From Samuel Smith
Baltimore Augt. 8th. 1810
The Branch Bank has notified the Presidents of the Banks in this city, that on monday they had received orders from the Bank of the U. S. directing the Branch Bank to commence immediately the lessening their Discounts and to call in immediately the money that may now be due, or hereafter become due from the different Banks.
The declared object is safety to themselves, and may be to create such an outcry & such difficulties to men in Commerce, or largely engaged in Manufactures as will tend to compel Congress to renew their Charter.1 The drawing into the Vaults of the Bank of the U. S. specie to the amount of Ten Millions, may be attended with some inconvenience, but not at any time, so much as has been estimated—at this time less than for many years past. Trade being circumscribed by the Belligerents, leaves scarcely so much commerce for our pursuit, as will fully employ the actual capital of the Merchants, so that, men heretofore largely engaged in trade feel themselves now perfectly at ease; nor do I apprehend any danger to Commercial men from that amount of specie being locked up: but it may tend to lessen enterprize, & thus injure the price of our Exports.
To prevent this injury (to a greater amt. than the Capital of the Bank) is in the power of the Executive.
The Deposits belonging to the Treasury, now in the Bank cannot be less than four millions, and the payments will daily be making for Bonds that will become due, and which are deposited in the different Branch Banks of the U. S. The payment of those Bonds are a perpetual drain from the Vaults of the State Banks. From this drain it is in your power to releive, by directing the Secretary of the Treasury to draw (& that without delay) into some of the State Banks, the money collected or to be Collected by the U. S Bank; this will have a twofold operation: It will prevent the Bank of the U. S from accumulating more specie than the amt. of their Capital, and it will enable the State Banks (to which the Treasury transfers their funds) to discount for those persons, whose Discounts will be curtailed in the U. S. Banks under the late order.
I have been informed that Mr. Gallatin has on a former occasion transferred a part of the public money from the U. S Bank to the Manhattan Bank;2 so that he has found it can be done without any great inconvenience.
Commerce has certainly been harrassed, but it is a fact that in this city the Merchts. have made money since the Embargo. I know only one exception.
Permit me to add that if this course should not be pursued, (or some other that will prevent the injury resulting from the collection of the Bonds made by the Bank of the U. S. and it’s Branches,) there will be members of Congress who will attribute it to improper motives, and who will beleive that the Secretary of the treasury was thereby favoring the institution. We certainly had better have no such institution, if the consequence is, that it can awe the Government at it’s pleasure. Excuse the frankness with which I write & beleive me to be with sincerity & truth Your friend & Servt.
NB. A Ship just arrived left Bordeaux on the 8 June, the Sally (intended to Come from St. Sebastian for Genl. A.) had not arrived but was daily expected. A very intelligent Capt. whose Vessel & Cargo were seized & sold, Conjectures, that there is a well founded hope, that the property will all be restored, he forms this Conjecture from their being very particular in the sales, and from their Compelling him to attend & take an Acct. of the Sales of his Cargo—the Vessel is not yet up—there are on board he says Despatches for Govt. from Genl. A.
RC (DLC: Rives Collection, Madison Papers). In an unidentified hand with emendations, signature, and postscript in Smith’s hand. Docketed by JM.
1. In April Congress had postponed a decision about rechartering the Bank of the United States until its next session. In the interim, enemies of the bank, of whom Smith was among the most prominent, leveled charges against it of concealed profits and mysterious operations. Smith had significant connections with state banking interests in Maryland and was to vote against recharter in 1811 (see John R. Smith to JM, 3 Feb. 1810, n. 2; Cassell, Merchant Congressman in the Young Republic, pp. 165–69; Hammond, Banks and Politics in America, pp. 211, 220; James O. Wettereau, “New Light on the First Bank of the United States,” Pa. Mag. Hist. and Biog., 61 : 268).
2. Smith was probably referring to Gallatin’s decision to allow the Manhattan Company to remit government funds to London in 1805. The effect of this decision was to increase the deposits of the Manhattan Company at a time when it was in danger of suffering from a shortage of specie and the hostile activities of a rival bank, the Merchants Bank of New York (Hammond, Banks and Politics in America, pp. 159–60, 202–6).