Ohio History Journal

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ABBY L. GILBERT

 

Thomas Ewing, Sr.: Ohio's Advocate

for a National Bank

 

 

 

 

Thomas Ewing, Sr., lawyer, Ohio Senator, and Cabinet officer who asserted "we

must have a National Bank," and Abbott Lawrence, Massachusetts industrialist,

politician, statesman, and philanthropist who firmly believed "the currency of this

wide extended country never could be properly regulated without some great central

controlling power over the State banks," were very influential in the attempt to

charter a third national bank in 1841.1 The Whigs advocated a bank. From their

point of view Andrew Jackson's veto of the rechartering of the Second Bank of the

United States in 1832 had not settled the issue. Only a national bank would provide

a uniform national currency, regulate the money supply, and provide the capital

needed for sustained economic growth.

The development of a genuinely national economy was the goal of the Whig party.

Under Henry Clay, Daniel Webster, Thomas Ewing, and business leaders, such as

Abbott Lawrence, the Whig party sought to foster the growth of American capitalism

and promote economic opportunity and prosperity through government intervention

in the economy. The Whigs had a more realistic appreciation of the needs of a

dynamic economy than the Jacksonian Democrats, whose policy on the national

level, and to some extent in Ohio, was negative. They eliminated the national bank

first, and then attempted to rid the state of banks in the belief that the destruction of

all privileges would bring economic equality. During the 1830's and 1840's the

Democrats drifted toward the wholly inadequate policy of hard-money, while the

Whigs, realizing the supply of specie (coin) was insufficient to meet the demands

of economic growth, insisted upon a federal bank and on credit supplied by local

state banks.² Had the Whigs succeeded, an element of centralized control would

have been established in the financial structure of the nation's banking system, and

this control would have significantly affected the development of American capitalism.

Thomas Ewing was born in West Liberty, Virginia, December 28, 1789. Four

years later his family moved to Athens County, Ohio, where he was raised on the

 

1. Thomas Ewing to Mr. Silliman, April 19, 1841, Box 43, Thomas Ewing Family Papers,

Manuscript Division, Library of Congress; Congressional Globe, 24 Cong., 2 Sess., 272.

2. Glyndon G. Van Deusen, The Jacksonian Era, 1828-1848 (New York, 1959), xv-xvi, 50,

97-98, 118-119, 263-265; Melvyn Dubofsky, "Daniel Webster and the Whig Theory of Eco-

nomic Growth: 1828-1848," New England Quarterly, XLII (December 1969), 551-557,

571-572.

Ms. Gilbert is an economist in the Banking and Economic Research Department, Office of

the Comptroller of the Currency, U. S. Treasury Department.

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6                                                             OHIO HISTORY

 

frontier. Ewing worked for three years in the Kanawha salt works in order to earn

enough to attend Ohio University. He received the school's first bachelor's degree

in 1815. In 1816 he was admitted to the bar and went on to become one of Ohio's

outstanding legal minds. His giant intellect, logical thought, clear convincing argu-

ment, and incisive style made him a lawyer of the first rank, gaining him a national

reputation as the "Logician of the West." Also, taking an active interest in politics,

the young lawyer soon became recognized as the most eminent Whig in Ohio. Quiet,

gentle, self-controlled, courteous, dignified, and generous to those who differed with

him, Ewing was described by Daniel Webster as the best informed gentleman he

ever met.³

As a businessman Thomas Ewing had a wide range of interests. Since early man-

hood he engaged in salt manufacture, which contributed much to the economic devel-

opment of Ohio. He owned stock in railroads, purchased large coal lands, and dealt

heavily in land script. Realizing that Ohio was underdeveloped and that farmers

were unable to market their produce economically, he took a deep interest in the

building of canals and assisted in both public and private efforts. Ewing served as

one of the nine directors and for some time as president of the Lancaster Lateral

Canal Company, a private company created to dig a branch to the main Ohio and

Erie canal.⁴

Ewing was also involved in banking. From 1818 to 1829 he was Prosecuting

Attorney of Fairfield County and succeeded in breaking a counterfeit ring there.

By 1828 he was a member of the board of directors and at times handled the legal

business of the Lancaster Ohio Bank, established in 1816. He served until the

bank closed in 1842.⁵ From this position Ewing was able to experience first hand

the difficulties of banking under the prevailing nonuniform currency system, the

futility of the laws which tried to correct the situation, and the problems of supplying

development capital for orderly economic growth without a national bank.

In political philosophy Thomas Ewing was a conservative Whig and opposed the

radical antibank, hard-money Democrats. A nationalist, who recognized that the

Ohio Valley's economic interests and lines of trade bound it to every other section

of the country, he advocated internal improvements and a federal bank. Only a gov-

ernment with a policy of active participation in the economic development of the

West would bring greater prosperity to Ohio. Ewing was a strong supporter of the

protective tariff policy advocated by Henry Clay. In August 1827 the western lawyer

had actively pursued this interest at the Harrisburg Convention, called by advocates

of protection. He was one of Ohio's seven delegates who helped to form the state's

position that the farmer and mechanic were entitled to protective tariff benefits equal

to those of the merchant. The convention sent a memorial to Congress asserting that

continued prosperity depended upon a protective policy. Ewing met Abbott Law-

rence at the conference and a lifelong friendship began. When the General Assembly

 

The major sources of specie during the first half of the 19th century were trade, foreign

investment, and new supplies from domestic and foreign mines. Domestic gold and silver did

not become plentiful until after the 1840's.

3. Ellen Ewing Sherman, Memorial of Thomas Ewing of Ohio (New York, 1873), 1-30,

94-95, 100-101, 111, 119, 123-126, 179, 202, 230.

4. Paul I. Miller, "Thomas Ewing: Last of the Whigs" (unpublished Ph.D. dissertation,

The Ohio State University, 1933), 33-35, 316; Thomas Ewing, "Oration at the Commence-

ment of the Ohio Canal at the Licking Summit," Ohio Archaeological and Historical Quar-

terly, XXXIV (January 1925), 77-84.

5. Ewing to John McLean, April 18, 1828, Letterbook, pp. 54-55, Box 165, Ewing Papers;

Miller, "Thomas Ewing," 16-17, 28-29, 52, 122-124.

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Thomas Ewing                                                                7

 

elected Thomas Ewing to the Senate in 1830, he was voted onto the most important

committee of the session, the special committee on the application for recharter of

the Bank of the United States. There he became friends with Clay and Webster and

renewed his friendship with Lawrence, who was serving in the House.⁶

Abbott Lawrence was born December 16, 1792, to one of the leading families of

Massachusetts and made his fortune in the firm of A. & A. Lawrence. The Law-

rences, in association with other textile magnates, developed the cotton textile indus-

try in New England at a time when most United States merchants looked with indif-

ference if not distrust at domestic attempts to compete with the fabrics of Europe.

The industrialist realized the importance of diversification and urged the West to

develop. Lawrence early saw the products of the West and South enjoying a home

market and advocated a national bank, protective tariff, and railroads to achieve a

truly national economy. In March 1833 he wrote Henry Clay that if internal im-

provements continued there was no doubt that "this Union would be bound by ties

stronger than all the constitutions that human wisdom could devise." Liberal minded

and farsighted, a man of honor, integrity, intuitive insight, and business sagacity,

Abbott Lawrence became the most important man in the Boston community.

Since Lawrence recognized the value of uniform currency, he and other Boston

entrepreneurs established the Suffolk Bank System, a great clearing system for

redeeming bank notes which put New England's currency on a sound basis. By

rigidly controlling the extension of credit, the Suffolk Bank was able to suppress

speculative local banking. Because of this stability, state bank notes achieved so

wide a circulation in Massachusetts that the Bank of the United States, as a note

issuing institution, was not important. In 1823, five years after the Suffolk Bank was

founded, the circulation of the United States Bank was 5.5 percent of the total; a

decade later the ratio stood at $7,889,110 to $264,720, roughly 3 percent, the lowest

ratio in any of the states. Nor was the Bank important as a source of capital.⁷

By contrast, the Bank of the United States became a powerful force in the devel-

opment and prosperity of Ohio and the West. The Ohio General Assembly char-

tered twenty banks in 1816-1818, more than all the northwestern states combined.

Power of note issue was unrestricted and the state was flooded with varied and often

unredeemable bank paper. The legislature tried intermittently but unsuccessfully to

control circulation and to end unauthorized banking. The shortage of capital, most

deeply felt in Cincinnati, the Northwest's most important trade center, was critical.

Thus it was that the two branches of the Bank of the United States, one in Cincinnati

and one in Chillicothe, were accepted in Ohio.⁸

 

6. Ibid., 27, 37, 42-44, 51, 117-119, 196, 327.

7. "Mercantile Biography: Abbott Lawrence: The Man, The Merchant, The Statesman,"

Hunt's Merchants' Magazine, XXXIV (January 1856), 46-56; Hamilton Andrews Hill, Memoir

of Abbott Lawrence (Boston, 1884), 1-10, 23-33; John Quincy Adams, Memoirs of John

Quincy Adams (Philadelphia, 1876), X, 43; Jean Alexander Wilburn, Biddle's Bank: The

Crucial Years (New York, 1967), 76-78.

The Lawrence family, founders of Lawrence, Massachusetts, were never involved in invest-

ments in western banks or industry. Abbott Lawrence to Ewing, November 14, 1840, Box 41,

Ewing Papers.

8. Charles Clifford Huntington, "A History of Banking and Currency in Ohio Before the

Civil War," Ohio Archaeological and Historical Quarterly, XXIV (July 1915), 266, 271-286,

294-296, 350; Richard Terrence Farrell, "Cincinnati in the Early Jackson Era, 1816-1834: An

Economic and Political Study" (unpublished Ph.D. dissertation, Indiana University, 1967),

49-57, 64-65, 72-74, 78-80, 85.

Seven cities in Ohio, many containing old and established banks, requested a branch of the

national bank, citing expanded business activity once Ohio's canal system was completed.

Wilburn, Biddle's Bank, 58.

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8                                                                 OHIO HISTORY

 

At the outset, however, the Bank overextended and then contracted loans and

oppressed local banks through its western branches, engendering deep-seated ani-

mosities. A major source of opposition arose from the Bank's almost virtual control

of the business area of Cincinnati and rich farm lands which it acquired in liquidation

of debts as a result of the Panic of 1819. Added to this was the furor caused by the

state's attempts in 1819 to tax the Bank's branches at Cincinnati and Chillicothe.

Also, charges were made that the Bank tried to influence both the Ohio and national

legislators through loans granted to them. In later years the Bank's supply of capital

and uniform currency wiped out much of this ill will.⁹

As Ohio's economy recovered from the 1819 Panic, the need for a national bank

became greater. After 1827 the state's circulation was 4 to 5 percent of the Bank's

total note issue. In 1830 it was $649,615; by 1832, $1,130,475. The Bank's circula-

tion was usually in a one to five ratio with state issues. In 1820 Ohio banks had a

circulation of $1,203,869; in 1835, $5,221,520. The Bank contributed substantially

to Ohio's development as an important source of capital and by facilitating the flow

of capital from financial centers to the West. Between January 1811 and July 1830,

eighteen Ohio banks failed or discontinued their business, taking out bank capital of

$1,911,179, leaving only eleven banks with a capital of $1,454,386 to serve the needs

of the state. With less good banking services than Ohio's economic growth and

rapid extension of commercial agriculture required, the federal Bank's loans and

exchange dealings which financed the movement of Ohio's major exports, were

welcome. In 1825 the Bank loaned $1,939,000. Between 1828 and 1832, the nine

offices of the West and Southwest increased their loans from one-third to one-half

of the total granted by the Bank. Ohio's share was 8.4 percent, a monthly average

of loans outstanding of $3,539,390, in 1830; 8.3 percent, $5,508,725, two years

later; and 7 percent, $3,519,180, in 1834. Ewing told Congress in 1832:

This bank [Bank of the U. S.] was little needed in that portion of our country where capital

has been accumulating for ages, and therefore abounds. It was not wanted in Boston . . .

but in the West.... In these sections of our country ... accumulated capital ... cannot,

exist; and there, of all places else, is there need of capital.... By lending freely in this

youthful section of our country [the Bank] did wisely . . . for the general benefit of the

nation.10

Revisionist studies show that the Bank of the United States had a limited

potential to be a central bank but did not fully utilize its tools. It did carry out the

central banking functions of supplying a uniform currency and being an efficient

 

 

 

9. Ralph C. H. Catterall, The Second Bank of the United States (Chicago, 1903), 51, 62-67,

77-91, 96-99, 113, 223-224, 249-255, 380-381, 401-411, 418-419, 430-446, 451-452; Wilburn,

Biddle's Bank, 47-51, 64, 131.

10. Catterall, Second Bank of the United States, 137-141; Henry Adams, ed., The Writings

of Albert Gallatin (Philadelphia, 1879), III, 356-358, 362-364; Wilburn, Biddle's Bank, 49;

Davis R. Dewey, The Second United States Bank (Washington, D.C., 1910), IV, 200; House

Executive Documents, 21 Cong., 2 Sess., No. 63, pp. 8-79; ibid., 23 Cong., 1 Sess., No. 523,

pp. 74-145, 218-247; Senate Documents, 23 Cong., 2 Sess., No. 8, pp. 2-43; Register of

Debates, 22 Cong., 1 Sess., VIII, 1249, 1254-1255.

Loans in Ohio are taken to be those granted by the branch bank in Cincinnati and the

agencies in that city and Chillicothe. Loan data is figured from the monthly statements of

the bank.

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Thomas Ewing                                                                9

 

fiscal agent,¹1 and it is highly probable that the Bank would have continued its

development into a true central bank if its charter had been renewed. It did succeed

admirably in providing a national currency by increasing the total issue of its own

uniform notes and by returning state bank notes for redemption in specie, in Bank

notes, or in bills of exchange. Because state bank notes were redeemable, they

became sound and tended to circulate at par. The quality of the money supply was

also improved after 1820 by stricter state laws relating to specie redemption and to

the development of inter-bank balances which made notes redeemable in distant

places. For many reasons Ohio bank notes were considered to be more sound than

other western bank notes. Between 1821 and 1834, the Bank of the United States

and the banks of Ohio supplied practically all the bank notes for the West that

circulated beyond state lines. This was because the great number of bank failures

in the depression of 1819 precipitously reduced the banks which issued notes. Those

institutions which remained, notably the state chartered banks in Illinois and Ken-

tucky, issued irredeemable bank notes which did not circulate beyond their imme-

diate locality.¹²

The Bank of the United States was able by its size also to affect the economy and

to offset small changes in the money supply mainly by varying its own currency.

However, the Bank was limited in regulating economic expansion and contraction

because it was not the sole supplier of currency nor the sole reservoir of specie.

Evidence shows that against notes and deposits banks maintained small specie

reserves, the circulation issued was not sensitive to the amount of specie on hand,

and an observable contraction of specie did not lead to a contraction in notes or

deposits. What local banks seemed to fear was that the national Bank would all but

exhaust their supply of specie. Analysis reveals that the Bank behaved more often

as a large, powerful commercial bank than as a central bank. That is, instead of

acting counter cyclically it acted cyclically and, with its size, exacerbated expansion

or contraction. Some countercyclical behavior was necessitated by the Bank's desire

for self-preservation and profit rather than the achievement of national monetary

stability. Many state banks would not have needed its aid if the Bank had not

acted drastically on its own behalf first. The Bank's treatment of the Ohio banks

in the crisis of 1818-1819, when it suddenly called in a tremendous sum of loans,

is an excellent case in point. Only twice did the Bank utilize its rediscounting tools

and act as a true central bank: during the contraction of 1828-1829 and part of the

expansion of 1829-1833. Once it acted as a lender of last resort--in the contraction

of 1825-1826.13

If the Bank of the United States was not a true central bank, why did Thomas

 

 

11. David G. Hayes, "The Second Bank of the United States as a Central Bank" (unpub-

lished M.A. thesis, Brown University, 1959), 1-15; Joseph Van Fenstermaker, The Develop-

ment of American Commercial Banking: 1782-1837 (Kent, 0., 1965), 75-76; Harold Barger,

The Management of Money (Chicago, 1966), 22-23.

12. Hayes, "Second Bank of the United States," 6-8, 11; Catterall, Second Bank of the

United States, 96-97, 113, 430; Barger, Management of Money, 19-21; Fenstermaker, Ameri-

can Commercial Banking, 28, 36, 39, 42-45, 90-91, 94.

Section One of an Ohio banking law passed in the Ohio house on January 6, 1821, provided

that "every bank" which shall refuse to redeem its notes when presented for payment in

specie, "such refusal shall be, and the same is hereby declared to be a forfeiture of the

charter of such bank." Ohio, House Journal, 1820-21, p. 239.

13. Hayes, "Second Bank of the United States," 10-20, 33-41; Fenstermaker, American

Commercial Banking, 69-76, 99; Barger, Management of Money, 23.

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10                                                            OHIO HISTORY

 

Ewing and the Whigs want it? The Whig position held that Congress made a national

bank the agency responsible for monetary policy and that the bank should utilize its

powers in the public interest to supply a uniform currency, regulate credit, provide

as well as attract capital, and stabilize economic growth.¹⁴ Ewing's main concern

in 1832 was the recharter of a properly restricted national bank that would provide a

universally convertible currency and capital and would regulate but not oppress the

local institutions. He opposed weakening the Bank's role as a fiscal agent and refused

to set what he considered a poor precedent of paying interest on volatile government

demand deposits. And he voted against requiring state assent for the establishment

of branches.

Thomas Ewing's major contribution to the new charter concerned the Bank's

circulation, which he wanted to be acceptable at par everywhere. He thus objected

to limiting payment of $50 notes and less only at the branches where issued. The

Ohio Senator introduced the amendment in 1832 which provided that although a

note was payable only at a particular branch, it was to be received by the Bank at

any of its offices if tendered in payment of any balance due the Bank from the state

banks. Horace Binney, the Bank's lobbyist, communicated to Ewing that the Bank's

president, Nicholas Biddle, did not wish the amendment adopted. Whereupon Ewing

told Binney that he was "determined upon this clause" and warned him that "many

of the Western members would not vote for the renewal without some such clause."

The amendment would end the slight depreciation which existed when notes were

redeemed and would insure strict convertibility everywhere, thereby resulting in

freer circulation. The Bank's ability to place a measure of limited restraint over state

bank issues was weakened, however, because the state banks could draw specie for

notes not issued by the particular branch at which the notes were offered. This would

tend to increase the state bank reserves on which more notes could be issued.¹⁵

In 1832 Ewing reflected the sentiments of most Ohioans who felt the national bank

was needed to insure continued economic development of the West. Claims that the

state banks resented the federal institution are simply not true in Ohio after the effect

of Nicholas Biddle's policy, which increased capital in the West, became noticeable.

Support for the Bank remained strong in Cincinnati and local bankers did not

actively oppose the branch. Citizens signed sixteen petitions, and four large state

banks sent memorials to Congress praying for recharter. An Ohio Democrat ex-

pressed a widespread feeling when he asserted: "Refuse to re-charter the bank, and

Pittsburgh, Cincinnati . . . and New Orleans, will be crushed at one blow."16

The vote on recharter showed that the West favored a national bank. Ohio's

Whig Senators, Thomas Ewing and Benjamin Ruggles, voted yes. In the lower house,

ten of the state's Representatives voted yes, three against and one was absent. It

was not a strictly party nor sectional vote; of those favorable, six were National

Republicans and four were Democrats, and they were representative of all the

 

 

14. Richard H. Timberlake, Jr., Money, Banking, and Central Banking (New York, 1965),

159-160, 167.

15. Register of Debates, 22 Cong., 1 Sess., VIII, 948, 964, 980, 989, 1007, 1021, 1045;

Horace Binney to Nicholas Biddle, February 14, 1832, Vol. 31, Nicholas Biddle Papers,

Manuscript Division, Library of Congress; Catterall, Second Bank of the United States, 236-

237, 429.

16. Farrell, "Cincinnati in the JacksOn Era," 50-51, 74, 78-85, 230; Wilburn, Biddle's Bank,

37, 45, 51-53, 63-65, 129, 131-135; Arthur Schlesinger, Jr., The Age of Jackson (Boston,

1946), 77-78.

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Thomas Ewing                                                               11

 

economic regions of the state. All opposed were Democrats. The President vetoed

the bill.¹⁷

In a lengthy speech on July 11, 1832, Ewing attacked a number of the major

points in Jackson's veto message and listed what he felt were the major benefits of a

national bank. He showed that the Bank's borrowers were "the young, the active, and

the enterprising"--not the rich as Jackson had claimed. The Ohio Senator declared

the national bank's ability to attract foreign capital was of great importance. "Ought

we to complain that foreigners come here and lend their money or invest their

capital? ... [D]oes Ohio feel grieved that her stock is owned in ... London? No

such thing. It is, of all others, that which advances our prosperity." In fact, lack

of capital prevented the United States from competing with foreign manufactured

goods.¹⁸

Ewing argued further that the Bank's loans had financed much of Ohio's growth

and the calling in of these loans would affect the state banks and set back economic

development since there was no longer any free capital available for banking. "[T]he

necessities of the country do at present require this institution. .... [The] bank ...

is the ... invigorating principle of our whole moneyed system .. . [T]here is no bank,

and no individual . . . whatever be his occupation . . . but is, in a greater or less

degree, directly or indirectly, connected in and through his daily avocations with the

Bank . . . and its issues." The shipment of specie to Europe, as foreign capital was

repatriated, would cause severe pressures on the money market. Ohio's banks,

pressured for specie, would stop lending and would be forced to withdraw their

issues, causing a drastic fall in prices.¹⁹

Andrew Jackson's veto of the national bank charter and the Panic of 1837 and

ensuing seven-year depression had economic and political consequences of great

significance in Ohio. The first effect was a rapid expansion of the money supply,

but one that consisted of a varigated currency which fluctuated in value in proportion

to the distance from the place of redemption. A second result was high exchange

rates. And, third, capital became less available. Efforts to improve the currency

affected the supply of capital since note issue served currency, credit, and long-term

capital functions. Thus the expansion of banks in the 1830's differs from the standard

interpretation that state banks rushed to fill the vacuum created by the demise of

the federal bank. Instead, the increase in the number of chartered and reorganized

banks reflected the great scarcity of capital and a need beyond that supplied by the

national bank and the eleven state banks. In 1839 Ohio had thirty-five authorized

banks. At the same time a significant amount of banking was carried on by about

thirty unauthorized banks opened in response to the critical conditions caused by

the depression. Eastern capital, attracted by the canal regions and as a way of

 

17. Wilburn, Biddle's Bank, 6-9, 133; House Journal, 22 Cong., 1 Sess., 1074-1075.

18. Register of Debates, 22 Cong., 1 Sess., VIII 1252-1254. Foreign loans were the least

burdensome way of acquiring capital for the state's canal program.

The Bank of Cincinnati concurred in Ewing's analysis which was in contravention of the

typical Jacksonian line derailing the small ownership of stock in the West (712 shares in

Ohio). Senate Documents, 22 Cong., 1 Sess., No. 68.

19. Register of Debates, 23 Cong., 1 Sess., X, 301-329, 1291-1295, 1597-1599, 1728-1729,

1781-1782; ibid., 22 Cong., 1 Sess., VIII, 1256-1257.

As a member of the powerful Finance Committee, Ewing assisted in the final investigation

of the Bank of the United States in late 1834. He inquired into the trade and currency of

the West, distributing a questionnaire covering twenty points. The final report approved the

Bank's policies. Senate Documents, 23 Cong., 1 Sess., No. 17.

• 8
 

12                                                              OHIO HISTORY

 

profiting from the speculative land boom, made possible much of the bank expansion.

By 1833, $3.3 million of $4.7 million of banking capital in Ohio was owned by

nonresidents; in 1840, one-half was foreign owned.²⁰ As the banks were forced to

diversify their limited resources, capital became less available and in all probability

helped to prolong the depression.

Western banks faced two major problems which grew progressively more acute

after the national bank closed: maintenance of circulation and preservation of specie

reserves. Without bank notes there would have been very little money in circulation.

Financial success thus was dependent upon the ability to keep notes circulating, and

banks resorted to all sorts of schemes to prevent their notes from returning for

redemption. Political influence was used to have the state distribute a particular

bank's notes far from the home office. Cooperative efforts whereby two distant banks

circulated their notes in each other's cities were also effective.²¹ The prospect of a

large and unexpected demand for specie was an ever-present danger for the banker

operating without a central bank to which he could turn in an emergency. Deliberate

intra-state bank warfare and specie raids added to the hazards of western finance.

Loans were often affected by a desire to protect as well as increase specie reserves.

Not only was a customer's credit worthiness and collateral taken into account, but

also consideration of where the money was to be spent, with an attempt to ensure

a slow return of notes for redemption or an increase of specie through repayment

in eastern funds.²²

An important part of the credit demand was related to the export of the agricultural

surplus to eastern and southern markets. The ability of Ohio's banks to lend often

determined whether business was done or shipments made at all. Between 1839 and

1843 discounted bills of exchange, important financial instruments for the export

trade, were between 31 and 43 percent of total loans. Local banks were forced to

divert over a third of their scarce capital to a sector once financed by the national

bank. Had a federal institution been able to supply this capital the local banks would

have been able to finance other sectors of the economy.

Western banks helped to support the rapidity of migration and settlement. They

also had a great deal to do with the speculative land boom and the bunching of

projects in a short time. Many long-term loans, often based on government deposits

and extended after a small percentage was repaid, were used for improvements, and

the credit terms offered were attractive to settlers. The land boom was drastically

curtailed in 1836 when President Jackson issued the Specie Circular. This directive

required payment in coin for public lands. Ewing fought to rescind this measure

because it threw purchasers into the arms of speculators who would accept bank

notes. Other burdens placed on the state banks were the considerable demands for

capital made by the internal improvement agencies, both public and private.²³

Thus by 1840, without the national bank and with the stability of the state banks

 

20. Carter H. Golembe, "State Banks and the Economic Development of the West, 1830-

1844" (unpublished Ph.D. dissertation, Columbia University, 1952), 2, 50-51, 210-212, 217,

220-226, 230-240; Paul B. Trescott, Financing American Enterprise (New York, 1963), 16-17,

22, 25, 264-265, 268; Harry N. Scheiber, "The Commercial Bank of Lake Erie, 1831-1843,"

Business History Review, XI (Spring 1966), 49-54, 63-65.

21. Golembe, "State Banks," 54-55, 58-62a, 65-66, 74-79, 213n, 249; William E. and Ophia

D. Smith, A Buckeye Titan (Cincinnati, 1953), 240-253, 270, 276, 296, 300, 311-312.

22. Golembe, "State Banks," 62a-73, 117, 225, 249; Smith, Buckeye Titan, 243-244, 288-292.

23. Golembe, "State Banks," 81-84, 89-101, 112-124, 135-139, 143-149, 154-167, 187, 207-

208, 225-239, 249; Congressional Globe, 24 Cong., 2 Sess., 10, 17, 35, Appendix, 11-14.

• 9
 

Thomas Ewing                                                              13

 

in doubt, a need was increasingly being felt for the establishment of a central banking

facility to restore order to the chaotic financial conditions. Whigs and Democrats

each recommended solutions to the crisis, solutions that were to have important

repercussions on American financial and banking history. There was a great

divergence as to the meaning and direction of America's development. Whig doctrine

declared that a balanced economy, financed by bank credit, was essential to economic

development of the country. The Democratic party was seriously split by the

depression which enabled the doctrinaire hard-money faction, hostile to the develop-

ment of a business community, corporations, banks, and paper money, to gain

control nationally and in Ohio. These radical hard-money Jacksonians blamed the

depression on the banks' inflationary extension of credit. Their solution was the

establishment of the Independent Treasury under which the Government would be

completely divorced from the banks, and they worked for the end of the banks in

Ohio. The conservative or soft-money Democrats, on the other hand, held that the

banks must be better regulated, political influence in the granting of charters stopped,

the issue of notes by any but chartered banks forbidden, and the circulation of small

notes restricted. The only effective reform in Ohio was pioneering legislation passed

in 1839 providing for three state bank commissioners to make surprise visits to the

banks once a year to examine their books. Political animosities and deeply held

views prevented passage of long-term, realistic, and meaningful reforms.²⁴ To

Thomas Ewing, who asserted that Democratic hard-money policies were inadequate

for the growth of Ohio and America, this situation only increased the urgency for

a national bank.

The excitement of the Whig campaign in 1840 found wide appeal because of its

diversions from the pressures of America's first major depression. Ewing, one of

the Whig's foremost orators, and Lawrence showed great enthusiasm for William

Henry Harrison because he would consider a national bank. Behind the ballyhoo

there was some discussion of issues--the economy, the currency, and a national

bank. Ewing stated: "Our opponents were gravely raising and debating the question

whether [the Bank] was convenient or necessary." Daniel Webster sketched the

outlines of a bank, noting its central banking functions "in case local panics should

occur, to relieve the community, by [an] adaptation of the amount of outstanding

circulation." Harrison told a large Dayton audience of 100,000 he would sign a

bank bill if a bank was found necessary and demanded by a majority of the people.

The Whigs won with 53 percent of the vote: 1,275,612 for Harrison, and 1,130,033

for Martin Van Buren. They handily carried Ohio and Massachusetts.²⁵

As soon as the results were in, the Cabinet became a topical subject. The Wash-

 

24. Van Deusen, Jacksonian Era, 11-12, 22-25, 119; James Roger Sharp, The Jacksonians

Versus the Banks: Politics in the United States After the Panic of 1837 (New York, 1970), 5-6,

14-18, 24, 44, 130-131, 209. One of the political repercussions was the defeat of Ewing for his

Senate seat in 1840 by William Allen, a hard-money Democrat par excellence.

The Independent Treasury Act was finally passed during the Van Buren administration in

1840 and was repealed by the Whigs in 1841. The deposit system of the government was not

regulated by law until 1846 when the Democrats revived the act. This legislation served without

important change as the basis of U. S. government's relationship to the banking system until

passage of the Federal Reserve Act in 1913.

25. Ewing to L. D. Barker, July [18?], 1840, in "Documents: Diary of Thomas Ewing, August

and September, 1841," American Historical Review, XVIII (October 1912), 108; Daniel

Webster, The Works of Daniel Webster (Boston, 1851), II, 61; Niles' National Register, LIX

(October 3, 1840), 71; Arthur M. Schlesinger, Jr., and Fred L. Israel, eds., History of American

Presidential Elections (New York, 1971), I, 685-690.

• 10
 

14                                                              OHIO HISTORY

 

ington Globe cried: "No one will be ... appointed who is not a friend to BIDDLE'S

BANK."²⁶ One man who was highly influential in helping Harrison choose his

Cabinet was Abbott Lawrence. Just two days after the election, Lawrence wrote to

Ewing: "We have chosen you into Gen. Harrison's Cabinet--therefore prepare

yourself to go to Washington." He also wrote John J. Crittenden, recently designated

Attorney-General, on January 7 concerning "the positive necessity of having a

Secretary of the Treasury who has the confidence of the people . . . it is the most

important office in the govt.... I ... am confirmed in the opinion that our friend

Thomas Ewing is ... the best man.... Ewing is with and of the people ... as well

as the monied interest of the country have confidence in him."²⁷ The opinions of

the New England capitalist carried great weight; Thomas Ewing became Secretary

of the Treasury.

After Harrison's inaugural address in which he declared against an exclusively

metallic currency, Lawrence continued in frequent consultation with Harrison's

Cabinet and dined with the President. Just before he returned to Boston, Lawrence

called on his good friend John Quincy Adams and assured him that "Ewing is for

banks." On April 2, Lawrence wrote Ewing from Boston: "I hope . . . you will

make the Treasury strong.^"28

Two days later William Henry Harrison was dead, the first President to die in

office. He was succeeded by John Tyler who had been nominated to appeal to the

states rights faction of the Whig party. Tyler had left the Democratic party in

protest over Jackson's removal of the government deposits from the Bank of the

United States, which he held was executive usurpation and contrary to the principle

of government by law. Tyler, however, continued to adhere to the Democratic view

that a national bank was unconstitutional since there was no direct provision for

one in the Constitution. Nevertheless, Tyler had supported Harrison's position in

the campaign at St. Clairsville and Steubenville, and in a letter to citizens of Virginia

he had adopted the language of Harrison declaring: "Now if 'the power granted'

could not be carried into effect without incorporating a Bank, then it becomes

'necessary and proper,' and of course expedient.. ."²⁹ Some Whig leaders, however,

were uneasy about the new President's policies. For example, Alfred Kelley of Ohio

wrote Ewing:

Considerable anxiety is felt... as to the course which the Vice President will pursue. I...

feel confident, as do most of our political friends ... that he will adopt the views of the late

President and carry them out with religious fidelity.³⁰

 

 

 

26. The Globe (Washington, D. C.), December 17, 1840.

27. Lawrence to Ewing, November 14, 1840, Box 41, Ewing Papers; Lawrence to John J.

Crittenden, January 7, 1841, Vol. 7, John J. Crittenden Papers, Manuscript Division, Library of

Congress.

28. James D. Richardson, ed., A Compilation of the Messages and Papers of the Presidents

(Washington, D. C., 1897), IV, 14; Adams, John Q. Adams, X, 438, 443-445; Lawrence to

Ewing, April 2, 1841, Box 43, Ewing Papers.

29. Oliver Perry Chitwood, John Tyler: Champion of the Old South (New York, 1939),

114-115, 126-139, 185-191, 476-477; John Tyler to Citizens of Henrico County, Virginia, Octo-

ber 6, 1840, letter in Defence of the President Against the Attacks of Mr. Botts and the Clay

Party (1843), 3.

30. Alfred Kelley to Ewing, April 9, 1841, Box 43, Ewing Papers. Kelley (1789-1859), a lead-

ing figure in the development and administration of Ohio's canal system, later wrote the legisla-

tion (Act of 1845) which reformed Ohio's banking system.

• 11
 

Thomas Ewing                                                               15

 

On April 9, 1841, Tyler addressed the nation: "A permanent and radical change

should ... be decreed" in the country's finances. "I shall promptly give my sanction

to any constitutional measure which . . . shall have for its object the restoration of

a sound circulating medium, so essentially necessary . . . to reestablish the public

prosperity." Tyler added the caveat that in deciding upon the measure he would

resort to the example of the great Republican school.³¹ Despite the fact that the

country was once again in the hands of a strict constructionist and that Tyler's words

were open to varying interpretations, the Whigs felt encouraged to go forward with

their plans for a bank.

There had been calls for a national bank as soon as the campaign ended. On

November 20 an old acquaintance told Ewing: "I . . . would be glad to see a bill

introduced in the next Congress for a National, a truly National Bank." Christmas

Day the Cincinnati Chronicle called for the establishment of a national bank to

provide a uniform currency. The urgency for a national bank was acutely felt by

the Ohio Whigs because the charters of most Ohio banks were due to expire in

1843 and the state would be left without an adequate supply of capital.³²

Abbott Lawrence hoped that he could personally "take part in the settlement of

a few prominent questions [including] those concerning the currency." On April 5,

he wrote Ewing that despite Harrison's death the work of reform should go on and

anticipated that Congress would set forth a series of measures "boldly and fearlessly

disclosing our intentions." Lawrence continued, "I shall begin upon the Bank this

week and hope by the advice and assistance of our friends to produce a practical

charter--that will be satisfactory to the People, the Government and the Capitalist."

Toward the end of the month, however, Lawrence confessed that he had just

commenced upon the bank project, finding it "full of difficulties," but hoped that he

would be able to produce something that "will give you a tolerable degree of

satisfaction." He continued:

It is a very delicate matter to adjust the provisions of a bank to meet the wishes of a

majority of the Representatives of the people,--retain the functions which should belong

to such an Institution, and satisfy the capitalists of the Country--This cannot be done,

and adopt the views of the Virginia School of Politicians.

Lawrence was able to forward to Ewing the outline for a bank on May 6, with

apologies for his tardiness:

 

When I left Washington it was my intention to have sent to you the outline of a Bank of

the United States very soon after my return home--but I have been so constantly

engaged that I have not found time to do more than to give you the "legs and wings" of a

Bank.... I should have been glad to have sent you a Charter complete written out... it

is however quite impossible for me to go through the detail till next month, when I shall

have the time, but too late for you--... Look on it as I submit it to you--if explanations

are required I should be happy to furnish them.33

 

 

31. Richardson, Papers of the Presidents, IV, 37-39.

32. J. W. Coffinburg to Ewing, November 20, 1840, Box 41, Ewing Papers; Edgar Allan Holt,

Party Politics in Ohio, 1840-1850 (Columbus, 1930), 157.

33. Hill, Abbott Lawrence, 59; Lawrence to Ewing, April 5, 23, 1841, (Private & Confidential),

July 5, 1841, Box 43, 44, Ewing Papers; Lawrence to Ewing, May 6, 1841, A. Lawrence Papers,

Massachusetts Historical Society. The "Virginia School of Politicians" were the extreme states

rights oriented politicians, most of whom came from Virginia.

• 12
 

16                                                                 OHIO HISTORY

 

In the meantime, Tyler had also been giving serious thought to the bank. On

April 30 he wrote to Henry Clay. "As to a Bank, I design to be perfectly frank with

you--I would not have it urged prematurely.... I desire you to consider whether

you cannot so frame a Bank as to avoid all constitutional objections. . . ." To avoid

a deadlock it was also important that a clash between the nationalist views of Henry

Clay and the states rights principles of John Tyler be averted, but Ewing was

encouraged that Tyler seemed open to proposals from Congress that would meet his

constitutional scruples.³⁴

On June 1 the President sent a message to Congress calling for a suitable fiscal

agent capable of collecting and disbursing the public moneys, adding, "Upon such

an agent depends in an eminent degree the establishment of a currency of uniform

value...." Tyler warned Congress that he reserved the ultimate power of rejection.

The following day Secretary of the Treasury Ewing sent his annual report to

Congress. Strongly recommending the establishment of a bank, he stated, "Experi-

ence has demonstrated the superior utility of a bank, constituted and adapted by

Congress as a fiscal agent." The Secretary was "irresistibly led to the conclusion"

that such a fiscal agent was "essential to the wants of the Treasury and of the com-

munity" and would produce "important benefits on the country." On June 7, Con-

gress asked Ewing for a plan of a bank free from constitutional objections. On June

12, Ewing submitted his plan. It appears from the Ewing-Lawrence correspondence

that Lawrence's ideas and draft charter were an important basis for Ewing's bill. In

early July, Lawrence wrote the Secretary, "After your plan came out, it was said,

and published in the papers that I was the author of it." Ewing knew that Tyler

would not surrender his lifelong position on states rights and so tried to make his

plan to meet the President's approval. Tyler, attempting to find a common ground

between his views and those of the bank proponents, had recommended to Ewing

that he frame his bill for a bank in accordance with a scheme that Congress establish

a bank in the District of Columbia where it had constitutional authority. The

President sincerely felt that this expediency solved the constitutional issue of whether

or not Congress had the power to establish a bank.35

Henry Clay, on the other hand, wanted a bank created by Congress with power

to establish branches where national economic growth demanded. If Ewing had

chosen Clay's position, the President would never have accepted the bill and there

would have been no chance for a bank. If he took some of Tyler's scruples into

 

 

34. Tyler to Henry Clay, April 30, 1841, in Lyon G. Tyler, ed., The Letters and Times of the

Tylers (Williamsburg, 1896), III, 93; Ewing to Clay, May 8, 1841, Vol. 23, Henry Clay Papers,

Manuscript Division, Library of Congress.

35. President Tyler seemed to be trying to revive an old idea that had earlier failed for lack

of support. In 1819 the State of Pennsylvania proposed to the consideration of the state legis-

latures an amendment to the Constitution that provided "Congress shall make no law to erect or

incorporate any bank or other monied institution except within the District of Columbia, & every

bank, or other monied institution which shall be established by the authority of congress, shall,

together with its branches and offices of discount and deposit, be confined to the District of

Columbia." The legislature of Ohio agreed to the proposal on January 19, 1820, without the

senate's statement on the constitutionality of the bank. The Ohio house held that the con-

stitutionality of the bank was not at issue here, and it would resolve on December 28, 1820, that

the Bank of the United States was a "private corporation of trade" and therefore legally taxable.

Ohio, Senate Journal, 1819-20, pp. 116-117, 188, 193; House Journal, 1820-21, p. 193; Richard-

son, Papers of the Presidents, IV, 40-51; Secretary of the Treasury, Report on the Finances,

1837-1844 (Washington, D. C., 1851), IV, 446-447; Lawrence to Ewing, July 5, 1841, Vol. 6,

Box 44, Ewing Papers.

• 13
 

Thomas Ewing                                                           17

 

account, a bank might be chartered. Ewing's compromise plan provided for a

$30,000,000 bank in the District of Columbia, one-fifth of the stock to be taken by

the Federal Government. Loans to the Government would be limited to $3,000,000

for 180 days; loans to the states $100,000; and, recognizing the West's need for

longer credit terms, other loans could run for a maximum of 180 days, would not be

renewable, and would cease when circulation reached three times the amount of

specie, preventing inflationary tendencies. The bank notes, of a minimum denomina-

tion of ten dollars, were to be issued only by the parent bank and were redeemable on

demand. As the fiscal agent of the Government, its notes were acceptable for public

dues. Ewing's bill, taking cognizance of Tyler's states rights views, proposed that

the bank would only establish branches with a state's consent, but once established

the branch could not be withdrawn without congressional assent. The bank was also

empowered to employ agencies, without state consent, to transact all business, such

as accepting deposits and dealing in bills of exchange, except discounting--that is,

the granting of loans. And Congress would retain the option of placing offices of

discount and deposit where necessary for handling the public revenue. Ewing's

charter, which envisaged the concept of monetary control, would have created an

institution that could have developed into a central bank. Because of Tyler's stand

in the campaign and statements in his two addresses as President, it was understood

that he would sanction Ewing's plan. Tyler even urged Clay to support it.³⁶

Merchants from the principal cities were invited to Washington to discuss the

Secretary's proposal, and they promised to support the bank. Webster thought

Ewing's plan the only one on which agreement in Congress could be reached.

Horace Greeley also enthusiastically favored the charter and announced, "The

crippled Commerce, the prostrate Enterprise, the disjointed Currency of the Country,

all require a National Bank."³⁷

Clay, however, rejected the critical parts of Ewing's draft, and on June 21 reported

out a bill chartering a bank with power to branch without state assent. He felt that

without the power to branch the bank would be devoid of effective national character.

Furthermore, a derivation of power to the Federal Government from the states

would be unsound in principle and dangerous. The Senate leader thus replaced

Ewing's attempt at compromise with ultra-Whig demands. The opposition of Clay

to the Secretary of the Treasury's bill aroused debate within the Whig party. Ultra

Whigs disliked a bank that compromised their nationalist views, while the moderates

stood behind Ewing. Lawrence wrote from Massachusetts on July 5:

Your plan as a whole does not meet the approbation of our people.... Mr. Clay's plan

meets with more favor.... I am not wedded to my own plan--or opinions, and am quite

ready to make every concession that can be desired--provided such concessions do not

involve principles upon which the success and usefulness of the Bank depends.

Support for the Treasury Secretary came from Ewing's Ohio friends:

As between the plan [you] suggested . . . and that contended for by Mr. Clay our friends

are a good deal divided. But as far as I can judge the Treasury plan has the most friends.

... [M]any pronounce the plan submitted by yourself as the product of necessity being

 

 

36. Tyler, Letters of the Tylers, II, 54, 68-69; Senate Documents, 27 Cong., 1 Sess., No. 17;

Timberlake, Money and Banking, 167-168; Chitwood, John Tyler, 220.

37. Ibid.; Log Cabin (New York), June 12, 19, 1841.

• 14
 

18                                                              OHIO HISTORY

 

made as is supposed to escape the president's Veto. And reasoning in the same way it is

feared that a bill upon the basis advocated by Mr. Clay will not receive the President's

sanction.

*  *  *

I find the Great mass of Whigs (I mean the middle class) opposed to Mr. Clay's Bank bill,

and in favor of the one recommended by you.... Democrats are willing to go for Mr.

Ewing's plan. It is every where said if we must have a Bank let us have Mr. Ewing's plan.38

The debates in Congress revolved around two principle points. One basic question,

whether or not the country needed a national bank to regulate economic growth, was

contested by the Whigs and the Democrats. The hard-money radicals dominated the

Democratic position and supported the Independent Treasury system, opposing the

Whig proposal of a national bank. The second question, the kind of national bank

which Congress would be likely to charter and the President would approve, was

debated among the Whigs. At stake, in the moderate view, was the chance to

reestablish a national bank; in the ultra-Whig view, the retention of a nationally

oriented policy over narrow states rights demands. Complicating and coloring the

Whig fight was Henry Clay's determination to use the bank issue to gain the Presi-

dency, making him stubbornly opposed to proposals from either Ewing or the

President.

The debate lasted six weeks. The Democratic forces were led by Senator Benjamin

Tappan, the first advisor Tyler called in upon his accession to the Presidency; Robert

Walker, the Democratic Senator from Mississippi and a future Secretary of the

Treasury; and Thomas Hart Benton, Senator from Missouri and the nation's most

outspoken advocate of the hard-money philosophy. The Ohio Senators, Tappan and

William Allen, like Benton, were hard-money Jacksonians, intransigent and uncom-

promising. In Ohio there was concern lest Tappan's hard line upset alliances with

the conservatives. But in Congress Tappan had the support of Tyler and knew that

the President would not sign any bill creating a national bank of discount, regardless

of any states rights considerations. Even though Clay attempted to railroad his bank

bill through Congress, the Democrats were not put off easily. They spoke out against

the central banking provisions inherent in the bill.³⁹

The longest debates centered around the branching issue. The moderates, realizing

that Clay's bill would never meet the President's states rights strictures, proposed

changes. Virginia Senator William C. Rives, a conservative Democrat who advocated

a regulated state banking system, was at this time a leading supporter of Tyler's

views on the bank issue. He moved to restore Ewing's provision in the bill allowing

for state assent for branch banks. Senator Rufus Choate of Massachusetts, an

acknowledged authority on law and a nationalist, reasoned that there was no sur-

 

 

38. "Report of a Fiscal Agent," Senate Documents, 27 Cong., 1 Sess., No. 32; Lawrence to

Ewing, July 5, 1841, H. H. Hunter to Ewing, July 10, 1841, James Cunningham to Ewing, July

29, 1841, Vol. 6, Box 44, Ewing Papers.

Hocking H. Hunter, one of Ohio's pioneers, was an intimate friend and law partner of Ewing

and a Whig leader in Lancaster, Ohio. Miller, "Thomas Ewing," 34, 282; New York Times,

Obituary, February 7, 1872.

39. Benjamin Tappan Senate Journal (December 6, 1840-February 24, 1844), June 2, 8, 16,

25, 1841, Box 3, Benjamin Tappan Papers, Ohio Historical Society; Sharp, Jacksonians Versus

the Banks, 18-19, 22; Congressional Globe, 27 Cong., 1 Sess., 157-158, 167-172, 177, 197-198,

234, 251, 278, Appendix, 194-197, 207-208. Pamphlets of the time also clearly pointed out a

national bank's central banking powers.

• 15
 

Thomas Ewing                                                           19

 

render of constitutional power but that it may not always be expedient to exert a

power. To moderate Whigs, many of whom were as staunch nationalists as the ultra

Whigs, the passage of a bill providing for a national bank to regulate the currency

and to promote business among the states by an economical exchange was more

important than Clay's insistence that the constitutionality of the power of Congress

to create a national bank was not an issue for debate. To the ultra Whigs any other

than Clay's proposal meant a dangerous relinquishing of national power. Their

priorities were not only for a bank but also for the maintenance of the principle

of the power of Congress to charter a bank.⁴⁰ Ewing personally agreed with Clay's

position; he had publicly declared against state assent eight years before. His primary

goal now, however, was a bank.

By a vote of thirty-eight to ten the Rives amendment, allowing for state assent,

was defeated. Also defeated was a proposal by Senator Richard Bayard of Delaware

which permitted the conversion of agencies into offices of discount and deposit, that

is, branches empowered to grant loans.

Moderate Whigs in the business community and the administration now took the

lead in reaching a compromise that would please Clay and Tyler and result in a bank.

They were aided by the fact that Clay realized his bill, as matters then stood, was

doomed to defeat.⁴¹ The chief influence upon Clay was his old confidant Peter Buell

Porter of New York, one of the architects of the Whig party. Porter arrived in

Washington at Clay's request and proposed a compromise amendment to Clay. Each

state could prevent the establishment of a branch bank by an act passed in the first

session of the state legislature after the passage of the bill by Congress. If, however,

such legislation were not passed, the state's assent to the establishment would be

presumed. Porter felt that Tyler would "feel gratified in having a bill presented to

him so nearly accordant with his own views." He suggested that Clay himself, as a

gesture of conciliation, introduce the amendment. Porter neatly argued that without

such an amendment the legislatures of many southern states would resent the affront

and forbid branches; whereas, with the amendment they would abstain from such

action and would find they needed the bank. It seems, however, that Clay had his

own plans and remained obdurate. Thus Porter turned to Senator William Preston,

a moderate from South Carolina, for support. Porter received Preston's agreement

to the amendment and showed it to several members of Congress and to Clay on the

morning of July 20. Clay still did not act and Porter wrote again on the twenty-first,

before he left Washington, holding that the amendment was, as regarded the con-

stitutional difficulty, the best that could be drawn up. It would leave the operations

as extensive as could be devised, but nothing for its enemies to pounce upon. Even

Webster was advising conciliation. New York Whigs supported Porter's plan and

would be gratified to see Clay make this innocuous concession for the sake of

harmony. Clay finally yielded.⁴²

John Minor Botts, a Whig Representative from Virginia, offered to see if the

Porter proposal was as acceptable to Tyler as it had been to the Whig caucus. Tyler

 

 

40. Ibid., 133, 141, 145, 152, 255, Appendix, 351-361.

41. Ibid., 145, 152.

42. Clay to Peter Buell Porter, April 24, June 30, July 18, 21, 1841; proposed letter from

[Porter] to Preston, July 20, 1841, Charles Hammond Papers, Ohio Historical Society; Porter to

Clay, n.d., n.d. [pre-July 20], July 21, 23, 24, 1841, Peter Buell Porter Papers, Roll 12, Buffalo

and Erie County Historical Society.

• 16
 

20                                                              OHIO HISTORY

 

seemingly accepted the compromise. On July 27 Clay offered the Porter amendment

so that his bill might pass. But Clay further provided that Congress should have the

power to establish an office of unstated function when necessary, regardless of the

state's position. In the Senate, the amendment passed 25 to 24. The next day the

bill passed 26 to 23. Allen and Tappan, the key man controlling Democratic votes,

voted no.⁴³

Now Tyler began to claim he favored Ewing's bill though Webster had earlier

informed Ewing that the Secretary's original plan no longer pleased the President.

But the Clay version passed the House by a vote of 128 to 97 on August 6.⁴⁴ The

Ohio vote, twelve in favor and seven opposed, was along strict party lines. Most of

the Democrats supported the radical view. Most of the Whigs represented economi-

cally sophisticated areas: the Muskingum Valley, one of the major producers of the

nation's corn, wheat, and pork, and the rich Western Reserve and Scioto Valley, seat

of the state's cattle industry. Two Representatives from the Scioto Valley, bisected

by the Ohio Canal, had supported the bank in previous congressional votes and one

was later influential in the drafting of Ohio's banking law. The moderately Demo-

cratic constituency of Cincinnati realized the need for a national bank, but bank

views among Ohio's citizens were, with certain exceptions, directly correlated with

economic development, and Representatives of the poorer areas voted no.⁴⁵

The Cabinet strongly advised the President to sign the bill. The Secretary of the

Treasury set forth the nationalist views of the Whigs: Congress was constitutionally

empowered to charter a bank with branches with or without state assent. However,

he recognized that Tyler held other views and in a tightly reasoned argument, of

which he was a master, demonstrated to the President that signing the bill would

not conflict with his principles. Congress could create a corporation in the District

of Columbia and implied assent for the branches, falling within the comity of nations,

was presumed unless forbidden by law. Ewing could find in this principle no violation

of the Constitution and no infringement of the rights of the states.⁴⁶

There is evidence that Tyler would have signed the Treasury bill had it been

promptly passed, but Clay's plan was totally unacceptable to the President.⁴7 At the

time Ewing was preparing his argument, Tappan reported in his journal, "it is

generally expected by all parties that the President will veto it [Clay's bill]. I have

taken great pains to satisfy Tyler that if he would veto that bill the Democratic party

would sustain him against Clay." Tappan also told Rives that he should advise the

President that his veto should simply state the Executive's objections and not be

accompanied with any recommendations because the Democrats might be unable to

support them. A committee of Ohio Representatives had prevailed upon Tyler to sign

the bill, but he admitted he would be obliged to veto it; nevertheless, he would recom-

mend a bank he could approve. This course was counter to Tappan's suggestions.

On August 16 Tyler vetoed the bill giving four reasons against it. First, he thought

 

43. Chitwood, John Tyler, 222-223; Congressional Globe, 27 Cong., 1 Sess., 254-256, 260,

Appendix, 362-366.

44. Tyler, Letters of the Tylers, II, 52; Congressional Globe, 27 Cong., 1 Sess., 303.

45. Sharp, Jacksonians Versus the Banks, 160-168, 173-178, 184-188, 336-338. The designa-

tion of the political affiliations of the counties of Ohio is based on Sharp's excellent analysis

and covers the years 1836 to 1844. Ibid., 166n, 168n, 333-334, 344.

46. Van Deusen, Jacksonian Era, 157; Ewing to His Excellency the President of the United

States [Bank Charter, 1841], Box 44, Ewing Papers.

47. Tappan Senate Journal, June 12, 1841; Ewing to Tyler, September 11, 1841, in Niles'

Register, LXI (September 18, 1841), 34.

• 17
 

Thomas Ewing                                                           21

 

a national bank was unconstitutional. Throughout his career, Tyler had consistently

maintained that it was unconstitutional for Congress to create a national bank to

operate over the nation. The nationalists, including Ewing, asserted that Congress

did have the authority and that the issue had long been settled.

Tyler next charged that a bank of discount was not necessary for the government's

fiscal powers of collecting, keeping, and disbursing the public revenues and incidently

regulating commerce and exchange. Local transactions had nothing to do with

regulating the currency; it was the exchange operations which effected a uniform

currency. Third, the bank was not properly limited to dealing in exchange. The

nationalist Whig concept was also at odds with these two objections relative to

banking functions. The Whigs did not deny the invaluable role of exchange in

creating a uniform currency, but to Ewing, Clay, Webster, Lawrence, and other

nationalists, a federal bank did far more than this. A national bank's loans and

discounts, though local, were a source of much needed capital. Loans not only

affected the currency, which Tyler denied, but also influenced economic stability and

growth. Because most loans, especially in the West, were made in the form of

currency rather than demand deposits, they increased the circulating medium in

general and uniform circulation in particular. When the bank's large capital was

lent, the economy expanded; when withdrawn, it contracted. In short, the bank's

ability to finance economic growth, as envisioned by the Ewing and Clay bills, was

completely overlooked by Tyler.

Finally, obeying his states rights dictates, the President found that the sovereign

rights of the states were still not sufficiently secured in the bill. This last objection

was perhaps the crucial part of the message and surely the principal factor in Tyler's

decision. The nationalists, in contravention, held that Congress had such power and

had composed the branching provisions as a concession to the President.⁴⁸

The moderate Whigs still hoped for a settlement after the veto. Virginia Repre-

sentative Alexander H. Stuart went to Tyler with a modification of Senator Bayard's

defeated amendment. The new provision would forbid the conversion of agencies

into branches but would permit the establishment of agencies without state assent.

Tyler seemed to accept this basic concept. The Whig caucus instructed John Sergeant

and Senator John Berrien to draw up a bill on this scheme and seek an interview

with the President to insure that there was no misunderstanding.

At the Cabinet meeting on August 18, the President was informed that Congress

was perfectly ready now to pass Ewing's bill. Tyler replied: "Talk not to me of Mr.

Ewing's Bill--it contains that odious feature of local discounts which I have re-

pudiated in my message." According to Ewing's diary, Ewing then asked Tyler to

state his opinions so that there would be no misunderstanding among the Cabinet.

Tyler said he desired a bank of issue and deposit with power to deal in bills of ex-

change without state assent but not to discount promissory notes. Ewing and Webster

at the President's urging helped to draw up the new bill according to his wishes. While

the bill was under consideration in Congress, the President more than once stated

to his Secretary of the Treasury that he desired a postponement and gave strong

intimations that he would veto any bank bill. Ewing personally attempted to have the

 

48. Tappan Senate Journal, August 6, 9, 15, 16, 1841; Francis P. Weisenburger, The Passing

of the Frontier, 1825-1850 (Carl Wittke, ed., History of the State of Ohio, III, Columbus, 1941),

399; Richardson, Papers of the Presidents, IV, 63-68; Congressional Globe, 27 Cong., 1 Sess.,

Appendix, 365.

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22                                                             OHIO HISTORY

 

bill postponed, but he was unsuccessful. He sensed that Clay was "hurrying matters

to a catastrophe," that is, force another veto, "compel the Cabinet to resign...

denounce the Administration and make himself as the head of the Whig party an

opposition candidate for the Presidency."⁴⁹

The new bill, first introduced into the House by Sergeant, was modeled on the

Clay, or vetoed bill, but contained three major alterations. The capital of the bank

was reduced to $21,000,000 with power to increase it to $35,000,000. There were

to be no offices of discount and deposit, only agencies. The bank's operations were

to be confined to buying and selling foreign bills of exchange, including those drawn

in one state and payable in another. There were to be no discounts, and all references

to them were struck out of the bill. The bill passed the House in two days after little

debate. Ohio's delegation voted as before along strict party lines. The moderate

Whigs sincerely believed the bill to be what the President wanted. Tyler, however,

confided to Tappan on August 18 that he believed the Whigs "were trying to deceive

him into signing another bank bill with a view to destroy his character entirely."

Later he spoke to Tappan with much contempt for the bank bill as it had passed

the House and stated that "the more ridiculous they [Congress] made it the easier

it would be for him to veto it."⁵⁰

Berrien introduced the bill in the Senate despite Tappan's plea for a postponement.

Clay made a conciliatory speech accepting what were now the minimum Whig de-

mands. The debate was a battle over the exchange provisions. Tappan led the

Democrats who insisted that the exchange transactions were actually authorized

discounts. The ability to deal in bills drawn in one state and payable in another

sanctioned a mode of discounting paper and making loans common in the West. The

western banks found it far more profitable to deal in exchange and few directly

discounted promissory notes. Tappan charged the title should read "The United

States Bank." Whigs denied the charges, the power of local discounts being expressly

expunged. Rives claimed that the only power that would satisfy Tyler was exchange

dealings limited to cash drafts payable on demand. The bill passed on a strictly

party vote.⁵¹

At the President's request Ewing again prepared an argument explaining the

constitutionality of the bill and demonstrating that a national bank was a necessary

and proper means of answering the Government's fiscal needs. He pointed out how

a bank dealing in exchanges would aid the country. If the bank used its capital

solely for exchanges, it set free bank capital so applied, and directed the money

towards financing economic growth.⁵²

After its passage, Tyler claimed he never saw the bill before it was submitted to

Congress. Webster claimed that to his knowledge Tyler had read the bill and

personally had written down his changes. On September 9, Tyler vetoed the bill,

again objecting to a bank which was national in character. The greater part of the

veto criticized the exchange provisions. Local discounts could occur under the guise

 

49. Chitwood, John Tyler, 238-242, 247-248, 264, 469-470; "Ewing Diary," 99-106.

50. H.R. 14 and S. 5, Bills and Resolutions Originated in the House of Representatives, 1841,

File 27, A-B 1; Original Engrossed Bills, 27 Cong., Vol. 7, Record Group 233, National Archives;

Congressional Globe, 27 Cong., 1 Sess., 363-372; Tappan Senate Journal, August 18, 23, 1841.

51. Congressional Globe, 27 Cong., 1 Sess., 372, 378-379, 402, 418-423, Appendix, 337-350.

The vote in the Senate: 27-22; House: 125-94.

52. Ewing to His Excellency the President of the United States, late August 1841, Vol. 6,

Ewing Papers.

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Thomas Ewing                                                          23

 

of bills of exchange--such as a Cincinnati bill drawn on a bank in a Kentucky

border town. Tyler apparently was confused on fiscal matters and persisted in using

the words "local discount" in the general sense of local loans.⁵³ The nationalists,

who were now willing to forego the power of local loans in order to establish a

national bank that would achieve the minimum Whig goal--a uniform currency

and bills of exchange to economically move the country's goods and finance eco-

nomic growth--were again defeated.

Samson Mason, one of Ohio's Whig Congressmen, delivered a long speech against

the veto. Tyler had failed to fulfill the pledges he had made to provide the nation

with a uniform currency, even after Congress had made concessions to the President

regarding the branching power. Mourned John Q. Adams, "We all felt that the

hour for the requiem of the Whig party was at hand."⁵⁴

On September 11 the Cabinet resigned. Ewing had earlier considered the problem

of being forced to leave and had conferred with Congressmen Patrick Goode and

Samuel Stokely and Alfred Kelley who felt he should remain until removed by the

President, but the veto changed Ewing's mind. Webster asked Ewing to reconsider

his decision to resign immediately. The Secretary of the Treasury, however, felt he

could not stay and maintain his reputation for truth. His letter of resignation pointed

out the inexplicable inconsistency in the President's objections to those very provi-

sions which were inserted at his request. "I cannot abandon the principles for which,

during all my public career, I have struggled. ... "55

The failure to establish a national bank was deeply felt in Ohio. The esteemed

paper, Niles' Register, stated: "There is no state in the Union in which at present

the subject of banks and banking is more agitated, on [sic] or where wise legislation

to obviate the difficulties they are laboring under is more required."⁵⁶ The state

banking system became the center of a political storm for a decade and was reduced

to inadequacy, resulting in an unstable currency and a lack of capital which affected

the rate of economic growth. Governor Tom Corwin requested the Assembly to act,

pointing out that banks were still failing in the wake of the depression and the

charters of nearly all the Ohio banks would expire in January 1843, causing the

withdrawal of a great deal of capital from the state. The interests of the people

demanded the retention of well-regulated banking.

The antibank, hard-money radical Democrats won control of the state in 1841

and 1842 and refused to recharter the existing banks. Instead they shrewdly agreed

to the passage of a general banking law, the Latham Act, which provided for such

rigid regulations that it was hoped their goal, the destruction of all banks, would

be achieved, for no banks were organized under it. The amendments of 1843

proved no more successful. Ohio was thus forced to rely upon neighboring states

and unauthorized banking institutions for circulation. Banks or no banks was again

a major issue in the fall election of 1843. The Whigs won control of the legislature

and were faced with drafting an entirely new banking system. Only eight authorized

banks remained in 1844, with a capital of $2,304,745. Loans and discounts had

 

53. Tyler, Letters of the Tylers, II, 86, 98; Chitwood, John Tyler, 261; Richardson, Papers of

the Presidents, IV, 68-72.

54. Congressional Globe, 27 Cong., 1 Sess., 450, Appendix, 393; Adams, John Q. Adams,

XI, 14.

55. "Ewing Diary," 106-107; Ewing to Clay, November 1, 1843, Vol. 23, Clay Papers; Letters

of Resignation, Niles' Register, LXI (September 18, 1841), 32-34.

56. Ibid., LXV (December 16, 1843), 243.

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24                                                             OHIO HISTORY

 

reached their nadir, under $3,000,000; and circulation was $2,200,000, just about

the 1833 level.

The Whigs determined to respond to public complaints of the scarcity of money

and inadequate banking facilities. In 1845 Alfred Kelley's bill, based on the best

experience of other states, provided for organizing two new classes of banks in

addition to the retention of the existing banks. The State Bank of Ohio with power

to branch was one, and independent banks, the other. The number of banks in the

twelve designated districts was to be limited, and a bond secured, uniform and

redeemable circulation and many safety precautions were included. This legislation

made Ohio's banking system one of the best in the nation prior to the Civil War.

Five years later the hard-money Democrats were defeated in their attempts to

prohibit banks in the new state constitution, and the long and bitter controversy

slowly ended on the state level. Difficulties in Ohio's banking system and an unstable

currency nationally that increased the costs for businesses and individuals could

have been avoided had Thomas Ewing's bill been enacted. Developments proved

the veracity of the Whig position that banks and the process of controlled credit

creation were essential to orderly economic growth, but what is remarkable is that

the hard-money advocates with their inadequate views of economic development

almost won nationally as well as in Ohio.⁵⁷

History, thus, seems to have been on the side of the Whigs. Sincerely believing

in the constitutional power of the Federal Government to give positive assistance in

the economic development of the country and nationalist in outlook, the party had

strived for an adequate national currency and a bank to stimulate and regulate

economic growth. Thomas Ewing perceived the inability of any one state, no matter

how efficient its banking system, to provide the nation with a stable monetary sys-

tem. The Whigs' failure to solve the major issue of the times in 1832 and 1841

continued to have important repercussions on the financial history and banking

structure of the United States as the nation developed industrially and increased its

influence in international affairs. The nation would have benefitted in the long-run

had there been a national institution to temper the rapidity and direction of economic

growth. With a national bank, western settlement and development would have

occurred at a more even pace. The various state banking systems were instrumental

in transforming the primitive agricultural economy of the nation into a more sophis-

ticated and highly productive one. But the Whig idea for a national bank would have

reached the same end by means of more orderly economic growth.⁵⁸

 

57. Huntington, "History of Banking in Ohio," 396-399, 403-408, 413-428, 446, 481-484;

Golembe, "State Banks," 201, 238-240; Sharp, Jacksonians Versus the Banks, 15-16, 124, 133-

159, 188-189, 194-195; Trescott, Financing American Enterprise, 39-40.

58. It was not until December 1913, seventy-two years after Tyler's veto of the Third Na-

tional Bank charter, that a central banking system was finally established by the Federal

Reserve Act, assuring an elastic currency and central control over the nation's credit supply.

• 21