CHAPTER VII.
The Crisis on the Atlantic Coast.
HE Bank of the United States, in its internal administration, was found to be approaching a crisis in July, 1818.[1] On the 20th, the directors ordered a reduction of discounts at Philadelphia, Baltimore, Richmond, and Norfolk, to the aggregate amount of $5 millions. Amongst the reasons given, the delinquency of the State banks in paying their balances is one of the foremost. October 30th, a report was made to the directors that these reductions had been only partially carried out.
The Bank resolved to insist upon further reductions, to get specie from abroad, silver being then at ten per cent. premium, and rapidly exported, and to draw $550,000 in specie from the West. The local currencies being now very unequal again and the Bank itself falling into distress, the task of equalizing the currencies was given up. August 28th, it was resolved to take no branch notes save at the branch which issued them; but the use of branch drafts was extended, with the same effect. They led to the device of drawing and re-drawing between the branches what were called "race horse bills," which combined the qualities of accommodation paper and endless renewals. They tended to draw the capital of the Bank away from the sounder and more conservative branches to the weaker and more reckless ones.
The directors ordered, October 20th, that all discounts on stock above par should be reduced, as to that excess, 25 per cent. every sixty days, and that in the meantime collaterals should be demanded for the excess. Nevertheless, on the 6th November, another vote was passed in the interests of stock jobbing, which allowed the president and cashier to accept the note and hypothecation of the buyer in place of those of the seller. During November and December, the discounts were greatly reduced.
- ↑ In the history of the Bank, which is here given, we follow the report of 1819 and Cheves's report of 1822, presenting the internal history of the Bank in its chronological position, although it must be remembered that the facts were not known to the public until those reports were published.
