Specie, Paper and E-money due to speedy Loans : The Supplemental Treasury Operations

Posted by Kathryn Schwartz on August 10, 2015
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TransfersA. Size and Aggregate Implications of the Transfers

The aspect of the Deposit Act of June 23, 1836 (also known as the “Distribution Act”) that raised the most concern among its opponents was the return of the federal surplus to the states. Less controversial were provisions that prohibited government deposits from exceeding three-fourths of a bank’s paid-in capital and required the establishment of at least one bank as a government depository (i.e., “pet”) in each state that chartered banks. To comply with the latter provision, then Secretary of the Treasury Levi Woodbury quickly selected 45 new deposit banks, increasing their number from 36 in June of 1836 to 81 by December. Woodbury also asked Congress to clarify his authority to prepare for the official distribution of the surplus that was to begin on January 1 while also reallocating balances to meet the new deposit limits. Congress responded by amending the Deposit Act on July 4 to affirm Woodbury’s discretion to achieve an “equitable” balance among the states. The Secretary then ordered more than $38 million in “supplemental” interbank transfers over the next six months, with nearly two-thirds involving interstate transactions. Of this total, $26.4 million were completed by the end of 1836, with 57 percent crossing state lines. Most of the remaining orders were completed in the first quarter of 1837, with 79 percent requiring interstate movement. These supplemental transfers stand apart from the $28 million transferred in the official distribution, of which only 22 percent crossed state lines. Bank’s paid-in capital has required in the past to deposit funds in accounts but now you may just take a loan even via the Internet and the web site www.speedy-payday-loans.com and decide what sum you want to possess. Any inquiries will be asked and looked for.

Despite the Secretary’s efforts, an increase in the level of government balances from $34 million in June of 1836 to nearly $43 million by December limited his ability to achieve the distribution among the states that soon would be required. Collections over this period were twice as large as payouts, and more than half of the $22 million in new revenues required movement from their point of receipt. Woodbury recognized that the continued inflows would dramatically increase the amounts that would need to be removed from New York City, where the federal deposits had already accumulated far beyond the state’s proportion of the national population. He therefore focused the supplemental transfers in the Summer and early Fall of 1836 on gradually moving large sums from New York. The secret nature of these transfers first led contemporary observers to misunderstand the causes of the rising monetary pressure in August, but as the extent of the pre-distributional transfers became known, they were criticized, along with the Specie Circular, and held responsible for the pressure that had risen to a fever pitch by October.

Woodbury, who had underestimated the strain that the supplemental operations would place on the New York banks, responded by delaying until January more than $1.3 million in interstate transfers that were originally scheduled to take place in November and December of 1836. As the Specie

New York banksCircular began to drain Eastern banks of their specie reserves, he also attempted to bring coin back to the East in the Fall and early Winter months with a new set of transfers from the Michigan and Ohio banks. These measures brought some relief to the money market through January as is apparent in Figure 2, but the pressure soon re-intensified as the delayed transfers, most of them interstate, came due along with those of the official distribution.

Responding to growing pressure from legislators to quantify the impact of the supplemental operations on the tightening money market, Woodbury’s annual report to the Senate on December 20, 1836 specified the individual orders by date, sending and receiving bank, and the date on which each transfer became effective or would be completed in early 1837. Table 1 summarizes the gross amount of Treasury orders completed in each month from July, 1836 through July, 1837. The left panel shows the supplemental transfers while the right panel provides similar figures for the official distribution. Money, banks are everywhere you will see looking around. but who may guarantee you they are trustworthy. but there are banks who have gained a tested reputation and such the Internet bank as speedy-payday-loans.com may borrow you various sums of money to low percentage.

The supplemental transfers were more than 35 percent larger than the official ones and involved nearly five times as many interstate orders. Further, the supplemental orders that were carried out between June, 1836 and April, 1837 were more than double those ordered by the Treasury in the course of normal payment operations from June, 1835 to April, 1836. And though the details of the previous year’s orders are not available, the 1836-37 transfers, by virtue of the provisions of the Deposit Act, would surely have involved more interstate movements. The $7 million in interstate supplemental transfers that were completed in the first quarter of 1837 were especially disruptive, and came just as the $18 million ($2.5 million interstate) involved in the first and second installments of the official distribution also came due.

Timberlake (1960) does not mention the supplemental transfers. Temin (1969) suggests that they were perhaps even routine. Nonetheless, both acknowledge that a large proportion of the interstate transfers and nearly all interregional transfers associated with the official distribution of the surplus would have involved specie. To the extent that this is true, the interstate transfers associated with the supplemental operations would also have been drawn largely in specie. Since Temin (1969, p. 71) reports the total specie in the United States at only about $73 million at the end of 1836, specie movements such as those suggested by the interstate transfers in Table 1 would have represented a significant portion of the nation’s stock. Given the direct evidence of specie movements offered in the remaining sections, it becomes evident that ignoring the supplemental operations omits a sizeable shock from any analysis of the U.S. economy in the months leading up to the panic.

B. Interregional Transfers and Specie Reserves

Granted that the supplemental transfers were large, it is appropriate to ask next if they diverted Interregional Transfersspecie to the Western states. An analysis of the individual Treasury orders, however, shows that they primarily directed funds from North to South and from West to East. Nevertheless, when viewed beside the balance sheet items of the deposit banks at a regional level, the timing and size of both the supplemental and official net transfers shed light on the paths through which specie moved about the country and on the strains that these transfers caused, especially in the Spring of 1837.

Table 2, which presents previously unorganized information from various congressional documents (see note to table), partitions the deposit banks into five groups covering New York City, the Western states (Ohio, Indiana, Illinois and Michigan), the Southwestern states (Alabama, Kentucky, Louisiana, Mississippi, and Tennessee), the Southeastern states (Georgia, North Carolina, South Carolina and Virginia), the mid-Atlantic States (Delaware, Maryland, New Jersey and Pennsylvania), and the six New England states. The upper panel shows the large interregional transfers made by the deposit banks of New York City, which lost 37 percent ($5.3 million) of their government deposits between August 1, 1836 and March 1, 1837 in the course of completing more than $8 million in such Treasury-ordered transfers. A loss of 61 percent ($4.4 million) of their specie coincided with the transfers, yet loans fell by only 14.7 percent ($5.6 million). The New York City banks lost a good deal of specie and did not contract their loans commensurately. To have a good deal is worth taking all the efforts you have. But it is rather difficult to find a good partner meeting all your demands. As such a partner you may choose it is an Interne bank which with a great desire confirm you a loan speedy. It is a partner you may trust and believe in.

The West was the only other region that was consistently called upon for large interstate transfers. The second panel of Table 2 shows that the deposit banks in Ohio, Indiana, Illinois and Michigan transferred more than $5.8 million out of the Western region between August 1 and March 1, yet their government deposits fell by only $3.3 million. In fact, the specie reserves of the Western deposit banks rose by nearly 63 percent (more than $1.3 million) between October 1 and March 1. It would thus appear that there was an important source of both specie and government deposits emanating from the region whose pace exceeded that of the government’s attempts at redirection. One sensible explanation would attribute these deposits to a rapid rise in the purchase of public lands with specie. I address this possibility with evidence in Section IV below.

The Southwestern states were net recipients of the supplemental transfers in the Fall of 1836, but these balances were drawn down by later Treasury orders, many of which had been delayed by Woodbury from January 1, 1837 until later in the Spring to ease the growing monetary pressure in New Orleans. Interestingly, loans of the Southwestern banks also rose by 15.5 percent ($7.6 million) between September 1 and March 1, only to precipitously fall by 51.5 percent ($29.2 million) over the next two months. The Southwestern banks contracted loans sharply as their government deposits dwindled and panic conditions intensified.

The remaining panels of Table 2 indicate that the Southeastern, mid-Atlantic and New England states were consistently net recipients of the interregional transfers. Though many of these transfers were likely to have been made in specie, only the Southeast saw its specie totals grow significantly between September 1 and March 1. Loans by the Southeastern deposit banks also rose by 51 percent ($8.7 million).

Table 3 presents more precise transfer data on a monthly basis between July of 1836 and June of precise transfer data1837 for those states whose government balances were drawn upon most heavily. These states included New York and those where deposits from public land sales were the largest, namely Michigan, Ohio, Mississippi, and Louisiana. The table shows that the majority of New York’s transfers in the Fall were directed to the Southeast, and by January 1 more than $4.6 million had been sent there. There is direct evidence that at least some of the transfers completed in the Fall were drawn in specie. Money may be paper and specie, but in the modern world there is also e-money. Such money are kept in Internet banks as well. With the fuction of speedy-payday-loans you may in no time receive the laon and money itself.

The table also provides details of the Treasury’s attempts to return funds from the Western banks to points of financial stress, and particularly to Eastern cities. Michigan sent nearly $0.9 million to Pennsylvania alone between October 1, 1836 and May 1, 1837, and $0.7 million each to New York and the New England states in the Fall of 1836. Ohio was called upon to replenish the Eastern and Southwestern money centers, with transfers of $0.7 million to Philadelphia and $0.8 million each to banks in New Orleans and Louisville. The Mississippi banks had transferred $0.75 million to Nashville by February, and $0.4 million to the mid-Atlantic states. Specie continued to accumulate in the Western banks (see Table 2) despite the Treasury’s efforts to remove it.

This evidence suggests a geographical pattern in the transfer orders that exploited the existing transportation network to facilitate the movement of specie. The New York banks made transfers to cities along the coastal waterway because this route was convenient for shipping bulkier silver coins. The Cincinnati banks sent silver downstream along the Ohio and Mississippi rivers to states in the midSouth and New Orleans, and shipped a more limited amount by river, rail and canal to the nearest tidewater near Philadelphia. Mississippi and Louisiana were called upon for limited and more risky upstream transfers to the neighboring states of Tennessee and Arkansas, but most of their transfers involved the coastal route to points in the Northeast. Michigan presented a unique problem as gold from the Northeast began to accumulate. The Secretary’s orders recognized the relative isolation of this state from points South, and thus called upon Michigan to replenish the specie of the Northeastern states via the Erie Canal.

The transfers from New York to the Southern coastal states and from Ohio to the Southern interior were in preparation for the upcoming distribution, as the Southern states held government deposits that were far smaller than those for which they would become entitled. It is likely that these transfers supported the rapid expansion of banking capital in the Southeast and public land purchases in Alabama and Mississippi. Transfers from Michigan and Indiana moved excess government revenues to convenient money centers where they would be later required (i.e., New England) or redirected yet again (i.e., New York and Pennsylvania). If Woodbury had expected these interstate transfers to involve primarily bookkeeping or paper transactions among the deposit banks, adherence to paths of most convenient transport for a heavy and valuable item would have been less critical, and it is less likely that such a clear geographic pattern would have emerged.

government depositsUnder pressure from legislators, Woodbury included a table in his report to the Senate on December 20, 1836 that summarized the extent of the supplemental operations. It was misleading, and perhaps deliberately so. The table indicates that New York and Michigan were the only states to suffer net losses of government deposits in excess of $250,000 between June 20 and December 19, 1836, and that these losses were only $570,000 and $430,000 respectively. Temin (1969, pp. 135-136), using these figures, reasons that the hardship must have been small since they represented only 5% of New York’s government deposits in June. The net changes in government deposits, however, ignore the $22 million in new revenues that had accumulated between these dates, mostly in New York and the Western states. Seen in this light, the failure of government balances to fall more sharply in New York in the second half of 1836 is much less striking. Further, moving the first snapshot date from June 20 to August 1, which is closer to when the first supplemental transfers became effective, shows government deposits in New York falling by $2.75 million, or nearly 19 percent, by December 1 as the pet banks sustained a net loss of more than $6 million in interstate transfers (see Table 3). The supplemental operations alone account for an additional $1.4 million in interstate transfers for New York between December 1 and March 1, 1837, while government deposits fell by an additional $2.7 million. These losses are not reflected in the Treasury’s table. The drain of funds from New York was larger and would come to be much larger than the amounts that Woodbury chose to convey in December.

Similarly, Michigan suffered a net loss of $1.7 million in government deposits between August and December. This is significant not because Michigan banks were forced to contract discounts, but because their specie reserves continued to rise despite the $1.4 million in funds that were transferred to the East (see Table 3), most likely in specie. Rather than illustrate Michigan’s insignificant role in the crisis, these figures further support the belief that specie accumulated rapidly there as public land sales maintained a brisk pace.

The main difficulty in assigning a key role to the Specie Circular in bringing on the panic had always been a lack of convincing evidence that large amounts of specie actually left the Eastern money centers to points in the South and West. The above evidence suggests that specie did indeed leave New York, while the transfer orders suggest that at least some of it moved South. The accumulation of specie in Michigan and Indiana and the limitations imposed by the simple transportation network also point to New York as the source of the Western increases. This story of internal specie movement is reinforced by the fact that net international specie movements for the U.S. were small between the Summer of 1836 and mid-Spring of 1837. The total specie holdings of the nation’s deposit banks were also relatively steady over this period, rising from $14.6 million on August 1 to only $15.3 million on March 1. Since neither the quantity of specie in the nation nor the amount held in the deposit banks changed dramatically, the clear decline in New York and increases in the West and South suggest that specie did indeed move actively about the country.

TABLE 1: Transfers Ordered by the U.S. Treasury, 1836-1837

Intrastate SupplementalInterstate % Inter Distribution of the Surplus Intrastate Interstate % Inter
Jul 1836 $1750.0 $819.0 31.9% $0 $0
Aug 1836 2305.0 2642.0 53.4 0 0
Sep 1836 2681.1 3134.5 53.9 0 0
Oct 1836 1874.0 3690.0 66.3 0 0
Nov 1836 1353.8 2410.0 64.0 0 0
Dec 1836 1485.0 2300.0 60.8 0 0
Jan 1837 605.0 3470.0 85.2 8104.4 1211.8 35.0%
Feb 1837 680.0 1935.0 74.0 0 0
Mar 1837 565.0 1600.0 74.0 0 0
Apr 1837 525.0 860.0 62.1 7924.9 1348.8 14.5
May 1837 175.0 460.0 72.4 0 0
Jun 1837 0 600.0 100.0 0 0
Jul 1837 0 20.0 100.0 6952.8 2484.3 26.3
Jul-Dec 1836 11448.9 14995.5 56.7 0 0
Total 13998.9 23940.5 63.1 22982.1 5044.9 18.0

TABLE 2: Selected Balance Sheet Items of the Deposit Banks and Interregional Transfers Ordered by the U.S. Treasury, August 1836 – August 1837

No.Banks Specie Loans GovernmentDeposits Circulation SupplementalTransfers Distribution of Surplus
New York City
Aug 1, 1836 14 $5877.3 $38150.8 $14457.1 $5138.3 $-1932.0 0
Sep 1,1836 14 7191.9 37089.3 13756.2 4849.1 -1843.5 0
Oct 1, 1836 14 5142.4 36633.7 12549.2 5825.1 -1845.0 0
Nov 1, 1836 14 3804.3 34563.8 11279.5 4590.8 -430.0 0
Dec 1, 1836 14 3810.5 34637.0 11705.0 7121.5 -1455.0 -496.9
Mar 1, 1837 14 2780.5 32537.3 9153.7 5008.7 -770.0 -577.9
May 1, 1837 14 1473.1 29659.9 4909.8 3745.5 0 0
Jul 1, 1837 14 1768.4 26307.1 3870.1 3665.1 0 -1098.2
Illinois, Indiana, Ohio, Michigan
Aug 1, 1836 Sep 1,1836 Oct 1, 1836 Nov 1, 1836 Dec 1, 1836 Mar 1, 1837 May 1, 1837 Jul 1, 1837 1011
13
15
14 14 14
13
$2468.92394.7
2078.0
2780.6
2953.2
3392.2 3418.4 2980.9
$12955.313689.0
13864.5 14418.7
14224.6
15876.1 9770.4 9616.8
$10374.510079.4
9460.4 9085.9
9142.5 7026.3 5747.1 4523.0
$5957.95805.7
5635.5 5772.9
5833.4
7015.4
6767.6
5681.7
$-350.0-760.0
-950.0
-930.0
-2910.0
-400.0
-100.0
0
$00
0
0
0
-37.5
0
-150.0
Alabama, Kentucky, Louisiana, Mississippi, Tennessee
Aug 1, 1836 Sep 1,1836 Oct 1, 1836 Nov 1, 1836 Dec 1, 1836 Mar 1, 1837 May 1, 1837 Jul 1, 1837 913
14 14 14 14 14
14
$2177.42559.2
3018.3 2983.0
3328.2
3498.2 2934.6
2373.4
$44870.948971.8 54089.1
54871.8 55237.4 56572.0
27419.6
32470.7
$8649.59171.1
9674.7
10183.7 10681.0
10685.8
8613.9
7170.9
$12120.813055.2
13920.1
13509.1 13676.6 15483.5
12957.2 10490.4
$380.0757.5
515.0
100.0
150.0
150.0
200.0 0
$00
0
0
0
0
0
0
Georgia, N. Carolina, S. Carolina, Virginia
Aug 1, 1836 Sep 1,1836 Oct 1, 1836 Nov 1, 1836 Dec 1, 1836 Mar 1, 1837 May 1, 1837 Jul 1, 1837 55
7
7
8 8
9
9
$1955.12045.1
2982.1
2957.5
2971.5
3006.2 2730.0 2320.7
$17546.117360.3
19615.6
23068.1
24736.2 26089.0
16532.6
16372.3
$2031.92230.1
2731.2
3882.9 3681.4 2910.0 1679.6
1810.9
$8392.48751.7
10489.4
10636.8
11312.6
11645.2
9022.4
7287.1
$800.01000.5
1350.0 0
1610.0 550.0
0
0
$00
0
0
0
0
0
0

TABLE 2: Selected Balance Sheet Items of the Deposit Banks and Interregional Transfers Ordered by the U.S. Treasury, August 1836 – August 1837

No.Banks Specie Loans GovernmentDeposits Circulation Supplemental Distribution Transfers of Surplus
Delaware, Maryland, New Jersey, Pennsylvania
Aug 1, 1836 8 $1136.5 $16656.4 $4001.2 $2660.1 $352.0 $0
Sep 1,1836 8 1329.7 17226.0 4467.9 2509.0 246.0 0
Oct 1, 1836 9 1324.6 17370.0 4853.9 2801.2 55.0 0
Nov 1, 1836 10 1114.1 18156.7 5138.6 2894.4 -515.0 0
Dec 1, 1836 10 1264.5 18146.7 4760.4 2761.3 1860.0 -84.9
Mar 1, 1837 10 1322.0 18559.4 4757.3 2630.6 1200.0 -84.9
May 1, 1837 10 776.5 14454.4 3241.3 2272.2 700.0 0
Jul 1, 1837 9 680.6 13559.4 1720.9 1951.7 0 -192.4
New England
Aug 1, 1836 10 $716.5 $7168.2 $2741.9 $1150.0 $380.0 $0
Sep 1,1836 17 823.1 10075.5 3183.6 1714.4 757.5 0
Oct 1, 1836 24 919.6 12977.1 4063.6 2469.7 515.0 0
Nov 1, 1836 24 953.8 13419.0 4671.0 2462.9 100.0 0
Dec 1, 1836 24 884.6 13282.0 4519.8 2149.7 150.0 0
Mar 1, 1837 25 988.3 13203.6 3863.2 2043.3 150.0 0
May 1, 1837 25 817.5 9498.2 2204.8 2211.4 200.0 0
Jul 1, 1837 24 604.0 8665.3 783.4 1754.3 0 0

TABLE 3: Interstate Transfer Orders Drawn on Deposit Banks of Selected States, July 1836 – July 1837

Supplemental Transfers Official Installments
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 1st 2nd 3rd Totals
From New York to
New England 55 380 453 51 150 173 248 1510
Delaware 30 140 46 46 37 299
Pennsylvania 100 1000
New Jersey 44 222 206 50 50 130 110 90 902
Washington, DC 200 400 150 340 230 100 25 170 50 1665
Georgia 200 300 350 200 150 1200
North Carolina 100 400 100 50 200 50 163 163 163 1389
South Carolina 300 200 100 280 100 980
Virginia 400 100 850 900 100 100 175 200 2825
Mississippi 200 200
Tennessee 50 0
U.S. Mint 200 200 50
NY Totals 299 2002 1849 2455 430 100 1880 125 670 100 0 0 512 792 740 11520
From Michigan to
New York 400 270 670
New England 460 150 100 710
Pennsylvania 100 200 200 80 80 100 100 860
Washington, DC 20 20
Ohio 100 100 60 70 50 380
MI Totals 20 0 460 750 400 530 150 130 100 100 0 0 0 0 0 2640
From Ohio to
Pennsylvania 100 500 100 150 850
Arkansas 17 16 33
Kentucky 100 100 190 390 780
Louisiana 200 400 200 800
Tennessee 300 100 38 438
Illinois 80 80 160
OH Totals 0 200 100 200 400 700 590 390 0 0 100 0 97 135 150 3061

TABLE 3: Interstate Transfer Orders Drawn on Deposit Banks of Selected States, July 1836 – July 1837

Supplemental Transfers Official Installments
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun 1st 2nd 3rd Totals
From Mississippi to
New York 100 100
Delaware 100 100 200
New Jersey 100 100 200
Arkansas 187 187
Tennessee 100 100 150 400 125 875
MS Totals 0 0 0 0 100 100 250 400 200 200 0 0 125 0 187 1562
From Louisiana to
New York 100 100 200 400
Massachusetts 150 200 350
Maryland 300 100 150 150 200 900
Pennsylvania 100 100 300 200 150 150 200 1200
Arkansas 34a 34
LA Totals 0 0 0 100 0 200 300 600 450 300 300 600 0 0 34 2884

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