Page:A History of Banking in the United States.djvu/283

 had then reached Illinois, it was supposed that all the towns of any note would soon become cities, and that other uninhabited towns, laid out only for speculation, would immediately become thriving, populous and wealthy, and the town-lot market would be established. "Chicago had been for some time only one great market town" for town lots. The eastern people, however, were likewise led to adopt this notion of the prospective value of the new land. The sales of public land had been from $2 millions to $3 millions a year. In 1833 they rose to $4.9 millions; in 1834, $6 millions; in 1835, $15.9 millions; in 1836, $25.1 millions. They fell, in 1837, to $7 millions; in 1838, $4.3 millions; 1839, $6.4 millions; and 1840, $2.7 millions. These sales were made in 1835 and 1836 for the notes of the banks of the western States.

In the President's message of 1836 the operation was described as follows: "The banks loaned out their notes to speculators, they were paid to the receivers, and immediately returned to the banks to be lent out again and again, being mere instruments to transfer to speculators the most valuable public lands, and pay the government by a credit on the books of the banks. Those credits on the books of some of the western banks, usually called deposits, were greatly beyond their immediate means of payment, and were rapidly increasing. Indeed each speculation furnished means for another; for, no sooner had one individual or company paid in the notes, than they were immediately lent to another for a like purpose, and the banks were extending their business and their issues so largely as to alarm considerate men, and rendered it doubtful whether these bank credits, if permitted to accumulate, would ultimately be of the least value to the government."

On the 11th of July, 1836, the Secretary of the Treasury issued an order, afterwards known as the "Specie Circular," in the name of the President, ordering the receivers to accept nothing in payment of public lands but gold and silver, or, in proper cases, Virginia scrip. The chief motive was declared to be "to discourage the ruinous extension of bank issues and bank credit."

This order was denounced by all those who were interested in the prevailing inflation and by all the believers in the "credit system."

It is well worthy of notice that the whole of the great surplus which was at this time piled up in the treasury, that is, in the deposit banks, could be accounted for by the increased revenue from the sale of public lands. The outcry against the circular was so great that, in spite of the great administration majority, a bill was passed to supersede it. In form it specified what currency might be received for payments to the United States, but it included bank notes, provided that they were payable and paid in specie, and that the banks whose notes were taken issued no notes under five, later under ten, and later still under twenty dollars. These restrictions were idle because every one of the banks in question satisfied them, and they furnished no guarantee against the evils complained of. Jackson filed this bill