War with the Bank Continued

HISTORY OF AMERICAN CURRENCY. WAR WITH THE BANK CONTINUED. In the message, December, 1834, the President made known-to Congress that the bank had retained dividends due the nation on its stock, to reimburse itself for a draft on the French government which it had negotiated, and which had not been honored because the treaty had not been ratified by the French Chambers. The bank was forced by suit to pay the dividends. He also said that the bank, after contracting its loans from August, 1833, to June, 1834, had as suddenly extended them. The amount was seventeen millions. He took this as proof that the previous curtailment had been wanton and unnecessary, and placed the bank in the position of having manipulated the money-market solely to carry its own point. In fact the bank, finding that other banks were taking its place, and that it was robbing itself without coercing the public, had changed its course.

The deposits were now put in designated banks which issued no small notes, and which kept oneHISTORY OF AMERICAN CURRENCY. 115 third of their circulation represented by specie. Many banks bought or imported gold in order to meet this latter requirement. The general government also used its influence successfully with nearly all the States to have laws passed forbidding small notes. SMALL NOTES. The prohibition of small notes is a measure which is simple, but very important for the results it effects. The principle is that paper issues displace coin of equivalent denominations. If paper is issued for sums of $ o and above, it may be issued to the amount of the coins of that and higher denominations which the public require, and no more. If issued for $5, the paper may be increased by the amount of half-eagles, which the public formerly used, and no more. Therefore, if it is desired to use paper to a certain* extent, but not to displace specie entirely, the simplest way to accomplish this is to limit the paper to a certain denomination, say $10. Then half-eagles, and pieces of $3.00, $2.50, and $1 would circulate, and would form a stock, whicli, Il6 HISTORY OF AMERICAN CURRENCY.