Thomas Benton - Thirty Years' View (Vol. II of 2)

We now touch a point, said Mr. B., vital to the safety of banking, and I hope it will neither be passed over without decision, nor decided in an erroneous manner. We had up the same question two years ago, in the discussion of the bill to regulate the keeping of the public moneys by the local deposit banks. A senator from Massachusetts (Mr. Webster) moved the question; he (Mr. B.) cordially concurred in it; and the proportion of one-fourth was then inserted. He (Mr. B.) had not seen at that time the testimony of the governor and directors of the Bank of England, fixing on the one-third as the proper proportion, and he presumed that the senator from Massachusetts (Mr. W.) had not then seen it, as on another occasion he quoted it with approbation, and stated it to be the proportion observed at the Bank of the United States. The proportion of one-fourth was then inserted in the deposit bill; it was an erroneous proportion, but even that proportion was not allowed to stand. After having been inserted in the bill, it was struck out; and it was left to the discretion of the Secretary of the Treasury to fix the proportion. To this I then objected, and gave my reasons for it. I was for fixing the proportion, because I held it vital to the safety of the deposit banks; I was against leaving it to the secretary, because it was a case in which the inflexible rule of law, and not the variable dictate of individual discretion should be exercised; and because I was certain that no secretary could be relied upon to compel the banks to toe the mark , when Congress itself had flinched from the task of making them do it. My objections were unavailing. The proportion was struck out of the bill; the discretion of the secretary to fix it was substituted; and that discretion it was impossible to exercise with any effect over the banks. They were, that is to say, many of them were, far beyond the mark then; and at the time of the issuing of the Treasury order in July, 1836, there were deposit banks, whose proportion of specie in hand to their immediate liabilities was as one to twenty, one to thirty, one to forty, and even one to fifty! The explosion of all such banks was inevitable. The issuing of the Treasury order improved them a little: they began to increase their specie, and to diminish their liabilities; but the gap was too wide – the chasm was too vast to be filled: and at the touch of pressure, all these banks fell like nine-pins! They tumbled down in a heap, and lay there, without the power of motion, or scarcely of breathing. Such was the consequence of our error in omitting to fix the proper proportion of specie in hand to the liabilities of our deposit banks: let us avoid that error in the bill now before us.

To show the working of the federal government is the design of this View – show how things are done under it and their effects; that the good may be approved and pursued, the evil condemned and avoided, and the machine of government be made to work equally for the benefit of the whole Union, according to the wise and beneficent intent of its founders. It thus becomes necessary to show its working in the two great Atlantic sections, originally sole parties to the Union – the North and the South – complained of for many years on one part as unequal and oppressive, and made so by a course of federal legislation at variance with the objects of the confederation and contrary to the intent or the words of the constitution.

The writer of this View sympathized with that complaint; believed it to be, to much extent, well founded; saw with concern the corroding effect it had on the feelings of patriotic men of the South; and often had to lament that a sense of duty to his own constituents required him to give votes which his judgment disapproved and his feelings condemned. This complaint existed when he came into the Senate; it had, in fact, commenced in the first years of the federal government, at the time of the assumption of the State debts, the incorporation of the first national bank, and the adoption of the funding system; all of which drew capital from the South to the North. It continued to increase; and, at the period to which this chapter relates, it had reached the stage of an organized sectional expression in a voluntary convention of the Southern States. It had often been expressed in Congress, and in the State legislatures, and habitually in the discussions of the people; but now it took the more serious form of joint action, and exhibited the spectacle of a part of the States assembling sectionally to complain formally of the unequal, and to them, injurious operation of the common government, established by common consent for the common good, and now frustrating its object by departing from the purposes of its creation. The convention was called commercial, and properly, as the grievance complained of was in its root commercial, and a commercial remedy was proposed.

It met at Augusta, Georgia, and afterwards at Charleston, South Carolina; and the evil complained of and the remedy proposed were strongly set forth in the proceedings of the body, and in addresses to the people of the Southern and Southwestern States. The changed relative condition of the two sections of the country, before and since the Union, was shown in their general relative depression or prosperity since that event, and especially in the reversed condition of their respective foreign import trade. In the colonial condition the comparison was wholly in favor of the South; under the Union wholly against it. Thus, in the year 1760 – only sixteen years before the Declaration of Independence – the foreign imports into Virginia were £850,000 sterling, and into South Carolina £555,000; while into New York they were only £189,000, into Pennsylvania £490,000; and into all the New England Colonies collectively only £561,000.

These figures exhibit an immense superiority of commercial prosperity on the side of the South in its colonial state, sadly contrasting with another set of figures exhibited by the convention to show its relative condition within a few years after the Union. Thus, in the year 1821, the imports into New York had risen to $23,000,000 – being about seventy times its colonial import at about an equal period before the adoption of the constitution; and those of South Carolina stood at $3,000,000 – which, for all practical purposes, may be considered the same that they were in 1760.

Such was the difference – the reversed conditions – of the two sections, worked between them in the brief space of two generations – within the actual lifetime of some who had seen their colonial conditions. The proceedings of the convention did not stop there, but brought down the comparison (under this commercial aspect) to near the period of its own sitting – to the actual period of the highest manifestation of Southern discontent, in 1832 – when it produced the enactment of the South Carolina nullifying ordinance. At that time all the disproportions between the foreign commerce of the two sections had inordinately increased. The New York imports (since 1821) had more than doubled; the Virginia had fallen off one-half; South Carolina two-thirds. The actual figures stood: New York fifty-seven millions of dollars, Virginia half a million, South Carolina one million and a quarter.

This was a disheartening view, and rendered more grievous by the certainty of its continuation, the prospect of its aggravation, and the conviction that the South (in its great staples) furnished the basis for these imports; of which it received so small a share. To this loss of its import trade, and its transfer to the North, the convention attributed, as a primary cause, the reversed conditions of the two sections – the great advance of one in wealth and improvements – the slow progress and even comparative decline of the other; and, with some allowance for the operation of natural or inherent causes, referred the effect to a course of federal legislation unwarranted by the grants of the constitution and the objects of the Union, which subtracted capital from one section and accumulated it in the other: – protective tariff, internal improvements, pensions, national debt, two national banks, the funding system and the paper system; the multiplication of offices, profuse and extravagant expenditure, the conversion of a limited into an almost unlimited government; and the substitution of power and splendor for what was intended to be a simple and economical administration of that part of their affairs which required a general head.