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NEW YORK, October, 1841. Sir: I had the honor to receive your letter asking my opinion on the propriety and effect of a restump- tion of specie payments by the banks of West New Jersey. Banks have been permitted to issue paper money on the express condition that they should sustain its value at par with specie. Whenever the condition ceases to be performed, the privilege should likewise cease to ex- ist. If that natural principle was rigidly adhered to, if the banks were expressly forbidden to issue the notes of any suspended bank, (including of course their own notes when they had themselves suspended specie pay- ments,) this alone would, in most cases, prevent a sus- pension, and when it did not, the provision must ne- cessarily enable the suspended bank or banks, if sol- vent, to resume their payments within a very short time. A much greater indulgence has been granted to the banks in the case of a general suspension-much greater certainty in this instance than was necessary. But it is not the less an obvious moral and legal duty on their part to resume as soon as possible. On that subject, as well as on the intolerable evils and immoral tendency of depreciated currency, I have nothing to add to what I have already published on several occa- sions, before, during and since the suspension in this city; and I beg leave to refer you to my last essay and appendix; (particularly pages 20 21, and 59 62 of the essay, and pages 101-114 of appendix.) If a sense of justice be not a sufficient motive, it seems to me that their interest should induce the banks to perform their duty. The patience of the people is nearly exhausted. They have waited from time to time, always expecting the promised restoration of a sound currency. They now see that nothing has been done in that respect by the change of Administration, that nothing can be expected from it. The opposition to banks, strengthened by the catastrophe of that of the U. S., and by numerous other failures or defalcations, is daily gaining ground: and the effect on the bank- ing system generally and indiscriminately, cannot be otherwise averted than by a speedy restoration of the currency. I would, indeed, myself prefer a total ex- clusion of paper money to a continuance of that system as now organized and administered West and South of New York. In order to be able to resume specie payments, the Banks which have suspended must have made the ne- cessary preparations. It is not a matter of opinion, but a mathematical truth, that this can be effected in no other manner, than by a diminution of the liabilities of the Banks, and a corresponding curtailing of their own loans and discounts. This last measure is always in- convenient to the borrowers, who call it an injury to the community. The continued suspension of specie pay- ments, and circulation of a depreciated currency, are the general evil and the true injury to the community at large. The reduction in the amount of discounts is a partial evil which falls precisely on those who ought to bear it, since it was the excess of loans which was the cause of the suspension. Two years have elapsed since this took place for the second time. If any of the Banks have not, during a period so amply sufficient for the purpose, gradually lessened their discounts and their liabilities, so as to be prepared for an immediate resumption, it is their own fault; and it is far better that some of them should if necessary, wind up their business, rather than that those which are sound and prepared, should continue to suspend their payments, and that the general interest should still be sacrificed for the benefit of the few. The interest of those bor- rowers who oppose a resumption may be combined with that of some of the banks, either on account of their own embarrassment, as was the case with the U. S. Bank of Pennsylvania, or because they make larger profits, so long as they are not compelled to cur- tail their discounts. In either case, plausible pre- tences for farther delay are never wanted; and of this we had sufficient evidence prior to the resumption of specie payments by the banks of this city. It is notorious, 1st, that they did resume not only without waiting for the co-operation of the other banks, but notwithstanding the various reasons or pretences alleged in opposition to that measure, all which were founded on its presumed impracticability, or on the pre- tended general distress which it would cause; 2d, that the resumption was effected with great ease, and with- out being attended with any of the fatal consequences which had been predicted; 3d, that, within less than three months, the example was generally followed by all the Banks of the United States; 4th, that the subse- quent suspensions were caused, exclusively, in all but some of the South-western States, by the inconceivable and unparalleled mismanagement of the U. S. Bank of Pennsylvania. As far as I am able to judge, the reasons now alleged for a continued suspension, which are drawn from the supposed inconveniences of a partial resumption, are as unfounded as those which were ad- duced for the same purpose in 1838. I cannot, for in- stance, perceive how the fact, that the produce of West New Jersey is mostly sold in Philadelphia, and paid for in Philadelphia currency, can, if your banks should re- sume before Philadelphia, prove more injurious to the producer and to the country, than it now is. The price obtained for the produce, that given for the goods purchased in return, or the amount of debt payable in Philadelphia, extinguished with the proceeds, will, re- main precisely the same. But the plea of expediency, whether well founded or frivolous, is utterly inadmissible, when the ques- tion is one, not of profit and loss, but of justice. I cannot see any substantial difference between an at- tempt to prove that the deteriorated specie currency issued by a coiner is a public benefit, and the asser- tion, that the suppression of a depreciated paper cur- rency is a public injury. Repudiating, therefore, every objection to a resumption, founded on presumed con- venience, or expediency, the fact remains to be ascer- tained, whether the sound banks of West N. J. have generally made such preparations, as will enable them, at this time, to resume and to maintain specie pay- ments? Of this you are the only competent judges.- With their actual situation I am unacquainted, and can, at most, only point out in a general way, the obstacles which, if they have not been foreseen, might defeat the attempt. There are, always, in resuming specie payments af- ter a protracted suspension, difficulties to be encounter ed, which vary in different places and at different times. In the intercourse between two countries or two dis- tricts of the same country, that which is possessed of the greatest circulating capital will, generally, be cre- ditor of the other. The city of New York, partly on that account, and also from its having become the prin- cipal centre of the commerce and money transactions of the U. S., is generally creditor in reference to all the other sections of the country; but, for the same rea- sons, the U. S. are generally indebted to Europe, and New York is the place where that debt is concentrated and must be provided for. On that account, it would have been very difficult for the banks of this city to have resumed, so long as the foreign exchanges were unfavorable; and they must always be prepared for such a contingency. At this moment there is a continued exportation of specie from this port to Europe amount- ing to four or five hundred thousand dollars a week, and which in the opinion of men of business, may continue six weeks longer. It has not, as yet, affected our banks, the specie wanted having been supplied by an influx from various parts of the country. It must be admitted that this drain, whilst it continues, renders the general resumption somewhat more difficult; but the portion which you might be called on to supply would be so small, that, so far as you are concerned, this can hardly be considered as an impediment. West New Jersey is, however, in the natural course of trade, generally indebted to Philadelphia; and if, as a necessary preliminary to a resumption, the portion of that debt which is payable, not in Philadelphia, but in New Jersey, has not been considerably diminished, money dealers may, if you resume before Philadelphia, compel your merchants to pay that portion in specie. This may render it necessary for your banks to be bet- ter provided than would otherwise be requisite; and it seems to me, that this is the only special difficulty grow- ing out of your commercial connexion with Philadel-
