The Sextant Christopher Newport University’s On-Line History Journal

Vol. 9, Fall/Winter 2012-13

 

 

In his September 15, 1816, reply to Nathaniel Silsbee, a Massachusetts merchant, William Jones spoke of the need for “a republican majority.” The majority that Jones referred to was not that of Congress or in the state legislature, but a majority in the newly re-chartered Bank of the United States .  Jones remarked that after conferring with his associates “south and west of this city, and also with those at New York ,” they had come to an agreement on several principles regarding the Bank’s management.  The letter focused primarily on the upcoming election of bank directors and the effect of a significant provision in the Bank’s new charter.  This clause limited stockholders to thirty votes regardless of the number of shares they held.  The stipulation prevented large shareholders from dominating the Bank’s management.  Jones and his associates, however, reasoned “a republican majority…to be indispensable, and that of right we may claim it, as well by a superiority of interest in the capital, as by a decided majority of voters.” Jones defended proxy voting despite its undemocratic character because it allowed large shareholders, who ultimately held a larger stake in the Bank’s operations, to enter the institution’s management.  But Jones also cautioned against maintaining too large a majority.  In the typical spirit of the “Era of Good Feelings,” Jones worried that if the present political situation changed, the Republican Party could be marginalized.  To ensure that the election of bank directors would reflect this balance, Jones proposed exploiting a loophole in the Bank’s charter, known as proxy voting.  The charter allowed stockholders to exceed thirty votes when voting for others through the use of power of attorney.  Many enterprising capitalists, including Jones, quickly realized that this loophole could be exploited by placing their shares in the names of others.  Though he had recently declared personal bankruptcy, proxy voting propelled Jones to the presidency of the nation’s largest financial institution. [1]

In its later years, opponents derided the Second Bank of the United States as a “money power,” a “monster bank” and the supporter of a “monied aristocracy.” These phrases evoked comparisons between the National Bank and the Bank of England, and expressed the opinion that elites controlled the Bank of the United States .  The Bank’s charter, however, provided several efforts to make it more democratic than the First Bank.  Conversely, the federal government hoped to play a more prominent role in overseeing the central bank by subjecting the institution to Congressional oversight and by making the Bank large enough to restrain state banking.  Through combining increased regulation with democratic policies, Congress intended to open the institution’s ranks to disinterested citizens who would be more inclined to act in the public’s best interest.  The Bank’s re-charter, however, came at a time when bank directors frequently took advantage of their privileged access to accessible credit.  As a result, many of the Bank’s foremost proponents sought to control the institution.  The introduction of proxy voting only served to complicate matters.  By listing their shares under multiple names, capitalists could evade regulations and multiply their voting power.  Many capitalists used proxy voting to elect themselves to privileged positions within the Bank.  Initially, proxy voters took advantage of their positions and mismanaged the Bank.  Although Jones and other capitalists subverted democracy, this paper will demonstrate how proxy voting became common practice and emerged as a self-correcting force that led to stable management in the National Bank’s later years. 

Interpretations of the founding of the Second Bank of the United States have undergone extensive revisions since the publication of the institution’s first early histories in the 1830s.  Over time, these interpretations have been greatly influenced by changes in economic thought.  Early histories adopted the contemporary “hard money” view towards banking.  This view believed only “hard money” such as gold, silver and its equivalents to be acceptable mediums of exchange.  For these authors, paper money represented not only poor economic policy, but also a corrupting moral influence on society.  Moreover, accounts from this time period primarily relied on Jacksonian publications, such as the Niles Weekly Register, to support their anti-bank views.  As a result, these histories typically portrayed the Bank negatively, as being founded for the “special benefit of stock-jobbers and speculators.” [2]

By the turn of the twentieth century, professional historians such as Ralph Catterall began making extensive use of the American State Papers and other government and institutional documents.  Catterall was one of the first historians to make an economic assessment of the Bank’s financial records, and concluded that the institution had acted favorably under its later management.  In describing the Bank’s re-charter and early existence, Catterall focused solely on the legislative aspects of its re-charter before moving on to the institution’s management and operations.  For Catterall, legislators acted as selfless participants who universally recognized the need for the Bank’s existence.  Through observing Congressional debates independent of the personal correspondences of the personalities involved, Catterall concluded that legislators acted purely out of national interest, writing, “In a word, nothing spoke in this plan but the necessities of the government.” [3] By relying on legislative and institutional records of the Bank, however, Catterall overlooked the motivations behind the institution’s foremost proponents.  Moreover, Catterall’s findings deemphasized the divisiveness of the issues behind re-charter and the two years of debate that preceded it. [4]

Consensus historians applied a Keynesian interpretation to the Bank’s activities.  The leading work of this school was written not by a historian, but an economist.  Bray Hammond, who served as assistant secretary of the Board of Governors of the Federal Reserve Bank from 1944 to 1950, compared the Bank of the United States to the Federal Reserve System and argued that the Bank of the United States performed the regulatory functions of a central bank.  His Pulitzer Prize winning Banks and Politics in America from the Revolution to the Civil War confirmed Catterall’s assessment that the Bank’s management acted favorably in its later years.  Hammond also viewed the re-charter debate as divided along sectional lines, arguing that Southerners and Westerners were its leading advocates.  In keeping with his consensus interpretation, however, Hammond agreed with Caterall that openness to re-charter was unanimous. [5]

Current historians describe the origins of the Second Bank of the United States in the context of expanding democracy and capitalism.  In The Market Revolution, Charles Sellers observes that “contrary to liberal mythology, democracy was born in tension with capitalism, and not as its natural and legitimizing political expression.” [6] In his assessment of the Bank’s re-charter, he acknowledges the work of the competing principles of democracy and capitalism to regulate as well as democratize the Bank.  Likewise, in describing the self-interest faced by large financiers who sought to dominate the Bank, Sean Wilentz has noted that “patriotism was not altruism.” [7]

The circumstances surrounding the Second Bank’s creation contributed to several important differences in its character.  Following the dissolution of the First Bank of the United States in 1811, states immediately began chartering new banks to meet the market’s demand for credit.  Many of these banks were ill prepared to handle the strains of the War of 1812, however, and after the British captured Washington in August of 1814 the majority of banks outside of New England suspended specie payments.  That same year, Congress made several attempts for the Bank’s re-charter, hoping to obtain a loan for the war effort and to induce state chartered banks to resume specie payments.  Legislators were self-interested in their efforts since the government desperately needed a loan to continue the war effort.  Whereas debate over the First Bank’s charter had centered on its constitutionality, however, the Second Bank’s debate was marred by partisanship and revolved around the size and scope of the institution.  The government hoped the Bank would regulate state banks, an issue that was not pertinent under the First Bank’s charter.  With this added purpose, however, was an added need for government intervention to keep the institution’s far-reaching actions in check. [8]

Congress intentionally crafted the Second Bank’s charter to give indirect advantages to the Democratic-Republican Party.  In the First Bank, shareholder elected each director to make the institution independent of government control.  In the Second Bank’s charter, however, the President of the United States appointed five of the institution’s twenty-five directors.  The charter also required the Second Bank to provide a $1.5 million bonus to the federal government in three yearly installments; to establish a branch in every state whose application Congress approved; and subjected the Bank to Congressional oversight at any time.  With the presidency and Congress dominated by the Republican Party, the charter’s increased regulation served to give the Party more control over the Bank’s activities.  The party’s nationalist influence is also evident in the charter’s provision on branches, since allowed Southern and Western constituents to participate in the nation’s credit expansion.  More importantly, the Bank’s charter contained a provision to allow investors to use government bonds in lieu of specie to purchase Bank stock.  This provided an immediate bonus for bondholders since they could exchange depreciated bonds at face value.  As the chief purchasers of war bonds, the measure primarily benefited Republicans and ensured that the Party would play a larger role in the Bank’s operations.  For these reasons, the Second Bank’s charter gave the institution a decisive, regulated character that gave indirect advantages to the Republican Party. [9]  

The Bank’s charter also initiated significant efforts to make the institution democratic.  The charter included provisions to hold yearly elections for eighty percent of its directors, and to limit shareholders to a maximum of thirty votes regardless of their holdings.  Provisions were also included to reduce the price per share from four hundred to one hundred dollars and allowed purchasers to pay in four quarterly installments.  This reduced price permitted the average citizen, who would have been unable to purchase the First Bank’s four hundred dollar shares, to take part in the nation’s largest financial institution.  At the same time, these provisions encouraged enterprising investors, with little knowledge of banking or lending practices, to dominate to the Bank’s management at the expense of large financiers who hoped to control the effects of their investment.  [10]

 

John Jacob Astor

Stephen Girard and John Jacob Astor, two of America ’s wealthiest financiers took a special interest in the Bank and greatly influenced the attempts for re-charter.  After the dissolution of the First Bank, Girard purchased its building with the intention of improving the familiarity of his own bank.  Moreover, both investors subscribed heavily to the government’s Sixteen Millions loan of 1813.  As the War intensified and credit diminished, Girard and Astor recognized the need for sustainable federal credit and became increasingly concerned over the subsequent drop in the value of their bonds.  They quickly realized that to protect their investment and ensure credit for the war effort, the government would need to reestablish confidence in its ability to repay its debts.  The National Bank provided a solution to the predicaments of both parties.  One historian has described Girard as “one of the moving spirits of the Bank from the time of its inception,” and noted that many of Girard and Astor’s ideas appeared in the institution’s final form. [11] Together, the financiers formulated plans for a new National Bank that would allow subscribers to purchase stock with previously issued government bonds in lieu of specie.  Astor assisted Girard by lobbying for support in the Senate. [12] Alexander Dallas, a Philadelphia lawyer with political connections in the Democratic-Republican Party, proved to be their most successful recruit. 

Alexander Dallas

Dallas became an active lobbyist in Washington and submitted several proposals for the Bank’s re-charter.  Astor and Girard heavily influenced these proposals and many of their recommendations appeared in the institution’s final form.  But their plan did not encounter unanimous support, as previous historians have asserted.  Daniel Webster decried this scheme as a project “calculated only for the benefit of the holders of the stock, created since the war.” [13] It would take more than two years of debate and seven attempts before the Bank’s re-charter could be realized. [14]

To monitor their investment closely, Girard and Astor remained influential in the Bank’s early organization and management.  Through Dallas ’s efforts, Congress appointed both financiers to serve as commissioners for receiving stock subscriptions.  These positions proved to be extremely important when the government allowed stockholders to purchase additional shares.  Although the Bank’s charter initially prevented individuals from purchasing more than three thousand shares, Congress reversed the policy after subscriptions slumped.  As commissioners, Girard and Astor found themselves poised to take advantage of their positions and subscribe to the remaining shares.  Before the books reopened, Girard met with William Jones and Pierce Butler, and agreed that Girard would purchase the stock.  Both Butler and Jones had previously served in Congress and would later become influential in the Bank’s management.  When the books reopened, Girard subscribed to the remaining $3 million of Bank stock and subsequently distributed it among Astor and their associates.  One historian has observed that Girard carried out his “well-prepared strategy” in order to prevent an increase in potential voters.  Since control of the Bank’s stock meant control of the Bank, Girard and Astor hoped to control the Bank’s management by limiting the number of possible voters. [15]  

Stephen Girard

Girard and Astor also hedged their bets to ensure that they would remain influential in the Bank’s management.  In his history of Stephen Girard’s bank, one historian describes a letter written from Dallas to Girard stating, “the Government Directors must be appointed during the Spring: Tell me in confidence whether you would prefer to be appointed here, or to be chosen by the stockholders.” [16] President Madison later appointed both financiers to serve as government directors.  After their position in the Bank proved certain, the financiers worked quickly to elect likeminded directors to form a majority.  Both Astor and Girard favored conservative bankers such as James Lloyd of Boston , Brockholst Livingston of New York City , and Thomas Willing of Philadelphia for bank directors.  The first election, however, proved to be extremely disappointing for the financiers.  Girard believed that “intrigue and corruption had framed a ticket for twenty directors of the Bank of the United States who… appear to have been elected for the purpose of securing the presidency to Wm.  Jones, the cashier’s office to Jonathan A.  Smith and for other pecuniary measures.” [17] Girard and Astor realized that they had been outsmarted by innovative investors who took advantage of proxy voting to increase their influence in the election.  Although they would later play a significant role in exacting change in the Bank’s management, both financiers reduced their holdings in the Bank’s stock following the election. [18]

Whereas Girard hoped to limit the number of potential voters, Jones and other capitalists sought to dominate the Bank through artificially multiplying their voting power.  The intentions of these investors represent a third facet in the struggle for control of the Bank.  Contemporaries branded these stockholders as “speculators” because many of them traded heavily in the Bank’s stock and artificially inflated its price.  As members of the banking community, these individuals supported the National Bank’s re-charter and quickly infiltrated the institution’s ranks.  According to one banking historian, bankers generally supported the Bank’s re-charter since the organization provided “opportunities for speculation, for more lucrative offices, and for more liberal discounts on loans.” [19] Bankers saw the moneymaking potential brought about by the Bank’s influx of capital and quickly worked to capture the interests of politicians for the Bank’s re-charter.

Congress was more sympathetic to the interests of these capitalists in the debate over the Second Bank.  Many legislators, especially in the South and West, realized the potential for economic growth brought by developed national financial markets.  Moreover, congressmen during this time increasingly held positions as bank directors, and the agrarian opposition to banking present in the debate over the First Bank had largely subsided.  These legislators worked to guarantee that their constituents would take part in nation’s financial infrastructure.  When Hugh Nelson, a representative from Virginia , submitted a proposal for the Bank’s re-charter, numerous representatives rose to amend it.  Nelson’s bill stipulated a Bank with $50 million in capital and established procedures for organizing the institution.  The bill also designated Boston , New York City, Philadelphia , Baltimore , Richmond , Charleston and Pittsburg as the centers where the stock would be sold, and named individuals from each city to serve as commissioners.  The congressmen who objected did not oppose the Bank’s size or limitations, but instead believed that the choice of locations for public subscriptions was biased against the South and West.  Congressmen hurriedly proposed amendments to include locations such as New Orleans , Nashville , Raleigh , Savannah , Lexington (KY), St.  Louis, Chillicothe , and Washington City .  Congressmen from New England also rose to support locations such as Portsmouth (NH), Hallowell (ME), Windsor (VT) and Utica (NY.) Eventually, the bill became so crowded with amendments that “the Clerk himself could scarcely arrange them, or the Speaker state them to the House, It was ordered to lie on the table, and to be printed as amended.” [20] Capitalists succeeded in capturing the interests of politicians because banking appealed to the nationalist emphasis on economic nationalism and development. [21]

 As one banking historian notes, “Despite concerted efforts to encourage dispersed share ownership, many, perhaps even most, banks fell into the hands of a few shareholders.” [22] The Second Bank of the United States was no exception.  Capitalists used proxy voting to elect themselves to powerful positions within the Bank.  Once elected as a bank director, the institution’s structure made the organization easy to infiltrate.  Bank directors held powerful positions within the Bank since they reviewed loan applications and appointed branch presidents, cashiers and directors.  The prime access to readily available credit proved enticing to those who hoped to control the Bank.  According to Naomi Lamoreaux, who compared nineteenth-century banks to modern “investment clubs,” the practice of loaning to oneself or close relatives, known as insider lending, was especially common in the early-nineteenth century. [23] The use of proxy voting allowed these enterprising capitalists to exert disproportionate voting power and effectively control the Bank’s management. [24]

Once placed in positions of authority, however, the directors administered over a case study in mismanagement.  Before rising to the Bank’s presidency, William Jones had served in the Revolutionary War and later worked as a merchant in Charleston and Philadelphia .  As a former politician, cabinet member and unsuccessful merchant, Jones followed the events surrounding the Bank’s re-charter closely and was influential in organizing stockholders for the election of bank directors.  Once elected, however, Jones was an incompetent administrator whose recent bankruptcy was a testament to his lack of managerial skills.  Jones took a decentralized approach to the Bank’s management and allowed branches to operate independently.  These actions resulted in an overextension of the Bank’s capital as Western bankers loaned liberally to individuals who lacked credit credentials.  Much like today’s credit crisis, where investors often fail to understand the intricacies of the mortgage backed derivatives in their portfolios, bankers in the early-nineteenth century did not fully grasp the complexities of double-entry bookkeeping.  The result was a severe contraction in credit that became known as the Panic of 1819. [25]

Jon Canfield Spencer

Issued in January of 1819, the Spencer Report revealed the extent of the Bank’s mismanagement and evidence of proxy voting through the testimony of bank directors.  The Spencer Report was a congressional investigation led by John Canfield Spencer that examined the Bank’s mismanagement.  The investigation exposed the Bank’s liberal lending policy, as well as extensive corruption.  The committee found that the Bank’s general practice, when faced with a debtor who could not pay, was to renew the loan at the same rate of interest—a practice unheard of today.  These debtors appealed to the board of directors, typically citing the “depressed state of commerce” or the “unprecedented scarcity of money,” in hopes of renewing their loans. [26] This practice was especially questionable when debtors attempted to renew loans that had been used to purchase stock.  Many investors purchased additional shares with borrowed money, betting the share price would continue to rise.  In one instance, an investor proposed purchasing 450 additional shares in his request to renew his loans. [27] When the board of directors granted this and similar requests, it served to manipulate the stock price by keeping it artificially high.  Investors continued to purchase additional shares in hopes that the price would continue to increase.  Many investors took out loans, using their current stock as collateral, to purchase additional shares.  The house of cards created by these speculations eventually fell when falling stock prices led to panic as banks recalled loans in a severe contraction. [28]

The Spencer Report revealed speculation at the Bank’s highest levels.  The testimonies of three bank directors, including Jones, provide an incompatible and sometimes contradictory story of Jones’s transactions.  Jones testified that he had speculated on future prices of Bank stock through stock options and realized a profit of $33,000.  Both Dennis A.  Smith and James McCulloch testified that they presented contracts to Jones “gratuitously, after the stock had risen, and a profit would be realized.” [29] These accusations were especially damaging to the Bank’s reputation when Maryland courts indicted three of its officers for conspiracy in 1819 for their roles an embezzlement scheme.  Contemporaries referred to the trials as the Baltimore Conspiracy Cases since the defendants were tried on conspiracy charges because no law existed in Maryland at that time against embezzlement.  When the cases came to light, the Spencer Report revealed that James McCulloch, George Williams and James Buchanan had loaned money to each other using stock that was partially paid for as collateral.  Because Buchanan and McCulloch served as the president and cashier of the Baltimore branch and George Williams was a prominent attorney who served on the board of directors at the central bank, their scheme went unnoticed until falling stock prices sent Buchanan’s merchant house into bankruptcy. [30]

The Spencer Report also revealed extensive loans to congressmen that presented a conflict of interest for the Bank.  George Williams advised in one letter, “it is all important to accommodate the Members of Congress.” [31] During this time, individuals commonly referred to loans as accommodations or accommodation paper.  After the Spencer Report exposed the extent of the corruption, Niles Weekly Register derided the Bank, noting “We learn, that about forty members [of Congress] are stockholders—some of them heavily so: we hope that none of them voted in their own case.” [32] Other congressmen held offices at the Bank or received payment for other services, especially legal fees.  John Sergeant received $20,000 “for his services as agent to [the] bank” while serving in the House of Representatives. [33] The fact that the very individuals who provided oversight to the Bank’s activities also had a personal stake in its future reveal the extent of the Bank’s mismanagement. [34]

Testimony from the Spencer Report also uncovered how proxy voting allowed proxy voters to play a dominant role in the Bank’s activities.  The committee compiled a table (Figure 1) to distinguish between votes placed by an attorney and those submitted by stockowners.  As the table below illustrates, proxy voting appeared in nearly every city that sold subscriptions.

 

 

 

No.  of shares by subscribers

No.  of names

Votes authorized

Shares taken by an attorney

Number of attorneys

Votes on such shares

S/V*

 

Portland

2,036

22

263

None

None

-

7.741

 

Portsmouth

1,206

14

182

None

None

-

6.626

 

Boston

24,023

364

4,355

8,615

34

2,183

5.516

 

Providence

7,419

144

1,612

3,202

6

769

4.602

 

Middletown

5,873

2,474

3,813

5,323

27

3,633

1.540

 

Burlington

63

2

20

None

None

-

3.150

 

New York

20,012

2,641

6,450

12,044

63

5,036

3.102

 

New Brunswick

1,302

84

488

832

7

339

2.668

 

Wilmington

4,706

1,078

2,214

4,530

22

2,158

2.125

 

Washington

12,708

617

3,203

6,783

27

2,542

3.967

 

Richmond

16,987

1,283

5,450

9,490

68

4,052

3.116

 

Philadelphia

88,520

3,566

19,260

37,330

96

16,054

4.596

 

Lexington

9,587

710

3,291

4,692

14

2,388

2.913

 

Cincinnati

4,700

707

1,257

2,432

7

1,121

3.739

 

Raleigh

2,843

266

769

944

10

408

3.697

 

Charleston

25,986

1,588

7,682

3,389

32

1,170

3.382

 

Augusta

8,263

102

1,727

None

None

-

4.784

 

New Orleans

3,085

45

435

1,524

1

140

7.091

 

Nashville

540

14

110

None

None

-

4.909

 

Baltimore

40,141

15,628

22,187

36,230

142

21,645

1.809

 

 

 

 

 

 

 

 

 

 

Total

280,000

 

84,768

137,360

556

63,638

3.303

 

Source: Spencer Report, January 16, 1819, American State Papers, Finance, Volume III, 349. 

*The ratio of shares to votes authorized

The column on the far right of the table includes a ratio of shares to votes authorized for each city.  Lower numbers correlates to increased voting power for that locality.  This is evident from a comparison of Philadelphia and Baltimore .  Although Philadelphians owned more than twice as many shares as Baltimoreans, Baltimore possessed more authorized votes.  Because the table also includes relevant figures for votes taken by an attorney, the impact of proxy voting on the election of bank directors can be extrapolated.  In Middletown , twenty-seven individuals cast 95 percent of the 3813 votes cast.  In Wilmington , twenty-two individuals cast 2,158 votes, more than 97 percent.  The most influential, however, was Baltimore where 142 attorneys cast 97.55 percent or 21645 of the 22187 votes cast (more than twenty-five percent of total votes cast in the election).  Cincinnati and Philadelphia also ranked highly with more than 80 percent of their votes cast by proxy.  From the table it is obvious that proxy voting held a significant impact on the election and that those who employed it hoped to dominate the Bank. [35]

The fact that bank directors spoke openly of their activities is particularly revealing.  The committee inferred from the testimonies of Thomas Leiper, George Williams, James McCulloch and Dennis Smith that it was a common and general practice, well known to the judges of the election and to the directors, to divide shares into small parcels, varying from one to twenty shares to a name, held in the names of persons who had no interest in them, and to vote upon the shares thus held, as attorneys for the pretended proprietors. [36]

The fact that Leiper, a judge in the first election, had knowledge of these activities and engaged in the practice himself is especially striking.  Leiper’s reaction to the committee’s questions shows that these investors did not make a distinction between private transactions and the public interest.  These capitalists discussed choices of candidates for Bank offices as openly as a political party might discuss candidate options, and considered their transactions to be free from public implications.  After questioning William Jones, the committee found that “Mr. Jones appears to consider those transactions as lawful private concerns; the committee deem them intimately connected with the public management of the institution.” [37] Contemporaries did not always make distinctions between the public and private spheres.  If the Bank of the United States had been a purely private institution, insider lending would not have been a national issue.  Its public nature, however, made the Bank a prime target for allegations of favoritism. [38]

Langdon Cheves

Proxy voting was also influential after the Panic of 1819 in generating conservative change.  Following the release of the Spencer Report, stockholders reacted in 1820 to elect Langdon Cheves, a former Speaker of the House from South Carolina , to serve as the Bank’s president.  In this election, stockholders replaced fourteen of the Bank’s twenty-five directors.  Cheves ushered in a reactionary era of conservative lending practices that kept the Bank afloat but did little to help foreclosures on Western farms.  As one contemporary described Cheves’s administration “The Bank was saved, and the people were ruined.” [39] Although, one historian of the Bank has largely credited Stephen Girard with replacing Jones’s leadership, this assertion ignores the importance of other organizers in producing change. [40] References to proxy voting during this time are also seen in Daniel Webster’s letters to conservative bankers such as Jeremiah Mason and James Lloyd.  Webster became increasingly involved in the Banks activities after the Panic and was influential in organizing support in New England to remove the institution’s incumbents.  In a letter to Mason dated November 15, 1819, Webster noted “A list of Directors was pretty much agreed on at least for the northern states… it is [intended] that N.  York & Mass shall have three each.” [41] Webster went on to list Isaac Bronson, Archibald Gracie, William Baynard, James Lloyd, Nathaniel Silsbee and himself as probable choices for directors.  Webster also described the election process and insights into his reasoning, noting

Our proxies here, will be given to Mr. Lloyd, or Mr. Silsbee, both of whom will attend the Election.  They should be with power of substitution, lest accident should happen.  It is thought here, that the present is a favorable time to introduce proper management into the Bank, & I think you will be of that opinion.  Will you write me on the subject, & let me know the number of Votes may be calculated on, in N.  H.  It is not thought probable that any opposition will be made to the Ticket which will be proposed; but it will be well to be prepared agt.  surprise. [42]

In this quotation, Webster emphasizes the importance of giving Lloyd the “power of substitution,” or power of attorney.  Webster also expresses confidence, noting that opposition is unlikely.  The confidence and elaborate planning evident in Webster’s letters, reveal how proxy voting influenced the election of 1820. [43]

Although proxy voting subverted democracy, it provided an incentive structure that ensured stable management in the long term.  Reckless entrepreneurs initially prevailed over the attempts by government and large financiers to dominate the Bank.  Despite the fact that these bankers made poor decisions once elected, proxy voting established a precedent that ultimately led to more conservative business practices.  Over time, proxy voting emerged as a powerful agent for exacting change and correcting defects in the Bank’s management and became an accepted means of election.  As William Jones observed, “a republican majority…of right we may claim it, as well by a superiority of interest in the capital as by a decided majority of voters.” [44]

* Funding for travel was provided through an award from Christopher Newport University's Undergraduate-Graduate Research Council.

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Walters, Raymond Jr.  “The Origins of the Second Bank of the United States .” The Journal of Political Economy 53 No.  2 (Jun., 1945): 115-131. 

Webster, Fletcher, ed.  The Private Correspondence of Daniel Webster.  Boston : Little, Brown and Company, 1857.

Wilburn, Jean Alexander.  Biddle’s Bank, The Crucial Years.  New York : Columbia University Press, 1967.

Wilentz, Sean.  The Rise of American Democracy from Jefferson to Lincoln .  New York : W.W Norton & Company, 2005. 

Wiltse, Charles M.  ed.  The Papers of Daniel Webster: Correspondence, Volume 1, 1798-1824.  Hanover , New Hampshire : University Press of New England , 1974

 



[1] William Jones to Nathaniel Silsbee, September 15, 1816, Letter and Portrait of William Jones 1816, MSS2639 [AC736], Manuscripts Division, Library of Congress, Washington , D.C; for examples of voting through use of power of attorney, see J.  Kelsey Burr Collection of the Bank of the United States 1774-1865, Container 1, [AC6046A] Library of Congress Manuscripts Division, Washington D.C.; Preston Family Papers, 1769-1864, Section 27, Manuscripts Mss1 P9267 e 1412-1413, Virginia Historical Society, Richmond, Virginia.

[2] William M.  Gouge, A Short History of Paper Money, and Banking in the United States ; To Which is Prefixed an Inquiry into the Principles of the System ( New York : Augustus M.  Kelley Publishers, 1968) First published (Philadelphia: T.W Ustick, 1833), 80; for agrarian opposition to banking, see Ron Chernow, Alexander Hamilton ( New York : Penguin Books, 2004), 347; for early interpretations of the bank, see also Richard Hildreth, The History of Banks ( New York : Augustus M.  Kelley Publishers, 1968.  First edition published, Boston : Hilliard, Gray & Company, 1837). 

[3] Ralph C.H Catterall, The Second Bank of the United States (Chicago: University of Chicago Press, 1902), 11.

[4] Catterall, The Second Bank of the United States , 1-45. 

[5] Bray Hammond, Banks and Politics in America from the Revolution to the Civil War (Princeton: Princeton University Press, 1991: first printed 1957); for additional consensus interpretations see also Kenneth L.  Brown, “Stephen Girard, Promoter of the Second Bank of the United States ,” Journal of Economic History 2 No.  2 (Nov., 1942): 125-148; Raymond Walters Jr., “The Origins of the Second Bank of the United States ,” The Journal of Political Economy 53 No.  2 (Jun., 1945): 115-131; Walter Buckingham Smith, Economic Aspects of the Second Bank of the United States (New York: Greenwood Press, 1953), 99.

[6] Charles Sellers, The Market Revolution: Jacksonian America , 1815-1846 (New York: Oxford University Press, 1991), 32. 

[7] Sean Wilentz, The Rise of American Democracy from Jefferson to Lincoln ( New York : W.W Norton & Company, 2005), 204; see also Naomi R.  Lamoreaux, Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England (New York: Cambridge University Press, 1994); for interpretations of the Bank from the nineteen sixties and seventies see Jean Alexander Wilburn, Biddle’s Bank, The Crucial Years (New York: Columbia University Press, 1967); J.  Van Fenstermaker, The Development of American Commercial Banking: 1782-1837 (Kent: Kent State University, 1965); Donald R.  Adams Jr., Finance and Enterprise in Early America: A Study of Stephen Girard’s Bank 1812-1831 (Philadelphia: University of Pennsylvania Press, 1978).

[8] Catterall, The Second Bank of the United States , 1-45.

[9] Richard E.  Ellis.  Aggressive Nationalism: McCulloch V.  Maryland and the Foundation of Federal Authority in the Young Republic ( Oxford : Oxford University Press, 2007), 42; Susan Hoffmann, Ideas, Public Policy, and the Creation of Financial Institutions ( Baltimore : Johns Hopkins University Press, 2001), 49. 

[10] John D.  Haeger, John Jacob Astor: Business and Finance in the Early Republic (Detroit: Wayne State University Press, 1991), 142-144; Howard Bodenhorn, State Banking in Early America ( New York : Oxford University Press, 2003), 19.

[11] Brown, “Stephen Girard, Promoter of the Second Bank of the United States ,” 125, 128-129.

[12] Walters, “The Origins of the Second Bank of the United States ,” 119.

[13] Daniel Webster to Ezekiel Webster, November 24, 1814, Washington, in The Private Correspondence of Daniel Webster ed.  by Fletcher Webster (Boston: Little, Brown and Company, 1857), 247.

[14] Haeger, John Jacob Astor: Business and Finance in the Early Republic, 142-144; Walters, “The Origins of the Second Bank of the United States ,” 117-124; Brown, “Stephen Girard, Promoter of the Second Bank of the United States ,” 125-132.  

[15] Adams Jr., Finance and Enterprise in Early America: A Study of Stephen Girard’s Bank 1812-1831, 55-56

[16] Alexander Dallas to Stephen Girard, April 8, 1816, quoted in Adams, Finance and Enterprise in Early America: A Study of Stephen Girard’s Bank 1812-1831, 55. 

[17] Ibid, 55.

[18] Haeger, John Jacob Astor: Business and Finance in the Early Republic, 200-202; Adams, Finance and Enterprise in Early America: A Study of Stephen Girard’s Bank 1812-1831, 61-63.

[19] Walters, “The Origins of the Second Bank of the United States ,” 129-130.

[20] Matthew St .  Clair Clarke and David A.  Hall, Legislative and Documentary History of the Bank of the United States Including the Original Bank of North America (Washington: Gales and Seaton, 1832), 519. 

[21] Clarke and Hall, Legislative and Documentary History of the Bank of the United States, 487-489, 492, 519; Catterall, The Second Bank of the United States, 1-45.

[22] Bodenhorn, State Banking in Early America , 19.

[23] Lamoreaux, Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England , 15.

[24] Bodenhorn, State Banking in Early Ameria, 19; Ibid, 15.

[25] Smith, Economic Aspects of the Second Bank of the United States , 99.

[26] Jacob Myers to the President and Directors of the Office of Discount and Deposit, Baltimore , July 29, 1819, Records of the Bank of the United States , Baltimore Md. , 1795-1855, Container 1, Library of Congress Manuscripts Division, Washington D.C MSS95463.

[27] Minutes of a meeting of the President and Directors of the Bank of the United States, June 18, 1819, Records of the Bank of the United States, Baltimore Md., 1795-1855, Container 1, Library of Congress Manuscripts Division, Washington D.C, MSS95463.

[28] Records of the Bank of the United States, Baltimore Md., 1795-1855, Container 1, MSS95463, Library of Congress Manuscripts Division, Washington D.C.; Spencer Report, January 16, 1819, American State Papers, Finance III, 306-391.

[29] Spencer Report, January 16, 1819, American State Papers, Finance III, 313.

[30] Spencer Report, January 16, 1819, American State Papers, Finance III, 313

[31] George Williams, quoted in Ellis, Aggressive Nationalism: McCulloch V.  Maryland and the Foundation of Federal Authority in the Young Republic , 64.

[32] Niles Weekly Register, February 27, 1819, Volume 16, quoted in Gouge, A Short History of Paper Money, 102. 

[33] Spencer Report, January 16, 1819, American State Papers, Finance III, 340. 

[34] Lamoreaux, Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England , 1-2, 18-22.

[35] Spencer Report, January 16, 1819, American State Papers, Finance III, 306-391.

[36] Spencer Report, January 16, 1819, American State Papers, Finance III, 314.

[37] Spencer Report, January 16, 1819, American State Papers, Finance III, 313. 

[38] Lamoreaux, Insider Lending: Banks, Personal Connections, and Economic Development in Industrial New England, 35; Spencer Report, January 16, 1819, American State Papers, Finance III, 306-391. 

[39] Gouge, A Short History of Paper Money, 110.

[40] Brown, “Stephen Girard, Promoter of the Second Bank of the United States ,” 125. 

[41] Daniel Webster to Jeremiah Mason, November 15, 1819, in The Papers of Daniel Webster: Correspondence, Volume 1, 1798-1824, ed.  Charles M.  Wiltse (Hanover, New Hampshire: University Press of New England, 1974), 266.

[42] Ibid, 266.

[43] Smith, Economic Aspects of the Second Bank of the United States , 111; Brown, “Stephen Girard, Promoter of the Second Bank of the United States ,” 125; Ibid, 266.

[44] Jones to Silsbee, September 15, 1816, Letter and Portrait of William Jones 1816, MSS2639 [AC736], Manuscripts Division, Library of Congress, Washington , D.C.

 

 

Contents

Introduction

 


Coddington

Garmon

Grozbean

Hilleary-Nasser

King

Keene

Viar

Judkins

Plarr
Ruble
Shaughnessy
Buxbaum
Herbert
Porter