The Papers of Roger Brooke Taney

Baltimore Nov. 5. 1833. My dear friend

Being about to leave Baltimore for some days, I feel myself bound to redeem my pledge before I go – I have no idea that I shall present be able to present any new views to thee on the subject of substituting State Banks as the agents of the government, in the place of the Bank of the United States, and its branches – But as I have for many years been opposed to the present Bank of the United States, both on account of its unconstitutionality and inexpediency – it may be expected that I have devoted some time to the consideration of a substitute for that establishment, which will afford equal safety and facility to the public, without encountering the objections to which that Bank is so justly obnoxious. 

In giving to the subject, the consideration to which its great importance entitles it, it has appeared to my mind that the purity of the currency, and safety of the public funds, in the hands of the agents of the government, are the primary objects to be attended to in any new plan that may be devised – the regulation of Exchange being a subject, that, like all other commercial operations is conducted with the greatest measure of public benefit, when unembarrassed by legal restraints, and left open to the greatest degree of competition – for a power to regulate exchange, necessarily implies a power of monopoly2 somewhere – a power which never fails to be abused by persons who enjoy it – not less in currency and Exchange than in Bread or any other article of necessity.

The fact that the coinage of money and regulation of its value is confided to Congress by the Constitution, and the prohibition, by the same instrument, to states to make any thing, but coined gold and silver a tender in the payment of debts, seems clearly to limit the power of Congress over the currency, to its action upon money, as known to the Constitution, that is, money coined and its value regulated, under the laws of the general government. The fact that the general currency of the country is, in reality, Bills of exchange, or contracts, entered into, under the laws of the states, and dependent upon the certainty, with which those laws can be enforced for its Purity, seems to place beyond the power of Congress, any right to legislate upon this description of currency unless it be in under their power to pass Bankrupt-Laws. 

It cannot, and ought not to be disguised however, that there is danger that the purity of that description of currency issued under the laws of the states, will become impaired in consequence of the facility with which Charters are granted for Banking companies by the several State Legislatures – 

With reference therefore to these views, I will communicate the result of my reflections upon the subject of a system, which, if carried into effect, may obviate all the3 objections that can be urged against laying down the Bank of the United States, and at the same time afford to the government, ample surety for the safety of the public money, and a sure pledge that the general currency shall not be impaired in purity. In the first place, I would suggest that, the general government should select as the depository of the public money in each state, such Bank or Banks as would agree to give the security for to the Treasury Department for the safe keeping and proper application of the public money, of the State itself, or some other state of the Union, by a deposite of transferable Certificates of Loans, which in case of necessity might be sold, to make good any defalcation on the part of such Banks. The Bank or Banks thus situated would derive such advantages from the use of the public money that the States themselves would wish to become participators in the profits, and would either form connections with the Banks already established by increasing their capitals and becoming stockholders, and paying their subscriptions in Loan Certificates, which certificates the Banks would hypothecate with the Treasury, as security for the public funds, or they would create new Banks, and become stockholders in them in the same way. In either case the effect would be the same, certain Banks in each state would be brought under the patronage of the State, and would be nurtured by it, to the exclusion of other Banks, which, if already in existence, would be permitted to wind up their concerns when4 their Charters expire, and no new Banks would be chartered by our Legislatures, because if created they would be competitors with the Banks from which the State may derive an important revenue, and which would be diminished in proportion as competitors for deposites and circulation of currency were created. I would expect this result to grow out of the measure of requiring security, while the notes of such Banks as gave security would receive a general credit, by their reception every where in payment of all debts to the government while the government would be secure in their reception, because it would hold stocks of the states, amply sufficient to redeem, if sold, all the notes of the Banks which might come into its hands. It moreover would be necessary that the Treasury department should hold a control over the amount of issues of such Banks as it gave this general credit to, for the purpose of guarding the community against imposition.

The Treasury Department would of course be a central and controlling power to which reports from all the Banks would be made, as is now the case, and the duties of those Banks, in relation to the government business would be prescribed by the Treasury department according to the exigencies of the case.

It seems to me, that the general government will have done all that it has a right to do, in relation to the regulation of Exchange, when it gives a general credit to Bank notes, by receiving them in payment everywhere, and when it requires the public funds to be transmitted from point to point in the United States at par. – that every thing else in relation to Exchange and currency belongs5 to the states, and must be incidentally regulated by the general competition in trade, and universal experience has proved that where there is no monopoly, or great contracting controlling power, that the effect of competition will reduce prices to the very smallest measure of profit, that will justify its prosecution – 

The general interest which each state will have in the use of the public funds in this way, would, I suppose, form an important bond of union between themselves and the general government, which would have a very salutary effect in sustaining the institutions and prosperity of the nation – But I think the exaction of security from the Banks must be the basis of any system, adopted by the general government, that will be the permanent in its nature, or upon which a pure currency can be established, by the use of any thing as a medium of Exchange between the buyer and seller except gold and silver –

We have conversed so often and so fully upon this subject, and I know there is so little discrepancy in our views, that I really fear I may be considered officious in relation to it – But believing as I do, that complete success of the measures now in the act of consummation depends so much upon an unexceptionable plan being presented to Congress, for the safety and future management of the public funds, and the sustaining a pure currency with due regard to the rights of the states – I feel unwilling to withhold my views upon the subject whether they be entitled to weight or otherwise. I deem this to be a critical moment and no time for the friends of the measures adopted by the Treasury Department, in relation to the Bank of the United States, and the future 6 administration of the finances of the country, either to withhold the expression of their opinions, or shrink from any responsibility which they may be properly called upon to assume. 

For the purpose of placing the preceding letter in a form that it may be read, I have caused it to be written in the hand of one of my daughters.

I am, with great respect / thy Friend (Signed) Th. Ellicott

Letter Copy

Library of Congress, Manuscript Division, Washington, D.C.

Roger Brooke Taney Papers, MMC 2191; Folder 5

The letter is marked Copy

The letter is subscribed as Hon’ble / R. B. Taney / Washington

Copy of a letter from / Thomas Ellicott to / R B Taney. / 11 mo 5th. 1833.

Plan for the Government / in regard to removal deposits