Financial Measures 1840-1850

FINANCIAL MEASURES FROM 1840 TO 1850. The second suspension of the United States Bank in 1839, and its operations of that year, cost it a great many of its friends. The administration of Mr. Van Buren clung to the hardmoney policy, and opposed any national bank. But the fight was not yet over; in fact, the few next years were full of financial legislation and of battles over bank or no bank. In 1840 the Independent Treasury Act was passed, by which the government was to take the custody of its own funds. It wras not passed without fierce opposition, especially from those who saw in the specie circular the beginning of all the woes of the country. As that had with162 HISTORY OF AMERICAN CURRENCY. drawn the support of the government acceptance from the bank issues, so this would withdraw the public funds from use as banking capital. The specie circular did indeed withdraw powerful support from the banknotes, which enjoyed credit while the government received them, which they did not possess when refused at the Treasury, but if A is a man of doubtful credit, and gains confidence by being supposed to be a friend of B, an honest man, and if B declares that he is not a friend of A, A may lose the credit he enjoyed, and be ruined ; but who except A will lay the blame of that ruin on B ? The Independent Treasury Act accomplished the "divorce of bank and State," and we, who have that battle to fight over again, can see in it only wise statesmanship.

It was proposed in England that the holders of State bonds should try to get Congress to assume the State debts as had been done in 1791.* Sydney Smith wrote a letter to Congress petitioning that this might be done,f and represent* See page 55. f The text of it is in McCulloch's Diet., Art. " Funds."

HISTORY OF AMERICAN CURRENCY. ing that he and other liberals had staked both their word and their money on the honor of the American Republic. After a strong contest resolutions were passed to crush any hopes of success in such an attempt. The opposition was based, not on the impropriety of the assumption of State debts by the general government, but on the necessity of resisting the dictation of foreign bankers. The foreign bankers were only trying to collect their debts, and this story, colored by tradition, still injures American credit, especially in England. In 1841 Mr. Harrison became President, and called an extra session of Congress for May 31st of that year. This session was held under Mr. Tyler, and was marked by some of the worst legislation ever passed since the Constitution was adopted. Mr. Tyler had become a whig, though formerly a democrat. To this he owed his place on the ticket, and it soon seemed to the whigs that with President Harrison they had lost the victory, for which they had waited so long and worked so hard.

The first act of the session was the repeal of 164 HISTORY OF AMERICAN CURRENCY. the Independent Treasury Act. Mr. Clay had proposed three other important measures for the session: a national bank, an increase of duties, and a land distribution bill. Before any of these latter could be acted on, a Bankruptcy Act was introduced by the Senator from Mississippi. This act was bargained off for the Bank Act ando the Distribution Act, and the three went through together. Benton says of the Bankrupt Act: " It applied to all persons in debt—allowed them to commence their proceedings in the district of their own residence no matter how lately removed to it—allowed constructive notice to creditors in newspapers—declared the abolition of the debt where effects were surrendered and fraud not proved." He says that the number of men who had failed and wanted to get clear of encumbrances for starting anew was estimated at one hundred thousand.

The Land Distribution Bill was the new form of the bill for assuming the State debts. The income from public lands (less than one and a half millions in 1846) was to be divided HISTORY OF AMERICAN CURRENCY. amongst the States to help them pay their debts ($200,000). It contained a proviso that if duties above 20 per cent, should ever be laid, this act should be suspended. When the tariff was passed it contained a proviso that it should not suspend the Land Distribution Act, but it was vetoed. The Compromise Tariff had cut down the revenue from customs without providing any other resource. During its first years it had produced a surplus, but its last years, falling in with the " hard times," had left a deficiency. The debt increased as follows : Jan. 1, 1840 $5,125,077.63 Jan. 1, 1841 6,737,398.00 Jan. 1, 1842 15,028,486.37 July 1, 1843 27,203,450.69 From this time it decreased until 1847.

As for the bank, President Tyler took a whim in regard to the word " Bank." He wanted it to be called the Fiscal Agent, or something " fiscal." He vetoed two bills passed for incorporating such an institution, the relations of which to the 166 HISTORY OF AMERICAN CURRENCY. Treasury promised great mischief, if either had g-onc into operation. The Treasury, being" still unable to pay specie by the failure of a loan authorized at the special Session, began to pay congressmen in Treasury notes. Ben ton caused one of the checks to be protested in January, 1842. Specie payments were soon after resumed by the government, and did not cease until 1862. Two tariffs having" been vetoed in 1842, because they provided for the distribution of the revenue from public lands, a third was passed, which raised duties above twenty per cent., and so suspended distribution. In 1843 the Bankruptcy Act was repealed, having been found in its operation to be worse for debtors than for creditors. The man who availed himself of it could obtain no further credit.

Thus the legislation of these years came to nothing but the new tariff, and the excitement of party contests only served to keep the country anxious, and to restrain it from entering on the new career. The government was now, howHISTCRY OF AMERICAN CURRENCY, jfiy ever, fixed in the hardmoney system, and the sub-treasury system, by which it was so entirely severed from the money-market that, fortunately, the bankers and merchants could afford to laugh at the insignificance of the government on their arena. Its position was never so strong or sound as when, in this point of view, it was most ridiculous. The nation had too much energy and too vast opportunities to long remain inactive. From 1844 on, things began to mend. Banks began to expand once more with the growth of trade. Prices advanced, and in 1846 a new tariff once more relaxed the restrictions of trade. In 1847 the failure of the crops in Europe gave a market for bread-stuffs, of which nearly ?,j± million dollars' worth were exported. The total exports of that year were larger than for any preceding year, 158,000,000. The imports of specie exceeded the exports by more than 22,000,000. The abolition of the corn laws in England opened a permanent market for the surplus product of the West, and the settlement of that portion of the country took new form. As soon as the famine 168 HISTORY OF AMERICAN CURRENCY.

was felt in Ireland, its population began to apply the only true cure of the trouble—emigration— and the revolutionary struggles on the continent in the year 1848 contributed to increase emigration to this country by their failure. IMMIGRATION. FROM IRE-TOTAL. LAND. 1845 44,821 II4.37I 1846 51,752 154,416 1847 i°5>536 234,968 1848 112,934 226,527 1849 i59'398 297,024 The extension of railroads kept pace with the other developments, which it in turn helped to multiply. MILEAGE OF RAILROADS. WESTERN TOTAL. STATES. 1845 374 4,633 1846 419 4,930 1847 608 5.578 1848..; 679 5,996 1849 727 7,365 1850 1,276 9,021 1851 1,846 10,982 HISTORY OF AMERICAN CURRENCY. 169 Finally, the discovery of gold in California in 1847 added another powerful element to the industrial development of the time. PERIOD FROM 1850-1862. The outlook in 1850, with abundant emigration, a new empire arising on the Pacific, the prospect of becoming the granary as well as the cotton-field of the world, ship-building increasing year by year, and no cloud of war or political disturbance visible, was very flattering. The only hindrances to a speedy realization of these golden dreams were want of capital and want of technical and scientific training. Railroad building at the West must, in the nature of things, outstrip the settlement of the region. It is the chief form in which capital is applied to the settlement of the country, but evidently it is a case in which the returns from the investment cannot be immediate, and in every such case in which the supply goes ahead of the demand there is especial need of care, foresight, and judgment.