Article Text
mand for stock had not originally been such as to fill up
the subscription at par, yet by these devices it was made
to advance from one degree to another until in August,
1817, it was sold at $156 for shares of $100! It afterwards
declined, so that in January, 1819, it was at $110. After
the Report of the Committee, it fell to $88. Here was a
fluctuation of sixty-eight per cent. in the price of property
by the gambling speculations of this national bank!
A few extracts from that part of the testimony taken by
the Committee of 1819, which relates to buying and sell-
ing of the stock, will exhibit, in a strong light, the charac-
ter of this institution, and the uses to which it is made
subservient.
Jonathan Smith, the Cashier, stated that-
"He has purchased and sold a good deal of stock at
different times. He was at one time, a gainer, perhaps of
$50,000; but he has purchased stock at a higher rate than
he ever sold, and upon the whole, he believes he has
been a loser." - "In November, 1816, he made a contract
with J. A. Smith, for the sale of 1000 shares, deliverable
in January, 1818. He gave credit at the same time
for twenty dollars advance, on each share; he does not
recollect whether the stock was actually transferred, or
whether he paid the difference, but thinks the latter was
the case; stock had risen to at least $150."
Thus we see, that this National Bank, perhaps more
properly called Gambler's Bank, enabled one of its offi-
cers to make FIFTY THOUSAND DOLLARS, which,
by an unfortunate turn of the die, he again lost. In a sin-
gle contract, between a Director of the Bank and the
Cashier, for one thousand shares, one party makes $20,000
and the other $30,000, in consequence of the increase in
the price of stocks, brought about by their own manage-
ment!
To see how many of these speculations were managed,
read the following:
Thomas M. Ewen, among other things, stated that-
"A contract was originally made by Dennis A. Smith
with Mr. Girard, for four thousand shares previous to the
Bank going into operation. It was made in the name of
Mr. Roberjet, guarantied by Mr. Girard, by which he
contracted to deliver to D. A. Smith 4000 shares previous
to the second instalment; the first instalment had been
paid by Mr. Girard: D. A. Smith applied to Mr. Ewen,
Hale, and Davison, to complete the purchase; they obtain-
ed a loan of $260,000 on the same stock, by which they
paid for the stock and the second instalment; the third
instalment was completed in the same way, by a loan of
the Bank of $140,000, together making $400,000; after
the third instalment, (15th June, 1818,) it was transferred
to Smith and Buchanan."
Upon these 4000 shares it is obvious that the first instal-
ment of $120,000, paid in by Mr. Girard, was drawn out
by Smith's agents to buy the stock with, and the 2d and
3d instalments, of $140,000 each, were wholly paid by
stock notes, so that there was not a dollar in Bank on ac-
count of these 4000 shares!-Yet were they held in this
way, without the payment of a dollar, except the inte-
rest on the stock notes, until they might have been sold
at more than 50 per cent. advance, yielding a profit to
the speculator of about $200,000!
One other extract must suffice.
James W. McCulloch stated, that "a purchase of 1000
shares was made by D. A. Smith, George Williams, and
Smith, and Buchanan, receivable of Wm. W. Smith, a
broker, and the Commercial Bank at Philadelphia; it was
the intention of those gentlemen, if the stock rose, to pre-
sent them to William Jones, without whose knowledge the
purchase had been made. Mr. D. A. Smith, contrary to
the purpose of the gentlemen who were concerned with
him, and, as they thought, prematurely, after the stock had
risen a few dollars, mentioned the transaction to Mr.
Jones, who accepted the purchase, and considered the
stock as his own; he thinks that Mr. Jones received the
assignment of the contract and sold it without having the
stock transferred to him; he sold it at a profit of about
$15,000, as Mr. McCulloch recollects."
Here is the President of the Bank, concurring in all the
measures to raise the price of the stock, and making FIF-
# TEEN THOUSAND DOLLARS
by a single purchase
and sale, made in other names!
However, the carcer of this band of speculators did not
last long. In two years they brought the Bank to the ve-
ry brink of bankruptcy and ruin. They saw the precipice
to which they were hastening, and in July, 1818, ordered
rapid curtailments of their business. The public took the
alarm; an investigation was ordered by Congress; the ini-
quities of the institution were partially developed; the
President and several of his associates resigned; a new
Board was formed; and, in March, 1819, Langdon Cheves,
Esq., entered upon his duties as President of the Bank.
The business of the Bank had been curtailed $6,539,159;
upwards of two millions of its funded debt had been sold;
the $7,311,750 of specie which had been imported were
gone; and on the 12th April, 1819, the principal Bank had
in its vaults only $71,522 47, when it owed the City
Banks of Philadelphia a balance of $196,418 66, besides its
deposits and notes in circulation. The Philadelphia
Banks could have stopped it in a day. From this perilous
situation, the Bank was relieved by the arrival of $250,-
000 in specie from Ohio and Kentucky.
The Government had favored the Bank as much as pos-
sible; the public deposites were $3,273,855 45; no calls were
made upon them, which could be avoided; and yet it was
for some time a matter of doubt whether the whole money
and power of the Government could preserve it from a
suspension of specie payment. By the most careful ma-
nagement, by the aid of the Treasury, and by procuring a
loan of $2,500,000 in Europe, Mr. Cheves succeeded in
saving the Bank, and retrieving its affairs. It was not
effected, however, without heavy losses to the Government,
as well as the other stockholders. From July 1819, to
January 1821, inclusive, no dividends were declared. In
July, 1821, the dividend was but 1 1-2 per cent.; in Janua-
ry, 1822, it was 2 per cent.; and in July of that year, 2 1-4;
During all that period, the Government was paying the
Bank 5 per cent. on the seven millions of stock which it
had subscribed as a part of the capital. The amount thus
paid, exceeded the receipts of the government from the
Bank, during the same period, $822,500. Deduct from
this, $182,000, nett profit, which the Government had re-
ceived prior to July, 1819, and it will show in July, 1822,
a dead loss to the Government, on account of this Bank,
of SIX HUNDRED AND FORTY THOUSAND,
FIVE HUNDRED DOLLARS! This sum was actu-
ally paid out of the Treasury, to sustain a Bank, which,
it is pretended, is necessary to sustain the Treasury.
The losses of the Bank, through the stock-jobbing Di-
rectors, and other officers and their friends prior to March,
1819, exceeded $3,500,000, when the entire profits of all
its banking operations, excluding the interest received on
the public debt held by it, were but $3,061,441 02. Of
this loss the sum of $1,671,221 87 was at the Baltimore
Branch. The following is a short account which Mr.
Cheves gave of that affair, in 1822:
"In the office at Baltimore, of which James A. Bucha-
nan was President, and J. W. McCulloch was Cashier,
there where near three millions of dollars discounted or
appropriated, without any authority, and without the
knowledge of the Board of the Office, or that of the pa-
rent Bank! S. Smith and Buchanan, of which firm J.
A. Buchanan was a member, James W. McCulloch and
George Williams, (the latter a member of the parent
board by the appointment of the government) had obtain-
ed the parent Bank discounts, in the regular and accus-
tomed manner, to the amount of 1,957,700 on a pledge of
18,290 shares stock of the bank. These men, without the
knowledge of either Board, and contrary to the resolves
and orders of the parent bank, took out of the office at Bal-
timore, under the pretence of securing it by pledging the
surplus value of the stock, already pledged at the parent
bank for its par value and more, and other like surplusses,
over which the bank had no control; the sum of $1,540,000;
this formed part of the sum before stated to have been dis-
counted by the President and Cashier of the office with-
out authority."
By applying all the profits of the Bank to that object for
two years, about $3,200,000 of these losses were made up;
but there was yet a deficiency in the capital of the Bank
of about two and a half millions for balance of losses, bo-
nus actually paid, premium on four millions of 5 per cent.
stocks actually paid, and cost of banking houses, which is
probably not entirely repaid to this day!
These details are important to enable the people to un-
derstand what uses are made of this Bank which bears
their name, and is pretended to be so essential to their in-
terests and the due administration of their government. It
will be found important in another particular. There are
striking analogies between the management and condition
of the Bank prior to March 1819, and at a more recent pe-
riod, which we shall endeavor to point out.
