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“R ESI JR R ECTI ON NOTES.”
IN SE?xATE of the united states,
February 12, 183*.
Mr. Grundy, from the Committee on the
Judiciary, made the following report:
The Committee on the Judiciary, to whom was .
referred that part of the President’s Message |
which relates to the issuing and reissuing of
the notes of the late bank of the U. States, I
by the bank recently chartered by the State
of Pennsylvania, by and under the .same
name, have had the same under considera
tion, and present the following report;
By the act ofCongress chartering the bank
of the United States, passed on the tenth of A
pril, 1815, that institution was invested with
all the usual privileges of banking corporations;
and was especially authorized to issue its bills
and notes, not less in amount than five dollars,
in the ordinary form of bank notes, signed by
its president and cashier. I hose bills and
notes, when payable on demand, were made
receivable in all payments to the United States.
For the security of these and itsother legal ob
ligations, the capital stock was created, am
ounting to thirty five millions of dollars. -
Twenty-eight millions of this were to be raised
and paid by individuals, companies, or corpora
tions. The remaining 7 millions were paid in
by the L l . States. The affairs of the corporation
were to be managed by twenty-five directms,
■five of whom were to be appointed by the 1 re
sident of the United Slates. A committee of
Congress was authorized to examine into the
transactions of the bank; and legal pro.
• ■codings were to be instituted by tue
Executive, whenever any of the provisions of
the charter were violated. The United States
were to receive, half yearly, a portion of the
profits of the institution, corresponding to the
portion of the capital they subscribed.
It will thus be seen that, during the exist
ence of the bank, and during the period w'hen its
bills and notes were issued under the cnaiter,
ihe United States were deriving a profit from
its transactions; that their funds were pledged
lor the security of those who received and
held its notes; and that they were invested (at
least so far as the words of the law went) with
some control over its management.
By the same law, all the banking powers of
the corporation were limited to the third of
March, 1835, after which day they entirely
ceased; although it was authorised for two
years subsequent thereto to use its corporate
capacity “for the purpose of suits for the final
settlement and liquidation of the affairs and ac
counts of the corporation, and for the sale and
disposition of its estate; but not for any other
purpose, or in any other manner; whatsoever.”
The objects of this part of the law are too
plain to be misunderstood. The intention of
Congress was to preclude, after the third of
March, 1836, every banking transaction —the
issue of bills, the discount of notes, the lending
of money; in a word, the continuance of all
transactions for the profit of the stockholders.
Its object was to prevent the bank from incur
ring, after that day, any additional liability, by
which the property either of the U nited States
or individuals invested in the corporation might
bo directly or indirectly bound, and to require
the bank fully te settle its accounts and dispose
of its property, to redeem its obligations, pay
its debts, and collect its assets before the third
of March 1838.
It appears that, on the eighteenth of Febru
ary, 1836, the Legislature of Pennsylvania,
by an act entitled “An act to repeal the State
taxon real estate and personal property, and
to continue and extend the improvements of
the State by rail roads and canals, and to char
ter a State Bank, to be called the United States
Bank/’ incorporated the existing stock
holders of the Bank of the United States,
(excepting the United States and the Treasur
er of the United Slates) and such other persons
as might become stockholders, according to
the provisions of that act of the Legislature;
previously requiring the same, however, to
be accepted by the actual stockholders at a
general meeting. On the nineteenth of Feb
ruary, 1836, a general meeting of these stock
holders was held, without, however, auy as
sent, representation or authority on the part of
the United States. At that meeting, resolu
tions were passed, accepting the charter from
the Legislature of Pennsylvania, and directing
the president of the bank to make that accep
tance known to the Governor of the State.
At the same meeting, the stockholders thus as
scm bled, directed the president and directors
of the bank chartered by Congress “to pay,
transfer, and deliver to this new institution, all
and singular the shares, purparts, interest and
property whatsoever of the stockholders, so
incorporated by the State of Pennsylvania, of
and in the goods, chattels, moneys, effects,nnd
estate, real and personal of the present Bank of
the United States.” Os this measure no notice
was given to the Government of the United
States; no application was made to, or authori
ty sought from, Congress, although it was no.
torious that a portion of the effects of the bank,
in addition to the sum of seven millions of dul
lars, belonged exclusively to them; that they
were entitlcu to one seventh part o’* the effects
to !»•' co lected and divided; and that they were
halde, in the same proportion, for the proper
settlement of the affairs and discharge of the
obligations, which were thus summarily taken
out of their hands, and placed beyond their
control. Though, in words, the direction of
these assembled stockholders to their president
and directors was to transfer their own shares
and parts of the eff ets, yet, as those effects
had never been divided, as no proposition for
their division had ever been made, as they
consisted of the great and complicated mass of
property belonging to such an institution, and
in the nature of things, incapable, without ex
treme difficulty, of ;i.vision, it was in fact a
sudden and summary transfer of the whole j
property and effects belonging to the people of.
the United States, and invested by them in
that institution, under carefully devised guards
and stipulations, to a State corporation, sud- .
denly created, in whose transactions they had
no participation.
As if to remove all doubt of this being the '
nature and intention of the transfer, the presi
dent and directors of the bank chartered by
Congress proceeded, on the second of March,
1836, the very day before the charter expired,
solemnly to resolve, that “o/Z and singular the
j money, goods, chattels, rights, credits, and
personal estate whatsoever owned by, or InZ/te
custody of this bank, wheresoever the same may
be, together with all evidences and securities
for the same, be, and the same hereby are, as
signed, transferred, and conveyed to the pres
ident, directors, and company of the Bank of
the United States incorporated by the State of
Pennsylvania,” and thev created that institu
tion their trustee, to conduct and wind up the
business of the bank.
Thus, in direct violation of the spirit, if not
the letter, of the act of Congress, which impo
sed upon the bank chartered by itself the duty
' of‘‘settling and liquidating the affairs and ac
counts of the corpoiation,” which had given it
two years expressly for that purpose, and
which had retained for Congress the power of
examining, by its committees, the correctness
of its proceedings, and controlling it, if neces
Isary, by a summary judicial process; in viola
tion of this provision, and in manifest infringe
i ment of the rights of the people of the United
I States, whoso property was invested m the in
stitution to a large amount, a portion of the
I stockholders, excluding the United States, giv.
ing them no notice, asking no authority from
Congress, suddenly assuming with a high hand
the management of the whole affair, undertake
the solemn farce of passing resolutions to cre
ate themselves (incorporated it is true, by an
other law, though not under another name)
their own trustees; and, having so done, they
take possession of all the properly, and as
sume the settlement of all the affairs of the in
s itution, relieved, as they, suppose, from every
responsibility and control to which Congress
mean ihe bank should b • subject in winding
up its business.
On the 4th of March, 1836, when, in contem
plation of the act of Congress, the Bunk of the
United States should have been commencing
the settlement of its affairs, including the large
interest of the government, we find a portion
of its sock holders who have cast off the rest,
seizing and keeping possession of every parti
cle of the joint property, and assuming the
right to manage it, free from the obligations of
the charter under which that propcity w.s col- ’
lected, and from the control of those by whom
that charter was granted and to whose constit
uents a very large portion of that property be
longs.
It docs not appear that, at the lime of this
transfer, by a portion of the stockholders, of
the whole property of the bank to themselves,
any inventory or statement of the effects and
I estate of the institution was made; and no steps
whatever were taken for the regular “settle
ment and liquidation of the affairs and accoun's
of the corporation,” as the charter positively
required, The whole busine>s was mixed up
with that of the new institution. Although
the Secretary of the Treasury was desirous
and endeavored to obtain a payment or divid
end of the property proportionate to the shares
belonging to the United States, he was unable
to do so. Resort was of necessity, had to an
estimate of the value of the shares, founded on
an examination of the general accounts of the
old institution. There is, perhaps, no reason .
to doubt, on the whole, the correctness of this *
valuation; but it must be admitted that such
was not “the settlement and liquidation of the:
affairs and accounts of the corporation,” stipu-;
lated for by Congress at the time it granted
the charter, and which was frustrated by the
summary ami unauthorized conduct of the in-j
dividual stockholders, in transferring to them-|
selves all the property ofthe bank just before!
the charter expired; and from the time of such
transfer, neither keeping its accounts or wind
ing up any of its concerns.
Soon after the estimated valuation of the
stock of the bank, thus made, the State institu
tion and trustee came forward, and voluntari
ly offered to pay the same, by equal instal
ments, in September, 1837, ’3B, ’39, nnd ’4O.
with six percent, interest from the time the
charter expired. This offer the Secretary of
the Treasury was directed, by a joint resolu-1
lion of Congress, passed on the third of March
’37, to accept, taking obligations for its fulfil, t
ment; the first of which, it is understood, has
been redeemed, and the amount paid into the
Treasury.
Thus virtually terminated the affairs of the
late Bank ofthe United States; in a manner
very different from that settlement and liquid
ation which were a part of’he obligations of.
its charter; in a manner very different from
that in which the business of a great national'
institution should have been finally closed.
Il is true, the individual stockholders have be
come possessed, by a general sweep, of all the
property of the bank; and the United States
have exchanged their shares of stock and their
claim to dividends for a liquidated sum, secur
ed by t!.e bonds ofanother corporation. But
have these operations released either party from
their obligations to the community? have they
given to those |>ossessed of the propertv a right
to use it, in manifest contradiction to the char
ter by which it was created’ have they given
sanction, direct or indirect, to an employment
of the corporate privilege and the corporate
property, long after the charter has expired,
for purposes not only unnecessary to the setJ
lit me nt of its affairs, but calculated to post
pone and retard such a settlement? have they !
absolved Congress from the duty, solemnly ini- *
posed upon it, of “examining the proceedings’’
done under color of that chartei? v. ill th* y jus
tify it in taking no measures to redeem and
canci 1 the obligations of an institution it crea
ted? above all, do they furnish it with an excuse
fur suffering the name, credit, and apparent
authority of the United States, to give value to
obligations in which they Have no longer an
interest?
Os ail the powersand privileges of banking
institutions, that which’most widely affects the
whole community is the issue of bank notes;
the authority by which they may be used, the
■ mode in which their ultimate solvency and
■ payment are guaranteed, constitute their char.
■ acter, anti give them a greater or less circula
i lion. The notes of the late bank of the United
i States were issued under the authority ofCon
gress. They were made receivable from one
.end of the continent to the other, as equivalent
to gold and silver, in the payment of the reve
nue. The whole community took them with
confidence, because a large portion of the cap
ital pledged fortheir redemption belonged to
the United States; because the issue of them
was limited to the duration of the charter; and
1 because the conduct of those who issued and
' circulated them was placed immediately under
■ the supervision ofCongress. From these cau
ses, the notes of the late Bank of the United
States derived their extensive credit among
the people; and thiscredit. thus derived, impo
ses upon Congress the corresponding obliga
tion, to take care that no act of omission of
theirs shall mislead the community, when these
causes of peculiar credit to these notes have
ceased to exist.
On the 3d of March 1830, when the char-
I ter of the bank terminated, the bank notes
which it had issued amounted to thirty-four
millions four hundred and thirty-four thousand
two-hundred and seventy dollars and sixteen
cents. On these it had on hand thirteen mil
lions three hundred and twenty-four thousand
nine hundred and seventeen dollars and nine
ty-three cents. These notes, thus on hand at
the expiration of the charter, it was the obvi
ous duty of the bank immediately to cancel;
they were obligations originally issued under
a charter which had expired; they had been
returned into the bank: they formed no part of
its property to be collected or divided. Yet on
the 2d of April following, the Slate institution,
in its first report to the Legislature of Pennsyl
vania, declared the amount of its notes issued
to be thirty-six millions six hundred and twen
ty-thousand four hundred and twenty dollars
and sixteen con’s; of which it had then on
hand, notes of the Bank ol the United States to
the amount of sixteen m'llions seven hundred
and ninety.four thousand seven hundred and
thirteen dollars and seventy-one cents; thus
showing that the directors of the bank charter
ed by Congress, in transferring “all their mon
ev, goods, and chattels” to their trustee, ha I
delivered up the bank notes which ought to
have been cancelled, and which were entirely
unnecessary for winding up the concerns of
the bank, or performing any of the trust duties
undertaken by that trustee. The practice thus
adopted,of keeping instead ofcancelingthe no’es
issued under the authority of the charter from
congress,after that charter had expired was not
confined to those thus improperly delivered by
a part of the stockholders to themselves, under
the name of a trustee. Nearly two years
■ have since elapsed, and yet in the statement
made by the bank to the Legislature of Penn
sylvania, on the sth January, 1838, is this
item, “notes issued of the late r\nk and
AroncAcf on h vnd, $15,800,517 73.” Thus
when the two years in which the affairs of the
banJ< were to have been settled are nearly ex
pired, when the control (such as it is) that
Congress may yet possess is almost at an end,
about sixteen millions of dollars, in bank notes
which bear the name of the United States, and
were actually made under the authority of
Congress, which, if put in circulation, will be
naturally and reasonably considered by those
who take them as guaranteed by Congress, are
now in the exclusive possession of a banking
institution which has the power to use them
when and for what purpose it pleases.
Even if it could be said that these bank
notes would not be used for purposes of circu
lation and currency; even if it were certain
that these evidences of the liability of the Uni
ted States would not be put forth after that lia
bilit v was at an end; even if the trustee who
has obtained possession of them had evinced a
determination to cancel them, as the redeemed
obligations of a concern which ought to be
wound up without delay, still, it is a duty im
posed upon Congress, who originally authoriz
ed their issue, to see that this is done; to on
force, by law, and not to leave to the discre
tion or honesty of auy individual or corpora
tion, that which the whole American people
have a right to look for at their hands.
But is not that duty absolutely forced upon
them, when those who have thus obtained pos
session of these uncancelled notes ofan extinct
corporation actually use them for purposes of
circulation, and, in defiance of the charter,
boldly issue them as a lawful currency and for
their own individual profit? Yet not only is
this the case. They claim the legitimate right
so to use and issue them. The trustee who
receives and accepts the property of th" late
bank, under the pledge to redeem its notes,
debts, obligations, unequivocally asserts the
right, not merely to refuse to cancel the notes
for the redemption of which funds have been
conveyed, but actually to pay out these notes
as other tanks might d* who received them
in the ordinary transactions of trade- “The
Bank of the United Sta’es chartered by th«
State of Pennsylvania, has,” in the deliberate
language of its own directors, “done as other
bonks have done—paid out the notes of the
Rank of the United States;” as if there was the
slightest similarity between a bank which re
ce«ve», by a general transfer, sixteen millions
of dolla rs in bank notes that had been regular
ly issued and returned to the institution by :
which they were made, and those banks which
receive the notes of one another in the ordin
ary course of commercial dealing, and pay
them out in the same mode: as if there was the
least resemblance between the reissue of bank
notes by a trustee who had undertaken to re
deem those notes, and had received a large
and sufficient amount of funds for that, object,
and the bona fide payment of them by a bank,
for the purpose of collecting their amount, and
without any interest in them whatever, except
as a common medium of exchange. Between
such proceedings there is no similarity, nor can
the one affo d any justification to the other.
But is not the course pursued by this institu
tion, which has received these no'es for the
purpose of redeeming them, and now boldly re
issues them, in all respects identical with that
of a partner who having funds of an expired I
partnership in his hands, for the purpose of I
settlement, should use and reissue, in violation |
of all faith, the notes or obligations of his con
fiding partner? Is it not similar to that of an
executor, who voluntarily assumes the duty of
winding up the estate of a deceased testator,
and yet seizes upon the property confided to
him in that trust, and applies it to his personal
benefit, and put into circulation, by himself
and his agents, uncancclled notes found among
the papers of the testator, which had been ful
ly paid off and discharged?
Previously to the Ist of July, 1837, the
monthly statemen’s furnished to, and
published by, the Aud.tor General ol
Pennsylvania, cid not distinguish between the
business of the State Bank and that of its trus
tee; between the notes of the late and present
bank, issued or in circulation. The informa
tion that should thus have been furnished can
not, therefore, be obtained for the long inter
val between the third of March, 1835, and the
Ist of July, 1837. On the first of July, 1837,
however, notes of‘.he late bank, in circulation,
were only $7,013,909, 43, while on the first
ot August, 1838, they amounted to $7,170,658
; 36; an excess of issue of the old notes over all
that were paid in of upwards of $150,000 in a
single month. Again, on the second October,
1837, the notes of the late bank in circulation
a restated at $6,175,861 05, but on the first
November following, at $6,522,839 40; w! ich
would show a re.is.-uc of notes that ought to
have been cancelled, amounting to upwards of
$340,000 in less than a mouth.
Thus it appears, that al hough Congress ex
presslv enacted, in granting the charter, that
'he banking privileges o' the Bank ol the Uni
t d States should expire on the third ot March,
1836, yet the most important of those privile
ges, so far as the community is concerned —
the issue of bank notes, made under the provi
sions of the charier—has continued for twenty
mon’hs alter that period, and probably still
continues; that although two years were al
lowed after the expiration of ihe charter, “for
the final settlement an 1 liquidation of the fa.
fairs arid accounts of the corporation, and for
ihe sale and disposition of its (state, bid not for
any other purpose," yet now, when the two
years are nearly at an end, there are in exist
ence, and ready to be re issued, when desired,
about $16,000,000 in bank notes, the cancel
ling of which was one of the first and principal
duties of those who were “to settle and liquid
ate its affairs.” No provision was made in
the charter for such a state of things. It is
therefore, proper that Congress should at once
provide for it by appropriate legislation. Such
is its duty, if the principles of the charter
which it granted are to be fulfilled. It is no
infringement of any privilege actually confer
red on any individual or corporation, er inten
ded to be by that charter; and it will at once 1
put an end to the erroneous impression which
a want of it will naturally establish, th it the I
faith or the property of the United States con- ■
tinues to be pledged for the security ofthe bank
notes bearing the name of the United States,
and originally issued under that pledge. It is
due to consistency that the termsand meaning
of the charter should be guarded and preserv
ed; it is due to good faith that, when the prop,
erty ofthe United States is withdrawn, by the
sale of the stock, from liability for the redemp.
tion of the notes, they should not stand by and
permit them to be issued and circulated among
the community, exactly as they were when
that property formed a part of the capital by
which they were secured; it is due to their le
gislative functions that the right which they
retained, of examining into the proceedings of
of the bank, and thus virtually promising the
community the exercise of a supervisory pow
er, should not, at a moment when it is most |
needed for the public welfare, be neglected or
relinquished, even though their own direct in
terest has ceased by the bargain they have
made.
Nor is it with reference alone to the late or
present bank of the United States that such
legislation is necessary. The course adopted
by those institutions may be pursued by every
other banking institution chartered by Con
gress. The notes issued in the District of Co
lumbia, under the authority of charters from
the United States, may, without greater im
propriety, be re-issued and circulated after
those charters have expired, either by the
banks themselves, or by trustees to whom they
may transfer them the day before their corpo
rate privileges terminate. 1 hnt some law
should be passed to prevent and obviate such a
proceeding, cannot admit of question.
In passing such a law, it is the duty of Con
gress carefully to avoid any provision which
should affect the citizen who holds or receives
these notes in the ordinary course of trade, or
who passes or transfers them in good faith from
hand to hand. It is only those who hold or re
ceive them with the means and for the purpose
of redeeming them; who pass and circulate
them when ’hey know that they hav - come in-
to their hands for such a purpose and under
such obligations; and who neglect or refuse to
cancel them, when they are bound to do so by
the intention ofthe charter under which they
were originally made.
Considering this subject, therefore, with re
ference to these relations of the United States
towards the lale national bank and to the com
munity which are derived from the charter of
that institution, a prompt and efficient interfer
ence of Congress is unquestionably demanded.
They have derived large profits from the cir
culation of these notes, for the redemption of
which their share of the capital was pledged;
and they have now withdrawn that shareof the
capital from its former liability; they prescribed
by the charter that all banking privileges, a
mong which was that of issuing these no’es,
should terminate at a certain period, and that
period is now passed; they reserved to them
selves the light,and thus imposed on themselves
the duty, of examining that the stipulations of
the charter were fulfilled, and to do this the
enactment of such a law is now absolutely re
quired.
But there are other considerations bearing
directly on the present situation of the com
merce and business ofthe country, and on the
respect due from Congress to the laws and pol.
icy ofthe individual States, which ougiit not to
be overlooked. It is a fact that .the present
Bank of the United Slates is in actual posses
sion, having them within its own vaults, and
under its control, of a fund of bank notes to
the amount of’about twenty millions of dollars
over and above those in circulation, issued, to
a certain extent, on the faith of the United
States, and bearing a corresponding credit.
There appears, at least in many portions of
the country, a s’rongdisposition on the part of
the banks to resume specie payments; but tire
uncontrolled possession of this vast amount of
paper mor.ey will enable the present Bank of
tire U.Slates,if so disposed, to* retard, perhaps to
prevent, them from effecting that laudable and
desirable object It holds in its hands, under
the apparent sane ion of Congress, an immense
fund, which it can transport to any part of the
country at its pleasure, and purchase the notes
ofthe State banks, to be returned upon them
en masse, at the very instant they shall endea
vor to resume. What is there to prevent this
institution from sending to New Orleans one or
two millions of these no’es, placing them in
’ the possession of any local bank or its agents,
and exchanging them for the notes, of banks
preparing to resume, so that they may be us
ed to embarrass and retard their efforts as
s ion as they are commenced? It cannot be
said that this is a proceeding arising from tho
large capital of the present bank ofthe United
States, and which is not consequent upon tho
ssue of its old and uncancclled notes. It is the
possession of those notes which exempts it from
danger in the adoption of such a course. In
dependent of the additional credit, attached to
them from being made under a national char
ter; they are now circulated without the res
ponsibility that attends those issued under the
charter ofthe State; and it is to this cause that
may be attributed the remarkable fact, disclo.
sed in the statement of the bank on the sth
January last, that while they had on hand sis.
teen millions eight hundred thousand five hu i
dred dollars and 73 cents of the old no'.**;,
one million fair hundred and three thousand
ninety-two dollars at their Stale bank agencie •,
and two millions seven hundred and thirty,
three thousand nine hundrel and ninety dolla s
m transitu, making altogether no less a sum in
their actual possession and under their contr 4
than nineteen millions nine hundred and thirt
seven thousand five hundred and ninety.nine
dollars and seventy.three cents of these o'd
notes; when they h id, also, in circulation a
t mong the community, the further sum of six
millions two hundred and twenty thousand four
I hundred and sixty seven dollars and seventre i
cents of these same old not* s; being an nggr ’-
gate of the notes ofthe expired corporation, of
twenty six millions one hundred and fifty eight
thousand and sixty six dollars and ninety cents;
yet, at the same time, the whole outstanding
circulation of their own notes, (exclusive of
post notes;) only amounted to five hundred an I
forty-seven thousand six hundred dollars an 1
forty-five cents, or about the fortieth part of
the old notes in their hands and in circulation.
On every’ note issued under the present
State charter of Pennsylvania, the holder has
by the State Jaw a summary proceeding, if it
is not redeemed on demand; more than this,
the bank is bound, in case of refusal, to pay the
high interest of 12 per cent.; and if such refu
sal be continued beyond a stated period, there
is a provision for the speedy forfeitures of its
charter.
But how is it with these notes of the late
bank, of which it has obtained possession? To
them none of these penalties of the law of Penn
. sylvania will apply; it has received them, and
i promises to redeem them/is a mere trustee; and
iin case of refusal, holder, it is presumed,
i is to be driven to the tedious process of a suit
in chancery, or some other form of protracted
legal proceeding, to obtain that payment
which he could enforce if the note had been is
sued by a State Bank, in the most rapid and
compulsory mode. Thus it is, that so long a*
Congress permits this institution to keep and
issue these, it gives it the power of circulating
a paper currency, free from the restriction*
and safeguards which the State that chartered
it meant to impose; it enables it to control the*
efforts of other banks for the resumption ofspe
cie payments; and leaves the citizen who takes
or circulates these notes without any speedy
protection and redress.
But again: This voluntary trustee of the
National Bank received its new charter from
the State of Pennsylvania, on the expressed
condition that it should issue no bank note of
a less denomination than ten dollars. It is
presumed to be part of the policy of that wiso