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 hard-money 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 was 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 As that had withdrawn the support of the government acceptance from the bank issues, so this would withdraw the public funds from use as banking capital.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 bank-notes, 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, and representing 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 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 and 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 amongst the States to help them pay their debts ($170,000,000). 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:

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 Treasury promised great mischief, if either had gone 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. Benton 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, however, fixed in the hard-money system, and the subtreasury 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 37½ 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 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.

The extension of railroads kept pace with the other developments, which it in turn helped to multiply.

Finally, the discovery of gold in California in 1847 added another powerful element to the industrial development of the time.