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220 CONGRESS, Ist Session.
[ Rep. No. 460. ]
Ho. OF REPS,
BANK OF THE UNITED STATES.
APRIL 30, 1832.
TWENTY-SECOND CONGRESS_FIRST SESSION.
CONGRESS OF THE UNITED STATES,
In the House of Representatives, Maroh 14, 1832. “Resolved, That a select committee be appointed to inspect the books, and examine into the proceedings of the Bank of the United States, to report thereon, and to report whether the provisions of its charter have been violated or not; that the said committee have leave to meet in the city of Philadelphia, and shall make their final report on or before the twenty-first day of April next; that they shall have power to send for persons and papers, and to employ the requisite clerks, the expense of which shall be audited and allowed by the Committee of Accounts, and paid out of the contingent fund of the House."
REPORT OF THE MAJORITY. Mr. CLAYTON, on behalf of the majority of the committee appointed on the
14th March, 1832, to inspect the books, and examine into the proceedings of the Bank of the United States, made the following
REPORT: In obedience to the foregoing resolation, the committee appointed under the same, proceeded to the city of Philadelphia, and commenced the inspection of the books, and the examination of the proceedings of the bank, on the 23d of March last: and, after the most attentive and laborious investigation which their limited time would allow, the majority have prepared the following report, which they beg leave to submit to the House of Repre
They believed, that, as the House wished information more for the purpose of enlightening their minds, and assisting their judgments as to the expediency of again renewing the charter, than to abridge it of the small remnant of time left for its operation, a liberal construction
of the tesolution Would not be deemed a departure from their trust; consequently, they have direced their inquiries to two general objects. ist
. Whether the provisions of the charter have been violated. 2d. Wether there have been any circumstances of mismanagement against which future legislation might guard, or which should destroy its claims to furher confidence.
On the first point, following the example of a former committee, making a similar investigation, they will submit to the House, withort expressing any opinion, such cases as have been subjects of imputation agairst the bank. These cases they conceive to be six in number, and are as follow: 1st. In relation to usury. 2d. In relation to the issuing of branch orders, as a circulation. 3d. The selling coin, and particularly American coin.
4th. The sale of stock obtained from Government under special acts of Congress.
5th. Making donations for roads and canals, and other objects.
6th. Building houses to rent or sell, and erecting other structures in aid of that object.
On the first ground, the president of the bank refers us to a statement marked G, and says it will “explain the only cases to which this description might be considered applicable, two of them being cases in which the board repaid the amount considered overcharged, and, in regard to the third, no application has been made for any change in the form of the original loan." See said statement, marked No. 1,
To a question asked the president, whether any cases of disguised loans, on domestic bills of exchange, had come to the knowledge of the parent bank, in which the branches have received usurious interest? he replied he had never heard of any, but made a further statement, marked No. 2, in which he states that the usual custom is to charge upon domestic bills of ex. change, the rate of interest and the rate of exchange; and, if the sums united should exceed six per cent., it is not usury; and gives an explanation in said statement.
On the second ground, the committee will submit document No. 3, and its enclosures, in which the cause and origin of branch drafts will be fully seen. The president states the inability of the bank to furnish the amount of circulating medium which it was created to supply, became apparent at an early period. In a year after its organization, the directors presented a memorial to Congress, dated 9th January, 1918, requesting that an alteration might be made in the charter, so as to authorize the president and cashiers of the several branches to sign the notes issued by those branches." See copy of the memorial, marked 3, a, in which it is stated " that, inasmuch as the act to incorporate the subscribers to the Bank of the United States,' requires that the bills or notes which may be issued by order of the said corporation, shall be signed by the president, and countersigned by the principal cashier, it has been found in practicable to supply, in any reasonable degree, the required circulation from the bank and its numerous offices of discount and deposite:" it is, therefore, asked of Congress to permit the presidents and cashiers of branch banks to sign and issue bills. The application was not granted. The president states the subject was resumed by another memorial, dated November 24th, 1820." See copy of the memorial, marked 3, b, in which it is stated, “ under the charter, it has been doubted whether the bank has power to authorize the issuing of notes not signed by the president, and countersigned by the cashier. The labor and the time necessary to sign notes for the bank, and all its branches, are much greater than either of those officers can bestow upon that object; ani hence the bank has been unable to put in circulation a sufficient amour of notes of the smaller denominations, which the public most want, an, which are best calculated to serve the interest of the bank." It ther requests that
power be given to the parent bank to appoint one or more persons to sign notes of the smaller denominations, which was not acted upon.
The president states the "application was again renewed, and a select committee of the House of Representatives reported in favor of allowing the appointment of signers, on the 27th of February, 1823; but there was no action of the House upon it.” And he refers us to “ Pamphlet, vol. viii. No. 11."
On the first of December, 1826, the president was instructed to endeavor to procure the necessary change. He says " he reported on the 27th of February, 1827, that no action on the subject would take place at that session of Congress, and, accordingly, the matter was referred to the Committee on the Offices.' See Doc. 3. c.
He adds, " the opinion of Mr. Binney, Mr. Webster, and Mr. Wirt, the Attorney General, was taken on the subject of issuing branch drafts."
See Doc. 3. C.
On the 6th of April, 1827, the following communication was made to the board of directors: " The Committee on the Offices, to whom was referred, on the 23d of February last, the report of the president of the bank, stating the unsuccessful result of the application to Congress for an alterution of the charter, which would authorize the signature of notes by other persons than the president and cashier, report that, in various parts of the Union, but, more especially, in the southern and western sections, there is a constant and unceasing demand at the offices for the smaller denominations of notes, which it is impossible to supply.” They therefore suggest that the “dis. tant offices should be instructed to draw checks on the cashier of the bank for smaller sums than they have hitherto been in the habit of furnishing. In order to save the labor of preparing such checks at the offices, as well for the greater security of the bank and the community, it has been deemed best to prepare the blank forms of a uniform appearance, and to distribute them from the parent bank. Such forms have been accordingly devised, and are now submitted to the board, with the recommendation of the com. mittee that the experiment be tried, and, if found useful to the community, be permanently adopted.” See Doc. 3, c.
The document marked 3, d, is a correspondence between the President of the bank and the Secretary of the Treasury, on the character of these branch drafts, which has already been printed and submitted to Congress. The
paper marked 3, e, contains instructions to the branch banks as to the issue of branch orders. On the 21st of April, 1827, the cashier of the parent bank writes a circular to the respective branches, informing them, among other things, that the directors have “deemed it best that blank forms of an uniform appearance should be prepared with skill and care at the parent bank, and thence distributed to such of the southern and western offices as seem to stand most in need of them, or to be able best to employ them usefully. Enclosed I send you a specimen of the 5 and $10 blank drafts adopted. After being numbered, registered, and appropriated here h certain offices, a supply of them will be forwarded as soon as possible, wth instructions to the cashier of each office to have every four hundred drate in succession, and as they may be wanted, filled in the order of some one olcer of the branch, by whom they must be endorsed lengthwise, and about the middle of the draft, payable to bearer, before they be signed by the presiant and cashier. When completed, they are to be furnished to the customer of the bank, or other persons who may wish to procure them.
The entries respecting them, both here and at the branches, are intended, for convenience sake, to be analogous to those of branch notes Their receipt, under the denomination of branch drafts, is to be similarly acknowledged by the cashier, and in duplicate through the respective presidents. They are, besides, to be reported on the weekly state of the office as branch draft paper received, used, and on hand.
“ And, whenever they may be in transitu between the offices, must be 80 noticed at the foot of the statement, like other packages."
On the 7th of January, 1831, a resolution passed the board to isue drafts of the denomination of 20 dollars. These branch orders, when discharged by the parent bank, are again re-issued by that bank when it has no small notes of its own. The paper marked 3, f, contains a statement of the amount of branch drafts issued, on hand, in circulation, and the offices from whence issued. By this table, it will be perceived that $10,781,635 have issued; $3,371,544 are on hand; and $7,410,090 are in circulation.
The foregoing is a succinct history of the issue of branch drafts. Whether it can be justified under the charter of the bank, the committee will leave to the better judgment of Congress.
The third case is the selling coin, and particularly American coin. The attention of the committee was drawn to this subject by the fact that the General Government had, on one occasion, to pay the bank two per cent. on ten thousand Spanish dollars, which it wanted for the benefit of the navy in South America. To an interrogatory put to the president on this subject, he replied: “The bank is authorized to deal in bullion. It buys and sells bullion. All foreign coins are bullion. Their being a legal tender does not make them the less bullion, and the bank having bought them at a premium, sells them at a premium. The obligation of the bank is, to pay the claims on it in coin, American coin, or legalized coin; and if the foreign coin is worth intrinsically, or commercially, more than the American coin, the difference in value must be worth the difference in specie, and there seems no reason why the bank should sell its bullion any more than its bills of exchange, at less than their value.” He then refers the committee to a correspondence, marked No. 4.
Although the bank acted under legal advice, it may be well questioned whether foreign coin is bullion. The constitution gives to Congress the right to regulate its own and foreign coin; when, therefore, the latter has a value prefixed to it by law, and is suffered to be used with that regulated value, in like manner with our own coin, it would seem not to have lost the name and character of coin, and is made, by force of law, what it would be if carried through the mint, and subjected to the condition of our own coin; and therefore, to deal in it as a commodity, is calculated to disturb its legal value, and render at least that portion of the metallic currency uncer. tain and fluctuating.
If, however, the committee have taken a wrong view of this subject, so far as foreign coin is concerned, it seems by the statement of the president of the bank, to be virtually admitted that our own coin is not bullion, and, therefore, does not come within the objects of trade allowed to the bank by the 9th fundamental rule of the charter. By reference to the statement of specie sold by the bank, marked No. 24, it will be found that the sum of $84,734 44 of American gold coin has been parted with.
The fourth case is, selling stock obtained from Government under special acts of Congress. They have thought it their duty to prevent the subject to the consideration of Congress.