SPEECH

IN THE SENATE OF THE UNITED STATES, MARCH 30, 1840, ON THE TREASURY NOTE BILL.

I REGRET, Mr. President, that the chairman of the committee is absent, as he might probably have made use of this occasion, not only to show the necessity of raising this sum of five millions, for the immediate use of Government, by some extraordinary means, but also to state his opinions upon the public revenue, both in regard to its present state and its prospect for the future.

The sum and substance of the measure now before us is, to borrow five millions of dollars, for two years, if necessary, and to pay therefor any rate of interest not exceeding six per cent. This borrowing is to be done by means of issuing Treasury notes, bearing interest; and, so often as they shall be received at the Treasury, they are to be re-issued, so that the whole sum of five millions may be kept out. And the authority to issue and re-issue is to last one year. The consequence of this is, that, one year from the date of the bill, if the whole five millions be not then outstanding, the balance may be issued, redeemable in a year from that time. It is a power, therefore, to make a loan, for five millions, with an authority to continue that loan, by borrowing to-day to repay the sum borrowed yesterday, and to continue this process, in effect, for two years. This is the substance of the bill.

Mr. President, at the opening of the session, the President of the United States informed Congress that the financial operations of the Government for the past year had been very successful.

The Secretary, too, in the very first paragraph of his annual report, stated, with much satisfaction, that the revenue of the Government had been increased, and the expenditures diminished.

That the resources of the country are abundant, no one can doubt. Its wealth, its activity, its commerce, and its freedom from burdensome taxation, render it able to raise, with entire facility, a revenue quite equal to all the just wants and necessities of the Government. But, notwithstanding these congratulations of the President and Secretary, I cannot but entertain a doubt whether, under the operations of provisions now actually existing, and under the expenditures which have been made, and are making, or are in

anticipation, it is prudent to indulge in sanguine hopes of an overflowing Treasury. The doubt receives countenance from the fact that the bill before us is to authorize the borrowing of five millions, in the form of Treasury notes, and under such circumstances as leave no reasonable hope, as I think, of their redemption within this year. I do not oppose the bill, but I propose to say a few words on the state of the Treasury, and on the history of its receipts and disbursements for the last three years.

We learn, from the Secretary's annual communication, that, at the commencement of this year, there was in the Treasury no more than a million and a half of dollars available for the purposes of Government. I omit fractions, and use round numbers, for the sake of brevity. At the same time, the Government owed, on outstanding Treasury notes bearing interest, two millions and three quarters, or two millions seven hundred and fifty thousand dollars. This was the state of the Treasury January 1, 1840, as near as the Secretary could estimate or ascertain it in December. It turns out, from the paper just read, that, in fact, there were a few hundred thousand dollars more in the Treasury in January than the Secretary's estimate, but from what funds or sources does not appear; and this circumstance does not affect the general view which propose to take.

Let us now go back to January 1, 1837. In 1836, there being a great surplus in the Treasury, the deposit law was passed, by which five millions were to be reserved in the Treasury, in aid of accruing revenues that should be in the Treasury January 1, 1837, to meet future demand, and the rest of the money divided, in deposits, with the States, by four quarterly payments or instalments.

As the Secretary was obliged to make his calculation a little before the 1st of January, and could not say, exactly, what amount might be in the Treasury at the time, he made a safe allowance; and it happened, in the end, I think, that six millions and more were retained in the Treasury instead of five. At the commencement of 1837, then, the Government had on hand six millions; and it had before it the whole accruing revenue of the year. Before the year was out, - that is to say, in the September session, Congress suspended the payment of the last or fourth instalment, or fourth deposit to the States. This measure retained in the Treasury a further sum of nine millions, thus raising the reserved aggregate up to fifteen millions. Subsequently, the Treasury received from the Pennsylvania Bank of the United States five millions of dollars, as part of the property, or capital, of the United States in the former bank. This swelled the amount to twenty millions. So that, since January, 1837, the Treasury has had full twenty millions of former receipts, as well as all revenues arising

since.

Now, it is apparent that these twenty millions have been expended within the three years, in addition to all the revenue which has accrued in the mean time, with one deduction, which I shall It is true, that, in September, 1837, Congress suspended, or postponed, the payment of certain custom-house bonds; but the time of postponement has long since expired, and the bonds have been paid. It is true, also, that the deposit banks, in 1837, held certain sums belonging to Government, which they wished time to pay. But, before the commencement of this year, these debts had been brought down to a million of dollars, or thereabouts. The true account, then, stands thus:

Reserved under the Deposit Act,
$6,000,000
Amount of fourth deposit held back from the States, . 9,000,000
Received from the Bank of the United States,
Borrowed on Treasury notes, outstanding Jan. 1, 1840, 2,750,000

5,000,000

22,750,000

Deduct amount in Treasury January 1, 1840, .

Twenty millions two hundred thousand dollars, then, appear to have been expended in the three years between January, 1837, and January, 1840, besides all the receipts from the custom-house, and land-offices, and all other sources.

If there be any error in this general statement, I hope some gentleman will point it out, and I will cheerfully make the necessary correction. My object is to be accurate as well as distinct. But, if there be no error, if this statement be true, as I

suppose, then the result certainly is, that, for the last three years, the Government has expended almost seven millions a year beyond its income, and has supplied the deficiency out of funds previously acquired or received. The six millions reserved under the deposit law, the nine millions afterwards withheld from the States, the five millions received from the bank,—all these were funds previously acquired, and none of them any part of the income of 1837, 1838, or 1839. All the income and revenue of those years have been expended, and these twenty millions more.

This general state of the Treasury, and the history of revenue and expenditure for the last three years, may well awaken attention. We have no twenty millions more in crib to go to. Our capital is expended. There will be two millions and a half due from the Bank of the United States in September, and there is a

small balance still due from the deposit banks; both together not exceeding three millions and a half; and for the rest we are to rely on the usual sources, the custom-house and the land-offices.

Now, then, the important questions are, Does the Administration expect an augmentation of income?

Or does it expect such a reduction of expenditure as shall keep it within the income?

Or does it contemplate loans, either in the form of Treasury notes, or otherwise, to make up deficiencies?

And, if the last, to what extent ?

The present measure is to authorize the immediate issue of five millions in Treasury notes, for the purpose of being paid out to persons having claims on Government, or used as means of borrowing money for the necessities of the Treasury.

I do not propose to oppose the passage of the bill, because I think it quite clear that the money is needed, in order to carry on the Government. There are, indeed, objections to this form of borrowing money. For it is a borrowing of money, to all intents and purposes. The Secretary, indeed, in a recent communication to the Senate, does not call it borrowing. He avoids that word, as if he were afraid it would burn his mouth. He calls it only "exchanging Treasury notes for specie." This falls under that form of statement now usually called humbug. The Secretary receives money, gives for it his Treasury notes, payable a year hence, and bearing an interest of five or six per cent. But this, he thinks, is not borrowing money; it is only "exchanging his notes for money;"-a sort of exchange, I believe, which most borrowers are obliged to conform to. The authority, and the only authority, under which he makes this marvellous "exchange," is a section of the law of 1837, which authorizes him to "borrow money."

I cannot say that I think the communication of the Secretary, to which I have referred, is a very full or clear answer to the call of the Senate. But we learn from it, after all, what I was sure must have existed, and which it may be of some importance to show. He admits that deposits have been made to the credit of the Treasurer, in certain banks; and that thereupon such banks have received Treasury notes to a corresponding amount. And the Treasurer, in a letter accompanying the Secretary's report, says that these funds are drawn for as other funds, and not specifically. The Secretary says these deposits are special, and in specie. All this is humbug again; for, all deposits in banks are regarded as specie deposits while banks pay specie, and the Treasurer, as I have remarked, says expressly that these sums, thus deposited, are drawn for, when needed, in common with other funds, and not specifically, or separately. This idea, or this delusion, or this pretence, for it hardly deserves a respectable name, about special

specie deposits, was sufficiently dissipated by the examination, last year, into the conduct of the banks connected with the New York custom-house. When the banks pay specie, a special deposit is nothing but a deposit in specie, or its equivalent; and the amount is paid out, on draft, in specie or its equivalent. And this is the case with all other deposits of money, unless it be left in kegs or bags, and not carried into the general account of the bank. Any one may see how this is, and has been, who will recur to the evidence of the cashier of the Bank of America, on the occasion which I have referred to. As I have already said, the Treasurer informs us that these deposits are mixed with other funds belonging to the United States in the same bank. That is to say, they all stand together, to his credit, on the books of the bank, and he draws as he has occasion, just as is done by any other dealer with the bank. This is the whole of it. Special specie deposit is a nonentity.

Now, it is easy to see that this mode of obtaining money from the banks may be of very considerable profit to them. Suppose a bank deposits a million of dollars to the credit of the Treasury, and receives therefor a million of dollars in Treasury notes, bearing an interest of six per cent. Interest immediately accrues to the bank, of course, on the whole of this sum; but it may be many months before it is all drawn out. The Treasury may give out its drafts slowly, and these drafts, when made, may be sent to distant parts of the country, and be some considerable time in reaching the bank. When they arrive, the bank will generally pay in its own notes; but, beside this advantage, it will make a clear gain, because it has been receiving interest on more money than it has parted with.

Under the law of 1836, the deposit banks were required to pay interest on Government deposits. The present system looks very much like making Government pay the banks interest on its own deposits.

The

There are objections, I repeat, to the use of Treasury notes, as means of borrowing money. In the first place, the interest must be higher than on a loan contracted in the common manner. greater part of all the Treasury notes issued since 1837, have borne an interest of six per cent.; whereas my information is,—and I have little doubt of the correctness of it, that United States stock, bearing 4 per cent. interest, could be readily sold at par abroad, not having any great number of years to run; or it could readily be sold at home, with a view of sending it abroad.

In the next place, Treasury notes, bearing a high interest, and redeemable at any time, upon two months' notice, issued under the present circumstances of the country, are very likely to absorb a considerable portion of the money now so much needed for the