its funded debt for nearly $2 millions, and some bank stock besides, and extricated itself by November 1. Two circumstances increased the difficulty: a demand for specie for the British army in Canada and a demand for specie to found a bank at New Orleans. "I went immediately to New York," says Biddle, "where I sought the gentleman who was preparing to draw specie from the banks of Philadelphia in order to send it to New Orleans, and gave him drafts on that city. These drafts were not given to protect the Bank itself, which was then a creditor of the Philadelphia banks for more than the amount of them, but they were employed to arrest from these city banks a drain which could not fail to embarrass them." He declared that he had met the panic by an increase of the loans of the Bank at that time.[1]
The specie in the Bank of the United States in July, 1821, was $5.8 millions. It declined to $3.3 millions one year later. Then it increased steadily to $6.7 millions, January, 1825. In July it was down to $4 millions, and in the following January to $3.9 millions.[2]
In 1827, the Bank renewed its petition with regard to the compulsion on the chief officers to sign the notes; once more in vain. This led to the revival of the use of branch drafts. They were drawn by the cashier of any branch on the parent Bank, to the order of some officer of the branch, and endorsed by the latter to bearer. They then circulated like bank notes. At first the denominations were five's and ten's. In 1831, twenty's were added. They were also payable at the place where issued. Binney, Wirt, and Webster gave opinions that these drafts were legal. The Secretary of the Treasury approved of them and allowed public dues to be paid in them. They were a most unlucky invention. Most of the subsequent real trouble of the Bank can be traced to them. Immediately upon their re-introduction, the "race-horse bills" reappeared,—that is, drafts drawn between the different places where there were branches, so that a bill falling due at one place was met by the discount of a bill drawn on another place. The name, which is said to have been invented by Cheves, was derived from the nimbleness which was required of the drawers to keep up with the system. The device largely robbed the Bank of the control of its own business.
The receipt of branch drafts at New York in 1828 was nearly $12 millions and in 1829 over $11 millions. The total receipt of them in 1828 and 1829 at Philadelphia, New York, Baltimore, and Boston was over $37 millions. They became the medium with which the South and West paid for its purchases.[3] Gallatin said of them that they "are of the same character, depend on the same security, and in case of failure, would share the same fate with bank notes. Though not usually included in the amount of the circulation of the Bank, we cannot but consider the average amount in actual circulation as making part of the currency of the country."[4]
In December, 1827, the Bank of the United States was able, by putting
