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July 1838

“Extracts from the Private Diary of a Certain Bank Director,” Part II

“Satan came among us in the guise of a Loco-Foco…[He] said much about the importance of a fixed standard of value…much about justice, and equity, and honesty.”

Editor’s Note

In the first part of the Democratic Review’s peek into the private life of American bank directors and fund managers, the anonymous author introduced the story’s narrator and hero (of sorts).  Our narrator (one Mr. Graball) explained in particular the difficulties of maintaining sufficient specie to meet the depositor’s demands and his bank’s persistent shortage of hard currency.  In his quest to fill the vaults and balance his accounts, Graball becomes convinced that “specie” is in fact worth whatever people deem it to be worth, and therefore virtually anything can count toward a bank’s specie reserves—including IOUs written on the spot by the bank’s directors.  Through linguistic alchemy, Graball thus converts his personal guarantee into real assets. 

In the second half of the story, his intellectual idol departs from the local church for a preaching (and drinking) binge, leaving Graball and the rest of the flock in the hands of a rather different temperament.  The new “priest” insisted that institutions did not nullify the laws of ethics, and theft by any other name remained theft.  The narrator spends most of his diary space defending his business affairs, his personal charity, and his public ethics.  Later confronted by a “Loco-Foco,” however, Graball is once again shaken at the notion that he has dishonestly and immorally leached a lush life out of his fellow beings.  The Loco-Foco suggests that ethics was singular and could not be divided into “theoretical” and “practical,” “private” and “public.”  Put simply, individuals are called upon to be good, virtuous people in all their dealings; the Loco-Foco “never heard of Adam Smith or J. B. Say’s keeping a huckster-shop.”  Our heroic bank director, however, flees the devilish Loco, retreating to Dr. Diddler and his church, where he is “comforted and edified as usual.”

Anthony Comegna, PhD
Assistant Editor for Intellectual History

“Extracts from the Private Diary of a Certain Bank Director,” US Magazine & Democratic Review, 2 No. 8 (July 1838)

Sunday. Brother McThwackem has gone to a watering place, partly to recruit his health, partly to look after some rail road, and other speculations in which he and I are jointly interested—and partly to try if he cannot be of some spiritual benefit to the poor, light-headed mortals who usually flock to these scenes of gaiety. Through some strange mistake he left to fill his pulpit a stupid country parson, or I should rather say priest, for if his sermon did not savor of popery I know not what popery is. It was all works—works—works! Not one word about the precious doctrines of grace! I doubt if the man be not a Jesut in disguise, smuggled into the church by the hard-money men with intentions best known to themselves. His text was “THOU SHALT NOT STEAL;” and, in the course of his remarks, he drew a strongly marked line between what he was pleased to call conventional and essential honesty. There were, he said, many practices which, though strictly compatible with the former, were at utter variance with the latter. Taking advantage of men’s ignorance and necessities in driving a bargain, was, he said, just as bad in the eyes of reason and religion, as taking advantage of their physical weakness and robbing them on the high way. It was no matter whether this was done according to the forms of law or contrary thereunto. What was wrong in itself, mere human enactments could never make right…If a multitude of men were thus treated, it only added to the enormity of the offence…

If I use the power which circumstances or my superior intelligence gives me to increase my wealth, I am only acting according to the dictates of nature. That is morally right which is conformable to the law of the land. It is the law of the land which, in fact, determines what is right in a civil sense, and therefore in a moral sense. If the law is wrong I am not in fault. I did not make the law.

Went in the evening to hear Dr. Diddler, and heard a truly great and glorious discourse. It was all gospel and no law—all faith and no works.

Monday. An old friend…called on me this morning…and from some of his remarks I fear he is infected with the new-fangled notions of the day. The doctrines of legal righteousness are making strange havoc among professors…He reminded me that about twenty years ago when I was much embarrassed [i.e. poor], he had not pressed for the payment of a debt of five thousand dollars I then owed him, but suffered the claim to lie over. With some little difficulty I recollected the fact, but I did not think it very Christian-like in him to call it up at this late day. A favor ceases to be a favor if gratitude is required in payment. He said that he had met with many reverses since that time—an ample estate had been reduced to nothing—and all the efforts he had made in the South and West to retrieve his fortunes had proved unsuccessful. Understanding that I was possessed of boundless wealth—of a tract of three millions of acres of land, and six town plots, in the Western country, besides stocks and various other property in the East, he now ventured to hope I would discharge his claim—the interest he would give in if I would pay the principal.

Such effrontery I never before met with. The debt is barred by the statute of limitations, and has been these thirteen or fourteen years.

Mr. Downright said law was not every thing—there was such a thing as equity. So there is, I admit, but I have had the misfortune to fail three times in the course of my life, and the aggregate of my old debts (if debts they can be called) is between two and three millions of dollars. It is utterly impossible for me to pay all, and nothing could be more clearly inequitable than for me to pay one of my creditors and not the others.

Finding by further conversation that Downright was in great distress I gave him a check for fifty dollars, writing charity on one corner of it, as is my practice when I make donations, in. order that I may keep my accounts square, and know exactly how much I give in each year for benevolent purposes. Downright refused to receive the check unless this word was erased; and so finding him both poor and proud, I took it back, leaving him to suffer the consequences of his folly. People ought to learn to conform to their circumstances.

In regard to the three millions of acres of Western land, I must remark that they are not exactly mine, though they will, I hope, nay trust, be mine. It is Newcraft’s tract which he has transferred to me on certain conditions, and which I am to restore to him in certain contingences, which I shall take good care shall never occur. Newcraft thinks himself a man of business. And so he is, but others are men of business as well as he.

Tuesday. Beset during the whole day by a crowd of vulgar mechanics, to whom, during the late high prices, I had sold, or let on ground rent, some hundreds of lots in the city and the many new and important towns and villages that were then rising up around us on every side. The company of this class of people is always disagreeable, but I had to endure it. On a great number of these lots they have erected substantial buildings, but owing to the pressure of the times, (produced entirely by the doings of the Government,) these buildings rent at very reduced rates, and such of the lots as remain vacant will sell for but a small part of their original cost. Made the best arrangement with these people that I could, both for themselves and for myself. I cannot enter into particulars. It is enough to say that there is a fair prospect of my getting back one-half of my lots with good houses upon them, and the mechanics who built them will be rid of all incumbrances—for property is always an incumbrance to this kind of people. I fear, though, I shall have to sue some of them to get my just dues, and this will be very unpleasant and somewhat expensive.

Was bored for a whole hour by that eccentric old mortal, Judge Johnson of West-Quoddy Head. He maintained that I and Snatchpenny and O’Squeezem, and the other directors of the great bank of Bubble-opolis, are conducting our affairs on false principles. He said that the proper business of a bank is granting facilities to merchants by discounting business paper, and that to this we ought to confine ourselves. He averred that a banks dealing in cotton was only a kind of wholesale pawnbroking. He said that the bank of West-Quoddy Head, of which he is a director, never discounts any thing but business paper, and has in consequence not made one bad debt in twenty-five years.

I cannot subscribe to such views. Banks, so far as my observation goes, are not established by people who want to lend money, but by people who want to make money. We pay heavy sums to the State for our privileges, first in the shape of a bonus and next of an annual tax. And it is strange, indeed, if after this we are not to be allowed to use our privileges for our own exclusive benefit. But I must confess that I see a great deal of ignorance of the proper principles of modern civilized financiering still prevailing even among those who ought to know better. When I see, as I must say I do pretty often, men enjoying the advantages of position, and the opportunities of knowledge, of bank directors, neglecting to take the gifts the Gods provide them, and clinging to the absurd antiquated notions which our glorious science has exploded, and which those pestilent Loco-Foco destructives are trying to revive,—I can scarcely conceal my contempt for such ignorance and stupidity.

Wednesday. It seems as if my troubles were never to end. Today I was tormented by groups of old men, and old maids, and old widows, and some young ones among them, to whom I had sold stocks when they were high.  Stocks have fallen now, and these foolish people really seem to think I am to blame.  I told them that the fall of stocks was altogether owing to the infamous Specie Circular, and the odious Sub-Treasury, and thus satisfied some of them.  With the rest I did the best I could—that is, I bought back their stocks at such prices as I was able and willing to give.  Some of them said I was rather buying them back at such prices as they, from stress of circumstances, were forced to take.  But what is this but the usual course of trade?  All questions of price are questions of power—of power on the side of the seller to get as much as he can, and of power on the side of the buyer to give as little as he can.

I was truly grieved at the conduct of many professing Christians, both among the mechanics who visited me yesterday and the motley group that filled my office to-day. Downright infidels—very heathen—could hardly have displayed less resignation under reverses of fortune. There was one old father in particular, a man seventy-five years of age, and a member of the church from his youth, who seemed as if he would go frantic under his losses…The old man said he knew not how, with what was left, he should be able to support himself, his aged and bed-ridden wife, and three small grandchildren, who had, within the last six months, lost both father and mother.

Thursday. Good news at last. The odious Specie Circular is repealed! I know not at which most to rejoice, whether at the Governments being compelled to bow to the banks, or to the power now given to us to raise prices as high as we please. One joy is enough for one day, and the prospect of the rise of prices is quite sufficient of itself to make me forget all my past troubles. Now for the sale of the lots and houses that were transferred to me on Tuesday, and for the stocks I bought on Wednesday. And now I shall be able to do something handsome with my three million acres of Western lands and my six town plots. I may as well call them mine, for I have so arranged matters that Newcraft can never get them from me.

Of all means of advancing the wealth of a country there is none like banking. Agriculture, manufactures, and commerce, are well enough in their place; but they all sink into insignificance when compared with this modern mode of acquiring wealth—or rather of producing, for I will maintain that the two terms are synonymous.  By our banking operations, between 1834 and 1836, we gave value to many pieces of property which never had any value before, and which will never have any value again. The pine lands of Maine attest our power, as do also the cabbage gardens in the neighbourhood of New York, and the lands ten feet under water in the new State of Arkansas. An able writer estimates all the landed property in the United States as having been worth four thousand millions of dollars in 1834, and six thousand millions in 1836.  By our banking operations we added half as much to the value of real estate in two years as all the industry of the country had been able to give to it in two hundred years. And if the Government had not interfered with its despotic and atrocious experiments, who knows but that we might, in two years more, have made the real estate of the country worth sixty thousand millions!

Now this obstacle is happily removed, confidence will be restored, and we shall go on increasing in wealth. Some say this will be only in appearance. Let it be so. What is there that is truly real in this world of vanity and show? Every thing depends on our conceptions of things, and if a man can only fix it firmly in his fancy that he is worth six millions of dollars, he may enjoy just as much happiness as if he really possessed this amount of solid wealth. If he had the whole sum in silver dollars he could not eat them or drink them; neither could he eat or drink what they could procure. A man’s personal wants are very few, and easily supplied; but most men have cravings to which it is not easy to set limits. And I will affirm that there is no way in which all men’s cravings, or even the cravings of any great number, can be satisfied, unless it be by banking, or some similar contrivance. It is, in the nature of things, absolutely impossible that all men, or that any great number of men, should be very rich; but by the rise of prices, produced by plentiful issues of paper money, a great many may be brought to believe that they are very rich, and thus enjoy as much satisfaction as if they really abounded in wealth. Happiness resides in the mind. All philosophers agree in this.

Friday. Great jubilation at a meeting of our friends to-day; but Satan came among us in the guise of a Loco-Foco, and a more appropriate shape he could not have assumed. Loco-Foco said much about the importance of a fixed standard of value—that it would be as absurd to be always changing the size of the bushel, or the length of the yard stick, as to be always changing the value of the dollar, & c. Talked, also, much about justice, and equity, and honesty, and all that sort of thing. The devil can, you know, quote scripture to serve his purpose. Told Loco that all he had said was very true in the abstract; but he was a mere theorist. I was a practical man.  Loco asked me if I knew the meaning of the word “theory.”  Told Loco that if I did not, my friend Doctor Diddler did.  Loco asked what I meant by “a practical man.”  He had never heard of Adam Smith or J. B. Say’s keeping a huckster-shop.  Made no reply to Loco, but thought within myself that “a practical man” is one who has failed in business at least twice, and owes at least twice as much as he can ever pay.

Changed the subject by telling Loco that the “Specie Circular” was “a humbug.”  Loco said modestly that perhaps the paper money system was “a humbug…”

Saturday. Well, this is most outrageous. The old Specie Circular is repealed; but here comes a new Specie Circular close on its heels. Our tyrannical Government is not content with redeemable paper, but will have it actually redeemed at stated periods! This is a downright farce.

Redeemable paper, every one knows, is just as good as gold and silver. Having it redeemed is sinking bank notes to a level with the notes of private traders. The very means by which banks make their profits are by issuing a great many notes which, though always payable, are never paid. However, we have obtained one great and open triumph over our abominable Government, in the repeal of the old Specie Circular; and, as for the new, if we do not make that a dead letter my name is not Graball. Government is at Washington. The collectors are all along shore; and the receivers all over the prairies. They are not as stupid as the Administration. They know where their own true interest lies.

Sunday. Really the Church is as much in need of reform as the State. McThwackem is still at the watering place, and his pulpit was supplied by, if possible, a more intolerable proser than we had last Sunday. His text was, “Ye cannot serve God and mammon.”  He said that to be idolaters men need not bow down before images of wood and stone.  There were false gods still more to be dreaded—idols of the mind, for, whatever a man did in heart regard as his Supreme Good was, in reality, the god he worshipped…

In the evening went to hear Dr. Diddler, and was comforted and edified as usual.

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