A Compilation of the Messages and Papers of the Presidents | Page 7

regarded to a great degree as controlling

both. If paper be used as the chief medium of circulation, and the power
be vested in the Government of issuing it at pleasure, either in the form
of Treasury drafts or any other, or if banks be used as the public
depositories, with liberty to regard all surpluses from day to day as so
much added to their active capital, prices are exposed to constant
fluctuations and industry to severe suffering. In the one case political
considerations directed to party purposes may control, while excessive
cupidity may prevail in the other. The public is thus constantly liable to
imposition. Expansions and contractions may follow each other in rapid
succession--the one engendering a reckless spirit of adventure and
speculation, which embraces States as well as individuals, the other
causing a fall in prices and accomplishing an entire change in the
aspect of affairs. Stocks of all sorts rapidly decline, individuals are
ruined, and States embarrassed even in their efforts to meet with
punctuality the interest on their debts. Such, unhappily, is the condition
of things now existing in the United States. These effects may readily
be traced to the causes above referred to. The public revenues, being
removed from the then Bank of the United States, under an order of a
late President, were placed in selected State banks, which, actuated by
the double motive of conciliating the Government and augmenting their
profits to the greatest possible extent, enlarged extravagantly their
discounts, thus enabling all other existing banks to do the same; large
dividends were declared, which, stimulating the cupidity of capitalists,
caused a rush to be made to the legislatures of the respective States for
similar acts of incorporation, which by many of the States, under a
temporary infatuation, were readily granted, and thus the augmentation
of the circulating medium, consisting almost exclusively of paper,
produced a most fatal delusion. An illustration derived from the land
sales of the period alluded to will serve best to show the effect of the
whole system. The average sales of the public lands for a period of ten
years prior to 1834 had not much exceeded $2,000,000 per annum. In
1834 they attained in round numbers to the amount of $6,000,000; in
the succeeding year of 1835 they reached $16,000,000, and the next
year of 1836 they amounted to the enormous sum of $25,000,000, thus
crowding into the short space of three years upward of twenty-three
years' purchase of the public domain. So apparent had become the
necessity of arresting this course of things that the executive

department assumed the highly questionable power of discriminating in
the funds to be used in payment by different classes of public
debtors--a discrimination which was doubtless designed to correct this
most ruinous state of things by the exaction of specie in all payments
for the public lands, but which could not at once arrest the tide which
had so strongly set in. Hence the demands for specie became unceasing,
and corresponding prostration rapidly ensued under the necessities
created with the banks to curtail their discounts and thereby to reduce
their circulation. I recur to these things with no disposition to censure
preexisting Administrations of the Government, but simply in
exemplification of the truth of the position which I have assumed. If,
then, any fiscal agent which may be created shall be placed, without
due restrictions, either in the hands of the administrators of the
Government or those of private individuals, the temptation to abuse
will prove to be resistless. Objects of political aggrandizement may
seduce the first, and the promptings of a boundless cupidity will assail
the last. Aided by the experience of the past, it will be the pleasure of
Congress so to guard and fortify the public interests in the creation of
any new agent as to place them, so far as human wisdom can
accomplish it, on a footing of perfect security. Within a few years past
three different schemes have been before the country. The charter of
the Bank of the United States expired by its own limitations in 1836.
An effort was made to renew it, which received the sanction of the two
Houses of Congress, but the then President of the United States
exercised his veto power and the measure was defeated. A regard to
truth requires me to say that the President was fully sustained in the
course he had taken by the popular voice. His successor to the chair of
state unqualifiedly pronounced his opposition to any new charter of a
similar institution, and not only the popular election which brought him
into power, but the elections through much of his term, seemed clearly
to indicate a concurrence with him in sentiment on the part of the
people. After the public moneys