704 



THE FARMERS' REGISTER. 



GALLATIN ON SUSPENSION AND RESl'MPTION 

 OF BANK PAYMENTS. 



New York, ISth Oct., 1841. 



Sir : I had the honor to receive your letter ask- 

 ing my opinion on the pro[)riety and effects o/' a 

 repunipiioi) oT specie payments by tl~.e banks of 

 West New Jersey. 



B^nks liave been permitted to issue paper mo- 

 ney on the express condition that thev should sus- 

 tain its value at par with specie. Whenever the 

 condition ceases to be performed, the privilege 

 should likewise cease to exist, ll" that natural 

 principle was rigidly adhered to, if the banks 

 were expressly ibrbidden to issue the notes of 

 any suspended bank (including of course their 

 own notes when they had themselves suspended j 

 specie payments,) this alone would, in most cases, j 

 prevent a suspension, and when it did not, the I 

 provision must necessarily enable the suspended 

 bank or banks, ilsolvem, te resume their payments 

 within a very short time. 



A much greater indulgence has been Granted 

 to hanks in the case ol a general suspension — 

 much ijreater certainly in this instance than was 

 necessary. Bui it is not the less an obvious moral 

 and legal duty on their part to resume, as soon as 

 possible. On that subject, as well as on the into- 

 lerable evils and immoral tendency of depreciated 

 currency, I have nothing to add to what I have 

 already published on several occasions, before, 

 during and since the suspension inthisciiy; and 

 I beg leave to refer you to my last Kssay and ap- 

 pendix ; (particularly pages 20-24 and 59-62 ol 

 the Etfsay, and f)ages lOl-lU of appendix.) 



If a sense of justice be not a sufficient motive, 

 it seems to me that their interest shouM induce the 

 banks to perform iheir duty. The patience of the 

 people is nearly exhausted. They have waited 

 from time to lime, always expectinff the promised 

 restoration of a sound currency. They now see 

 that nothing has been done in that respect by the 

 change of administration, that nothing can be ex- 

 pected from it. The opposition to banks, strength- 

 ened by the catastrophe of that of the United 

 States, and by numerous other failures or defalca- 

 tions, is daily gaining giound ; and the effect, on 

 the banking system generally and indiscriminate- 

 ly, cannot be otherwise averted than by a speedy 

 restoration of the currency. I would, indeed, my- 

 self preler a total exclusion of paper money to a 

 continuance of that system, as now organized 

 and administered west and south of New York. 



In order to be able to resume specie payments, 

 (lie banks which have suspended must have 

 made the necessary preparations. It is not a 

 matter of opinion, but a mathematical truth, that 

 this can be effected in no other manner, than by 

 a diminution of the liabilities of the banks, and a 

 correspondinsr curtailing of their own loans and 

 discounts. This last measure is always inconve- 

 nient to the borrowers, who call it an injury to 

 the community. The continued suspension ol 

 specie payments, and circulation of a depreciated 

 currency, are the general evil and the true injury 

 to the community at large. The reduction in the 

 amount of discounts is a partial evil which falls 

 precisely on those who ought to bear it, since il 

 was the excess of loans which was the cause of 

 the suspension. Two years have elapsed since 

 this took place for the second time. If any of 



the banifs have not, during a period so amply 

 sufficient for the purpose, gradually lessened their 

 discounts and their liabilities, so as to be prepared 

 for an immediate resumption, it is their own fi^uli, 

 and it is far better that some of them should, if' 

 necessary, wind up their business, rather than that 

 those which are sound and prepared should con- 

 tinue to suspend their payments, and that the 

 general interest should still be sacrificed lor the 

 benefit of the few. The interest of those bor- 

 rowers who oppose a resumption may be combin- 

 ed with that of some of the banks, either on ac- 

 count of their own embarrassment, as was the 

 case with the United Stales Bank of Pennsylva- 

 nia, jr because they make larger profits, so long 

 as they are not compelled to curtail their dis- 

 counts. In either case plausible pretences for 

 fijrther delay are never wanted; and of this we 

 had sufficient evidence prior to the resumption of 

 specie payments by the banks of this city. 



It is notorious — 1st, that they did resume, not 

 onl}' without waiting for the co-operation olthe 

 olher banks, but notwithstanding the various rea- 

 sons or pretences alleged in opposition (o that 

 measure, ail which were founded on its presumed 

 impracticability, or on the pretended general dis- 

 tress which it would cause; 2d, that the resump- 

 tion was effected wiih great ease, and without 

 being attended with any of the fatal consequen- 

 ces which had been predicted ; 3d, that, within 

 lees than three months, the example was general- 

 ly liallowcd by all the banks of the United States : 

 4ih, that the subsequent suspensions were caused, 

 exclusively, in all but some of the souih-weslern 

 states, by the inconceivable and unparalleled mis- 

 management of the United States Bank of Penn- 

 sylvania. As far as I am able to judge, the rea- 

 sons now alleged for a continued suspension, 

 which are drawn from the supposed inconvenien- 

 cies of a partial resumption, are as unfounded as 

 those which were adduced for the same purpose 

 in 1838. I cannot, for instance, perceive how 

 the fact, that the produce of West New Jersey 

 is mostly sold in Philadelphia, and paid for in 

 Philadelphia currency, can, if your banks should 

 resume before Philadelphia, prove more injurious 

 to the producer, and to the country, than it now 

 is. The price obtained for the produce, that 

 given for the goods purchased in return, or the 

 amount of debt payable in Philadelphia, extin- 

 guished with the proceeds, will remain precisely 

 the same. 



But the plea of expediency, whether well 

 founded or frivolous, is utterly inadmissible, when 

 the question is one, not of profit and loss, but of 

 justice. I cannot see any substantial difference 

 between an attempt to prove that the deteriorated 

 specie currency, issued by a coiner, is a public 

 benefit, and the assertion, that the suppression of 

 a depreciated paper currency is a public injury. 

 Repudiating, therefore, every objection to a re- 

 sumption, founded on presumed convenience, or 

 expediency, the fiict remains to be ascertained, 

 whether the sound banks of West New Jersey 

 have generally made such preparations, as will 

 enable them, at this time, to resume and to main- 

 tain specie payments'? Of this you are the only 

 competent judges. With their actual situation 

 I am unacquainted, and can at most only point 

 out, in a general way, the obstacles which, if they 

 have DOl l>een foreseen, might defeat the attempt. 



