Thomas Jefferson Papers

Enclosure: John Melish to James Madison, 7 February 181[1]


John Melish to James Madison

New york 7 Feby 1810 [1811]


Having had occasion to study the Trade of the United States with1 Europe for a series of years past, I am now of opinion that it has reached a Crisis which calls for a new system of Political Economy in this Country: and a few general ideas have occurred to me on the subject, which I shall do myself the honour of stating to you.—My determination is accelerated by a consideration of the Peculiar2 manner in which the Government of the United States is situated regarding the Bank Charter.

To illustrate my subject I shall take a short glance of the Commerce of the United States with Europe—as it was—As it is—and as it will probably be hereafter.—

I consider it of no importance to the argument to refer to Public Documents to ascertain the precise amount of what this Commerce has been; I shall therefore assume as a data that when uninterrupted it stood nearly as follows—

Exports to Britain $20.000.000—  
 Do to the Continent  33.000.000 $53.000.000—
Imports from Britain  43.000.000
 Do from the Continent  10.000.000 53.000.000—
Balance in favour of America by the Continental Trade 23.000.000—
 Do Against America by the British Trade 23.000.000—
Revenue arising from Imports from Britain 7.500.000—
 Do arising from Imports from the Continent 1.500.000—

It hence appears that the United States have been chiefly dependant upon the Continent of Europe for a market, and that the Government have been chiefly dependant upon the Imports from Britain for Revenue.—

Now, that the Commerce of the United States has been, by the injustice of the Belligerent powers of Europe, interrupted for a number of Years—the Continent is almost compleatly sealed up to the American Trade.—The British Market is compleatly Glutted with American produce, some of which is selling at less than ds of the value, and that often not paid for.—Bills of exchange are returning to An immense extent, and the Merchants are failing in numbers.—Produce calculated for the European Market has declined in price in this Country, and many who considered themselves wealthy will probably be ruined by the shock.—The United States Revenue has fallen short, which has afforded matter of triumph to the political3 oponents of the Government; and these oponents, in conjunction with a foreign faction, have unceasingly villified the party in power as the cause of evils which they have laboured Incessantly to prevent.—Meantime many new branches of Manufactures have sprung up, but they have not advanced so rapidly as could have been wished because the Country has not hitherto been in a state for giving them that active support to which they are well entitled.—

And it does not appear that any favourable change in the foreign Trade is to be expected soon.—The policy of the European powers evidently is to render the Continent independant of Foreign Commerce; and this System I fear they will rigidly act upon.—A Trade with Britain without the Continent would be ruinous, for it would bring the balance against America to the extent of 4 or 5 Millions of Dollars—Annually.—American produce would find a ruinous market in Britain if confined to it alone.—But indeed the Commercial distress of that Country is such, that it is to be feared it will be a long time before they be in a Capacity for carrying on a favourable trade with Any Country.—

It is of little consequence to enquire into the cause of the interruptions which Commerce has sustained.—I may just remark that it appears to me that the chief cause is to be found in the rapacity of the British Fleet, and the violent hatred which the British Court bear to Republican principles.—Actuated by a mistaken policy they have Cut the sinews of a Commerce in which their own nation were the principle gainers, and now they are the principle sufferers.—It is probable that in the course of this spring a change of councils may take place in Britain, and I would not be surprised if that should bring about a General peace.—Should that be the case America may Again enjoy a considerable portion of foreign Commerce.—But that is uncertain, and at any rate, I consider the present Revolution of Commerce (for such it really is) to be too far gone to be stopped in its progress.—It must go on, and if the present period be properly improved by the American Government, they will render an essential service to their Country by making it really independant; and to Republican principles, by fixing them upon a Rock never to be shaken.—

I consider it the duty of every genuine republican, who has his Countrys good at heart, to contribute his aid at this important Crisis.—With a view of contributing mine I beg leave to address myself immediately to the Chief Magistrate.—Whether what I have to say is of Any value is most respectfully submitted to his judgement.—

It is my opinion that the government of the United States should as soon as possible lend their attention to the following circumstances.—

1st So to plan the Revenue that the Government will not be dependant upon foreign Commerce.—

2d So to order monied institutions as that they may not be baneful to Republican principles, and to institute such a Bank as will be beneficial to Commerce generally—with out respect of persons, and in particular which may be useful in promoting manufs and internal Commerce.—

3d So to order national property as that it may become a fund for opening up and improving the Country by constructing Roads Bridges & Canals.—

On the first branch my remarks shall be short.—The present duties on imports ought I think to be continued, and some of them may perhaps with propriety be encreased.—Whether the encrease should be general appears questionable; and indeed on some few articles I am rather inclined to think they should be reduced.—We may safely calculate that the Imports will be considerable under any circumstances; but I think it will be neither wise nor prudent to trust exclusively to that source alone4 for the Federal Revenue.—It places the Country too much at the Mercy of Foreign Powers.—It causes the Best interests of the Country—that of internal industry—to be overlooked and neglected; and it furnishes the enemies of the Republic with arguments against its prosperity.—But internal Taxes are objectionable also.—It is difficult to Collect them, and the Collectors would, in such a Country as this, be very apt to abuse their powers.—I shall condescend upon what I think would be a considerable fund in another part of this letter, and shall close this part of the subject by remarking, that perhaps the best method of providing against any deficiency would be to make an arrangement with the Individual States, that each might furnish its quota, according to its number of inhabitants; and this could be done by simply augmenting the state Taxes a little, in case of necessity.—There may be objections to this plan which I am not aware of; but were it practicable, it would, I think, be a very effectual one.—Little or nothing would probably be wanted from the individual States, but were a law passed making provision for such support in case of necessity, it would effectually put a stop to the expectations of a foreign government, and their adherents,—that the Government of the United States would be beat into schemes derogatory to the interest and honour of the Country, in order to raise revenue.—

On the second branch I shall be more Ample, because it embraces the Banking System on a National Scale, and on Republican principles; a correct view of which is essentially necessary at the present period, not only on account of the change which has taken place in the Commerce of the Country, but also on account of the expiry of the Charter of the present United States Bank.—

Concerning this Bank I shall in the first place say a few words.—It consists with my knowledge that it has been conducted with a shameful partiality.—That it has been made subservient to Anti-republican principles; and to the interests of a foreign government, who have unceasingly endeavoured to maintain an undue influence in this Country:—That the great benifits to be derived from a paper Circulation have been principally transferred to foreigners, of avowed hostility to Republican Government That the managers of the Bank have generally been men of high aristocratic principles, who, during a great part of the time the Charter existed, never failed to vilify and abuse the very government to which they were indebted for their aristocratical Consequence.—It is true they have of late a good deal lowered their tone, but the motive is known.—Let them but get a renewal of the Charter for 20 Years more, and we will soon see the old game5 played over with accelerated effect.—But it is impossible, surely, that such an institution can be allowed to exist in the Republic.—The Charter ought not to be renewed under any modifications whatever; and I am glad to observe that there is likely to be a sufficient knowledge of the subject, and sufficient republican virtue in the Legislature to put a stop to its operations.—

Conceiving that the Charter will not be renewed, I shall now proceed to state what I think should be the Outlines of the plan of a new National Bank;—calculated to Consolidate and strengthen Republican principles; to encourage and support manufactures, and internal Commerce; and to bring a large revenue to the public, to whom the profits of a paper circulation should exclusively belong

1st The Capital Stock to be furnished wholly by the United States Government.—It may be either limited or not; and the Govt may be authorized to borrow money to raise it, in case of need.—

2d The Bank to be established at Washington, and the Directors and other Office-Bearers to be appointed by the Legislature—

3d A Branch to be established in every state in the Union, with consent of the respective State Governments, who may be allowed a certain share in the nomination of the managers.—

4 The Whole notes to be issued at Washington, and to have a general circulation through the Union.—

5 The Bank and its branches to Accomodate the public by Discounting good notes at legal interest.—

6 The institution to be so arranged as that there may be a general exchange throughout the Union, by the branches drawing on each other—6

8 The Bank and its branches to bring their Books to a balance Annually, previous to the meeting of Congress.—To report the profits and present state of the Institution to the President of the United States, to be by him laid before Congress, and published.—

7 The Bank to be Cashiers for the Federal Government; To Collect the Revenue; and to have the use of the surplus—

9 And to superintend the Management of the whole Agents may be appointed to inspect the Bank’s Branches, as often as may be judged necessary—To devise the best plans of making the Institution beneficial to the Community; and to make such reports, from time to time, to the President of the United States—as they may judge proper.—

These are the general outlines of a national bank, adapted to the present state of this Country, as they have occurred to me, and being pretty well acquainted with the principles of Banking I should be very glad to go more into detail were it to be of any value to the Community.—Of this you can judge.—Meantime I shall notice a few objections which may be urged against establishing such a Bank.—

I shall begin with the popular one—“The Bank should be unconnected with the Government.”—This is an argument derived from Britain, and is applicable to the state of that Country, but not of this.—In Britain the executive is hereditary, and supported by an Hereditary Aristocracy.—Of Course they have a separate interest from the Community, and the patronage of monied institutions is, in their hands a dangerous weapon.—But in the United States, where the whole branches of the Government are elective, the people have very little to dread from an abuse of patronage; or if any abuse should occurr, every succeeding election gives them an opportunity of correcting the evil.—In fact the argument lyes the other way.—The plan of establishing Banks independant of the Government is dangerous to Republican principles, as it has an evident tendency to raise up a monied Aristocracy.—Besides, the whole profits of a paper Circulation ought to belong to the Community at large; and there is no way of managing this so well as by putting Banking Institutions under the immediate Controul of their legitimate Office-Bearers.—I am so Clear upon this point,7 that I think the Individual States should establish State Banks upon the same principles as I have pointed out for the National one, and grant no Charters.—If monied Men chuse to combine together and form Banking Institutions, let them do so; but let them have no peculiar priviledges, and let their whole property be responsible for their transactions.—

The Constitutional Objection of the right of the United States to establish branches, is done away by the plan of establishing them with Consent of the State Governments.—

The next objection is the want of Capital.—It is a very weak one, and can only be urged by those who are grossly ignorant of the principles of Banking, or wilfully blind to the power and resources of this Country.—As a preparatory step to meet the argument I shall advert to the nature of Paper Currency.—

Paper Currency, under proper regulations, is superior to all others for internal Circulation.—It is created at little expence.—It is easily transferred from place to place.—It can be more easily secured against fire or depredation than the precious metals, and tho; lost, or destroyed, the loss falls upon the last possessor only—the issuer is a proportional gainer.—To be under proper regulations it ought to be the representative of substantial property; and be exchangeable, on demand, into the precious metals—these being the Universal Currency.—

Now, no paper Currency, in this Country, could be so Substantially backed as that issued by a Bank belonging to the United States; for it would actually be the representative of the whole property in the Country;—and none could have so extensive, or so respectable a circulation; for every individual in the Community would have an interest in it.—And a very small sum of the precious Metals is sufficient to serve as the basis of a paper Circulation.—I knew a Banking Company in Scotland who with a Capital of £20,000 Stg put £250,000,000. in circulation; and I am convinced that a United States Bank properly organized, could do even more than that.—It is quite a mistaken notion that every Dollar of paper-money should have a corresponding hard Dollar in the Vaults of a Bank.—Were this the case a real loss would be sustained by the Banking business.—But the case is far otherwise.—As already stated, a very small sum of the precious Metals is sufficient as a basis, particularly where an extensive Circulation may be calculated on, which would be the case with the Notes of this Bank:—And I am of opinion that a sum equal to 10 times the amount which would be wanted, could be raised by the U.S. Govert at Any time, and that without being obliged to have recourse to foreigners at all—whose voice being heard in a Bank is a disgrace to the Country.—

The only other objection I shall notice at present is—“The Danger of changing an established System for one New and Untried”—The objection has some weight, and contains the strongest arguments that can be used for continuing the old Bank Charter.—But objections of this kind have their limits, and must always be viewed in connection with existing Circumstances.—If allowed to be set up as mere bug-bears, their tendency is to put a stop to all improvement in the State of Society.—The arguments against renewing the old Charter are insuperable.—A new system is imperiously called for by the present state of Commerce, and during the change measures can be adopted to guard against any inconveniences that would be apt to arise out of it.—A reasonable time may be allowed the old Bank to wind up its affairs, and during this period the new Bank can be organized, so as its notes may supply the place of the old paper, as fast as it is withdrawn from Circulation.—The establishment at Washington, if the plan should be adopted, will of course be entirely new; but the Bank at Philadelphia and its several branches may all be converted into branches of the new Bank.—In short I think matters might be so conducted as that very little inconvenience would arise at and any little that might occur would soon be amply made amends for by the superior advantages that would result from the new Bank.—

 The profits that would arise from this Institution Annually would probably exceed $2.000.000
 The Duties on Imports and Tonnage continued with certain modifications will probably exceed} 10.000.000

These will of themselves form a considerable Revenue, and it may soon come to be greatly Augmented by a judicious application of the Public Lands—which leads me to notice

The Third General Topic— the Improvement of the Country by constructing Roads, Bridges, and Canals.—In my opinion the National Lands is an ample fund for this purpose, and they should be exclusively devoted to it.—The funds arising from the Lands, as fast as sold, should be laid out on these improvements, and the tolls levied upon them, when Constructed, would soon form a very considerable portion of the National Revenue; and this would be a permanent fund, which would not only promote the national prosperity, but would encrease with its encrease.—

These are great national Topics, and the subject presents a fine field for active exertion.—I hope I will not be deemed presumptuous in laying my opinions concerning them before you.—There are many others, no doubt, who are much abler, and have better opportunities of investigating the subjects than me: But I have also devoted a considerable attention to them, and having a little leisure time at present I should be very glad to have an opportunity of applying it to the benefit of my adopted Country.—Should this letter Merit your notice I beg leave to observe that I can give the most satisfactory references both as to the correctness of my principles and Conduct.—

I have seen and conversed with your worthy predecessor, Mr Jefferson, to whom, out of respect, I have sent a Copy of this letter.—I have communicated it to no other—

With sincere wishes for your Welfare, and for the prosperity of our Country—I remain with much esteem and high Consideration—

sir Your mo: ob. Ser

John Melish

My address is “John Melish New york”

Tr (DLC: TJ Papers, 189:33665–70); entirely in Melish’s hand; misdated; at head of text: “James Madison Esq.” and “Copy.”

1Preceding four words interlined.

2Manuscript: “Pecular.”

3Word interlined.

4Word interlined.

5Manuscript: “glame.”

6Melish numbered the following two points thus in manuscript, with the “8” reworked from “7” and both numbers preceded by an “x.”

7Word interlined.

Index Entries

  • Bank of the United States; and renewal of charter search
  • Bank of the United States; opposition to search
  • banks; J. Melish on search
  • canals; in U.S. search
  • Congress, U.S.; and renewal of bank charter search
  • Great Britain; J. Melish on search
  • Madison, James; letter to, from J. Melish search
  • Melish, John; letters to J. Madison from search
  • Melish, John; on banking search
  • taxes; J. Melish on search
  • United States; trade of search
  • Washington (D.C.); proposed national bank at search