V. Restricting Bank Credit: Proposals and Actions

Contrasting to proposals for expanding the money supply were suggestions for restricting bank credit such as placing curbs on the issue of bank notes or requiring banks to redeem in specie. They grew out of the grave problem of the defaulting and suspending banks, and of the widespread depreciation of their notes. The impetus came from both a belief that sounder banking would cure the panic by placing monetary and banking affairs on a firmer basis and the desire to prevent unsound bank credit expansion, and subsequent depression, in the future.

Secretary of Treasury Crawford, despite his toying with the idea of inconvertible paper, typified the opinion of those who wished to restrict banks and bank credit. In his Currency Report,¹ he declared that in order to return to a specie convertible basis, superfluous banks must be eliminated. Banks should only exist in the principal commercial cities of each state. Small denomination note issues should be prohibited and banks should discount “nothing but transaction [commercial] paper payable at short date.”² The maximum amount of these discounts should equal the total of savings and deposit accounts and half the paid-in capital. Then the banks would always be able to maintain convertibility. The present system of banking, Crawford declared, had banished specie by issuing paper in excess of the demand for transmitting funds and had fostered extravagance, idleness, and the spirit of gambling. Crawford stated that restraints on the banks were a responsibility of the state legislatures, although he conceded that the federal government had contributed to the spirit of speculation by granting credit on public land sales and through the extension of credit by the Bank of the United States.

Banks were largely state responsibilities. And so the problem of the banks was thrashed out largely on the state level. In Georgia, the legislature voted in late 1818 to penalize any incorporated bank refusing to pay specie on demand, and imposing a 2 percent per month interest penalty. This followed the defeat of a 3 percent per month interest penalty proviso in a bill to incorporate the new Bank of Darien. Another important measure passed in the same session—prohibition of the circulation of notes of unchartered private banks and of the issue of small denomination notes.³ In 1820, Georgia passed an act requiring annual reports from the banks, but it proved ineffectual.⁴

One of the methods of restraining bank credit expansion was to reject incorporations of new banks or to insert compulsory specie payment clauses in their charters. An indication of popular opinion was the presentment of a grand jury of Jasper County, a rural county southeast of Atlanta. The presentment asked for no further additions to bank charters.⁵ The Georgia legislature turned down several applications for new banks. It rejected a charter of a proposed Agricultural Bank of the State of Georgia by a two-to-one vote. This bank would have had an authorized capitalization of $1 million. The bank was rejected even after the charter was amended to include an absolute specie paying clause.

The Georgia legislature also rejected by a similar majority a bill to authorize the Marine and Fire Insurance Company of Savannah to issue its own notes and discount promissory notes. On the other hand, it passed the charter of a new bank at Augusta, over opposition, and enacted a charter for the Bank of Darien without penalizing failure to pay in specie.⁶

Virginia was a leading stronghold of hard-money opinion. Its leading statesmen, such as Thomas Jefferson, attacked any issue of bank paper beyond the supply of specie. As we have seen in the case of the Crawford Report, Thomas Ritchie, editor of the Richmond Enquirer, used sophisticated economic arguments to attack any suggestion of inconvertible paper schemes.⁷ Typical of Virginia opinion was an Enquirer editorial laying the blame for the crisis squarely at the doors of the banks. The only remedy was for the parasitic banks to be eliminated, with industry and economy allowed to effect a cure.⁸ Ritchie also urged that if bank paper be permitted to continue in existence, there at least be vigorous restrictions on all banks, whether state or national, private or incorporated. Small denomination notes must be prohibited and paper must always be convertible into specie. The least reluctance to do so should forfeit the bank’s charter.⁹

A writer from Petersburg, in southeastern Virginia, blamed the current plight on paper money and cited the French economist, Destutt de Tracey (whose work was being translated under the supervision of Thomas Jefferson), to the effect that when a merchant could not pay his debts, the best he could do was liquidate and to become bankrupt quickly.¹⁰

Another point of view was expressed by “A Virginian.” He suggested the abolition of all incorporated banking, instead placing reliance on private banks, the owners of which would be fully liable for their debts. Such banks, he declared, “cannot overtrade, that is, issue more paper than the market requires; their credit will not exceed its just limits.”¹¹

Some writers, however, sounded a note of caution, stressing that bank note contraction should take place slowly, so as not to disrupt the economy unduly.¹²

A unique monetary plan was offered by Spencer Roane, the great Chief Justice of the Virginia Court of Appeals and the leading foe, on behalf of states’ rights, of Justice John Marshall’s loose constructionist decisions.¹³ Roane began by asserting that “banking is an evil of the first magnitude,” and in this sentiment he claimed the support of prevailing opinion throughout the United States. However, bank paper could not be eradicated and a return made to pure specie without causing “widespread ruin and distress.” How, then, to reform the banks? As long as they remained in existence, they must be controlled. The Bank of the United States was not the proper instrument for this control, for it possessed the nationwide power of increasing or diminishing the circulating medium at will. The United States Bank had a far greater potential for harm than did the state banks. On the other hand, the state banks needed a general central control, to produce uniformity of action and confidence in their issues and to see that they redeemed their notes. As a substitute for the present unsatisfactory system, then, Roane proposed “Banks which shall be local as to the extent of their patronage and power, but national as to their responsibility.” Roane—champion of states’ rights—suggested a Constitutional Amendment to prohibit the states from creating any bank corporations and to authorize the federal government to establish an “independent bank” in every state, with the assent of that state. Of the capital stock of each such bank, one-fifth was to be subscribed by the United States government, one-fifth by the state, and the remainder by the citizens of the particular state. Each bank was to have fifteen directors, all citizens of the state—three to be appointed by the federal government, three by the state government, and the remainder by the other stockholders. “The objection to the United States Bank, as at present organized, would not apply to [these] bank[s]. . . . The patronage of the directory and its power over the circulating medium, would be confined to the state where it should be located.” The Bank of the United States had compelled some branches suddenly to curtail their note issue, because of the independent and lax management of other branches. “An independent bank would be enabled to pursue a course regulated only by its own business and the balance of trade for or against the state where it should be located.” On the other hand, the independent banks would be incorporated by the federal government and would therefore be uniform throughout the country, and all compelled to redeem in specie.

It cannot be doubted that institutions that are relied on to afford a national currency, should be under national control. It would be as unwise to depend on state institutions for a medium of exchange, in which to receive the national dues, as it would be to depend on state authorities for the payment of those dues [i.e., the system of the Articles of Confederation].

The Constitution, Roane asserted, gave Congress the authority to regulate the currency of the country and prohibit such regulation to the states. This should apply to paper currency as well as to specie.

Virginia’s hard money contingent, in its distrust of banks, recognized that the Bank of the United States had inflated proportionately less than did the bulk of the state banks. However, like Roane, they feared the bank as having greater potentialities for evil. As Ritchie asked: state banks were certainly evil, but “what is there to control the power of the national bank?”¹⁴

The most famous and one of the most thoroughgoing opponents of bank credit was Thomas Jefferson. Jefferson reacted to the panic of 1819 as a confirmation of his pessimistic views on banks.¹⁵ He elaborated a remedial proposal for the depression in a “Plan for Reducing the Circulating Medium,” which he asked his friend William C. Rives to introduce in the Virginia legislature without disclosing authorship.¹⁶ The goal of the plan was bluntly stated as “the eternal suppression of bank paper.” The method was to reduce the circulating medium gradually to that “standard level” which pure specie would find for itself equally in the several nations. For this purpose, the state government should compel the complete and utter withdrawal of bank notes in five years, one-fifth of the notes to be called and redeemed in specie each year. Further, the state should make it a high offense to pass or receive any other state’s bank notes. Those banks who balked at such a plan should have their charters forfeited or be forced to redeem their notes. In conclusion, Jefferson declared that no government, state or federal, should have the power of establishing a bank. He envisioned a circulation consisting solely of specie.¹⁷

Governor Thomas Randolph, son-in-law and close friend of Jefferson, in his inaugural address in December, 1820, summed up the predominant Virginia attitude toward banks.¹⁸ Randolph stated that only specie, never paper, could be a measure of value. Specie, in universal demand, had a relatively stable value, while banks caused great fluctuations in the supply and value of money, with attendant distress. Randolph looked forward to the day when eventually the whole revenue of the government would be collected in specie only. He was willing to see the state print paper money, provided that it be absolutely convertible in specie and guaranteed to be equal in value to the specie owned by the state—in short, a 100 percent reserve program.

In Delaware, the restrictionist forces kept up a running fight with the expansionists and advocates of relief legislation during the 1819 and 1820 sessions. The restrictionists made their first move in the House upon submission of the report of the Brinckle Committee to consider the state of the paper currency. Representative Martin W. Bates of Kent County moved to reject that part of the committee’s report which declared it inexpedient to compel the banks to resume specie payment. Bates’s motion carried the House by one vote and had the support of Representative Henry Brinckle, himself, but of no one else on the committee.¹⁹ The House had not yet passed a compulsory resumption bill, however. In the next session, Brinckle introduced a resolution to establish a committee to introduce the required bill.²⁰ Brinckle’s bill passed numerous tests in the House, albeit by one vote, but the Speaker of the House took the unusual step, on final passage, of personally voting nay, and thus blocking the resolution by a nine-to-nine tie.

In Maryland a leading expression of hard money sentiment was a citizens’ meeting at Elkton, in the extreme northeastern end of the state, referred to previously. Not only did the “farmers and mechanics” of Cecil County pledge themselves to refuse to take the notes of nonspecie-paying banks but they proceeded to denounce the banks and call for strict laws to compel specie payment.²¹ They “viewed with abhorrence” the alarming increase of “fictitious capital” furnished by banks, they assigned the principal causes of the “decline of agricultural, mercantile, and mechanical interests” to the banks, and they pledged themselves not to vote for any candidate that would not pledge to vote to compel specie payment by the banks. The meeting also passed resolutions of gratitude to Hezekiah Niles, editor of Niles’ Weekly Register, and to the late State Representative Matthew Pearce, for their staunch anti-bank leadership.²² The resolutions were widely reprinted throughout Maryland and also in the Niles’ Weekly Register. They were denounced in the Baltimore Federal Gazette by its editor, William Gwynn, as slanderous; Gwynn charged that the citizens had been duped by Niles. Niles quickly retorted that Gwynn was himself a bank director.²³

Niles by no means advocated complete abolition of bank paper, however. His suggested remedies for the financial troubles: (1) cease granting corporate charters to banks; (2) make bank stockholders fully liable; and (3) enforce payment of all specie demands.²⁴

The Maryland hard money advocates did not succeed in tightening the laws against banks not redeeming in specie, but they succeeded in blocking any action for monetary expansion by the legislature.

One of the leading bank restrictionists of the period was Daniel Raymond, a Baltimore lawyer, who in 1820 wrote Thoughts on Political Economy, the first systematic treatise on economics published in the United States.²⁵ Raymond set forth a virtual 100 percent specie-reserve position on banking. Bank notes, he maintained, should be confined to bank capital. Raymond criticized the assertion of Adam Smith and Alexander Hamilton (whom he otherwise greatly revered) that bank notes added to the national capital in so far as they substituted for, and economized on, specie.²⁶ In reply, he cited David Hume that “in proportion as money is increased in quantity, it must be depreciated in value.” An issue of paper money therefore had the same effect as debasing the coinage. The increase in price raised the prices of domestic goods in export markets and caused an unfavorable balance of trade. Bank credit also promoted extravagant speculation. Ideally, Raymond believed that the federal government should eliminate bank paper entirely and supply the country with a national paper fully (100 percent) representative of specie.²⁷ If this could not be accomplished, then Raymond suggested that banks be subjected to government control. Government would have a monopoly on the manufacture of paper, which it would give to banks, while regulating the maximum amount that they could lend in proportion to their capital. If this plan were not adopted, Raymond’s third choice was government’s taxing bank profits above the going rate of interest, thus eliminating the motive for increasing bank paper.

Another advocate of 100 percent reserve, signing himself “A Farmer,” was asked, in the course of a debate in the pages of the National Intelligencer, by a “Brother Farmer”: What would become of the farmers if the banks were annihilated? “Farmer” answered that they would no longer have debts or bankruptcies and that their income would then be in undepreciated specie.²⁸ Joining in the antibank sentiments, “A Stockholder” hailed the current credit liquidation and hoped that the purification process would continue until all banks were eliminated.²⁹

In the District of Columbia there were proposals to consolidate the three banks of the district into one bank. These proposals were not adopted, however. Typical of the attacks upon it was one by “Nicholas Dumbfish,” who assailed the consolidation as assisting “in perpetuating this wretched system of paper, which, if left to itself, will expire, whether by its own limitation or by the total and irretrievable loss of public confidence.” Better to let these institutions die a natural death.³⁰

New York was one of the main centers of monetary restrictionist sentiment. Typical was the famous Address of the Society of Tammany to its Absent Members, which circulated throughout the country. The report was written by John Woodward, and among its signers were the Grand Sachem of Tammany (then as now in political rule of New York County), Clarkson Crolius, and secretary James S. Martin.³¹ The Address frankly lambasted banks as being “poisonous.” In particular, it attacked bank loans to agriculture. Banks might be useful in rapidly liquidating commercial transactions, but could only bring ruin to agriculture. The Address recommended total abolition of bank loans to agriculture, as well as the forfeiting of the charters of any banks refusing specie payment. The Society of Tammany itself, however, when passing recommendations for remedies of the depression a week later, omitted banking from the list.³²

The Tammany Address was widely circulated and considered, and drew comments and letters from many famous statesmen. James Madison, for example, wrote to Crolius praising the report. He declared that even when banks restricted their operations to temporary loans to persons in active business, promising quick returns, they were likely to be harmful. There was no doubt of the mischief involved in banks’ lending indiscriminately and at long term.³³

One of the leading figures of New York State, Judge William Peter Van Ness, pseudonymously published a pamphlet advancing two restrictions on banks: (1) they may discount no “accommodation paper,” i.e., simple loans that were not self-liquidating in the course of active trade; and (2) that they grant no renewals of loans.³⁴ Van Ness reasoned that failure to follow this rule had caused the depression; for when a bank loaned so as to constitute, rather than merely supplement, the capital of a merchant, it thereby sponsored “adventurers” rather than sober businessmen. Accommodation paper, furthermore, was created for the sole purpose of being discounted, whereas “business paper” arose from the actual sale of a good.³⁵ Van Ness believed that the Bank of the United States could aid greatly in furthering such a program.

The New York City press had largely restrictionist views. The New York American concluded that the true remedies for the depression were: “The gradual . . . but flexible reduction of bank discounts, refusing to incorporate any new institutions, compelling those which exist . . . to redeem their notes in specie . . . or forfeit their charter.”³⁶

One unique approach to the monetary problem appeared as an anonymous pamphlet on currency and credit.³⁷ “Seventy-Six” attacked paper and bank credit. He was unique in advocating a grain standard instead of a specie standard. He argued that grain must really be the best money since people resorted to barter in grain as a last ditch measure.

A significant report on the New York situation was delivered by Assemblyman Michael Ulshoeffer, from New York City, of the Committee on Currency.³⁸ Ulshoeffer’s task was to investigate remedies for the disordered currency. As he explained, “the great object in view is that the various banks should redeem their notes promptly in specie, and that such notes should pass at their par value in every part of the state.” The enormous banking capital in the state should be reduced, he demanded, and only a vast retrenchment in the paper money supply, and its prompt redemption, would effectively restore paper to par throughout the state. It was true, he conceded, that public opinion governed the value of all paper money, and that the public must be trusted to distinguish between good and unsound banks. Yet, laws might aid public opinion and restore public confidence. The state banks, he charged, had refused to redeem their notes, had kept their offices closed, and had placed all manner of obstacles in the path of redemption, while continuing to lend and circulate their notes. Therefore, Ulshoeffer recommended that the state treasurer not receive notes of any bank not promptly redeeming in specie, or not passing at par in the principal cities.

Governor De Witt Clinton, in his message opening the 1819 session of the legislature, implicitly called for an end to new bank charters for the present, indicating that the multiplication of banks was one of the main causes of the current depression, and stating that he had always been opposed to this expansion.³⁹ Clinton charged that investing banks with the power to coin money instead of issuing paper would be less pernicious, since at least the coins would have intrinsic value. Taking this section of the Governor’s speech as a point of departure, the Senate and Assembly appointed a Joint Committee on the part of the Governor’s speech dealing with currency. The report of Chairman David Allen, of the Eastern district, concluded it inexpedient to grant any more bank charters.⁴⁰ The Allen Report particularly attacked overextension of banking as one of the major causes of the depression. The banks were all right when confined to commercial centers, where they invigorated trade. But banks overextended when they began to establish themselves in remote agricultural areas, emitting “excessive issues of bank notes without the means of redeeming them,” and the depreciation of their notes.⁴¹

One of the most astute writers in the press of the period was “Senex,” who had his own solution for the problem of the country banks in New York.⁴² He explained that pernicious effects of country banks’ overissue stemmed from their having opened accounts with sound city banks, the latter thus assuming the liabilities of the former. After accepting country bank notes on deposit, the city banks felt bound to redeem the country notes in specie, both from want of foresight and out of the desire to please their customers. If they had not done so, the country notes would have circulated only in their local areas. The remedy was simple: the city banks should refuse to support these worthless notes. This would “reduce the amount of floating paper money by substituting metallic currency in their place.”

There was no great need in New York for legislative action to enforce specie payment, since it had been largely taken care of in the 1818 session, before the panic had started. New York had then passed a bill compelling any bank to pay its notes in specie or Bank of United States notes, or suffer a payment of penalty interest to the noteholder. The strength of the proponents was seen in their defeating, by a two-to-one margin, Senator Martin Van Buren’s attempt to vitiate the bill almost completely by exempting notes already in existence from its provisions. The legislature, in the same session, also prohibited any private, unchartered banking whatsoever, whether for purpose of note issue, deposit, or discount.

The most dramatic bank crisis in New York City during the depression was the failure of Jacob Barker’s Exchange Bank, a private bank of unorthodox principles which had been established in New York City, a stronghold of financial conservatism. Barker had secured an exemption for three years from the legislative ban on private banking, but he went insolvent as soon as the panic arrived.⁴³ He was moved to pen a rather remarkable apologia for his actions.⁴⁴ Barker’s pamphlet depicted a virtual morality play. His bank was begun after the war as a humanitarian gesture, doing its business mainly “with mechanics and residents of the neighboring counties, who were unable to obtain accommodations from other banks.” Barker’s rivals, the corporate banks, were angry because of this benevolence and conspired to wreck the bank. Barker was able to withstand all the wicked maneuvers, until pressure for redemption somehow built up from various sources, and he was forced to suspend specie operations, which in New York meant to go out of business.

A rebuttal pamphlet, printed anonymously, put its finger on a common point of restrictionist attack: small denomination notes.⁴⁵ “Plain Sense” pointed out that Barker’s notes were overissued and, consequently, were now exchanging at a 45 percent discount. Particularly evil was small note circulation, and Barker’s Bank was especially active in issuing small notes, which circulated among the poorer classes and “increase the change in favor of the banker” through destruction, accidents, etc. Furthermore, such people accepted the notes, even when depreciated, out of ignorance or necessity. The author advocated that banks be prohibited from issuing notes under $20. Such prohibition would restrict the area of their circulation; “notes would constantly be flowing into the hands of men having large capitals, and engaged in extensive transactions, who would return them into the bank for payment when they came into their hands.” The public would then be safe, and the banker would have to confine himself to fair profits “arising from the employment of his real capital.”

Another writer, using the signature “A Merchant,” pointed out a second major argument against small note issue: that it leads to rapid disappearance of specie from circulation. He urged that the New York legislature follow the lead of Pennsylvania, Maryland, and Virginia and prohibit all notes under $5 denomination.⁴⁶

Anti-bank sentiment was strong in Pennsylvania, which, as seen, was a battleground for expansionist proposals. As the panic arrived, alongside petitions for monetary expansion came petitions for coerced specie payment. Requests bombarded the legislature for liquidation of the charters of all the banks that had suspended specie payments, and for rendering the property of individual stockholders fully liable. Some of the petitions went so far as to urge revocation of all bank charters in the state. Conspicuous in sending such petitions were Mifflin County in central Pennsylvania, neighboring Union County, and Bucks County in the extreme eastern part of the state.⁴⁷ In far west Pittsburgh, the Republicans of the district (and the Republicans were the only effective political party in the state), and all Republican candidates for office, favored a compulsory specie payment law.⁴⁸ These Republicans also favored a tax against the Bank of the United States. In both of these demands, they were endorsed by the Pittsburgh Statesman.⁴⁹ State Senator Condy Raguet, in the course of his very extensive inquiry into the extent of the depression in Pennsylvania, sent a questionnaire to leading citizens as well as legislators in each county, sampling opinion on the depression. One of his questions was, “Do you consider that the advantages of the banking system have outweighed its evils?”⁵⁰ Of the nineteen counties sampled, sixteen answered in the negative, and these covered all areas of the state.

Raguet, who concluded that the depression was caused by bank credit expansion in the boom and subsequent contraction when specie drained from bank vaults, urged that every new or renewed bank charter have the following restrictive provisions:

(1) a penalty of 12 percent interest per annum and forfeiture of the charter, should any notes or deposits not be redeemed in specie on demand. (This was the most important provision.⁵¹ The inclusion of deposits with notes was characteristic of Raguet, who pioneered in emphasizing their simultaneity in constituting the money supply.)

(2) loans to be limited to 150 percent of paid-in capital.

(3) all profits over 6 percent to be divided equally between stockholders and the state.

(4) prohibition on borrowing from a bank by one of its directors, also ban on a bank director’s holding legislative office.

(5) annual inspection of bank accounts.

(6) prohibition of small notes under $5 denomination.

(7) no bank should be permitted to buy its own notes, or notes of any other bank, for less than par. (This was to check the speculative practice of country banks’ buying their own notes in the city at a discount, instead of having to redeem them at par.)

(8) no bank should be able to own any securities of the United State government, or its own stock, or the stock of any other corporation. (The purpose of banks, as gleaned from their charters, wrote Raguet, was to accommodate merchants, farmers, mechanics, and manufacturers, and not to lend to stock speculators. Investing in government securities was a particular spur to speculation, since the greater marketability of government bonds caused government to issue more notes than it would otherwise.)

(9) no loans on security of bank’s own stock.

(10) a required contingency fund for redemption of 10 percent of the bank’s capital.

Although Raguet was decidedly unsympathetic to the existence of any banks aside from those with 100 percent reserve for their demand liabilities,⁵² he doubted whether repeal of existing charters was expedient. Instead, he advocated inserting the provisions listed, before any charters were renewed. For existing banks in suspension, Raguet recommended that the charters not be renewed, that they be prohibited from making any new loans or note issue, and that they be given three to five years to collect their debts and wind up their affairs.

Similar calls for restrictions on banks, particularly for the forcing of specie payment, were made in William Duane’s Philadelphia Aurora.⁵³ Duane advocated compulsory specie payments and full individual liability for banks’ stockholders. Similar provisions had unfortunately been turned down in 1814, when forty-two new banks were incorporated. And now, as then Governor Simon Snyder and other critics had predicted, those rural counties which had been the most enthusiastic supporters of bank expansion were “the most distressed and impoverished,” and the same areas were petitioning the legislature to confine all banks to cities.

“A Pennsylvanian,” in an article in the Philadelphia Union, in the course of an open letter to the Raguet Committee, recommended the following provisions in bank charters:

(1) no bank may refuse to redeem its paper when it has specie in its vaults (a milder provision than recommended by Raguet).

(2) no bank suspending payments should be allowed to issue paper or declare dividends.

(3) directors of suspending banks must call on stockholders not yet paid in full, and sue defaulting stockholders.

(4) every director to be individually liable for the paper. The writer asserted that these measures, in addition to ending fraudulent practices, would prevent future depreciation of bank paper, reduce bank paper outstanding, and increase its value.⁵⁴

The Pennsylvania legislature began restricting bank expansion in late 1818, at the urging of former Governor Snyder, now a State Senator. It passed resolutions compelling suspended banks to make public statements of their affairs and prohibiting them from declaring dividends during the period of suspension.⁵⁵ In the spring of 1819, Pennsylvania annulled the charter of any bank refusing to redeem its notes in specie, except for the very important case of brokers who had bought the notes at a discount.⁵⁶

In 1819, the Pennsylvania legislature passed a law forfeiting the charter of any bank established under the mass incorporation act of March, 1814, which, after August of 1819, should refuse to redeem its notes in specie. Stockholders and directors would be individually liable and there would be a 6 percent interest penalty on the bank.⁵⁷ In 1820, the Pennsylvania General Assembly suggested a constitutional amendment prohibiting the United States Bank from having branches within the states.

In Rhode Island, the panic quickly led to abolition of the state’s peculiar system of debt collection—particularly speedy in the case of a bank collecting from its borrowers, as compared to creditors trying to collect from the bank. Another step taken by Rhode Island, in June, 1820, was to prohibit banks from circulating notes in excess of their paid-up capital. This was not really necessary in a state with conservative banking.⁵⁸

Vermont had passed a stringent law, in 1817, prohibiting the circulation of non-specie paying bank notes, so that the hard money forces needed mainly to repulse expansionist programs, which in Vermont consisted largely of appeals for chartering new banks. One intense dispute took place over a phenomenon peculiar to Vermont the fact that there were many private Canadian bills in use in the state as money. A bill was presented in the legislature to prohibit the circulation of Canadian private notes; this bill almost passed, but was finally rejected. In the meanwhile, the opposition attempted to pass a law compelling the state to receive Canadian notes for taxes and debts due, but this was summarily dismissed.⁵⁹

In New Hampshire, hard money forces, led by former Governor William Plumer, caused a great stir in the 1820 session, by petitioning the legislature against any charter renewals for banks. The suggestion was tabled by the legislature.⁶⁰

A New England writer, “O.,” brought up an acute point: one cause of excess bank credit expansion was the banks’ agreement between themselves to accept and exchange each others notes. In effect, they borrowed from each other without paying interest. “O.” saw perceptively that competition between numerous banks could restrict the total supply of bank notes, for each bank could only issue its notes to a narrow, limited clientele, beyond which the notes would be returned to the bank quickly for redemption. Interbank agreements could suspend this force. Therefore, “O.” recommended that legislatures consider such agreements to be violations of bank charters.⁶¹

Thomas Jefferson’s thoroughgoing opposition to paper money was heartily concurred in by his old enemy and current friend, Massachusetts elder statesman John Adams. Adams, writing to his old Jeffersonian opponent, John Taylor of Caroline, denounced banks roundly and placed the blame for the depression on their shoulders. Paper money beyond the value of specie he considered to be “theft” and bound to depreciate as in the case of debased coins.⁶² He cited a similar abysmal failure of paper money in Massachusetts in 1775, which was quickly and efficiently replaced in circulation by silver.

John Adams’ son, Secretary of State John Quincy Adams, had similar views on bank paper at that time.⁶³ A plan for government paper money had been sent to him by a Frenchman, Peter Paul De Grand. Adams wrote De Grand that he would send the plan on to Secretary of Treasury Crawford, but that he himself felt that it would create fictitious capital. He commended to De Grand the Amsterdam bank system, where paper was “always a representative and nothing more”—a 100 percent equivalent of the specie in the banks vaults.

In Indiana, a bill in 1821 to prohibit issue of irredeemable bank currency failed in the legislature,⁶⁴ although a citizens’ meeting in Washington County, across the river from Louisville, denounced the entire banking system as a destructive and fraudulent monopoly.⁶⁵Missouri outlawed private unchartered bank notes in 1819.⁶⁶ In Ohio, Governor Ethan Allen Brown laid the blame for the depression on excessive bank credit and declared the only remedy to be the gradual reduction of bank paper, which would revive the credit of the banks.⁶⁷ As early as the beginning of 1819, a Committee on the State of the Currency and Banks of the Ohio House recommended that the law against private unchartered banks be enforced, and that inquiries be made into the conditions of banks not reporting their accounts.⁶⁸

The depth of sentiment throughout the West against banks in general and the Bank of the United States in particular, for their excessive expansionist and contractionist activities, was revealed by incidents in rural Ohio. In the fall of 1819, General William Henry Harrison, later President of the United States, was a successful candidate for the Ohio State Senate. A citizens’ meeting before the elections criticized him for being a director of a local branch of the Bank of the United States. Harrison, in a lengthy reply, insisted he was a sworn enemy of all banks and especially the Bank of the United States.⁶⁹ He declared that he was unalterably opposed to the establishment and continuance of the United States Bank.

The major energies of Ohio during this period, in fact, were occupied by its famous war against the Bank of the United States. This war was not depression-born, having begun in late 1817 with a proposal to tax the business of the bank’s Ohio branches, in order to drive them out of the state. The tax was defeated in this session, but carried overwhelmingly in February, 1819, after the anti-bank forces had triumphed in the fall elections of 1818. Leader in the fight was Representative Charles Hammond, from Belmont County.⁷⁰ Anger at the bank was compounded of three elements: inflationists’ irritation at the bank’s contractions and calling on state banks for redemption; hard money resentment at the bank’s expansionist activities during the boom; and general political anger at a privileged “money power.” The law that levied a tax on the bank also imposed the same tax on all unincorporated banking in the state, thus revealing the predominance of general anti-bank opinion in Ohio. Attempts to tax or penalize the bank were struck down in famous United States Supreme Court decisions—Maryland’s in McCulloch vs. Maryland (1819) and Ohio’s in Osborn vs. Bank of United States (1824).⁷¹

In the frontier town of Detroit, in Michigan Territory, the citizens became aroused about the depreciated state of their circulating medium, which consisted principally of Ohio bank notes. In early 1819, they organized a meeting to deal with the depreciated small-change notes which individuals were issuing and circulating. The meeting pledged the members not to accept any individual change notes that were not redeemable within three days after demand for redemption.⁷² In December of the same year, the leading citizens of Detroit held a meeting over the depreciated state of Ohio bank notes. They noted in alarm that the recent suspension of specie payment by these banks opened the door to a much greater depreciation. Therefore, the citizens resolved that those banks not redeeming their notes in specie were unworthy of confidence. The meeting appointed a committee of five to inquire into the condition of all the banks whose notes were circulating in Michigan, and to publish their results periodically in the Detroit Gazette. The committee was also directed to inquire into the status of individuals issuing small notes.⁷³

The citizens of Detroit also took action against clipped, or “cut,” silver, which made its appearance in force during the panic. The Detroit Gazette urged its readers to accept cut silver only by weight, and not at face value. A year later, in August, 1821, a large meeting of Detroit citizens resolved to refuse to accept cut silver coins, and to do all they could to discourage their circulation. This voluntary action effectively ended cut coin in Detroit.⁷⁴

The state of Tennessee saw a concerted drive by hard money forces at the same time that expansionists were pushing their proposals. A petition from Warren County, a rural county in mid-Tennessee, demanded bluntly that banks be placed on a plane of “constitutional equality with the citizens,” by compelling them to redeem their notes in specie. Refusal should entail a penalty interest on the bank, and stockholders should be personally liable. Similar petitions were received from Smith and Giles Counties, in mid-Tennessee.⁷⁵ A bill to compel specie payment or suffer an interest penalty was introduced in the House in the late 1819 session, by the hard money leader, Representative Pleasants M. Miller of Knoxville. The bill passed the House by a 20-to-14 vote, but was rejected in the Senate.⁷⁶ Representative J. C. Mitchell, of Rhea County in East Tennessee, proposed instead to make all real and personal property of bank stockholders liable for bank debts, but the House spurned this for the stronger Miller bill.⁷⁷ After assuming office in 1821, Governor William Carroll turned the tide of the state’s expansionist legislation and called for coerced resumption of specie payments, a step which was eventually adopted. One point of interest for the later post depression years was that the young future President James K. Polk, a wealthy cotton planter, began his political career with a staunch advocacy of return to specie payments. Polk maintained that specie payments were essential for confidence and in order to end depreciation.⁷⁸ Polk also proposed a measure to speed up execution against the property of any bank that might refuse to pay specie. Joining young Polk at this time was the frontier representative from western Tennessee, Davy Crockett, who “considered the whole Banking system a species of swindling on a large scale.”⁷⁹

A great deal of anti-bank sentiment was expressed in Kentucky during the controversy over inconvertible paper schemes. State Senator Jesse Bledsoe, from Bourbon County, delivered a speech which was later reprinted in pamphlet form. The speech was essentially a denunciation of the banking system as the cause of the depression through granting credit, thereby generating debt burdens and bankruptcies. Bledsoe called for the abolition of incorporated banking and compulsory redemption in specie by the banks.⁸⁰

Amos Kendall, influential editor of the Frankfort (Ky.) Argus, and a future Jacksonian advisor, became a bitter opponent of the entire banking system as a result of the depression.⁸¹ The very thought of banks he found “disgusting.” The best method of rendering them harmless, he felt, was simply to prohibit them by constitutional amendment. If, as seemed likely, such a step was not politically feasible, then the next best step was to require every bank to give a security fund to the courts to provide for payment for their paper. This requirement, he believed, would insure that all liabilities could be redeemed (in effect, a 100 percent reserve plan) and would be more effective than to require individual stockholder liability.

As soon as the panic struck, Governor Gabriel Slaughter quickly called for action to restrict the banks.⁸² He advocated making stockholders and directors individually liable for bank notes. Ideally, Slaughter sought a federal constitutional amendment to outlaw all incorporated banks.⁸³

In the Kentucky legislature, Representative John Logan from Shelby County, near Frankfort, proposed a set of resolutions to investigate the mass chartered “independent” banks with a view to repeal the charters of those found violating their requirement to pay specie on demand. These banks, forty in number, had opened in the spring of 1818, expanded their notes rapidly, and were now refusing to redeem. They had an aggregate capital of $89 million.⁸⁴ Representative Thomas C. Howard, of Madison County, south of Lexington, attempted to amend the resolution to repeal immediately the charters of all the independent banks. The resolution for investigation passed overwhelmingly, but the repeal measure was beaten by a three-to-one margin.⁸⁵

Kentucky moved swiftly against the banks. In early 1819, the bank committee reported to the House a rather mild bill along the lines of Slaughter’s message. It required that banks pay a tax of ½ percent per month on their capital, that the directors be individually liable for the notes of their bank, and that there be “double liability” for stockholders. When the bill reached the floor, there was a flurry of attempts both to weaken and strengthen the measure. The pro-bank forces succeeded in including an amendment requiring the state treasury to receive the notes of all banks complying with the bill. They failed by a two-to-one vote to require the state to receive the notes of all banks incorporated in Kentucky, regardless of what provisions they followed.

The restrictionists passed far stronger amendments. One was a proviso requiring the state to refuse any notes in taxes unless the bank, each year, bonded with an auditor security in pledge that the banks pay all demands in specie. This passed by a two-to-one vote. An amendment to extend the provisions from the “independent” banks to all banks in the state failed by two to one. Finally, the legislature passed the bill restricting the action of the independent banks.

In January, 1819, there was also introduced into the legislature a very vigorous series of anti-bank resolutions. They charged that banks were a moneyed monopoly and substituted speculation for production. They concluded that banks should be abolished by the federal government and the states. No action was taken on this proposal.⁸⁶ Early in the 1820 session, the legislature finally repealed the charters of the independent banks, ending also their mass of depreciated notes. Almost all these banks had suspended payments by mid-1819.⁸⁷ The bill, commended heartily by Niles, passed by a two-to-one vote in the House and by a narrow three-vote margin in the Senate.⁸⁸

Restrictionist proposals in the federal arena concentrated, of course, on the activities of the one federally chartered bank, the Bank of the United States. Representative John Spencer, from upstate New York near Onondaga, and chairman of the famous committee that had revealed some of the malpractice of the bank, introduced a resolution to forfeit the bank’s charter unless it accepted restrictions on its activities.⁸⁹ These included provisions against fraud in the purchase of bank stock, reduction of its capital, and a maximum limitation of $5 million of bank holdings in United States bonds. Spencer withdrew his proposal after he saw that there was no chance for adoption. Representatives David Trimble from the vicinity of Lexington, Kentucky, and Joseph Johnson from northwest Virginia, went further to propose outright repeal of the bank charter. Trimble declared that the bank had failed in two of its original purposes—equalizing exchanges within the country, and checking the paper issues of local banks. On the contrary, it had contributed to excessive credit expansion by waiving the collection of stock installments in specie. He predicted that if the bank continued in operation the currency would only be further depreciated and deranged. Representative James Pindall, from northwest Virginia, denounced the bank for expanding its issues, as well as for withdrawing needed specie capital from other banks.

The Trimble Bill failed by an overwhelming margin. Indeed, the only restriction on the bank that passed was a bill by Representative Burwell Bassett from eastern Virginia, to prohibit any director of the bank from dealing in its own stock.⁹⁰

Except for these proposed restrictions or abolition of the Bank of the United States, Congress had little chance to consider the banking problem. One interesting pronouncement, however, was a report in February, 1820, by Representative Joseph Kent, of Maryland, from the outskirts of Washington. Kent, Chairman of the District of Columbia Committee, reported on a proposal to consolidate the banks in the Capital territory.⁹¹ Kent opposed compulsory consolidation. He stated that competition in banking was salutary, and that while banks were injurious, there would be no remedy in suddenly prostrating them. Instead, the evil excesses of banking were currently being corrected through failures and lowered profits.

One of the few leading citizens opposing severe restrictions on banking from a point of view not simply expansionist, was the influential New York merchant, Churchill C. Cambreleng.⁹² He declared banks only secondarily responsible for the economic evils, since they were not the only creators of “fictitious capital.” If bank credit were suppressed, other forms of credit would replace it. “Legislatures might as well attempt to confine the wind—as to encircle credit with legal restrictions.” Cambreleng, however, was by no means in favor of unrestrained banking action. On the contrary, he believed that unincorporated private banks injured trade and property and should be eliminated. Incorporated banks were beneficial, but they must be rigidly regulated by the government, namely: there should be a maximum limit on the amount of paper issued; annual statements and reports by banks should be required; and banks should be compelled to pay specie on penalty of a 12 percent interest payment. Such regulations, asserted Cambreleng, were particularly needed in the southern and western states.

Thus, monetary restrictionists did not all limit themselves to opposing inflationist schemes and calling for enforcement of specie payment by the banks. Many went further to suggest regulations of banks to facilitate the maintenance of specie payment. Quite a few wanted to confine banks to the principal commercial cities, to prohibit notes of small denominations, or to confine bank loans to short-term commercial discounts. Some believed that vigorous competition between banks would suffice to restrict the note issue of each. They saw that interbank agreements would thwart such restriction and concluded that such agreements should be outlawed. Many leading restrictionists proceeded onward to condemn all banks, and either recommended outright repeal of all bank charters or an enforced 100 percent specie reserve. This position is particularly interesting, as it predated the enunciation of the similar Currency Principle in Great Britain.

It is clear, once again, that hard money opinion was not stratified along geographical or occupational lines. Restrictionist sentiment ranged from such eminent and disparate leaders as Thomas Jefferson and John Quincy Adams to obscure western farmers. Hard money opinion was particularly strong in Virginia, New York City, and New England, but it permeated every state and territory in the Union. Party lines meant little, for ultra-hard money sentiments were echoed by arch-Republicans and Federalists alike. In New York State, the two bitterly disputing Republican factions (De Witt Clinton, and Van Buren-Tammany) both upheld a sound money position. Hard money leadership was abundant and influential in the West as well, although wealthy and influential leaders of opinion were also ranged on the other side of the fence. Furthermore, it cannot be said that commercial towns favored one or the other of the monetary positions—expansionist and restrictionist—while rural areas favored another. Each subdivision of each geographic region engaged each other vigorously in the press, and disputants often came from the same county. Taken all in all, it is fair to say that the majority of leading opinion was on the hard money side, at least to the extent of supporting specie payment and opposing inflationist plans. Only a minority of restrictionists pressed further for more drastic measures against bank paper.

The Panic of 1819 intensified hostility against the Bank of the United States, and enmity toward the bank grew throughout the country. Aside from long-standing hostility on general political or constitutional grounds, opponents of the bank consisted of the uncompromising wings of two diametrically opposed camps: the inflationists who wanted inconvertible government paper, and the hard money forces who criticized the bank for acting as a national force for monetary expansion. Historians portraying the struggle over the Bank of the United States have often overlooked, or slurred over, this critical distinction.⁹³ The Jacksonian war against the bank has often been depicted as an inflationist battle against central bank restrictions on credit. Yet the opposite viewpoint, which realized that the bank’s nationalizing force was a powerful engine of credit expansion, was also important, as evidenced by hard money attacks on the bank during the 1818–21 period.

Another major area of controversy generated by the depression presented far more clear-cut sectional and occupational features than the monetary debates; this was the tariff question.

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¹Crawford, Report, p. 15.

²Also see “Agricola,” in Washington (D.C.) National Intelligencer, April 21, 1819, December 31, 1819; January 11, 1820; and “A Farmer,” March 25, 1819.

³Georgia General Assembly, Journal of the House of Representatives, 1818–19 (December 1, 1818): 56; (December 10, 1818): 76ff. For an attack on excessive bank paper, see Washington (Ga.) News editorial reprinted in the Washington (D.C.) National Intelligencer, August 4, 1821.

⁴Heath, Constructive Liberalism, p. 188.

⁵Niles’ Weekly Register 15 (September 19, 1819): 59.

⁶Georgia General Assembly, Journal of the House of Representatives, 1818 (November 18–20, December 1, 1818): 31–40ff.

⁷Also see Ambler, Thomas Ritchie, p. 76.

⁸Reprinted in Philadelphia Union, June 4, 1819. Also see the Richmond Enquirer, July 16, 1819.

⁹“On Crawford’s Currency Report,” in Richmond Enquirer, March 21, 1820.

¹⁰Washington (D.C.) National Intelligencer, March 2, 1819.

¹¹“A Virginian,” City of Washington Gazette, December 22, 1818. “Philo-Economicus” cited Adam Smith in support of the abolition of corporate banking. The reference was erroneous, since Smith had expressly asserted the advantages of the corporate form for the banking business. “Philo-Economicus,” Richmond Enquirer, June 1, 1819; Adam Smith, Wealth of Nations, pp. 714–15.

¹²“Quaesitor,” Richmond Enquirer, June 1, 1819; and “Colbert,” November 16, 1819.

¹³“Amphictyon” (Roane), “Hints in Relation to a General Reform of our Banking System,” Richmond Enquirer, April 18, 1820. Roane’s article is omitted from the collection of his writings in the Enquirer published in the John P. Branch Historical Papers, Randolph Macon College (1904–05): vols. 1 and 2.

¹⁴Ritchie on Crawford’s Currency Report, Richmond Enquirer.

¹⁵Jefferson to John Adams, November 7, 1819, in his Writings, Bergh, ed., vol. 15, p. 224.

¹⁶Jefferson to William C. Rives, November 28, 1819, ibid., 15, pp. 229–32.

¹⁷Jefferson to Charles C. Pinckney, September 23, 1820, in ibid., 15, p. 279. Also see Jefferson to Hugh Nelson, March 12, 1820, ibid., p. 258; Jefferson to A. Gallatin, November 24, 1818; December 26, 1820. Also see Washington (D.C.) National Intelligencer, March 2, 1819.

¹⁸Virginia General Assembly, Journal of the House of Delegates, 1820–21 (December 4, 1820): 11–12.

¹⁹Delaware General Assembly, Journal of the House of Representatives, 1819 (February 3, 1819). Only one of the legislators voted for both compulsory resumption and the relief proposals.

²⁰Ibid., 1820 (January 29, 1820): 109–14. Apparently, it was the general practice in the state for a bank simply not to appear in answer to a summons against it, and the court would thereupon dismiss the case. Brinckle’s bill provided that in such cases judgment against the bank be recovered by default.

²¹Niles’ Weekly Register 15 (September 12, 1818): 33.

²²For commendations of Niles for his anti-bank paper stand, from citizens of Tennessee, Maryland, and Virginia, see Niles’ Weekly Register 15 (September 5, 1818): 36.

²³The Federal Gazette, in fact, took the lead in calling for a general suspension of specie payments. See the criticism in the New York Daily Advertiser, March 23, 1819.

²⁴For example see Niles’ Weekly Register 16 (August 1, 1818), 377; 15 (September 19, 1818), 58, 245; 20 (March 7, 1821): 36.

²⁵Daniel Raymond, Thoughts on Political Economy (Baltimore: F. Lucas, Jr., and E.J. Coale, 1820). A second, more widely known edition was Elements of Political Economy, 2 vols. (Baltimore: F. Lucas, Jr., and E.J. Coale, 1823). On Raymond, especially his pro-tariff views, see Dorfman, Economic Mind, vol. 2, pp. 566–74.

²⁶On this question, see also “A Virginian,” “Reflections Excited by the Present State of Banking Operation in the United States,” City of Washington Gazette (December 22, 1818); “A Merchant,” Boston New England Palladium, June 8, 1819; “Colbert,” Richmond Enquirer, November 16, 1819.

²⁷Raymond, Elements, vol. 2, pp. 132 ff.; also see vol. 1, pp. 248–53.

²⁸Washington (D.C.) National Intelligencer, March 22, 1819.

²⁹“A Stockholder,” Baltimore Federal Republican, May 27, 1819, reprinted in Washington (D.C.) National Intelligencer, June 21, 1819. Also see “Cato,” National Intelligencer, June 19, 1819; Philadelphia Union, June 4, 1819; “Piano E. Sano,” Boston New England Palladium, January 18, 1820.

³⁰“Nicholas Dumbfish,” Washington (D.C.) National Intelligencer, January 11, 1820.

³¹The report was signed on October 4, 1819. The Tammany Society had appointed a committee on August 30 to report on the state of the national economy.

³²John Woodward, Address of the Society of Tammany to Its Absent Members (New York, 1819), p. 40.

³³James Madison to Clarkson Crolius, December 1819, in Washington (D.C.) National Intelligencer, January 22, 1820.

³⁴“Aristides” (William Peter Van Ness), A Letter to the Secretary of the Treasury on the Commerce and the Currency of the United States (New York: C.S. Van Winkle, 1819).

³⁵Also see “A Richmond Correspondent” in Boston New England Palladium, May 28, 1819.

³⁶New York American, March 6, 1819.

³⁷“Seventy-Six,” Cause of and Cure for Hard Times.

³⁸New York Legislature, Assembly Journal, 1820 (February 21, 1820): 466–69.

³⁹New York Legislature, Senate Journal, 1819 (January 6, 1819): 4–14.

⁴⁰Ibid. (January 26, 1819): 66–70.

⁴¹For proposals to eliminate rural banks outside of New York City and Albany, see Albany Argus, June 29, 1819, reprinted in the New York Evening Post, July 2, 1819.

⁴²“Senex,” New York Daily Advertiser, March 24, 1819. On “Senex,” see Murray N. Rothbard, “Contemporary Opinion of the Depression of 1819–21” (New York: Columbia University, Unpublished master’s essay, 1946), pp. 20ff.

⁴³New York Legislature, Senate Journal, 1818 (February 28, 1818): 98.

⁴⁴Jacob Barker, (Appeal) to the Public (New York, 1819).

⁴⁵“Plain Sense,” An Examination of Jacob Barker’s Appeal to the Public (New York, 1819).

⁴⁶“A Merchant,” in New York Daily Advertiser, January 16, 1822.

⁴⁷Pennsylvania Legislature, Journal of the House, 1818–19 (December 29, 1818, January 30, 1819): 334–39; and 1819–20 (January 4, 1820): 160–62.

⁴⁸Niles’ Weekly Register 15 (September 19, 1818): 58–59.

⁴⁹Pennsylvania Legislature, Journal of the House, 1818–19 (January 5, 1819): 138; and (February 1, 1819), p. 345.

⁵⁰Pennsylvania Legislature, Journal of the Senate, 1819–21 (February 14, 1820): 311–37.

⁵¹Ibid., 1819–21 (January 29, 1820): 221–26.

⁵²In Raguet’s terminology, banks going beyond 100 percent reserves were, in this respect, “banks of circulation.” In their capacity of storing money, they were “banks of deposit,” and in their capacity of lending their own money or the borrowed funds of others, they were “banks of discount.” Raguet’s report on bank charters, ibid., 1820–21 (January 15, 1821): 252–68.

⁵³Reprinted in Philadelphia United States Gazette, January 30, 1819.

⁵⁴“A Pennsylvanian,” in Philadelphia Union, February 11, 1820.

⁵⁵Niles’ Weekly Register 15 (January 2, 1819): 350.

⁵⁶Ibid., 16 (April 17, 1819): 132.

⁵⁷Washington (D.C.) National Intelligencer, April 15, 1819.

⁵⁸Brigham, “The Period,” p. 292.

⁵⁹Vermont General Assembly, Journal of the House, 1820 (November 10, 1820): 198ff., also (November 13, 1820), pp. 212ff. For an example of New Hampshire antibank opinion, see “C.S.” in Washington (D.C.) National Intelligencer, November 11, 1819.

⁶⁰Washington (D.C.) National Intelligencer, November 28, 1820.

⁶¹“O.” in Boston New England Palladium, July 4, 1820.

⁶²John Adams to John Taylor, March 12, 1819, in John Adams, Works (Boston: Little, Brown and Co., 1856), vol. 10, p. 375.

⁶³John Quincy Adams to Peter Paul Francis De Grand, November 16, 1818. De Grand proposed that the government issue paper and lend it at 3 percent to the Bank of the United States, which would in turn lend it at 6 percent to private borrowers. John Quincy Adams, Writings, Worthington C. Ford, ed. (New York: The Macmillan Co., 1916), vol. 6, pp. 472–73.

⁶⁴Esarey, “The First Indiana Banks,” p. 152.

⁶⁵On May 16, 1819. See Washington (D.C.) National Intelligencer, June 19, 1819.

⁶⁶Anderson, “Frontier Economic Problems, I,” p. 63.

⁶⁷Ohio General Assembly, Journal of the House, 1819–20 (December 7, 1819): 9–15.

⁶⁸Washington (D.C.) National lntelligencer, February 8, 1819.

⁶⁹Niles’ Weekly Register 17 (October 30, 1819): 139.

⁷⁰Hammond was the recognized leader of the Ohio bar, leader of the Federalist Party in Ohio, and was later to decline a United States Supreme Court nomination tendered him by John Quincy Adams. See Charles B. Galbreath, History of Ohio (Chicago: American Historical Society, 1925), vol. 2, p. 468.

⁷¹Maryland and Kentucky had also levied a tax on the Bank before the depression. Kentucky accepted the decision of the Maryland case.

⁷²The meeting took place on January 30, 1819. See Detroit Gazette, February 5, 1819.

⁷³Secretary of the meeting was J.P. Sheldon, publisher of the Detroit Gazette, and also designated printer of the U.S. Laws for the Michigan Territory. Chairman of the Committee was James Abbott, a dry goods merchant. The committee periodically reported its findings in the Gazette.

⁷⁴Dain, Every House a Frontier, pp. 102–03.

⁷⁵Nashville Gazette, September 15, 1819, cited in Parks, “Felix Grundy”; Tennessee General Assembly, Journal of the House of Representatives, 1820 (June 28, 1820): 925.

⁷⁶Tennessee General Assembly, Journal of the House of Representatives, 1819, pp. 75ff., 132ff., 182ff. Of the 20 votes in favor, 17 came from East Tennessee, while only 3 came from mid-Tennessee. Similarly, of the 14 votes opposed, 12 came from mid-Tennessee. Yet, as seen previously, there was a great deal of anti-expansionist opinion in mid-Tennessee. Also see Parks, “Felix Grundy,” pp. 19–43.

⁷⁷Parks, Felix Grundy, p. 109.

⁷⁸Tennessee General Assembly, Journal of the House of Representatives, 1820, pp. 39–40; ibid., 1821 (September 21, 1821): 49.

⁷⁹Nashville Whig, October 13, 1823, quoted in Charles G. Sellers, Jr., James Polk, Jacksonian, 1795–1843 (Princeton, N.J.: Princeton University Press, 1957), pp. 79ff.

⁸⁰Jesse Bledsoe, The Speech of Jesse Bledsoe, Esq. . . . Concerning Banks (Lexington, Ky.: Norvell, 1819).

⁸¹Kendall, Autobiography, passim.

⁸²Kentucky General Assembly, Journal of the House of Representatives, 1818–19 (December 2, 1818): 9–19.

⁸³Connelley and Coulter, History, p. 605.

⁸⁴Baylor, John Pope, p. 150.

⁸⁵Kentucky General Assembly, Journal of the House of Representatives, 1818–19 (December 19, 1818): 87–91.

⁸⁶Connelley and Coulter, History, p. 605. See also Bray Hammond, Banks and Politics in America (Princeton, N.J.: Princeton University Press, 1957), p. 608.

⁸⁷The charters were repealed at the end of 1820 to take effect in May 1821. See Stickles, Critical Court Struggle, p. 22.

⁸⁸Niles’ Weekly Register 20 (June 17, 1820): 296.

⁸⁹Spencer came from a leading New York family. He was a leading Clintonian, later a Whig and Secretary of War under Tyler, and a rejected Tyler appointee to the United States Supreme Court.

⁹⁰Annals of Congress, 15th Congress, 2d Session (February 18, 1819), p. 1254; (February 24, 1819), pp. 1404–09; also see M. St. Clair Clarke and D. A. Hall, Legislative and Documentary History of the Bank of the United States (Washington, D.C.: Gales and Seaton 1831), pp. 682ff.

⁹¹Representative Kent to House of Representatives, American State Papers: Finance 3, no. 575 (February 2, 1820): 470. Kent was a leading politician and farmer who later became a leading Whig, a senator and three times governor.

⁹²“One of the People” (Cambreleng), An Examination of the New Tariff, pp. 189–202.

⁹³Professor Schur, in a recent article, seriously underweights both the inflationary role of the bank in 1817–18, and the extent to which the reaction against the bank stemmed from hard money views. Leon M. Schur, “The Second Bank of the United States and the Inflation After the War of 1812,” The Journal of Political Economy 68 (April 1960): 118–34.