210 BANKING THEORIES IN UNITED STATES
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liquidate their investments in stocks, rather than call for repayment
of commercial loans.! William H. Crawford, the Secretary
of the Treasury at the time, adopted Carey’s suggestion and urged
it in a letter to the president of the Bank of the United States.?
Emphasis continued to be put by a number of later writers
upon the need of liberal discounts in times of stress, and reference
was frequently made to the beneficial effects of such a policy in
allaying panics in England. Nathan Appleton, a Boston business
man,® held the New York banks chiefly responsible for the crisis
of 1857, asserting that their panicky contraction had caused most
of the distress.* Others, on the other hand, saw only the need of
contracting the currency at any cost when financial pressure begins,
in order to strengthen the banks and to influence specie
movements by altering the balance of trade. A committee of the
New York banks wrote, with reference to the crisis of 1837:
If the share of the blame which may justly be imputed to the banks be
analyzed, it will be found to consist in their not having, at an early period,
duly appreciated the magnitude of the impending danger, and taken, in
time, the measures necessary to guard against it; in their want of firmness —
when the danger was more apparent and alarming — in yielding to the demands
for increased, or continued bank facilities, instead of resolutely curtailing
their loans and lessening their liabilities.5
When pressure arises in the money market, one writer observed,
bankers must curtail their loans for perhaps two months. “If no
new loans have been made during that time, the bank has then
taken care of itself, as the directors are bound to see that it does,
whatever may happen to themselves or others.” ¢ The Bank
1 M. Carey, Essays on Banking (1816), pp. 69-73, 123-129.
2 Crawford, Letter to William Jones (Nov. 29, 1916), in American State Papers,
Finance, iii, 316.
3 Appleton was one of the group that introduced the power loom in the cotton
industry of America. He played a prominent part in the New England life of his
time, being a member of Congress and one of the founders of Lowell, Massachusetts.
¢ Appleton, Remarks on Currency and Banking (third edition, 1857), pp. 59, 61.
Cp. “The Banks and the Merchants,” Hunt's Merchants’ Magazine (Jan., 1858),
xxxviii, 131, 132; J. S. Ropes, “The Financial Crisis,” New Englander (Nov.,
1857), XV, 704.
5 Report of the New York delegates to the bank convention of 1837 (Dec. 15,
1837), Financial Register, i, 229. Albert Gallatin was one of the signers of the
report.
§ Thomas G. Cary, Practical View of the Business of Banking (1841), p. 5.
