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AIELLO, John Douglas, 1941- OHIO'S WAR UPON THE BANK OF THE UNITED STATES: 1817-1824.

The Ohio State University, Ph.D., 1972 History, m odem

University Microfilms, A XEROX Company, Ann Arbor, Michigan

Copyright by

John Douglas Aiello

1972

THIS DISSERTATION HAS BEEN MICROFILMED EXACTLY AS RECEIVED. OHIO'S WAR UPON THE BANK OF THE UNITED STATES;

1817-1824

DISSERATION

Presented in Partial Fulfillment of the Requirements for the Degree Doctor of Philosophy in the Graduate School of The Ohio State University

By

John Douglas Aiello, B.A., A.M.

*****

The Ohio State University 1972

Approved by

Ad^ilsèr Department^Jf History PLEASE NOTE:

Some pages may have

indistinct print.

Filmed as received.

University Microfilms, A Xerox Education Company PREFACE

The philosophy of states' sovereignty has been a conten­ tious issue throughout the history of the United States. Poli­ ticians and commentators of the present talk of the concentration of too much power in Washington. There is still a call for the return of power to the states. The flag of states' rights is still waved and given allegiance.

The first century history of the United States witnessed a number of clashes over the doctrine of states' sovereignty. The tactic of nullification was developed to implement the weaponry in the hands of the states. The Alien and Sedition Acts gave birth to the Kentucky and Virginia Resolutions, authored by Thomas

Jefferson and James Madison. The Tariff of Abominations caused

John C. Calhoun to develop further the doctrine of nullification, and South Carolina to defy the national government and nullify the tariff within her borders. The advocacy of states' rights led ultimately to the bloody war between North and South. These are pre-eminent examples of the clash between national and state authority. One clash, however, which is often overlooked by historians or has been explained minimally is the episode of

Ohio waging war upon the second Bank of the United States.

In attempting to elucidate the clash between Ohio and the national Bank, I have had the invaluable guidance of. my ad­ viser, Professor Bradley Chapin. His suggestions have made this a

ii better paper than it ordinarily would have been.

To the others who have helped me, I would like to express my gratitude. To the staffs of the Ohio Historioal Center

Library, the Ross County Historioal Library, the Ohio State

Library, the The Ohio State University Library who aided me in my research, I thank all of you. I would also like to express my great appreciation to Mrs. Rosemary Parker who labored so hard and so well in typing this dissertation, and to Paul Treece and

Jim Tootle who helped me meet the deadlines.

And, finally, I am particularly indebted to my wife,

Patricia Aiello, and my daughter, Julie, for the encouragement and strength to carry this work through to its completion.

H i VITA

March 23, 1941 ...... B o m - Utica New York

1954 ...... B.A., Loyola University, Chicago, Illinois

1965-6 ...... Graduate assistant. Department of History, John Carroll University, University Heights, Ohio

1966 ...... M. A., John Carroll University, Uni­ versity Heights, Ohio

1966-7 ...... Instructor, Department of History, John Carroll University, University -, Heights, Ohio

1967-8 ...... Doctoral Work, Department of History, The Ohio State University, Columbus, Ohio

1968-9 ...... Teaching Associate, Department of History, The Ohio State University, Columbus, Ohio

1969-71...... NDEA IV Fellowship, The Ohio State University, Columbus, Ohio

FIELDS OF STUDY

Major Field: U.S.: Early National Period. Professor Bradley Chapin.

Colonial and Revolutionary Period. Professors Paul Bowers and Bradley Chapin.

Middle Period, U.S.A. Professor Merton Dillon.

Tudor and Stuart England. Professor Clayton Roberts.

IV TABLE OF CONTENTS

Page PREFACE ...... ii

VITA ...... iv

Chapter

I. THE BANK OF THE UNITED STATES IN O H I O ...... 1

Ohio and Her Regulation of State Banks The Bank of the United States Established Branches in Ohio

II. UNPOPULARITY OF THE UNITED STATES B A N K ...... 12

Early Displeasure at the Bank Cheves Saves the Bank of the United States Depression in Ohio

III. OHIO TAXES THE BANK ...... '...... 35

First Moves against the Bank Congressional and State Opposition to the Bank

IV. THE BANK BEFORE THE SUPREME C O U R T ...... 54

The De veaux and. McCulloch Cases Reaction to the McCulloch Decision

V. OHIO TAXES THE B A N K ...... 70

The Tax Is Levied Newspaper Reaction to the Ohio Tax

VI. THE CASE CONTESTED IN CIRCUIT C O U R T ...... 82

Preliminary Skirmishing Resolutions against the Bank Ohio Legislature Enters the Battle Defeat in the Circuit Court VII. THE OHIO CASE BEFORE THE SUPREME COURT ...... 105

Interpretation of the Eleventh Amendment The Case Deoided The End of the Fight

EPILOGUE...... 124

BIBLIOGRAPHY...... 127 CHAPTER I

THE BANK OF THE UNITED STATES IN OHIO

Ohio and Her Regulation of State Banks

The termination of the war of 1812 by the Treaty of Ghent

signalled a return to the normal growth of the West. Emigrants,

restricted by the exigencies and fears of war, were now free to proceed Westward. A steady stream flowed West and supplied a

large accretion to the Ohio population.^ The population growth in

Ohio was fantastic. Numbering only 45,365 inhabitants in 1800, the

population increased 408.7 percent ten years later to 230,760. By

1820 the State claimed 581,434 residents. The population was over­

whelmingly rural in this period; 98.3 percent of the total were

farmers in 1820.^ Speculation restrained or unbridled, was the 3 order of the day. Every type of improvement was advanced.

The circulating medium of the state was augmented by an increase in

the number of banks. There were but four state banks operating in

Salmon P. Chase, "A Preliminary Sketch of the History of Ohio," in The Statutes of Ohio and of the Northwestern Territory Adopted or Enacted from 1788 to 1833 Inclusive (Cincinnati: Published by Coney and Fairbanks, 1833), Vol. I, p. 42. Here­ after cited as Chase, Statutes of Ohio. p Ted V/. Brown, Secretary of State (Compiler), The State of Ohio: Number of Inhabitants Urban and Rural Population . .,as certified in the Eighteenth Federal Census (Columbus, Ohio: The F.J. Heer Printing Co., 1961), p. 22.

^Chase, Statutes of Ohio. Vol. I, p. 42. 2

1811 with a total capital of $895,000. The niomber tripled to twelve in 1815; the capital increased to $1,434,719. Nine addi­ tional banks were created in the succeeding year bringing the total in 1816 to twenty-one banks with $2,061,927 in capital. In

1820 the number dipped slightly to twenty banks, and the capital declined to $1,797,463.^ The diminution in banks and capital is understandable in the light of the practices of the second Bank of the United States, chartered in 1816, and the Panic of 1819 and the resultant depression.

Ohio's war upon the second Bank of the United States was no isolated act.^ The entire credit structure of Ohio was endangered by an increasing number of unauthorized, unchartered banks that operated under the creed that banks could issue their notes without any necessity of redeeming them in specie.® A first step to regu­ late banks was taken by the Ohio Legislature on February 2, 1815.

Passing "An act to raise revenue from banks and to prohibit the unauthorized issuing and circulating bank paper," the legislature levied a 4 percent annual tax payable to the State Auditor. The

Albert Gallatin, "Considerations on the Currency and Banking System of the United States," in The Writings of Albert Gallatin, edited by Henry Adams (New York: Antiquarian Press Ltd., 1960), Volume III, pp. 358-359. Hereafter cited as Gallatin, "Considerations on the Currency."

^William Graham Sumner, A History of Banking in the United States, Volume I of series A History of Banking in All the Leading Nations, compiled by Thirteen Authors (New York: Journal of Commerce and Commercial Bulletin, 1896), Volume I, p. 91. Hereafter cited as Sumner, History of Banking in the United States.

^William T. Utter, The Frontier State: 1803-1825, Volume II of The History of the State of Ohio, ed. Carl Wittke, (Columbus, Ohio: Ohio State Archaeological and Historical Sociey, 1942, Volume II, p. 274. Hereafter cited as Utter, The Frontier State. 3 law pertained to both chartered and unchartered banks.

Governor Thomas Worthington expressed a growing appr- hension over the role of banks in state affairs in a message to the

Ohio Senate in December 1815. He commented that as long as banks aided in producing salutary effects in and for the state, they were beneficial; but, if they added to the fever of excessive speculation and debilitated the morals of society, they would produce deleterious effects. It then became the duty of the legislature to devise, and pass laws to protect its constitutents.®

The state was vexed over the problem of depreciated paper.

Besides this she had to contend against agencies, chartered by other states, whose depreciated bank notes were so low that they were driving Ohio notes out of circulation.^ As a result the legislature passed "An act to prohibit the issuing and circula­ ting of unauthorized bank paper" on January 27, 1816. The act levied a $1,000 fine on persons acting as agents for banks char­ tered by laws of other states. Also the use of Ohio law courts and its processes was denied such banks.Such early tactics used on her own banks and agencies of other states provided Ohio with practice and a foundation for opposition to the Bank of the

'Chase, Statutes of Ohio. Volume II, pp. 868-869.

Q Ohio, General Assembly, Senate, Journal of the Senate of the State of Ohio, 14th General Assembly, 1st Session, December 20, 1815, p. 73. Hereafter cited as Ohio, Senate Journal.

^Ernest L. Bogart, "Taxation of the Second U. S. Bank by Ohio," in The American Historical Review, XVII (1915), 313. Hereafter cited as Bogart, "Taxation of Second U. S. Bank."

^^Chase, Statutes of Ohio, Volume II, pp. 904-905. 4

United States. In later years Ohio employed identical means in legislating against the Bank.

The Bank of the United States Established

The charter of the first Bank of the United States expired in 1811 and was not renewed. On January 4, 1814, however, the notion of a new bank was instilled with life when a petition from

150 New York City residents, asking the incorporation of a national bank, was presented in the House of Representatives.^^

The question of a new.bank was debated in Congress throughout the year, and ultimately a bill incorporating a Bank of the United

States passed on January 20, 1815. The bill was vetoed ten days later by President James Madison on the grounds that "the pro­ posed bank does not appear to be calculated to answer the purposes of reviving the public credit, of providing a national medium of circulation, and of aiding the treasury by facilitating the indispensable anticipations of revenue, and by affording the public more durable l o a n s . "^2 The birth of the second Bank of the

United States was aborted only temporarily, however, as

Congress immediately resumed discussion on the Bank.

In 1815 Treasury Secretary Alexander Dallas re­ commended the creation of a national bank for the reasons that it

^^M. St. Clair Clarke and D. A. Hall (eds.). Legislative and Documentary History of the Bank of the United States : Inclu­ ding the Original Bank of North America (Washington; Printed by Gales and Seaton, 1832), p. 472. Hereafter cited as Clarke and Hall, Legislative and Documentary History of the Bank of the United States.

^^Ibid., p. 594. 5 was necessary to restore both specie payments and the national currency. The local banks were unable to provide a uniform national ourrency. Their issues depreciated, and their value often fluctuated daily and from one place to another.

The choices before Congress were either to force the state banks to pay their debts in specie or to establish a national bank to clear up the monetary difficulties.

The national bank issue was debated throughout 1815. On

March 4, 1815, the bill to incorporate the Bank of the United

States passed in the House by a small margin - 80 to 7 1 . Less than one month later the Senate, by a vote of 22 to 12, passed the incorporation act with amendments and returned the bill to the

House for ooncurrence. After some half-hearted attempts to change the Senate amendments, the House finally relented and pasts<-;. the bill. On April 10, 1816, President Madison signed into law the bill entitled, "An act to incorporate the subscribers to the

^^Gallatin, "Considerations on the Currency," Volume III, p . 289.

^'^Ibid., p. 288.

^^United States, Congress, House, Annals of the Congress of the United States (Washington: Printed and Published by Gales and Seaton, 1855), 14th Congress, 1st Session, March 14, 1816, p. 1219. Hereafter cited as Annals of Congress.

^^Ibid., Senate, 14th Congress, 1st Session, April 3, 1816, p. 281. IV Clarke and Hall, Legislative and Documentary History of the Bank of the United States, p. 713. 6

Bank of the United States." Ohio's two senators split on the bill.

Jeremiah Morrow voted for the bill; Benjamin Ruggles voted against 18 the measure. Her five Representatives voted, three for the proposal and two against.

The Bank of the United States, located in Philadelphia, was chartered for twenty years with a capital of $35 millions.

The United States would subscribe to and pay for one-fifth of the

Bank's capital; the remainder would be subscribed to by private individuals. The Bank'was to have twenty-five directors. Five would be appointed by the President of the United States; twenty were to be elected at the Philadelphia banking house by qualified stockholders. The number of votes a stockholder could cast varied according to the n'umber of shares he possessed; but, thirty votes were the maximum that any one stockholder could cast. The Bank's

President would emerge from among the Board of Directors, as the

Board would elect one of its own number. Public monies of the

United States were to be deposited either in the parent bank at

Philadelphia or in branch banks.Section 7 of the incorporation charter gave the Bank of the United States the right to "sue and be sued, plead and be impleaded, answer and be answered, defend and be defended, in all State courts, having competent jurisdiction, and in any circuit court of the United States. .

18 Annals of Congress. Senate, p. 281.

^^Ibid., House, p. 1219. 20 Clarke and Hall, Legislative and Document airy History of the Bank of the United States, pp. 801-811, and passim.

^^Ibid., pp. 803-804. 7

Branches in Ohio

In light of Ohio's assault on the national Bank, it is interesting to view the ayidity with which cities in the state courted the Philadelphia Bank in order to obtain branch banks at their sites. A group of residents of the former state capital of

Ohio, Chillicothe, petitioned for a branch b a n k . 22 The Chilli- cothe petitioners presented a number of reasons why a branch bank should be located there, namely: because of the central position of the town; because of its commerce; and, finally, because Chilli­ cothe was a thoroughfare for the Western c o u n t r y . 23 Besides these reasons, the Chillicothean boosters mentioned that of the number of shares that were subscribed to in Ohio, Chillicothe ac­ counted for over two-thirds. At present residents of Chillicothe owned 2,070 shares, while Cincinnati, her chief rival for a branch, could boast of subscribing to only 1,400 s h a r e s . ^4

Chillicothe's desires for a branch were aided by the active solicitations of Governor Thomas Worthington. Worthington was a friend of the first President of the Bank, William Jones. The

Governor steadfastly supported the aspirations of Chillicothe, which was near his Adena home, in a number of letters to Jones.

His claims were often identical to those which appeared in the above mentioned petition. In late November 1816 Worthington wrote to the

^^Chase, Statutes of Ohio, Volume II, p. 953. The State Capital moved to Columbus on the 2nd Tuesday of October, 1816.

Chillicothe, Town Meeting, 1816, Petition for the Establishment of the United States Bank in the Town of Chillicothe, 1816, pp. 4-8, and passim.

^^Ibid., p. 7. 8

Bank President ; ". . . . w e think having subscribed more than twice the amt. of Cincinnati, that you ought to have given a little more time to hear from us, especially as I assert . . . that this place will make a branch much more profitable for the stockholders and infinitely more useful to the State.But Worthington's campaigning was confined not only to letter writing. A group of

Philadelphia and personally present the qualifications of the town.

Coincidentally the Governor's wife had been ill, and her doctor recommended travel. Worthington realized that he could possibly obtain a branch bank for his town and aid in his wife's recovery.

Taking his wife and youngest child with him, he departed for the

East.

If Chillicothe was happy about Worthington's solicitations, other Ohio towns were livid. The Western Spy, a Cincinnati newspaper, was extremely critical of the Governor's role. Calling him an "Envoy Extraordinary and Minister Plenipotentiary from the citizens of that place to the will be[sic"! directors, " the paper queried whether the Governor received an $8,000 outfit as was the custom with other foreign ministers. 27 Cincinnati,

^^Letter from Thomas Worthington to William Jones, Chillicothe, November 22, 1816, Thomas Worthington Papers, February 23, 1795 - November 15, 1826, Manuscript, In Ohio State Library, Columbus,Ohio. Hereafter cited as Worthington Papers.

^^Alfred Byron Sears, Thomas Worthington; Father of Ohio Statehood (Columbus: The Ohio State University Press, 1958), p. 201. Hereafter cited as Sears, Thomas Worthington.

^'^The Western Spy, October 18, 1816. 9 not Chillicothe, was the ideal location for a branch bank because of its importance and commercial advantages. Anyone with good

sense would realize that.^® Worthington was further attacked for electioneering for his home surroundings and deserting his gubernatorial duties.29

Worthington was not universally assailed, however. The

Chillicothe papers, naturally enough, rose to the defense of the beleagured chief executive. It was pointed out that the

Cincinnati newspapers were hypocritical in chiding Worthington's mission while they conveniently glossed over the fact that at the

same time a Cincinnati delegation was descending on Philadelphia

for the identical reason.What papers won the battle of words

is debatable. The crux of the argument was that some Ohio towns were rushing to Philadelphia to persuade the Board of Directors

to locate a branch in their locale. Whatever town Worthington

would opt for, the other towns would be jealous. In this

instance he chose to work for his home surroundings and, as a

result, his motives and actions were questioned.

Chillicothe's exertions seemingly were futile as the

directors of the national Bank announced that a branch would be

established at Cincinnati. Nevertheless, Jones offered a

^®Ibid. 29 Ibid., November 15, 1816.

OQ Scioto Gazette and Fredonian Chronicle, November 28, 1816.

^^The Western Spy, December 6, 1816. 10 concession to Worthington. He notified the Ohio Governor that he would suggest that there be located in Ohio one branch, but with two offices - one at Cincinnati and the other at Chillicothe. There would be thirteen directors, and the directors and_ the capital of the branch would be divided between the two towns in proportion to 3? their population and resources. The aspirations of Chillicothe were not to be denied, however. Another petition was devised; another trip to Philadelphia was arranged. A committee was chosen to petition the Bank for a branch. The chairman of the committee was Edward Tiffin, a former governor of Ohio.

Chillicothe was finally successful, and Governor Worthington was so notified by Jones that, "Colonel Bond will have informed you of the determination of our Board of Directors to establish an Office of Discount and Deposit at Chillicothe . . .

Ohio now had two Offices of Discount and Deposit within her boundaries. The Cincinnati branch opened its doors for busi­ ness in March 1817 ; the Chillicothe branch commenced operation in

November 1817, and William Creighton, Jr. was elected President of 35 the branch. The directors of the Chillicothe branch decided to

Jones to Worthington, Philadelphia, November 7, 1816, Worthington Papers.

^^Citizens of Chillicothe, Memorial to President and Directors of the Bank of the United States from Citizens of Chillicothe. 1817, p. 3.

Jones to Worthington, Philadelphia, September 21, 1817, Worthington Papers. 35 Minutes of the Board of Directors of the Bank of the United States at Chillicothe, Ohio 1817-1825, November 10, 1817, Manuscript, In the Ross County Historical Society Library, Chilli­ cothe, Ohio. Hereafter cited as Minutes of the Board of Directors• 11 rent half of the house of John Carlisle (also a Board Member), and to locate the branch office at the c o m e r of Paint and Second

Street.The Boards of Directors of both branches contained some of the most prominent Ohioans of the day. The Cincinnati branch consisted of Daniel Drake, Martin Baum, John H. Piatt, Jacob 37 Bumet, and William Henry Harrison. The Board of Directors in

Chillicothe was no less illustrious, listing such prestigious names as William Creighton Jr., Edward Tiffin, William Key Bond, and

Duncan McArthur. The men named to the boards were clearly state leaders. Tiffin was an ex-governor; McArthur was the Speaker of the Ohio House and a future governor; Creighton was a United

States Representative who voted for passage of the Bank bill;

Harrison was a member of the Ohio Legislature and a future

President of the United States. Worthington became a member of both boards and a director. The two Offices of Discount and Deposit

thus began of a solid foundation in 1817.

^^Ibid., November 13, 1817. 3'7 Utter, The Frontier State, Volume II, p. 278. 38 Minutes of the Board of Directors. CHAPTER II

UNPOPULARITY OF THE UNITED STATES BANK

Early Displeasure at the Bank

It was not long before Ohio sentiment turned against the national Bank. Whether the reasons for this were justifiable or imaginative made scant difference, for in the estimation of many

the Bank embodied wickedness. Senator Thomas Hart Benton's

latter day overstatement about the monstrosity of the Bank would have touched a familiar chord for Ohioans in 1818-1819, and after.

Benton orated;

. . .all the flourishing cities of the West are mortgaged to this moneyed power. They may be devoured by it at any moment. They are in the jaws of a monster1 A lump of butter in the mouth of a dog! one gulp, one swallow, and all is gone !^

A number of accusations levelled against the bank were

unjustifiable. In attempting to move the country to a firmer

financial footing by creating a sound currency and by requiring the

states to resume specie payments, the Philadelphia institution

inadvertently wrought deleterious effects, not only upon state

bankers but upon merchants and farmers as well. No matter what

United States, Congress, Register of Debates in Congress, Comprising the Leading Debates and Incidents of the First Session of the Twenty-Second Congress (Washington: Printed and Published by Gales and Seaton, 1832), Volume Vlll, Part 1, June 1, 1832, p. 1003. The statement was made by Senator Benton, in Andrew Jackson's first administration, during the battle over the re- chartering of the second Bank of the United States.

12 13 policies were pursued, some feelings and pocketbooks would suffer.

Opponents of the Bank multiplied with the passage of time. They accused it of a plethora of offenses which increased the process of its vinification from 1815 onward. The reasons why the Bank of the United States was detested and opposed in Ohio can be narrowed to four; because of the officers of the Bank and the policies which were pursued; because of the fear that the Bank would be able to establish some type of financial hegemony over the states; because of mismanagement by the Bank's surrogates in Ohio; and, finally because of the financial woes plaguing Ohio.

President James Madison named five of the federal Bank's directors from the ranks of his Republican party. They were

William Jones, Pierce Butler and Stephen Girard, of Philadelphia,

John Jacob Astor, of New York, and James A. Buchanan, of Baltimore.

The Bank's stockholders, showing remarkably less partisanship than

Madison, chose ten Federalists and ten Republicans as members of the

Board. President Madison and Treasury Secretary Dallas successfully maneuvered for the election of a Republican Bank president. William

Jones was elected.^ Jones' credentials for the high administrative post were far from impeccable. Formerly a bankrupt merchant, he had seen previous government service as an inefficient Secretary of the Navy and as an inept acting Secretary of the Treasury

Ralph C. H. Catterall, The Second Bank of the United States (Chicago; The University of Chicago Press, 1903, p. 22. Hereafter cited as Catterall, Second Bank of the United States. 14 for James Madison. 3 The choice was an exceedingly poor one because it was under Jones' direction that the Bank pursued an erratic course which caused it much trouble.

The initial problem confronted by the federal Bank under

Jones was to compel the state banks to resume specie payments.

Secretary Dallas, in March 1815, proposed methods to the state banks whereby they could redeem, but his schemes were thwarted by the banks' refusal. Governmental optimism increased with the passage of the bill incorporating the Bank of the United States.

Congressional passage of a joint resolution calling for the payment to the United States, after February 20, 1817, in gold, silver, treasury notes, notes of the national Bank, or notes of banks payable and paid on demand in specie further buttressed the hopes of the government. A more confident Dallas thus proposed that beginning in October 1816 all state banks resume specie payments on notes under the $5 denomination. Once again he was rebuffed as the banks announced that they would begin redemption after July 1,

1817. Secretary of the Treasury William Crawford accepted Dallas' position and decided to submit the undertaking to the federal 4 Bank.

The unwillingness of the state banks to resume specie payments was primarily because they were unable to do so. As a

3 Bray Hammond, Banks and Politics in America; From the Revolution to the Civil War (Princeton, New Jersey; Princeton University Press, 1957), p. 251. Hereafter cited as Hammond, Banks and Politics in America.

‘^Catterall, Second Bank of the United States, pp. 23-24. 15 result the entreaties of the national Bank were dismissed. The

Bank of the United States, meanwhile, had to wend a middle course between the government's desire for specie payments and the inability of the banks to resume payment.^ The policy was pursued, however, and ultimately the banks concurred in the resumption of specie payments by February 20, 1817. Eastern banking institutions assented first, and the interior banks fol­ lowed their lead. The initial success of the Bank was more superficial than substantive, nevertheless. Resumption of specie payments was not universal; bank notes were still discounted with variations from place to place. Finally, the real force behind the partial success was not William Jones but rather Secretary

Crawford who guided Jones and the whole resumption process.®

The modicum of success subjected the Bank to as much obloquy as praise. Ohio's initial reaction was complimentary to the Bank. The first to suffer from the presence of the branches in

Ohio were the wildcat banks. The presence of the offspring of the federal Bank necessitated the resumption of specie payments on notes held against the Ohio banks. At first the chartered banks were able to comply with the demand. The wildcat banks, sustaining principally upon their notes, with little if any specie backing, suffered and many went bankrupt. Chartered banks

^Davis R. Dewey, The Second United States Bank (Washington : Government Printing Office, 1910), p. 190. Hereafter cited as Dewey, The Second United States Bank.

®Hammond, Banks and Politics in America, pp. 248-249. 16 desired the ruin of the wildcats and thus welcomed the policy of the Philadelphia institution. But, because the chartered banks often were guilty of overinflating their currency and accepting much dubious paper, especially through the land offices, they soon suffered as well. The United States Bank pressed the Ohio banks for the redemption of the great amounts of paper in their possession.

The banks could not comply, and a general collapse ensued. As the initial popularity of the Bank waned, opposition within Ohio increased.

The first months of 1818 were popularly known as "the golden age of the western country." They were so designated because the abundance of paper money circulating in the west was reputedly as plentiful as silver was in Jerusalem in the days of King Solomon.

Once the Bank curtailed its operations, however, money was very scarce.® The anti-Bank movement in Ohio generated momentum with the increasing scarcity of money in the state.^ Thus an ever- increasing complaint found in Ohio during this period was over the lack of or scarcity of money.

As early as 1817 comments were made regarding the lack of

n Sears, Thomas Worthington, p. 201

®William M. Gouge, A Short History of Paper-Money and Banking in the United States (New York: Published by B. & S. Collins, 1835), p. 37. 9 William Henry Smith, "Charles Hammond and His Relations to Henry Clay and John Quincy Adams or Constitutional Limitations and the Contest for Freedom of Speech and the Press," An Address Delivered before the Chicago Historical Society, May 20, 1884 (Published for the Chicago Historical Society, 1885), pp. 15-16. Hereafter cited as Smith, "Charles Hammond and His Relations to Clay and Adams." 17

money in the West. John Crafts Wright, lawyer and Ohio Rep­

resentative to the United States Congress, wrote to his friend and

colleague, Charles Hammond, former newspaperman, lawyer, Ohio court

reporter, and member of the Ohio Legislature. Wright claimed that

on returning to the West he was shocked at the scarcity of money.

The paper circulating throughout the territory was "vile and

worthless trash." The currency was so valueless that scarcely

any business could be transacted.

The process continued as Ohio newspapers chronicled the

draining of specie from her borders. A typical article appeared

in a Lancaster, Ohio newspaper entitled "Two Wagon Loads of

Specie." It reported that two wagons carrying hard money recently had passed through the town on its journey to the Philadelphia

Bank. As a result Ohio banks had to disoontinue specie payments.

Popular thinking was that within a brief period the state would be devoid completely of specie. "Such are the blessed effects of the Mammoth Bank." It was estimated that between $120,000 and $140,000 had been taken from the state.12

In March 1819 the steam boat Perseverance embarked frcm

l^Letter from John Crafts Wright to Charles Hammond. Steubenville, July 24, 1817, Charles Hammond Papers, Manuscript, In Ohio Historical Center Library, Columbus, Ohio. Hereafter cited as Hammond Papers.

^^The Ohio Eagle, cited in The Liberty Hall and Cincinnati Gazette, November 24, 1818.

^^ezekiah Niles (ed.), Niles' Weekly Register. Containing Political. Historical. Geographical, Scientifical, Statistical, Economical, and Biographical Documents, Essays, and Facts; Together with Notices of the Arts and Manufactures, and a Record of the Events of the Times (Baltimore; Printed by William Ogden Niles) Volume IV, No. 15, June 5, 1819, p. 256. Hereafter cited as Niles' Weekly Register. 18

Cincinnati with about $400,000 of specie in her h o l d . 13 Not only were Ohioans angered because huge sums were transported from their borders but because they could see little or nothing brought into the state by the Mammoth. The federal government received a share of the blame and complaints for allowing the Bank of the

United States to operate in Ohio. Ohioans argued that their banking institutions had rendered invaluable and uncomplaining service to the government during the late war with England, and their reward now was to be "oppressed and plundered."14 Niles'

Weekly Register estimated that within the span of one year the

Bank had relieved Ohio of at least $800,000 in specie.1^

Besides the visual evidence of the loss of specie, the state discerned that the Bank's operations contributed to western inflation. Large amounts of bank notes and loans were issued from the western offices of Discount and Deposit late in 1817 and through 1818. Through the issuance of notes westerners were able to pay their eastern creditors. Beoause the branoh notes were redeemable at any branch or at the parent institution, the large western issues resulted in the flow of capital from the parent bank and eastern offices to the western branches. By 1819 nearly

$5,500,000 of oapital was distributed to the western offices while the amount of the branches north and east of Philadelphia

^^The Liberty Hall and Cincinnati Gazette, cited in The Chillicothe Supporter. March 3, 1819.

^Western Herald and Steubenville Gazette, March 20, 1819.

^^Niles' Weekly Register, Volume IV, No. 18, June 26, 1819, p. 298. 19 totalled less than $1,000,000. The Philadelphia Bank allowed her surrogates in the west to overextend their notes which, in turn, encouraged the state banks to overtrade and to inflate their currency. This brought on another problem. Large balances accrued against the state banks, and for awhile, the Mammoth was content to leave them untouched. Because they were not called on to settle the balances against them, the state banks believed themselves at liberty to inflate further their issues and to expand their discounts. When the liberal policy of the Bank was reversed in

July 1818, and the state banks were called upon to redeem their paper, disaster struck. Helpless banks harried their equally 1 rj helpless debtors to little avail. Bankruptcy was the price for many Ohioans.

The complaint was lodged that before the national Bank was introduced into Ohio the local institutions had rendered satisfactory service. The public had confidence in them; they believed in their solvency. The intrusion of the new institution wrought ill effects on the state and her banks. The Mammoth arbitrarily refused notes of some solvent banks while accepting notes from others less fiscally responsible. Notes which were accepted accumulated in the vaults of the branch banks until specie was demanded. The net result was that the circulating

Charles C. Huntington, "A History of Banking and Currency in Ohio before the Civil War," in Ohio Archaeological and Historical Society Pulications, XXIV (1915), 288-290, and passim. Hereafter cited as Huntington, "History of Banking in Ohio." 17 Utter, The Frontier State, Volume II, p. 264. 20 medium of the state was composed almost entirely of notes from non-specie paying banks.1® The confidence of the inhabitants of the Western territory in their banks was shaken. Widespread mistrust replaced it. The Bank was blamed for all this.

The plight of the fiscal institutions of the state did not proceed unnoticed. Ohio legislators were greatly concerned.

An Ohio legislative committee proclaimed that the state had an abiding interest in her banks because:

They supply a safe and solid currency for all the purposes of domestic commerce. They extend and cherish individual credit, and if properly conducted, they supply an annual revenue of very considerable amount, which must ultimately lay a foundation for relieving the citizens of a part of the present taxes upon the absolute necessaries of life.19

The importance of state banks properly managed and operated cannot be minimized, but the legislators had to know that their banks were not universally immaculate as the early regulation of them indicated. The United States Bank was an omnipresent force, however, and the legislators argued that their own institutions and Ohio could not prosper as long as the national Bank functioned within Ohio's l i m i t s . 20 Under these circumstances there was

little reason to dilute their cause by mentioning the past trans­

gressions of the banks which antedated the federal Bank.

The Offices of Discount and Deposit were encouraged

to discount heavily during the early period of William Jones'

administration. Loans were sought and given on security that was

1 O The Ohio Watchman, December 9, 1819. 19 The Chillicothe Supporter, January 27, 1819,

^°Ibid. 21 generally real estate. Huge quantities of southern and western real estate ultimately fell into the Mammoth's grasp.The Panic of 1819 and ensuing depression was a prime reason for the failure to pay debts, resulting in the loss of land. The reputation of banks, in general, and the Bank of the United States, in particular, suffered gravely as hard times descended upon the country. The national Bank liquidated its debts in 1818-1619. A great deal of Ohio land was taken in from debtors unable to pay back their loans. Much land and.property in the Cincinnati area fell into the Bank's hands. Its value increased because of Cincinnati's rapid growth. The acquisition of the real estate and its rapidly increasing value infuriated its former owners. Bank acquisitions in Kentucky arid Ohio alone totalled nearly 50,000 acres. Further, the Philadelphia corporation secured a large part of the rapidly Op growing Cincinnati. The Bank thus presented an image of pros­ pering upon the sufferings of its prior customers. In such a period and under such conditions it was little wonder that the fiscal institution be described bitterly as the Mammoth.

William Jones resigned his position as President in

January 1819, and Langdon Cheves was elected. Cheves' accession signalled the advent of more fiscally responsible operations for the institution. The new leadership recognized that the Bank under

Jones had damaged its standing by extending itself too far. A

21 Dewey, The Second United States Bank, p . 242. 22 United States, Congress, Senate Document #98, 22nd Congress, 1st Session, pp. 22-27 22 policy of contraotion was pursued and in January 1820, the circulation of the Bank stood at $3,600,000, a sizeable reduction from the $8,300,000 circulating in 1818. The new policy created friction. The west complained that the policy of oontraction Z3 made money even more scarce in their locale. Although Cheves' policy was technically correct, it was not widely popular. He had to tighten up the organization after the loose operations of his predecessor. He was successful but the measures taken increased the Bank's unpopularity in Ohio.

Another practice of the Bank which rankled its enemies, although they never contested it on that ground, was its usurious practices ;

It is a fact, highly honorable to the persecuted debtors of that institution, that the statute of usury was not plead, in a single instance; though it was a fact, easy of proof, that in least half of the cases, the defendants did not receive from the bank more than sixty, or at most seventy per cent of the amount for which they gave their notes.

Yet another reason for opposition to the Bank of the

United States may be described as philosophical. The Bank appeared to be well qualified to act as a potential empire builder.

It was looked upon as a foreign institution which invaded Ohio

soil. Some described it as a great hidden enemy.

Charles Hammond wrote that he was strongly convinced that

23 Dewey, The Second United States Bank, p. 227. 24 Jacob Burnet, Notes on the Early Settlement of the North-Western Territory (Cincinnati: Derby, Bradley & Co., Publishers, 1847), p. 410. 23 the United States Bank "is about to be a most potent, empire, for oontrolling all the pecuniary concerns of the country." he stated that ;

I regard it as a most melancholy circumstance that this places all our best interests at the mercy of stockjobbers and Brokers, mostly foreign agents, without morals or social feelings of any kind whatever which can induce them to assimilate with us in the great concerns which they may, and I am fearful, will c o n t r o l . 25

The Ohio legislative committee report on the Bank, alluded to earlier, wondered if the Bank despoiled public liberty. The committee claimed that the Mammoth usurped powers that the national government refused to accept. Because this monied aristocracy, was assuming such powers, the committee did not doubt that the sovereign power's authority was being usurped.

The fact that the Philadelphia Bank had branches in the states hardly helped its image. Ohio opponents looked askance at the favored position of the "foreign institution" and the Monster.

The Bank possessed great privileges, paid no taxes, and often as­ sumed the role of the knowledgeable master correcting a recalcitrant child.This outlook on the Bank might have bothered its enemies even before its practices seemed to work ill effects on the state; but the two factors working concommitantly made new foes for the institution. It made no difference whether resentment against the "foreign institution" preceded the Bank's practices

P5Charles Hammond to Thomas Worthington, Belmont, March 24, 1817. Hammond Papers.

^^The Chillicothe Supporter, January 27, 1819. 27 Sumner, History of Banking in the United States, Volume I p. 109. 24 which hurt Ohioans. What mattered was that resentment of the corporation developed to such an extent that open warfare was waged against it.

A further explanation for the hatred of the second Bank of the United States rests with the Offices of Discount and De­ posit. Great abuses were perpetrated by the branches before

Cheves assumed the presidency. In 1818 the loss of the Philadel­ phia Bank on a capital of $16,500,000 was $328,000; the loss of the Baltimore branch was $1,662,000 out of a capital of only

$1; 500,000 - or, in other words, more money than the branch had ; the Norfolk branch lost $229,000 on a oapital of $500,000. This was typical of what transpired throughout the rest of the branches.

The figures demonstrated that the worst mismanagement took place in the branches rather than in Philadelphia.^® One of Cheves' major undertakings upon assuming office was to correct the abuses of the branch offices.

The names of Ohioans involved as members of the Boards of

Directors were mentioned earlier. These men were influential leaders. In light of the charge of mismanagement of the branches, it is interesting to note the assessment of the Chillicothe Board that former Governor Worthington presented to Langdon Cheves.

President Cheves sought information from Worthington about the

Chillicothe Board. Worthington named the eleven directors and rated them in this order: (1) William Creighton; (2) Edward

OQ United States, Congress, Reports of Committees of the House of Representatives at the First Session of the Twenty Second Congress (Washington: Printed by Duff Green, 1831), Volume IV, Document #460, p. 16. 25 Tiffin; (3) J.P.R, Bassard; (4) Walter Dun; (5) William McFarland;

(6) Duncan McArthur; (7) Cadwalader Wallace; (8) John McCoy; (9)

John Carlisle; (10) John McLandburgh; and, (11) William Key Bond.

Worthington provided a frank and sometimes caustic, assessment as to the qualities and character of each man. Mr. Creighton, whom he rated first, he described as a "gentlemen of talents

. . . but does not possess that frankness which would create for him esteem and respect." As he approached the middle of the pack, he described William McFarland as "a man of strict integrity little information and too selfish." Duncan McArthur, former

Speaker of the Ohio House and a future governor, fared even worse.

He was "equally and more selfish 6 obstinate and overbearing."

Worthington's scorn was reserved for his last choices, however.

McLandburgh was "narrow and contracted" and often succumbed to the temptations of intoxication. Bond, an attorney, was extremely unpopular. Worthington believed that two of the eleven should be relieved immediately of their posts, and then further revised his list to include a few others who should be replaced immediate- 29 ly. The former governor's assessment was only of the Chillicothe branch, and thus no general statement about all branch banks can be made. Worthington's attitude cannot be dismissed as a grudge against the Bank, however. He was, if anyone was, a prime mover in placing a branch at Chillicothe. He boasted an evident friendship

^^Letter from Thomas Worthington to Langdon Cheves, Chillicothe, September 17, 1819, Thomas Worthington Letters to Langdon Cheves, 1819, Manuscript, Typescript copies in Ross County Historical Society Library, Chillicothe, Ohio. Hereafter cited as Worthington Letters to Cheves. 25 30 with William Jones. And Cheves thought well enough of Worthington

to ask his opinion of the Chillicothe Board.

An incident of great fraud in the branch office at Baltimore

was unearthed in 1819. James A. Buchanan and William McCulloch were

the President and Cashier respectively of the Baltimore office. A

stupendous fraud was perpetrated under them. Buchanan, McCulloch,

and confederates discounted or appropriated nearly $3,000,000

without the knowledge of either the Baltimore Board or the 31 parent bank. James McCulloch lent himself more than $500,000

in bank funds. Buchanan and others took part in the dealings.

Speculation soon gave way to fraud, and Cheves had to confront 32 the problem soon after he became President. The Baltimore office

was in disarray as a result of the scandal. McCulloch was quickly 33 replaced and Buchanan resigned his post. The ëcandal chipped

away further at the Banlc's reputation. Those opposed to the

institution found new evidence to hurl against the Bank; for

30 A number of letters in Worthington's correspondence indicates that he and Jones were on very good terms. 31 Langdon Cheves, Langdon Cheves' Exposition, in Report on the Condition of the Bank of the United States, by the Committee of Inspection and Investigation (Philadelphia: Printed by William Fry, 1822), pp. 17-18. Hereafter cited as Cheves, Report on Condition of the Bank. 32 United States Congress, American State Papers, Folio Finance « Selected and edited under the authority of Congress, by Asbury Dickins, Secretary of the Senate, and James C. Allen, Clerk of the house of Representatives, (Washington-: Published by Gales and Seaton, 1858), Volume III, pp. 372-378, and passim. Hereafter cited as American State Papers, Folio Finance. 33 Cheves, Report on the Condition of the Bank, Philadelphia, Langdon Cheves to William Crawford, May 27, 1819, pp. 73-74. 27 others the transactions at Baltimore raised grave doubts.

The unpopularity of the Bank was a real fact. However, the financial corporation numbered many defenders who attempted to rebut the charges against it. Local banks hated the instrument 34 which tried to reform them. The Bank's defenders quite properly argued that hard times and depression, which the Bank had not caused, were the reasons behind the attacks. The Philadelphia giant was a vulnerable target for the sufferers and malcontents.

It was blamed for events over which it had no control. It was utilized as a scapegoat for the pecuniary woes of the period, and this, it was claimed, was unreasonable. The Bank's defenders maintained that :

The crisis which we have reached, would have arrived if the Bank of the United States had never been in existence. The host of individuals who have been nursed and sustained by credit, would have fallen ere this . . . and in that fall would have poured forth their clamors against the state institutions who first led them within their fatal magic circle; but the Bank of the United States started into existence opportunely to relieve those establishments of a large share of obloquy.

In other words if the Bank of the United States did not exist to shoulder the blame, the state banks would have had to weather the wrath of its accusers.

Cheves Saves the Bank of the United States

The accession of Langdon Cheves to the post of President of the federal Bank meant a great improvement in its operation.

Cheves was an attorney from South Carolina. A former Republican

34 Bogart, "Taxation of Second U. S. Bank," p. 317. 35 The Southern Patriot (Charleston), cited in The American, September 29, 1819 28 member of the United States House of Representatives, he had risen to the position of the Speaker of the House. Cheves was offered the office of Secretary of the Treasury in 1814 but refused it. The presidency of the Bank was accepted reluctantly by the South Carolinian as he might have been appointed to the

Supreme Court by President James Monroe. He was an able administrator, the complete antithesis of his predecessor.

Soon after Cheves became President and assesed the position of the Bank, he wrote to Secreta;cy Crawford that "the situation of the Bank of the United States, at this moment . . . is critical; and it is more so, because the state institutions are equally or more embarrassed."^"^ The critical situation did not stymie him for long. The problems and errors of the Bank were so manifest that they were easily discerned. Suitable re­ medies were applied readily. Cheves wrote that "the southern and. western Offices were immediately directed not to issue their notes, and the Bank ceased to purchase and collect exchange on the south and west."38 The Board of Directors met on April 9, 1819. A com­ mittee was appointed to study the Bank's problems and make recom­ mendations. Six measures were proposed by the committee;

1. To continue the curtailments previously ordered. 2. To forbid the Offices to the south and west to issue their notes when the exchanges were against them. 3. To collect the balances due by local Banks to the Offices'. 4. To claim of the Government the time necessary to

^^Hammpnd, Banks and Politics in America, p. 262.

^^Cheves, Report on the Condition of the Bank, Philadelphia, Cheves to Crawford, March 20, 1819, p. 40.

Cheves' Exposition, in Report on the Condition of the Bank, p. 20. 29

transfer funds from the Offices where money was collected to those where it disbursed .... 5. To pay debentures in the same money in which the duties, on which the debentures were secured, had been paid. 5, To obtain a loan in Europe for a sum not exceeding $2,500,000 dollars, for a period not exceeding three years.

Cheves' ability was demonstrated early. He perceived that much of the cause of the Bank's financial embarrassment could be traced to the transactions of the southern and western branches. He moved swiftly to prevent them from issuing their notes "when the ex­ changes were against them." Hie other measures provided further relief for the corporation. Cheves announced that within the period of seventy days the institution had been resurrected from a perilous situation to a position of relative safety and power.40

Langdon Cheves believed that the machinery of the Bank was too cumbersome. There were too many branches for the organization to be governed effectively. Those in charge of the local branches were influenced frequently by local interests and sentiments.

As a result Cheves hoped to reduce the number of Offices of

Discount and Deposit.

In the meantime, however, the parent bank moved to correct the poor distribution of capital. The western and southern branches were relieved of much of their funds, which, in turn, were trans­ ferred to northern offices. The branches were forced to remit

39 Ibid., pp. 20-21.

‘^Ibid.

^^Cheves; Report on the Condition of the Bank, Bank of the United States, Cheves to Crawford, May 27, 1819, p. 73. 30 in specie or bills of exchange on Europe or on the north. By

October 1819 the bad distribution of capital was corrected.

Not only were the branches dealt with strictly, but

the state banks felt the regulatory hand of the Bank also. It was insisted that the state institutions immediately reduce the

balances held against them by the Bank. The banks were to settle

those balances at fixed intervals and constantly redeem their notes in specie.In this manner the Bank recovered part of

the debt owed to it by the west. By August 1822 it had received

$961,653 out of a debt due of $6,351,120. Cheves believed this

to be a notable achievement.*^

Cheves' position caused a great deal of conflict with

the state banks. With the currency in a poor state, suspension

of specie payments prevalent, and the country undergoing a de­

pression, the south and west suffered most. The currency of those

sections was reduced further by the frequent presentation of notes

to the state banks for specie. The result was that loans and

currency were extremely scarce. The Bank was blamed.

Depression in Ohio

The greatest opposition to the Bank occurred in Ohio. The

question must be posed and answered why Ohio opposition became so

^^Catterall, Second Bank of the United States, p. 73.

^*^Richmond Bncruirer, May 28, 1819.

*^^heves, Cheves' Exposition, in Report on the Condition of the Bank, pp. 26-27.

*^^Catterall, Second Bank of the United States, pp. 83-84. 31 fierce that it led to nullification of federal laws in the state regarding the Bank.

A partial answer as to why Ohio was such fertile ground for a conflict with the Mammoth can be discerned in the economic woes of the state. The culmination of the War of 1812 left the western territory free for settlement. As emigration quickened, the population of the west increased rapidly. The swift growth of the west, however, left her with an inadequate currency supply.

The desire for money proliferated banks which were of varying

degrees of soundness.

The dearth of specie combined with a lack of confidence

in Ohio bank paper produced a distressing effect on prices in the

state. The worst period coincided in time with the operations of

the branches in Ohio. Wheat sold in Chillicothe for $1.50 a

bushel in November 1816, and inhabitants of the town were counselled

to hold off the sale of their produce as the price would surely

rise.^'^ By October 1816, however, the price of wheat in the

town had plummeted to 75 cents per bushel.In 1824 Thomas

Worthington observed that the price of wheat had varied for the

last few years from 25 to 50 cents. The average price of wheat

for the last five or six years had not exceeded 37^ cents.

Corn which sold in Cincinnati in December 1818 for 37g

"^^Huntington, "History'- of Banking in Ohio," p. 271. 47 Scioto Gazette and Predonian Chronicle, November 28, 1816.

^^The Chillicothe Supporter, October 21, 1818. 49 Ibid., September 16, 1824. 32 cents per bushe1^0 sold for 10 cents a bushel in May 1821.51

Wheat, in the same place, brought $1.00 a bushel in December 1818.

Superfine flour sold for $6.00 to $6.50 per barrel. The cost of apples a barrel was from $2.00 to $3.00. Eggs sold for 18 cents a dozen.By December 1821, however, an offer was made of 31^- cents per bushel for good marketable wheat if it was "immediately delivered at the Cincinnati steam m i l l . "53 By the end of 1821 flour sold in the city for $2.50 a barrel, apples for $1.00 a barrel, and eggs for 8 cents a d o z e n . 54 jn Dayton wheat was

$1.00 a bushel on January 1, 1817. By October 1819 the price had declined to 62^ cents a bushel. The Dayton price for a bushel of wheat in April 1822 had fallen to 30 c e n t s . 55

Ohio was afflicted with hard times which were reported in the newspapers of the day. The Western Herald and Steuben­ ville Gazette printed a letter from the Public Advertiser from a

Cincinnati resident to an acquaintance in Kentucky. The letter demonstrated the economic distress in Cincinnati. The writer said:

^^The Western Spy, December 12, 1818.

^^United States Gazette and True American, May 22, 1821.

The Western Spy, December 12, 1818.

^^Liberty Hall and Cincinnati Gazette, July 28, 1821.

Niles' Weekly Register, Volume IX, No. 24, February 9, 1822, p. 381.

^^History of Montgomery County, Ohio, p. 343, cited in Huntington, "History of Banking in Ohio," p. 298. 33 I am sorry I can give you no good tidings of this once flourishing place. The distress is beyond all conception .... Marshals' and Sheriffs' sales are daily. To give you an idea of the situation of this town . . . I will give you a statement of some property sold this day by the Marshal, and which I have seen myself - A handsome gig and very valuable horse, sold for four dollars; an elegant side­ board for three dollars; a fine Brussel's carpet and two Scotch carpets for three dollars; three beds and bedding for three dollars; a good dining table at 25 cents, and a long list of other valuable articles. . . .

The author of the letter claimed that with the modest amount of money he possessed, he could attend the daily sales and make him­

self a fortune. However, he could not reconcile such conduct to his conscience. He refused to profit at the expense of his neighbors. Further evidence of the financial problems of

Ohioans generally, and Cincinnatians particularly, can be gleaned

from the hundreds of sheriffs' sales that appeared in Cincinnati newspapers in 1821 in order to settle judgments or for delinquent taxes.

Some claimed that Ohio was "in a state of pauperism" and

that the task of all her citizens was to uplift her from that position.^® One of the saddest and yet most eloquent expositions of the plight of farmers was penned by "A Farmer of Ross."

Desiring to make some remarks to his readers about the times, he noticed that whenever people now met they had little to converse

^^Western Herald and Steubenville Gazette, August 19, 1820. 57 Liberty Hall and Cincinnati Gazette, August 18, 1821,

^^From the Muskingum Messenger, cited in Cleaveland Herald, May 22, 1821. 34 about except the hard times. He continued;

Well, it is true, the times are hard enough. Two or three years ago we could get a dollar a bushel for our wheat, and for our pork and beef, four or five dollars the hundred. Then, our farms were worth something .... Now, we can get little or nothing for our wheat, our pork and our cattle. And as for our farms, we could hardly give them away .... But one of the greatest evils that has befallen us Farmers, is, the money of a host of swindling institutions through­ out the state, that has been shoved on to us by the mer­ chants, Contractors for the General Government, and almost all the officers and agents who have money to pay out for the Government. The General Government . . . have nothing to do with the de­ preciated paper that has been among us, but pay into the hands of their agents and contractors specie, or that that is as good. Yet these contractors and agents have sold the good money for a great premium, as it is called, and with the bad money, they have purchased up our flour, pork, and whis­ key. This bad money, we . . . have received of them and the merchants who have bought our produce, at par. But when we go to settle up our "outstanding balance," or purchase an article at their stores, our money is worth little or nothing. They can take it only at 25, 30, or 40 per cent discount .... If we tell them they ask too high a price for their goods, the answer is "the money in the country is bad ; we are obliged to charge high". . .

The money that the Farmer of Ross mentioned to be at a discount of

25, 30, or 40 percent depreciated even more by 1821. Ohio money reportedly was running at a 53 percent discount in the Atlantic states.

It was not until 1824 that Ohio's bad times began to abate and be replaced by more prosperous times. Prices took an upturn, and the financial condition of Ohioans improved accor­ dingly. It was during the period from 1818 to 1824 in which economic conditions were bad that the greatest activity against the Bank ensued in Ohio.

^^The Supporter, July 5, 1820.

^*^United States Gazette and True American. May 22, 1821. CHAPTER III

OHIO TAXES THE BANK

First Moves Against the Bank

A branch of the United States Bank was located in

Cincinnati in January 1817, and one in Chillicothe in October of the same year. The Ohio Legislature took notice of the branches when it convened in December 1817, at which time it took its first steps against the national Bank. A joint committee was established to inquire into the expediency of taxing any of the Bank's branches which might be located in Ohio. The committee submitted its report on December 27, 1817. Claiming that so many important principles and questions were involved, it maintained that it could not discharge satisfactorily the duty assigned it by the legislature. Reasons for and against the right of taxation were bared by the committee, however. In support of the principle of taxation, the committee claimed that the downfall of the state financial institutions could result if the branches were tax exempt. It was argued also that if you "dry up this important souroe of your revenue, you must supply it by a tax on the faithful laborious husbandmen, whilst the greatest proportion of the funds, thus prevented from reaching your treasury, is carried beyond the

35 36

State, to increase the wealth of strangers and foreigners."^

The committee, nevertheless, perceived that the incorporation act amounted to a contract between the United States and the stock­ holders of the Bank. The Ohio Constitution, meanwhile, stated that "no ex post facto .1 aw, nor any law impairing the validity of contracts shall ever be made." The committee reasoned that the law incorporating the Bank was constitutional. If the states had given Congress the right to create a Bank, it was irrational for them not to allow the Bank to function. Finally, because Ohio was a relatively young state, the committee argued that she should not 2 assume the lead in contravening acts of the federal government.

After having studied the argument for and against levying a tax on the branch banks, the committee decided that the preponderance of the evidence was for not taxing them.

The matter was far from settled. The Ohio House withheld its assent from the report. On January 19, 1818, the House first resolved by a vote of 48 to 12 that it was constitutional and legal to tax the funds of the Bank's subscribers in Ohio. Second and third resolutions were combined into one which proclaimed the expediency of immediately levying a tax. The resolution passed by 3 a much closer margin - 33 to 27.

^Ohio General Assembly, House, Journal of the House of Representatives of the State of Ohio, 16th General Assembly, 1st Session, December 27, 1817, p. 146. Hereafter cited as Ohio, House Journal.

^Ibid., pp. 146-147.

% b i d . . p. 307. 37

A substitute report was submitted in place of the month old joint committee report. The new report, after discussing the privileges and duties of the Bank, and the privileges of the states, presented its objections to the Bank. Stating that it was a rule of political economy that a state in need of capital should never tax money, nonetheless, it did not follow that the state should give privileges to foreigners which were denied its own citizens.

Furthermore, there was no guarantee that the branches would bring any special advantages to Ohio. It rather appeared that the oper­ ations of the state institutions would be hampered by their presence.^ After further charges were made against the Mammoth, it was resolved that a tax could now be levied against it. A three man committee, composed of Charles Hammond of Belmont

County, Gustavus Swan of Franklin County, and James Shields of

Butler County, was designated to prepare and present a tax bill.^

On the following day Charles Hammond reported a bill which assessed a 4 percent annual tax on the sum of dividends made in

Ohio. If the Bank defaulted in its payment, a $3,000 assessment would be levied on each Office of Discount and Deposit. A committee of the whole House considered the bill on the evening of January 23.

Speaker of the House, Duncan McArthur, left his chair and assumed a place on the floor for the debate. McArthur deliver a long, bitter oration against the proposed tax, attacking Hammond and the supporters of the bill as "enemies of the peace of the country and the sovereignty of the U. States." The Speaker warned of the

^Ibid., pp. 308-315, and passim.

^Ibid., p. 315. 38 bitter consequences Ohio would suffer if she dared to attack the

financial institution. The western country would lose all her

specie; funds for internal improvements would be denied her by the

general government. McArthur was quoted as asking, "if there was

any man who Dared raise his hand against the Bank and the United

States, and encounter these oonsequences?"® The Speaker later

denied ever having made the quote.

McArthur's impassioned defense of the Giant was only part

of the tactics utilized by the Bank and its supporters to send

the proposed bill to its grave. The proximity of the Chillicothe

office to Columbus aided the Bank's cause. Its supporters carried

on a strenuous lobbying campaign to defeat the bill. McArthur took

a leave of absence and visited his home in Chillicothe. A few of

the branch directors visited the capital. A handbill containing

six columns in opposition to the tax was circulated and placed

upon the table of each of the legislators. The President of the

Cincinnati office made a trek to Columbus at this time.^ Although

there is no direct evidence to be found concerning what the board

members said or why McArthur went to Chillicothe, the presumption

that they wanted the bill defeated can be made confidently.

McArthur's invective in the Bank's cause was not entirely

successful. Jesse Martin, representative from Jefferson County,

rose to notify his fellow members that he had changed his mind

^Belmont Journal, signed Investigator, cited in The Supporter, September 2, 1818.

'^Ibid. 39 regarding the taxation of the corporation. He had opposed taxation initially, but the picture of the Bank painted by the Speaker was too painful to accept. A banking corporation possessed no right to limit a state from exercising its constitutional powers. He would vote to tax the branches. Hammond was offended. Comparing

McArthur's oration to that of an army commander reprimanding his troops for dereliction of duty, Hammond said, "If the members were to be dragooned out of their opinions, it was no fault of his." 8 He remarked that McArthur had raised no new arguments. Hammond moved that the bill be engrossed and read a third time on January

24. William Vance of Ross County proposed that the whole matter be postponed until the first Monday of December 1818. Vance's pro­ posal was defeated narrowly - 29 to 27.^ The victory for the foes of the Mammoth was only temporary.

As the bill was called up for a third reading on January 24,

Eli Baldwin of Trumbull County, who was present the preceding day but had not voted on the matter, moved to postpone the consideration of the bill until the second Monday of December 1818. Baldwin then made what was critically appraised as "a mouthing kind of speech" about proceeding too swiftly on such an important matter. Hammond retorted that he was angry that gentlemen were not strong enough to maintain their convictions."^ The day was lost as the question

®Ibid.

^Ohio, House Journal, 15th General Assembly, 1st Session, January 23, 1818, p. 359.

^^Belmont Journal, cited in The Supporter, September 2, 1818. 40 to postpone won by a 31 to 28 margin.Ü The pro-Bank foroes won over only one vote from the anti-Bank group, Edward

Scofield. However, the pro-Bank group added to its number a few men like Baldwin who had not voted on the preceding day.

Hammond's group lost one man to the opposition, added one to its ranks, and another who was present did not vote.

The failure to tax the Bank did not cause a great com­ motion, however. A writer using the pseudonym "Graochus" believed it bad policy to tax the Bank. He argued that if

Congress possessed the constitutional power to charter the Bank,

Ohio had no right to tax it. He insinuated that the legislators were driven by an ulterior motive, that a number of them were stockholders or directors of state banks. As a result they de­ sired to eradicate the power of the national Bank in O h i o . 12

James Wilson, editor of the Western Herald and Steuben­ ville Gazette and grandfather of Woodrow Wilson, took a moderate tone after efforts to tax the Bank were defeated. The newspaper said that the attempt to levy a tax upon the Bank was a

llOhio, House Journal, January 24, 1818, pp. 360-351.

^^The Supporter, February 25, 1818. The charge that Ohio politicians had bank connections was common and contained some substance. Gustavus Swan, Franklin County representative, was at one time, president of the Franklin Bank of Columbus. Ethan Allen Brown, Ohio's next governor, was director of the Bank of Cincinnati in 1810. He held stock in the Miami Exporting Company in 1817. Many prominent Ohioans of the day had bank connections. See John Still, "The Life of Ethan Allen Brown," (Unpublished Ph.D. dissertation. Department of History, The Ohio State University), pp. 52 and 67. 41 doubtful measure. The Philadelphia institution commenced operations with good intentions, and its Ohio branches had barely started. Certainly it was proper to allow the federal Bank the 1 ^ opportunity to make good.-^'^ The newspaper's present moderation was the antithesis of the strident tones it would use in a few months.

The issue remained relatively quiet until aggravated in the summer of 1818. New fires of opposition were kindled when, on July 20, 1818, the Philadelphia institution demanded, that the balances against the Cincinnati banks be collected at the rate of

20 percent a month.The president and directors of the

Cincinnati branch gauged the demand and asked the parent bank to reconsider. The branch officers notified their superiors of the astonishment excited by the request. The new policy, they asserted, would cause distress, perhaps ruin, for the community.

They pleaded with the Philadelphia Directors "to pause and re­ flect upon the measure which they have adopted as fraught 1 5 with consequences unforeseen and indescribable."" The Cincinnati banks swiftly protested, but William Jones rejected their requests to proceed slowly. Instead of offering them relief, the president and directors of the United States Bank instructed the cashier of

^^estern Herald and Steubenville Gazette, September 9, 1818. 14 Catterall, Second Bank of the United States, pp. 62-63

^^American State Papers, Folio Finance, IV, pp. 859-861. 42 the Cincinnati branch not to receive the notes of the Cincinnati banks. He should receive only "the lawful currency of the United

States, or the notes of the said office, unless in payments due to the United States, for which he will receive any of the bills of this bank or its offices.

The Cincinnati banks were in trouble. A precipitous run was made on them for specie. They initially paid it out 17 but quickly resolved to suspend specie payments. Not only did the banks feel the disastrous effect of the Bank's edict but those who transacted business with the banks and branches were 18 effected as well. Many described the policy of the Philadelphia 19 Bank as the "immediate cause of Ohio's financial disaster."

The residents of Cincinnati were ill-equipped to forestall the demands of the Bank. They held a meeting in the turbulent days in order to obtain a resolution supporting the suspension of speoie payments. What resulted was the appointment of a committee to investigate the causes of the suspension. It evidently was hoped that a stream of public indignation be launched against the

Bank, but the meeting proved ineffectual. PC)

l^ibid.. pp. 851-862.

^^The Western Spy, November 7, 1818.

^^Liberty Hall and Cincinnati Gazette, November 10, 1818.

^^Utter, The Frontier State. II, p. 299. 20 American State Papers, Folio Finance, IV, Extracts of letters from Cashier of Cincinnati branch, to Cashier of Bank of the U.S., November 7 and 8, 1818, p. 864. 43

Newspapers provided the most effective opposition. The

Liberty Hall and Cincinnati Gazette, commenting on the recent developments, claimed that the Bank required the immediate payment of specie from the Cincinnati banks because they were not humble enough before the "Presence of their High Mightiness." It was contended that the remonstrance made by the banks in which they proposed to pay off the balances against them was too haughty for the Bank to b e a r . ^ l The newspaper's charge contained too much hyperbole. Rather it was the mismanagement of the Bank under

Jones that was the fault. As a result the state institutions overextended themselves, while the Bank of the United States allowed them to do so. The request for payment asked too much, too soon. Great opposition was aroused which augured ill for the Bank. The Ohio Legislature would meet in December 1818 with the above events before it.

Supporters of the Bank were among the first to suffer for the position they had assumed. I t was reported that the election of 1818 revolved around the question of the Bank. And, in every instance where the Bank was an issue, those who sup­ ported it lost. Duncan McArthur, so instrumental in delaying a tax levy against the Bank in thelast legislature, was d e f e a t e d .

Former Governor Worthington ran for the Senate in 1818 and was defeated by Colonel William A. Trimble. Worthington's popularity had waned somewhat, partially because of his role in bringing the

21 Liberty Hall and Cincinnati Gazette, November 10, 1818,

^^Niles' Weekly Register, Volume III, No. 10, November 31, r Sicl 1818, p. 149. 44

Mammoth into Ohio, and because he was both a stockholder end director.Men who opposed the Bank were elected. Ethan Allen

Brown, an anti-Bank candidate who Ironically had studied law in the offices of Alexander Hamilton, was elected to succeed Thomas

Worthington.

A week after the Ohio General Assembly convened in

December 1818, a five man committee was named to inquire fully into the status and management of the branches of the United States

Bank in Ohio, and of the condition of the state banks. The committee was to submit all information to the House "together with their opinion of the measures that it would be expedient to adopt, both with respect to taxing the Capital of the United

States Bank, and for regulating the proceedings of the state banks.Charles Hammond, Valentine Keffer, James S. Swearin­ gen, Isaac Miner, and Daniel Smith, all of whom voted to set up the committee, were named to it.

Governor Brown's address was delivered to the General

Assembly on December 16, 1818, one day after the naming of the committee. He expressed his opposition to the Bank in objections that had been often made before. The two branches had been located in Ohio without Ohio's permission; and the state had no control over the actions of the officers. Brown viewed the

Congressional power which granted the charter of incorporation

^^Sears, Thomas Worthington, p. 208.

^“^Ohio, House Journal, 17th General Assembly, 1st Session, December 15, 1818, pp. 86-87. 45 to be debatable. However, so long as the question was doubtful, he recommended that the state acquiesce in the action of Congress.

The new governor, nevertheless, discerned no reason why the branches should be tax-exempt. To allow the Offices of Discount

and Deposit to be free from taxation would be unfair to the state banks which had to pay. A principal question was whether the

state had the power to tax an organization chartered by Congress.

Brown indicated that the state had the power.His inclinations obviously were opposed to those of his predecessor. Moreover the executive and legislative branches demonstrated an increased belligerence to the Bank.

The committee on banks submitted its findings to the House on January 18, 1819. The same charges that appeared in the

Governor's address appeared in the report alongside numerous other faults of the Bank. The agents of the branches were accused of being more interested in their employers than in

Ohio and her banks. Tlie committee descried the fact that the

state banks were reduced to little more than broker shops.

The report concluded with the committee recommending that an

attorney general be appointed to enforce the law against un­

authorized banking and to inquire into the conditions of banks

that refused to report. A recommendation was made to enact a

25 Ohio, Senate Journal, 17th General Assembly, 1st Session, December 16, 1819, pp. 97-98.

^^Ohio, General Assembly, 17th Assembly, Report of the Committee on the Subject of Levying a Tax on the Capital of the U.S. Bank, Employed in Ohio (Columbus: David Smith, printer, 1818), pp. 10-11. 46

law levying an annual tax of $50,000 on each branch of the

Bank which determined to remain in Ohio and transact business.

And finally.

Your committee also recommend that provision be made by law for simplifying legal proceedings in all cases where banks are a party, and securing the holders of bank notes against impositions by prohibiting all brokerage in bank paper especially on the part of debtors to and stock­ holders in banks ; and unless directed by the house, your committee will proceed, so soon as they can be prepared, to report bills conformable to the suggestions here m a d e . 27

The committee hoped to utilize the threat of taxation to drive the

branches from Ohio. If the threat did not work sufficiently, the

actual levying of the $50,000 annual tax would take place.

Congressional and State Opposition to the Bank

It would be misleading to concentrate solely on Ohio's

disenchantment with the Bank of the United States. Parallel

sentiments developed elsewhere simultaneously, both in Congress

and in other states.

Only two weeks before the naming of the committee to

study the Bank in Ohio, Representative John Spencer of New York

proposed a resolution in the House of Representatives that a

committee be appointed to inspect the Bank's books and to examine

its proceedings. It should report, among other things, whether

the provisions of the Bank charter had been violated.^8 The

resolution passed on November 30. A five man committee was

^'^Ibid. , pp. 17-18.

OQ Annals of Congress, 15th Congress, 2nd Session, House of Representatives, November 25, 1818, p. 317. 47 appointed and proceeded to Philadelphia. Convening there, it

summoned the necessary persons and papers before it.^^

The results of the investigation were reported by Spencer

on January 15, 1819. The committee's lengthy report concluded

that the federal Bank violated its charter in four instances; first,

by purchasing $2,000,000 of public debt to substitute them for

$2,000,000 of similar debt which it had contracted to sell to

Britain, and which the Secretary of the Treasury claimed the right

of redeeming; second, by not requiring "the fulfillment of the

engagement made by the stockholders, on subscribing, to pay the

second and third installments on the stock in coin and funded

debt"; third, by paying dividends to stockholders who had not

paid their installments; and fourth, by allowing stockholders 30 to have too many votes in Bank elections. The maximum number

of votes any one stockholder could cast was thirty, but by using

loopholes he could cast more. There was no mention in the re­

port whether the charter of the Bank ought to be repealed.

The subject of the repeal of the Philadelphia Bank's

charter was aired in Congress three days after the report. David

Trimble of Kentucky proposed that the United States Attorney

General act jointly with the Pennsylvania district attorney and

cause a scire facias to be issued. The task of the Bank would be

^^Ibid., November 30, 1818, p. 335. 30 Clarke and Hall, Legislative and Documentary History of the Bank of the United States, pp. 731-732. 48 to explain why its charter should not be forefeited. By

a 71 to 53 vote the House decided not to consider the resolution 31 at the present. It was referred to a committee of the whole

House. Spencer of New York later presented a resolution, containing

a list of propositions, the last concerning a scire facias to be

issued from a United States circuit court. The resolution was

tabled as the House agreed to devote full time to discuss the matter.

On February 9, 1819, James Johnscn of Virginia submitted

a resolution "That the Committee on the Judiciary be instructed

to report a bill to repeal the act entitled An act to incorporate

the subscribers to the Bank of the United States . . . ."

Johnson's resolution was referred to the committee of the whole

House.u 33

A full discussion was afforded to the Bank of the United

States for the next two weeks. The attempts to repeal the charter

finally were defeated on February 24, 1819. The committee of the

whole disagreed with Johnson's resolution by a vote of 121 to

30. Trimble's earlier proposal also met defeat by a vote of 34: 116 to 39. Both resolutions were rejected, thus stifling

Congressional opposition for a long period.

Annals of Congress. 15th Congress, 2nd Session, House of Representatives, January 19, 1819, pp. 598 and 600.

^^Ibid., February 1, 1819, pp. 923-925.

^^Ibid., February 9, 1819, pp. 1140 and 1142.

^^Ibid., February 24, 1819, pp. 1411-1413. 49

State antipathy to the Bank was much stronger in this period.

The Bank was opposed by some as early as 1816. The Indiana

constitution of that year prohibited the inoorporation of a bank

or a banking company within its borders "for the purpose of 35 issuing bills of credit or bills payable to order or bearer."

The Illinois constitution of 1818 barred the existence of banks

or moneyed Institutions from the State except those that were

already lawfully provided for or except for a State bank and its

branches.Tennessee imposed a tax of $50,000 on any other

bank transaoting business in the state except for a state bank.^'^

A Georgia law entitled "An Act to raise a Tax for the support of

Government for the Political Year 1818" levied a tax of 31% cents

on every $100 of bank stock "operated upon, or employed within 38 this state." The Maryland General Assembly enacted a law in

February 1818, levying a heavy stamp tax on all notes issued by

outside chartered banks. No bank notes could be issued except

upon stamped paper: there would be a stamp of 10 cents on every

35 Benjamin Parley Poore, The Federal and State Constitutions, Colonial Charters and Other Organic Laws of the United States. (Washington: Government Printing Office, 1878), Volume I, Article X, Section I, p. 509. Hereafter cited as Poore, Federal and State Constitutions.

^^Ibid., Volume I, Article VIII, Section 21, p. 447. 37 Laws of Tennessee, Scott's Edition, Volume II, pp. 389 ff; Laws of 1817, Chapter 132, Seotion 2, November 22, 1817, cited in Catterall, Second Bank of the United States, p. 64.

Lucius Q. C. Lamar, A Compilation of the Laws of the State of Georgia, Passed by the Legislature since the Year 1810 to the Year 1819, Inclusive, (August; Published by T. S. Harmon, 1821), assented to December 19, 1817, pp. 889-890. 50

five dollar note, 20 cents on every ten dollar note, 30 cents on every fifty dollar note, all the way up to a 20 dollar stamp on every one thousand dollar note. A fine of $500 would be levied on any recalcitrant president, cashier, or director who refused to comply with the law.In December 1818 North Carolina imposed a yearly tax of $5,000 on the Offices of Discount and Deposit.'^®

In January 1818 the Kentucky Assembly levied the heaviest sum

of all, $60,000 per annum on each branch within the state.

The law would go into effect on March 4, whereupon the Bank was

to pay a $5,000 monthly tax. Henry Clay was "mortified" to hear

of the step his state had taken. He sent a copy of the Kentucky

tax act to President William Jones with the comment that much

of the blame for the tax measure could be traced to the jealousy

of the state bank. He felt that Kentucky was inconsistent in the matter, first inviting the Bank into the state and then proceeding

^^Maryland, General Assembly, Laws Made and Passed by the General Assembly of the State of Maryland, at a Session Begun and Held at the City of Annapolis, on Monday the First Day of December, Eighteen Hundred and Seventeen (Annapolis; Printed by Jonas Green, 1818), Chapter 156, passed February 11, 1818, pp. 174- 175. 40 Charles Warren, The Supreme Court in United States History (Boston: Little, Brown, and Company, 1926), Vol. II, p. 889. Hereafter cited as Warren, The Supreme Court.

^^Kentucky, General Assembly, Acts Passed at the First Session of the Twenty-Seventh General Assembly for the Commonwealth of Kentucky, Begun and Held in the Town of Frankfort, on Monday the Seventh Day of December 1818, and of the Commonwealth the Twenty-Seventh (Frankfort : Printed by Kendall and Russels, 1819), Chapter 343, passed January 28, 1819, p. 637. 51 42 to tax it out of existence.

Seven out of the twenty states in the Union had taken

some sort of legislative or constitutional action against the

Bank of the United States by the end of January 1819. During

this time Ohio antagonism against the financial institution gained momentum. The Ohio Legislature, meanwhile, had the

example of over one-third of the Union, and, thus, did not proceed

in isolation.

The Bank Committee reported a bank bill to the Ohio

House which levied a tax on the Bank. The bill passed the 43 House by the overwhelming margin of 56 ayes to 3 noes. The

Senate concurred, and on February 8 , 1819, the tax on the United

States Bank became law. Entitled "An act to levy and collect a

tax from all banks and individuals, and companies and associations

of individuals, that may transact banking business in this state,

without being authorized to do so by the laws thereof," the

preamble stated ;

Whereas, the president and directors of the bank of the United States have established two offices of discount and deposit in this state, at which they transact business, by loaning money and issuing bills in violation of the laws of this state; and whereas, diverse companies and associations of individuals within this state, unauthorized by law, continue in like manner to do business as bankers and

42 James P. Hopkins (ed.), Papers of Henry Clay (Lexingtoni University of Kentucky, 1963), Henry Clay to William Jones, Washington, March 3, 1819, Volume II, p. 442. Hereafter cited as Hopkins (ed.). Papers of Henry Clay.

^^The Supporter, February 3, 1819. 52

banks, by loaning money and issuing bills and by trading in notes and bills; and whereas, it is just and necessary that such unlawful banking, while continued, should be subject to the payment of a tax for the support of government. . .

Ohio rivalled Kentucky in harshness by exacting an annual tax of $50,000 on each Office of Discount and Deposit. The law ordered the State Auditor to collect the tax which was to be levied in September 1819 and annually thereafter. The Auditor could issue a warrant appointing a collector to levy the tax.

The collector was given the extraordinary power of unlimited search. Armed with a warrant, he could enter into the Bank's premises and demand payment of the stipulated amount. If the de­ mand was refused, and, he was unable to locate any money, bank notes, or goods it became his duty "to go into each and any other room, or vault of such banking-house, and every closet, chest, box or drawer in such banking-house to open and search . . .

The law was termed the crow-bar law because of the instrument used to execute it.

A journalistic justification for taxing the Bank was offered by Niles' Weekly Register. Believing that the incorp­ oration of the Bank was erroneous, but that the institution had rendered some meritorious service to the country, the magazine believed that the Bank ought to be preserved. It had to be restrained, however, and the most effective manner of accomplishing this was through the acknowledged right of state taxation because

Chase, Statutes of Ohio. Volume II, Chapter 343, passed January 28, 1819, p. 1072. 45 Ibid., pp. 1072-1073. 53

"The People Are The Only Safe Depository of Their Own Interests."

If the Bank performed well, it insured its existence. If it erred badly, it might be driven from the state. Niles contended that a denial of the states' right of taxation meant a denial of state sovereignty.^^ This was the crux of the issue.

Eight states, or 40 percent of the Union, had taken action against the Bank by February 1819. Ohio's action was no lone effort. Whether the action was constitutional was moot ; but it was on the verge of being decided when Ohio took her step.

'^^Niles* Weekly Register. Volume III, Number 25, February 13, 1819, p. 464. CHAPTER IV

THE BANK BEFORE THE SUPREME COURT

The Deveaux and McCulloch Cases

The Maryland stamp tax prompted legal action in that state in 1818 which became the famous case of McCulloch v.

Maryland. The state brought an action against the Baltimore branch cashier, James W. McCulloch, for violating the state law requiring that bank-notes be issued upon stamped paper. The cashier refused either to purchase the stamps from Maryland or to pay a heavy tax. Governor Charles Ridgley reported the progress of the court action to the Maryland General Assembly in December 1818. The Bank determined to disobey the stamp tax,

• !laer, desired to test the constitutionality of the tax before the courts. Both the Maryland authorities and the national

Bank, recognizing the gravity of the issue, agreed to waive all

legal delays and quickly bring the case before the United States

Supreme Court. The case progressed rapidly through the courts.

Judgment was rendered for the state in the suit instituted before

the Baltimore county court ; the Bank appealed the judgment to

the state court of appeals in June 1818, and once again the

decision favored the state. The case had now reached the

Supreme Court of the land. Meanwhile the Bank and Maryland had

concluded an agreement. If the Bank lost the case, the penalty would not be exaoted from the institution; instead the Bank

54 55 would pay $15,000 into the Maryland treasury, as specified by

the legislative act. The Bank agreed to pay the annual tax so

long as the statute remained in force or the Bank remained in

Maryland. If judgment was rendered against Maryland, neither

costs would be exacted nor would the state pursue any further

steps against the financial institution.^

Although the McCulloch case is a truly important case in

constitutional law, its notoriety should not obscure the fact that

this was not the first time that the United States Bank was

involved in a Supreme Court case. , The first Bank of the United

States encountered problems with the state of Georgia a decade

earlier. A branch office was located in Savannah in 1802. At

first welcomed by borrowers, a reversal of sentiment prevailed

when the Bank demanded repayment. Debtors as well as would be

borrowers were alienated. Soon resentment was channeled into

legislative action. An 1805 act of the Georgia General Assembly

which raised a tax to support the state government levied a tax

of 2^ percent "on the amount or capital of any bank or banks,

offices of discount and deposit within the state and the further sum

of one half percent, on the amount of bills issued from any such p bank or offices of discount and deposit . . . ."

^Niles' Weekly Register, Supplement to Volume XII, p. 71. Governor Ridgley's Communication to the Maryland General Assembly, 1818. p Georgia General Assembly, Acts of the General Assembly of the State of Georgia, Passed at Louisville, in December. 1805 (Augusta: Printed by George F. Randolph, 1805), assented to December 4, 1805, p. 20 56

An act of December 1806 placed a tax of 31% cents on every

$100 of bank capital or capital of the Offices of Discount and 3 Deposit. The following year witnessed a repeat of the same

taxation of bank capital

Not only did Georgia establish an example for future

legislative action against the second Bank by her taxation of the

original, but the state also provided an example of action that

Ohio would imitate a decade later. The Bank refused to pay the

tax. State officers thereupon entered the Bank's premises at

Savannah on April 20, 1807, and secured two boxes of silver

containing $2,004.^ An action of trespass was pressed by the

Bank and ultimately reached the Supreme Court. The opinion of

the Bank of the United States v. Deveaux et al. was delivered by

Chief Justioe John Marshall on March 15, 1809. The Chief Justice

claimed that two points were made in the case, namely; (1 )

that a corporation, composed of the citizens of one state may

sue a citizen of another state, in the federal courts; and

(2) that a right to sue in those courts was conferred on this

bank by the laws which incorporated it. Marshall considered

the second point first. The Bank had sued in the circuit courts;

3 Acts of Georgia General Assembly . . . November and December, 1806 (Louisville: Printed by Ambrose Day, 1806), assented to December 8 , 1806, p. 80.

^Acts of Georgia General Assembly, Passed at Milledge- ville, in November and December, 1807 (Milledgeville: Printed by Alexander M'Millan, 1807), assented to December 10, 1807, pp. 72-73.

^William Cranch, Reports of Cases Argued and Adjudged in the Supreme Court of the United States, in February Term, 1809 (New York: Banks & Brothers, Law Publishers, 1882), Volume V, p. 61. 57 but the Judicial Act did not bestow the right for the Bank to

sue in that court upon the principle that the case arose under

a law of the United States. The Bank's lawyers contended that the

incorporating act gave the Bank the right to sue in the circuit

courts. It enabled the Bank "to sue and be sued, plead and be

impleaded, answer and be answered, defend and be defended, in

courts of record, or any other place whatsoever." Marshall

said:

But the 9th article of the 7th section of the act furnishes a conclusive argument against the construction for which the plaintiffs contend. That section subjects the president and directors, in their individual capacity, to the suit of any person aggrieved by their putting into circulation more notes than is permitted by law, and expressly authorizes the bringing of that action in the federal or State courts. This evinces the opinion of congress, that the right to sue in the courts of the Union, unless it be expressed. . .

Marshall concluded that the incorporating act gave the Bank

no right to sue in the federal courts.

The second point considered was whether a corporation

may sue in the federal courts, since the jurisdiction of such

courts was limited "to controversies between citizens of diff­

erent states." Both parties involved in the suit had to be

citizens in order to fall within this description. The Bank had

to be considered not as a "mere faculty" but rather as "a company

of individuals, who, in transacting their joint concerns, may use

n a legal name . . . ."

^Ibid., pp. 85-86.

'^Ibid., pp. 86-87 58

The court cited a case in British law, known as the

Mayor and Commonalty y. Wood, to settle the principle. A

London corporation had instituted a suit against Wood in the mayor's court. An objection was made that a "corporation was an intangible, incorporeal entity in which the characters of the members involved were completely submerged." The court decided that it could look past the corporate name and discern the character of the individuals. Marshall found an ample 0 precedent therein for the Deveaux case. He concluded:

The court feels itself authorized by the case in 12 Mod., on a question of jurisdiction to look to the character of the individuals who compose the corporation, and they think that the precedents of this court, though they were not decisions on argument, ought not to be absolutely disregarded. If a corporation may sue in the courts of the Union, the court is of opinion, that the averment in this case is sufficient. Being authorized to sue in their corporate name, they could make the averment, and it must apply to the plaintiffs as individuals. . . .

The Bank lost the case and the Savannah branch paid the

Sheriff's execution. The case, however, was so entangled in technicalities that the constitutional issue involved was ignored.Later problems could have been alleviated if the constitutional issue had been settled, but it was ten years beforec that was accomplished. Meanwhile the Bank's charter expired in

1811, and it was five years before the second Bank received a charter.

8 Ibid., p. 90.

^Ibid., pp. 91-92.

Sumner, History of Banking in the United States, Volume I, p. 48. 59

While the problem involved in the Deveaux case was jurisdictional, the question in the McCulloch case was constitutional. The case was an action of debt by John James, suing for himself and the state of Maryland, to recover a

$100 penalty from James McCulloch, Baltimore branch cashier, for violation of the Maryland statute by circulating an unstamped banknote. The case came before the Supreme Court in the

1819 February term. In preparation for it Chief Justice Marshall sold the seventeen shares of bank stock he owned and never again

TO bought any. The arguments by six of the country's outstanding lawyers - Attorney-General William Wirt, Daniel Webster, and

William Pinkney, for the Bank, and Luther Martin, Joseph Hopkinson, and Walter Jones, for Maryland - consumed nine days, from Feb­ ruary 22 to March 3.

The last argument, presented by William Pinkney from

March 1 to March 3, was the most eloquent and persuasive in the case. Pinkney queried whether the congressional act of incor­ poration was consonant with the constitution. He presented his view of the constitution thus;

But the constitution acts directly on the people, by means of powers communicated directly from the people. No state, in its corporate capacity, ratified it; but it was proposed for adoption to popular conventions. It springs from the people, precisely as the state constitution springs from the people, and acts on them in a similar

Henry Wheaton, Reports of Cases Argued and Adjudged in the Supreme Court of the United States. February Term 1819. (New York: Banks & Brothers Law Publishers, 1883), Volume IV, p. 317. Hereafter cited as 4 Wheaton. TP Bray Hammond, Banks and Politics in America, p. 264. 60

manner. . . . The federal powers are just as sovereign as those of the states. The state sovereignties are not the authors of the constitution of the United States. They are preceeding in point of time, to the national sovereignty, but they are postponed to it, in point of supremacy, by the will of the people.

Pinkney argued for an implied powers theory of government.

He claimed that unless means were denied specifically to the general government, it had them within the ambit of its powers.

It was impossible for the constitution's writers to detail every means, because it would have required too much detail and because the writers could not foresee the future.Philologically analysing the terms "necessary and proper," Pinkney demonstrated that the word "necessary" did not possess an inflexible meaning.

It could be qualified by adjectives and adverbs "such as very indispensably, more, less, or absolutely necessary; which last is the sense in which it is used in the 10th section of this article of the constitutionI" He concluded that a strict entymological study of the word proved it was used not only in a strict and rigorous sense.He preferred a liberal inter­ pretation which would allow the incorporation of the Bank.

Pinkney contended that the Offices of Discount and

Deposit were identical with the parent bank. Because Congress possessed the principal power to charter the Bank, the subordinate power to establish branches followed.

^^4 Wheaton, pp. 377-378.

^“^Ibid., pp. 384-385.

^^Ibid.. pp. 387-388.

^^Ibid.. p. 390. 61

The last question considered by the Bank's counsel was considered by him to be the only difficult question in the case, and of vital importance to the Union. Arguing that there was no constitutional provision to exempt the national institutions or property from state taxes, it was only by implication that they were tax exempt. Pinkney argued that

Congress' power to establish implied a power to continue.

The law of Maryland acted on the Bank's operations and could destroy it. He claimed that the Bank was as much a govern­ mental instrument for monetary purposes as the courts were for judicial reasons. Both sprang from the supreme power; both 17 could claim its protection. Pinkney maintained that Congress possessed and exercised the authority to tax the state banks.

The states might argue that they had the authority to tax the national Bank. However, because Congress exercised the power of the people, when it acted it did so as the whole acting on the whole. When a state taxed the Bank, however, this was a part acting on the whole. The Bank attorney concluded that it was inconsistent to establish a Bank if it was to be driven out of existence by state taxation. In such a way might the whole machinery of the national government be stopped. "No other alternative remains, but for this court to Interpose its author­ ity, and save the nation from the consequences of this dangerous attempt.

Supreme Court Justice Joseph Story effusively praised

17 Ibid., pp. 391-396 and passim.

^®Ibid., pp. 397-400, passim. 62

Pinkney's presentation. Justice Story averred that he had never heard an hbler speech in his whole life. He claimed that,

It was worth a journey from Salem to hear it; his elocution was exceedingly vehement, but his eloquence was overwhelming. His language, his style, his figures, his arguments were most brilliant and sparkling. He spoke like a great statesman, and a sound constitutional lawyer. All the cobwebs of sophistry and metaphysics about State rights and State sovereignty he brushed away with a might besom.

Pinkney's performance not only pleased Story but affected the 20 Chief Justice as well.

The Court, composed of five Republican justices and two

Federalists delivered a unanimous opinion in favor of the Bank.

Four members of the Court had received their appointments from 21 Jefferson and Madison. The Chief Justice delivered the unanimous opinion on March 7, 1819, one day after Langdon Cheves assumed the presidency of the Bank. Congressional power to incorporate and-control a Bank was affirmed. The selecting of locations for branch banks was a proper action of the Bank. The power of the state to tax the federal Bank was denied. The

19 William W. Story (ed.). Life and Letters of Joseph Story (Boston: Charles C. Little and James Brown, 1851), letter to Stephen Smith, March 3, 1819, Volume I, p. 325. 20 Maurice Baxter, Daniel Webster and the Supreme Court (The University of Massachusetts Press, 1966), p. 174. Baxter points out the striking similarities between Pinkney's arguments and Marshall's opinion. See footnotes 16 and 17.

^^Warren, The Supreme Court in United States History, p. 515. 63

Maryland law imposing a tax on the Bank was declared -uncon­

stitutional and void. The decision encompassed much more than the Bank of the United States. The Bank was portrayed as an instrument of government rather than simply a financial institution. As a result of the case federal authority was greatly enhanced which was of greater significance than merely preserving the Bank. This was understood by interested spec­ tators.

Reaction to the McCulloch Decision

While the North and East, where the Bank was less unpopular, generally adhered to the McCulloch decision, the

South and West stridently denounced ito The criticism levelled

at the Court was not because the Court possessed the power to

declare a Congressional act unconstitutional, but, because, in

this instance, it had refrained from doing so. Rather, by

its decision, the Supreme Court aided and abetted the wide lati­

tude of power that gave Congress the power to establish a 23 national Bank. Strict Jeffersonians were incensed at the

decision. For believers in states' rights the decision signified

a great encroachment on state sovereignty.

The loudest outcries against the McCulloch decision

appeared in the newspapers. Niles' Weekly Register published a

three part article on the case entitled "The Sovereignty of

the States." Bemoaning the fact that state sovereignty had been

22 4 Wheaton, pp. 400-437, and passim.

^^arren. The Supreme Court in United States History, pp. 514-515. 64 dealt a deadly blow, Niles was shocked that the wielder of the weapon was an agency so inaccessible to public opinion - the

Supreme Court. He was convinced that "the welfare of the Union has received a more dangerous wound than fifty Hartford 24 conventions. . . ."

The second article stressed the fear that the principles established in the case were more dangerous for the country than anything that the United States ever had to fear from foreign invasion. While the Register claimed that England's threat to

"depose" President Madison was frivolous, the judicial decision was alarming. It posed a threat to state sovereignty; it allowed monopolies; and it would "make the productive many subservient 25 to the unproductive few." The Register considered the Bank and its Offices of Discount and Deposit a monopoly, and thought the states were able to tax monopolies within their boundaries.

The constitution did not prohibit this.^^

The most cogent argumentation against the decision appeared in the third article of the Register. The Supreme

Court opinion clothed the federal government with too much power, the power to grant monopolies in "all cases whatsoever." These

^%files' Weekly Register, New Series No. 3, Volume IV, March 3, 1819, pp. 41 and 43.

Ibid., New Series No. 6 , Volume IV, April 3, 1819 p. 103.

^^Ibid., The 10th article of the amendments to the constitution says, "The powers not delegated to the United States by the constitution, nor prohibited by it to the States are reserved to the States respectively, or to the people." 65 monopolies were then exempt from the operations of the state.

The decision was alarming especially because "it squints at 27 Consolidation." Utilizing a historical argument to prove its contentions, the magazine argued that the constitution was ratified because the states believed that they would be free from monopolies and would reserve the powers not delegated specifically to the national government. New York, for example, declared

"That Congress Do not Grant Monopolies, or Erect Any Company With

Exclusive Advantages of Commerce." Maryland resolved, "That

Congress shall exercise no power but what is expressly dele­ gated by this constitution." Niles also quoted Alexander Hamilton, author of number 33 of the Federalist to demonstrate that the states were empowered to levy a tax except on imports or exports.

The prevention or abrogation of such a law would be a usurpation

OQ of a power not granted by the constitution. The Register was in the vanguard of the opposition to the McCulloch decision.

Newspaper criticism in Ohio was as vitriolic as could be found anywhere. A leader in violent criticism to the opinion was James Wilson's Western Herald and Steubenville Gazette.

Wilson's editorial comment on the decision was entitled "The

United States Bank, Every Thing I" He wrote that a usurpation had been committed as a result of the Supreme Court opinion. No matter the iniquities of the Mammoth were, the Court made positive that the country and the west would be still afflicted by

27 Ibid., New Series No. 9, Volume IV, April 24, 1819, p . 145.

^®Ibid. 66 it. Wilson concluded that if the United States Bank was per­ mitted to perpetuate its operations - taxing states without their consent, plaoing branches in states without their permission, and remaining tax exempt - the states should not amend the constitution but rather should return to their 29 territorial status.

A more moderate stance was assumed by the Liberty Hall and Cincinnati Gazette. Although the decision was a surprise, the newspaper maintained that it had no quarrel with the jud­ iciary, the proper tribunal to define the constitution. Marshall's reasoning was conclusive5 but the newspaper advocated consti­ tutional changes lest too much power be concentrated in the 30 hands of the federal government. Within a short time, however, the paper reported the great dissatisfaction regarding the decision and stated, "we should not be surprised if the court should be called upon to revise it by the perseverance of some of the states in asserting their claims to the right of taxation.

A letter of Walter Dun, a director of the Chillicothe

Office of Discount and Deposit to Charles Hammond appeared in print. Dun inquired what was to be done with the bank law and bank report of the last session. Hammond evidently had not seen the text of the decision yet but replied that no arguments in support of the principle of the decision had been propounded

29 Western Herald and Steubenville Gazette, March 20, 1819. 3 0 Liberty Hall and Cincinnati Gazette, April 2, 1819.

^^Ibid., April 13, 1819. 67 yet which were worthy of refutation. If the Court's opinion lacked compelling rationality, Hammond hoped that Ohioans would compel the judges to review their opinions. Hammond then ex­ pressed a sentiment that would be a constant refrain of the opponents of the Court opinion. The western states would accept a decision when they were able to present their side in the m a t t e r . 32 Hammond believed that the McCulloch case was a pre­ arranged affair that smacked too much of collusion. Under such circumstances acquiescence was abhorrent to him.

Hammond's wish to witness the western states present their case against the Bank was not an idle one. Rumors cir­ culated that Governor Brown might convene the General Assembly into a special summer session to plan strategy to counter the

McCulloch decision. The Western Herald and Steubenville Gazette found the idea appealing. It wanted the state to assume the lead­ ership in organizing other similarly inspired states to fight against consolidation and to conserve states' rights. Ohio's leadership was advocated because she had suffered much from the Mammoth's hands, yet her patriotism was unimpeachable. 33

Governor Brown, writing to Hammond, observed that the western states would disapprove of the Supreme Court's opinion.

Tennessee, Indiana, Kentucky, Maryland, and Pennsylvania in varying degrees were alienated from the Giant ; Virginia and Georgia were leaning towards the opposition. So many powerful voices raised

^^The Belmont Journal, cited in The Supporter, March 31, 1819. OO Western Herald and Steubenville Gazette. May 1, 1819. 68 against the Bank, and the opinion supporting it would force

Congress to listen and "to attempt something restrictive of

the constructive power, and real influence of the Bank over the

Treasury and the public.

Not all newspapers adhered to the above criticism,

however. The Southern Patriot defended the McCulloch decision.

Arguing for a broad rather than a restricted interpretation of

the constitution, the newspaper stated that for the country to

operate effectively and efficiently Congress needed a latitude

of action. Its direction could not be delineated and prescribed

in any written constitution. The paper contended that the

public had been alarmed unduly and stirred up needlessly over

the decision by the journalistic medium. These Cassandras

prophesied the subjugation of the state governments to the

national government. There was no basis for this. The Western

Spy and Cincinnati General Advertiser printed the opinion of the

Court and claimed that the wisdom and virtue from which the

opinion was handed down would settle the question definitively.^®

The newspaper had misread completely the temper of its readers.

There was little unanimity of opinion upon the McCulloch

decision. Many could be found fervidly for while others were

34 Letter from Ethan Allen Brown to Charles Hammond, Cincinnati, May 29, 1819, Official Papers, 1818-1822, ■ Manuscript. In Ohio Historical Center Library, Columbus, Ohio. Hereafter cited as Brown Papers.

The Southern Patriot, cited in the Daily National Intelligencer. April 22, 1819.

^^West^^Western Spy and Cincinnati General Advertiser. April 3, 1819 69

bitterly opposed to the decision. Without the McCulloch decision 37 the Bank would have had little future in the west. There was

controversy over the decision, but it appeared to be the natural

outgrowth of argumentation surrounding a great issue. However,

the controversy demonstrated that neither the Bank nor the

principles enunciated by the Supreme Court were acceptable

yet. Ohio was the staunchest example of vocal opposition at

least. Whether that opposition would take more effective means

remained to be tested since the law taxing the Bank was still on

the books.

07 Catterall, Second Bank of the United States, p. 65. The author states, "It was only the decisions of the Supreme 'Court in the cases of McCulloch vs. Maryland and Osborn vs. the Bank of the United States which saved the bank. Had it lost either of these cases, there can be no doubt that it would soon have been taxed out of existence in all of the southern and western states." CHAPTER V

OHIO TAXES THE BANK

The Tax Is Levied

The McCulloch decision did little to allay the anti­ pathy of Ohioans towards the Bank, especially at a time when prices were low, specie was scarce and foreclosures brought real estate into the hands of the Bank. The discovery of fraud in the Baltimore branch confirmed suspicions that the Bank was mismanaged and that the Supreme Court decision was rendered to shore it up. Concommitant with these practical matters were the constitutional objections of Ohio leaders like Charles Hammond,

John Wright, and Governor Brown. They were in a position to challenge the Bank and the decision if they desired.

The Supreme Court decision caused the Ohio opponents of the bank some consternation. The men intimately involved in the warfare on the Mammoth desired to clarify their position.

Charles Hammond corresponded with the governor and posed a series of questions on strategy. The most important inquiry was whether the tax still would be collected or would the court's decision be followed. The chief executive replied that because there were no circumstances in which the tax was a threat to public safety, he would not suspend the tax. Asked whether he intended to convene the legislature into special session. Brown answered that he had nothing definite to place befcre it. The governor

70 71 did not want to call the legislature until something positive had been accomplished. To do so at that time might mean only impotent or half-hearted accomplishments which would blunt

Ohio's opposition. It was better to lose the fight before the

Supreme Court than to falter because of unpreparedness. Brown suggested a method for placing Ohio's position before the

Supreme Court. Try to collect the tax, and if the circuit court enjoin the collection, Ohio attorneys would go to court to quash the injunction.^ The governor was committed still to an anti-Bank route. The tax would still be assessed.

The tax was to be collected on September 17, 1819. As the day approached it was clear that the state was serious about collecting. The institution tardily moved to forestall the action of the state. On September 11 the state auditor,

Ralph Osbom, was served with a notice by the Bank's attorneys that application would be made on September 14 or soon afterward to the United States circuit court at Chillicothe to enjoin the proceedings of the February 8 , 1819 act which levied the tax. On

September 15 Osborn was served with a copy of a petition in chancery. Filed in the circuit court, the petition prayed that the auditor be enjoined from levying the tax on the branch offices established in Ohio. Osborn also received a subpoena in chancery to appear before the court on January 1 to answer

^Brown to Hammond, Cincinnati, May 29, 1819, Brown Papers. 72 the petition.^

The intrepid auditor was not stymied for long. Doubting that he could be enjoined and observing the further transactions of the Bank in violation of the Ohio legislative act, he 3 commissioned John L. Harper to collect the tax. Osbom took the precaution to submit all the papers served on him to Jeremiah

McLene, the secretary of state. McLene submitted the documents to the counsellors for the state and secured their written opinions before O s b o m proceeded any further. The opinion of the lawyers was that there did not appear to be a court order allowing an 4 injunction in the papers served on Osbom. The state was not barred from collecting the tax.

The details of the exciting confrontation between fed­ eral and state authority can be pieced together. John Harper accompanied by two companions, James McCollister and Thomas Orr, drew up a wagon before the Chillicothe branch and entered the

Bank "in a ruffian like manner, jumped over the counter and took possession of the vault." It was 12:30, Friday, September 17.

The state officers confronted William Creighton, president,

Abraham Claypoole, cashier, and J. Walker, teller. Claypoole

attempted to remove the trespassers but was stopped by Harper

O Ralph O s b o m , Communication from the Auditor of Ohio, Accompanied with Documents to Both Houses of the Legislature, at the Commencement of the First Session of the Eighteenth General Assembly. December 8 . 1819 (Columbus: Printed at the office of the Columbus Gazette, by P.H. Olmstead, State Printer, 1819), pp. 3-4. Hereafter, cited as Osbom, Communication from the Auditor.

^Ibid., pp. 4-5.

^Ibid., pp. 14-15. 73 who inquired whether he was ready to pay the state tax. Claypoole refused, tried to regain possession of the vault, and failed.

Creighton demanded to know by what authority they were there.

Harper revealed his warrant from the state auditor. The branch officials tried another tack. They reminded their opponents of the McCulloch decision and of the circuit court injunction.

Harper, unshaken, either by Creighton's arguments or by Claypoole's feeble efforts - the cashier tried again unsuccessfully to gain possession of the vault - removed bank notes and specie totalling

$120,422, of which $7,930 was a special Treasury deposit.^

The collected tax was then delivered to the bank of

Chillicothe that same day, after banking hours, and was deposited there for the night. On September 18 the amount was redelivered to Harper and his cohorts who, protected by a guard, set out for

Columbus and the state treasury with their precious cargo.®

Eight miles outside of Chillicothe, Harper was served with an injunction to return the money. He was undeterred. In Colum­ bus, meanwhile, Osborn also received an injunction. If the money was returned, the cashier promised that it would be received.

Osborn decided that the matter was now out of his hands because 7 the money was destined for the state treasury. When the money reached Columbus it was handed over to the state treasurer, Hiram

Mirick Currey who deposited it in the Franklin bank of Columbus.

^Minutes of the Board of Directors, September 17, 1819.

^ O s b o m , Communication from the Auditor, pp. 14-15. 7 Belmont Journal, cited in The Ohio Watchman, October 14, October 14, 1819. 74

Harper received $2,000 for collecting the tax. It was dis­

covered that too much money had been collected. The overplus

of $20,000 was returned to the Chillicothe branch.®

The news of what was called "a most atrocious outrage"

was dispatched immediately to Secretary of Treasury William

Crawford and to Langdon Cheves. After the shocking details

were recounted to Crawford, the Chillicothe cashier concluded

that, "this flagrant spoiliation of our funds has necessarily

suspended all banking operations, (save the renewal of notes,) and

of oourse to discontinue the payment of the numerous pensioners

from distant parts of the State.Cheves was promised that the

branch would employ every possible method to punish the

offenders.

Langdon Cheves understandably was livid at the course

of events. Terming wnat transpired in Ohio an outrage, he

claimed that "it can be rarely paralled under a Government of

laws, and, if sanctioned by the higher authorities of the state,

strikes at the vitals of the constitution,"^^ Former Governor

Thomas Worthington was astonished, but attempted to minimize

the deed by having the money restored and by offering to put up

$400,000 of property as security. His offer was refused.

O Zanesville Express, cited in The Ohio Watchman. October 14, 1819.

^American State Papers. Folio Finance IV, Claypoole to Crawford, Chillicothe, September 17, 1819, p. 903.

^^Ibid., Claypoole to Cheves, Chillicothe, September 17, 1819, p. 905.

^^Ibid., Bank of United States, Cheves to Crawford, September 30, 1819, p. 905. 75

Worthington claimed that he viewed "this transaction in the most odious light and from my very soul detest it. . . He was 12 ashamed and hurt that it had happened in Ohio.

Newspaper Reaction to the Ohio Tax

The step that the state of Ohio took warranted a great play in the nation's press for the next four months. Comments on the action were passionate. A Washington publication, The

National Register, claimed that Ohio had no justification for her action. The tax against the national Bank originated from a desire to preserve the obnoxious state financial institutions.

The populace was warned that if the check upon state banking was 13 gone then the community would be visited by great afflictions.

Aside from such mundane considerations, however, there was t ’.v. . matter of Ohio's attack upon an agency of the federal govern­ ment. The paper inquired about what rights Ohio possessed prior to the federal constitution. The response was that she had none.

Her very existence stemmed from a congressional act. Thus the state should not be trying to shake and shatter federal authority.

As for the banner of states' rights being unfurled in Ohio's defense, the paper countered that "under the outcry about state rights, the most singular absurdities have been maintained." A prediction was made that the people of Ohio would not support

12 Worthington to Cheves, Chillicothe, September 17, 1819, Worthington Letters to Cheves.

^^The National Register, Number 14, Volume VIII, October 2, 1819, p. 220. 76 the actions of the state regarding the Bank. In that sense the paper was completely inaccurate.

Future issues of The National Register were equally critical. Ohio should have consulted with the other states before she undertook such a rash move. If Ohio was so constitutionally minded, why indeed did the state not utilize the constitution to her benefit. "Declaratory amendments, conveying the sense of all the people of the United States on the subject, would have answered every honest purpose.

The consequences of the action, if effectively carried out, were discussed. An eastern newspaper commented that if

Ohio was successful in the action she took, and established a precedent to resist whenever a state thought itself threatened by a congressional act or by a decision of the federal courts, the national government was then constructed upon quicksand.

The results of the forcible taxation of the federal Bank were defined more fully in the Augusta Chronicle. It argued that the national government must possess national authority or else

"its institution is a mere nullity." If a state persisted in her opposition to the national government, the United States would be confronted with some shocking choices: either the military would have to be mobilized to support the general government or a single state could lead to the prostration of the laws of the national authority. This was a question that necessitated an

^"^Ibid. , pp. 220-221.

^^Ibid., Number 16, Volume VIII, October 16, 1819, p. 241.

^^The American. October 20, 1819. 77 17 immediate response. Another Georgia newspaper feared the direction in which activities like Ohio's "rebellious conduct" tended. Rather than fearing the state governments being swallowed by the federal, the publication averred the opposite to be more 18 likely. This was neither the first nor the last journal that referred to Ohio's act as rebellion or treason.

The Southern Patriot, printed in Langdon Cheves' home­ town of Charleston, chided Ohio's sensibility for states' rights.

The paper queried whether it was states' rights or the heavy sums of money which Ohioans owed to the Bank which compelled the state to take drastic measures. To have blunted suspicions

Ohioans should have paid the branch the debts due it, and then moved against it.^^

One of the few Ohio newspapers which was critical of the state was the Cincinnati Inquisitor. It believed that discreet men in Ohio were against the action. In the past Ohio had con­ ducted herself with distinction as a member of the Union. Her present stand, however, would be viewed by her sister states 20 "as a stain upon our bright escutcheon." In later issues the

Ohio paper bemoaned the sorry spectacle that this conflict afforded

17 Augusta Chronicle, cited in the National Intelligencer. November 6, 1819.

Georgian, cited in the National Intelligencer. November 6, 1819. 19 The Southern Patriot, cited in The American. October 30, 1819.

Cincinnati Inquisitor. September 23, 1819. 78 the European despots. The monarchs of Europe could conclude that our republic was weak, incapable of governing itself, and destined 21 to last for only a short time.

Among other things the\state was accused of bringing up the same matter that was decided in the McCulloch case, of treasonous conduct, and of actions that could lead to the des­ truction of the Union. The eastern newspapers almost entirely 23 24 condemned Ohio. The southern press generally withheld support.

The western papers were generally more sympathetic to Ohio's cause. 25 Only two Ohio newspapers condemned the state. The remaining Ohio papers overwhelmingly supported her.

Ohio's defenders were as eloquent or as banal as her detractors. The first surprise that confronted the state was the apparent wavering of a staunch opponent of the Bank and proponent of the taxing power of the states - Niles' Weekly

Register. Ohio, the paper declared, erred. It was not her pre­ rogative forcefully to oppose laws as settled by the constitutional

^^Ibid.. October 19, 1819.

^^The Southern Patriot, cited in the Cincinnati Inquisitor. December 7, 1819. 23 Niles' Weekly Register. Number 5, Volume 5, October 2, 1819, cited in Warren, The Supreme Court, p. 530. 24. barren. The Supreme Court, p. 531. 25 Niles' Weekly Register, Number 8, Volume 5, January 1, 1820, p. 295. An Ohio correspondent writing to the magazine stated; "In fact, no paper in the state has said anything in condemnation but the Cincinnati Inquisitor, and the Muskingum Messenger. The first has little influence, and the second is supposed to be actuated by personal pique toward an individual, distinguished for his active agency in support of the officers of the state." 79 authorities of the nation.^® Niles' defection was short-lived, for within a week the paper returned to the flock. Ohio's act was prompted by the oppressive operations of the branches within her 27 boundaries. Niles concluded that the McCulloch decision had been rendered, but the subject of the Bank of the United States was being agitated again. The editor reasoned that it was tenable to bring the case before the high court once more, to shed new light on the matter, and possibly to effect a different decision.

Publishing a letter from an Ohioan, the letter's author claimed that if the case were decided against the state, Ohio would submit Op peacefully. This sentiment should not be glossed over. The

somewhat violent action of the state was perpetrated to force a legal, constitutional issue. Those involved constantly maintained that they would submit gracefully if the issue was lost.

Not all publications eschewed the term "rebels." A

letter from a man calling himself "Brutus," addressed to Langdon

Cheves, appeared in a Philadelphia paper. The author reminded the

Bank president that rebels was a term dear to American hearts.

This was a nation of rebels. Washington, Jefferson, and Franklin were rebels. And this nation of rebels would not prostrate it­

self now before an "odious engine of kingly corruption

^^Ibid.. Number 5, Volume 5, October 2, 1819, p. 15.

^'^Ibid., Number 6, Volume 5, October 19, 1819, p. 85.

^^Ibid., Number 9, Volume 5, October 30, 1819, pp. 129- 132, and passim. pQ ^^TheThe Aurora.Au Brutus to Langdon Cheves, cited in The Ohio Eagle. December 12, 1819. 80

The notion that Ohio had committed a monstrous outrage and defied the laws of the United States was brushed aside by a

Kentucky journal. The auditor simply performed his duty; if the

Bank had served a proper injunction upon him the matter would have been resolved. The institution did not, however, and the state 30 officers proceeded lawfully. The prestigious Richmond Encruirer rose in defense of the beleagured western state. Why reserve the blame solely for Ohio, it queried. Why not blame the legis­ lators who incorporated the bank? Why not reproach the Supreme

Court for undermining the principles of the constitution? The newspaper was irate at reports that the Bank was established to 31 make the federal government stronger.

Ohio newspapers, almost unanimous in their approval of the state, varied in temperament and tone from the moderation of the

Cleaveland Herald to the bellicosity of the Western Herald and

Steubenville Gazette. The Cleaveland Herald claimed that the state was battling against the encroachments of the Bank. The state legislators hardly imagined that they were perpetrating an act of 32 treason. Another journal argued that the financial institution was created unconstitutionally and proceeded in the case in the same., manner. It said:

30 Kentucky Reporter, cited in Liberty Hall and Cincinnati Gazette, October 18, 1819.

31Richmond Encruirer, cited in Cleaveland Herald. November 9, 1819.

^^Cleaveland Herald, November 2, 1819. 81

An individual would be deemed to act very aggressive, who would sue for his remedy in a court of law and court of equity at the same time who would sue or imprison one, or more at law, and at the same time, for the same claim, bring suit against others in equity. All this has been done. But as the bank does not receive its existence from per­ mission of the constitution the course of its conduct is not at all affected by it.

Ohio's ablest advocate was James Wilson's Western Herald. Not dismayed by criticism he claimed that the Bank knew of the Ohio tax law; it remained here; it was taxed. Let it leave the state and its money would be returned. If the branch remained, the state would collect again in subsequent years. “ Whether he read the Cincinnati Inquisitor or not, Wilson would have disagreed with the conclusion that Ohio's action had besmirched her honor.

Rather, he claimed, that in the conflict Ohio was a symbol "to

QC the friends of freedom and the constitution." James Wilson desired that the state fight the matter as strenuously as possible.

The questionable strategy of the state taxation having been put into effect, the matter now entered into a quieter but more important phase. Once again the courts were confronted with the issue of the Bank of the United States. Ohioans who protested against a colluded McCulloch case could not utilize that excuse again.

^^Ohio Monitor, cited in the Hamilton Gazette & Miami Register, Deoember 14, 1819.

^^estern Herald and Steubenville Gazette, October 16, 1819.

^^Ibid., November 6, 1819. CHAPTER VI

THE CASE CONTESTED IN CIRCUIT COURT

Preliminary Skirmishing

The Ohio case was contested in three areas with differing degrees of effectiveness: in the newspapers, in the state legislature, and in the courts. Those involved in the conflict on the side of Ohio constantly sought support from other states in order to buttress their position.

After the exaction of the tax, the United States Bank turned once again to the courts, this time for redress. An action for trespass was pressed against Ralph Osborn and others. In mid-October two of the collectors, John L. Harper and Thomas

Orr, were incarcerated with bail set at $240,000.^ A circuit court order was issued on November 22, 1819, by Judge Charles

Willing Byrd which prohibited the removal, meddling with, or disposal of the tax money. This was strengthened by a similar order on the following day issued by Chief Justice Marshall, enjoining Osbom, Currey, Harper, Kerr (president of the Franklin bank of Columbus), and Neil (cashier of the bank) from disposing of o the money until the adjournment of the seventh circuit court.

^Hammond to Wright, Belmont, October 27, 1819. Hammond Papers. O Osbom, Communication from the Auditor, pp. 26 and 28-29.

82 83

Harper and Orr's application for a writ of habeas corpus in the court of common pleas was denied by Judge John Thompson which ignited a battle of words in the Ohio press. Thompson's opinion on the request was published and generally criticized by all except the few Ohio newspapers favorable to the Bank. The

Cincinnati Inquisitor regarded it as "the light of truth, flowing from a pure fountain," but this was disputed. Another Cincinnati journal thought the decision an important one because it involved the question of how far the state judiciary could proceed to protect the liberty of a citizen against the encroachments of the national authority. Judge Thompson's opinion was devoid of merits, however.^ The Western Herald and Steubenville Gazette complained

that the opinion brought great discredit upon the judicial talents of the state. If Thompson ever applied for a federal judgeship, his opinion would give the government ample proof of his logical

and reasoning powers. The newspaper believed that the judge's nonsensical opinion would exclude him from any federal appoint­ ment even though it favored the federal government.

Not all the Bank's allies were pleased with the rigidity

and aggressiveness that it had so far exhibited in the case.

Reasoning that Cheves would prefer to settle the matter as quickly

and quietly as possible, Thomas Worthington approached the Chilli­

cothe branch president, William Creighton, with a proposal. He

asked for the release of Harper and Orr and promised that he would

^The Literary Cadet, December 6, 1819.

‘Western Herald and Steubenville Gazette, December 4, 1819. 84 be responsible for their court appearance. By pursuing a conciliatory course, Worthington hoped that the Ohio legislature would act correspondingly and thus effect a compromise. Creighton ruminated over the proposal for a day and then refused the ex- govemor on the grounds that he would be acting contrary to instiructions. Worthington's loyalties were sorely tested by the affair. He respected the constituted authorities of the nation, but he could not "forget that Ohio is a sovreign fsic~], inde­ pendent state whose reputation is to me . . . most dear . . . .

The former governor could not comprehend the Bank's rigidity at this point. Both parties had more to gain if accomodations were made.

Henry Clay, supporter of the Bank and destined to become its attorney, expressed sentiments akin to Worthington's. Al­ though he deplored the conduct of Ohio, he questioned a policy of coercion towards the state. He did not want the national govern­ ment to act unless it clearly was supported by the constitution.

If Ohio did not disown the conduct of her officers, all other states would condemn her.® Clay also preached caution. Neither he nor Worthington was anxious to witness a further clash between state and federal authorities.

Before the convening of the Ohio legislature in December,

^Worthington to Cheves, Chillicothe, November 22, 1819. Worthington Letters to Cheves.

®Hopkins (ed.). Papers of Henry Clay, Clay to Cheves, November 14, 1819, II, p. 721. 85

Charles Hammond offered a number of suggestions to Governor

Brown. Hammond believed that the governor should not mention the events surrounding the Bank in his address to the legislature.

The rationale behind this strange suggestion was because the

Bank attempted "to assume a ground higher than that of ordinary individuals." By mentioning what transpired in his message,

Brown would be lending credence to the Mammoth's pretensions.

Rather he should look on the affair as an ordinary tax matter, unworthy of notice.*^

Hammond's advice notwithstanding, Governor Brown's December

7 message recognized the importance of the Bank question. The case, he said, was worth no more public notice in a chief execu­ tive 's message than that of any other public defaulter except for the involvement of constitutional questions. The Supreme Court had rendered a decision in the McCulloch case, but the governor expressed confidence that the Court would re-examine the question.

Brown admitted that he envisioned two alternatives for the legis­ lature: either it acceded to the Bank or let the controversy be decided by the courts. He advised the latter and promised that

"if the courts sustain jurisdiction in this instance, which on grounds of their former decisions, has been much doubted, the judgment or decree will receive due regard from the state."

Hammond to Brown, Zanesville, November 16, 1819. Hammond Papers. 86

He concluded the message by stating,

The United States' Bank ask no favors - solicit no compromises. In their opposition they rely upon strict law; to that they have resorted for redress ; and it must be presumed that, if entitled, the law will afford them a remedy. If they fail, the conclusion is forcible, that the exclusive privilege, for which they contend is unfounded; and that they are not distinguishable, by any such mark, from ordinary defaulters of the public revenue.®

The governor's mentioning of the controversy signified no split with Hammond. In fact Brown was inclined to similar sentiments.

However, he comprehended the importance of all the issues involved and knew that Ohioans desired to hear his views. A few days after his speech, Ralph O s b o m submitted the pertinent documents on all that had transpired to the legislature.

While the legislature was convened. The Frankfort Argus reported the case of Commonwealth v. James Morison et al. before the court of appeals. The officers of the Lexington branch were on trial for penalties for not paying the tax levied against the branch bank by the 1817 Kentucky act. The three judge court unanimously concluded that the tax could be levied because the bank was unconstitutional; however, two of the judges claimed that they were bound by the McCulloch case, and they reaffirmed that decision. The paper concluded that Kentucky was no longer sovereign.^ Ohio anti-Bank foes were unwilling to concede their

0 Ethan A. Brown, Message from the Governor of the State of Ohio, to Both Houses of the Legislature, at the Commencement of the First Session of the eighteenth General Assembly, December 7, 1819 (Columbus: Printed at the Office of the Columbus Gazette, by P.H. Olmstead, State Printer, 1819,), pp.7-8. 9 The Frankfort Argus, cited in The Western Spy, December 10, 1819. 87 approaching case, however.

The principal attorneys for the state were Charles Hammond and John Crafts Wright. Hammond was one of the preeminent Ohioans of the day. Lawyer, state legislator, Ohio supreme court reporter, and newspaperman, he was a fierce opponent of the Bank of the

United States. His life embodied some curious enigmas which, at times, were difficult to explain. In earlier years he had expressed

Federalist views of the federal judiciary which were transformed when he supported Ohio's position before the federal courts.A staunch Federalist who could not forgive the defection of others, he paradoxically led the opposition to the Bank of the United

States in Ohio.He led the opposition masterfully in the press, in the courts, and in the legislature in which he served. He did so by speeoh, brief, and pamphlet.He was on friendly terms with such notables as Daniel Webster and Henry Clay. John Quinoy Adams often consulted him on constitutional questions.13 Although a

Federalist, nevertheless he was a firm believer and defender of

^^Hammond to Wright, May 6, 1821, cited in Francis Phelps Weisenburger, "A Life of Charles Hammond: The First Great Journa­ list of the Old Northwest," Ohio Archaeological and Historical Quarterly. XLII (October, 1934), 345.

^^Utter, The Frontier State. Volume II, p. 297.

^^Emilius O. Randall and Daniel J. Ryan, History of Ohio (New York: The Century History Company, 1912), Volume II, pp. 324-325.

^^Letter from Stephen S. L'Hommedieu to Rosewell Marsh, Cincinnati, Ohio, November 24, 1862, Letter (photocopy). In Ohio State Historical Center Library, Columbus, Ohio. L'Hommedieu was Hammond's son-in-law. Hereafter cited as L 'Hommedieu's Letter. 88 states' rightsi In Washington at the time of the Cohens v. Vir­ ginia case, he wrote a series of articles under the pseudonym

"Hampden" in which he ardently defended states' rights.Ham­ mond, with his friend John Crafts Wright, United States, Repre­ sentative , would argue Ohio's cause in court.

On January 5, 1820, an application was made in the circuit court for an attachment against Osborn and Harper for contempt because they disobeyed the injunction of the previous September.

Arguments between the Bank's counsellors and those of the state officers ensued for the next few days. Wright contended that the conduct and proceedings of the officers were justified. He raised a series of points for the court to consider; that the court proceedings were really against the state of Ohio, over which the court had no jurisdiction; that the papers were served on O sbom by a person with no legal authority, and were thus irregular and constituted no legal injunction; that if O s b o m disobeyed the in­ junction, he was not in contempt because he had no intention to commit contempt; and that Harper was not included in the injunction, he was a public officer independent of the auditor's control. The court observed the importance of the case. Grave legal and constitutional issues were involved. The case was taken under advisement and the court adjoumed until the September term.^^

Harper and Orr did not languish in jail until September,

Charles Hammond, Review of the Opinion of the Supreme Court of the United States, in the Case of Cohens vs. Virginia (Steubenville, Ohio: Printed by James Wilson, 1821).

^^Niles' Weekly Register, Volume V, Number 26, February 26, 1820, p. 450. 89 however, Initially they were jailed in Chillicothe but were

transferred later to Lancaster, presumably because the Chillicothe

jail was insecure. Bank foes alleged that the transfer of the

prisoners to a more distant locale - Lancaster was thirty four miles away from Chillicothe - was designed to separate Orr from his wife and children, and both men from the consolations of their

friends.During the January session of the circuit court, it was shown that the two men had been arrested by a deputy marshal who was not legally constituted such. His commission as baliff was granted through a few words written oh the back of an old

letter. After their incarceration the marshal arrived and acted

as though he arrested the two. The court decided that the arrest

was illegal, because the marshal could not delegate a special

bailiff. The state lawyers agreed they would not prosecute the 17 marshal and his deputy. After almost three months in jail.

Harper and Orr were released

Resolutions Against the Bank

Ohio anti-Bank advocates were heartened by steps taken

“against it elsewhere. Prior to the opening of the court case,

news was received that Pennsylvania and Georgia were close to

levying a tax on the institution, the McCulloch decision notwith-

^^Ibid., from an Ohio Correspondent, Volume V, Number 18, January 1, 1820, p. 294.

^'^Ohio Monitor, cited in E. Bates (ed.). The Philanthro­ pist. A weekly journal containing Essays, on Moral and Religious Subjects. Domestic Economy, Agriculture, and the Mechanic Arts; together with a Brief Notice of the Times (Mountpleasant: Printed and Published by the Editor) Volume III, No. 14, January 29, 1820, p. 217. 90

TO standing. ° The Virginia Assembly resolved that Congress had no authority to grant a charter of incorporation to the Bank of the

United States.

What appeared to be the most effective move against the

Bank was a series of resolutions by the Pennsylvania legislature which proposed a constitutional amendment that stated:

Congress shall make no law to erect or incorporate any bank or other moneyed f sic~] institution, except within the District of Columbia; and every bank or other moneyed rsic! institution which shall be established by the authority of Congress, shall, together with its branches and offices of discount and deposits f sicl. be confined to the District of Columbia.

The proposed amendment and resolutions were sent to each of the

Pennsylvania representatives and senators in congress who were requested to exert all efforts to have the amendment added to the constitution. State governors received copies and were asked to submit them to their legislatures and appeal to them for help in procuring the adoption of the amendment. Senator Walter Lowrie of Pennsylvania offered the proceedings of the Pennsylvania PO legislature in Congress on January 5, 1820. The Pennsylvania resolutions had been passed as early as March 1819. It was only now, however, that they were gaining wide circulation.

On January 31, 1820, Henry Baldwin, United States rep­ resentative from Pennsylvania, proposed a constitutional amendment in the identical words of the Pennsylvania proposal. Congress

^^The Cleaveland Herald, January 4, 1820.

^^Literary Cadet, and Cheap City Advertiser. June 20, 1820.

AnnaIs of Congress, Senate, 16th Congress, 1st Session, January 5, 1820, p. 70. 91 was to enact no law which incorporated a bank except in the

District of Columbia. The resolution having been read twice, it was referred to the committee of the whole on the state of the

Union.

The proposed amendment made little impact on either

Congress or the state legislatures. It was never concurred in by

the United States Congress. It received only miniscule state

support in the next few years. After a stormy joint committee

session in the Ohio legislature the Pennsylvania resolution was 22 adopted. Ohio's resolutions, agreeing to the amendment, were

communicated to the United States Senate on February 16 by Ohio 23 Senator William Trimble.

The Pennsylvania amendment was enervated through a lack cf

support. While states such as Ohio, Tennessee, and Indiana

concurred with their sister state, the majority withheld their

support. By the end of 1823 the states of New Jersey, Connec­

ticut, Vermont, New Hampshire, South Carolina, Georgia, Massa­

chusetts, and New York had made known that they would not sub- 24 scribe to the Pennsylvania amendment. Other states neglected

to respond to the call. The lack of response in constitutionally

^^Ibid., House of Representatives, January 31, 1820, p. 1022.

^^Columbus Monitor. December 30, 1819, cited in Niles' Weekly Register, January 29, 1820, p. 355.

^^Annals of Congress, Senate, 16th Congress, 1st Session, February 16, 1820, p . 417.

Resolutions of the state legislatures mentioned above may be found either in the state papers of Governor Brown, from 1820 until he resigned office to become United States Senator, or in the Ohio Senate Journal, from 1820 until the end of 1823. 92

battling the Bank evidently disappointed those involved in the

Ohio case. Newspaper support outside the state was welcomed,

but Ohio was more desirous of having as many of her sister

states array themselves alongside her as possible. Lack of

support enervated her position, morally and psychologically.

Ohio Legislature Enters the Battle

In March 1820 the Bank retained Henry Clay as a legal

, counsel in the case. Clay notified Langdon Cheves of the

impending announcement that he would practice in the Ohio federal

court. The Speaker of the House believed that his announcement

was artful strategy. The fact that he would practice in Ohio

would "appear less invidious to the Bar and to the public of that

State." The assignment meant that Clay would have to resign

his Speakership and kept him from his congressional seat for two

months.

While the Bank exulted over the enlistment of the eminent

Kentuckian in the case, the Ohio lawyers were not similarly

impressed. John Wright inquired of Hammond what his thoughts

were on the news that Clay would be their opponent. Wright

observed that he did not think that Clay would be able to demon­

strate his skills "upon this term." Tongue-in-cheek he

concluded that it was too bad. "The mountain will labour, and

will not bring forth even a mouse . . . ."26

^^Hopkins (ed.). Papers of Henry Clay, Washington, Clay to Cheves, March 15, 1820, II, pp. 794-795.

^^Wright2®Wrig: to Hammond, Steubenville, June 27, 1820. Hammond Papers 93

The September term of the circuit court did not yield a final decision. Samuel Sullivan, successor as state treasurer to

Hiram Currey, was made a defendant in the case. An action of trespass was commenced against Osbom, Harper, Orr, McCollister,

Wright, and Hammond, charging them with "taking and carrying away the same sum of money in the proceedings in chancery specified, on under color and pretense of the law of Ohio. The court granted two injunctions favorable to the bank. The state treasurer was prevented from spending the tax collected from the bank; the auditor was enjoined from collecting the tax in the future, at 28 least until the case was decided.

The case still not settled, there ensued a phase of in­

tense activity against the Bank in the Ohio legislature. Anterior

to this the branch office at Cincinnati was closed in October 1820,

ostensibly because Cheves believed that the bank had too many 29 branches. Governor Brown was re-elected overwhelmingly; Charles

Hammond was elected to the legislature as a representative from

Belmont County. The Ohio legislature convened on December 4.

State auditor O s b o m reported the further court proceedings

of the Bank against the state officers. After his report Charles

Hammond moved that the auditor's communication and respective

27 Ohio, House Journal, 19th General Assembly, 1st Session, December 12, 1820, p. 99.

Tuscarawas Chronicle, cited in Cleaveland Herald. September 26, 1820. 29 American State Papers, Folio Finance, IV, Langdon Cheves to William Crawford, October 21, 1820, p. 944. 94 documents be submitted to a joint committee of eight, four from the house and a similar number from the senate, to examine the report and documents, and to report on them. The house agreed to 30 Hammond's resolution.

On December 12 the joint committee submitted a lengtj. . report in which historical argument, precedent, and reasoning were employed to justify the efficacy of Ohio's position. The elaborate report, largely the work of Hammond, was described by friends as compelling and by foes as specious. It claimed that by the eleventh amendment the separate states were not subject to the federal courts' jurisdiction in matters involving their sovereign state power and authority. "No state can be concluded, by the opinions of these tribunals." The committee firmly believed that the McCulloch case was contrived, and the states need not be bound by the principles established by it. The McCulloch decision had saved the Bank. But the committee cited the Marbury and Yazoo cases as instances in which Supreme Court decisions were effec­ tively ignored; Citing these precedents the report argued that

Ohio should not be condemned because of her refusal to succumb to

30 Ohio, House Journal, 19th General Assembly, 1st Session, December 5, 1820, pp. 46-47. 31 Ohio, General Assembly, Report of the Joint Committee of Both Houses of the General Assembly of Ohio, on the Communi­ cation of the Auditor of State upon the Subject of the Proceedings of the Bank of the United States, against the Officers of State, in the United States' Circuit Court (Concord: Printed by Hill and Moore, 1821), p. 27. Hereafter cited as General Assembly, Report on the Communication of the Auditor. 95 the Court's promulgations.^2

It was maintained that if congressional intent was to prevent the Bank from being taxed, this would have been explicit in its charter. The investiture of the corporation with vague and latent privileges was particularly odicus and dangerous to the committee.23

In recommending what should be done about the Bank in

Ohio, two strategies were proposed. A compromise was proposed which offered to return the assessed tax to the Bank if, in turn, the law suits were discontinued and the branches were removed from

Ohio. The second strategy was the startling proposal that laws be enacted prohibiting the Bank from using Ohio jails, courts, or notaries public. Maintaining their propositions to be peaceful and constitutional, the committee was drawing the executive and legislative branches of the federal government into the case.

By withdrawing the Bank from the protection of the state laws or from using state facilities, the Bank's protection was left solely to the federal government.24

Ibid.. p. 30. The report stated : "If the United States stand justified, in withholding a commission, when the court ad­ judged it to be the party's right; if the United States might, without reprehension, retain possession of the Yazoo lands, after the supreme court decided that they were the property of the purchasers from Georgia, surely that state of Ohio ought not to be condemned because she did not abandon her solemn legislative acts, as a dead letter, upon the promulgation of an opinion of that tribunal."

^^Ibid.. pp. 44-45.

^^Ibid.. pp. 62-63. 96

The report concluded with the committee proposing resolutions for adoption by the legislature. The•Virginia and

Kentucky resolutions were recognized and approved. The suit in the federal court was protested against as violating the eleventh amendment because state officers were sued for performing state duties. The state's right to tax the Bank as a private trade corporation was maintained. The Supreme Court was criticized ; the rights and powers of sovereign states were not to be settled and concluded in that Court. The governor was called upon to trans­ mit the report and resolutions to the other state legislatures and to seek their opinion. Copies were also to be sent to the Presi­ dent and to Congress. Finally, the Ohio legislature was called on to 35 prepare bills consonant with the above report. The whole report and individual resolutions were considered by the House on December

28, 1820. Henry Clay was present in the gallery. The whole report was agreed to by a vote of 57 to 8 . The near unanimity of purpose in the Ohio House was noteworthy. Despite the radical sentiments of some of the resolutions, the maximum number of votes that opponents could muster was a mere eight out of sixty- five. The Senate voted to agree with the resolutions by a similar 37 lopsided manner on December 30.

Governor Brown dispatched copies of the report to the

35 Ibid., pp. 63-64.

^^Ohio, House Journal, 19th General Assembly, 1st Session, December 28, 1820, pp. 192-195, and passim. 37 Ohio, Senate Journal, 19th General Assembly, 1st Session, December 30, 1820, pp. 173-177, and passim. 97

QO ex-presidents Thomas Jefferson and James Madison. John Jay

and DeWitt Clinton also received copies. Inquiring whether

Jefferson would censure or agree to the report, Brown was

delighted to find the ex-president sympathetic to the Ohio stand.

Supporting the report, but unwilling to be quoted, Jefferson's

distress at the federal judiciary was plainly evident. He com­

plained that "the judiciary is the dangerous corps of sappers and miners because they are in place for life and beyond responsi­

bility, impeachment being found in practice a mere scarecrow."

The ex-president believed that the Ohio report had rendered the

judiciary's doctrines so questionable that it should reconsider 39 its conclusions against the states. If Madison replied to

Brown's communication, his letter has been lost. John Jay

answered the governor. He regretted controversies between federal

and state authorities and hoped that the trouble between Ohio

and the national government would soon be settled. He wished that 40 boundaries of federal and state power be learned and defined.

Governor DeWitt Clinton of New York, long a favorite of Ohioans,

answered in words similar to Jefferson's. He saw the Ohio report

as an able document illuminating "the encroachments of the Supreme

Court." Clinton advocated measures to be taken against that

^®Ethan Allen Brown to Thomas Jefferson, Ethan Allen Brown to James Madison, January 28, 1621. Brown Papers.

3 9 Ibid., Thomas Jefferson to Ethan Allen Brown, Monti- cello, February 21, 1821.

^ Ibid., John Jay to Ethan Allen Brown, Bedford, New York, April 30, 1821. 98 body to stem whatever evils would flow from its doctrines.

The New York governor did not mention specific measures, but presumably he counted the Ohio report in that group. Although

Ohio gained some powerful moral support here, her sister states never rallied to her side. Some Virginia papers supported her;

Kentucky bestowed her approval. But the remaining states either disapproved or ignored the Ohio report.

In the month of January, Charles Hammond approached Henry

Clay with an offer to use his influence to have $95,000 to $98,000 of the tax money returned to the bank. Clay, somewhat leery, was willing to accept the offer on condition that none of the Bank's 4:3 rights would be surrendered. The deal never transpired.

On January 29, 1821, legislative action against the bank in Ohio reached its highest point. A law was passed, entitled

"An act to withdraw from the bank of the United States the protection and aid of the laws of this state, in certain cases."

The law would go into effect if the Bank continued operations in

Ohio after September 1821. The legislature was pursuing the strategy enunciated in the joint committee report. This extra­ ordinary law denied the use of the state's law processes to the

Bank. Judges and justices of the peace were prohibited from

41 Letter from Ethan Allen Brown to DeWitt Clinton, April 21, 1821, Correspondence, August 22, 1806 - September 11, 1836, of Ethan Allen Brown, Governor of Ohio, 1818-1822, Manuscript (Microfilmed), In Ohio Historical Center Library, Columbus, Ohio. 42 Warren, The Supreme Court. I, pp. 530-532. 4-3 Hopkins (ed.). Papers of Henry Clay. Clay to Cheves, January 22, 1821, III, p. 13. 99 acknowledging or receiving proof of any deed or mortgage to which

the Bank was a party. Ohio jails were closed for its use: anyone who committed theft, burglary, or arson on the federal institution would not be incarcerated. Monetary penalties would be levied upon any judge, sheriff, notary public, or any other person mentioned in the act who violated the law. An alternative course

was offered, however. If the suits against the state officers were dropped, and if the Bank submitted to a four percent annual

tax on dividends, or if the Bank dropped the case and withdrew

entirely from Ohio, the law would be suspended.The Ohio

legislative report which reaffirmed the Virginia and Kentucky

Resolutions was followed. The law's effect was to nullify the

McCulloch decision and the Bank's standing, granted by congres­

sional charter, in Ohio.

A second bill enacted within a week of the first, offered

to refund $90,000 to the Bank when that institution agreed to

drop its suits against the state officers and pay a four percent

yearly tax on its dividends or a tax of $2,500. If the insti­

tution withdrew from Ohio, its money would be returned.The

agreement of the Bank, although the bill was silent on the matter,

also meant that the organization would again enjoy the protection

of Ohio laws.

The bill to restore the money was unpalatable to Clay.

^"^Chase, Statutes of Ohio, II, Act passed January 29, 1821, pp. 1185-1185. ^^Ibid., Act passed February 2, 1821, pp. 1198-1199. 100

Conditions for the return made it impossible for the Bank to concur. The only remedy for the Bank was to proceed through the courts. Clay hopefully commented that the case would be 45 decided in the September term.

There was some opposition to the legislative acts of the

Ohio legislature. Joseph Cooley read a dissent into the House

Journal on February 2. The protest maintained that no states' rights philosophy should compel men to endanger the Union. Even a foreigner was protected by the state's laws ; and yet a corporation, established under the constitution and laws of the

United States, was left unprotected by Ohio laws. The protest maintained that congress had the constitutional right to establish a bank. The judiciary, not the states, were expositors of the constitution, for;

If the states themselves are to be the sole expositors . . . of the nature of those powers conferred upon the general government, and those retained to the states, they would probably receive as many different constructions, as there are members of the American family, as the interests, the feelings or the prejudices of each might dictate. And, instead of the energy, the strength, and the harmony contemplated by the union of the states, our government would become a perfect "hydra." It could afford neither safety or protection; but must either fall to pieces of its own weight, or be destroyed by the discrep­ ancy of the materials of which it is composed.

After arguing that the suit did not violate the eleventh amendment, and blaming problems on the multiplicity of state banking insti­ tutions rather than the United States Bank, the report concluded that the law which exacted the $100,000 tax and all the subsequent

“^^Hopkins (ed.). Papers of Henry Clay, Clay to Cheves, Washington, February 15, 1821, III, p. 41. 101 proceedings were erroneous. The protest was signed by William

Vance, James Cooley, James Harris, Johnathan Sloane, John R. 47 Parrish, and William W. Gault. None of the six suffered for the position they assumed. James Cooley was elected to the Ohio Senate the next year. The others were returned to the Lower House.

A Franklin County grand jury, convening in April, was extremely critical of its legislators and the laws enacted in

January and February. The act which outlawed the Bank, and the proceeding relating to that subject, the grand jury was convinced, had degraded the state's political character. The jury contended

that all Ohioans would become disenchanted with the legislators

and litigation when they perceived how badly the state's reputation

was damaged and how much the treasury was depleted as a result of

the costs of legislation and litigation.

The high points of Ohio opposition to the Philadelphia

corporation were threefold: the levying of the tax on the Bank;

the exaction of the tax; and the legislation outlawing the Bank.

The zenith of opposition was attained by the final action which

embraced the doctrine of nullification. However, from this point

on the lawmakers steadily retreated from their position. The

February 2 law was rather conciliatory in offering to return the

Bank's money, already demonstrating the legislators' retrench­

ment. Subsequent actions and inaction demonstrated the same

principle.

'^"^Ohio, House Journal, 19th General Assembly, 1st Session, February 2, 1821, pp. 386-393, and passim.

^^Cleaveland Herald, June 5, 1821. 102

Defeat in the Circuit Court

Almost two years after the exaction of the tax from the

Mammoth, the circuit court decided the case in the Bank's favor.

On September 5, 1821, the defendants were enjoined perpetually

from collecting the tax from the Bank, were to pay the court costs,

and were to return the $100,000 with six percent annual interest

since September 17, 1819, on the $19,830 of specie. The money 49 was to be returned before September 6. An agreement was filed

by the parties in the case regarding the further procedure of the

case. If the defendants appealed the case, they would do so on

the $2,000 paid to Harper, the interests and the costs of the

suit in chancery.

State Treasurer Sullivan refused to comply with the court's

decree on the grounds that his predecessor received the money and

that he, Sullivan, could not relinquish it because neither the

auditor ordered it nor the state constitution nor laws allowed it.^^

Sullivan was jailed for contempt by the marshal of the district

and a writ of sequestration was awarded. If the money was not

found in the state treasury, the complainants were authorized to

take the money from Sullivan's lands, real estate, goods and

chattel. The state treasuiry was entered and the sum of $98,000

^^United States, Circuit Court, Ohio, Transcript of the Case. 1819-1821. of the Bank of the United States vs. Ralph O s b o m . September 5, 1821. In Ohio State Historical Center Library.

5°Ibid.

^^Ibid., September 7, 1821. 103 taken and delivered to the plaintiffs.

The irony of the money's return cannot be missed in a

scene reminiscent of the state's earlier encounter at the branch

bank. Sullivan was removed from jail and taken to the state

treasury. Refusing a request for the keys to the treasury, the

marshal simply removed them from Sullivan's pocket. The money

was removed, placed in a wheel barrow, and transported "to a

tavern superbly fitted for its reception. The next day the

money was returned to Chillicothe.

Reaction to the decision and to the entering of the state

treasury was less intemperate than might be expected. The

Cleaveland Herald thought that states' rights proponents would be

shocked by a state treasury being entered upon a circuit court

order; but since nearly all admitted that the tax was illegally

collected, the writ granted by the court was correct and justi-

fied « The more vocal Liberty Hall and Cincinnati Gazette com­

plained that the federal.judiciary was leading the federal

government to supremacy over all. And, in a later issue, it

facetiously queried whether it would not be cheaper for the Ohio

legislature to be replaced by the federal circuit court and for

the executive to be replaced by the Bank. Many papers found

the conduct of the state gratifying, however. The case had been

^^Ibid.. September 10, 1821.

^^Ohio Monitor and Patron of Industry. September 15, 1821.

^'^Cleaveland Herald, September 18, 1821. 55 Liberty Hall and Cincinnati Gazette. September 22, 1821 and November 24, 1821. 104 in the court for almost two years and emotions had subsided.

Governor Brown related the proceedings in his annual message to the General Assembly. He told the lawmakers that it was now the duty of the United States Supreme Court to decide upon the legality and constitutionality of the circuit court decision.

If the Court reaffirmed the circuit court's decision, perhaps it was time for the states to enact a constitutional amendment

"to prevent the clashing of jurisdictions."^® The governor did not refer specifically to the eleventh amendment, but he did

speak of the court decision which made a state a defendant without its own consent. Ohio had more than one recourse open to it.

The oase still had to go before the Supreme Court. If an unfavor­ able verdict was rendered, there was the alternative of a constitutional amendment.

®®Ohio, Senate Journal, 20th General Assembly, 1st Session, December 4, 1821, pp. 9-10. CHAPTER VII

THE OHIO CASE BEFORE THE SUPREME COURT

Interpretation of the Eleventh Amendment

States' rights proponents of Ohio's position in the case challenged the Bank forces over the correct interpretation of the eleventh amendment to the constitution. The eleventh amend­ ment stated that,

"The judicial power of the United States shall not be constructed to extend to any suit in law or equity, commenced or prosecuted against one of the United States by Citizens of another State, or by Citizens or subjects of any Foreign State."

The Report on the Communication of the Auditor took great notice of the conflicting interpretation of the eleventh amend­ ment. Hardly an impartial party in the matter, the committee which authored the report argued that the eleventh amendment had been misconstrued in bringing the state before the circuit court. The Supreme Court originally possessed the power to hear the oase which involved a state; however, that power had been taken from the federal judiciary by the enactment of the above amendment. The committee noted that it was clearly expressed that before ratification of the amendment, circuit courts could not maintain jurisdiction over the states or her officers in

^Poore, Federal and State Constitutions, Part 1, p. 22.

105 106 cases "of the direct action of the state sovereignty." Only the Supreme Court had power to act directly upon the states. How enigmatic it was, then, that the eleventh amendment, expressly enacted to prohibit the states from being taken before the

Supreme Court, would be operative "as vesting the circuit courts with power to do that indirectly which they never had any direct O power to do."

The legislative committee claimed that the state was an

"intangible entity." By moving against the officers of Ohio, the state herself was being attacked, for it was through her Q agents that the state acted. The committee's work, concurred in by the General Assembly, was a worthy piece of states' rights argumentation.

The lawmakers' interpretation of the eleventh amendment was not novel. The legislators were in the mainstream of thought of those who took the side of Ohio in the encounter. As early as 1819 friendly Ohio newspapers and ideological allies argued that the state could not be brought constitutionally into court.

One Ohio journal, the Hamilton Gazette and Miami Register, claimed that the Bank of the United States was openly disregarding the eleventh amendment by pursuing its case against state officers

2 General Assembly, Report on the Communication of the Auditor, pp. 6-8, and passim.

3-,Ibid., p. 10. 107 who were carrying out a law enacted by the Ohio legislature.^

The Bank was guilty of violating the spirit, if not the letter, of the amendment.

For proponents of state sovereignty, the specter of the federal judiciary increasingly encroaching upon the prerogatives of the states was too much to bear. As a result they pressed on with objections to the jurisdiction of the circuit court.

Charles Hammond was especially troubled by the judiciary's apparent usurpation of power. He complained in a letter to Governor

Brown that.

There is yet a wide extent of ground unexplored upon the question - And the more it is discussed, the more difficulties will present themselves in the way of the march of the federal court to absolute supremacy .... Indeed, my Dear Sir, I feel its . . . vast importance, and cannot but mourn the apathy and misapprehension of our Sister States, and some good men among ourselves.^

Hammond saw the necessity of the states upholding their sover­ eignty. Obstacles had to be placed in the path of judicial branches march to absolute power.

An Ohio newspaper carried Hammond's arguments and fears even further with the belief that the Supreme Court was surely progressing on a path which would destroy the federative prin­ ciples of the United States. From the ashes of states' rights would arise the phoenix of a mighty consolidated empire. For­ tunately for the countiry, the newspaper proclaimed, the state of

4 Hamilton Gazette and Miami Register, December 14, 1819.

^Hammond to Brown, Belmont, November 29, 1619. Hammond Papers. 108

Ohio had undertaken the defense of her sovereignty which slowed down

the pretensions of the federal court.®

A most notable foe of the federal judiciary was former president Thomas Jefferson. Unwilling to publish his thoughts

for public consumption, the former president was, nonetheless, both an admirer of Ohio and of Charles Hammond. Jefferson feared

that the seeds of dissolution of the United States government

resided in the federal judiciary whom he called an "irresponsible body." Imperceptibly but surely power was being usurped from the

states until the government of all be consolidated into one.

To this trend Jefferson was opposed. The ex-president who had

tangled often and bitterly in the past with the federal judiciary,

still remained firm in his distrust and antipathy for that group.

The period of intense activity against the bank, charac­

terized by the events of 1819-1821, entered into a relatively

quiet phase. Ironically the defenders of Ohio's state sovereignty

turned towards the Supreme Court to overturn the circuit court verdict and to uphold the state's position. The state actually

had gone about as far as possible in arraying herself against the

federal government. The behavior of the men who had pushed the

case into court, although regarded as intemperate, even rebellious

by some, demonstrated no desire to effect an irreparable con­

frontation with federal authorities. In fact as soon as Ohio

^Liberty Hall and Cincinnati Gazette. June 16, 1821.

'^Andrew A. Lipscomb (ed.). The Writings of Thomas Jefferson (Washington, D.C.: The Thomas Jefferson Memorial Association, 1903), Thomas Jefferson to Charles Hammond, Monticello, August 18, 1821, Volume XV, pp. 331-332. 109 lawmakers declared the national Bank outlawed in Ohio, the legislature receded from that position by offering the Bank a compromise.

An irony in the case was that the principal attorneys for each side were fairly close friends. Charles Hammond had long admired Henry Clay, and he was one of the Kentuckian's presidential boosters. However, Clay's advocacy of the Bank caused Hammond consternation. In writing to Clay the Ohio attorney expressed his earnest wish someday to see a westerner as president of the United States; but, he was less sure of advocating Clay for that office when he saw the Kentuckian steadfastly adhere Q to the doctrines put forward by the Philadelphia corporation.

The former Speaker of the House attempted to assuage the doubts of his Ohio friend. Clay glossed over the differences between

Hammond and himself. He claimed that a comparison of their res­ pective views assuredly would show that they were not so 9 divergent. Whether Clay's letter immediately reassured the

Ohio lawyer is unknown; however, Hammond remained a firm friend and admirer of his opponent.

Charles Hammond attempted to proselytize converts for the

Ohio cause through a pamphlet which was published in 1823.

Using the pamphlet as a vehicle for his views, he demonstrated at what stage the controversy was and developed an argument to

®Hopkins (ed.). Papers of Henry Clay, Hammond to Clay, St. Clairsville, July 1, 1822, Volume III, pp. 245-246.

^Ibid., Clay to Hammond, August 14, 1822, III, p. 276 110

uphold the Ohio position. Hammond's argument was not new; it was

essentially the same as found in the 1821 General Assembly report.

Declaring that the circuit court decree was erroneous because of

a number of particulars, the Belmont attorney claimed that the

state, proceeded against through her agents, was actually the

defendant in the case. Both the constitution and the judicial

act of 1789 excluded the circuit court from jurisdiction in the

matter. The only federal judicial body invested with the nec- 10 essary jurisdiction was the Supreme Court. Hammond referred

to section 13 of the 1789 act which gave the Supreme Court the

"exclusive jurisdiction of all controversies of a civil nature,

where a state is a party, except between a state and its citizens,

and except also between a state and citizens of other states or

aliens, in which latter case it shall have original, but not

exclusive jurisdiction."^^ The principal state's attorney averred

that the Bank's charter of incorporation gave that institution

the right to sue in the circuit court, a right that Pennsylvania

.and Kentucky courts upheld. Nevertheless he concluded that,

Neither the rules of evidence nor the law of contract are or can be regulated by the national legislature. In the case supposed, no question can arise except under the law of evidence or of contract. How absurd then to say that the case arises under a law of congress, when in the whole progress of litigation no law of congress is drawn into discussion . ^

Charles Hammond, The State of the Case and Argument for the Appellants, in the Case of the Bank of the United States, versus the Auditor and Treasurer of the State of Ohio, and Others, in the Supreme Court of the United States (Cincinnati : Morgan and Lodge, 1823), p. 45.

^^Ibid., p. 49.

^^Ibid., pp. 49-50. Ill

The only method for handling such a case, for a state to defend its sovereignty and rights, was to go before the supreme tribunal of the land.

Maintaining that the Bank was neither a governmental institution, such as the mint or post office, nor a public institution, Mr. Hammond discussed the taxation question. He argued that it was demonstrable that an exemption from taxation was not incidental to the Bank's charter. The fact that the original charter for the first Bank of the United States claimed no exemption, the precedent of the Deveaux case, and

Virginia's rejection of the principle of exemption were used as proof that exemption was debatable. If Congress decided to

settle this moot point, it would have included a grant of exemption in the second charter. Congress had not done so, however. The 13 Bank was therefore unable to claim this privilege.

Charles Hammond considered the objection that the tax

levied was much more than a tax, that it amounted to a penalty.

The whole thrust of the tax was to level a prohibition rather

than to collect revenue. The Ohio apologist concluded that

prohibition was a proper end of taxation for all governments.

The tax, he claimed, was not designed to interfere with the

governmental functions of the Bank but only with the private

trade of that corporation.^^

The Belmont lawyer concluded his defense of the state's

position by maintaining that the constitution spoke on the topic

l^Ibid., pp. 70-71.

^"^Ibid., p. 95. 112 when the states may or may not tax. The states could not be restrained from using that power unless there were specific state­ ments to the contrary. To do so was "to change the principles of the constitution."^^ Hammond was still an adamant defender of the correctness of the state's position. His arguments were consonant with a states' rights interpretation.

It is unknown whether Hammond's opus won over new suppor­ ters to the Ohio cause. Among the readers of the pamphlet was

Chief Justice John Marshall. Although the two men were divergent in their philosophies of the national goveimment, nonetheless,

Marshall commended Hammond on his work. Marshall informed the

Ohio attorney of his pleasure at reading such a cogent argument, one that was written with great ability.

The Case Decided

Nearly four and one-half years had passed since state officers had exacted the tax money. Anyone who followed the case during those years witnessed a plethora of legislative maneu­ vering, propagandizing, newspaper bickering, and court battles.

The final arbiter in the case, the Supreme Court, agreed to hear the O s b o m case in its 1824 February term. Charles Hammond,■

Ethan A. Brown, now a United States Senator, and John C. Wright were attorneys for Ohio. Henry Clay, John Sergeant, William Wirt, and Daniel Webster argued the Bank's case.

Charles Hammond presented the opening argument for the

ISlbid.. p. 98.

^®John Marshall to Hammond, Richmond, December 28, 1823. Hammond Papers. 113 appellantss borrowing heavily from the report presented by the

Ohio legislature and from his own pamphlet published in the previous year. He claimed that the circuit court decree, ordering the return of the tax money plus interest, was erroneous. The main points of his objections were that the state of Ohio was proceeded against by the circuit court which had no jurisdiction in the matter. And, he objected, because the court decree assumed that "the bank of the United States is not subject to the taxing power of the state of Ohio, and decides, that the law of Ohio, 17 the execution of which is enjoined, is unconstitutional."

As he had in the past on the former point, Hammond argued that the bill in the case was against the state and not against her ministerial agents. The acts that the Bank and the bill complained against were those of the Ohio legislature. The constitution and the judiciary act were clear on the point that the inferior court could not exercise jurisdiction in the case.

This was an example of original jurisdiction which was reserved

IQ to the Supreme Court. The Ohio counsel asserted that the decree was therefore erroneous:

1. Because the proper parties are not before the court: 2. Because the circuit court cannot, under either the constitution or laws of congress, exercise jurisdiction over the proper party: 3. Because both the constitution

TV Henry Wheaton, Reports of Cases Argued and Adjudged in the Supreme Court of the United States. February Term, 1824. (New York: Banks & Brothers, Law Publishers, 1883), Volume IX, pp. 744-745. Hereafter cited as 9 Wheaton.

^®Ibid., pp. 755-752, and passim. 114

and law vests exclusive jurisdiction of the case made in the supreme court.

Hammond considered the most important point to be the power of the states to tax the Bank. The Supreme Court was petitioned to reconsider its previous opinion in the McCulloch case which declared that the states did not have the legitimate power to tax the corporation. Hammond tried to show that the fiscal institution was a private rather than a public corporation and, as such, did not merit a tax exempt status. Reminiscent of his past thoughts and words, he refuted the Bank's claim that it was a public corporation. Contrasting it to such agencies of the federal government as the post office, the mint, or customs houses, Hammond claimed that there were no real comparisons.

The business of the post office was of a public nature, whereas that of banking was private. The Bank's work for the government 20 was only incidental to its private concerns.

The final point made by Hammond was that the tax exempt privilege enjoyed by the fiscal institution was not necessary for its existence. It was beneficial for the institution but, in no way, was it necessary. The Bank had existed for twenty years without such a grant and was useful. The privilege must, he pleaded, be specifically inserted into the charter of incorporation. PI This was not the case.

Henry Clay made a brief argument in which he assumed a

l^Ibid., p. 765.

^^Ibid., pp. 785-787, and passim.

^^Ibid.. pp. 794-795. 115 nationalist point of view. Refraining from debating Ohio's right to levy a tax on the grounds that the McCulloch case had already replied to that, the Kentuckian declared that the whole point of the Ohio law was prohibitory. The law meant to drive an instru­ ment of the national government outside of the state.

Clay agreed with his adversary over the words of the constitution which claimed that a state could not be sued; but he disagreed over the interpretation. The constitution must not be read so that an individual could be offended "because a law of the state happens to come under consideration." If state interests were at stake in the case, even more so were the sovereign interests of the national government. Clay argued that the vexatious jurisdictional problem was solved by congress which had vested the bank with the capacity to sue in circuit court.

After John Wright cited the eleventh amendment as a defense of state sovereignty, the Court expressed a desire to hear a reargument on the jurisdictional problems involved. As the lawyers prepared their briefs for a last round. Clay corres­ ponded with Nicholas Biddle, the new president of the Bank.

Clay admitted the explosive nature of the issue. If the Court accepted Ohio's interpretation, all the cases heretofore decided 24 would be called into question. Clay's apprehensiveness was not exhibited to his foe, however. Clay wrote to Hammond and

^% b i d ., pp. 795-796.

23Ibid., p. 798.

^"^opkins (ed.). Papers of Henry Clay, Clay to Nicholas Biddle, February 17, 1824, Volume III, p. 646. 116 predicted that Ohio would lose which would not be the cause of

any great surprise. The rearguiaent over jurisdiction, he handily d i s m i s s e d . 25 The confidence he expressed to Hammond

was not the same as he had shown to Biddle.

Hammond believed that the Ohio forces had acquitted

themselves well in the encounter. Clay had wandered somewhat

from his prepared brief to deliver extemporaneous statements

about the state’s conduct in the matter. Hammond concluded that

his Kentucky counterpart was somewhat diffident in the c a s e . 25

Clay, he felt, was trying to cover up fallacies in his case by

personal vituperation. On how this would be accomplished,

however, Hammond was silent.

Hammond was somewhat despondent before the reargument,

fearing that the case was lost. Having received Clay's letter,

the Ohio attorney reasoned that the reargument over jurisdic­

tion meant that the other points had gone against the state.

He remained convinced of his position but was pessimistic over

the outcome.Hammond feared that the cause was finally over.

Reargument took place on March 11 in connection with

^^Ibid.. Clay to Hammond, February 22, 1824, III, p. 655.

^^Hammond to ?, Cincinnati, February 23, 1824. Hammond Papers.

^'^Ibid.. Hammond to Wright, Cincinnati, March 5, 1824. 117 another case, the Bank of the United States v. Planters * Bank of

Georgia. Charles Hammond was absent. The ill health of his wife forced a return home to be at her side. Langdon Cheves was present to render whatever help he could to the plaintiffs.29

The reargument produced nothing that was new. So much had been written and said on the matter that the argumentation was predictable. Bank attorneys claimed that the 1816 charter granted the Bank the power to commence suits in circuit court. The

Deveaux case decided that the original Bank did not have the right to sue in federal courts, but, the attorneys argued that the high Court implied that the institution would have possessed the right if the charter specified it. Congress, meanwhile, possessed the power to confer jurisdiction upon the circuit courts.

The Ohio lawyers said that there was no actual difference between the charters granted to both federal Banks. Congress could not invest the first institution with power to sue in

This case involved two Georgia banks; the Planters' Bank and the Bank of the State of Georgia. President Cheves attempted to have the two banks redeem their notes in specie in 1820. An agreement was worked out whereby the banks would redeem their notes either weekly or monthly. Both banks ultimately rejected the agreement and would not redeem the notes presented by the national Bank. The Georgia Legislature entered the controversy in 1822 by declaring that the state bank notes which the national Bank held would not be redeemed in specie unless the person who presented the notes swore that they were not pro­ cured for the purpose of drawing specie. See Catterall, Second Bank of the United States, p. 84. 29 Wright to Hammond, Washington, March 8, 1824. Hammond Papers.

^^9 Wheaton, pp. 805-806. 118 the circuit courts and was incapable of granting that power to its successor.

At home with his ailing wife and away from the action,

Hammond reflected upon the case. He grew more pessimistic over chances for victory. Believing that the jurisdiction argument had been fully explicated, he brooded that the reargument augured defeat. As is the wont of most people in a similar situation,

Hammond yearned for more time to develop a fuller and better argument.

The Supreme Court rendered its decision on March 19, 1824.

Hammond's dire premonitions were fulfilled. Chief Justice

Marshall delivered the Court's opinion and began by disposing of the jurisdictional issue. The Court rejected the appellants' claim that the charter of incorporation did not grant the circuit court jurisdiction. Semantically analyzing the words which granted the suing in circuit court, Marshall concluded that there could be only one interpretation. The words could not be "made plainer by explanation." The Bank was found against in the Deveaux case because the power to sue, granted in the charter of the original Bank was too broad.The second charter rectified that.

Marshall affirmed that the grant which gave the Bank the capa­ bility to sue was constitutional.^^

^^Ibid.., P*p. 812.

^Hammond to Wright, Cincinnati, March 15, 1824. Hammond Papers.

^^9 Wheaton, p. 817.

^"^Ibid.. p. 828. 119

Once the jurisdictional issue was laid aside, the Court responded to all of Hammond's objections concerning the erroneous nature of the circuit court decree. The constitutionality of the decree was affirmed. Marshall rejected Ohio claims that the Bank was a private corporation. The thrust of the McCulloch decision was that the financial institution was an instrument for carrying out national ends. The fact that it carried on private business was incidental to its work for the federal government. Marshall asked why the Bank was created and responded that it was a

"necessary and proper" instrument for engaging in governmental 35 financial business. The McCulloch decision was reaffirmed, and

Ohio had finally lost her long battle. The circuit court decision ordering interest to be paid on the money held by the state officers was reversed, as they had been restrained from using the 36 money in any manner.

The End of the Fight

It is ironical that the case which had opened in such

turmoil was resolved and accepted with such equanimity. Ohio newspapers reported the decision with little editorial comment.

Apparently"the most disappointed parties were the men who had

argued so forcifully in the courtroom. Sending home the court's

opinion, John Wright evidenced his sorrow. He believed that a

few more similar decisions, and the populace could bid farewell

^^Ibid.. pp. 860-861.

^^Ibid.. p. 871. 120 37 to their state sovereignties. Hammond remained unconvinced by the opinion. His most cogent argument that dealt with the state's

QQ inability to be sued, he believed went unanswered. The final decision found Hammond unswayed in his arguments and prin­ ciples.

The Belmont attorney was lauded for his role. John

Wright informed his friend that Daniel Webster complimented

Hammond on his arguments. And an unidentified man, in a burst of hyperbole, declared that he would rather have written Hammond's 39 argument than be president. Even John Marshall praised Hammond in effusive terms. He called his brief "the most remarkable paper that had been placed in our courts, since the days of Lord Mans­ field." The Chief Justice was so impressed by the brief that he was nearly persuaded to decide "that wrong was right in the case.Marshall also spoke highly of the "remarkable acuteness and accuracy of mind" and the great intellectual power Hammond displayed.There is little doubt that Hammond had shown himself to be a formidable and persuasive personality even in defeat.

Ohio's defeat, although not contested, further angered

37 Wright to Hammond, Washington, March 22, 1824. Hammond Papers.

Ibid., Cincinnati, Hammond to Wright, Cincinnati, April 9, 1824. 39 Ibid., Wright to Hammond, Washington, April 9, 1824.

^L'Hommedieu Letter, L'Hommedieu to Marsh, November 24, 1862. 41 Smith, "Charles Hammond and His Relations to Clay and Adams," p. 28. 121 those who distrusted the power of the federal judiciary. Hammond quoted an excerpt from a letter he received from Thomas Jefferson to Representative Wright. The letter afforded another example of

Jefferson's antipathy towards the federal judiciary. He stated:

The germ of disolution Fsici of our federal government is in the constitution of the federal judiciary; an irres­ ponsible body, working like gravity by night and by day, gaining a little to day and a little to morrow, advanoing its noiseless step, like a thief, over the field of jurisdiotion, until all shall be usurped from the states, & the government of all be consolidated into one.

Although Hammond was not as pejorative in his choice of words, there is little doubt that Jefferson's sentiment expressed

Hammond's beliefs.

With the culmination of the case, it was necessary for the state legislature to respond to the verdict and dismantle the apparatus of its opposition to the Bank. Although the case was decided in March the Ohio legislature did not convene until

December 1824. At that time Governor Jeremiah Morrow told of the necessity of appropriating money to pay the debts inourred by

the state officers. A resolution was passed authorizing the

treasurer to pay out the money according to the judgment and to

credit the books of the late treasurer with $98,000 that had been

"^%iammond to Wright, September 17, 1824. Hammond Papers. This is an excerpt from a letter that Hammond received from Thomas Jefferson dated August 18, 1821. 122 taken from him by the writ of sequestration.^^

A last spark of defiance originated against the Bank in the Ohio Senate in 1825. The Cincinnati branch was to be reopened for business which launched some irate legislators into activity.

A set of resolutions was offered in the Senate, protesting against the reopening of the Cincinnati branch as unconstitutional because the legislature had not given its permission. A second resolu­ tion refused the state's consent from allowing the branch to open within the confines of Ohio. The resolutions were to be forwarded to Nicholas Biddle and the cashiers of each branch.

The indefinite postponement of the resolutions was achieved, albeit by a slender vote of 19 to 1 6 . The closeness of the vote attested to the continued unpopularity of the Bank; but, in face of the Osborn decision, it is difficult to imagine any good results the passage of the resolutions could have accomp­ lished. Fortunately cooler more prudent heads prevailed.

On January 18, 1826, the act that withdrew the protection and aid of Ohio law from the Bank of the United States in Ohio was repealed.Legislative resistance, although ended previously.

^^Ohio Laws, Volume 23, p. 106, cited in Jean Dick Cheetham, "State Sovereignty in Ohio," in Ohio Archaeological and Historical Publications, IX (1901), pp. 300-301. 44 Ohio, Senate Journal, 23rd General Assembly, 1st Session, February 2, 1825, pp. 301-302.

^^Ohio, General Assembly, Acts of a General Nature, Passed at the First Session of the Twenty-fourth General Assembly of the State of Ohio, Begun and Held in the Town of Columbus, December 6, 1825 (Columbus: Printed by George Nashee, State Printer, 1826), Volume 24, p. 24. 123 was now technically concluded. Ohio's assault on the Bank and her embracing of nullification had come to an end. EPILOGUE

The gracious acceptance of the Supreme Court decision contrasts sharply with the rancorous conduct which precipitated the conflict. Many reasons may be offered why Ohioans put up no further resistance against the Bank. The issue had stretched out over too long a period of time. A four and one-half year battle had ensued in the courts - too long a period for everyone to maintain the high peak of interest which signified the beginning. In the meantime Ohio interests were turning to other matters of great interest. The presidential election of 1824 was approaching, and the nation and state were turning their attention to that issue. However, of even greater significance and interest to Ohioans was the project of building the Erie and

Ohio Canals with the accompanying expectations of increased trade.

Furthermore, the Bank had taken steps to rectify itself. The inept stewardship of William Jones was replaced by the abler

Langdon Cheves and, finally, by Nicholas Biddle. The latter two rectified questionable practices and straightened out the financial matters of the Bank.

The nation and the state had emerged from the depression that struck it in the latter part of the second decade and the first years of the third. Gone from the Ohio newspapers were the omnipresent laments of farmers and Ohio citizens, and the multitudinous advertisements of sheriff's sales. The finances

124 125 of the state were in a prosperous way by 1826.Î The econoitiio and political considerations combined to negate Ohio opposition to an unfavorable verdict. Finally, one must consider that the men most intimately involved in the case, inspired by economic or philosophic motives, had contested as far as they could. With the improvement of the economy one issue was erased. The philosophy of states' rights suffered by the verdict but further combat was inconceivable.2 Men like Hammond, Wright, and Brown fought hard and accepted defeat. Their intent was not to undermine the federal government.

The Ohio case has been the subject of varying interpre­ tations. Some have been content to see the problem as a political and constitutional issue.^ Others have tended to focus entirely on the economic aspects of the case, concluding that warfare upon the Bank was economically motivated. Constitutional issues were drawn in, however, to legitimize the actions the state undertook. Even historians sympathetic to Ohio's action have embraced the latter argument.^ As compelling as the economic argument appears to be, a modification seems in order. The men most wholeheartedly involved in the case were the leaders of the state. Their action was not isolated but done within a community

^Sumner, History of Banking in the United States. Volume I, p. 155.

fitter. The Frontier State, Volume II, p. 312. 3 Chase, Statutes of Ohio, Volume I, p. 43. 4 Bogart, "Taxation of the Second U. S. Bank," p. 312.

^Utter, The Frontier State, Vol’jme II, p. 312. 126 of action of other states. When those states retreated, Ohio maintained her constitutional interpretations until she had her day in court. While the economic argument is difficult to rule out, one cannot read the papers and correspondence of the man most symbolic of Ohio resistance - Charles Hammond - to discern that his objections were philosophically not economically inspired.

Thus, while economics plays an integral role in the affair, there is an interplay of economic and constitutional issues rather than a precedence of the former over the latter.

Since the Ohio case is so much the story of Charles

Hammond, a final irony is in order. An influential newspaperman in the 1830's, Hammond remained an ardent Clay supporter until the former's death in 1840. Hammond who fought so strenuously against the Bank in the past, arrayed himself on the side of the

Bank during the Jackson administration. He lost again. BIBLIOGRAPHY

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Bates E. (ed.). The Philanthropist. A Weekly Journal Containing Essays, on Moral and Religious Subjects. Domestic Economy. Agriculture, and the Mechanic Arts; Together with a Brief Notice of the Times. Mountpleasant: Printed and Published by the Editor.

The Chillicothe Supporter.

Cleaveland Herald.

Hamilton Gazette & Miami Register.

The Inquisitor, and Cincinnati Advertiser.

Liberty Hall and Cincinnati Gazette.

Literary Cadet. (Cincinnati).

National Intelligencer. (Washington).

National Register. (Washington).

Niles, Hezekiah (ed,). Niles' Weekly Register: Containing Political. Historical. Geographical. Scientifical. Statis­ tical. Economical, and Biographical Documents. Essays, and Facts: Together with Notices of the Arts and Manufactures, and a Record of the Events of the Times. Baltimore : Printed by William Ogden Niles.

The Ohio Eagle. (Lancaster).

Ohio Monitor and Patron of Industry.

The Ohio Watchman. (Dayton).

Scioto Gazette and Fedonian Chronicle.

United States Gazette and True American. (Philadelphia).

Western Herald and Steubenville Gazette.

Western Spy, and Cincinnati General Advertiser. 132

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Brown, Ted W. (Compiler), Secretary of State. The State of Ohio: Number of Inhabitants Urban and Rural Population . . . as Certified in the Eighteenth Federal Census. Columbus, Ohio: the F. J. Heer Printing Co., 1961.

Catterall, Ralph C. H. The Second Bank or the United States. Chicago: The University of Chicago Press, 1903.

Hammond, Bray. Bank and Politics in America: from the Revolution to the Civil War. Princeton, New Jersey: Princeton University Press, 1957.

Holdsworth, John Thom and Dewey, Davis R. The First and Second Banks of the United States. Washington; Government Printing Office, 1910.

Randall, Emilius 0. and Ryan, Daniel J. History of Ohio. 5 vols. New York: The Century History Company, 1912.

Sears, Alfred Byron. Thomas Worthington: Father of Ohio Statehood. Columbus: The Ohio State University Press, 1958.

Sumner, William Graham. A History of Banking in the United States. Vol. I of A History of Banking in All the Leading Nations. Compiled by Thirteen Authors. New York: Journal of Commerce and Commercial Bulletin, 1896.

Utter, William T. The Frontier State: 1803-1825. Vol. II of The History of the State of Ohio. Edited by Carl Wittke. Columbus, Ohio: Ohio State Archaeological and Historical Society, 1942.

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Bogart, Ernest L. "Taxation of the Second U. S. Bank by Ohio," The American Historical Review, XVII (1912) 312-331.

Cheetham, Jean Dick. "State Sovereignty in Ohio," Ohio Archaeological and Historical Publications. IX (1901) 290- 302. 133

Huntington, C. C. "A History of Banking and Currenoy in Ohio before the Civil War," Ohio Archaeologioal and Historical Society Publications, XXIV (1915) 235-539.

Smith, William Henry. "Charles Hammond and His Relations to Henry Clay and John Quincy Adams or Constitutional Limitations and the Contest for Freedom of Speech and the Press." An Address Delivered before the Chicago Historical Society, May 20, 1884. Published for the Chicago Histori­ cal Society, 1885.

Weisenburger, Francis Phelps. "A Life of Charles Harnmondî The First Great Journalist of the Old Northwest," Ohio Archaeological and Historical Quarterly, XLII (1934) 340-427.

Unpublished Material

Still, John. "The Life of Ethan Allen Brown." Unpublished Ph.D. dissertation. Department of History, The Ohio State University.