To Nicholas Low1
My Dear Sir
I have learnt with no small pain the animosities which seem to be kindling between the adherents to the Bank of New York and the Stockholders of the Bank of the United States;2 though you will recollect it corresponds with what I expected. The little unpleasant incidents which have attended you personally are not you may be sure indifferent to me; at the same time that I have the consolation of believing they are not very material either to your interests or feelings.
But permit me to observe that foreseeing much more important consequences in a public view from a rivalship between State banks and branches, I grow more and more anxious on that subject. And let me add that the more I contemplate the present scheme of branches, the more I am led to regard the operation as ticklish and hazardous and the less do I find a solid basis on which to rest my confidence. Indeed if the plan be persisted in, in every case in which I have an option left me concerning the disposition of the public funds, I shall be sadly perplexed between my attachment to an institution which has originated with myself and my judgment of what is due to the public safety.
You recollect that when you was here I mentioned an idea of establishing branches on principles which would require a supplementary Act. The more I have reflected on those principles the more I am satisfied of their solidity and I have no doubt of the act being easily obtained.
Its object would be to enable the Bank of the United States to open subscriptions wherever the Directors thought fit to establish a branch; limiting the whole amount of those subscriptions every where to a certain definite sum. The Directors to have a preferable right to subscribe for as many shares of the Stock of each Branch as they should think fit and the rest to be subscribed by any others bodies politic or individuals.
Each branch to form a distinct Corporation but to be so organised as to be under the controul of the Directors of the Bank of the United States. The Directors of each branch, at the discretion of the Directors of the Bank of the United States, to be either wholly appointed by them or partly chosen by the Stockholders of the Branch & partly appointed by the Directors of the Bank of the United States.
The Directors of the Bank of the U States to have power to invest so much of the Capital of each branch as they may think fit in public stock.
The advantages of this plan will be the following—
1 Greater security and solidity; as the whole would not be liable for every part, each part being a distinct Corporation whose mismanagement could only affect its own funds and not involve the Main Institution.
2 Greater acommodation to the Community by uniting in one Center all the Banking Capital employed and removing the apprehensions which will naturally arise out of a state of competition & rivalship & which will be apt to check the operations of each Bank.
3 The avoiding the political parties which will naturally grow up in the monied interest from rival banks under Fœderal & State authorities; as an opportunity of uniting will be afforded to the State banks.
4 Appreciation of the intrinsic & permanent value of Bank Stock by giving greater security to the operation and inspiring more absolute confidence at home & abroad.
5 Additional profits, from the greater energy which will result from a more combined and extensive Capital, free from the restraints of an unfriendly competition.
The opposite of this last Idea, I am aware will be apt on a superficial view to prevail; but I plege myself the event will prove it is not well founded. In the first place I am persuaded that the present specie Capital of the Bank of the U States will be found inadequate to the demand for loans. In the second place if state banks exist they will divide the business with the branches & neither will dare to act with as much vigour as if there was no enemy in the neighbourhood. In the third place if the capital is found to exceed the use for it, the surplus can be invested in public stock and while a future profit on the Capital may be derived from a judicious investment of it the interest of the Stock produced by the part of the Capital so invested will serve to increase the profits on the whole operation.
I could add a thousand things to prove the eligibility of the plan but I have not time to enlarge. I would you would turn it maturely in your mind, and I am sure that if you think it a good one, no little irritation from what has happened will prevent your affording your hearty cooperation. Adieu My Dear Sir
Believe me always truly Yrs
ALS, The Andre deCoppet Collection, Princeton University Library.
1. Low was a New York City merchant and a shareholder and director of the Bank of New York.
2. An authority on this subject has written: “The Bank of New York … after finally obtaining a State charter (March 21, 1791), had proceeded in August to enlarge its capital stock almost three-fold to $900,000, reserving 300 shares or $150,000 for ownership by the Bank of the United States. When the offer was formally made in November 1791, the directors of the National Bank declined to accept on the ground that such a purchase was prohibited by the terms of its charter. Inter-corporate stock-ownership being thus outlawed, there remained the possibility of interlocking directorates; but the practice, although not entirely unknown, does not seem to have become common” (James O. Wettereau, “The Branches of the First Bank of the United States,” The Journal of Economic History, II [December, 1942], Supplement, 75).