Unfortunately no practical measures were at first
instituted to relieve the distresses of the working
classes, and advantage was taken of the opportunity by
politicians and demagogues to inflame the passions of
the ignorant and the vicious.
The economic harvest of the Jackson years is the Panic
of 1837, with an ensuing depression. During these years
cotton production increased in the South, agriculture
expanded in the West, cities grew, manufacturing
replaced trade as the economic base in the North. These
phenomena were accompanied by a rise in the sales of
land, and also in the price paid for land. There was a
need for internal improvements, roads, canals, etc. and
these had to be financed by states and private
companies. Inevitably, speculation and inflation
accompanied such activities, and President Jackson hoped
to curb the unhealthy aspects of a growing economy by
extirpating the central bank, which he considered the
root of the evil.
But with Federal funds distributed widely in "pet
banks" and surplus revenues distributed among the
states, the control exercised by the Bank of the United
States is replaced by financial anarchy: the number of
banks and the number of bank notes increase. In response
to the President's Specie Circular issued in 1836, the
local banks are faced with a critical situation, and
call in their loans. (At the same time, a depression in
Great Britain results in withdrawals of British
investments and a decline in the demand for cotton.)
First the New York City Banks suspend specie payment;
then others follow suit. Lacking sufficient hard money,
banks fail, enterprises go bankrupt, unemployment
spreads. As the depression deepens, President Van Buren
continues to follow Jackson's policy, with the
ill-advised codicil of a plan to fragment the single
treasury into a system of "sub-treasuries."
Sub-treasury System
The sub-treasury system of the United States is an
outgrowth of the panic of 1837. In his special session
message to Congress that year President Van Buren
strongly recommended such a system (III, 324). Silas
Wright of New York, introduced a bill in Congress in
accordance with the President's recommendations. It
prohibited Government agents from receiving anything but
gold and silver. In 1840 the bill became a law and
sub-treasuries were established at New York, Boston,
Charleston, and St. Louis, the mint at Philadelphia and
the branch mint at New Orleans having been also made
places of deposit. The law was repealed in 1841 and
reenacted in 1846.
Special Session Message (From the Presidential Papers
and Messages)
During the term of Martin Van Buren while in office
as President March 4, 1837 to March 4, 1841.
Washington, September 4, 1837
Fellow-Citizens of the Senate and House of
Representatives:
Volume: III Page: 324 (extract) The act of the 23d
of June, 1836, regulating the deposits of the public
money and directing the employment of State, District,
and Territorial banks for that purpose, made it the duty
of the Secretary of the Treasury to
discontinue the use of such of them as should at any
time refuse to redeem their notes in specie, and to
substitute other banks, provided a sufficient number
could be obtained to receive the public deposits upon
the terms and conditions therein prescribed. The general
and almost simultaneous suspension of specie payments by
the banks in May last rendered the performance of this
duty imperative in respect to those which had been
selected under the act, and made it at the same time
impracticable to employ
the requisite number of others upon the prescribed
conditions.
The specific regulations established by Congress for
the deposit and safe-keeping of the public moneys having
thus unexpectedly become inoperative, I felt it to be my
duty to afford you an early opportunity for the exercise
of your supervisory powers over the subject. I was also
led to apprehend that the suspension of specie payments,
increasing the embarrassments before existing in the
pecuniary affairs of the country, would so far diminish
the public revenue that the accruing receipts into the
Treasury would not, with the reserved five millions, be
sufficient to defray the unavoidable expenses of the
Government until the usual period for the meeting of
Congress, whilst the authority to call upon the States
for a portion of the sums deposited with them was too
restricted to enable the Department to realize a
sufficient amount from that source. These apprehensions
have been justified by subsequent results, which render
it certain that this deficiency will occur if additional
means be not provided by Congress.
[Continue on next page]
|
