31 Aug. 1816.
Your favor of the 25. inst. has been received. All the answers to the Treasury proposition, for a partial renewal of payments in coin, are in the negative, except from the New-England Banks. I select a few of these, for your information; and I add the communications made officially to me, of the result of the proceedings of the Convention of Bankers at Philadelphia. Be so good as to return the letters to the Treasury, as I must frame and publish a reply, to meet the public expectation, as well as the future enquiries, of Congress.
The hope of any co-operation of the State Banks is at an end. They act upon their own interests and policy; and the Government must, also, take an independent course. But I do not think, that any thing further can be attempted by the Executive, at this time. Coercive measures towards the Banks, must, unavoidably, prove oppressive ⟨mea⟩sures towards the people; and the only relief which the People can procure for themselves (a suspension of the payment of taxes) must prove destructive to the revenue. The plan of co-ercion, which you are so good as to intimate for consideration, would, probably produce an explosion; and certainly would depreciate the Bank Notes, so as to affect, materially, their value in the Treasury, as well as in circulation. It would, also, increase the quantity of floating debt, which it is the great aim of the Treasury to reduce and exinguish. But the conclusive reason against its adoption, is the want of power to issue Treasury Notes, while the medium, in which the revenue is collected, is abundant for the payment of every local demand, in the States, in which the Treasury Notes would be issued.
Under every view of ⟨the⟩ situation, I submit to you that the non-cooperation of the Banks may be ⟨as⟩signed as a reason for not persisting in the proposition to introduce partial payments in coin; but that the notification of the general resumption of coin payments on the 25. of February be formally made.
The revenue accumulates, far beyond our wants, in New-York, in Philadelphia, and in Baltimore. Its accumulation in the Southern and western States, may be considered, as equal to our wants. In the eastern States, the revenue ⟨is⟩ almost entirely paid in Treasury notes; but the absorption of the revenue has greatly reduced the outstanding amount of Treasury notes, and the local currency (coin) of those States must soon be employed in the payment of duties and taxes. This effect will increase the clamour, upon the differences of the medium of payment in the different States; but it will enable the Government to meet its engagements, without an insidious augmentation of the 7. per cent. funded debt, in the only portion of the Union, whose local currency has hitherto been out of our reach.
Since the adjournment of Congress, and, more particularly, since the accumulation of the revenue, in the manner which has been mentioned, my object has been to render our funds as active as possible, in paying whatever could be paid. The issue of Treasury Notes has been confined to the payment of demands, where the Treasury did not possess the local currency; and the issue has not been great. The subscription to the Loan of 1815, the collection of the impost, and the direct payments at the Loan Offices, have brought a large amount of Treasury Notes into the Treasury to be ⟨ ⟩ed; and the two last instruments are working Still, with accelerated force. The dividends on the funded debt, both at home and abroad, have been amply provided for; and all the temporary Loans have been, or will be shortly, paid, except the balance of the loans in Massachusetts. The temporary Loans were effected, principally, by the War Department, and formed a very considerable aggregate. The concluding operation will be settled at Washington, by applying the surplus of the appropriation for the Sinking fund, beyond the permanent charges, to the purchase of Stock, wherever it is below par, and the Treasury can command the local currency. By all these means, I hope we shall be able to compensate, in a great degree, for the losses sustained upon our payments in the Eastern States; and to reduce the amount of our Bank credits, So as to suffer the least possible inconvenience, when the Bank of the United States shall become active.
The National Bank grows in the public confidence. I believe its immediate uses will be as great, as was anticipated by its most Strenuous advocates. Under a prudent and Skilful Director, acting in concert with the Government, it will restore the national currency, and destroy the artificial differences of exchange. But I look with peculiar pleasure to the establishment, as furnishing a machin⟨e⟩ to frustrate the usurpations of ⟨th⟩e State Banks, and to retrieve the Constitutional powers of the Government, over the coin and currency of the nation.
I shall proceed to Washington by tomorrow’s Stage. It will give me some satisfaction to be informed there, whether you have made any definitive arrangements, on the succession to the Treasury. I am, Dear Sir, most respectfully & faithfully, Yrs.
A. J. Dallas
I inclose Mr. Carroll’s offer to sell, or to give, a plt. for the Observatory. It will be safest to postpone a purchase until Congress meet. The acceptance of a gift Should, perhaps, receive the Legislative Sanction. You will be so good as to decide upon the answer.
DLC: Papers of James Madison.