Bank Issues in the Middle States.

The banking mania now broke out in the Middle States. In 1810 Pensylvania found it necessary to forbid the issue of notes by incorporated companies — bridge companies, etc. The charter of the Bank of the United States expired in 1811, and its renewal met with such vigorous opposition that it was defeated. The constitutionality of the charter by Congress was doubted from the outset. This bank, so far as we can judge from the information we have in regard to it, was soberly managed, successful, and beneficial in restraining the issues of the smaller banks. It was on this latter account especially, and also because others desired to form small banks, that a strong party was formed against the renewal of its charter. The same influence defeated its efforts to get a charter from the State of Pennsylvania. Great fears were entertained that a severe crisis must follow the winding up of the United States Bank, but they were not realized.

The note circulation of the banks of the country in 1811 is estimated by Gallatin at 46,000,000.

The field being thus cleared, twenty-five charters were passed through the Pennsylvania legislature in 1812–13, but all vetoed. In the following session forty-one banks, with $17,000,000 capital, were chartered by Pennsylvania over the veto. In a report to the Pennsylvania Senate made in January, 1820, by a committee of which Condy Raguet was chairman, it is stated that at this time prices were low in New England, and specie was flowing thither.

The country being now at war, Mr. Eppes, of the Ways and Means Committee, thus explained the financial measures by which it was proposed to carry on war (Winter of 1813—1814).

There were $75,000,000 bank capital, and $100,000,000 circulation and discounts (deposits). Deduct forty-seven millions circulation required; there remain fifty-three millions, “of which we propose to borrow thirty millions.” In 1812 the government borrowed six millions from banks, and four millions from individuals at par. In 1813 it borrowed twenty millions, allowing one hundred and thirteen for one hundred paid. In 1814 it borrowed fifteen millions; twelve millions nett, allowing one hundred and twenty-five for one hundred received. No more was to be had. No tax was laid until January 1, 1814. The loans nearly all came from the Middle States, the New England States being strongly opposed to the war, as foolish, unnecessary, a help to Napoleon, and completing the ruin begun by the embargo.

The revenue for 1812, '13, and '14 was twelve millions. The peace expenditures had been eight millions. Treasury notes for one year were issued in 1812 to the amount of three millions, interest at five and two-fifths per cent., receivable in taxes. Six millions were issued in 1813; eight millions in 1814. By 1814 prices were rapidly advancing, business was brisk, and importations were great. Pennsylvania notes were at fourteen per cent, discount. It was complained at Philadelphia that silver flowed to New England and was there exported. The importations came through New England. There was, therefore, now an “adverse balance of trade,” between the Middle and New England States. It was also claimed that the New Englanders were buying bills drawn for the supply of English troops in Canada with their surplus silver.

The New England Bank having collected over $100,000 worth of the New York bills which flooded New England, sent them home for redemption. The silver was loaded and on its way to Boston, when the Collector of New York stopped it at Chester, and ordered it to the Manhattan Bank, of which he was a director. He said he suspected that it was to be sent to Canada. The President of the United States ordered it to be given up.

On the 30th August, 1813, the directors of the chartered banks of Philadelphia published a circular, in which they said that, on account of the blockade, exportation of produce was impossible. Hence specie had been exported, and “ as the importation of foreign goods in the Eastern States has been very large, it has for many months past occasioned a continual drain from the bank.” They also refer to the English bills of exchange. For a time they had been able to draw from the Southern States (the New Orleans banks suspended because “ a contraband trade was drawing off the specie”), but this was no longer possible. “ It became a serious consideration whether the banks should continue their exertions to draw within their vaults the specie capital of the country, and thus facilitate the means of exporting it from the United States, or whether they should suspend the payment of specie before their means were exhausted.”

This plausible explanation appealed to the popular prejudice against exporting silver, but evidently concealed the true relation of facts. The silver went to New England unquestionably. On the Ist June, 1811, the banks of Massachusetts held $1,709,000 in specie;

It went thither because there was a sound currency and low prices there, and went away from the Middle and Southern States because displaced by redundant paper and consequent high prices. It was because the Pennsylvania banks had issued paper until it was at a discount, that, when they got the silver into their vaults, they could not keep it there, but it was demanded of them and exported. When the New Englanders took it they gave something for it, and there was an unusual importation from New England. They also used it. Having far more than they needed, they exported it either directly to Europe or by buying bills payable in London, and increased their imports. I know of no more complete illustration of the true doctrine, and of the error by which it is beclouded

There was at the same time a movement of specie to Ohio, Kentucky, and Tennessee, where there were no banks.