The Middling Men of Power: Levi Woodbury, Part Three
A full life of Woodbury suggests that coalition‐builders and compromisers often accomplish much for themselves, but bury their movements.
The Independent Treasurer
Anthony Comegna, PhD
Assistant Editor for Intellectual History
For our final “Portrait with Pen and Pencil” of Levi Woodbury, we reflect on heady victories and severe shortcomings. In the history of American libertarianism, its key moments have occasionally been those of coalition and compromise. With centuries of hindsight and historiographical baggage, we remember the precious few moments of victory with fondness and warmth. Even libertarians long for heroes, and middling men who helped slay the Great Bank Hydra like Levi Woodbury make for decent libertarian heroes. In our third section from the Democratic Review’s biography of Woodbury–at the time Van Buren’s Secretary of the Treasury–presents an economic analysis of 1837 most libertarians will find unobjectionable. More problematic, perhaps, was the Review’s sigh of relief that distribution of the government’s treasury had bailed out irresponsible state banks. With the administration’s doling out of government deposits to a series of pet banks, the Democratic Party and its chief coalition‐builders could help reward their friends, punish their enemies, and buy votes with public largesse. The Woodburys of the country could ride high on the tide of Loco‐Foco socio‐economic radicalism but stop short to tread a fine political line when it served their individual advancement.
Yet Levi Woodbury was merely an enforcer in the late 1830s, and when his coalition failed to reelect Martin Van Buren in 1840, Woodbury returned to the Senate. There, he supported Polk for President after the 1844 nominating convention bypassed Van Buren. Polk rewarded him with a position on the Supreme Court. Woodbury occupied this last stage in his career for only a short while, but they were significant years. During the Polk administration, the Mexican War violently divided Democrats between those unwilling to compromise with slaveholding influence over the party and those stressing party harmony over all else. Woodbury attempted once again to tread the line between factions from a position of middling influence and inordinate power. To those fearful that their republican government would become a mere tool for slaveholding interests, Woodbury’s majority opinion in Jones v Van Zandt (1847) reassuringly argued that there was no Slave Power conspiracy afoot–each state had the right to determine its own domestic institutions and no slaveholders could interfere with Massachusetts government. To slaveholding Democrats, Woodbury clearly stated that northern states were bound by contract to respect the Fugitive Slave Act of 1793. Yes, northerners, you’ll have to return slaves; but no, southerners, you cannot force your institutions on other states, either.
Woodbury died in 1851, just a few years before Kansas and Nebraska changed everything, northerners ignored the new Fugitive Slave Act in state after state, and the Taney court was using Woodbury’s precedent to define African American citizens out of existence. Using the political‐intellectual coalition built over the decades by middling men of power and influence like Levi Woodbury, later figures attempted to nationalize the institution of slavery. By 1860, the classical Jacksonian coalition was dead, bloated and festering; the bright, radical ideas it may once have stood for had long since been bargained away for a song.
With the year 1837, the difficulties of the banks, arising from their excessive issues, which had been repeatedly adverted to by Mr. Woodbury, and the fatal consequences predicted in his annual report on the finances at the commencement of the preceding session, were aggravated by the execution of the deposites with the States. The preliminary measures required by law, of transferring, from the banks holding amounts of public money exceeding three‐fourths of their capital, that excess, had occasioned, during the last half of the year 1836, great distress in the principal commercial cities. This was materially increased by the payment of the first instalment of one‐fourth of the surplus in January, which required further curtailments of the currency in those cities. The banks throughout the country manifested an increasing distrust towards each other. The payment of the next instalment in April heightened the general pressure and distrust. But the catastrophe evidently contemplated as the great result of the vast expansions produced, as we have seen, from the commencement of 1833, and rendered inevitable by the Deposite Law, was hastened by the measures taken by the Bank of England. As soon as the advocates arid supporters of tire Bank of the United States had determined that the measure of distribution of the surplus among the States should be brought before Congress, foreseeing that irresistible motives would insure its passage, even by a two‐ thirds vote if necessary, that bank dispatched its cashier to Europe, for the purpose of borrowing and importing a large amount of specie to enable it to withstand the shock which it was foreseen would be brought upon the credit of all the banking institutions of the country. The large amount drawn from England for this purpose, early in 1836, added to the drain from the continent of Europe, soon afterwards compelled the Bank of England, to exercise a restriction upon its issues, so rigorous, that several of the most respectable commercial houses in England, stopped payment. The prices of our staples fell to such an extent, in that country, that a great portion of the bills drawn against them by the exporters were returned under protest. It became so difficult to procure undoubted exchange on England, and the rate became so exorbitant, that soon after the payment of the April instalment, specie began to be drawn from the banks of New York for the purpose of remittance. Satisfied that this course would he extensively adopted by individuals who were determined to sustain their credit abroad, the banks of New York, — their stock of specie having been greatly reduced a short time before by drafts made upon them by those of other cities, especially of Philadelphia, — determined, on the tenth of May, to refuse the payment of their obligations in specie. A similar resolution was adopted in the course of that month by most of the banks throughout the Union.
POLITICAL PORTRAITS WITH PEN AND PENCIL, (No. VIII): LEVI WOODBURY
This general suspension of the payment of lawful currency, placed the public Treasury, these means of payment had by law been lodged in banks, nearly the whole of which dishonored their obligations at once, in a novel and most embarrassing predicament. From the origin of the Government of the United States the laws had strictly provided that no payments should be tirade into the Treasury but in gold and silver coin. In practice, these laws had been relaxed by the receipt of the notes of specie paving banks convertible into specie at the place where received as equivalent to cash, and tins practice had been sanctioned by the joint resolution of Congress of 1816. Under the provisions of the act of 1836, no payment to any public creditor even in the notes of specie paying banks, excepting above certain denominations and equivalent to specie where offered, was lawful. When the banks throughout the country, holding within their control nearly the whole means provided for meeting the public engagements, refused at once to furnish the medium of payment required by law, the first impression among all classes of people was, that the financial operations of the Government must he totally stopped. This was exultingly proclaimed, in advance of the suspension, by individuals who had per‐ formed a leading part in the measures which had produced it.
But Mr. Woodbury met this emergency with his characteristic promptitude, energy, and sagacity. As soon as information of the suspension of the banks of New York, reached the seat of Government, circular orders were dispatched, to the collectors and receivers of the public money, to forbear making deposites to the credit of the Treasurer, in any bank which should not redeem its notes in legal currency…
Loud complaints were made by the projectors and advocates of the suspension of specie payments, that this course which protected the public creditors from injustice, and supported the laws, offered inducements to individuals to protest the drafts upon the banks, and was an act of direct hostility towards those institutions. The illegal dishonor of their own paper, by which its value as currency, was depreciated from ten to thirty percent in different sections of the Union, wholly for the advantage of themselves and their debtors, effecting at once a most important practical change in the burden of all existing contracts, was zealously defended as a great measure of exalted and disinterested patriotism. Great pain was taken to foment excitement through the country against the measures adopted by Mr. Woodbury, under the hope that a general refusal to make any payments on public account, might be brought about, unless the irredeemable paper of the banks should be received into the public Treasury.
Had the public creditors been obliged to accept such paper, in discharge of their claims upon the Treasury, the public debtors ought undoubtedly to have been permitted to pay in the same currency. Equity and fair dealing, would require that the same medium in which debts are paid, should be received in payment of dues. But the course taken by Mr. Woodbury, for the discharge of warrants, entirely destroyed the great object of the previous expansion, and defeated the advantages anticipated from the suspension. If, by means of appeals made to the basest and most mercenary feelings of a portion of the community, the irredeemable paper of the suspended banks had been received into the public Treasury, the expansion of paper currency would have doubtless increased, and in a short time the currency of the country would have been reduced to a worse condition than in 1816. The recognition, by the Government, of depreciated paper, would have afforded irresistible motives to the banks in the different sections of the country to have increased its depreciation. The receipts into the Treasury would, as a necessary consequence, have borne a variety of values in various parts of the United States. To extricate the country from a state of things so disastrous to the industrious and producing classes, Congress as on a former occasion, would have no doubt been urged to resort to its implied powers, and recharter the Bank of the United States.
The necessity for providing immediate means to sustain our arms against the public enemy had led, during the war, while public credit was prostrated, to a departure from the law requiring payments into the Treasury to be effected in legal currency alone. The urgency of the occasion afforded the only apology for this breach of the principles of the Constitution. While the war continued, and the taxes raised were mainly expended within our territory, and from the condition of the country, little currency was employed in the operations incident to foreign commerce, the inconvenience was cheerfully submitted to. But the return of peace displayed at once the inequality of the burthens imposed upon different sections of the country by this state of things. The actual difference in the medium in which duties were paid in the Eastern arid Southern States was from twenty to thirty percent in favor of the latter, which operated as an increased tax to that extent upon the former. To obviate this evil, the resolution of 1816 was passed, forbidding the receipt of irredeemable paper into the Treasury; and the Bank of the United States was chartered for the purpose of affording a convenient currency for such payments. Its subsequent operations overthrew a great part of the State banks which had previously furnished the medium for that purpose and left a large amount of “unavailable funds” in the public Treasury in the shape of bank notes totally without value, where they still appear in the annual reports as a permanent monument of the inevitable misfortunes attending the adoption of temporary expedients for relief.
Nor were these the whole of the evils. The expansions of the currency caused by the operations of the Bank of the United States, in 1817 and the first half of 1818, stimulated the spirit of speculation which had previously existed throughout the country to such an extent, that when that bank was able to save itself from destruction only by suddenly calling upon all its debtors, both banks and individuals, and to discredit the notes of every State bank in the Union, by refusing to receive them in payment for public dues, the productive interests of every section of the Union were at once overwhelmed in embarrassments. An immediate paralysis was brought, by this means, upon our manufactures, which was absurdly attributed to any thing but its true origin. Under the cost of production which had been extravagantly raised by the previous expansions, our producers found it impossible to compete with those of foreign countries in our own markets. It was, therefore, the mismanagement of the banks which gave rise to the clamor for the increase of the tariff, and led to the establishment of the preposterous policy facetiously called the American System.
Those who will take the trouble to follow the various steps pursued by the Bank of the United States from 1832 will be able to judge if its managers exercised any foresight and premeditation in the great task they had assumed of regulating the currency, whether the sufferings and embarrassments inflicted upon the people of the Union during the year 1837 were not a subsequent portion of the great drama, of which the first act was performed during the panic session, — and whether the recharter of the Bank of the United States was not to be the catastrophic and consummation of the piece. During this performance, the cupidity of the State banks, and the necessity of a National Bank to control them, were the principal themes of declamation by the Opposition until the suspension of specie payments was brought about. Since that event the argument has changed — to the hostility manifested by the Government these corporations in refusing to receive their irredeemable paper into the Treasury. Could this great point have been carried in consequence of the dilemma into which the public service was believed to have been thrown by the unrestrained expansions of these banks, it would doubtless have soon plunged them into the bottomless abyss of permanent non‐redemption, by a similar process of crippling and destroying the State banks as that practised after the former suspension, while the Bank of the United States, by means of its extensive foreign resources, and the great confidence reposed in its operations by the mercantile community, might have received a charter from Congress, which would have been urged by its advocates as the only effectual means for restoring that equality of payments into the Treasury required by the Constitution.
The firmness of the Executive, and the efficient arrangements adopted, on the spur of the suspension, by Mr. Woodbury, not only protected the immense amount of outstanding contracts from the consequences of an increasing depreciation, but relieved the public finances from any pretext for committing them to a private corporation which had shown itself totally unscrupulous as to the violation of any law which interfered with its interests. More than all this — the State banks were saved from ultimate overthrow by this wise and judicious course. The prospect of the resumption of their duties to the community, which has already been realized to a gratifying extent, must be in a great measure attributed to the assurance afforded, that their true advantage was only to be promoted by the discharge of their obligations. Had the banks throughout the country been encouraged not only to have continued but to have increased the expansion of irredeemable currency, by its receipt into the public treasury, the only alternative, except the charter of a National Bank, for the purpose of destroying the State banks, would have been not “placing the credit system and the exclusive metallic system fairly in the field, face to face, with each other” but arranging these combatants quietly side by side, under a legally established ratio of depreciation, as was done by our fathers during the Revolutionary War, — as Russia and Austria have more recently been compelled to do in consequence of the expansions of their banks,-as will no doubt be done by Brazil, under the advice of the leading financiers in Europe, as the only effectual mode of preventing the entire subversion of property which the present condition of her bank currency must otherwise inevitably produce, — and as every contest, from the origin of commercial interchange, which has arisen between a sound and equal currency and a false and fraudulent measure of value, has resulted.
On the occurrence of the suspension, the necessary arrangements for meeting the public exigencies to the extent of the revenue accruing into their hands from time to time, and making suitable provision for the balance, imposed a task upon Mr. Woodbury which required unremitting care and attention. The deficiencies from this source were supplied by drafts placed upon the banks holding public money in deposite in the mode before described. The largest payment which these banks were called on to effect, after their suspension, was the third instalment of deposite with the States, payable under the terms of the law, in July. Several of them were either unable or unwilling to pay their proportions — in some instances even to the States which had chartered them. Many transfers which had been directed by Mr. Woodbury, with the view of making seasonable provision for the last instalment, which fell due in September, had been at once stopped by the inability of the banks to execute them in consequence of the suspension. The innumerable obstacles which obviously intervened in effecting the balance of the deposites with the States under this new state of things, together with other weighty considerations relative to the security of the public resources, and the necessary facilities in their management, induced the President to issue his proclamation for calling Congress together on the first Monday of September, 1837.
The occurrences of the extra Session, as well as those of the present session of Congress, relative to the management of the public finances, are presumed to be so fresh in the recollection of our readers, as not to need special reference to them. We have felt ourselves obliged to furnish a general narrative of the course taken by the Bank of the United States, and its consequences upon the commerce and prosperity of the country, in connection with Mr. Woodbury’s management of the Treasury Department, in order that the duties which devolved upon him, and the manner in which they were discharged, may be fairly understood. The expedients which have been adopted from time to time by that corporation, and the measures promoted by its partisans and advocates, for the purpose of creating an apparent necessity for its recharter by Congress, form an instructive and interesting portion of our public history; while the sudden change of condition of thousands of private individuals have acquired almost a tragic interest from the convulsions of excitement and depression, to which the industry and trade of the country have been continually subjected since 1832 in furtherance of this great design.
Some of the measures accessory to the various schemes which have been from time to time devised for this purpose, have inadvertently received the countenance of very respectable portions of the democracy of the Union. We have no question but this happened under the influence of mistaken views of expediency entertained with entire honesty of motive on their part. It cannot be regarded as a reproach against the general intelligence of our active business men to say, that many of them are not thoroughly informed on the subject of currency, — since one of the most experienced and successful financiers of Europe has recently expressed his deliberate opinion to a Select Committee of the house of Commons of England — an assembly of which he was himself, for many years, a distinguished member, though now elevated to the British Peerage, that Parliament authorized the suspension, and compelled the resumption of specie payments by the Bank of England in unsuspecting ignorance of the great revolution which these measures would produce upon all contracts and pecuniary obligations. Men who are actually engaged in engrossing pursuits, rarely enjoy either the means or opportunity of considering the ultimate consequences of such measures, especially when plausibly recommended by pretexts of public benefit, and when immense sums are lavished upon partisan presses to advocate, as well as unwearied personal exertions are made to promote them by political and pecuniary speculators.
More conclusive proof of the want of correct information on the part of an influential portion of our commercial community cannot be required, than their zeal and sincerity in endeavoring to carry into effect the intention lately avowed, of making the Bank of the United States a great political and fiscal machine on the plan of Law’s Royal Bank of France — notorious in history on the Mississippi scheme. The letter published by the head of that corporation, in April last, for the first time expresses the determination to adopt the principles respecting trade and money which were originally introduced and practiced upon by Law, and which unsettled the security of private property, and involved the public finances to such an extent that the ruinous consequences upon the industry and prosperity of France, were not retrieved throughout a whole generation. The main feature of Law’s scheme was to make “the farms, the commerce, the factories, and the internal improvements of the country,” the basis of paper currency. Every reflecting mind will perceive that unless the whole world shall agree to change the fixed capital of every nation into circulating medium, any country that enjoys extensive foreign commerce which shall adopt this plan, must be overwhelmed with disaster whenever the currency becomes depreciated, as inevitably will be the case. The bold enunciation of such a doctrine shews the extent to which the gambling operations, encouraged by this corporation, were confidently believed to have blinded and corrupted the mercantile community. Paper currency actually representing coin, into which it is convertible at the pleasure of the holder, is the result of a totally different system of banking.
The friends of the general prosperity must feel the deepest satisfaction that the protection afforded to the permanent welfare of the country by the provident and efficient course pursued by the ad ministration of the General Government is appreciated by the farsighted and judicious of all parties. Such must become the general feeling throughout the country when truth shall be understood by the people at large — that a private corporation, possessing neither soul nor conscience, and unvisited either by remorse or compunction, has not only inflicted so much suffering, distress, and destruction of property, upon the community, and hopes in the execution of its design, to control the future destinies of the nation; but, at the present time, prevents that revival of confidence so essential to commercial enterprise. It is to the influence and example of the Bank of the United States that the general delay of the other kinks in fulfilling their obligations to the community is to be ascribed. Claiming, as this corporation constantly has done, the most ample ability to discharge its debts, it has, in substance, proclaimed that nothing but the reluctance of its managers to confess, as would be done by resumption, that its great design has miscarried, through the vigilance and sagacity of the Executive, now prevents its return to the path of honesty and fair dealing. Whether its warfare upon the sound and wholesome prosperity of the country will be prolonged until, like many of the splendid bubbles inflated by its operation, it shall explode into nonentity; or whether advantage will be taken of some convenient pretext for a speedy withdrawal from this contest, time only can determine.
We have had occasion to notice some of the criticisms to which the official conduct of Mr. Woodbury has been subjected. It would, however, be gross and unjustifiable slander upon our free institutions to intimate that the vituperations which have been showered upon him during his administration of the Treasury Department, have, in the slightest degree, impaired the esteem and confidence of his fellow citizens in his ability and purity of purpose. On the contrary, the amenity of manners and spirit of accommodation, coupled with the firm and impartial course he has pursued during the stormy period we have endeavoured to describe, have unquestionably increased his previous high standing.
His native State appears to appreciate justly the character and talents of Mr. Woodbury. The important and dignified office of Chief Justice of her Supreme Court having recently become vacant by the death of an individual of distinguished abilities and virtues, who had held it for many years — her constituted authorities have unanimously selected Mr. Woodbury for his successor. While this sketch is in the hands of the printer, we have been informed that Mr. Woodbury has been induced to waive his well known personal predilections, for the present, in favor of the paramount claims of the public service of the Union.