CHAPTER XI. Philadelphia-Financial Crisis.-Payment of State Dividends suspended.-General Distress and private Losses of the Americans. -Debt of Pennsylvania.-Public Works.-Direct Taxes.-Deficient Revenue.-Bad Faith and Confiscation.-Irresponsible Executive.-Loan refused by European Capitalists in 1842.-Good Faith of Congress during the War of 1812-14.-Effects of Universal Suffrage.-Fraudulent Voting.-Aliens. Solvency and good Faith of the Majority of the States.-Confidence of American Capitalists.-Reform of the Electoral Body.—General Progress of Society, and Prospects of the Republic. Philadelphia, January to March, 1842.-WISHING to borrow some books at a circulating library, I presented several dollar notes as a deposit. At home there might have been a ringing of coin upon the counter, to ascertain whether it was true or counterfeit ; here the shopwoman referred to a small pamphlet, reedited "semi-monthly," called a "Detector," and containing an interminable list of banks in all parts of the Union, with information as to their present condition, whether solvent or not, and whether paying in specie, and adding a description of " spurious notes." After a slight hesitation, the perplexed librarian shook her head, and declaring her belief that my notes were as good as any others, said, if I would promise to take them back again on my return, and pay her in cash, I might have the volumes. It often happened that when we offered to buy articles of small value in shops, or fruit in the market, the venders declined to have any dealings with us, unless 172 FINANCIAL CRISIS. CHAP. XI. we paid in specie. They remarked that their change might in a few days be worth more than our paper. Many farmers and gardeners are ceasing to bring their produce to market, although the crops are very abundant, and prices are rising higher and higher, as if the city was besieged. My American friends, anxious that I should not be a loser, examined all my dollar notes, and persuaded me, before I set out on my travels, to convert them into gold, at a discount of eight per cent. In less than four weeks after this transaction, there was a general return to cash payments, and the four banks by which the greater part of my paper had been issued, all failed. A parallel might perhaps be found for a crash of this kind in the commercial and financial history of England, or at least in some of her colonies, Australia, for example, where the unbounded facility afforded to a new country of borrowing the superabundant capital of an old one, has caused a sudden rise in the value of lands, houses, and goods, and promoted the maddest speculations. But an event now occurred of a different and far more serious nature. One morning we were told that the Governor of Pennsylvania had come in great haste from Harrisburg, in consequence of the stoppage of one of the banks in the city, in which were lodged the funds intended for the payment of dividends on state bonds, due in a few days. On this emergency he endeavoured to persuade other banks to advance the money, but in vain; such was the general alarm, and feeling of insecurity. The consequent necessity of a delay of payment was announced, and many native holders of stock expressed to me their fears, that although they might obtain the dividend then actually due, it might be long before they received another. At the same time they declared their conviction, that the resources of the State, if well managed, were ample; and that, if it depended on the more affluent merchants of Philadelphia, and the richer portion of the middle class generally, to impose and pay the taxes, the honour of Pennsylvania would not be compromised. It was painful to witness the ruin and distress occasioned by this last blow, following, as it did, so many previous disasters. Men advanced in years, and retired from active life, after success in business, or at the bar, or after military service, too old to migrate with their families to the West, and begin the world again, are left destitute; many widows and single women have lost their all, and great numbers of the poorer classes are deprived of their savings. An erroneous notion prevails in England that the misery created by these bankruptcies is confined chiefly to foreigners, but, in fact, many of the poorest citizens of Pennsylvania, and of other States, had invested money in these securities. In 1844, or two years after my stay in Philadelphia, the Savings' Bank of New York presented a petition to the legislature at Harrisburg for a resumption of payment of dividends, in which it was stated that their bank then held 300,000 dollars, and had held 800,000, but was obliged to sell 500,000 at a great depreciation, in order to pay the claimants, who were compelled by the distress of the times to withdraw their deposits. The debt of Pennsylvania amounted to about 8,000,000l. sterling, nearly two thirds of which was held by British owners; and as a majority of these belonged to that party which always indulged the most 174 DEBT OF PENNSYLVANIA. CHAP. XI. sanguine hopes of the prospects of the American republic, and estimated most highly the private worth of the people and their capacity for self-government, they suffered doubly, being disappointed alike in their pecuniary speculations and their political views. It was natural, therefore, that a re-action of feeling should embitter their minds, and incline them to magnify and exaggerate the iniquity of that conduct which had at once impugned the soundness of their judgment, and inflicted a severe injury on their fortunes. Hence, not a few of them, confounding together the different States, have represented all the Americans as little better than swindlers, who, having defrauded Europe of many millions sterling, were enjoying tranquilly and with impunity the fruits of their knavery. The public works executed with foreign capital are supposed by many in England to yield a large profit on the outlay, which is not the case in any one of the delinquent States. The loss or temporary suspension of the interest even of one third of the above-mentioned debt, in a country like Pennsylvania, where there is a small amount of capital to invest, and that belonging chiefly to persons incapable of exerting themselves to make money, a country where property is so much divided, and where such extensive failures had preceded this crisis, inflicts a far deeper wound on the happiness of the community, than the defalcation of a much larger sum in Great Britain would occasion. When we inquire into the circumstances which have involved the Pennsylvanians in their present difficulties, we shall find that, disgraceful as their conduct has been, their iniquity is neither so great, nor the pros pect of their affairs righting themselves so desperate, as might at first sight be supposed. Every holder of Pennsylvanian bonds is undoubtedly entitled to assume that "there's something rotten in the state of Denmark," and to observe to any traveller who extenuates the delinquency of the State, "the better you think of the people, the worse opinion you must entertain of their institutions." How, under a representative form of government, can such events occur in time of peace, and, moreover, in a state so wealthy, that an income tax of 13 per cent. would yield the two milions of dollars required,* and where the interest on the bonds was not usurious nor unusual in America-unless the majority of the electors be corrupt or grossly ignorant? It appears that in the year 1831, when Pennsylvania borrowed a large sum for making railways and canals, she imposed direct taxes for seven years, for the express purpose of regularly paying the interest of her debt. It was hoped, from the experience of New York, that, at the expiration of that term of years, the public works would become sufficiently profitable to render it unnecessary to renew the tax. The inhabitants went on paying until the year 1836, when the government thought itself justified in remitting the burden, on being unexpectedly enriched by several large sums from various sources. In that year they received for granting a charter to the U. S. Bank of Pennsylvania 2,600,000 dollars, and 2,800,000 more for their share of monics which had accumulated in the treasury of the Federal Government, arising out of the sale of public lands, and then divided among the States. It was calculated that these funds would last for three years, and that the * Tucker's Progress of the U. S. 1843, p. 210. |