From Fisher Ames
Boston August 15th 1791
I have heard that the Bank of N York propose to reserve a number of their shares for the acceptance of the U. S. Bank, so as to create a kind of partnership.1 Tho’ little seems to be known of the particulars, yet it is insinuated that the idea is suggested under your patronage.2 When I wrote you last,3 I was ignorant of all this. Tho’ the Bank is to govern itself, yet your opinion of the proper arrangements will, & ought to, have weight.
It is proper you should know how pliant our Massa. Bank wd. probably be found, & what is thought here of blending the general and local Banks. This is all the use that I suppose can be made of my letters—for you are so much and I so little an actor in this Affair that I do not ask your correspondence.
I think that any connection between the Banks wd. be generally disagreeable in this quarter.
I think also that this (Massa) Bank is in the best disposition in the world, ready to give up the ghost, and take a chance for a resurrection as a branch, which will be a joyful one, because the stockholders have a sure & certain hope of getting more Money in their future than their present state. Tho’ a few receive the idea of abolishing the Mass. Bank with great repugnance, yet so many more own shares in the U. S. Bank to a greater Amot., they hope so much from the one and despond so totally of the other, that the present sanguine moment seems to be the critical one. Tho’ this Bank never had much popularity, yet it may hereafter be courted by a certain faction to give weight & activity to their party, by their reputation & property. Other passions & persons may displace the present & change the aspect of things. I draw my information from persons who well know the temper of the stockholders & who have great merit in having prepared them for dissolution. Indeed, with their connections, they are able to carry a major vote.4
I know that you are as much an Unitarian in politics as I am, and therefore the reflections which this representation has produced in my mind will rise in your’s without my suggesting them.
No proper means of strengthening the Govt. shd. be neglected. The Bank has been justly considered as one of the best. But it’s efficacy will essentially depend on events posterior to it’s legal establishment. It’s uses to trade and to the Govt. can exist in the highest degree only in case of it’s engrossing the whole business. The state Banks by dividing, not only take away part, but by opposing they will impair the value of the remainder. They are at liberty to issue Bills at pleasure. Their power, used ever so discreetly, will be an evil, and overcharge the channels of circulation, inasmuch as the issues of the U. S. Bank will be sufficient to fill them. If the latter should forbear, it’s capital will lie idle, and it’s rivals will fill the space it may have chosen to leave vacant. But suppose these rivals should want discretion, and, eager for profit, should multiply their bills unduly. This, it is true wd. be at their own risk, perhaps loss, and perhaps ruin. They wd. do a great deal of mischief, however, in the mean time. They wd. pour forth a torrent of paper money as baleful as a pestilence. Industry wd. sicken.
But without proceeding to extremes so hazardous to themselves, they might increase their paper to a point that wd. be injurious to the national Bank. The Massa. Bank under less favorable circumstances has acted this part. With a capital, buildings &c included, of 100,000 Dols., it has pushed it’s operations as far as possible.5 The dividend of 16 or 18 per Cent proves that they have done much with little. The seeds of public confidence in banks have been lately sown and the state institutions will not fail to gather part of the crop. They may issue bills very freely without much risk. So cheap an augmentation of capital wd. enable them to give longer credit and better terms than heretofore—and, if the national paper should be exchangeable only at Philada, in some measure to exclude it’s currency. In that proportion, the U. S. Bank wd. lose part of it’s profits, trade of it’s facility & Govt. of it’s resource. For the capacity of the Bank to aid Govt. must be measured by the prosperity of the former.
It is true that the increased paper of the state Banks might be rapidly returned upon them because of it’s limited currency. But that may also be equally true of the national Bank paper. The latter, if managed with prudence & skill, wd. probably gain the ascendant at last. The political good effects wd. be delayed however, and some of them might never take place. The scramble of rival Banks wd. sharpen the acrimony of party humours, which at this moment are dulcified by the cream of speculation.
My corollary, or to proceed like a divine, my impr⟨ove⟩ment from all this preaching is, that the present is the most fa⟨vo⟩rable time for making progress with the Bank—that Sub⟨-Banks,⟩ if a safe plan for establishing them could be devised, and ⟨this⟩ I am told some knowing ones have no doubt, wd. be adequate to the object in view—and that any union connection of the general and local Banks wd. be inauspicious. It wd. give life, too long life, to those who are ready & willing to die. Like parasite plants having no root of their own they wd. subsist by sucking the sap from their supporter. They are rivals and I think cannot be partners. To apply a remark of your’s on another occasion not dissimilar, it is establishing a qualified Anarchy—and that too in a system whose perfection is simplicity.
I make no doubt that you wll discern in my remarks that I have not the best means of judging of my subject, and that I have not made the best use of what I possess. For in truth I do not know the principles on whh the supposed ⟨union⟩ of Banks is to be contemplated. I am sure however that you will hold my leading principle as important as I do.
As I impose upon you the task of only reading my letter, you see I do not scruple to make it a long one.
The late rise of paper and bank stock, tho now declining,6 has excited no small share of envy among those who might have made money by it, yet did not. But the fact redounds to the honor of the public counsels; and in that view, it seems to have it’s full effect.
The price of paper being above par evinces the solidity of the principle on whh you founded your system of finance—as it shews the reduction of the rate of interest to be in fact as well as theory a fair ground of bargain with the creditors. I congratulate you on the vindication of the basis of your plan which some, even of your friends, treated as untenable. But a triumph of a nobler kind is found in the situation of our country. The body politic is certainly in high health. It’s enemies, it’s friends, chance & design seem to have conspired in it’s favor. The very poison of the amendments has been food to it. Weak men feel their fears subside, sanguine men their hopes realized. The federal tree was in blossom almost as soon as it was planted. It is very lately that they have seen it bear fruit—and such fruit as makes their mouths water. They see too that tho every Antifederal puff has shaken it, the motion has given new vigor to the roots.
By seeing the effects of your public duties, you get rewarded for having performed them. With sentiments of respect and attachment, I am, dear Sir, Yr very hble. Srvt
P.S. The subscription for Mrs W’s poetry7 is closed and the Books are on sale for the Booksellers benefit. Tho I had told her husband that you had desired me to subscribe to the work on your behalf, yet I think it wd. be a departure from your intention to do anything in the matter, under these circumstances.
We have you exhibited here in Wax. You see that they are resolved to get money by you in every form.
ALS, Connecticut Historical Society, Hartford.
1. Ames was a Federalist and a member of the House of Representatives from Massachusetts.
Following the incorporation of the Bank of New York under a charter granted by the state legislature on March 21, 1791, there was a rapid expansion of the bank’s stock.
On August 7, 1791, Christopher Gore wrote to Rufus King: “The post of last evening bro’t news that the Bank of New York had completed their number of Shares & that the Directors had reserved three hundred Shares, intending to offer them to the Governor & directors of the National bank—that, by this measure, they hoped to prevent the establishment of a branch from the National Bank in your city” (Charles R. King, The Life and Correspondence of Rufus King [New York, 1894], I, 400–01).
2. It cannot be stated definitely whether or not this plan originated with H, but it is clear that he favored some form of association with the state banks. See H to William Seton, November 25, 1791; January 18, 24, 1792. In addition, on August 20, 1791, Seth Johnson, a New York City merchant, wrote to Andrew Craigie: “Mr. Seton informed me that in a Conversation he had with Mr H. the latter observed it was difficult to say what plan the National directors would pursue—he seemed to approve of this Bank offering the 300 shares—this in Confidence” (Davis, Essays description begins Joseph Stancliffe Davis, Essays in the Earlier History of American Corporations (“Harvard Economic Studies,” XVI [Cambridge, 1917]). description ends , II, 56).
4. On June 23, 1791, the stockholders of the Massachusetts Bank voted that the directors be authorized to purchase two hundred and fifty shares of the Bank of the United States.
5. There was a sharp rise in the circulation of the bank’s notes in 1790–1791. The average amount of notes in circulation per week rose from $264,707 in 1790 to $487,000 in 1791. In the first half of 1791, circulation increased markedly, and by August 15–20 the average amount of notes in circulation per week was $637,159. See N. S. B. Gras, The Massachusetts First National Bank of Boston, 1784–1934 (Cambridge, Massachusetts, 1937), 597–601.
6. On July 4, 1791, the authorized stock of the Bank of the United States was oversubscribed. In the following weeks the price of public securities rose in a spectacular fashion. On August 11 there was a break in the security market in New York City, and on the following day its effects were felt in the Philadelphia security market. The sharp decline in security prices was halted on August 17.