Volume IV Part 20 (1/2)

A careful and accurate Scotch traveler thus describes their methods: ”By lending, and otherwise emitting their engravings, they have contrived to mortgage and buy much of the property of their neighbours, and to appropriate to themselves the labour of less moneyed citizens....

Bankers gave in exchange for their paper, that of _other banks, equally good with their own_.... The holder of the paper may comply in the barter, or keep the notes ...; but he finds it too late to be delivered from the snare. The people committed the lapsus, when they accepted of the gew-gaws clean from the press.... The deluded mult.i.tude have been basely duped.”[507] Yet, says Flint, ”every one is afraid of bursting the bubble.”[508]

As settlers penetrated the Ohio and Indiana forests and spread over the Illinois prairies, the banks went with them and ”levied their contributions on the first stroke of the axe.”[509] Kentucky was comparatively well settled and furnished many emigrants to the newer regions north of the Ohio River. Rough log cabins were the abodes of nearly all of the people[510] who, for the most part, lived roughly,[511] drank heavily,[512] were poorly educated.[513] They were, however, hospitable, generous, and brave; but most of them preferred to speculate rather than to work.[514] Illness was general, sound health rare.[515] ”I hate the prairies.... I would not have any of them of a gift, if I must be compelled to live on them,” avowed an English emigrant.[516]

In short, the settlers reproduced most of the features of the same movement in the preceding generation.[517] There was the same squalor, suspicion, credulity, and the same combativeness,[518] the same a.s.sertion of superiority over every other people on earth,[519] the same impatience of control, particularly from a source so remote as the National Government.[520] ”The people speak and seem as if they were without a government, and name it only as a bugbear,” wrote William Faux.[521]

Moreover, the inhabitants of one section knew little or nothing of what those in another were doing. ”We are as ignorant of the temper prevailing in the Eastern States as the people of New Holland can be,”

testifies John Randolph in 1812.[522] Even a generation after Randolph made this statement, Frederick Marryat records that ”the United States ... comprehend an immense extent of territory, with a population running from a state of refinement down to one of positive barbarism....

The inhabitants of the cities ... know as little of what is pa.s.sing in Arkansas and Alabama as a c.o.c.kney does of the manners and customs of ...

the Isle of Man.”[523] Communities were still almost as segregated as were those of a half-century earlier.[524] Marryat observes, a few years later, that ”to write upon America _as a nation_ would be absurd, for nation ... it is not.”[525] Again, he notes in his journal that ”the ma.s.s of the citizens of the United States have ... a very great dislike to all law except ... the decision of the majority.”[526]

These qualities furnished rich soil for cultivation by demagogues, and small was the husbandry required to produce a st.u.r.dy and bellicose sentiment of Localism. Although the bills of the Bank of the United States were sought for,[527] the hostility to that National inst.i.tution was increased rather than diminished by the superiority of its notes over those of the local money mills. No town was too small for a bank.

The fact that specie payments were not exacted ”indicated every village in the United States, where there was a 'church, a tavern and a blacksmith's shop,' as a suitable site for a _bank_, and justified any persons in establis.h.i.+ng one who could raise enough to pay the _paper maker_ and _engraver_.”[528]

Not only did these chartered manufactories of currency multiply, but private banks sprang up and did business without any restraint whatever.

Niles was entirely within the truth when he declared that nothing more was necessary to start a banking business than plates, presses, and paper.[529] Often the notes of the banks, private or incorporated, circulated only in the region where they were issued.[530] In 1818 the ”currency” of the local banks of Cincinnati was ”mere waste paper ...

out of the city.”[531] The people had to take this local ”money” or go without any medium of exchange. When the notes of distant banks were to be had, the people did not know the value of them. ”Notes current in one part, are either refused, or taken at a large discount, in another,”

wrote Flint in 1818.[532]

In the cities firms dealing with bank bills printed lists of them with the market values, which changed from day to day.[533] Sometimes the county courts fixed rates of exchange; for instance, the County Court of Norfolk County, Virginia, in March, 1816, decreed that the notes of the Bank of Virginia and the Bank of South Carolina were worth their face value, while the bills of Baltimore and Philadelphia and the District of Columbia were below par.[534] Merchants had to keep lists on which was estimated the value of bank bills and to take chances on the constant fluctuations of them.[535] ”Of upwards of a hundred banks that lately figured in Indiana, Ohio, Kentucky, and Tennessee, the money of two is now only received in the land-office, in payment for public lands,”

testifies Flint, writing from Jeffersonville, Indiana, in March, 1820.

”Discount,” he adds, ”varies from thirty to one hundred per cent.”[536]

By September, 1818, two thirds of the bank bills sent to Niles in payment for the _Register_ could not ”be pa.s.sed for money.”[537]

”Chains” of banks were formed by which one member of the conspiracy would redeem its notes only by paying out the bills of another. Thus, if a man presented at the counter of a certain bank the bills issued by it, he was given in exchange those of another bank; when these were taken to this second inst.i.tution, they were exchanged for the bills of a third bank, which redeemed them with notes of the first.[538] For instance, Bigelow's bank at Jeffersonville, Indiana, redeemed its notes with those of Piatt's bank at Cincinnati, Ohio; this, in turn, paid its bills with those of a Vincennes sawmill and the sawmill exchanged its paper for that of Bigelow's bank.[539]

The redemption of their bills by the payment of specie was refused even by the best State banks, and this when the law positively required it.

Niles estimated in April, 1818, that, although many banks were sound and honestly conducted, there were not ”half a dozen banks in the United States that are able to pay their debts _as they are payable_.”[540]

All this John Marshall saw and experienced. In 1815, George Fisher[541]

presented to the Bank of Virginia ten of its one-hundred-dollar notes for redemption, which was refused. After several months' delay, during which the bank officials ignored a summons to appear in court, a distringas[542] was secured. The President of the bank, Dr.

Brockenbrough, resisted service of the writ, and the ”Sheriff then called upon the by-standers, as a _posse comitatus_,” to a.s.sist him.

Among these was the Chief Justice of the United States. Fisher had hard work in finding a lawyer to take his case; for months no member of the bar would act as his attorney.[543] For in Virginia as elsewhere--even less than in many States--the local banks were the most lucrative clients and the strongest political influence; and they controlled the lawyers as well as the press.

In June, 1818, for instance, a business man in Pennsylvania had acc.u.mulated several hundred dollars in bills of a local bank which refused to redeem them in specie or better bills. Three justices of the peace declined to entertain suit against the bank and no notary public would protest the bills. In Maryland, at the same time, a man succeeded in bringing an action against a bank for the redemption of some of its bills; but the cas.h.i.+er, while admitting his own signature on the notes, swore that he could not identify that of the bank's president, who had absented himself.[544]

Counterfeiting was widely practiced and, for a time, almost unpunished; a favorite device was the raising of notes, usually from five to fifty dollars. Bills were put in circulation purporting to have been issued by distant banks that did not exist, and never had existed. In a single week of June, 1818, the country newspapers contained accounts of twenty-eight cases of these and similar criminal operations.[545]

Sometimes a forger or counterfeiter was caught; at Plattsburg, New York, one of these had twenty different kinds of fraudulent notes, ”well executed.”[546] In August, 1818, Niles estimates that ”the notes of at least ONE HUNDRED banks in the United States are counterfeited.”[547] By the end of the year an organized gang of counterfeiters, forgers, and distributors of their products covered the whole country.[548]

Counterfeits of the Marine Bank of Baltimore alone were estimated at $1,000,000;[549] one-hundred-dollar notes of the Bank of Louisiana were scattered far and wide.[550] Scarcely an issue of any newspaper appeared without notices of these depredations;[551] one half of the remittances sent Niles from the West were counterfeit.[552]

Into this chaos of speculation, fraud, and financial fiction came the second Bank of the United States. The management of it, at the beginning, was adventurous, erratic, corrupt; its officers and directors countenanced the most shameful manipulation of the Bank's stock; some of them partic.i.p.ated in the incredible jobbery.[553] Nothing of this, however, was known to the country at large for many months,[554] nor did the knowledge of it, when revealed, afford the occasion for the popular wrath that soon came to be directed against the National Bank. This public hostility, indeed, was largely produced by measures which the Bank took to retrieve the early business blunders of its managers.

These blunders were appalling. As soon as it opened in 1817, the Bank began to do business on the inflated scale which the State banks had established; by over-issue of its notes it increased the inflation, already blown to the bursting point. Except in New England, where its loans were moderate and well secured, it accommodated borrowers lavishly. The branches were not required to limit their business to a fixed capital; in many cases, the branch officers and directors, incompetent and swayed by local interest and feeling,[555] issued notes as recklessly as did some of the State banks. In the West particularly, and also in the South, the loans made were enormous. The borrowers had no expectation of paying them when due, but of renewing them from time to time, as had been the practice under State banking.

The National branches in these regions showed a faint gleam of prudence by refusing to accept bills of notoriously unsound local banks. This undemocratic partiality, although timidly exercised, aroused to activity the never-slumbering hostility of these local concerns. In the course of business, however, bills of most State banks acc.u.mulated to an immense amount in the vaults of the branches of the Bank of the United States.