refusal of the banks, in which the public moneys were
deposited, to pay their notes or the drafts upon them in specie deprived
the government of its gold and silver; and their refusal, likewise, of
credit and circulation to the issues of banks in other States deprived
the government also of the only means it possessed for transferring its
funds to pay the dividends on the debt and discharge the treasury notes.
Mr. Dallas found himself compelled to appeal to the banks by circular to
subscribe for sufficient treasury notes to secure them such advances as
might be asked of them for the discharge of the public obligations.

"In the latter end of the year 1814," says Mr. Gallatin, "Mr. Jefferson
suggested the propriety of a gradual issue by government of two hundred
millions of dollars in paper;" commenting upon which Mr. Gallatin
remarks that Mr. Jefferson, from the imperfect data in his possession,
"greatly overrated the amount of paper currency which could be sustained
at par; and he had, on the other hand, underrated the great expenses of
the war;" but at "all events," he adds, "the issue of government paper
ought to be kept in reserve for extraordinary circumstances." But here
it may be remarked that the evolution of the systems of American finance
seems to lead slowly but surely to an entire divorce of banking from
currency, and the day is not far distant when the circulating medium of
the United States will consist of gold and silver, and of government
issues restricted, according to the English principle, to the minimum of
circulation, and kept equivalent to coin by a specie reserve in the
treasury; while the banks, their circulation withdrawn and the
institutions freed from any tax, will be confined to their legitimate
business of receiving deposits and making loans and discounts.

On October 14, 1814, Alexander J. Dallas, Mr. Gallatin's old friend, who
had been appointed secretary of the treasury on the 6th of the same
month, in a report of a plan to support the public credit, proposed the
incorporation of a national bank. A bill was passed by Congress, but
returned to it by Madison with his veto on January 15, 1815. In this
peculiar document Madison "waived the question of the constitutional
authority of the legislature to establish an incorporated bank, as being
precluded, in his judgment, by repeated recognitions, under varied
circumstances, of the validity of such an institution in acts of the
legislative, exe