Letter from duPont de Nemours outlining the financial situation after the war of 1812

duPont de Nemours to J.Johannot d'Eachandrans, Vaud Switzerland.

Undated. [1816-1817. P.S. duPont died Aug. 7, 1817]

My dear Friend,

My Son has given me your letters and I glad that it is I who am to answer them, because I have more time than he in which to give you - you who are merchant, banker and financier and distinguished in all three professions - idea of the situation of the United States since the peace with England - a situation so unique in the history of the world that even I, who have known all those professions, could have foreseen it.

The banking business is free and some what undefined throughout the whole confederacy. Every individual State, and there am twenty, has given banking Charters to almost every company that has asked for one; and no effort has been made to stop the business of such as have no Charter, nor even to prevent individuals from issuing bills, if they have such credit that their bills will circulate. Mr. Stephen Girard has a bank of his own-one of the most powerful. There are perhaps four hundred chartered and unchartered in the United States.

Most of these banks are unable to place the quantity of bills on which they desire interest

It has resulted that they are considered even by themselves-territorial banks: Farmers Bank, Mechanics Bank' &c. soliciting customers; lending for terms of two months for any and every enterprise that offers any prospect of success-even if the prospect from the nature of the enterprise, cannot be realized for four, five or even six years; renewing their engagements every two months, or borrowing from one bank a day before the notes are due the amount with which to pay the other-which in its turn gives the same service. In a little while the two months is shortened by several days.

This Institution, which has grown of its own accord, has rapidly enriched the United Sates, because it offers capital that may be used for new ventures and permits the use of the proits before they are realized. And these capitals -which are vague and somewhat fictitious have created very real wealth.

On my return to this country I found New York increased by at least half; Philadelphia by two fifths;valleys that had been rocky and sterile covered with factories more or less flourishing that had been encouraged by the embargo against England during the war, and around which little villages have grown. This war did much for the United States by stimulating the business of the interior and by the employment given to the banks, which helped and sustained it.

Houses without number have been built of paper; ships-of paper; mill-sites or water courses for factories and the factories themselves-of paper; canals and roads or Turnpikes-of paper; beautiful and practical Steamboats-of paper.

The paper will be paid sooner or later some day. The houses are inhabited; the little village gardens cultivated; the farmers' poultry yards are paying; the factories are operating;the manufacturers are striving to improve them; one may travel on the canals and roads in the Stages and Wagons and Steamboats; men can communicate and merchandise find its market by many ways that did not exist when I was here before.

Our European banks have never given such activity to industry or to business.

But these bills vary in value according to the reputation of their banks for greater or less prudence and of those to whom they lend for more or less responsibility; or perhaps because they are nearer or further from their resources; or because it is believed that they could meet their bills with money. Those of the Banks that are situated near the western frontier lose in value as they approach the large cities and seaports. In going from one State to another one's purse is emptied by the change of State and its paper.

The Congress of 1815-1816 wished to enforce uniform paper that would really take the place of money. In order to give the Paper of all the Banks a Money value it was decided that it would be necessary to take their Charters from such banks as could not meet their bills on demand. This requirement-impossible for most banks-became impossible for all, because of the second cause of the crisis-of which I will tell you, and thus all banks were threatened with closure.

Congress reestablished, from January 1, 1817, the Bank of the United States, which was unwisely suppressed some years ago; and reopened even more unwisely under present conditions.

The United States has invested in this bank a very large sum, in both money and drafts. And it has, moreover, been made the treasury for all Government receipts and expenditures; as law did in France. It has been authorized to establish Branch Banks in all the States and cities where it may be thought wise.

These Government Branch Banks have created much alarm among the independent Banks of the different States and cities. This alarm, added to the threat of retiring the Charters and of winding up the affairs of those banks that could not pay their bills on presentation, had much foundation. It could not be called a panic.I have not yet told you why all the Banks, at the time, found it impossible to meet their Bills-a danger that exists in every country and for all banks as soon as there is distrust, since it is customary never to have money for more than a third--often a quarter---of the value of their

Life of E.I duPont vol 10, p 179, 1926