should be no bank notes under $20, and a large part of the circulation should consist of coin. For the next ten years there were, therefore, four schools of opinion and four systems of currency contending for the mastery: the national bank system, the local deposit bank system, the bullionist system, and a government inconvertible treasury note system.
For a short time in the summer of 1834, the currency was in a very sound condition. The Bank of the United States was, by the necessity of its position, under strong precautions. The local banks, by their efforts to meet the Treasury requirements, were stronger than ever before. In May it was said that there was more specie in the United States than ever before.[1] Silver was imported during the fiscal year to the valueof $3.7 millions. A statement which pretended to give the ratio of circulating paper to specie in the different States showed that, with the exception of Tennessee, Mississippi, Maine, Connecticut, Massachusetts, and South Carolina, the ratio was under 7 to 1.[2]
This, however, was a mere transition. As we shall see in the next chapter, the effect of the transfer of the government money to the local banks was that their number was greatly increased and a bank inflation was produced.[3] The state of things which existed in the summer of 1834 passed as mere phenomena of transition.
November 5, 1834, Secretary Woodbury informed the Bank of the United States that the Treasury would not receive branch drafts after January 1, 1835. This led to a spirited correspondence with Biddle in which the latter defended the drafts as good, both in law and in finance.[4]
In the message of Jackson recapitulated all the old complaints against the Bank and recommended that its notes should no longer be received by the Treasury, and that the stock owned by the nation should be sold. January 10, 1835, Polk introduced a bill to forbid the receipt of notes of the Bank of the United States at the Treasury, unless the Bank would pay at once the dividend which had been withheld in 1833. Bills were also proposed for regulating the deposits in the deposit banks, but no action was taken on any of these matters, and the session was fruitless as to banking and currency. The Committee on Finance of the Senate was, however, ordered to investigate the specie transactions of the Bank.
In the message of 1835, Jackson referred to the war which, as he said, the Bank had waged on the government for four years as a proof of the evil effects of such an institution. He declared that the Bank belonged to a system of distrust of the popular will, as a regulator of political power, and to a policy which would supplant our federal system by a consolidated government. Thus at the end of the Bank war we meet again with that allegation in regard to the constitution and purpose of the Bank as a plutocratic engine, which Ingham had formulated in his letter to Biddle, October 5, 1829.
