Memorandum from Albert Gallatin
[18 June 1802]
The Bank of Pennsylvania applies for relief—they fall regularly 100,000 drs. per week in debt to the Bank U. States, on account, as they say, of the deposits on account of Government made in the last. For a sketch of their situation compared with that of Bank of U. States, see the within paper—Their cashier is here come on purpose for assistance. In addition to the effect of Governmental deposits it is evident that they have extended their discounts too far. They say that these cannot at once be curtailed without ruining their customers who consist chiefly of retail shop-keepers. Those for whom the Bank U. States discounts are generally importers—There are but three means of affording them relief—1st Write to Bank United States to spare them—2dly Deposit 300,000 dollars with them, or direct collector Philada. to deposit part of his public monies with them—3dly Contract with them for part of Dutch debt, which, as we always pay considerably before hand, will have the effect of a deposit—I have proposed the last; but if we cannot agree on terms, should either of the two other modes be adopted? It is proper to prevent the exclusive monopoly in hands of Bank United States; but it is not proper to displease them, because they place instantly our money where we may want it from one end of the Union to the other, which is done on the tacit condition of our leaving our deposits with them, and because if we shall be hard run & want money, to them we must apply for a loan—
MS (DLC); undated; entirely in Gallatin’s hand; addressed: “The President of the United States”; endorsed by TJ as received from the Treasury Department on 18 June and “bank of Pensva” and so recorded in SJL. Enclosure not found.
The Pennsylvania legislature incorporated the BANK OF PENNSYLVANIA in 1793, thereby implementing a plan developed by Gallatin, as a member of the Ways and Means Committee in the state House of Representatives, to establish a bank with a relationship to the state government similar to that of the Bank of the United States and the federal government. The Bank of Pennsylvania was capitalized at $3,000,000, with one-third of the stock owned by the state. The state legislature appointed six of the twenty-five bank directors. Gallatin believed that the interest paid on the bank stock would provide the state with income to cover regular government expenses (Raymond Walters, Jr., Albert Gallatin: Jeffersonian Financier and Diplomat [New York, 1957], 43–4; Acts of the General Assembly of the Commonwealth of Pennsylvania, Passed at a Session, which was Begun and Held at the City of Philadelphia on Tuesday, the Fourth Day of December, in the Year One Thousand Seven Hundred and Ninety-Two [Philadelphia, 1793], 323, 325–6).
CASHIER: Jonathan Smith. A 30 June letter from Samuel M. Fox, president of the Bank of Pennsylvania, convinced Gallatin that his fears regarding the bank were unfounded. Gallatin informed Fox on 6 July that his apprehensions were “owing to the erroneous impressions I had received from my verbal communications with your Cashier.—The differences you state in the account of specie and in those for notes with other Banks affect materially the inferences I had drawn.” Before the error was evident, Gallatin had advised Fox that if the bank needed to raise specie, the sale of some of its U.S. stock “was more eligible, and would be more effectual than a retrenchment of discounts” (Gazette of the United States, 19 Jan. 1802; Gallatin, Papers description begins Carl E. Prince and Helene E. Fineman, eds., The Papers of Albert Gallatin, microfilm edition in 46 reels, Philadelphia, 1969, and Supplement, Barbara B. Oberg, ed., reels 47–51, Wilmington, Del., 1985 description ends , 7:302; Vol. 35:705n).