A Short History of Paper Money and Banking

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Minutes of the Assembly, March 21, 1785.

Petitions from a considerable number of the inhabitants of Chester County were read, representing that the Bank established at Philadelphia has fatal effects upon the community; that while men are enabled, by means of the Bank, to receive nearly three times the rate of common interest, and, at the same time, to receive their money at very short warning, whenever they have occasion for it, it will be impossible for the husbandman and the mechanic to borrow on the former terms of legal interest and distant payment of the principal; that the best security will not enable the person to borrow; that experience clearly demonstrates the mischievous consequences of this institution to the fair trader; that impostors have been enabled to support themselves in a fictitious credit, by means of a temporary punctuality at the Bank, until they have drawn in their honest neighbors to trust them with their property, or pledge their credit as securities, and have been finally involved in ruin and distress; that they have repeatedly seen the stopping of discounts at the Bank operate on the trading part of the community, with a degree of violence scarcely inferior to that of the stagnation of the blood in the human body, hurrying the wretched merchant who hath debts to pay into the hands of griping usurers; that the Directors of the Bank may give such preferences in trade, by advances of money, to their particular favorites, as to destroy the equality which ought to prevail in a commercial country; that paper money has often proved beneficial to the State, but the Bank forbids it, and the people must acquiesce: therefore, in order to restore public confidence and private security, they pray that a bill may be brought in and passed into a law for repealing the law for incorporating the Bank.

March 28.—The report of the committee, read March 25, on the petitions from the counties of Chester and Berks, and the city of Philadelphia and its viciuity, praying the Act of Assembly whereby the Bank was established at Philadelphia, may be repealed, was read a second time as follows, viz:

The committee to whom were referred the petitions concerning the Bank established at Philadelphia, and who were instructed to inquire whether the said Bank be compatible with the public safety, and that equality which ought always to prevail between the individuals of a republic, beg leave to report, that it is the opinion of this committee, that the said Bank, as at present established, is in every view incompatible with the public safety; that in the present state of our trade, the said Bank has a direct tendency to banish a great part of the specie from the country, so as to produce a scarcity of money, and to collect into the hands of the stockholders of the said Bank almost the whole of the money which remains amongst us. That the accumulation of enormous wealth in the hands of a society who claim perpetual duration, will necessarily produce a degree of influence and power, which cannot be entrusted in the hands of any set of men whatsoever, without endangering the public safety. That the said Bank in its corporate capacity, is empowered to hold estates to the amount of ten millions of dollars, and by the tenor of the present charter is to exist forever, without being obliged to yield any emolument to the Government, or to be at all dependent upon it. That the great profits of the Bank, which will daily increase as money grows scarcer, and which already far exceed the profits of European Banks, have tempted foreigners to vest their money in this Bank, and thus to draw from us large sums of interest.

That foreigners will doubtless be more and more induced to become stockholders, until the time may arrive when this enormous engine of power may become subject to foreign influence; this country may be agitated with the politics of European courts, and the good people of America reduced once more to a state of subordination, and dependence upon some one or other of the European Powers. That at best, if it were even confined to the hands of Americans, it would be totally destructive of that equality which ought to prevail in a republic. We have nothing in our free and equal Government capable of balancing the influence the Bank must create: and we see nothing which, in the course of a few years, can prevent the directors of the Bank from governing Pennsylvania. Already we have felt its influence directly interfering in the measures of the Legislature. Already the House of Assembly, the representatives of the people, have been threatened that the credit of our paper currency will be blasted by the Bank; and if this growing evil continues, we fear the time is not very distant when the Bank will be able to dictate to the Legislature, what laws to pass and what to forbear.

Your committee therefore beg leave further to report the following resolution to be adopted by the House, viz:

Resolved, That a committee be appointed to bring in a bill to repeal the Act of Assembly, passed the first day of April 1782, entitled, “An Act to incorporate the subscribers to the Bank of North America;” and also to repeal one other Act of Assembly, passed the 18th of March 1782, entitled, “An Act for preventing and punishing the counterfeiting of the common seal, Bank bills, and Bank notes of the President, Directors, and Company, of the Bank of North America, and for the other purposes therein mentioned.”

The opinion the Legislature of 1786 had of grants to corporations, may be judged of by the following extract from a speech by Mr. Smile.

“There are charters so sacred that they cannot be revoked. But there is a material distinction between charters, and the opinions of many have been very wrong on that head. When once an error is taken up, men go on a long time in delusion. There are many things which we now consider as absurd, which were formerly venerated, for want of being properly considered. The doctrine of hereditary right, which is now held odious, was once deemed sacred. There is a strong reason why persons from Europe are so highly prejudiced in favor of charters. In the twelfth and thirteenth centuries, Europe was in the lowest state of vassalage—the people were in some measure rooted to the soil, and sold with it. While affairs were in that situation, the kings and powerful barons granted charters of incorporation to towns and cities, thereby exempting them from the common vassalage of the state, and bestowing on them particular immunities; thus giving them political existence. These charters were sacred, because they secured to the persons on whom they were bestowed their natural rights and privileges. But, there are, sir, charters of a very different nature. And here it is necessary to fix the point of distinction. Charters are rendered sacred, not because they are given by the Assembly or by the Parliament, but by the objects for which they are given. If a charter is given in favor of a monopoly, whereby the natural and legal rights of mankind are invaded, to benefit certain individuals, it would be a dangerous doctrine to hold that it cannot be annulled. All the natural rights of the people, as far as is consistent with the welfare of mankind, are secured by the Constitution. All charters granting exclusive rights, are a monopoly on the great charter of mankind.”

Mr. Lollar said, “the House which granted it (the charter) entertained no idea of its being for a perpetuity, or of its being out of the power of the Assembly to alter or new-model it, as they might see fit. In support of this, Mr. Lollar quoted the minutes of that House, where it appeared that a clause had been introduced as a rider to the bill, for the purpose of empowering the Assembly that should sit in 1789, to alter or amend the charter as might be necessary. This was rejected by twenty-seven to twenty-four, and the express reason assigned for the rejection was, that the charter of the Bank must necessarily be always in the power of the House.”

“ What is all this to us?” said Mr. Morris in reply. “Are we to regulate our conduct by the private opinions of former members of Assembly?”

The friends of the Bank maintained, that the Legislature had no power over a charter once granted, and that the courts of law alone had power to declare a charter forfeited.

There are traces of a Bank in Virginia, previous to the establishment of the Bank of North America, but we have not been able to learn any thing satisfactory concerning its character.

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NOTE.—This work has been printed in about half the time usually employed in printing works of this size, in consequence of which some typographical errors escaped correction. Of these it is proper to note the following: