to take alarm. In December, 1836, he reported the specie in the country
to have increased from thirty millions in 1833 to seventy-three millions
at the date of his report, and the paper circulation, in the same
period, to have advanced, since the removal of the deposits from the
Bank of the United States, from eighty millions to one hundred and
twenty millions, or forty millions in eighteen months; and the bank
capital, in the same period, to have increased from two hundred to three
hundred millions. Importation augmented; the balance of trade suddenly
turned against the United States to the extent of one hundred and fifty
millions, and coin began to flow abroad to liquidate the account. There
was no debt to attract foreign investment and arrest the export of
specie. Added to this was the withdrawal of the government deposits from
the pet banks, which compelled an immediate contraction. The result was
inevitable. On May 10, 1837, the New York banks suspended, Mr.
Gallatin's institution being of course dragged down with the rest. It is
idle to suppose that any single bank can hold out against a general
suspension. It may liquidate or become a bank of deposits, but it cannot
maintain its relations with its sister institutions except on a basis of
common accord.

A general suspension followed. Mr. Woodbury proved himself equal to the
emergency, and recommended a plan of "keeping the public money under new
legislative provisions without using banks at all as fiscal agents."
This was the beginning of the sub-treasury system, a new departure in
treasury management, and a further evolution in American finance. It
still remains, and will no doubt be permanent. Its establishment was
necessary because of the absence of a national bank.

Mr. Gallatin at once turned his attention to bring about first a
liquidation and then a resumption. It was a favorite maxim with him,
that "the agonies of resumption are far harder to endure than those of
suspension," as it is easier to refrain from lapse of virtue than to
restore moral integrity once impaired. But in resumption the suffering
falls where it belongs, on the careless, the improvident, and the
over-trader.

On August 15, 1837, the officers of the banks of New York city, in a
general meeting, appointed a committee of three to call a convention of
the principal banks to agree upon a time for a resumption of specie
payments. This committee, of which Mr. Gallatin was chairman, on Aug