Gordon Clark
Shylock: as banker


In his first annual report to Congress, Salmon P. Chase as Secretary of the Treasury recommended the establishment of the National Banking System. A well-trained lawyer, he intimated from ground with which he was familiar, that he considered State Banks unconstitutional. This may have been largely the reason for his dealing with them so gingerly. That he distrusted their agents and dreaded their methods, his acts demonstrated. But those subtile-mannered men, with the prestige of millions, evidently impressed him with the need of their co-operation. In December of '62 he again recommended a National Banking Law, by which might be established "one sound, uniform circulation of equal value throughout the country, upon the foundation of national credit combined with private capital."  A perfectly honest man made this recommendation, intending it for his country's good, and not imagining that he would live to regret it.

The National-Bank bill became a law on the 25th of February, 1863. At that time, according even to the testimony of the man who drew up the act, there was no need of it whatever. Mr. Spaulding tells us that:

"No National-Bank currency was issued until about the 1st of January, 1864. After that time it was gradually issued. On the 1st of July, 1864 the sum of $25,825,695 had been issued; and on the 22d of April, 1865, shortly after the surrender of General Lee, the whole amount of Bank circulation issued to that time was only $146,927,975. It will therefore be seen that comparatively little direct aid was realized from this currency until after the close of the war. All the channels of circulation were well filled up with the greenback notes, compound-interest notes and certificates of indebtedness to the amount of $700,000,000 before the National-Bank Act got fairly into operation. This Bank issue was in fact an additional inflation of the currency."  ["Financial History," &c.,2d Edition, page 188.]

If instead of a good politician and prudent attorney, a great man like Thaddeus Stevens had been Secretary of the Treasury, he would have known exactly what to do with the banks and would have done it. Banks are useful institutions and bankers are useful men. They are required as aids to business. Because a man is a banker, why should the Knights of Labor, for instance, formally exclude him from their order, as one who can in nowise be expected to be an upright citizen? Banks and bankers have been a very important part of civilization. But they should not be permitted to ride and crush us with double interest and with the Monopoly of all monopolies — the exclusive right to furnish and regulate the medium of our exchanges. In 1861 banking should have been made "free and equal" on the plan of all other things in America.

Rich men or associations of men should have been allowed to bank as much as they liked on gold, silver, and the legal-tenders of the government, to discount commercial paper under proper safeguards, to charge interest on their loans, and to conduct all branches of their legitimate business. A statesman of first rate ability as Secretary of the Treasury could easily have established such a system in the early days of the Civil War. What instead was imposed upon our burdened backs?

Anybody who can see that one and one are not four — except under some scheme of larceny — can readily comprehend the National-Banking System.

A country is at war and has run in debt — to be paid some time with interest. According to law, Mr. Shylockson, with four friends buys a piece of this debt represented by "bonds" — say of fifty thousand dollars. He has it locked up for him in a government safe and lets it grow fat on six per cent annual increase. The Government at the same time hands out to Mr. Shylockson forty-five thousand dollars printed for him in banknotes — notes of "The First Shylockson National Bank." This institution is now set up. Mr. Shylockson lends to its customers on discount his forty-five thousand dollars at such interest as the law allows — say from six to ten per cent. Thus Mr. Shylockson, on an investment of fifty thousand dollars gets interest on ninety-five thousand.  The interest on the forty-five thousand is paid by a few people around him; that on the fifty thousand by all the people — the taxpayers.

It is quite right that Mr. Shylockson should have the interest on his bond, just so far as the issue of the bond has really been required; but just so far as government paper is needed for money — for currency — just so far the interest-bearing bond should never have been issued at all and the non-interest-bearing paper — say "greenbacks" — should have taken its place.  The difference is a cheat — a "green-goods" swindle. In conducting this "business," Mr. Shylockson, president of the First Shylockson National Bank, is also a receiver of stolen property. Having been, too, a corruptionist at Washington to legalize swindling, he has turned the United States into an accomplice — a thief procured to steal for his den. Moreover: if Shylockson had not gone to the Washington lobby as a political corruptionist to get a monopoly, his country could have put out a currency sufficient for a cash business — such as the French do since they had a revolution and guillotined the Shylocksons over there. Our Mr. Shylockson's bank-system, inherited from Hades and England instead of Venice and France, is the only obstacle in America to what in the main might be a safe, honest, cash business. Then it would not be necessary for the people who happen to be Shylockson's neighbors to depend wholly on him for money, paying him from six to ten per cent. — compounded three or four times a year — that very money being handed out to him from the people's treasury for nothing with the privilege of controlling its volume and making it dear when he pleases. On the principle that he who has much should take more, the First Shylockson National Bank loans in addition to its circulation a certain average of its customers' deposits — drawing interest on what it owes to pay for accommodating the public with what it steals. Though the big national banks have now become so greedy that they often eat the little ones, Mr. Shylockson's job is a good one — for him.  But it is death to everybody else.

Some of the incidental workings of the National Banking System were glowingly described in its early days by Mr. S.S. Marshall, a member of Congress from Illinois, who gave this bit of history in the House:

"An association of gentlemen in an Eastern State raised $300,000 in currency. They went to the office of the Register of the Treasury and exchanged their currency for $300,000 in six per cent gold-bearing bonds. They then went to the office of the Comptroller of the Currency in the same building, organized a National Bank, deposited their $300,000 in bonds and received for their bank $270,000 in national currency. They had let the government have $30,000 in currency more than they received for banking purposes and had on deposit $300,000 on which they received as interest from the government $18,000 a year in gold (and exempt from taxation). This was pretty good financeering for these bankers to receive $18,000 a year in gold on the $30,000 in currency which they had thus loaned to the government. But this is not the whole story. They had their bank made a public depository. They soon discovered that there was scarcely ever less than $1,000,000 of government money-deposited within their vaults. They did not like to see this vast sum lie idle. They therefore took $1,000,000 of this government money and bought $1,000,000 of five-twenty bonds with it. In other words they loaned $1,000,000 of the government's own money to the government and deposited the bonds received in the vaults of their bank, on which they received from the same government $60,000 a year in gold as interest. Thus for the $30,000 in currency which they originally loaned the government they received annually in all $78,000." [July 21st, 1868: Congressional Globe; Appendix]

Mr. Marshall's account of our National Banking has almost a touch of comedy in it. But when we remember that the struggling poor and the productive tax-payers have to settle for the larger part of such financial eccentricities, there is no great temptation to be merry.

The National Banks, as we have found, got under way in 1864 — not until a year or more after the passage of the act creating them. There was a reason for it. Their stockholders and managers — not all certainly but the most alert among them — belonged to the fraternity of the gold-bugs.  For three years they had exerted every human quality, except honor and decency, to injure the credit of their country that they might speculate in her embarrassments. In 1864 they pushed up gold to an immense premium. Poor little Mr. Fessenden — their obedient servant of the Senate in 1861 — who had now become Secretary of the Treasury, complained bitterly and said they were "very unpatriotic," because they were taking-full advantage of his own concessions to them. What a chuckle must have been their answer! For more than a year they kept gold at from fifty to a hundred and fifty per cent above the government paper of which they themselves had procured the depreciation, that they might buy it at the most depressed point. United States Bonds at that time fell to their lowest point, thirty-five cents on the dollar for coin. Then the gold-bugs hauled in the bonds and laid them down as the bottom of their National-Bank system, often doubling by the trick their whole capital. The people are trying to make up the difference even to the present hour.

Those National Banks, as they themselves often claim, were very "helpful" to us. So they were. Their manipulators helped the rest of us at the very start to get rid of all our property that they could lift and carry — and the end is not yet. But that which they desired most of all and that to which they have bent every energy and accomplishment known to the Father of Lies, was to get away from the Government and into their own hands the entire control of the volume of money. Give them the circulation and a gold-basis and what shall keep any remainder of things out of their pockets ?