country, the banks found themselves unable to continue their accustomed business, and pay their bills on demand, and were reduced to the alternative of discontinuing their ope rations, or suspending specie payments. Most of them adopted the latter, and discounted more liberally than ever, with an understanding that their bills should not be redeemed with specie. This course changed the circulating medium from specie to paper, more or less depreciated, according to the situation and credit of the bank from which it issued. It is obvious, that a promise which the public know will not be fulfilled in terms, can never be of par value, but is worth more or less, according to the opinion entertained of the honor of the maker, of his ability and disposition to pay, or of the legal means of coercion. The latter was out of the question. These corporations having no visible existence, or tangible property, an execution against them could avail the creditor nothing. A power of issuing bills for a circulating medium not to be redeemed on demand, was liable to great abuse, and in the hands of unprincipled speculators, afforded a convenient opportunity for imposing on the credulity of the public. Several radical defects existed in the outset of the banking business. The property of the individual stockholder, beyond the amount of his capital, was not liable for the debts of the bank. The legislatures who created these institutions, either did not possess the means of restraining the banks within their chartered limits; or were extremely remiss in using them. Scarcely a bank could be found which had not greatly exceeded its charter in contracting debts.

No effectual laws were passed punishing those who, under the cloak of a bank charter, conducted business on a fictitious capital, and perverted the funds pledged for the redemption of their bills. While an individual who counterfeited a dollar of this paper was punished with the loss of liberty, and rendered infamous, a company of speculators might possess themselves of a bank charter, issue bills to an unlimited amount, without a dollar of real capital, and enrich themselves with the fruits of their fraud with impunity. No field for the perpetration of villainy can long remain unoccupied. Bank charters were obtained, a fictitious capital created by taking stockholders' notes for the amount of their subscriptions, without any other security than their shares, and on this baseless system, bank paper issued to an unlimited extent, with which the stockholders enriched themselves.

The bank was then declared insolvent, its doors shut, and the unsuspecting bill holder left to put up with the loss.

Another mode was, where the original stockholders were men of probity and capital, and had actually paid in their subscriptions, for speculators to purchase a sufficient number of shares to obtain the control of the bank, then draw out the funds on their own security, and bankrupt the institution. Instances of frauds of this description took place in different parts of the country, more were apprehended, and a general distrust of bank paper took place, which occasioned its further depreciation. That legislatures should have been so incautious, and regardless of the safety of the community, as to impart to individuals, they knew not whom, a power of issuing bills for a circulating medium, to an extent which had no practical limits, without any personal responsibility, became matter of astonishment and regret, when its effects came to be felt. The delusion, however, pervaded every state in the union. Evils of the most serious and alarming nature resulted from this state of things, both to the public treasury and individual credit. Specie was not to be had to discharge custom-house bonds, and other treasury claims; the paper of the banks was at very different rates, at different times and places. No general standard value could be fixed below the nominal. Duties collected in different ports were paid in paper of very different value, and when disbursements were required to be made at places remote from the place of collection, great losses were sustained. Difficulties of the same nature attended private transactions. Money was not to be had for the purposes of traveling, or distant remittances. Creditors

exacting specie from their debtors could obtain their property almost upon their own terms: when willing to receive their demands in paper they had no means of ascertaining its value, or of determining whether it was worth any thing.

Proposition for a national bank. The secretary of the treasury, after giving a minute detail of the state of the finances, pointed out the embarrassments to which the treasury, as well as the community, was subject, in consequence of the want of a circulating medium of a uniform value; and recommended the establishment of a national bank. The question whether congress possessed the constitutional power to create such an institution, had undergone many critical and elaborate discussions in congress, and before the highest judicial authorities; and had resulted in a settled

opinion in the affirmative. It was not claimed that there was any clause in the constitution, conferring this power on congress, in express terms. But under the clause in the preamble, declaring the object of the instrument to be, to promote the general welfare, and that clause in the body of the constitution, which confers the power of making all laws necessary and proper to carry into effect the powers specifically delegated, the power of creating banking insti tutions was claimed to be included, as a necessary and proper measure, to conduct the financial concerns of the nation. The administrators of the government, in the construction of their own powers, have at all times given them the most liberal interpretation, and under these general clauses, have extended them to almost every case on which it was judged convenient to legislate.

Charter of 1791. At the commencement of the government, the secretary of the treasury, in an elaborate communication to congress, pointed out the utility, necessity, and constitutionality of a national bank; which led to the establishment of one, limited in its duration to twenty years, in 1791. At the expiration of that charter, the administration of the government had passed into other hands. The general utility of the institution had been tested by experience; and the rapidly increasing commerce and revenue of the country seemed to require its continuance. But such a moneyed institution was found to possess an extensive political influence. The borrower generally finds it necessary to subserve the views of the lender. He very naturally apprehends that accommodations will more readily be granted him, when he favors, than when he opposes those views. The control of millions of dollars to be loaned for individual accomodation, at this bank, was now in the hands of the party opposed to the administration, and might, it was apprehended, be used to their disadvantage. The administrators of the government in 1811, had, when out of place, been advocates for a limited construction of the constitution. To quiet their fears, and prevent an extraordinary extension of the powers of that instrument, an amendment had been made, providing, that "the powers, not delegated to the United States, nor prohibited by it to the states, were reserved to the states respectively, or to the people." Under this amendment they contended for a strict construction of the constitution; and that no such necessity for a bank existed as the last clause contemplated, under which it was claimed the power was granted. An application, made to

the congress in 1811, for the renewal of the charter, was unsuccessful, and it was suffered to expire without a substitute. During the extensive financial operations, to which the war, which soon afterwards ensued, gave occasion, the want of such an institution was severely felt; but it was now to be created, if at all, by those who in 1791 opposed the measure on constitutional grounds; and in 1811 refused to renew the charter. Its manifest necessity, however, overcome constitutional scruples, and the pride of opinion, both in the legislative and executive branches of the government. Propositions for a new bank. At the third session of the thirteenth congress, a bill passed both houses for the establishment of a national bank; but owing to a difference of opinion between them and the president, relating to some of its important features, it failed of becoming a law. The plan now recommended by the secretary, did not essentially vary from that adopted by the last congress. The objects proposed, were,

A profitable investment of a portion of the public stock : A safe and convenient deposit for the revenue:

The transmission of the public moneys from the places of collection to those of disbursement, without expense or risk to the treasury;

And the establishment of a uniform circulating medium throughout the United States.

On the general question, of the establishment of a bank, there was but little diversity of opinion. After much debate on its details, an act passed both houses, and was approved by the president on the 10th of April, 1816, to establish a national bank. Its principal features, were,

Terms of the charter. That its capital should consist of thirty-five millions of dollars, seven in specie, and twenty eight in funded debt of the United States:

That the secretary of the treasury should subscribe seven millions in behalf of the United States, payable wholly in public stock:

That the subscriptions of individuals should be payable, one quarter in specie, and the residue in stock, thirty per cent. at the time of subscribing, thirty-five on the 1st of July, 1816, and thirty-five on the first day of the succeeding January:

That the bank should be the exclusive depository of the public funds, and no other should be chartered during its continuance :

That it should be located at Philadelphia, under the superintendence of twenty-five directors, five to be appointed by the president, and twenty by the stockholders; the president of the bank to be appointed by the directors from among those who were appointed on the part of the government; and,

That the bank should have power to establish branches in any part of the United States, at the discretion of the di

rectors.

For these exclusive privileges, the bank was to pay into the treasury, a bonus of one million and a half of dollars; to perform the duties of the office of commissioner of loans, in the several states, and transmit the government funds to any placess in the United States where they might be required, free of expense to the treasury.

Subscriptions filled. Subscriptions were opened at the seat of government, and at a principal city in each of the United States, on the 1st of July, and continued for twenty days; on the return of the subscriptions to the commissioners at Philadelphia, it appeared there was a deficiency of $3,038,300 to complete the required capital. This was immediately subscribed by Stephen Girard, of Philadelphia; and the bank commenced its operations on the 1st of January following.

Debate on the commercial convention. When the subject of the commercial convention between Great Britain and the United States came before congress, the senate passed a bill, in general terms declaring, that all laws inconsistent with that treaty were repealed. In the house of representatives, a bill was introduced incorporating the principal stipulations of the convention into an act of congress. The object and effect of both bills were the same; but their different phraseology led to an interesting discussion between the two houses, on the subject of the treaty-making power, and revived, in some degree, the questions agitated in 1795, on the subject of Jay's treaty, when the house of representatives claimed of the president, an exhibition of the papers, relating to the negotiation, and insisted on the right of withholding the appropriations necessary to carry that treaty into effect. In the present instance, the bill from the senate imported, that the treaty itself, independent of any legislative provisions, repealed all laws inconsistent with its tenor; that of the house, implied the necessity of a legislative repeal of the laws, imposing discriminating duties in relation to Great Britain. In a conference between committees