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July 1838

The Middling Men of Power: Levi Woodbury, Part Two

Jacksonian management of the Bank War and its after-effects prompted new types within the American political class: opinion-makers and faction-wranglers.

Editor’s Note

For our second selection, O’Sullivan’s Review surveys the Bank War’s fallout, including Treasury Secretary Levi Woodbury’s implementations of Loco-Foco, radical Jacksonian fiscal, monetary, and banking policy. When Jackson vetoed the Second Bank of the United States recharter in 1832, it left the Bank with four years of life; it left the Jacksonians with a political mess. They had to successfully oversee the rapidly-expanding, nationalizing, globalizing economy through at least another presidential election, the Democrats battled with divisions between conservative supporters of the bank (the Calhounites) and radical Bank Warriors (the Loco-Focos), and they had to successfully draw upon a rising class of distinctly middling men from humble origins but possessed of inordinate talents. These were the Amos Kendalls, the Martin Van Burens, the Frank Blairs, the Levi Woodburys who contributed so much to their era and have largely escaped the sort of notice given to their more overtly powerful contemporaries. The Jacksonian middling men became some of the most important power-brokers, coalition-builders, opinion-makers, and vote jockeys in American history, let alone the nineteenth century. For better and for worse, these were the particular ageing white men who steered the United States from its Early Republican past into its post-Civil War future.

The Bank War was a fascinating period, and in the movements of its main actors we see how the American political class has used critical moments to both appropriate libertarian radicalism and stifle its arena for uncontrolled, spontaneous development in the future. Once the bank was set to expire, President Jackson needed somewhere to house the government’s treasury. Radicals wanted an Independent Treasury—a government office specifically designed to house government deposits—but in the meantime, Jackson intended to remove these from the Bank of the United States as soon as possible. Jackson’s cabinet nearly unanimously opposed the move and Treasury Secretary William Duane refused to enforce the removal order. Jackson fired him, and the new Secretary Roger Taney, with help from Amos Kendall and Levi Woodbury, removed deposits from the BUS into a series of state banks. Critics cited the unhealthy growth of executive power, the unjust distribution of funds to these “pet banks” of the administration, and entrenched opposition from BUS president Nicholas Biddle. Striking out at Jackson and his loose coalition, Biddle sharply cut credit lines to contract the economy. The brief panic period added fuel to fiery Jacksonian class rhetoric and helped elevate middling enforcers like Woodbury to national prominence and power. Chief Justice John Marshall died in December, 1835 and Jackson rewarded Taney with a black robe. Woodbury was rewarded with Taney’s old position as Treasury Secretary.

Anthony Comegna, PhD
Assistant Editor for Intellectual History

POLITICAL PORTRAITS WITH PEN AND PENCIL, (No. VIII): LEVI WOODBURY

The removal of the public money from the Bank of the United States to the selected State banks was condemned by a vote of the Senate, but sanctioned by a majority of the House of Representatives. When the nomination of Mr. Taney, as Secretary of the Treasury, came before the Senate, it was rejected; but no objection appears to have been made to that of Mr. Woodbury as his successor, whose appointment was confirmed at the end of June, 1834.

The duties which devolved upon him in this new station, and the manner in which he has discharged them, prove how well adapted were his talents, acquirements, and habits, for the efficient superintendence of the public finances. The variety of important reports, many of them calling for ability and research, which he has been required to make to Congress from time to time, in addition to the current business of his office, have fully evinced the energy and rapidity of his mental operations. Within a few months after he took charge of the Treasury Department he prepared an elaborate annual report on the finances, together with a supplemental report upon the keeping and disbursing the public moneys, which clearly demonstrated that no Bank of the United States is necessary for these purposes under the demands and facilities which exist at the present day, whatever may have been required by the state of public credit at the period when the first and second banks were chartered. The principal argument in favor of the constitutionality of a Bank of the United States is conclusively answered by the facts established by this report, since unless such an institution is actually required for the management of the public finances, it is admitted on all hands that Congress possesses no authority to charter it under the general grant of incidental powers. In this valuable document some of the questions relative to the currency and exchanges of this country which had been little understood, were explained in a most satisfactory manner; as well as many statistical facts collected, which must be regarded as an important accession of novel and authentic information on those subjects—particularly the tables showing the receipts and expenditures in each State—and the circulation of specie and paper in the different countries of the world at different periods.

Within the same time Mr. Woodbury prepared a masterly report upon the reorganization of the Treasury Department, in which the checks against the possible occurrence of fraud or mistake, in its various branches, were proposed to be simplified in such a manner as to enforce the most rigid accountability; and another report, which must have required extensive investigation and inquiry, upon the number, grades, and duties of the officers in the several custom houses of the United States. The repeated changes which had been made in the tariff had involved the practical computation of the mode pointed out by law for the compensation of most of the principal officers of the customs in great confusion, and, in many instances, produced a degree of injustice which could not have been foreseen by Congress. Mr. Woodbury explained the whole subject, in all its bearings upon the public service, with great ability.

About the same period he was obliged to enter into an extended correspondence with the President of the Bank of the United States respecting the issue by the bank of the drafts of its branches, and their payment to the collectors and receivers of public money as currency at points remote from those to which they were directed; and relative to the sequestration of the dividends belonging to the United States upon a claim for damages on the return of a bill of exchange upon the French Government—both of which assumptions of power by that corporation were exposed with great force and effect.

The panic measures concerted by that bank were pursued with so much harshness, before and during the session of Congress of 1833, 4, that several of its devoted friends were reduced to the verge of bankruptcy—-Indeed, some of them were evidently sacrificed for the purpose of increasing the clamor against the administration. But President Jackson remained steadfast in his desire of ultimately relieving the mercantile transactions of the community from the mischievous disturbances which the interest or caprice of the managers of the bank had so repeatedly produced, through its power over the public revenue. The excitement fomented with the view of inducing Congress to order the public money to be returned to its custody having entirely failed, the bank, near the close of 1834, suddenly and entirely changed its course of policy towards the merchants and the public at large. As to the results expected to be produced by this revolution, we have no further means of ascertaining the intentions of the managers of private corporations than of determining the motives which actuate individuals. If the general maxim that individuals possessing intelligence and free agency must be presumed to understand and intend the natural and ordinary consequences of their conduct, is to be applied to corporations, nothing can be more conclusive than that the managers of the bank, for the accomplishment of objects which will appear in the sequel, deliberately resolved, by this new movement, to throw the currency, exchanges, and public finances of the country into disorder and confusion. It cannot be supposed that the measures which inevitably produced this result were taken in ignorance of their consequences by men of experience, whose boldness seemed to disdain all disguise. The contraction, unsparingly exercised both upon its own issues and those of the State banks, had a short time before plunged the trading classes in every part of the country, as we have seen, into the deepest difficulties. All at once the bank commenced bestowing loans arid accommodations in every direction with the most profuse liberality. The desires of the mercantile community appeared to be far too limited for the employment of its boundless benevolence of means. The leading directors in- vested large amounts in public lands, and the great profits realized by these operations were ostentatiously reported throughout the community as an encouragement for similar undertakings. This course was held out as the ready and assured path to fortune, and thousands, whose habits and employments little fitted them to embark in such speculations, were induced to follow these brilliant examples of success. It became comparatively easy to make extensive purchases from the general plentifulness of currency which began to prevail in all sections of the country as soon as the restraint imposed by the previous course of the Bank of the United States had been removed from the operations of the State banks. By the returns of the Bank of the United States, printed by order of the Senate, it is shown that the expansion of the accommodations of this bank between December, 1834, and July, 1835, amounted to twenty millions of dollars! If to this amount is added the encouragement which this sudden liberality gave to the increased issues of about seven hundred State banks, the extraordinary impulse afforded to every description of speculative undertaking, wholly through a rise of prices from this sudden expansion of the commercial measure of value, may be comprehended.

Great importations of foreign commodities must, in the nature of things, be produced by such a rise of prices. If we had no intercourse with foreign nations, an expansion of currency here would be of no further injury to our citizens than the impairing the obligation of all antecedent contracts. The reduced comparative value of our currency would only enable us to see things in a larger light—like the person who put on magnifying spectacles to make the cherries he was eating look bigger. But a rise of prices caused by an expansion of paper is intended to increase all the expenses of living, and of course the rates of wages in this country, and always effects its design. The cost of bringing into the market the products of our agricultural and manufacturing industry is consequently increased, while they are placed in competition in our own markets with foreign commodities produced at less cost; or in the case of the exportation of our staples to a foreign market, their value is measured, not by the factitious currency in which the cost of production is computed, but by the solid money which enables foreigners to manufacture our raw materials cheaper than ourselves, and to undersell and destroy our manufacturing industry in spite of the mockery of legislative protection.

A large surplus revenue was brought into the public Treasury by the extensive importations of foreign goods, subject to duty, and by the great sales of the public lands, both of which were obviously produced by the enormous expansion of the currency—The extent of the public domain sold and paid for during the years 1835 and 1836 exceeded the whole which had been sold during the preceding period from the establishment of the General Land Office. The force and organization of this branch of the Treasury Department were found entirely inadequate to discharge its most pressing duties, and it was enlarged by Congress more than fourfold. The questions of conflicting interest among purchasers increased with their avidity to possess themselves of choice tracts. More questions of this kind were appealed to Mr. Woodbury and decided by him between 1834 and 1838, than had probably arisen from the foundation of the Department. Many of these questions were argued at length by counsel, and from their consequences, as precedents, and the value of the property involved, required extensive investigation and great care in their decision, and increased the burthen and responsibility of his official duties to an important extent.

The public money, accumulated in the manner we have endeavoured to explain, was deposited in the State Banks which had been selected for that purpose. These corporations enjoyed an accession of profits and influence by this means which excited general dissatisfaction on the part of those interested in the numerous other banks, as well as of vast numbers of individuals who, under the continued advance of prices, from the increasing expansion of currency, were desirous to avail themselves of greater facilities than they could command for speculation. This they hoped to do by the selection of a greater number of banks. All the complaints in every quarter of the country against the deposite banks, on the score of favoritism, and disinclination to accommodate the trading community, were charged against Mr. Woodbury and the administration of the General Government, though these banks had been originally selected by his predecessor without the slightest reference to partisan views, as must be evident from the fact that the directors of nearly the whole of them were politically opposed to the administration at the period of their selection, and have so continued to the present hour.

In his annual Report on the Finances made to Congress at the commencement of the session of 1835, ‘6, Mr. Woodbury discussed the question of disposing of the surplus which, under the existing laws, had been raised from the people beyond the necessary expenditures of the government, with signal sagacity and ability.  Such a question had evidently never occurred among the possibilities foreseen by the framers of the Constitution.  Under the operation of the system of solid currency exclusively recognized by that instrument, a large surplus revenue could not have been inadvertently created by a sudden expansion of the medium of payment.  Having suffered innumerable evils from the depreciation to which all paper currency is liable, they did not contemplate that their posterity would fall into the snare against which they had provided so many safeguards.  But factitious wealth had been created in spite of these restraints, and the speculations it had engendered produced this evil.  The corrupting influence of large amounts of public money employed by irresponsible individuals for their own private advantage, had aroused the jealousy of the people at large.  Some mode of disposing of it had become absolutely necessary.  Convinced, as he appears to have been, that the sudden withdrawal of the great amounts deposited in the banks would deeply affect their credit and usefulness, as well as impair the confidence reposed in them by the community, Mr. Woodbury recommended to Congress the enlargement of the appropriations for the permanent security of the frontiers, the completion, with all practicable rapidity, of our great public works and the investment of such sums as might not be applicable to these objects, in such stocks of the several States as might be readily sold in the market, forming a provident fund, with probable security, for the purpose of meeting the prospective reduction of the tariff and deficiencies of the revenue, which he confidently predicted from the inevitable operation of the existing system.  Instead of adopting these propositions, Congress determined to divide the surplus which might remain in the Treasury on the first of January 1837, among the several States, and in the meantime to distribute it among the banks in such a manner that no one should hold a greater proportion of the public money than three- fourths of the amount of its capital.

It is well known that President Jackson, foreseeing many of the evils to which the withdrawal of great amounts of money from the banks, within a short period, would expose both them and the community, under the state of artificial expansion which was continually going on, very reluctantly gave his approval to this measure, which had been most earnestly supported by the most zealous professing friends of the State banks.  With the view of checking this expansion, and enabling the banks to make suitable provisions for sustaining themselves under the crisis which it was obvious, to all reflecting men, must be occasioned by the operation of this measure, he directed the rigid enforcement of the laws, which require all purchases of public lands to be paid for in cash, except those made by actual settlers within a certain specified period which occasioned the promulgation, by Mr. Woodbury, of the circular order of the eleventh July, 1836, on that subject.

On the passage of the Deposite Law, Mr. Woodbury appears to have adopted the necessary measures for carrying it into execution…Many of the supporters of this law, fully aware of the severity of its operation upon the banks, of which they were zealous professing friends, had, besides charging upon Mr. Woodbury the responsibility which belonged to themselves, endeavoured to satisfy the public that many of the inconveniences arising from the curtailments required to execute its provisions, should be ascribed to the circular order requiring payments for public lands to be made in cash.  The absurdity of this pretext becomes too apparent for serious refutation, when it is recollected that these inconveniences were principally felt in the commercial cities where such payments were not required, while the banks of the States where most of the public lands were on sale, remained in a condition of comparative ease and safety, although the amount of specie transported to those States was trifling compared with the amount of the sales.   The clamor, therefore, against the Government, of hostility to the banks, was wholly misplaced — the measure which exercised the most disastrous influence upon them having originated and been supported principally by individuals who have usually been governed by suggestions from another quarter.

The various charges which had been made in Congress, during the sessions of 1835, ‘6 and 1836, ‘7, against the management of Mr. Woodbury, relative to the public money deposited with the selected State Banks, resulted, during the latter session, in the appointment, by the House of Representatives, of a Select Committee for the purpose of investigating this subject.  Another Select Committee was also appointed, about the same time, to investigate any other charges either against him or the other heads of Departments.  Of the decency and dignity of some of the expedients resorted to for the purpose of showing an improper collusion with any agent of deposite banks which was the leading subject of inquiry, the American people, to whom their representatives are alone accountable, must determine.  All the charges made against Mr. Woodbury were substantially abandoned, and after collecting a large volume of testimony, involving a most severe and searching scrutiny, the reports of the whole of the committee resulted in his exculpation.  Nor did the inquiries of the other committee develope anything which tended in the slightest degree to impugn the fidelity, judgment, and ability with which the transfers to the States, and the other requirements of the Deposite Law, which had been made the principal topic of complaint against Mr. Woodbury, had been directed by him.

So strong was the confidence of the framers of the Constitution of the United States in the intelligence and candor of the people, that they wisely prohibited the Executive officers charged with the necessary details of carrying the laws into operation, from that important privilege which is enjoyed by those of every other nation where a representative branch of the government is known.  In England, and every where upon the continent of Europe where public measures are discussed in deliberative assemblies, the responsible ministry always form a portion of these assemblies, and by their presence are able to explain and defend their own conduct.  But it is a fundamental principle with us that the Legislative and Executive authorities are to be kept separate. The advantages derived from this principle are obvious and conclusive; but as the best institutions may be abused, its operation sometimes enables factious individuals to misrepresent Executive transactions with impunity, as well as to mislead the judgments of the people, in cases where a single sentence of explanation from the individual whose official conduct is implicated, would be not only satisfactory, but triumphant, on the spot… 

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