upon the kingdom, and more glory upon the king, than the splendid victories of Poictiers, Agincourt, and Cressy.

But the senator may not be willing to yield to this example, this case in point, drawn from his own fountain, and precisely up to the exigency of the occasion. He may want something more; and he shall have it. I will now take the question upon its broadest bottom and fullest merits. I will go to the question of general power – the point of general authority – exemplified by the general practice of the British Parliament, for five hundred years, over the whole subject of bankruptcy. I will try the question upon this basis; and here I lay down the proposition, that this five hundred years of parliamentary legislation on bankruptcy establishes the point of full authority in the British Parliament to act as it pleased on the entire subject of bankruptcies. This is my proposition; and, when it is proved, I shall claim from those who carry me to England for authority, the same amount of power over the subject which the British Parliament has been in the habit of exercising. Now, what is the extent of that power? Happily for me, I, who have to speak, without any inclination for the task; still more happily for those who have to hear me, peradventure without profit or pleasure; happily for both parties, my proposition is already proved, partly by what I have previously advanced, and fully by what every senator knows. I have already shown the practice of Parliament upon this subject, that it has altered and changed, contracted and enlarged, put in and left out, abolished and created, precisely as it pleased. I have already shown, in my rapid view of English legislation on this subject, that the Parliament exercised plenary power and unlimited authority over every branch of the bankrupt question; that it confined the action of the bankrupt laws to a single class of persons, or extended it to many classes; that it was sometimes confined to foreigners, then applied to natives, and that now it comprehends natives, aliens, denizens, and women; that at one time all debtors were subject to it; then none but merchants and traders; and now, besides merchants and traders, a long list of persons who have nothing to do with trade; that at one time bankruptcy was treated criminally, and its object punished corporeally, while now it is a remedial measure for the benefit of the creditors, and the relief of unfortunate debtors; and that the acts of the debtor which may constitute him a bankrupt, have been enlarged from three or four glaring misdeeds, to so long a catalogue of actions, divided into the heads of innocent and fraudulent; constructive and positive; intentional and unintentional; voluntary and forced; that none but an attorney, with book in hand, can pretend to enumerate them. All this has been shown; and, from all this, it is incontestable that Parliament can do just what it pleases on the subject; and, therefore, our Congress, if referred to England for its powers, can do just what it pleases also. And thus, whether we go by the words of our own constitution, or by a particular example in England, or deduce a general authority from the general practice of that country, the result is still the same: we have authority to limit, if we please, our bankrupt law to the single class of banks and bankers.

The senator from Massachusetts [Mr. Webster] demands whether bankrupt laws ordinarily extend to corporations, meaning moneyed corporations. I am free to answer that, in point of fact, they do not. But why? because they ought not? or because these corporations have yet been powerful enough, or fortunate enough, to keep their necks out of that noose? Certainly the latter. It is the power of these moneyed corporations in England, and their good fortune in our America, which, enabling them to grasp all advantages on one hand, and to repulse all penalties on the other, has enabled them to obtain express statutory exemption from bankrupt liabilities in England; and to escape, thus far, from similar liabilities in the United States. This, sir, is history, and not invective; it is fact, and not assertion; and I will speedily refresh the senator's memory, and bring him to recollect why it is, in point of fact, that bankrupt laws do not usually extend to these corporations. And, first, let us look to England, that great exemplar, whose evil examples we are so prompt, whose good ones we are so slow, to imitate. How stands this question of corporation unliability there? By the judicial construction of the statute of Elizabeth, the partners in all incorporated companies were held subject to the bankrupt law; and, under this construction, a commission of bankrupt was issued against Sir John Wolstenholme, a gentleman of large fortune, who had advanced a sum of money on an adventure in the East India Company's trade. The issue of this commission was affirmed by the Court of King's Bench; but this happened to take place in the reign of Charles II. – that reign during which so little is found worthy of imitation in the government of Great Britain – and immediately two acts of Parliament were passed, one to annul the judgment of the Court of King's Bench in the case of Sir John Wolstenholme, and the other to prevent any such judgments from being given in future. Here are copies of the two acts:

FIRST ACT, TO ANNUL THE JUDGMENT

"Whereas a verdict and judgment was had in the Easter term of the King's Bench, whereby Sir John Wolstenholme, knight, and adventurer in the East India Company, was found liable to a commission of bankrupt only for, and by reason of, a share which he had in the joint stock of said company: Now, &c., Be it enacted, That the said judgment be reversed, annulled, vacated, and for naught held," &c.

SECOND ACT, TO PREVENT SUCH JUDGMENTS IN FUTURE

"That whereas divers noblemen and gentlemen, and persons of quality, no ways bred up to trade, do often put in great stocks of money into the East India and Guinea Company: Be it enacted, That no persons adventurers for putting in money or merchandise into the said companies, or for venturing or managing the fishing trade, called the royal fishing trade, shall be reputed or taken to be a merchant or trader within any statutes for bankrupts."

Thus, and for these reasons, were chartered companies and their members exempted from the bankrupt penalties, under the dissolute reign of Charles II. It was not the power of the corporations at that time – for the Bank of England was not then chartered, and the East India Company had not then conquered India – which occasioned this exemption; but it was to favor the dignified characters who engaged in the trade – noblemen, gentlemen, and persons of quality. But, afterwards, when the Bank of England had become almost the government of England, and when the East India Company had acquired the dominions of the Great Mogul, an act of Parliament expressly declared that no member of any incorporated company, chartered by act of Parliament, should be liable to become bankrupt. This act was passed in the reign of George IV., when the Wellington ministry was in power, and when liberal principles and human rights were at the last gasp. So much for these corporation exemptions in England; and if the senator from Massachusetts finds any thing in such instances worthy of imitation, let him stand forth and proclaim it.