The cabinet remained nearly as under the previous administration: Mr. Forsyth, Secretary of State; Mr. Woodbury, Secretary of the Treasury; Mr. Poinsett, Secretary at War; Mr. Mahlon Dickerson, Secretary of the Navy; Mr. Amos Kendall, Postmaster General; and Benjamin F. Butler, Esq. Attorney General. Of all these Mr. Poinsett was the only new appointment. On the bench of the Supreme Court, John Catron, Esq. of Tennessee, and John McKinley, Esq. of Alabama, were appointed Justices; William Smith, formerly senator in Congress from South Carolina, having declined the appointment which was filled by Mr. McKinley. Mr. Butler soon resigning his place of Attorney General, Henry D. Gilpin, Esq. of Pennsylvania (after a temporary appointment of Felix Grundy, Esq. of Tennessee), became the Attorney General during the remainder of the administration.
CHAPTER II.
FINANCIAL AND MONETARY CRISIS: GENERAL SUSPENSION OF SPECIE PAYMENTS BY THE BANKS
The nascent administration of the new President was destined to be saluted by a rude shock, and at the point most critical to governments as well as to individuals – that of deranged finances and broken-up treasury; and against the dangers of which I had in vain endeavored to warn our friends. A general suspension of the banks, a depreciated currency, and the insolvency of the federal treasury, were at hand. Visible signs, and some confidential information, portended to me this approaching calamity, and my speeches in the Senate were burthened with its vaticination. Two parties, inimical to the administration, were at work to accomplish it – politicians and banks; and well able to succeed, because the government money was in the hands of the banks, and the federal legislation in the hands of the politicians; and both interested in the overthrow of the party in power; – and the overthrow of the finances the obvious means to the accomplishment of the object. The public moneys had been withdrawn from the custody of the Bank of the United States: the want of an independent, or national treasury, of necessity, placed them in the custody of the local banks: and the specie order of President Jackson having been rescinded by the Act of Congress, the notes of all these banks, and of all others in the country, amounting to nearly a thousand, became receivable in payment of public dues. The deposit banks became filled up with the notes of these multitudinous institutions, constituting that surplus, the distribution of which had become an engrossing care with Congress, and ended with effecting the object under the guise of a deposit with the States. I recalled the recollection of the times of 1818-19, when the treasury reports of one year showed a superfluity of revenue for which there was no want, and of the next a deficit which required to be relieved by a loan; and argued that we must now have the same result from the bloat in the paper system which we then had. I demanded —
"Are we not at this moment, and from the same cause, realizing the first part – the illusive and treacherous part – of this picture? and must not the other, the sad and real sequel, speedily follow? The day of revulsion must come, and its effects must be more or less disastrous; but come it must. The present bloat in the paper system cannot continue: violent contraction must follow enormous expansion: a scene of distress and suffering must ensue – to come of itself out of the present state of things, without being stimulated and helped on by our unwise legislation."
Of the act which rescinded the specie order, and made the notes of the local banks receivable in payment of all federal dues, I said:
"This bill is to be an era in our legislation and in our political history. It is to be a point on which the view of the future age is to be thrown back, and from which future consequences will be traced. I separate myself from it: I wash my hands of it: I oppose it. I am one of those who promised gold – not paper. I promised the currency of the constitution, not the currency of corporations. I did not join in putting down the Bank of the United States to put up a wilderness of local banks. I did not join in putting down the paper currency of a national bank, to put up a national paper currency of a thousand local banks. I did not strike Cæsar to make Antony master of Rome."
The condition of our deposit banks was desperate – wholly inadequate to the slightest pressure on their vaults in the ordinary course of business, much less that of meeting the daily government drafts and the approaching deposit of near forty millions with the States. The necessity of keeping one-third of specie on hand for its immediate liabilities, was enforced from the example and rule of the Bank of England, while many of our deposit banks could show but the one-twentieth, the one-thirtieth, the one-fortieth, and even the one-fiftieth of specie in hand for immediate liabilities in circulation and deposits. The sworn evidence of a late Governor of the Bank of England (Mr. Horsely Palmer), before a parliamentary committee, was read, in which he testified that the average proportion of coin and bullion which the bank deems it prudent to keep on hand, was at the rate of the third of the total amount of all her liabilities – including deposits as well as issues. And this was the proportion which that bank deemed it prudent to keep – that bank which was the largest in the world, situated in the moneyed metropolis of Europe, with its list of debtors within the circuit of London, supported by the richest merchants in the world, and backed by the British government, which stood her security for fourteen millions sterling, and ready with her supply of exchequer bills (the interest to be raised to insure sales), at any moment of emergency. Tested by the rule of the Bank of England, and our deposit banks were in the jaws of destruction; and this so evident to me, that I was amazed that others did not see it – those of our friends who voted with the opponents of the administration in rescinding the specie order, and in making the deposit with the States. The latter had begun to take effect, at the rate of about ten millions to the quarter, on the first day of January preceding Mr. Van Buren's inauguration: a second ten millions were to be called for on the first of April: and like sums on the first days of the two remaining quarters. It was utterly impossible for the banks to stand these drafts; and, having failed in all attempts to wake up our friends, who were then in the majority, to a sense of the danger which was impending, and to arrest their ruinous voting with the opposition members (which most of them did), I determined to address myself to the President elect, under the belief that, although he would not be able to avert the blow, he might do much to soften its force and avert its consequences, when it did come. It was in the month of February, while Mr. Van Buren was still President of the Senate, that I invited him into a committee room for that purpose, and stated to him my opinion that we were on the eve of an explosion of the paper system and of a general suspension of the banks – intending to follow up that expression of opinion with the exposition of my reasons for thinking so: but the interview came to a sudden and unexpected termination. Hardly had I expressed my belief of this impending catastrophe, than he spoke up, and said, "Your friends think you a little exalted in the head on that subject." I said no more. I was miffed. We left the room together, talking on different matters, and I saying to myself, "You will soon feel the thunderbolt." But I have since felt that I was too hasty, and that I ought to have carried out my intention of making a full exposition of the moneyed affairs of the country. His habitual courtesy, from which the expression quoted was a most rare departure, and his real regard for me, both personal and political (for at that time he was pressing me to become a member of his cabinet), would have insured me a full hearing, if I had shown a disposition to go on; and his clear intellect would have seized and appreciated the strong facts and just inferences which would have been presented to him. But I stopped short, as if I had nothing more to say, from that feeling of self-respect which silences a man of some pride when he sees that what he says is not valued. I have regretted my hastiness ever since. It was of the utmost moment that the new President should have his eyes opened to the dangers of the treasury, and my services on the Committee of Finance had given me opportunities of knowledge which he did not possess. Forewarned is forearmed; and never was there a case in which the maxim more impressively applied.