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Communicated to the House of Representatives February 5, 1823.
Mr. Rochester, from the Committee appointed on the 13th ultimo, and instructed, by a resolution of the House of Representatives adopted on that day, to inquire into the expediency of continuing in force for a further term so much of the act entitled “An act regulating the currency within the United States of the gold coins of Great Britain, France, Portugal, and Spain, and the crowns of France and five franc pieces,” passed on the 29th day of April, 1816, as relates to the crowns of France and five franc pieces, reported on that subject:
That by the act of the 29th of April, 1816, these coins were declared to be a tender for the term of three years; the crowns at the rate of 117 6-10 cents per ounce, and the francs at the rate of 116 cents per ounce. The former had been made a tender by two earlier acts, which had been allowed to expire. Foreign gold coins ceased to be a tender on the 1st November, 1819, and on the 3d of March, 1819, the act of the 29th April, 1816, was continued in force, so far as related to crowns and francs, until the 29th April, 1821. On the 3d March, 1821, it was further continued in force, to the same extent, until the 29th April next. From assays lately made at the Mint the value of these coins, per ounce, has been ascertained to be greater than that of Spanish milled dollars, and of American silver coins.
It is believed the acts above referred to were passed with little or no opposition, and that no complaints have been made respecting their practical effects; and when we take into view the increasing difficulty of fulfilling engagements by specie payments, which is the inevitable consequence of the acknowledged diminution of the aggregate amount of our metallic medium during the current year, the expediency of continuing crowns and five franc pieces a tender for a further term forces itself upon the minds of your committee more strongly than at any former period.
It is believed that the gold coins, both foreign and domestic, have been almost wholly exported. They have certainly been withdrawn from circulation to such an extent that some very intelligent writers have asserted, with every probability of being correct, that there is not now in the United States one gold coin for every thirty that were in the country five years ago. Without inquiring into the causes which have produced this extraordinary drain, it may be added that they have, likewise, operated, to rid us of American and Spanish milled dollars to nearly the same extent, and have left in the country scarcely any of its usual metallic currency, except that which consists of the crowns of France, five franc pieces, and those silver coins which are of denominations less than a dollar.
In corroboration and illustration of the foregoing statement, your committee beg leave to subjoin a few well ascertained facts:
There is, and has been for many months, an uninterrupted and rising demand, in our seaport towns, for all descriptions of gold coins and dollars, for the purpose of remittances to foreign countries. It is well known that the former are never underrated in any country, whilst the Spanish milled dollars have a universality of circulation exceeding that of any other coin. The American dollar is received in the East Indies at from one and a half to two per cent. less than the dollar of Spain. There is very little foreign demand for five franc pieces, and none for crowns.
The balance of specie and bullion exported from the United States during the fiscal year ending on the 30th of September last, according to the custom-house entries, amounts to $7,434,634; but it is supposed that the law prohibiting the landing of specie, without a previous entry at the custom-house, particularly that which comes from countries where its exportation is forbidden, is sometimes evaded. Whether this surmise be true, and to what extent, the committee will not undertake to say, nor does anything beyond an allusion to it fall within the scope of the present inquiry. But when it is recollected that the amount of specie exportations may also be underrated, from a portion of it going out of the country without entry, it requires no great stretch of credulity to believe that the balance against the United States for the said year amounts to at least six millions of dollars.
There is no reasonable ground to suppose that the account current has assumed a more favorable aspect for the last four months; and there is less doubt that the said balance was made up principally, if not altogether, of gold coins and of dollars.
In consequence of the high rate of all foreign exchange, especially that of England, which has for a long time vibrated from 10 to 12 per cent., it has been confidently asserted that some of the banks in the largest commercial city in the Union, in conducting which great skill and foresight have generally been discovered , have at this time on hand a greater amount of crowns and five france pieces than of all other descriptions of specie; and that none of them have much gold of any kind, and scarcely a single American or Spanish dollar.
Your committee have no reason to believe that a better state of things exists in either of our other cities, with the exception, perhaps, of Philadelphia, the proximity of whose moneyed institutions to the Mint affords them some little additional facilities in procuring coins in cases of emergency; and not including the Bank of the United States, which possesses a decided advantage over all the others, on account of the revenue deposits; yet, notwithstanding such an immense advantage, this bank, at one time, found it necessary to import quantities of foreign coin, specially with the view to meet any possible exigency which might press upon it.
As one among the many proofs that might be adduced to show the extent and rapidity with which specie has been banished from the United States, the committee submit a statement, which they think will not be contradicted, that the specie in the Boston banks, which, in January, 1821, appears to have amounted to nearly two and a half millions of dollars, was, in June last, reduced to $406,275. It is impossible to state, with any certainty, the comparative extent of the whole diminution in the United States; but many commercial men estimate that about one-third of all the specie in the country left it in the course of the last year.
Should the act of Congress making the crowns and francs a lawful tender be suffered to expire at this time, and any serious or large demand be suddenly made upon the banks, they might find it extremely difficult, not to say impossible, to meet it. Such an event would be highly injurious, and it might, therefore, be dangerous to degrade their present metallic capital. Even now, with what they have in their vaults, they are frequently subjected to unpleasant embarrassments in providing for the demands which are occasionally made from one commercial place on another; and it is believed that, for nearly a year past, their principal support and credit have been derived from mutual forbearance, superinduced by mutual wants and a community of interest.
To prove that these conjectures are not fallacious, the committee will not go beyond the banks in the District of Columbia, under the immediate eye of Congress. By a schedule of the situation of the eleven banks in this District, contained in a report submitted to Congress in April last, it appears that at that time, with capitals exceeding, collectively, $5,000,000, they had an aggregate of $955,712 in notes in circulation, and only $262,187 of specie in all their vaults.
Under the present state of the money market, should it long continue as it now is, a formidable reaction must ensue, by the depreciation of all property, the withdrawal from circulation of most of the safe paper medium, and the consequent bankruptcy of very many of our most enterprising merchants.
Whether banks have been productive of more good than evil it is not necessary to inquire; but it may be stated that they are now so completely fastened upon the community, and their credit is so intimately connected with the moneyed interests of the country, and any shock they might experience would be so severely felt, that it would seem to be the policy of the General Government to afford them support compatible with the discreet exercise of its exclusive power to regulate coins. Past experience and present exigences clearly demonstrate that we cannot yet dispense with the use of foreign coins, although it was confidently predicted, thirty years ago, by some of our statesmen, that their beneficial tendency would be superseded by the operations of the Mint within the space of three years.
The committee are aware of the inconvenience of using a variety of coins, unequal in their purity; but cannot resist the conviction that, as a temporary expedient, it would be wise in Congress to extend its fostering care to the banks, by assigning a determinate legal value to the almost only coins now remaining in their vaults.
There is another consideration which ought, perhaps, to be adverted to. If the act making crowns and francs a tender be suffered to expire, the banks, with the exception of those at Philadelphia, will be compelled to transport those coins to the Mint, at great expense and some risk, for the purpose of being converted into American coins; and when that shall be done, their new character would give them an immediate passport to Europe. The committee therefore conclude that, while it is admitted that the rate of exchange is heavily against us, the precious metals rapidly vanishing, stocks going abroad, property depreciating, and insolvencies multiplying, every inducement should be held out for the importation of specie and bullion, and for the retention of that which our capitalists now possess.
The committee have prepared a bill continuing crowns and five francs a lawful tender, as heretofore, until the 4th day of March, 1825, which they ask leave to report.
Treasury Department, January 30, 1823.
Sir: In reply to your letter of the 15th instant, requesting my opinion of the expediency of prolonging the continuance of the Mint at Philadelphia, I have the honor to state that, in my opinion, a due regard to the public interest requires that that establishment should be continued for some time longer at Philadelphia.
The present state of the currency, also, justifies the conclusion that the act of the 3d of March, 1821, continuing in force for the term of two years so much of the act of the 29th of April, 1816, as makes crowns and five franc pieces of France a legal tender in the payment of debts, ought to be continued for a limited period.
I remain, with respect, your most obedient servant,
WM. H. CRAWFORD.
Hon. Wm. B. Rochester, Chairman of the Select Committee, &c.