On March 4, 1837, Jackson and Van Buren rode together from the White House to the Capitol in a "beautiful phaeton" made from the timber of the old frigate Const.i.tution, the gift to the general from the Democrats of New York city. He was the third and last president who has, after serving through his term, left office amid the same enthusiasm which attended him when he entered it, and to whom the surrender of place has not been full of those pangs which attend sudden loss of power, and of which the certain antic.i.p.ation ought to moderate ambition in a country so rarely permitting a long and continuous public career. Washington, amid an almost unanimous love and reverence, left a station of which he was unaffectedly weary; and he was greater out of office than in it.

Jefferson and Jackson remained really powerful characters. Neither at Monticello nor at the Hermitage, after their masters had returned, was there any lack of the incense of sincere popular flattery or of the appeals for the exercise of admitted and enormous influence, in which lies much of the unspeakable fascination of a great public station.

Leaving the White House under a still and brilliant sky, the retiring and incoming rulers had such a popular and military attendance as without much order or splendor has usually gone up Capitol Hill with our presidents. Van Buren's inaugural speech was heard, it is said, by nearly twenty thousand persons; for he read it with remarkable distinctness and in a quiet air, from the historic eastern portico. He returned from the inauguration to his private residence; and with a fine deference insisted upon Jackson remaining in the White House until his departure, a few days later, for Tennessee. Van Buren in his own carriage took Jackson to the terminus of the new railway upon which the journey home was to begin. He bade the old man a most affectionate farewell, and promised to visit him at the Hermitage in the summer.

The new cabinet, with a single exception, was the same as Jackson's: John Forsyth of Georgia, secretary of state; Levi Woodbury of New Hampshire, secretary of the treasury; Mahlon d.i.c.kerson of New Jersey, secretary of the navy; Kendall, postmaster-general; and Butler, attorney-general. Joel R. Poinsett, a strong union man among the nullifiers of South Carolina, became secretary of war. Ca.s.s had left this place in 1836 to be minister to France, and Butler had since temporarily filled it, as well as his own post of attorney-general. The cabinet had indeed been largely Van Buren's, two years and more before he was president.

Van Buren's inaugural address began again with the favorite touch of humility, but it now had an agreeable dignity. He was, he said, the first president born after the Revolution; he belonged to a later age than his ill.u.s.trious predecessors. Nor ought he to expect his countrymen to weigh his actions with the same kind and partial hand which they had used towards worthies of Revolutionary times. But he piously looked for the sustaining support of Providence, and the kindness of a people who had never yet deserted a public servant honestly laboring in their cause. There was the usual congratulation upon American inst.i.tutions and history. We were, he said,--and the boast though not so delightful to the taste of a later time was perfectly true,--without a parallel throughout the world "in all the attributes of a great, happy, and flourishing people." Though we restrained government to the "sole legitimate end of political inst.i.tutions," we reached the Benthamite "greatest happiness of the greatest number," and presented "an aggregate of human prosperity surely not elsewhere to be found." We must, by observing the limitations of government, perpetuate a condition of things so singularly happy. Popular government, whose failure had fifty years ago been boldly predicted, had now been found "wanting in no element of endurance or strength." His policy should be "a strict adherence to the letter and spirit of the const.i.tution ... viewing it as limited to national objects, regarding it as leaving to the people and the States all power not explicitly parted with." Upon one question he spoke precisely. For the first time slavery loomed up in the inaugural of an American president. It seemed, however, at once to disappear from politics in the practically unanimous condemnation of the abolition agitation, an agitation which, though carried on for the n.o.blest purposes, seemed--for such is the march of human rights--insane and iniquitous to most patriotic and intelligent citizens. Van Buren quoted the explicit declaration made by him before the election against the abolition of slavery in the District of Columbia without the consent of the slave States, and against "the slightest interference with it in the States where it exists." Not a word was said of the extension of slavery in the Territories. That question still slept under the potion of the Missouri Compromise, to wake with the acquisition of Texas. In Van Buren's declaration there was nothing in the slightest degree inconsistent even with the Republican platforms of 1856 and 1860.

The inaugural concluded with a fine tribute to Jackson. "I know," Van Buren said, "that I cannot expect to perform the arduous task with equal ability and success. But united as I have been in his counsels, a daily witness of his exclusive and unsurpa.s.sed devotion to his country's welfare, agreeing with him in sentiments which his countrymen have warmly supported, and permitted to partake largely of his confidence, I may hope that somewhat of the same cheering approbation will be found to attend upon my path. For him I but express, with my own, the wishes of all, that he may yet long live to enjoy the brilliant evening of his well-spent life."

The lucid optimism of the speech was in perfect temper with this one of those shining and mellow days, which even March now and then brings to Washington. But there was latent in the atmosphere a storm, carrying with it a furious and complete devastation. In the month before the inauguration, Benton, upon whom Van Buren was pressing a seat in the cabinet, told the President-elect that they were on the eve of an explosion of the paper-money system. But the latter offended Benton by saying: "Your friends think you a little exalted in the head on the subject." And doubtless the prophecies of the Bank opponents had been somewhat discredited by the delay of the disaster which was to justify their denunciations. The profoundly thrilling and hidden delight which comes with the first taste of supreme power, even to the experienced and battered man of affairs, had been enjoyed by Van Buren only a few days, when the air grew heavy about him, and then perturbed, and then violently agitated, until in two months broke fiercely and beyond all restraint the most terrific of commercial convulsions in the United States. Since Washington began the experiment of our federal government amid the sullen doubts of extreme Federalists and extreme Democrats, no president, save only Abraham Lincoln, has had to face at the outset of his presidency so appalling a political situation.

The causes of the panic of 1837 lay far deeper than in the complex processes of banking or in the faults of federal administration of the finances. But, as a man suddenly ill prefers to find for his ailment some recent and obvious cause, and is not convinced by even a long and dangerous sickness that its origin lay in old and continued habits of life, so the greater part of the American people and of their leaders believed this extraordinary crisis to be the result of financial blunders of Jackson's administration. They believed that Van Buren could with a few strokes of his pen repair, if he pleased, those blunders, and restore commercial confidence and prosperity. The panic of 1837 became, and has very largely remained, the subject of political and partisan differences, which obscure its real phenomena and causes. The far-seeing and patriotic intrepidity with which Van Buren met its almost overwhelming difficulties is really the crown of his political career.

Fairly to appreciate the service he then rendered his country, the causes of this famous crisis must be attentively considered.

In 1819 the United States suffered from commercial and financial derangement, which may be a.s.sumed to have been the effect of the second war with Great Britain. The enormous waste of a great war carried on by a highly organized nation is apt not to become obvious in general business distress until some time after the war has ended. A buoyant extravagance in living and in commercial and manufacturing ventures will continue after a peace has brought its extraordinary promises, upon the faith of which, and in joyful ignorance, the evil and inevitable day is postponed. All this was seen later and on a vaster scale from 1865 to 1873. In 1821 the country had quite recovered from its depression; and from this time on to near the end of Jackson's administration the United States saw a material prosperity, doubtless greater than any before known. The exuberant outburst of John Quincy Adams's message of 1827,--that the productions of our soil, the exchanges of our commerce, the vivifying labors of human industry, had combined "to mingle in our cup a portion of enjoyment as large and liberal as the indulgence of Heaven has perhaps ever granted to the imperfect state of man upon earth,"--was in the usual tone of the public utterances of our presidents from 1821 to 1837. Our harvests were always great. We were a chosen people delighting in reminders from our rulers of our prosperity, and not restless under their pious urgency of perennial grat.i.tude to Providence. In 1821 the national debt had slightly increased, reaching upwards of $90,000,000; but from that time its steady and rapid payment went on until it was all discharged in 1834. Our cities grew. Our population stretched eagerly out into the rich Mississippi valley. From a population of ten millions in 1821, we reached sixteen millions in 1837. New York from about 1,400,000 became 2,200,000; and Pennsylvania from about 1,000,000 became 1,600,000. But the amazing growth was at the West--Illinois from 60,000 to 400,000, Indiana from 170,000 to 600,000, Ohio from 600,000 to 1,400,000, Tennessee from 450,000 to 800,000. Missouri had increased her 70,000 five-fold; Mississippi her 80,000 four-fold; Michigan her 10,000 twenty-fold. Iowa and Wisconsin were entirely unsettled in 1821; in 1837 the fertile lands of the former maintained nearly forty thousand and of the latter nearly thirty thousand hardy citizens. New towns and cities rose with magical rapidity. With much that was unlovely there was also exhibited an amazing energy and capacity for increase in wealth. The mountain barriers once pa.s.sed, not only by adventurous pioneers but by the pressing throngs of settlers, there were few obstacles to the rapid creation of comfort and wealth. Nor in the Mississippi valley and the lands of the Northwest were the settlers met by the harsh soil, the hostilities and reluctance of nature in whose conquest upon the Atlantic seaboard the American people had gained some of their strongest and most enduring characteristics. We hardly realize indeed how much better it was for after times that our first settlements were difficult. In the easy opening and tillage of the rich and sometimes rank lands at the West there was an inferior, a less arduous discipline. American temper there rushed often to speculation, rather than to toil or venture. It did not seem necessary to create wealth by labor; the treasures lay ready for those first reaching the doors of the treasure house. To make easy the routes to El Dorado of prairies and river bottoms was the quickest way to wealth.

Roads, ca.n.a.ls, river improvements, preceded, attended, followed these sudden settlements, this vast and jubilant movement of population. There was an extraordinary growth of "internal improvements." In his message of 1831, Jackson rejoiced at the high wages earned by laborers in the construction of these works, which he truly said were "extending with unprecedented rapidity." The const.i.tutional power of the federal government to promote the improvements within the States became a serious question, because the improvements proposed were upon so vast a scale. No single interest had for fifteen years before 1837 held so large a part of American attention as did the making of ca.n.a.ls and roads. The debates of Congress and legislatures, the messages of presidents and governors, were full of it. If the Erie Ca.n.a.l, finished in 1825, had rendered vast natural resources available, and had made its chief builder famous, why should not like schemes prosper further west?

The success of railroads was already established; and there was indefinite promise in the extensions of them already planned. In 1830 twenty-three miles had been constructed; in 1831 ninety-four miles; and in 1836 the total construction had risen to 1273 miles.

The Americans were then a far more h.o.m.ogeneous people than they are to-day. The great Irish, German, and Scandinavian immigrations had not taken place. Our race diversities were, with exceptions, unimportant in extent or lost in the lapse of time, the diversities merely of British descendants. Nor were there the extremes of fortune or the diversities of occupation which have come with the growth of cities and manufacturing interests. The United States were still a nation of farmers. The compensations and balances, which in the varying habits and prejudices of a more varied population tend to restrain and neutralize vagaries, did not exist. One sentiment seized the whole nation far more readily than could happen in the complexity of our modern population and the diversity and rivalry of its strains. Not only did this h.o.m.ogeneity make Americans open to single impulses; but there was little essential difference of environment. They all, since the later days of Monroe's presidency, had lived in the atmosphere of official delight and congratulation over the past, and of unrestrained promise for the future. All, whether in the grain fields at the North or the cotton fields at the South, had behind them the Atlantic with traditions or experiences of poverty and oppression beyond it. Every American had, in his own lat.i.tude, since the ampler opening of roads and waterways, and the peaceful conquest of the Appalachian mountain ranges, seen to the west of him fertility and promise and performance. And the fertility and promise had, since the second English war, been no longer in a land of hardship and adventure remote and almost foreign to the seaboard. Every American under Jackson's administration had before him, as the one universal experience of those who had taken lands at the West, an enormous and certain increase of value, full of enchantment to those lately tilling the flinty soil of New England or the overused fields of the South. If new lands at the West could be made accessible by internal improvements, the succession of seed time and harvest had for a dozen years seemed no more certain than that the value of those lands would at once increase prodigiously. So the American people with one consent gave themselves to an amazing extravagance of land speculation. The Eden which Martin Chuzzlewit saw in later malarial decay was to be found in the new country on almost every stream to the east of the Mississippi and on many streams west of it, where flatboats could be floated. Frauds there doubtless were; but they were incidental to the honest delusion of intelligent men inspired by the most extraordinary growth the world had seen. The often quoted ill.u.s.tration of Mobile, the valuation of whose real estate rose from $1,294,810 in 1831 to $27,482,961 in 1837, to sink again in 1846 to $8,638,250, not unfairly tells the story. In Pensacola, lots which to-day are worth $50 each were sold for as much as lots on Fifth Avenue in New York, which to-day are worth $100,000 apiece. Real estate in the latter city was a.s.sessed in 1836 at more than it was in the greatly larger and richer city of fifteen years later. From 1830 to 1837 the steamboat tonnage on the Western rivers rose from 63,053 to 253,661. From 1833 to 1837 the cotton crop of the newer slave States, Tennessee, Alabama, Mississippi, Louisiana, Arkansas and Florida, increased from 536,450 to 916,960 bales, while the price with fluctuations rose from ten to twenty cents a pound. Foreign capital naturally enough came to share in the splendid money-making. From 1821 to 1833 the annual import of specie from England had averaged about $100,000, in the last year being only $31,903; but in 1834 it became $5,716,253, in 1835 $914,958, and in 1836 $2,322,920, the entire export to England of specie for all these three years being but $51,807, while the average export from 1822 to 1830 had been about $400,000; and its amount in 1831 had been $2,089,766, and in 1832 $1,730,571. From 1830 to 1837, both years inclusive, although the imports from all countries of general merchandise exceeded the exports by $140,700,000, there was no counter movement of specie. The imports of specie from all countries during these years exceeded the exports by the comparatively enormous sum of $44,700,000. The foreigners therefore took pay for their goods, not only in our raw materials, but also in our investments or rather our speculations, and sent these vast quant.i.ties of moneys besides. So our good fortune fired the imaginations of even the dull Europeans. They helped to feed and clothe us that we might experiment with Aladdin's lamp.

The price of public lands was fixed by law at $1.25 an acre; and they were open to any purchaser, without the wholesome limits of acreage and the restraint to actual settlers which were afterwards established. Here then was a commodity whose price to wholesale purchasers did not rise, and the very commodity by which so many fortunes had been made. In public lands, therefore, the fury of money-getting, the boastful confidence in the future of the country, reached their climax. From 1820 to 1829 the annual sales had averaged less than $1,300,000, in 1829 being $1,517,175. But in 1830 they exceeded $2,300,000, in 1831 $3,200,000, in 1832 $2,600,000, in 1833 $3,900,000, and in 1834 $4,800,000. In 1835 they suddenly mounted to $14,757,600, and in 1836 to $24,877,179. In his messages of 1829 and 1830 Jackson not unreasonably treated the moderate increase in the sales as a proof of increasing prosperity. In 1831 his congratulations were hushed; but in 1835 he again fancied, even in the abnormal sales of that year, only an ampler proof of ampler prosperity. In 1836 he at last saw that tremendous speculation was the true significance of the enormous increase. Prices of course went up. Everybody thought himself richer and his labor worth more. A week after Van Buren's inauguration a meeting was held in the City Hall Park in New York to protest against high rents and the high prices of provisions; and with much discernment the cry went up, "No rag money; give us gold and silver!"

There is no longer dispute that the prostration of business in 1837, and for several years afterward, was the perfectly natural result of the speculation which had gone before. The absurd denunciations of Van Buren by the most eminent of the Whigs for not ending the crisis by governmental interference are no longer respected. But it is still fancied that the speculation itself was caused by one financial blunder, and the crisis immediately occasioned by another financial blunder, of Jackson. It is not improbable that the deposits of treasury moneys in fifty state banks[12] instead of in the United States Bank and its twenty and more branches, which began in the fall of 1833, aided the tendency to speculation. But this aid was at the most a slight matter. The impression has been sedulously created that these state banks, the "pet banks," were doubtful inst.i.tutions. There seems little reason to doubt that in general they were perfectly sound and reputable inst.i.tutions, with which the government moneys would be quite as safe as with the United States Bank. It is clear that if the latter Bank were not to be rechartered, the deposits should, without regard to the accusations of political meddling brought against it, have been removed some time in advance of its death in March, 1836. At best it is matter of doubtful speculation whether the United States Bank under Biddle's direction would, in 1834, 1835, and 1836, while the government deposits were enormously increasing, have behaved with much greater prudence and foresight than did the state deposit banks. So far as actual experience helps us, the doubt might well be solved in the negative. The United States Bank, when its federal charter lapsed, obtained a charter from Pennsylvania, continuing under the same management; and is said, and possibly with truth, to have entered upon its new career with a great surplus. But it proved no stronger than the state banks in 1837; it obstructed resumption in 1838; it suspended again in 1839, while the Eastern banks stood firm; and in 1841 it went to pieces in disgraceful and complete disaster.

The enormous extension of bank credits during the three years before the break-down in 1837 was rather the symptom than the cause of the disease.

The fever of speculation was in the veins of the community before "kiting" began. Bank officers dwelt in the same atmosphere as did other Americans, and their sanguine extravagance in turn stimulated the universal temper of speculation.

When the United States Bank lost the government deposits, late in 1833, they amounted to a little less than $10,000,000. On January 1, 1835, more than a year after the state banks took the deposits, they had increased to a little more than $10,000,000. But the public debt being then paid and the outgo of money thus checked, the deposits had by January 1, 1836, reached $25,000,000, and by June 1, 1836, $41,500,000.

This enormous advance represented the sudden increase in the sales of public lands, which were paid for in bank paper, which in turn formed the bulk of the government deposits. The deposits were with only a small part of the six hundred and more state banks then in existence. But the increase in the sales of public lands was the result of all the organic causes and of all the long train of events which had seated the fever of speculation so profoundly in the American character of the day. To those causes and events must ultimately be ascribed the extension of bank credits so far as it immediately arose out of the increase of government deposits. Nor is there any sufficient reason to suppose that if the deposits, instead of being in fifty state banks, had remained in the United States Bank and its branches, the tendency to speculation would have been less. The influences which surrounded that Bank were the very influences most completely subject to the popular mania.

But the increase of government deposits was only fuel added to the flames. The craze for banks and credits was unbounded before the removal of the deposits had taken place, and before their great increase could have had serious effect. Between 1830 and January 1, 1834, the banking capital of the United States had risen from $61,000,000 to about $200,000,000; the loans and discounts of the banks from $200,000,000 to $324,000,000; and their note circulation from $61,000,000 to $95,000,000. The increase from January 1, 1834, to January 1, 1836, was even more rapid, the banking capital advancing in the two years to $251,000,000, the loans and discounts to $457,000,000, and the note circulation to $140,000,000. But there was certainty of disaster in the abnormal growth from 1830 to 1834. The insanity of speculation was in ample though un.o.bserved control of the country while Nicholas Biddle still controlled the deposits, and was certain to reach a climax whether they stayed with him or went elsewhere.

It is difficult rightly to apportion among the statesmen and politicians of the time so much of blame for the mania of speculation as must go to that body of men. They had all drunk in the national intoxication over American success and growth. But if we pa.s.s from the greater and deeper causes to the lesser though more obvious ones, it is impossible not to visit the greater measure of blame upon the statesmen who resisted reduction of taxation, which would have left money in the pockets of those who earned it, and not collected it in one great bank with many branches or in fifty lesser banks; upon the statesmen who insisted that the government ought to aid commercial ventures by encouraging the loans to traders of its own moneys held in the deposit banks; upon the statesmen who promoted the dangerous scheme of distributing the surplus among the States instead of abolishing the surplus. As the condemnation of public men in the wrong must be proportioned somewhat to the distinction of their positions and the greatness of their natural gifts, this larger share of blame must go chiefly to Daniel Webster and Henry Clay. At the head of their a.s.sociates, they had resisted the reduction of taxation. In his speech on the tariff bill of 1832 Clay said, with the exuberance so delightful to minds of easy discipline, that our resources should "not be h.o.a.rded and hugged with a miser's embrace, but liberally used." They insisted upon freely lending the public moneys. In his speech on the distribution of the surplus, Webster urged that the number of the deposit banks "be so far increased that each may regard that portion of the public treasure which it may receive as an increase of its effective deposits, to be used, like other moneys in deposit, as a basis of discount, to a just and proper extent." The public money was locked up, he declared, instead of aiding the general business of the country. Nor after this was he ashamed in 1838 to condemn Jackson's secretary of the treasury for advising the new deposit banks, as he had himself thus advised them, "to afford increased facilities to commerce."

If, indeed, Congress would not take steps to keep a government surplus out of the banks and in the pockets of producers, the secretary ought not to have been harshly judged for advising that the money go out into commerce rather than lie in bank vaults.

The distribution of the surplus among the States by the law of 1836 was the last and in some respects the worst of the measures which aided and exaggerated the tendency to speculation. By this bill, all the money above $5,000,000 in the treasury on January 1, 1837, was to be "deposited" with the States in four quarterly installments commencing on that day. According to the law the "deposit" was but a loan to the States; but, as Clay declared, not "a single member of either House imagined that a dollar would ever be recalled." It was in truth a mere gift. Clay's triumphant ridicule of the opposition to this measure has already been mentioned. Webster in sounding periods declared his "deep and earnest conviction" of the propriety of the stupendous folly. He did not, indeed, defend the general system of making the federal government a tax-gatherer for the States. But this one distribution would, he said in his speech of May 31, 1836, "remove that severe and almost unparalleled pressure for money which is now distressing and breaking down the industry, the enterprise, and even the courage of the commercial community." The Whig press declared that a congressman who could for mere party reasons vote against a measure which would bring so much money into his State, must be "far gone in political hardihood as well as depravity;" and that "to the Republican-Whig party alone are the States indebted for the benefits arising from the distribution." William H. Seward, two years before and two years later the Whig candidate for governor of New York, said the proposal was "n.o.ble and just." The measure pa.s.sed the Senate with six Democratic votes against it, among them the vote of Silas Wright, then probably closer than any other senator to Van Buren. Jackson yielded to the bill what in his message in December of the same year he called "a reluctant approval." He then gave at length very clear reasons for his reluctance, but none for his approval. He declared that "improvident expenditure of money is the parent of profligacy," and that no intelligent and virtuous community would consent to raise a surplus for the mere purpose of dividing it. In his first message, indeed, Jackson had called the distribution among the States "the most safe, just, and federal disposition" of the surplus.

But his views upon this, as upon other subjects, had changed during the composition of the Democratic creed which went on during the early years of his administration. His second message rehea.r.s.ed at length the objections to the distribution, though affecting to meet them. In his third message he recommended the abolition of unnecessary taxation, not the distribution of its proceeds; and in 1832 he made his explicit declaration that duties should be "reduced to the revenue standard."

Benton says it was understood that in 1836 some of Van Buren's friends urged Jackson to approve the bill, lest a veto of so popular a measure might bring a Democratic defeat. There must have been some reason unrelated to the merit of the measure. But whatever the opinions of Van Buren's friends, he took care before the election to make known unequivocally, in the Sherrod Williams letter already quoted, his dislike of this piece of demagogy. From the pa.s.sage of the deposit bill in June, 1836, until the crash in 1837, this superb donation of thirty-seven millions was before the enraptured and deluded vision of the country. Over nine millions a quarter to be poured into "improvements" or loaned to the needy,--what a delightful prospect to citizens hara.s.sed by the restraints of prudent, fruitful industry! The lesson is striking and wholesome, and ought not to be forgotten, that it was when the land was in the very midst of these largesses that the universal bankruptcy set in.

During 1835 and 1836 there were omens of the coming storm. Some perceived the rabid character of the speculative fever. William L.

Marcy, governor of New York, in his message of January, 1836, answering the dipsomaniac cry for more banks, declared that an unregulated spirit of speculation had taken capital out of the State; but that the amount so transferred bore no comparison to the enormous speculations in stocks and in real property within the State. Lands near the cities and villages of the State had risen several hundred per cent. in value, and were sold, not to be occupied by the buyers, but to be sold again at higher prices. The pa.s.sion for speculation prevailed to an extent before unknown, not only among capitalists, but among merchants, who abstracted capital from their business for land and stock speculations and then resorted to the banks. The warning was treated contemptuously; but before the year was out the federal administration also became anxious, and the increase in land sales no longer signified to Jackson an increasing prosperity. The master hand which drew the economic disquisition in his message of 1836 pointed to these sales as the effects of the extension of bank credit and of the over-issue of bank paper. The banks, it was declared, had lent their notes as "mere instruments to transfer to speculators the most valuable public land, and pay the government by a credit on the books of the banks." Each speculation had furnished means for another. No sooner had one purchaser paid his debt in the notes than they were lent to another for a like purpose. The banks had extended their business and their issues so largely as to alarm considerate men. The spirit of expansion and speculation had not been confined to deposit banks, but had pervaded the whole mult.i.tude of banks throughout the Union, and had given rise to new inst.i.tutions to aggravate the evil. So Jackson proceeded with his sound defense of the famous specie circular, long and even still denounced as the _causa causans_ of the crisis of 1837.

By this circular, issued on July 11, 1836, the secretary of the treasury had required payment for public lands to be made in specie, with an exception until December 15, 1836, in favor of actual settlers and actual residents of the State in which the lands were sold. The enormous sales of land in this year, and the large payments required for them under the circular, at once made the banks realize that there ought to be an actual physical basis for their paper transactions. Gold was called from the East to the banks at the West to make the land payments.

Into the happy exaltation of unreal transactions was now plunged that harsh demand for real value which sooner or later must always come. The demand was pa.s.sed on from one to another, and its magnitude and peremptoriness grew rapidly. The difference between paper and gold became plainer and plainer. Nature's vital and often hidden truth that value depends upon labor could no longer be kept secret by a few wise men. The suspicion soon arose that there was not real and available value to meet the demands of nominal value. The suspicion was soon bruited among the less as well as the more wary. Every man rushed to his bank or his debtor, crying, "Pay me in value, not in promises to pay; there is, I at last see, a difference between them." But the banks and debtors had no available value, but only its paper semblances. Every man found that what he wanted, his neighbors did not have to give him, and what he had, his neighbors did not want.

This is hardly an appropriate place to attempt an a.n.a.lysis of the elements of a commercial crisis. But it is not possible rightly to estimate Van Buren's moral courage and keen-sighted wisdom in meeting the terrible pressure of 1837 without appreciating what it was which had really happened. The din of the disputes over the refusal to re-charter the bank, over the removal of the deposits, over the refusal to pay the last installment of the distribution among the States, and over the specie circular, resounds even to our own time. To many the crisis seemed merely a financial or even a great banking episode. Many friends of the administration loudly cried that the disaster arose from the treachery of the banks in suspending. Many of its enemies saw only the normal fruit of administrative blunders, first in recklessness, and last in heartless indifference. To most Americans, whatever their differences, the explanation of this profound and lasting disturbance seemed to lie in the machinery of finance, rather than in the deeper facts of the physical wealth and power of the trading cla.s.ses.

Speculation is sometimes said to be universal; and it was never nearer universality than from 1830 to 1837. But speculation affects after all but a small part of the community,--the part engaged in trade, venture, new settlement or new manufacture; those cla.s.ses of men the form of whose work is not established by tradition, but is changing and improving under the spur of ingenuity and invention, and with whom imagination is most powerful and fruitful. These men use the surplus resources of the vastly greater number who go on through periods of high prices and of low prices with their steady toil and unvaried production.

In our country and in all industrial communities it is to the former comparatively small cla.s.s that chiefly and characteristically belong "good times" and "bad times," panics and crises and depressions. It is this cla.s.s which in newspapers and financial reviews becomes "the country." It chiefly supports the more influential of the clergy, the lawyers, the editors, and others of the professional cla.s.ses. It deals with the new uses and the acc.u.mulations of wealth; it almost monopolizes public attention; it is chiefly and conspicuously identified with industrial and commercial changes and progress. But if great depressions were as nearly universal as the rhetoric of economists and historians would literally signify, our ancestors fifty years ago must have experienced a devastation such as Alaric is said to have brought to the fields of Lombardy. But this was not so. The processes of general production went on; the land was tilled; the farmer's work of the year brought about the same amount of comfort; the ordinary mechanic was not much worse off. If some keen observer from another planet had in 1835 and again later in 1837 looked into the dining-rooms and kitchens and parlors of America, had seen its citizens with their families going to church of a Sunday morning, or watched the tea-parties of their wives, or if he had looked over the fields and into the shops, there would have seemed to him but slight difference between the two years in the occupations, the industry, or the comfort of the people. But if he had stopped looking and begun to listen, he would in 1837 at once have perceived a tremendous change. The great ma.s.ses of producing men would have been mute, as they usually are. But the capitalists, the traders, the manufacturers, all whose skill, courage, imagination, and adventure made them the leaders of progress, and whose voices were the only loud, clear, intelligible voices, until there arose the modern organizations of laboring men,--all those who in 1835 were flushed and glorious with a royal money-getting,--he would now have heard crying in frenzy and desperation. It is not meant to disparage the importance of this smaller but louder body of men, or to underrate the disaster which they suffered. In proportion to their numbers, they were vastly the most important part of the community. If they were prostrated, there must not only suffer the body of clerks, operatives, and laborers immediately engaged in their enterprises, and who may for economical purposes be ranked with them; but later on, the ma.s.ses of the community must to a real extent feel the interruption of progress which has overtaken that section of the community to which are committed the characteristic operations of material progress; and whether through the fault or the misfortune of that section, the injury is alike serious. A wise ruler, in touching the finances of his country, will forget none of this. He will look through all the agitation of bankers and traders and manufacturers, the well-voiced leaders of the richer cla.s.ses of men, to the far vaster processes of industry carried on by men who are silent, and whose silent industry will go on whatever devices of currency or banking may be adopted. This wisdom Van Buren now showed in an exalted degree.

The disaster which in 1837 overtook so large and so important a part of the community was, in its ultimate nature, not difficult to comprehend.

There had not been one equal and universal increase in nominal values.

Such an increase would not have produced the crisis. But while the great ma.s.s of the national industry went on in channels and with methods and rates substantially undisturbed, there took place an enormous and speculative advance of prices in the cities where were carried on the operations of important traders and the promoters of enterprises, and in the very new country where these enterprises found their material. When a new ca.n.a.l or road was built, or a new line of river steamers launched and an unsettled country made accessible, several things inevitably happened in the temper produced by the jubilant observation of the past.

There was not only drawn from the ordinary industry of the country the wealth necessary to build the ca.n.a.l or road or steamers; but the country thus rendered accessible seemed suddenly to gain a value measured by the best results of former settlements, however exceptional, and by the most sanguine hopes for the future. The owners of the prairies and woods and river bottoms became suddenly rich, as a miner in Idaho becomes rich when he strikes a true fissure vein. The owners of the ca.n.a.l or road or line of steamers found their real investment at once multiplied in dollars by the value of the country whose trade they were to enjoy; for, new as that value was, it seemed a.s.sured. Like investments were made in banks, and in every implement of direct or indirect use in the conduct of industries which seemed to belong as a necessity to the new value of the land. The numerous sales of lands and of stocks in roads or ca.n.a.ls or banks at rapidly advancing prices did not alter the nature, although they vastly augmented the effect, of what was happening. The so-called "business cla.s.ses" throughout the country, related as they quickly became, under the great impetus of the national hopefulness and vanity, to the new lands, to the new cities and towns and farms, and to the means of reaching them and of providing them with the necessities and comforts of civilization, found their wealth rapidly and largely increasing. Then naturally enough followed the spending of money in personal luxury. This meant the withdrawal of labor in the older part of the country from productive work, for which the country was fitted, to work which, whether suitable or not, was unproductive. The unproductive labor was paid, as the employers supposed, from the new value lately created at the West. So capital, that is, acc.u.mulated labor, was first spent in improvements in the new country, and then, and probably in a far greater amount, spent in more costly food, clothes, equipage, and other luxuries in the older country. The successive sales at advancing prices simply increased the sense of new wealth, and augmented more and more this destructive consumption of the products of labor, or the destructive diversion of labor from productive to unproductive activity at the East by the well-to-do cla.s.ses.

On the eve of the panic the new wealth, whose seeming possession apparently justified this destructive consumption or diversion to luxury of physical value, was primarily represented by t.i.tles to lands, stocks in land, ca.n.a.l, turnpike, railroad, transportation, or banking companies, and the notes issued by banks or traders or speculators. The value of these stocks and notes depended upon the fruitfulness of the lands or ca.n.a.ls or roads or steamboat lines. Prices of many commodities had, indeed, been enhanced by speculation beyond all proper relation to other commodities, measured by the ultimate standard of the quant.i.ty and quality of labor. But important as was this element, it was subordinate to the apparent creation of wealth at the West.

Before the panic broke, it began to appear that mere surveys of wild tracts into lots made neither towns nor cities; that ca.n.a.ls and roads and steamboats did not hew down trees or drain mora.s.ses or open the glebe. The basis of the operations of capitalists and promoters and venturers in new fields, if those operations were to have real success, must lie in the ma.s.ses of strong and skillful arms of men of labor. The operations were fruitless until there came a population well sinewed and gladly ready for arduous toil. In 1836 and 1837 the operators found that there was no longer a population to give enduring life to their new operations. They had far outstripped all the immediate or even the nearly promised movements of settlers. Men, however hardy, preferred to work within an easier reach of the physical and social advantages of settlements already made, until they could see the superior fruitfulness of labor further on. The new cities and towns and farms and the means of reaching them would be mere paper a.s.sets until an army of settlers was ready to enter in and make them sources of actual physical wealth. But the army stopped far short of the new Edens and metropolises. There was no creation among them of the actual wealth, the return of physical labor, to make good and real the popular semblances of wealth, upon the faith of which in the older part of the country had arisen new methods of business and habits of living. The withdrawal of actual wealth from the multifarious treasuries of capital and industry, to meet the expense of the improvements at the West and the increased luxury at the East, had reached a point where the pressure caused by the deficiency of physical wealth was too great for the hopefulness or credulity of those who had been surrendering that wealth upon the promises of successful and opulent settlements at the West. Nor was all this confined to ventures in the new States. Almost every Eastern city had a suburb where with slight differences all the phenomena of speculation were as real and obvious as in Illinois or Mississippi.

Jackson's specie circular toppled over the house of cards, which at best could have stood but little longer. In place of bank-notes, which symbolized the expectations and hopes of the owners of new towns and improvements, the United States after July, 1836, required from all but actual settlers gold and silver for lands. An insignificant part of the sales had been lately made to settlers. They were chiefly made to speculators. The public lands, which sold invariably at $1.25 an acre, were enormously magnified in nominal value the instant the speculators owned them. Paper money was freely issued upon these estimates of value, to be again paid to the government for more lands at $1.25. But now gold and silver must be found; and nothing but actual labor could find gold and silver. A further stream of true wealth was summoned from the East, already denuded, as it was, of all the surplus it had ready to be invested upon mere expectation. Enormous rates were now paid for real money. But of the real money necessary to make good the paper bubble promises of the speculators not one-tenth part really existed. Banks could neither make their debtors pay in gold and silver, nor pay their own notes in gold and silver. So they suspended.

The great and long concealed devastation of physical wealth and of the acc.u.mulation of legitimate labor, by premature improvements and costly personal living, became now quickly apparent. Fancied wealth sank out of sight. Paper symbols of new cities and towns, ca.n.a.ls and roads, were not only without value, but they were now plainly seen to be so. Rich men became poor men. The prices of articles in which there had been speculation sank in the reaction far below their true value. The industrious and the prudent, who had given their labor and their real wealth for paper promises issued upon the credit of seemingly a.s.sured fortunes, suffered at once with men whose fortunes had never been anything better than the delusions of their hope and imagination.

It is now plain enough that to recover from this crisis was a work of physical reparation to which must go time, industry, and frugality.

There was folly in every effort to retain and use as valuable a.s.sets the investments in companies and banks whose usefulness, if it had ever begun, was now ended. There was folly in every effort to conceal from the world by words of hopefulness the fact that the imagined values in new cities and garden lands had disappeared in a rude disenchantment as complete as that of Abou-Ha.s.san in the Thousand and One Nights, or that of Sly, the tinker, left untold in the Taming of the Shrew. Their sites were no more than wild lands, whose value must wait the march of American progress, fast enough indeed to the rest of the world, but slow as the snail to the wild pacing of the speculators. Every pretense of a politician, whether in or out of the senate chamber, that the government could by devices of financiering avoid this necessity of long physical repair, was either folly or wickedness. And of this folly or even wickedness there was no lack in the anxious spring and summer of 1837.

There had already occurred in many quarters that misery which is borne by the humbler producers of wealth not for their own consumption, but simply for exchange, whose earnings are not increased to meet the inflation of prices upon which traders and speculators are acc.u.mulating apparent fortunes and spending them as if they were real. On February 14, 1837, several thousand people met in front of the City Hall in New York under a call of men whom the "Commercial Advertiser" described as "Jackson Jacobins." The call was headed: "Bread, meat, rent, fuel!

Their prices must come down!" It invited the presence of "all friends of humanity determined to resist monopolists and extortionists." A very respectable meeting about high prices had been held two or three weeks before at the Broadway Tabernacle. The meeting in the City Hall Park, with a mixture of wisdom and folly, urged the prohibition of bank-notes under $100, and called for gold and silver; and then denounced landlords and dealers in provisions. The excitement of the meeting was followed by a riot, in which a great flour warehouse was gutted. The rioters were chiefly foreigners and few in number; nor were the promoters of the meeting involved in the riot. The military were called out; and Eli Hart & Co., the unfortunate flour merchants, issued a card pointing out with grim truth "that the destruction of the article cannot have a tendency to reduce the price."

The distribution of the treasury surplus to the States precipitated the crash. The first quarter's payment of $9,367,000 was made on January 1, 1837. There was disturbance in taking this large sum of money from the deposit banks. Loans had to be called in, and the accommodation to business men lessened for the time. There was speculative disturbance in the receipt of the moneys by the state depositories. There was apprehension for the next payment on April 1, which was accomplished with still greater disturbance, and after the crisis had begun. The calls for gold and silver, begun under the specie circular, and the disturbances caused by these distributions, were increased by financial pressure in England, whose money aids to America were but partly shown by the shipments of gold and silver already mentioned. The extravagance of living had been shown in foreign importations for consumption in luxury, to meet which there had gone varied promises to pay, and securities whose true value depended upon the true and not the apparent creation of wealth in America. Before the middle of March the money excitement at Manchester was great; and to the United States alone, it was then declared, attention was directed for larger remittances and for specie. The merchants of Liverpool about the same time sent a memorial to the chancellor of the exchequer saying "that the distress of the mercantile interest is intense beyond example, and that it is rapidly extending to all ranks and conditions of the community, so as to threaten irretrievable ruin in all directions, involving the prudent with the imprudent." The "London Times" on April 10, 1837, said that great distress and pressure had been produced in every branch of national industry, and that the calamity had never been exceeded.

The cry was quickly reechoed from America. Commercial failures began in New York about April 1. By April 8 nearly one hundred failures had occurred in that city,--five of foreign and exchange brokers, thirty of dry-goods jobbers, sixteen of commission houses, twenty-eight of real-estate speculators, eight of stock brokers, and several others.

Three days later the failures had reached one hundred and twenty-eight.

Provisions, wages, rents, everything, as the "New York Herald" on that day announced, were coming down. Within a few days more the failures were too numerous to be specially noticed; and before the end of the month the rest of the country was in a like condition. The prostration in the newer cotton States was peculiarly complete. Their staple was now down to ten cents a pound; within a year it had been worth twenty. All other staples fell enormously in price.

Later in April the merchants of New York met. Instead of condemning their own folly, they resolved, in a silly fury, that the disaster was due to government interference with the business and commercial operations of the country by requiring land to be paid for in specie instead of paper, to its destruction of the Bank, and to its subst.i.tution of a metallic for a credit currency. A committee of fifty, including Thomas Denny, Henry Parish, Elisha Riggs, and many others whose names are still honored in New York, was appointed to remonstrate with the president. "What const.i.tutional or legal justification," it was seriously demanded, "can Martin Van Buren offer to the people of the United States for having brought upon them all their present difficulties?" The continuance of the specie circular, they said, was more high-handed tyranny than that which had cost Charles I. his crown and his head. On May 3 the committee visited Washington and told the President that their real estate had depreciated forty millions, their stocks twenty millions, their immense amounts of merchandise in warehouses thirty per cent. They piteously said to him, "The n.o.ble city which we represent lies prostrate in despair, its credit blighted, its industry paralyzed, and without a hope beaming through the darkness, unless"--and here we might suppose they would have added, "unless Americans at once stop spending money which has not been earned, and repair the ruin by years of sensible industry and strict economy." But the conclusion of the merchants was that the darkness must continue unless relief came from Washington. It was unjust, they said, to attribute the evils to excessive development of mercantile enterprise; they flowed instead from "that unwise system which aimed at the subst.i.tution of a metallic for a paper currency." The error of their rulers "had produced a wider desolation than the pestilence which depopulated our streets, or the conflagration which laid them in ashes."

In the opinion of these sapient gentlemen of business, it was the requirement that the United States, in selling Western lands to speculators, should be paid in real and not in nominal money, which had prostrated in despair the metropolis of the country. They asked for a withdrawal of the specie circular, for a suspension of government suits against importers on bonds given for duties, for an extra session of Congress to pa.s.s Clay's bill for the distribution of the land revenue among the States, and for the re-chartering of the Bank. Never did men out of their heads with fright propose more foolish attempts at relief than some of these. But the folly, as will be seen, seized statesmen of the widest experience as well as frenzied merchants. The President's answer was dignified, but "brief and explicit." To the insolent suggestion that Jackson's financial measures had been more destructive than fire or pestilence, he calmly reminded them that he had made fully known, before he was elected, his own approval of those measures; that knowing this the people had deliberately chosen him; and that he would still adhere to those measures. The specie circular should be neither repealed nor modified. Such indulgence in enforcing custom-house bonds would be allowed as the law permitted. The emergency did not, he thought, justify an extra session. Nicholas Biddle called on Van Buren; and many were disgusted that in the presence of this arch enemy the president remained "profoundly silent upon the great and interesting topics of the day."

Van Buren's resolution to face the storm without either the aid or the embarra.s.sment of the early presence of Congress he was soon compelled to abandon. Within a few days of the return of the merchants to New York, that city sent the President an appalling reply. On May 10 its banks suspended payment of their notes in coin. A few days before some banks in lesser cities of the Southwest had stopped. On the day after the New York suspension, the banks of Philadelphia, Baltimore, Albany, Hartford, New Haven, and Providence followed. On the 12th the banks of Boston and Mobile, on the 13th those of New Orleans, and on the 17th those of Charleston and Cincinnati fell in the same crash. There was now simply a general bankruptcy. Men would no longer meet their promises to pay, because no longer could new paper promises pay off old ones. No longer would men surrender physical wealth safely in their hands for the expectation of wealth to be created by the future progress of the country. But men with perfectly real physical wealth in their storehouses, which they could not themselves use, were also in practical bankruptcy because of their commercial debts most prudently incurred.

The natural exchange of their own goods for goods which they or their creditors might use was obstructed by the utter discredit of paper money, and by the almost complete disappearance of gold and silver.

Extra sessions of state legislatures were called to devise relief. The banks' suspension of specie payment in New York was within a few days legalized by the legislature of that State. On May 12 the secretary of the treasury directed government collectors themselves to keep public moneys where the deposit banks had suspended.

For banks holding the public moneys sank with the others. And it was this which compelled Van Buren in one matter to yield to the storm. On May 15 he issued a proclamation for an extra session of Congress to meet on the first Monday of September. It would meet, the proclamation said, to consider "great and weighty matters." No scheme of relief was suggested. The locking up of public moneys in suspended banks made necessary some relief to the government itself. It was, perhaps, well enough that excited and terrified people, casting about for a remedy, should, until their wits were somewhat restored, be soothed by a.s.surance that the great council of the nation would, at any rate, discuss the situation. Moreover, it was wise to secure time, that most potent ally of the statesman. Within the three months and a half to elapse, Van Buren, like a wise ruler, thought the true nature of the calamity would become more apparent; proposals of remedies might be scrutinized; and thoughtless or superficial men might weary of their own absurd proposals, or the people might fully perceive their absurdity.

During the summer popular excitement ran very high against the administration. The Whig papers declared it to be "the melancholy truth, the awful truth," that the administration did nothing to relieve, but everything to distress the commercial community. Abbot Lawrence, one of the richest and most influential citizens of Boston, told a great meeting, on May 17, that there was no other people on the face of G.o.d's earth that were so abused, cheated, plundered, and trampled on by their rulers; that the government exacted impossibilities. No overt act, he said, with almost a sinister suggestion, ought to be committed until the laws of self-preservation compelled a forcible resistance; but the time might come when the crew must seize the ship. The friends of the administration sought, indeed, to stem the tide; and a series of skillfully devised popular gatherings was held, very probably inspired by Van Buren, who highly estimated such organized appeals to popular sentiment. In Philadelphia a great meeting denounced the bank suspensions and the issue of small notes as devices in the interest of a foreign conspiracy to throw silver coin out of circulation and export it to Europe, to raise the prices of necessaries, and recommence a course of gambling under the name of speculation and trade, in which the people must be the victims, and "the foreign and home desperadoes" the gainers.

The meeting declared for a metallic currency. "We hereby pledge our lives, if necessary," they said, "for the support of the same." Later, on May 22, there was in the same city a large gathering at Independence Square, which solemnly called upon the administration "manfully, fearlessly, and at all hazards to go on collecting the public revenues and paying the public dues in gold and silver." Their forefathers, who fought for their liberties, the framers of our Const.i.tution, the patriarchs whose memory they revered, were, with a funny mixture of truth and falsehood, declared to have been hard-money men. A week later, a great meeting in Baltimore approved the specie circular, and urged its fearless execution, "notwithstanding the senseless clamors of the British party;" for the crisis, they said, was "a struggle of the virtuous and industrious portions of the community against bank advocates and the enemies to good morals and republicanism." Protests were elsewhere made against forcing small notes into circulation. Paper had, however, to be used, for there was nothing else. Barter must go on, even upon the most flimsy tokens. In New York one saw, as were seen twenty-four years later, bits of paper like this: "The bearer will be ent.i.tled to fifty cents' value in refreshments at the Auction Hotel, 123 and 125 Water Street. New York, May, 1837. Charles Redabock." In Tallaha.s.see a committee of citizens was appointed to print bank tickets for purposes of change. In Easton the currency had a more specific basis. One of the tokens read: "This ticket will hold good for a sheep's tongue, two crackers, and a gla.s.s of red-eye."

When Congress a.s.sembled, the country had cried itself, if not to sleep, at least to seeming quiet. The sun had not ceased to rise and set.

Although merchants and bankers were prostrate with anxiety or even in irremediable ruin; although thousands of clerks and laborers were out of employment or earning absurdly low wages,--for near New York hundreds of laborers were rejected who applied for work at four dollars a month and board; although honest frontiersmen found themselves hopelessly isolated in a wilderness,--for the frontier had suddenly shrunk far behind them,--still the harvest had been good, the ma.s.ses of men had been at work, and economy had prevailed. The desperation was over. But there was a profound melancholy, from which a recovery was to come only too soon to be lasting.

CHAPTER IX

PRESIDENT.--SUB-TREASURY BILL