The Panic of 1819 (25 page)

¹¹⁶
Parks, “Felix Grundy,” p. 22; Tennessee General Assembly,
Journal of the House of Representatives, 1819
(September 20, 1819): 22.

¹¹⁷
Tennessee General Assembly,
Journal of the House of Representatives
, 1819, p. 245.

¹¹⁸
From Nashville
Whig
, July 3, 1819. Quoted in Sellers, “Banking,” p. 70.

¹¹⁹
Nashville
Clarion
, May 2, 1820, in Parks, “Felix Grundy,” p. 27. See above on charges and countercharges by the supporters and opponents of a special session.

¹²⁰
Hamer,
Tennessee
, p. 233.

¹²¹
Tennessee General Assembly,
Journal of the House of Representatives
, 1820 (June 26, 1820): 6–17.

¹²²
Ibid. (July 4, 1820): 49.

¹²³
Ibid. (July 7, 10, 1820): 61, 65.

¹²⁴
Ibid. (July 11, 1820): 68–72.

¹²⁵
Ibid. (July 17, 1820): 99–106.

¹²⁶
Tennessee General Assembly,
Journal of the Senate
, 1820 (July 5, 1820): 45; (July 14, 1820): 77ff.; (July 15, 1820): 83ff.

¹²⁷
Ibid. (July 21, 1820): 109ff.

¹²⁸
Tennessee General Assembly,
Journal of the House of Representatives, 1820
(July 19, 1820): 123; (July 20, 1820): 126; (July 25, 1820): 159; (July 27, 1820): 175ff. Tennessee General Assembly,
Journal of the Senate, 1820
(July 21, 25, 1820): 130; (July 26, 1820): 135.

¹²⁹
Jackson to Major William Berkeley Lewis, July 15, 1820; Lewis to Jackson, July 15, 1820; Jackson to Lewis, July 16, 1820,
New York Public Library Bulletin
4 (May 1900): 162; (June 1900): 188–91; and Parks, “Felix Grundy,” p. 32.

¹³⁰
Niles’ Weekly Register
19 (September 2, 1820): 9.

¹³¹
Ibid. 19 (November 18, 1820): 283.

¹³²
Hamer,
Tennessee
, p. 235.

¹³³
Ibid., pp. 236–37.

¹³⁴
Tennessee General Assembly,
Journal of the House of Representatives, 1821
(September 21, 1821): 49. Sellers seems to undervalue the extent of Carroll’s opposition to the new state bank. Sellers, “Banking.”

¹³⁵
Golden, “William Carroll,” p. 19.

¹³⁶
Sumner,
History of Banking
, p. 150.

¹³⁷
Duke,
History
, pp. 14ff. Also see Elmer C. Griffith, “Early Banking in Kentucky,”
Proceedings of the Mississippi Valley Historical Association
2 (1908–09): 168–81.

¹³⁸
See the Report of the Underwood Committee (headed by Representative Joseph R. Underwood) on the causes of the suspension of specie payment by the Bank of Kentucky, Kentucky General Assembly,
Journal of the House of Representatives, 1818–19
(December 11, 1818): 44–49.

¹³⁹
Cheves to Crawford, June 12, 1819, U.S. Congress,
American State Papers: Finance
4, no. 705 (March 22, 1824): 883.

¹⁴⁰
Philadelphia
Union
, June 9, 1819.

¹⁴¹
George M. Bibb was to become one of the main leaders of the relief movement. Bibb, from Lexington, was a distinguished jurist and statesman—a former Chief Justice of the Kentucky Court of Appeals, and former Senator. He later became United States Secretary of Treasury. He was widely known as a “gentleman of the old school.” Martin D. Hardin was a famous lawyer from Frankfort, Speaker of the Kentucky House, and former Congressman. He was later to become United States Senator. He had Federalist and later Whig tendencies.

¹⁴²
John Pope, one of the leading sponsors of the meeting, had represented the Bank of Kentucky at the earlier conference of banks at Frankfort in May.

¹⁴³
See the Washington (D.C.)
National Intelligencer
, June 9, 19, 23, 26, 1819.

¹⁴⁴
New York
Evening Post
, June 15, 1819. Coleman had been installed by Hamilton upon the founding of the New York
Evening Post
. He later became a supporter of Crawford and Jackson.

¹⁴⁵
New York
American
, June 9, 1819; New York
Daily Advertiser
, June 10, 1819; Washington (D.C.)
National Intelligencer
, June 5, 1819.

¹⁴⁶
Washington (D.C.)
National Intelligencer
, June 9 to 26, 1819.

¹⁴⁷
Reprinted in the New York
Evening Post
, June 15, 1819.

¹⁴⁸
“Franklin,” in the
Kentucky Herald
, reprinted in ibid., and also in the Boston
New England Palladium
, June 25, 1819.

¹⁴⁹
Niles’
Weekly Register
16 (July 3, 1819): 311.

¹⁵⁰
Washington (D.C.)
National Intelligencer
, June 23, 1819.

¹⁵¹
Ibid., June 26, 1819.

¹⁵²
Connelley and Coulter,
History
, pp. 595ff.

¹⁵³
This repeal passed the House by a two-to-one vote, but only narrowly passed the Senate. See
Niles’ Weekly Register
20 (June 9, 1820): 224; Connelley and Coulter,
History
, p. 206; Stickles,
Critical Court Struggle
, p. 22.

¹⁵⁴
Stickles,
Critical Court Struggle
, pp. 23ff.; Connelley and Coulter,
History
, pp. 609–13.

¹⁵⁵
Kentucky General Assembly,
Journal of the House of Representatives, 1820
(November 3, 1820): 88; (November 9, 1820): 112; (November 10, 1820): 117; (November 11, 1820): 127; (December 9, 1820): 267; (December 12, 1820): 276.

¹⁵⁶
Kentucky General Assembly,
Journal of the Senate, 1820
(November 21, 1820): 109–12; (November 22, 1820): 116ff.

¹⁵⁷
Kentucky General Assembly,
Journal of the House of Representatives
, 1821 (October 16, 1821): 9–16.

¹⁵⁸
Ibid. (October 20, 1821): 61–71. Crittenden was a noted lawyer from Logan County and later from Frankfort, and a close friend of George M. Bibb. He later became Kentucky’s leading politician—a Whig, an Adams nominee for the United States Supreme Court, a United States Senator, and Attorney General.

¹⁵⁹
Ibid. (November 2, 1821): 153–55.

¹⁶⁰
Ibid. (November 15, 1821): 251–54.

¹⁶¹
Washington (D.C.)
National Intelligencer
, November 27, 1821.

¹⁶²
Kentucky General Assembly,
Journal of the House of Representatives, 1822
, Part I (May 13, 1822): 6–8.

¹⁶³
Niles’ Weekly Register
20 (June 9, 1820): 225.

¹⁶⁴
Kentucky General Assembly,
Journal of the House of Representatives, 1822
, Part I (May 15, 1822): 55ff.; (May 17, 1822): 59; (May 21, 1822): 66ff.

¹⁶⁵
Ibid. (May 21, 1822): 76–79.

¹⁶⁶
Ibid. (May 23, 24, 1822): 91–102.

¹⁶⁷
B.B. Still to J.C. Breckenridge, August 16, 1821, in Connelley and Coulter,
History
, p. 615.

¹⁶⁸
Kentucky
Gazette
, May 9, May 21, in Connelley and Coulter,
History
, p. 617. Also see Baylor,
John Pope
, pp. 163–64.

¹⁶⁹
Kentucky General Assembly,
Journal of the House of Representatives
, 1822, Part II (October 22, 1822): 12–14.

¹⁷⁰
Wilson,
History
, II, 127.

¹⁷¹
Connelley and Coulter,
History
, p. 618; and Stickles,
Critical Court Struggle
, p. 28.

¹⁷²
Duke,
History
, p. 21; Wilson,
History
, p. 127.

¹⁷³
Reuben T. Durrett,
The Centenary of Louisville
(Louisville, Ky.: J.P. Morton and Co., 1893), pp. 90–92.

Since state banks were a state responsibility, the discussion of monetary remedies for the depression took place mainly on a state level. Some people, however, envisioned inconvertible paper currency on a national scale, and put forward proposals to that effect.

The simplest method of attaining a national inconvertible paper currency, given the existing situation, was a general suspension of specie payments, including suspension by the Bank of the United States. The bank’s inconvertible notes would then have been the basic national currency—a less radical course than the governmental creation of a new type of inconvertible paper. Some suggestions for this relatively moderate approach appeared. “A Mercantile Correspondent” advanced a cautious plan for a five-year suspension, with the bank to purchase one to two million of specie per annum, so that the bank would own five to ten million in specie at the end of five years, a sum which the writer deemed ample to resume payment.
¹
The writer advocated a quasi legal tender plan, through an enforced stay of execution should the creditor refuse to accept the notes. “Mercantile Correspondent” proposed a maximum limit of $35 million on outstanding sums of United States Bank notes, which would function as standard money. The other banks would need no statutory limitation, since each bank would be required to pay its obligations daily to every other bank, this interbank competition acting as a check on their respective issues.

Emergency suspension of specie payments by the bank was advocated by the highly influential Oliver Wolcott of Connecticut, formerly Secretary of the Treasury. Wolcott offered no detailed plan.
²

Another writer more boldly advocated permanent abandonment of specie payments and use of the bank notes as standard currency.
³
“One of the People—A Farmer” asserted that the credit of the bank and confidence in its notes depended on its capital and skill rather than on the quantity of its coin. A critic calling himself “Agricola” attacked this position, asserting that the credit of a bank is determined precisely by the quantity of its specie.
⁴
Confidence in a bank, declared “Agricola” shrewdly, is dependent on public opinion concerning the amount of specie that the bank possesses. Specie, after all, was the means for banks to pay their debts. The writer decried excessive, and therefore depreciating, note issue. Banks, he stated, could not add to the national wealth or capital. Their sole legitimate object was to furnish facilities for exchange and to transfer money from one place to another.

One of the most detailed proposals for an inconvertible paper based on the existing Bank of the United States was put forward by “An Anti-Bullionist” in a pamphlet.
⁵
The author attributed the crisis to the external drain of specie, particularly to the East Indies, which had caused a deficiency of the currency supply within the country. The solution was to substitute for specie a “well-regulated” paper money. This purely domestic money would enable development of the nation without danger from foreign competition or influence. Notable in “Anti-Bullionist’s” approach was his attempt to guard against excessive issue of the notes and subsequent depreciation.
His goal was stability in the value of money; he pointed out that specie currency was subject to fluctuation, just as was paper. Moreover, fluctuations in the value of specie could not be regulated; they were dependent on export, real wages, product of mines, and world demand. An inconvertible paper, however, could be efficiently regulated by the government to maintain its uniformity. “Anti-Bullionist” proceeded to argue that the value of money should be constant and provide a stable standard for contracts. It is questionable, however, how much he wished to avoid excessive issue, since he also specifically called a depreciating currency a stimulus to industry, while identifying an appreciating currency with scarcity of money and stagnation of industry. One of the particularly desired effects of an increased money supply was to lower the rate of interest, estimated by the writer as currently 10 percent. A lowering would greatly increase wealth and prosperity. If his plan were not adopted, the writer could only see a future of ever-greater contractions by the banking system and ever-deeper distress.

The “Anti-Bullionist” therefore proposed that the Bank of the United States issue non-redeemable paper, with the notes of the state banks redeemable in the new notes. In contrast to England, where the central bank was not subject to any legal check on its issue, the bank’s notes would be limited by a certain ratio to a Treasury issue of inconvertible notes, bearing interest of 3 percent. In this elaborate plan, while the bank notes would be redeemable in Treasury notes or in specie at the bank’s option, because of their interest-bearing quality the Treasury notes would not be money and would not enter into circulation. The Treasury notes would also be redeemable, at the option of the Treasury, in specie or in the par value of 6 percent government bonds. Thus, the bank notes would have a roundabout if tenuous connection with specie and would supposedly be supported at par to specie.