State of the Union Addresses of James Buchanan
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James Buchanan >> State of the Union Addresses of James Buchanan
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14 This eBook was produced by James Linden.
The addresses are separated by three asterisks: ***
Dates of addresses by James Buchanan in this eBook:
December 8, 1857
December 6, 1858
December 19, 1859
December 3, 1860
***
State of the Union Address
James Buchanan
December 8, 1857
Fellow-Citizens of the Senate and House of Representatives:
In obedience to the command of the Constitution, it has now become my duty
"to give to Congress information of the state of the Union and recommend to
their consideration such measures" as I judge to be "necessary and
expedient."
But first and above all, our thanks are due to Almighty God for the
numerous benefits which He has bestowed upon this people, and our united
prayers ought to ascend to Him that He would continue to bless our great
Republic in time to come as He has blessed it in time past. Since the
adjournment of the last Congress our constituents have enjoyed an unusual
degree of health. The earth has yielded her fruits abundantly and has
bountifully rewarded the toil of the husbandman. Our great staples have
commanded high prices, and up till within a brief period our manufacturing,
mineral, and mechanical occupations have largely partaken of the general
prosperity. We have possessed all the elements of material wealth in rich
abundance, and yet, notwithstanding all these advantages, our country in
its monetary interests is at the present moment in a deplorable condition.
In the midst of unsurpassed plenty in all the productions of agriculture
and in all the elements of national wealth, we find our manufactures
suspended, our public works retarded, our private enterprises of different
kinds abandoned, and thousands of useful laborers thrown out of employment
and reduced to want. The revenue of the Government, which is chiefly
derived from duties on imports from abroad, has been greatly reduced,
whilst the appropriations made by Congress at its last session for the
current fiscal year are very large in amount.
Under these circumstances a loan may be required before the close of your
present session; but this, although deeply to be regretted, would prove to
be only a slight misfortune when compared with the suffering and distress
prevailing among the people. With this the Government can not fail deeply
to sympathize, though it may be without the power to extend relief.
It is our duty to inquire what has produced such unfortunate results and
whether their recurrence can be prevented. In all former revulsions the
blame might have been fairly attributed to a variety of cooperating causes,
but not so upon the present occasion. It is apparent that our existing
misfortunes have proceeded solely from our extravagant and vicious system
of paper currency and bank credits, exciting the people to wild
speculations and gambling in stocks. These revulsions must continue to
recur at successive intervals so long as the amount of the paper currency
and bank loans and discounts of the country shall be left to the discretion
of 1,400 irresponsible banking institutions, which from the very law of
their nature will consult the interest of their stockholders rather than
the public welfare.
The framers of the Constitution, when they gave to Congress the power "to
coin money and to regulate the value thereof" and prohibited the States
from coining money, emitting bills of credit, or making anything but gold
and silver coin a tender in payment of debts, supposed they had protected
the people against the evils of an excessive and irredeemable paper
currency. They are not responsible for the existing anomaly that a
Government endowed with the sovereign attribute of coining money and
regulating the value thereof should have no power to prevent others from
driving this coin out of the country and filling up the channels of
circulation with paper which does not represent gold and silver.
It is one of the highest and most responsible duties of Government to
insure to the people a sound circulating medium, the amount of which ought
to be adapted with the utmost possible wisdom and skill to the wants of
internal trade and foreign exchanges. If this be either greatly above or
greatly below the proper standard, the marketable value of every man's
property is increased or diminished in the same proportion, and injustice
to individuals as well as incalculable evils to the community are the
consequence.
Unfortunately, under the construction of the Federal Constitution which has
now prevailed too long to be changed this important and delicate duty has
been dissevered from the coining power and virtually transferred to more
than 1,400 State banks acting independently of each other and regulating
their paper issues almost exclusively by a regard to the present interest
of their stockholders. Exercising the sovereign power of providing a paper
currency instead of coin for the country, the first duty which these banks
owe to the public is to keep
in their vaults a sufficient amount of gold and silver to insure the
convertibility of their notes into coin at all times and under all
circumstances. No bank ought ever to be chartered without such restrictions
on its business as to secure this result. All other restrictions are
comparatively vain. This is the only true touchstone, the only efficient
regulator of a paper currency--the only one which can guard the public
against overissues and bank suspensions. As a collateral and eventual
security, it is doubtless wise, and in all cases ought to be required, that
banks shall hold an amount of United States or State securities equal to
their notes in circulation and pledged for their redemption. This, however,
furnishes no adequate security against overissue. On the contrary, it may
be perverted to inflate the currency. Indeed, it is possible by this means
to convert all the debts of the United States and State Governments into
bank notes, without reference to the specie required to redeem them.
However valuable these securities may be in themselves, they can not be
converted into gold and silver at the moment of pressure, as our experience
teaches, in sufficient time to prevent bank suspensions and the
depreciation of bank notes. In England, which is to a considerable extent a
paper-money country, though vastly behind our own in this respect, it was
deemed advisable, anterior to the act of Parliament of 1844, which wisely
separated the issue of notes from the banking department, for the Bank of
England always to keep on hand gold and silver equal to one-third of its
combined circulation and deposits. If this proportion was no more than
sufficient to secure the convertibility of its notes with the whole of
Great Britain and to some extent the continent of Europe as a field for its
circulation, rendering it almost impossible that a sudden and immediate run
to a dangerous amount should be made upon it, the same proportion would
certainly be insufficient under our banking system. Each of our 1,400 banks
has but a limited circumference for its circulation, and in the course of a
very few days the depositors and note holders might demand from such a bank
a sufficient amount in specie to compel it to suspend, even although it had
coin in its vaults equal to one-third of its immediate liabilities. And yet
I am not aware, with the exception of the banks of Louisiana, that any
State bank throughout the Union has been required by its charter to keep
this or any other proportion of gold and silver compared with the amount of
its combined circulation and deposits. What has been the consequence? In a
recent report made by the Treasury Department on the condition of the banks
throughout the different States, according to returns dated nearest to
January, 1857, the aggregate amount of actual specie in their vaults is
$58,349,838, of their circulation $214,778,822, and of their deposits
$230,351,352. Thus it appears that these banks in the aggregate have
considerably less than one dollar in seven of gold and silver compared with
their circulation and deposits. It was palpable, therefore, that the very
first pressure must drive them to suspension and deprive the people of a
convertible currency, with all its disastrous consequences. It is truly
wonderful that they should have so long continued to preserve their credit
when a demand for the payment of one-seventh of their immediate liabilities
would have driven them into insolvency. And this is the condition of the
banks, notwithstanding that four hundred millions of gold from California
have flowed in upon us within the last eight years, and the tide still
continues to flow. Indeed, such has been the extravagance of bank credits
that the banks now hold a considerably less amount of specie, either in
proportion to their capital or to their circulation and deposits combined,
than they did before the discovery of gold in California. Whilst in the
year 1848 their specie in proportion to their capital was more than equal
to one dollar for four and a half, in 1857 it does not amount to one dollar
for every six dollars and thirty-three cents of their capital. In the year
1848 the specie was equal within a very small fraction to one dollar in
five of their circulation and deposits; in 1857 it is not equal to one
dollar in seven and a half of their circulation and deposits.
From this statement it is easy to account for our financial history for the
last forty years. It has been a history of extravagant expansions in the
business of the country, followed by ruinous contractions. At successive
intervals the best and most enterprising men have been tempted to their
ruin by excessive bank loans of mere paper credit, exciting them to
extravagant importations of foreign goods, wild speculations, and ruinous
and demoralizing stock gambling. When the crisis arrives, as arrive it
must, the banks can extend no relief to the people. In a vain struggle to
redeem their liabilities in specie they are compelled to contract their
loans and their issues, and at last, in the hour of distress, when their
assistance is most needed, they and their debtors together sink into
insolvency.
It is this paper system of extravagant expansion, raising the nominal price
of every article far beyond its real value when compared with the cost of
similar articles in countries whose circulation is wisely regulated, which
has prevented us from competing in our own markets with foreign
manufacturers, has produced extravagant importations, and has counteracted
the effect of the large incidental protection afforded to our domestic
manufactures by the present revenue tariff. But for this the branches of
our manufactures composed of raw materials, the production of our own
country--such as cotton, iron, and woolen fabrics--would not only have
acquired almost exclusive possession of the home market, but would have
created for themselves a foreign market throughout the world.
Deplorable, however, as may be our present financial condition, we may yet
indulge in bright hopes for the future. No other nation has ever existed
which could have endured such violent expansions and contractions of paper
credits without lasting injury; yet the buoyancy of youth, the energies of
our population, and the spirit which never quails before difficulties will
enable us soon to recover from our present financial embarrassments, and
may even occasion us speedily to forget the lesson which they have taught.
In the meantime it is the duty of the Government, by all proper means
within its power, to aid in alleviating the sufferings of the people
occasioned by the suspension of the banks and to provide against a
recurrence of the same calamity. Unfortunately, in either aspect of the
ease it can do but little. Thanks to the independent treasury, the
Government has not suspended payment, as it was compelled to do by the
failure of the banks in 1837. It will continue to discharge its liabilities
to the people in gold and silver. Its disbursements in coin will pass into
circulation and materially assist in restoring a sound currency. From its
high credit, should we be compelled to make a temporary loan, it can be
effected on advantageous terms. This, however, shall if possible be
avoided, but if not, then the amount shall be limited to the lowest
practicable sum.
I have therefore determined that whilst no useful Government works already
in progress shall be suspended, new works not already commenced will be
postponed if this can be done without injury to the country. Those
necessary for its defense shall proceed as though there had been no crisis
in our monetary affairs.
But the Federal Government can not do much to provide against a recurrence
of existing evils. Even if insurmountable constitutional objections did not
exist against the creation of a national bank, this would furnish no
adequate preventive security. The history of the last Bank of the United
States abundantly proves the truth of this assertion. Such a bank could
not, if it would, regulate the issues and credits of 1,400 State banks in
such a manner as to prevent the ruinous expansions and contractions in our
currency which afflicted the country throughout the existence of the late
bank, or secure us against future suspensions. In 1825 an effort was made
by the Bank of England to curtail the issues of the country banks under the
most favorable circumstances. The paper currency had been expanded to a
ruinous extent, and the bank put forth all its power to contract it in
order to reduce prices and restore the equilibrium of the foreign
exchanges. It accordingly commenced a system of curtailment of its loans
and issues, in the vain hope that the joint stock and private banks of the
Kingdom would be compelled to follow its example. It found, however, that
as it contracted they expanded, and at the end of the process, to employ
the language of a very high official authority, "whatever reduction of the
paper circulation was effected by the Bank of England (in 1825) was more
than made up by the issues of the country banks."
But a bank of the United States would not, if it could, restrain the issues
and loans of the State banks, because its duty as a regulator of the
currency must often be in direct conflict with the immediate interest of
its stockholders. if we expect one agent to restrain or control another,
their interests must, at least in some degree, be antagonistic. But the
directors of a bank of the United States would feel the same interest and
the same inclination with the directors of the State banks to expand the
currency, to accommodate their favorites and friends with loans, and to
declare large dividends. Such has been our experience in regard to the last
bank.
After all, we must mainly rely upon the patriotism and wisdom of the States
for the prevention and redress of the evil. If they will afford us a real
specie basis for our paper circulation by increasing the denomination of
bank notes, first to twenty and afterwards to fifty dollars; if they will
require that the banks shall at all times keep on hand at least one dollar
of gold and silver for every three dollars of their circulation and
deposits, and if they will provide by a self-executing enactment, which
nothing can arrest, that the moment they suspend they shall go into
liquidation, I believe that such provisions, with a weekly publication by
each bank of a statement of its condition, would go far to secure us
against future suspensions of specie payments.
Congress, in my opinion, possess the power to pass a uniform bankrupt law
applicable to all banking institutions throughout the United States, and I
strongly recommend its exercise. This would make it the irreversible
organic law of each bank's existence that a suspension of specie payments
shall produce its civil death. The instinct of self-preservation would then
compel it to perform its duties in such a manner as to escape the penalty
and preserve its life.
The existence of banks and the circulation of bank paper are so identified
with the habits of our people that they can not at this day be suddenly
abolished without much immediate injury to the country. If we could confine
them to their appropriate sphere and prevent them from administering to the
spirit of wild and reckless speculation by extravagant loans and issues,
they might be continued with advantage to the public.
But this I say, after long and much reflection: If experience shall prove
it to be impossible to enjoy the facilities which well-regulated banks
might afford without at the same time suffering the calamities which the
excesses of the banks have hitherto inflicted upon the country, it would
then be far the lesser evil to deprive them altogether of the power to
issue a paper currency and confine them to the functions of banks of
deposit and discount.
Our relations with foreign governments are upon the whole in a satisfactory
condition.
The diplomatic difficulties which existed between the Government of the
United States and that of Great Britain at the adjournment of the last
Congress have been happily terminated by the appointment of a British
minister to this country, who has been cordially received. Whilst it is
greatly to the interest, as I am convinced it is the sincere desire, of the
Governments and people of the two countries to be on terms of intimate
friendship with each other, it has been our misfortune almost always to
have had some irritating, if not dangerous, outstanding question with Great
Britain.
Since the origin of the Government we have been employed in negotiating
treaties with that power, and afterwards in discussing their true intent
and meaning. In this respect the convention of April 19, 1850, commonly
called the Clayton and Bulwer treaty, has been the most unfortunate of all,
because the two Governments place directly opposite and contradictory
constructions upon its first and most important article. Whilst in the
United States we believed that this treaty would place both powers upon an
exact equality by the stipulation that neither will ever "occupy, or
fortify, or colonize, or assume, or exercise any dominion" over any part of
Central America, it is contended by the British Government that the true
construction of this language has left them in the rightful possession of
all that portion of Central America which was in their occupancy at the
date of the treaty; in fact, that the treaty is a virtual recognition on
the part of the United States of the right of Great Britain, either as
owner or protector, to the whole extensive coast of Central America,
sweeping round from the Rio Hondo to the port and harbor of San Juan de
Nicaragua, together with the adjacent Bay Islands, except the comparatively
small portion of this between the Sarstoon and Cape Honduras. According to
their construction, the treaty does no more than simply prohibit them from
extending their possessions in Central America beyond the present limits.
It is not too much to assert that if in the United States the treaty had
been considered susceptible of such a construction it never would have been
negotiated under the authority of the President, nor would it have received
the approbation of the Senate. The universal conviction in the United
States was that when our Government consented to violate its traditional
and time-honored policy and to stipulate with a foreign government never to
occupy or acquire territory in the Central American portion of our own
continent, the consideration for this sacrifice was that Great Britain
should, in this respect at least, be placed in the same position with
ourselves. Whilst we have no right to doubt the sincerity of the British
Government in their construction of the treaty, it is at the same time my
deliberate conviction that this construction is in opposition both to its
letter and its spirit.
Under the late Administration negotiations were instituted between the two
Governments for the purpose, if possible, of removing these difficulties,
and a treaty having this laudable object in view was signed at London on
the 17th October, 1856, and was submitted by the President to the Senate on
the following 10th of December. Whether this treaty, either in its original
or amended form, would have accomplished the object intended without giving
birth to new and embarrassing complications between the two Governments,
may perhaps be well questioned. Certain it is, however, it was rendered
much less objectionable by the different amendments made to it by the
Senate. The treaty as amended was ratified by me on the 12th March, 1857,
and was transmitted to London for ratification by the British Government.
That Government expressed its willingness to concur in all the amendments
made by the Senate with the single exception of the clause relating to
Ruatan and the other islands in the Bay of Honduras. The article in the
original treaty as submitted to the Senate, after reciting that these
islands and their inhabitants "having been, by a convention bearing date
the 27th day of August, 1856, between Her Britannic Majesty and the
Republic of Honduras, constituted and declared a free territory under the
sovereignty of the said Republic of Honduras," stipulated that "the two
contracting parties do hereby mutually engage to recognize and respect in
all future time the independence and rights of the said free territory as a
part of the Republic of Honduras."
Upon an examination of this convention between Great Britain and Honduras
of the 27th August, 1856, it was found that whilst declaring the Bay
Islands to be "a free territory under the sovereignty of the Republic of
Honduras" it deprived that Republic of rights without which its sovereignty
over them could scarcely be said to exist. It divided them from the
remainder of Honduras and gave to their inhabitants a separate government
of their own, with legislative, executive, and judicial officers elected by
themselves. It deprived the Government of Honduras of the taxing power in
every form and exempted the people of the islands from the performance of
military duty except for their own exclusive defense. It also prohibited
that Republic from erecting fortifications upon them for their protection,
thus leaving them open to invasion from any quarter; and, finally, it
provided "that slavery shall not at any time hereafter be permitted to
exist therein."
Had Honduras ratified this convention, she would have ratified the
establishment of a state substantially independent within her own limits,
and a state at all times subject to British influence and control.
Moreover, had the United States ratified the treaty with Great Britain in
its original form, we should have been bound "to recognize and respect in
all future time" these stipulations to the prejudice of Honduras. Being in
direct opposition to the spirit and meaning of the Clayton and Bulwer
treaty as understood in the United States, the Senate rejected the entire
clause, and substituted in its stead a simple recognition of the sovereign
right of Honduras to these islands in the following language: The two
contracting parties do hereby mutually engage to recognize and respect the
islands of Ruatan, Bonaco, Utila, Barbaretta, Helena, and Moral, situate in
the Bay of Honduras and off the coast of the Republic of Honduras, as under
the sovereignty and as part of the said Republic of Honduras.
Great Britain rejected this amendment, assigning as the only reason that
the ratifications of the convention of the 27th August, 1856, between her
and Honduras had not been "exchanged, owing to the hesitation of that
Government." Had this been done, it is stated that "Her Majesty's
Government would have had little difficulty in agreeing to the modification
proposed by the Senate, which then would have had in effect the same
signification as the original wording." Whether this would have been the
effect, whether the mere circumstance of the exchange of the ratifications
of the British convention with Honduras prior in point of time to the
ratification of our treaty with Great Britain would "in effect" have had
"the same signification as the original wording," and thus have nullified
the amendment of the Senate, may well be doubted. It is, perhaps, fortunate
that the question has never arisen.
The British Government, immediately after rejecting the treaty as amended,
proposed to enter into a new treaty with the United States, similar in all
respects to the treaty which they had just refused to ratify, if the United
States would consent to add to the Senate's clear and unqualified
recognition of the sovereignty of Honduras over the Bay Islands the
following conditional stipulation: Whenever and so soon as the Republic of
Honduras shall have concluded and ratified a treaty with Great Britain by
which Great Britain shall have ceded and the Republic of Honduras shall
have accepted the said islands, subject to the provisions and conditions
contained in such treaty.
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