Representative James A. Johnson in the House, Saturday, February 8, 1868:]
"The majority here [Republicans, the party of the money power], in their insane attempts to perpetuate themselves in power, have ignored the Constitution altogether, and tried to cover the minority with disgrace for professing attachment to its provisions. All this, too, with a full understanding that without its plain letter and spirit we have no Government other than a despotism limitless as the boundless universe.
"Ignoring its existence entirely, their party has illegally, without accusation or trial, thrown our fellow-citizens into prison for expressing their opinions upon matters pertaining to their own right. They have made the writ of habeas corpus worse than a mockery.
"Free speech could not be indulged in by any unless they were base enough to sing praises to old John Brown. Our free presses were thrown out of four-story windows, while Radical major-generals stood at the street corners offering encouragement to the mobs by telling them that in their acts of violence and destruction they had only anticipated the official purpose of vandalism. They have exalted cowardice and treachery; they have sought to accomplish great national results by a deliberate, cold-blooded system of bribery and corruption; they deliberately, in time of profound peace, by military commission, sat in judgment upon the lives of the most unfortunate of our country, and as deliberately those unfortunates were put to death; and they have denied the right of representation to and questioned the existence of sovereign States of this Union when such States elected Democrats to office; they have loaded us with an unbearable system of taxation, and they have tried to reduce the white population of this country to a level with the African and other inferior races; they have pronounced the Democratic party dead, and arraigned the President for declaring the country could never be saved except through the instrumentality of that party; they have arraigned the President for declaring that peace existed in our war-stricken country; because they say Congress alone has power to declare war and conclude peace."
Mr. Kelley said :
Mr. Speaker : I desire to express, and I shall be grateful to the House if it will give me its ear while I do express, the reasons why I cannot support the bill No. 1572, reported from the Committee on Banking and Currency, and why at the proper time I shall move to substitute for consideration before the Committee of the Whole bill N. 539, presented by myself, and which I find by conversation with members is generally known as the three sixty-five interchangeable-bond bill.
I regard the bill of the committee as fraught with danger to the country and the revenues of the Government. The title, in so far as it speaks of proposing to establish free banking, is delusive. I am in favor of free banking, and therefore must oppose this bill, which proposes in terms, but under conditions that are almost impossible of fulfilment, the extension of the monopoly banking system which has become so odious to the country. It proposes to extend the provisions of existing laws, requiring whomever will organize a bank to deposit Government bonds in excess of the amount of currency to be received, as security for the redemption of the notes received. In this connection let me suggest that the bill would be well entitled were it called A bill to increase the value of estates of certain citizens of the United States and other countries by enhancing the market price of United States bonds and promoting speculation therein. This would be the inevitable effect of its passage. I cannot imagine the circumstances that would justify Congress in subjecting itself to the animadversion such action would invite. But there is nothing to justify it, as the deposit of bonds as security for our circulating medium is not essential to banking, and is at war with and an obstruction in the way of the establishment of free banking.
What is banking ? It is the borrowing and lending of credit ; or, in other words, of purchasing power, and involves the use of but little money, whether of gold or paper. If gentlemen desire demonstration of these facts, I refer them to the remarks made the other day by the amiable and witty gentleman from New Jersey, [Mr. Phelps,] to Bagehots Lombard Street and to Bonamy Prices recent works, and essays in the British magazines and reviews. One per cent of what Professor Price calls money, or gold as distinguished from bank-notes, nay ½ of 1 per cent, he tell us, serves for the banking of all London ; and 3 per cent, ½ per cent being in gold and the other 2½ per cent in cash or bank-notes, is all the money that is now required to carry on the enormous banking system and trade of London.
As we have said, banking is the borrowing and lending of credit, of purchasing power, and I will detain you but for a passing illustration of the fact. If I have a thousand-dollar draft at my disposal, I send it to my bank in Philadelphia ; and if I owe two sums of $500 each, I send checks for that amount to my creditors ; and the chances are that the whole will be adjusted without the use of one penny of money. The draft will go to one institution, and the checks to two individuals, each of whom will deposit his check in his bank, and the three will meet and be exchanged in the clearing-house the next morning. I have named but a small sum, because I am not in the habit of handling much larger ones. But what is true of my poor $1,000 is equally true of operations involving tens of thousands or hundreds of thousands of dollars. In the clearing-houses of London and New York balances of hundreds of millions are settled daily without the use of money.
Having shown that money in great sums is not essential to banking, I proceed to add that the power to issue money does not inhere in banking ; that this power constitutes no part of a just system of banking, but is dangerous to both the public and the banks that exercise it.
No system of banking in this country or in any other, in this age or in any preceding age, that involved the issue by the banks of paper, promising to pay gold or silver on demand, ever went trough its career without insolvency ; they have all involved ruin to the banks, loss to the note-holders, and general derangement of the industries and trade of the country. How Government interposition has saved the Banks of England and France I may show hereafter. The only banking system that have maintained the integrity of their issues have been those which avoided the gold-basis theory and discarded the use of bullion as a security for the redemption of notes. They have been very few. Let me name them. The free banking system, as it was called, of New York, under which bonds of the United States and of the State of New York were deposited to secure the notes. The next is the Bank of England, which, as we are assured by John E. Williams, an eminent banker of New York, in an interesting article in a recent number of Old and New, borrowed this salutary principle from the New York system. It may have $70,000,000 of notes afloat, which are secured by the deposit of £14,000,000 sterling of Government securities, and its notes have been interchangeable with money since 1844, with three brief intervals, when the system of promising gold redemption, and of issuing notes based on gold deposits in excess of the £14,000,000 brought about crises, and the Government intervened, and by order in council set aside the restrictions of the law and appealed to Parliament, then in session or when it assembled, to legalize the violation of law. The partial departure from the true basis has thus brought the bank to the verge of insolvency three times since 1844. The Bank of France has also been saved several times by the like interposition of the government, which relieved it from embarrassment by declaring its notes a legal tender, as they are at this time.
This was the process by which Thiers saved the bank, animated the industries, and increased the productive and taxable power of the people, and enabled conquered France to anticipate the date at which the enormous indemnity exacted by Germany was required to be paid. In adopting it he was not governed by speculative theory, but by the results of experience. The republic of 1848 found itself without revenue and the people without employment, and declared the notes of the bank to be legal tender.
Commenting on this act, the London Times, planting itself upon the doctrines of Hume, Ricardo, McCullough, Bastiat, and other bullionists, denounced it as the most disastrous incident of the revolution. But what was the result ? The Times itself shall answer this question. On the 16th of February, 1849, within one year from the date of the article I have referred to, it said :
As a mere commercial speculation, with the assets which the bank held in its hands, it might then have stopped payment and liquidated its affairs with every probability that a very few weeks would enable it to clear off all its liabilities. But this idea was not for a moment entertained by M. DArgout, and he resolved to make every effort to keep alive what may be termed the circulation of the life-blood of the community. The task was overwhelming. Money was to be found to meet not only the demands on the bank, but the necessities, both public and private, of very rank in society. It was essential to enable the manufacturers to work, lest their workmen, driven to desperation, should fling themselves among the most violent enemies of public order. It was essential to provide money for the food of Paris, for the pay of the troops, and for the daily support of the ateliers nationaux. A failure on any one point would have led to a fresh convulsion. But the panic had been followed by so great a scarcity of the metallic currency, that a few days later, out of a payment of 26,000,000 fallen due, only 47,000 franc could be recovered in silver.
In this extremity, when the bank alone retained any available sums of money, the Government came to the rescue, and, on the night of the 15th of March, the notes of the bank were by a decree made legal tender, the issue of these notes being limited in all to three hundred and fifty millions, but the amount of the lowest of them reduced for the public convenience to one hundred francs. One of the great difficulties mentioned in the report was to print these one hundred franc notes fats enough for the public consumption ; in ten days the amount issued in this form had reached eighty millions. No sooner was the bank relieved from the necessity of paying away the remnant of its coin, than it made every exertion to increase its metallic rest. About forty millions of silver were purchased abroad at a high price. More than one hundred millions were made over in dollars to the treasury and five hundred and six millions of five-franc pieces have been thrown by the bank into the country since March, and her currency was thus supplied to all the channels of the social system.
Besides the strictly monetary operations, the Bank of France found means to furnish a series of loans to the governmentfifty millions on exchequer bills on the 31st of March, thirty millions on the 5th of May, and on the 3d of June one hundred and fifty millions, to be paid up before the end of March, 1849; of this last sum only one third has yet been required by the State. The bank also took a part in the renewed loan of two hundred and fifty millions, and made vast advances to the city of Paris, to Marseilles, to the department of Seine, and to the hospital, amounting in all to two hundred and sixty millions more. But even this was not all. To enable the manufacturing interests to weather the storm, at a moment when all the sales were interrupted, a decree of the National Assembly had directed warehouses to be opened for the reception of all kinds of goods, and provided that the registered invoices of these goods, so deposited, should be made negotiable by indorsement. The Bank of France discounted these receipts. In Havre alone, eighteen millions were thus advanced on colonial produce, and in Paris fourteen millions on merchandisein all, sixty millions were thus made available for the purpose of trade. Thus, the great institution had placed itself, as it were, in direct contact with every interest of the community, from the minister of the treasury down to the trader in a distant outport. Like a huge hydraulic machine, it employed its colossal powers to pump a fresh stream into the exhausted arteries of trade, to sustain credit and preserve the circulation from complete collapse.
But to return from this instructive digression. The other case referred to is that of the United States. We were not taught by experience, but forced by that higher law, necessary, to issue notes based on the credit of the Government, pledged to no other form of redemption than their reception in payment of taxes and by making them a legal tender in payment of debts for all abject exceptand the exception was an almost fatal errorfor all obligations except duties on imports and interest on the public debt. The volume of currency of this character was supplemented by permitting certain banks to issue a limited volume of currency on condition that they should lend their capital to the Government at 6 per cent and deposit the bonds received therefor as security for the redemption of the notes the Government would prepare and permit them to issue.
Who ever lost a dollar by the note of one of the New York free bank ? Who has lost a pound by the notes of the Bank of England, which are secured by the deposit of public securities ? Who has lost a dollar by the failure of the Unites States Treasury note or a national-bank note thus secured to buy him a dollars worth of wine, or wheat, or wool, or any other American production ? No man ; and I challenge all history for a parallel to any one of these, where the banks promised to redeem their notes in specie.
Mr. Eldredge. Does not every man to-day who takes a dollar of greenbacks or national banking currency take in the neighborhood of 12½ per cent less than one dollar in bonds, another promise of the United States ?
Mr. Kelley. Mr. Speaker, I have very brief notes from which to speak ; and I propose to make my own speech, and not to discuss topics propounded by other gentlemen. I will listen attentively to the gentleman from Wisconsin when he gets the floor, and hear whatever he may have to suggest upon the question he has suggested. Should he then do me the honor to interrogate me, I will find pleasure in replying.
No, sir ; there has been no parallel case, but on the contrary when our banks failed and refused to return the funds of their depositors, and when with the finest satire of all history they issued certificates of deposit and said they did it to prevent a further emission of irredeemable paper, our paper issues retained their value. While proclaiming themselves bankrupt and unable to pay the checks of depositors, they issued certificates pledging the combined credit and assets of all the banks in the city of New York for the patriotic purpose of preventing a further emission of irredeemable paper. Could self-sacrifice have gone further than this ? Now, sir, in three days from the issue of the first of these certificates it took $105 in a certificate backed by all the banks of New York to buy $100 in greenbacks or secured bank-notes ; and it was months before depositors upon whose deposits these certificates received credit could get the notes of the very banks which held their deposits by any other means than by going to broker-shops and selling the depreciated substitute for irredeemable paper which the combined banks had created. Was there ever such heartless irony or such supreme impudence ? Or could the correctness of my position be more clearly proven ?
The bill is in its terms delusive, not only in promising free banking, but in promising to increase the volume of circulation by making it free. Sir, on 12th of July, 1870I would like the then chairman of the Committee on Banking and Currency [Mr. Garfield] to hearon the 12th of July, 1870, this House forced through a bill, as to which I know not whether it was most of a blunder or most of a crime, or whether it was both blunder and crime.---[Yet, Mr. Kelley voted for that bill; not only that but during the debates two different amendments were offered, each of which would have replaced $300million bank-notes with $300million greenbacks, thereby putting an end to national currency banking, and Mr. Kelley voted against both of those amendments..... In 1863 Mr. Kelley voted for the National currency Bank bill which applied the New York State free-banking system to the whole union.....]
There was at that time on deposit with the Government about $55,000,000, deposited by the American people, in the form of a temporary loan, at 3 per cent interest.
Mr. Garfield. Will the gentleman be kind enough to point out what it was in the bill referred to which he regards as a blunder or a crime ?---[instead of pointing out that Kelley voted for that crime and blunder, Garfield plays along nicely]
Mr. Kelley. If the gentleman will allow me to proceed I shall be specific enough. I have it in my mind to run pretty directly to some ends. When we began the discussion of that bill we had somewhere from fifty-five to seventy million dollars, as my memory serves me, of 3 per cent temporary loans. The American people were content to have 3 per cent interest, with the certainty that when there came tight times in the money market they could carry their 3 per cent certificates, which, being overdue, were payable on call, to the Treasurer or nearest assistant treasurer, and get greenbacks for them. That loan was the balance-wheel of our whole system of inconvertible paper money. So long as those millions of temporary loans lay there, greenbacks could not be locked up by speculators, a crisis could not be brought about ; for there were $55,000,000 held by the Treasury, belonging to businessmen, which was payable on call in greenbacks ; and it was the use and wont of the holders, when tight money market came, to get their temporary-loan certificates exchanged by the Government.
Mr. Burchard. If I do not interrupt the gentleman, I would like to ask him what time he refers to.
Mr. Kelley. I refer to the bill which was passed on the 12th of July, 1870. The gentleman will oblige me if he will defer any further questions till I shall have closed, when I will be glad to hear him.
The bill is, Mr. Speaker, as I was showing, delusive in promising an increase of the currency of the country. We withdrew the three per cents ; we forced their surrender under the lead of the then chairman of the Committee on Banking and Currency[Garfield], on the theory that the volume of currency was to be maintained without contraction. Pending the discussion of that bill, and after its suggestion, a large amount of these three per cents came in. The total amount outstanding, when we came to act on the bill finally was $54,000,000; and it was provided that $54,000,000 national bank notes should be issued in lieu of the $54,000,000 of these three per cents to be called in. Gentlemen on the floor said it was to work a contraction. Men who saw the terrible influence of contraction upon the debtor class and the enterprise of the country warned the House against even that measure of contraction ; but the answer of the eloquent gentleman from Ohio[Garfield] was, it does not mean contraction.
Now what was the result ? The three per cents were called in immediately and paid off. What I am asked, were they paid in ? They were paid by leaving that amount of 6 per cent gold-bearing bonds, which ought to have been called home and redeemed, remain in foreign markets, and we made the marvelous economy of borrowing $54,000,000 of foreigners at 6 per cent in gold as a substitute for that amount held by our own people at 3 per cent.
How about the $54,000,000 of bank currency going out to substitute the three per cents which had been counted in the reserve as greenbacks ? Have they all been issued yet ? No. They have come out slowly, at distant intervalspart of them have. Forty-nine million some hundred thousand have been issued, and the Comptroller of the Currency has this day informed me that there are still $4,390,693 of that $54,000,000 to be issued.
Now, I tell gentlemen that if they pass this free-banking bill, as it is called, they will have the same result again. The South and West are in no condition to buy bonds on a speculative market, such as they will have on the passage of this bill. They are in no better condition now to institute banks based on gold-bearing bonds than they have been in the intervening four years. If banks be established under this bill in the South and West, it will be done by capitalists and capital from east of the Hudson River. They may bear the name of a southern or western town or city, but they will be only a new facility granted to bankers and speculators residing east of the Hudson, where capital has accumulated to take new mortgages, not only upon current productions, but upon the farms and plantations of the West and South. They will give those sections currency shops ; they will be of advantage to the people so far as they will make places in which they may deposit their money and thus increase commercial capital, but they will represent an absenteeism as fatal to local enterprise and the prosperity of those sections as English landlordism of Ireland has been to the prosperity of that unhappy island.
Is free banking possible ? I have heard it said it is not. I think it is, sir. In the first place, let me say that the emission of money is an attribute of sovereignty, an attribute which cannot safely be delegated, which never should be delegated, and which the most enlightened opinion of Great Britain in now demanding shall be resumed by the British government for the benefit of the British people. I could cite many authorities on this subject, but I propose to refer simply to the closing paragraph of a paper entitled The mint and the Bank of England, in the Westminster Review for October last. It says :
In breaking this monopoly of the bank we should be taking a great stride toward the attainment of that ideal system of currency which Sir Robert Peel must have had in his heart when he passed his currency laws; a system under which the state shall be the sole fountain of issue, under which no money shall circulate on credit, or, if it does, shall circulate on the credit of the state, all bank-notes, as well as coins, bearing the image and superscription of the head of the state, and under which all profits upon the issue of money shall form part of the imperial revenue.
The power of issue is, and ought to be, a sovereign right. It was a sovereign right in the days of Athelstan, and as a sovereign right was exercised only by the king. It will be recognized as a sovereign right to be exercised only by the king in the days of Albert VI. But at our present rate suppressing private coinage, the issue of bank notes, it will not be till the days of Albert VI, and it has not been since the days of Athelstan. The power of issue now exercised by the Bank of England, and by the English, Irish, and Scotch banks, is a relic of feudalism, and of those rough and rude times when every prelate and noble set up a mint under the shadow of his palace or castle, coined money in their own names as grantees of the king and appropriated the profit of their mints as they appropriated the rent of their estates. The manufacture of coin has been suppressed long ago, but the manufacture of paper money still remains, and the profits of this manufacture are allowed to remain in private hands, the state taking upon itself the manufacture of the only part of the currency upon which there is, or can be, a loss. It is high time that this state of things ceased ; that all rights of issue were gathered into the hands of the state ; that the debt of the Bank of England was paid off ; that all notes except those of the state were suppressed ; that the powers of issue now exercised by the banks were vested in the hands of the royal mint ; that gold coinage, like silver and copper, was made self-supporting, and that the profits upon paper currency were claimed by the state, and appropriated, like the profits of the post-office, to the reduction of taxation.
I have said that the power to emit money cannot be delegated without danger to the Government and the people, and especially to the current trade and commerce of the country. It involves the highest attribute of sovereignty, and cannot be parceled out among the people of the several States without such collisions of interest and opinion as must perpetually endanger trade and commerce. And, sir, I maintain the position that paper money emitted by the Government should be based on the credit of the Government, which rests on the taxable property and power of the country ; that Government issues promising to pay specie, or any other mode of redemption than by their receipt in payment of taxes and all other pecuniary liabilities to the Government, would be fraught with the same delusive snare that bank promises to do an impossible thing are fraught with.
I know, sir, that this statement will envelop me with the tender emotion of pity, nigh akin to love, of the eloquent gentleman from the Hartford district of Connecticut, [Mr. Hawley] of my eloquent friend from New Jersey, [Mr. Phelps] and, it may be, of my good friend from Illinois [Mr. Burchard] and the learned bullionists of the country generally. I should undoubtedly be overwhelmed by the consciousness of their loving condescension and pity were I not something of an egotist, and in the habit of thinking my own opinions just as good as those of other men, especially when I stand on a proposition taught me, and supported more ably than I can support it, by Benjamin Franklin, John Jay, (when presiding over the Continental Congress) Thomas Jefferson, Alexander Hamilton, John Taylor of Caroline, James Madison, and John C. Calhoun, among the dead, and by Henry C. Carey, John A. Thomson of Summit Point, West Virginia, and Charles Sears, of Navasink, New Jersey, three as original and profound thinkers as God ever blessed our country with, and with a legion of men less worthy of distinction than they, but scarcely less worthy of it than my associates on this floor, who do me the honor to pity my ignorance and credulity.---[the fact is that Taylor of Caroline, Thomas Jefferson, and even John Calhoun, while alive clearly stated that they would be opposed to such recommendation as Kelley just made]
But let me say, and it would be well for the country to consider the proposition, that all talk of the resumption of specie payments at this time is a delusion without a shadow of foundation in fact or theory sustained by fact ; and they who not being bankers or of the creditor class who urge resumption are misled by the teachings of men who proclaim their science to be a science based on assumptions. This is like the oriental theory by which the earth is kept in its place ; the earth it is assumed rests on an elephant ; it is assumed the elephant rests on a tortoise, and the tortoise is assumed to rest on something ; and if one of these assumptions is wrong, the possibility is that the theory is not exactly right. And so is it with this science based on assumptions ; when assumptions are consistent with the facts of history and social life we may prove the deductions from them. Let me illustrate one generally accepted assumption, before proceeding to another point.
This school of philosophers tell us that by an unyielding law the volume of currency regulates the prices of commodities, and that gold is the standard of prices, the measure of value. Now I find by reference to page 39 of a work published by Hon. W.A. Richardson, Secretary of the Treasury, entitled Public debt and national banking laws of the United States, that
The amount of currency in actual circulation, including demand notes, reached its highest point about August 31, 1865, when it was $433,160,569. At the time of the proclamation of the President, April 2, 1866, declaring the rebellion ended in certain States therein named it was $422,749,252. It was first reduced below $400,000,000 September 1, 1866, near the time of the Presidents proclamation of August 20, 1866, declaring the insurrection at an end throughout the whole of the United States, when it was $399,603,592, and has never been so high since that date.
This work was published in 1873, prior to the financial crash which occurred in September.
Now, sir, let us look at the irrefutable assumption which is dinned into our ears daily by the scholars of the House with such pitying condescension toward their unfortunate associates who have not been able to find evidence to sustain it.
According to these learned teachers and Mr. Secretary Richardsons facts we have a pyramid, starting from its base on the 1st of January, 1864, going to its climax on the 31st of August, 1865, and descending steadily but less rapidly to January, 1867. If their theory is true, that pyramidal form is an inevitable result. What I have to say on the subject is, that if that is the law we have been living in flagrant violation of it, for which we deserve the most condign punishment. But, sir, what are the facts of the case ? They show that the pyramid was reversed, and that in August, 1865, the price of gold was lower than it had been in 1864, and than it was in 1866. I state the facts correctly, and if you will do me the honor to refer to my remarks when they shall appear in the Record, you will find a table prepared from the Bankers Almanac of New York which gives the price of gold every day, during the months of June, July, August, September, and October, for the three years of 1864, 1865, and 1866. The facts presented by this exhibit demolish these particular assumptions and repeal all laws which a priori reasoning has deduced therefrom.
Now, I insist that if we lived through those three years in such flagrant violation of known laws there ought to be some means of punishing us for it ; and that the men who bought their goods so cheaply in 1865, when currency was so abundant, ought, by some equitable process, to be made to pay more, because this law required them to pay nearly twice as much in that year as they did in 1864, and considerably more than they did in 1866. What have the adherents of this supposed law, who have addressed us so touchingly on the moral aspect of the currency question, to say on this aspect of the case ? I hope they will give us their view.
But it may be said that the war interfered with the operation of the law. If so, I reply by asking a question or two. Was not the war more remote from 1866 than it was from August, 1865; and pray what kept up the price of gold in 1866, when the work of contraction was going on so vigorously under the action of an enlightened Congress and Secretary of the Treasury ? I know that well-read gentlemen will say these facts are very vulgar, and I admit it, but must also claim that they have much force.
Sir, I repeat, that all talk of the resumption of specie payments under the existing condition of affairs is idle, and state, as my next proposition, that bond resumption must precede note resumption. Let us look at this. Come, let us reason together as brethren. Is the question of immediate or early resumption a practical one ? We owe on our gold-bearing bonds, in round numbers, $100,000,000$99,000,000 and a little more. We owe on State and municipal and corporate bonds enough to increase the total largely and make the sum payable abroad in round terms about $100,000,000 annually. This is payable at various periods during the year, the Government interest is payable quarterly or semi-annually, but the date of the semi-annual payments is so arranged that the falling due of instalments of interest may be regarded as quarterly. Seventy-three per cent of our carrying trade of last year was done in foreign bottoms, and the balance of trade was against us well-nigh $100,000,000. Our people are much given to foreign travel, and many thousands of them reside abroad. In the little city of Dresden the last census found more than two thousand American residents ; in Paris there is a much larger colony ; and they are found in all the attractive cities of the Continent. It is estimated that the outlay by European travelers and residents is $60,000,000 a year. Take into account $100,000,000 of gold interest ; take the balance of trade, a part of which is profit made by us, but a larger part of it is not profit, but results from the excessive importation through the resident agents of German, French, English, and other foreign manufacturers who put their old stocks on our market by auction at any price. I cannot make an accurate estimate of the carrying trade, and I throw off $30,000,000 of the estimated $60,000,000 for American travel and residence abroad, and that leaves a total of something over $180,000,000 a year to be paid to foreign countries in bullion or commodities. The fact that justifies the reduction of this estimate to the amount stated is the receipt of bullion in the hands of immigrants, of which no account can be taken largely over $200,000,000.
I pause here, and regret that my friend from the Hartford district of Connecticut is not here. I am very glad, however, that my friend from the Milwaukee district of Wisconsin [Mr. Mitchell] is not here. You will remember the enthusiasm with which my friend from Connecticut shouted over the new discovery in political economy made by the gentleman from Wisconsin, the enthusiasm, expressed by gesticulation and emphasis of every kind, with which he hailed and proclaimed that new discovery in political scienceso important did he regard it that he would fain have everybody know that it had been made and appreciate its value. I will, exclaimed he, quote his demonstration, lest some now listening may not have heard it. The demonstration was, that if a vessel sailed from an American port with $100,000 worth of goods on board, and went down in mid-ocean, there was no balance of trade against us, but it showed a favorable balance of exports. Well, sir, the demonstration was, I doubt not, really an invention of my friend from Wisconsin, and he deserves credit for originality ; but I am sorry to say it was among the earlier things that Bastiat taught me, and I regarded it with almost as much favor as the gentleman from Connecticut did until, on investigating the history of Bastiats works, I found that British writers, when they were less given to free trade than they are now, had suggested to Bastiat that he would do well, in other editions of his works, to leave out this Joe Millerism, as it was a very venerable suggestion, and had long been known under that title to the English people. The idea of resting the science of political economy on the occurrence of accidents, and the assumption that such accidents do not happen under general laws and in equal proportions to all commercial nations, that no storm shall sweep from the ocean any ship that does not bear the flag of a particular country, while the fleets of other nations move safely through storms and tempests, is a Joe Millerism in political economy to the authorship of which few thoughtful persons would aspire.
Sir, there is an average liability to accidents among commercial nations, and a solid basis for scientific consideration of the laws involved in the settlement of the balance of trade remains, notwithstanding the sanction of the authority of Joe Miller, Bastiat and my friends from Wisconsin and Connecticut.
But the gentleman from Wisconsin, with more ingenuity than candor, proceeded to say :
Of the same character with the balance trade bugbear is that sometimes urged to the effect that we can never return to a specie standard so long as we have so much interest to pay abroad. That objection is based on the exploded idea that we cannot pay our interest abroad in anything but specie, as if our wheat and corn, our cotton and petroleum, our pork and lumber, will not give us a credit balance in London just as readily as the gold of California.
This discovery is more ingenious than the other, and brings me to a point worthy of consideration by gentlemen about to legislate on banking and currency. I had the folly, when we were discussing the bill which became the act of July 12, 1870, [H.R. 1900 to increase banking facilities] to suggest that we were blessed in the fact that our currency was inexportable ; and I now reaffirm the doctrine that our commercial salvation depends upon the fact that our currency is inexportable, although the distinguished gentleman from Ohio, then the chairman of the Committee on Banking and Currency [Mr. Garfield], was so immensely surprised at my innocence that, forgetting that money is a creature of law, that it represents the sovereignty of the state by which it is emitted, that it is legal tender and can pay all a mans debts within the limits of the sovereignty by which it is emitted, he supposed it to be strictly analogous to eggs and butter and cheese ; and learnedly said that we had addled eggs and moldy cheese, and odorous butter, and divers other things that were not exportable, and wanted to know whether I thought our country blessed in the fact that they were inexportable. Sir, when were addled eggs made a legal tender ? What law of the United States ever made musty cheese a legal tender ? When was the sovereignty of this nation stamped on musty flour, or moldy cheese, or addled eggs ? It was a pleasant witticism, but it was slightly wanting in strict analogy, inasmuch as different effects ensue from the export of surplus commodities and of part of the life-blood of commercethe legal tender currency of a country, when that currency is not in excess of the legitimate demands of trade.
Now, sir, I come back to my argument. We owe abroad about $180,000,000 annually. Where do we get the gold with which to pay this annual charge ? We mine about $60,000,000, and we import from nations that become debtors to us in the course of trade, and have gold to spare about $20,000,000, making about $80,000,000. How do we settle the rest ? By virtue of our inexportable currency we settle the rest, to use the language of the gentleman from Wisconsin, [Mr. Mitchell] in our wheat and corn, our cotton and petroleum, our pork and lumber, and our gold from California. Foreigners, not being able to use our legal-tender currency in other lands leave our business to flow on undisturbed in its accustomed channels, and take their balances in the products of our soil, our mines, our fisheries, and workshops. And here is the point of my argument in favor of a currency that shall be of like value in every mans hands wherever the American flag floats as an emblem of sovereignty, and yet shall lose its money value when it leaves the limits of our country, and shall therefore serve us with a currency that a gold currency which our creditor covet, would not be permitted to.
Let us see what would probably be the effect of hastening by artificial means to the use of a convertible currency. I will not stop to discuss the method by which that end shall be attained, but will assume that it is possible that we may reach it, and will only discuss the probability of maintaining the position when we shall have reached it. We have $180,000,000 in gold annually to settle abroad, which our creditors now very gladly take in commodities. We resume specie payments ; and the Treasury begins te redeem greenbacks and the banks begin to redeem national-bank notes. All might go on swimmingly for a month or six weeks, or a few months, when Germany might draws on France for gold, unexpectedly to France, or France draws on Germany, or both draw on England, or England draw on both. They are all creditors to us. There being a crisis such as recently happened at Berlin the other day, or as is now happening in London, and as is imminent in France ; and, finding their specie drawn away from them they would avail themselves of the ocean cable, and telegraph their agents in this country and say, Sell $5,000,000 of bonds, merchandise, or anything, and remit the specie.
Under these circumstances orders such as I have supposed would not come from a single banker or merchant, but from dozens or scores of them. Our stock of gold coin would be the bank on which their crisis would cause a run ; greenbacks would be sent to the Treasury, and national-bank notes would be presented to the banks for redemption. Both might sustain the first shock ; but when steamer day came and it should be announced that one steamer had taken out two millions of specie, another $1,500,000, and another two millions more, merchants would probably say to themselves : If our gold is all to go abroad we must though it may cause a suspension, take care of ourselves ; and a run on the banks and the Treasury would ensue, and both would be compelled to suspend specie payment in the midst of a financial crisis.
I pray gentlemen to note that I make a distinction between gold and currency. I have no objection to our gold going abroad. It is mined by American labor ; it is wealth drawn from our mines ; and is a commodity as much as iron, lead, copper, petroleum, tobacco, cotton, or wheat. It is one of the productions of our soil, gathered by the labor of the American people ; and let it go as freely as any other commodity. But do not make it part of our currency just now ; do not make every note, whether greenback or bank-note, redeemable in it, until we shall have redeemed or converted half of our gold-bearing bonds and so far restored our commercial marine that we shall have a profit and not a charge in account with the carrying trade and our foreign exchanges.
But, say gentlemen, how can we redeem or convert our bonds ? Appeal to and trust the American people and you can redeem your obstructive gold-bearing bonds with a rapidity that will be magical. Rely on the American people as England in her exigencies relies on her people ; as France relies on hers, and as the German Empire trusts the people of that empire.
Appeal to and trust the American people again ! In the name of God and humanity I appeal to you to lift the laboring masses of our people from their idleness and deep dejection by trusting them again, as you did during the days of the war, when from the results of their labor they loaned the Government $2,000,000,000 on various forms of temporary loan ; on 3 per cent certificates, on seven-thirties redeemable in three years, on compound-interest notes, a legal tender for the face value but not for accrued interest, on certificates of indebtedness, on certificates of deposit, and other evidences of debt, they gave you $2,000,000,000, while their productive power was stimulated and sustained by a volume of currency adequate to the business of the country. While educing this wealth from our abounding raw materials and lending it to the Government, they were oaying for three successive years an average of $450,000,000 of taxes, without any contribution from the southern people. Give to the poor people who have been swindled in New York, in New England, and in my own city alone, to the extent of $2,000,000 by faithless savings-banks, a place in which they may make their deposits, with the assured faith they have in the Government that their money will be kept safely, that they can get it when they may require it, and that they shall have a rate of interest about as great or nearly as great as the savings-banks promised to give them3.65 per cent.
Sir, one set of representatives of workingmens associations in Philadelphia, little skilled in parliamentary law, wrote me letter last week imploring me to get through the three sixty-five loan bill. Some of them had been caught by the failure of Jay Cooke ; more of them by the failure of the Franklin Savings Institution, in whose vaults they and their class had put nearly $900,000. They had gathered their remnants and in going through their affiliated societies found that they had a little over $100,000 among them ; and their letter to me (I do not happen to have it with me now) begged me to get this bill through so as to save them from the risk of robbery and fire, and enable them to deposit their earnings where they would be safewhere they would remain at low interest but without the risk of such failures as have happened to so many of the savings-banks and private bankers of the country.
Gentlemen descant upon the danger of allowing banks to receive and pay interest on deposit. Sir, I have here the message of the President of the United States in which he recognizes both this evil and the importance of having a portion of our bonds convertible at the will of the bond holder. He suggests the deposit of bonds and the withdrawal of greenbacks, and the loss of interest on the bonds by the owner while they remain on deposit. I have here the report of the Secretary of the Treasury, in which he recognizes the popular demand for convertibility. He has no word to say for or against it, but asks that whatever measure be adopted may be well considered and guarded. I have the report of the Treasurer of the United States in which he devotes seven pages to detailing the evils of the payment and receipts of interest on deposits by banks, and to trying to persuade Congress to authorize the issue of three sixty-five bonds, as the only means of breaking up the paying of interest on deposit and the accumulation of the funds of the country in great money centers for speculation at times when the interests of the people require absolute or nearly absolute quiet. And I have here the report of the Comptroller of Currency, in which he presses these questions for the second time upon the attention of Congress. He does not rely upon the power of law ; for he knows we all know that laws do not control banks ; that when the fact comes out that the banks have been living in violation of the laws provided for the government, they have the people under such embarrassments that those they have wronged are the first to rush to the Legislature or to Congress and ask that the penalties of the law may be repealed and the banks be not put into liquidation. He knows that no law can bind the confederated banks of the country ; he knows that the charter of every New York City bank was forfeited last September. He knows that the only power he has with which to threaten banks when they certify checks to pay which no money has been deposited is to do what he does in this reportsay to them as affectionate mothers say to their troublesome sons, Now, you have been a very bad boy ; do not do it again ; for if you do and I catch you alone, I will punish you. He knows that when they all transgress, and the enforcement of the penalty would break up the whole system, he cannot even threaten to punish them but must palter with their iniquity and lawlessness.
[Here the hammer fell.]
Mr. Burchard. If the gentleman from Pennsylvania [Mr. Kelley] desires it, I move that his time be extended.
Mr. Kelley. I thank the gentleman from Illinois and the House.
Mr. Bright. I ask unanimous consent that the gentleman from Pennsylvania be permitted to proceed without limit.
[There was no objection.]
Mr. Kelley. The Comptroller of Currency enforces his recommendation of this year by citing what he said on the same subject last year, filling more than a page of his report. You profess to desire to stop the payment of interest on deposits. You cannot do it by the mere force of law. Suppose you prohibit the national banks from paying interest on deposits, you cannot extend your prohibition to State banks ; and if you could, you cannot prohibit private bankers from borrowing money on interest. Here is a statement of the assets and liabilities of the Philadelphia house of Jay Cooke & Co., showing quite a large list of banks which lost their Philadelphia balances, at least for the time being, when this private banking house closed its doors.
If law will not restrain the powerful and confederated corporations, how can you prevent their indulgence in these practices so fatal to legitimate business ? The remedy is simple and in our hands. It will save the Government millions of gold annually and hasten the permanent resumption of the use of gold as currency. It is to enable banks, bankers, insurance, railroad, and other corporations, merchants, farmers and laborers to hold their own balances by inviting them to take convertible bonds at 3.65 currency interest. When we shall be wise enough to thus restore to our inconvertible paper system the element of temporary loans the power of Wall street will be broken, and the scepter will drop from the palsied hands of its money kings. Do this and you will find the peoples reserve diffused over the whole country ; inactive, save as the Government may use it in the purchase of gold six per cents, and waiting the day of active business, when the bonds may be presented to the nearest assistant treasurer for redemption, or be used as domestic exchange from the East to buy the grain of the West, and from the North to buy the tobacco and cotton of the South.
This derided but beneficial system of interchangeable loans was an inherent part of our system of paper money until, as I have said, we blunderingly or criminally eliminated it on the 12th of July, 1870.
Restore it ! Restore the balance-wheel, the governor of the machine, and in doing it you will break up the power of Wall street to gamble with the wealth and industry of the country. But, sir, if we fail to do it and legislate at all this session, we will work disasters wider spread and greater than those from which we are now suffering. Twenty-six of the forty-four million dollars have already been issued. Shall we withdraw them ? The business of the country is paralyzed. Men, women, and children who would gladly earn, and were earning last September, honest livelihoods and laying up money for the future, are to-day out of employ by hundreds of thousands, and are living in enforced idleness. Your machinery, wonderful in its ingenuity and more wonderful in its power, stands still coated with dust or eaten by rust. Your water-power is running to waste and your mines are yielding but a small percentage of what they were accustomed to yield. Your revenues have run down, and the savings-banks, called upon by the laboring classes who are their depositors, are notifying mine and factory owners and business men to prepare to pay their mortgages, and the work of contraction thus goes on apace. What, in view of this condition of things, will be the result if you determine to recall the twenty-six of the forty-four million reserve which have been issued ?
Mr. Speaker, we have voted to issue the remaining $18,000,000. Ah, sir, that way greater danger lies, if no means be provided by which the surplus may be absorbed in seasons of commercial inactivity, and kept from Wall street and its gambling speculators, and I therefore voted against the proposition, wild inflationist as I am said to be. Add $18,000,000 to the $26,000,000, with stagnant business, and what will there be for it to do ? Why, it will go to Wall street, to Third street, to State street ; it will go into the hands of the Goulds, the Vanderbilts, the Drews, whose existence is proof that man may exist without conscience, moral principle, or human sympathy, and by next August your hotels at the watering places around New York will swarm with speculators, and money will be easy ; but when September shall come, and money be needed to move the crops of the West and South, we will have last September over again, but with a power increased in the double ration of the increased volume of currency and the listlessness of the productive power and trade of the country. Let gentlemen who talk of assignats and continental money take heed while they may, and provide legitimate employment at all seasons of the year for the entire volume of our inconvertible currency.
Can you guard against this danger ? Yes, gentlemen ; I have shown you how, and have borrowed my suggestions from the illustrious men whose names I mentioned in the earlier part of my remarks. I ask you to consult the unimpassioned wisdom of Benjamin Franklin. I ask you to read the words with which John Jay, from his office as President of the American Congress, addressed the people. I ask you to turn to Jefferson, who in his letter to Mr. Eppes of June 24, 1813, said,
We are an agricultural nation. Such an one employs its sparings in the purchase or improvement of land or stocks. The lendable money among them is chiefly that of orphans and wards in the hands of executors and guardians, and that which the farmer lays by till he has enough for the purchase in view. In such a nation there is one and one only resource for loans, sufficient to carry them through the expense of war; and that will always be sufficient, and in the power of an honest government, punctual in the preservation of its faith. The fund I mean, is the mass of circulating coin. Every one knows, that although not literally, it is nearly true, that every paper dollar emitted banishes a silver one from the circulation. A nation, therefore, making its purchases and payments with bills fitted for circulation, thrusts an equal sum of coin out of circulation. This is equivalent to borrowing that sum, and yet the vendor receiving payment in a medium as effectual as coin for his purchases or payments, has no claim to interest. And so the nation may continue to issue its bills as far as its wants require, and the limits of the circulation will admit. Those limits are understood to extend with us at present, to two hundred millions of dollars, a greater sum than would be necessary for any war. But this, the only resource which the government could command with certainty, the States have unfortunately fooled away, nay corruptly alienated to swindlers and shavers, under the cover of private banks. Say, too, as an additional evil, that the disposal funds of individuals, to this great amount, have thus been withdrawn from improvement and useful enterprise, and employed in the useless, usurious and demoralizing practices of bank directors and their accomplices.---[Why did Kelley need to resort to quoting Jefferson out of context ? Thomas Jefferson was writing about borrowing from the people for the purpose of financing a defensive war.]
I ask you, gentlemen from the South, to listen to the voice of one whom your section once idolized as its best thinker, the friend and counselor of all your great statesmen, John Taylor of Caroline. I ask you to read the marvelous addressesmarvelous for the prescience with which they portrayed the present condition of the countryof John C. Calhoun, uttered in 1834, 1837, and 1838. I could take whole pages of Mr. Calhoun addresses and read them here, and no man who had not read them would discover, except in their more finished style and choicer language, that I was not elaborating the thoughts I have drummed into your ears so often during this session. Turn to James Medison also. I know it is often said Mr. Madison, when young, and Mr. Madison, when old, were not the same man ; that in the course of his long life he was on both side of every question ; but it so happens that on the question I am considering, especially that of Government using its credit as money, he was consistent, so far as I have been able to discover, throughout his long life.
Sir, such a system as my bill proposes will not only give consistency and steadiness to our business, not only give safety to depositors, not only create small money centers all over the country, but it will open the way to truly free banking. Charter no more banks ; grant no more monopoly privileges ; but substitute a greenback of like denomination for every bank-note which goes into the Treasury, and surrender the bonds by which these notes are secured to the banks as fast as they are redeemed by this process and let them sell them for greenbacks on which to bank. Then banking will be free ; and why should it not be ? Why should not men select the corporation or individual with which they will deposit their money as freely as they select their doctor, their lawyer, and their clergyman ? Why should not the people select the banker with whom they will intrust their funds just as they do their grocer, their shoemaker, their tailor, and their drygoods merchant ? Whence does the Government derive the paternal right to regulate these matters for them ?---[such propositions have been offered in the House of Representatives in 1866, in 1867, in 1870, Pig-iron Kelley have not supported any of them.... In those years his Party, the Republicans --the party of the money power--, were way too busy reconstructing the United States along dictatorial lines]
Banking, the borrowing and lending of credit, of purchasing power, is a matter of business between man and man, with which the Government has nothing to do. It should issue and be responsible for the money of the nation, and then no man could lose a dollar by using paper money so long as there was a tax to pay to the Government, or an article to purchase from his fellow-citizen. But more than this, sir ; under this free system little money centers would organize themselves throughout the South and West ; private and corporate balances would find use in the localities in which they were produced ; bankers would receive deposits, and they would be able to show their depositors a reserve which was earning them 3.65 per cent, and which the credit and faith of the Government were pledged to redeem in greenbacks on presentation.
More than that, it would enable the Government to bring home the gold-bearing bonds from abroad ; it would lessen our interest account, and change its character from gold to paper ; for the money received from convertible bonds is by the provisions of my bill to be applied to the redemption of gold-bearing bonds. Ah ! but, say gentlemen, you say the committees bill will produce speculation in bonds ; what would the process you propose do ? Why, let me add, as I intend to do, a clause, or to purchase gold wherewith to call bonds, and my bill would create no speculation in bonds. If the Secretary of the Treasury should receive ten millions or hundreds of millions in exchange for three sixty-five bonds and had the choice to buy either bonds or gold with which to call overdue bonds, he could restrain speculation in both. There could be no effective combination against him then. let him reduce his gold indebtedness by issuing the greenbacks now in his possession in exchange for six per cents, and apply the interest thus saved with the proceeds of three sixty-fives to call in other 6 per cent bonds, and our interest account will run down rapidly, while the assured elasticity given to the currency will reanimate our industries and all will go merry as marriage-bells throughout our country in less than six months and our national credit will stand higher than it has ever done.
But other gentlemen say these bonds might come in unexpectedly to the Treasury. Well, my bill proposes to guard against this unlikely contingency. It proposes to restore the law to what it was in the beginning. It goes to the shades of the fathers of the system and ask for guidance. They who instituted the system foresaw all such contingencies and provided for them by ordaining a redemption fund of $50,000,000, applicable to the redemption of temporary loans when presented in emergencies. An incident not likely to happen in these happier days compelled the invasion of that fundan incident of war when troops had to be paid ; when disaster dogged our steps, and the revenues fell off. At that time, when the confidence in the resources of the Government was briefly impaired, that fund was drawn upon, and $33,000,000 of it were out on the 31st of August, 1865. There are no contingencies like that pending now, and that fund could be held so that if these bonds came in at any day in excess of current income and resources that $50,000,000 could be drawn upon, and when the unusual demand ceased it could be replenished from current income.
Mr. Butler, of Massachusetts. Will the gentleman allow me to ask him a question ?
Mr. Kelley. Yes, sir.
Mr. Butler, of Massachusetts. What inducement would there be to any man owning a 3.65 per cent bond to return it to the Treasury for redemption ? Why would not they circulate as money just as well as the greenbacks with which they would be redeemed ?
Mr. Kelley. In reply permit me to say that I have alluded to the fact that convertible bonds would constitute domestic exchange, and that is why the banks and bankers dislike them so much ; they make a great deal of profit out of buying and selling exchange. I can see no reason why these bonds under any circumstances should be rushed in for redemption ; but assuming that there might be a conspiracy among bankers, bondholders, and other capitalists to corner the Treasury, I inserted the clause I have referred to out of what I believe lawyers call abundant caution, not because I saw any necessity for it, but to remove doubt from the minds of others. The soundness of my opinion has been proven by experience.
When the great Chicago fire took place which consumed so many million dollars worth of merchandise and property, which lasted, I think, four days, and spread consternation throughout the banking, insurance, and commercial circles of the whole country, there were $70,000,000 of overdue 3 per cent certificates outstanding ; and what amount do you suppose went into the Treasury during the four days of that fire and two days thereafter ? Why, $1,500,000. And I have doubt that if $500,000,000 of these bonds were out, and a similar fire should occur, the fact that it was known there were so many out would protect the Treasury against a run for a single dollar.
Now, by way of drawing to a conclusion, permit me to say that I discover in the committees bill a very ingeniously disguised system of contraction by the retirement of all existing issues of national currency.
You will find it in the latter sections of the bill. It is very simple and very plausible. It proposes that $2,000,000 of greenbacks payable in gold twenty-four months after date shall be issued monthly, and that $2,000,000 of the existing greenbacks shall be retired, having been substituted by the gold greenbacks, and that that process shall continue as long as there is a note of the existing issues outstanding. Let us see how this would work. At the end of twenty-four months there would be $48,000,000 of gold-bearing greenbacks out. Then the first $2,000,000 issued would have to be redeemed. Now let us follow it up. For twenty-four months it would be simply an exchange of one kind of greenbacks for another. But let us go into the twenty-fifth month. Then there will be issued $2,000,000 of gold-bearing greenbacks, and $2,000,000 of legal-tenders will be withdrawn. The Treasury will pay off and cancel the $2,000,000 of gold-bearing greenbacks first issued. Gentlemen will now see where the little joker comes in. Each month $2,000,000 of gold-bearing greenbacks will be issued, $2,000,000 will be redeemed, and $2,000,000 of existing legal-tenders retired, until we shall come to a time when there will be but $48,000,000 of common greenbacks out ; and then for each month thereafter, for twenty-four months, we will take up $2,000,000 of them ; and then we will land where ? There will not be a legal-tender greenback of the present issue in circulation ; they will all have been redeemed, and if no mishap shall have occurred we will be in the happy land of specie payment.
And we will remain there how long ? As I have already demonstrated, we will remain there until France, or Germany, or England determines that either for their convenience or from their jealousy of our prosperity and growth it would be well enough to trip us up and exhibit our weakness and dependence. Then they will sell a few million dollars’ worth of goods or bonds, for gold-bearing greenbacks, which they will present for redemption, and ship the proceedsthe basis of our currency. The we shall be just where we were in 1857, when the Old Lady of Threadneedle street needed, or thought she did, $7,000,000 of gold coin. Our currency was then on a specie basis. What did she do ? She requested some of her customers to draw on us for that amount of specie, and they did. The notes were presented for redemption ; and there was a terrible noise in Cincinnati, especially about the doors of the Ohio Life and Trust Company, and a noise equally as great, or perhaps greater, about the doors of the Pennsylvania Bank in Philadelphia. And the next day there was a feu de joie all over the country. Never did financial institutions explode more rapidly. There was scarcely a solvent bank in the country. The Bank of England had exhausted them, as she will do again if we venture on the ingenious expedient of substituting redeemable greenbacks for the legal-tenders of to-day and redeeming them before we shall brought home in exchange for temporary loans or otherwise at least the principal of $50,000,000 annual interest in gold-bearing bonds now held abroad and shall have put our carrying and foreign trade into such a condition a shall give us a steady balance against the gold-using nations of the world.
And, Mr. Speaker, I thank the great Disposer of events that that day is coming apace. The largest ship ever launched, except the Great Eastern, was launched the other day near the borders of my district. She was built of Pennsylvania iron. And her twin sister of more five thousand tons burden, lies in the same yard ready for launching. John Roach & Sons have other ships upon the stocks, the Cramps are actively employed, and the Wilmington and Camden iron-ship builders are all as busy as they can be constructing gallant vessels to again carry the Stars and Stripes over the commercial waters of the world. The orders for this work preceded the panic. Shall they have others ? If such is to be the case, we must not paralyze them, must not contract their money and make them pay inordinate rates of interest, must not withdraw the medium of exchange by which they pay their laborers ; and must not force those laborers to lend their money to recklessly managed savings-banks, national banks, or to private bankers, to be sent into Wall street to be speculated with until they themselves fail and then issue certificates of deposits in order, as they modestly tell us, to prevent a further emission of irredeemable currency by the United States Government. The destinies of the present generation are in our hands and our constituents will hold us responsible for the fidelity with which we execute the trust.
Increase of Banking Facilities.
Pursuant to order, the House proceeded to the consideration of the bill (H.R. No. 1900) to increase banking facilities, and for other purposes.
The Speaker. This bill will be considered as having been read the first and second time. The pending question is, "Shall the bill be engrossed and ordered to a third reading ?" The gentleman from Ohio [Mr. Garfield] is entitled to the floor.
Mr. Garfield, of Ohio. Mr. Speaker, I trust I shall have at least the sympathy of the gentlemen in this House in an attempt to discuss so difficult and delicate a subject as the currency of the country, and especially so when, probably more now than at any time in the history of the country, there is a chaos of opinions and a war of theories concerning the currency, and a perfect war of theories on the whole subject. If any man should pass through this Hall and ask each member to write down in brief what he thinks ought to be done with the currency of the country, and all of those opinions were collated, it would make a most singular collection of contradictions. In saying this I make no reflection against the House or any member of it, but to exhibit the singular state of opinion, not only here, but throughout the whole country. After some reflection on the subject, I do not believe it is possible for any man to propose a comprehensive financial measure that will receive the general assent of the whole country or any considerable majority in this House.
Having my own cherished and decided opinions, and having frequently announced them here, I find it impossible to realize my ideas in any bill which can have the least possible chance of passing in this House; and so far as I know the same may be said of every other member of the House. Under circumstances like these it became the duty of the Committee on Banking and Currency to prepare a bill to meet as far as possible the manifest demands of the country. And in attempting to do this we labored under all the difficulties I have named, with the additional difficulties of instructions from this House and resolutions from the other branch of Congress expressing opinions diametrically opposite to those of the House.
Before entering upon the consideration of the bill it self I ask the indulgence of the House for a few minutes while I state a few general propositions touching the subject of trade and its instruments; a few simple principles from the foundation on which rests the whole superstructure of money, currency, and trade. They may be thus briefly stated:
First. Money, which is a universal measure of value and a medium of exchange, must not be confounded with credit currency in any of its forms. Nothing is really money which does not of itself possess the full amount of the value which it professes on its face to possess. Length can only be measured by a standard which in itself possesses length. Weight call only be measured by a standard, defined and recognized, which in itself possesses weight. So, also, value can only be measured by that which in itself possesses a definite and known value. The precious metals coined and stamped form the money of the world, because when thrown into the melting-pot and cast into bars they will sell in the market as metal for the same amount that they will pass for in the market as coined money. The coining and stamping are but a certification by the Government of the quantity and fineness of the metal stamped. The coining certifies to the value, but neither creates it nor adds to it.
Second. Paper currency, when convertible at the will of the holder into coin, though not in itself money, is nevertheless an order for money, a title to the amount of money indicated on its face, and so long as there is perfect confidence in the holder that it is a good title for its full amount it can be used as money in the payment of debts. Being lighter and more easily carried, it is for many purposes more convenient than money, and has become an indispensable substitute for money throughout all civilized countries. One quality which it must possess, and without which it loses all its title to be called money, is that the promise written on its face must be good and be kept good. The declaration on its face must be the truth, all truth and no lie. If the promise has no value the note itself is worthless. If the promise affords any opportunity for doubt, by uncertainty or delay in keeping it, then the note represents a vague uncertainty, and is measured only by the remaining faith in the final redemption of the promise.
Third. Certificates of credit, under whatever form, are the most efficient instruments of trade. The most common form of these certificates is that of a check or draft. The bank is the institution through which the check becomes so powerful an instrument of exchange. The check is comparatively a modern invention, whose functions and importance are not yet fully recognized. It may represent a deposit of coin or of paper currency, convertible or inconvertible, or may, as is more frequently the case, represent merely a credit, secured, it may be, by property in some form, but not by money. The check is not money yet; for the time being it performs all the functions of money in the payment of debts. No greater mistake can be made than to suppose that the effective value of currency is not directly increased by the whole amount of checks in circulation.
A recent financial writer says:
"Considering the bank note and check, both are promises to pay, both orders for money and payable, on demand, and both, when the holder has faith in the promise, are received in payment for debts."
Bonamy Price, the latest English authority on this subject, concludes one of his most powerful chapters on currency in these words:
For my part, let the others dwell on notes, the number of their circulation, their tendency to increase or diminish, their stability and their solvency -- let me rather hear of the movements and operations of the check. The rising flood of checks, as it is a sign of the activity, so also is it the usual mark of the profitableness of business; their ebb too surely announces the drooping resources of commerce. Great is the note I admit; but far greater yet is the check.
If any one doubts the correctness of this position, I call his attention to the remarkable fact that the bank-note circulation of Great Britain is no greater to-day than it was thirty five years ago. By Sir Robert Peel's currency act of 1844 the increase of bank notes was practically prohibited. In that year the total volume of bank notes in the United Kingdom was £39,297,180. In January, 1867, the volume was but £38,092,950. Commenting on this remarkable fact, R.H. Patterson, a Scotch writer, in a recent work entitled the Science of Finance, says: [no he doesn't]
For the year ending October, 1869, the total exchanges through the New York clearing-house amounted to $37,407,000,000, and the cash balances were about $1,120,000,000, being but little more than three per cent. of the total transactions. And even this small ratio of balances is paid mainly by checks and by a transfer of accounts. Every year witnesses some new device by which the use of actual money is economized.
I would not for a moment lose sight of the great first necessity of all exchanges, that they be measured by real money, the recognized money of the world; nor of that other necessity next in importance, that bank notes or Treasury notes should represent real money; should be of uniform value throughout the country, and should be sufficient in amount to effect all those exchanges in which paper money is actually used. l would keep constantly in view both these important factors. But that is a superficial and incomplete plan of legislation which does not include in its provisions for the safe and prompt transaction of business those facilities which modern civilization has devised, and which have so largely superseded the use of both coin and paper money.---[as you well know, currency-bank notes do not represent "real money" at best, they represent government bonds and greenbacks: according to the law which brought these banks into existence, these money corporations may issue four of their notes for each United States notes they have in their vaults. these banks are not expected or required to hold gold which you consider "real money" A Treasury note, on the other hand, at the very least, always represents real tax-paying ability at face value]
The bank has become the indispensable agent and instrument of trade throughout the civilized world, and not less in specie-paying countries than in those that are cursed by an inconvertible paper currency. Besides its function of issuing circulating notes, it serves as a clearing-house for the transactions of its customers. It brings the buyer and seller together, and enables them to complete their exchanges. It brings debtors and creditors together, and enables them to adjust their accounts. It brings the capitalist and the tradesman together, and offers facilities for credit far beyond the mere issue of its notes. It collects the thousand little hoards of unemployed money, and through loans and discounts converts them into active capital. In the language of Professor Bowen, in his Political Economy, just published------[there is always a professor for the occasion..... Garfield knows full well that people can prosper without bankers and their good offices; bankers, on the other hand..... after finding a host, the foremost and only goal of a parasite is to arrange things in a way that the host may not be able to prosper without the parasite, and to make the host believe that it is so.....
I find there are still those who deny the doctrine that bank deposits form an effective addition to the circulation. But let us see. A bank is established at a point thirty or forty miles distant from any other bank. Every man within that circle has been accustomed to keep in his pocket or safe a considerable sum of money during the year. That average amount is virtually withdrawn from circulation, and for the time being is canceled, is dead. After a new bank is established a large portion of that average amount is deposited with the bank and a smaller amount is carried in their safes and pockets. These accumulated deposits placed in the bank, at once constitute a fund which can be loaned to people who need credit [no, they don't need "credit" they need money]. At least four fifths of the average amount of deposits can be safely loaned out, thus converting dead capital into active [bank credit-note] circulation [as Mr. Biddle held: convert all capital into credit, and all credit into currency; if bankers were only allowed to facilitate the lending and borrowing of other people's idle cash, none of these enterprisers would go into the banking business; the money corporations favoured by Garfield want to be in the credit-note circulating business, that is where the money is].
But the word deposits covers far more than the sums of actual money placed in the bank by depositors. McLeod, in his great work on banking, says:
"Credits standing in bankers' books, from whatever source, are called deposits. Hence a deposit, in banking language, always means a credit in a banker's books in exchange for money or securities for money." Vol. 2. p. 267.
Much the largest proportion of all bank deposits are of this class, mere credits on the books of the bank. Outside the bank these deposits are represented by checks and drafts. Inside the bank, they effect settlements and make thousands of payments by merely being transferred from one man's account to that of another. This checking and counter-checking and transferring of credit amounts to a sum vastly greater than all the deposits. No stronger illustration of this can be found than in the curious fact that all the heavy payments made by the merchants and dealers in the city of Amsterdam for half a century were wade through a supposed deposit which had entirely disappeared probably some fifty years before its removal was detected. Who does not know that the $600,000,000 of deposits reported every quarter as a part of the liabilities of the national banks are mainly credits which the banks have given to business men.
The $200,000,000 now supposed to be deposited in the banks of New York never existed there at any one time, nor even the fifth part of it. About four fifths of the deposits are constantly loaned out to customers. The declared deposits in the Boston banks are about fifty million dollars, and the mere shifting of credit of this sum in the banks wipes out two or three hundred millions of indebtedness every week.
After alluding to this latter fact, Professor Bowen remarks:
"The relative amount of the bank circulation, or of the specie reserve, has nothing to do with this result, any more than it has with the position of the planets, for the whole process might go on undisturbed if there wore not a specie dollar or a paper dollar in existence."
If the analysis I have attempted to make of the principles which govern trade and business be correct, it will aid us in ascertaining the wants of the country and in determining what legislation is necessary to meet the demands of business.
Mr. Speaker, I shall venture to hope that those who have honored me with their attention will agree that a mere supply of currency, however abundant, will not meet the case; coin and currency form only the change --the pocket-money of trade. For the great transactions, which the marvelous energies of our people are carrying on, they need and will demand that greater instrument of modern invention --that credit currency, properly secured and guarded, which takes the forms of checks, drafts, and commercial bills. And this brings me to the question, how is the country now supplied with currency and with these other facilities for the transaction of business ?
It ought to be understood everywhere that the great injustice done to the eastern and southern portions of the country by the present distribution of currency and banking facilities is so flagrant that it will not much longer be endured; and if the wrong be not soon righted the overthrow of the national banking system is inevitable.
In entering upon this question of the present distribution of our currency and banking facilities I am met by our philosophical friends, who say, "Put the currency wherever you please, and like water on the top of the mountain it I will find its level; the distribution, therefore, makes no difference, as the currency will necessarily find its natural place."
Mr. Speaker, I recognize the truth asserted, but insist that it is not applicable to the case in hand. I offer in answer the fact that the distribution of banking facilities under the State system before the war is a better test of the wants of business than the present distribution. Look at the facts. In 1860-61 in eleven of the southern and southwestern States there were two hundred and ninety banks of issue, having a capital of $119,223,633, and a circulation of $74,153,545, besides specie to the amount of $26,064,503. Contrast that with the present situation. Trace a line from this capital westward by the south line of Maryland, Pennsyvania, West Virginia, Ohio, Indiana, Illinois, and Missouri, and we find that in the twelve States south of that line there are but seventy-one national banks with a capital of only $13,177,500, and a circulation of but $8,936,170.
This inequality of distribution was brought about partly by legislation, but mainly by a gross violation of the law.
The gentleman from New York has led me directly to the next point I had intended to discuss. It is not of the inequality of the currency we complain, but it is in the unequal distribution of banking facilities that the great injustice is perpetrated upon the West and South. They are deprived of what is far more important than circulation, the facilities for banking and credit which a proper distribution of banking capital would give them. Destitute of banks, they are compelled to keep on hand a large amount of currency, which is thus virtually locked up from circulation. With banks properly distributed in the destitute neighborhoods this currency would be deposited and would form the foundation of loans, drafts, checks, and the vast transactions that banks enable the people to perform. An increase of the greenback currency would merely give additional circulation, but would afford none of the advantages which accompany the establishment of banks.
I call attention to a circumstance which seriously aggravates this inequality of distribution. The great fluctuations caused by the uncertain value of our inconvertible currency have long depressed legitimate business and greatly stimulated mere speculation. The result is that our currency has been steadily flowing in to the centers of speculation, to be used in that fatal but fascinating game which is played every day in the stock exchange and gold room. For example, during the summer of 1869 the exchanges of the gold clearing house of New York averaged nearly one hundred million dollars per day, more than ninety per cent. of which was downright gambling; and though the material in which these gamblers dealt was what Mr. Fisk calls "phantom gold," yet in playing their reckless game they kept locked up from the legitimate business of the country millions on millions of currency. At the present moment there is a glut of currency in New York and a dearth of it in the West. I read a passage from the money article in a late New York paper:
The banks owe, May 28:
On deposits ......................... $228,039,345
On circulation ................... $33,132,478
Total .................................. $261,171,823
Twenty-five per cent, reserve would be ...... $65,292,956
They hold in gold and greenbacks 94,346,711
Excess .......... $29,053,755
Rate for money, four to five per cent. Speculation in the gold room is dull.
---[you carefully lumped together gold and greenbacks to hide the fact that the majority of that 94million is greenbacks; so how could they pay your "real money" for their notes ?]
Mr. Ingersoll. It is four per cent on call, is it not ?
Mr. Garfield, of Ohio. Certainly. That is the meaning of the quotation. Ninety-four millions of currency reserves in the vaults, thirty millions more than the law requires, money a drug at four and five per cent., and all this because speculation in the gold room was dull, while millions of our industrious citizens find it difficult to loan money at ten, fifteen, and even twenty per cent.
It is marvelous with what patience the American people permit themselves to be robbed and defrauded.
These speculators are now waiting to see what tax laws we pass, as my friend before me [Mr. Judd] suggests, and what influence they will have on the operations of the gold room. During this suspense the gamblers of Wall street are letting their money lie idle, to see which way the tide will turn. Let Congress neglect to pass the legislation which is necessary to overcome the difficulties of the situation and you will see the scenes of July and August, and September, with its black Friday, of 1869, re$euml;nacted. I hasten to say that I do not in any way indorse the notion that Congress can determine by any artificial mathematical rule just how the currency ought to be distributed through the country or how much of it is needed. But it cannot be denied that theory and practice and our past and present experience demonstrate the outrageous injustice of the present order of things in regard to the currency.---[so why not send a team of reconstructionist goons to the gold room and put an end to those speculators ?]
And now I come to inquire for a remedy. What shall it be ? By what means shall we supply the West and South with currency and banking facilities to meet the demands of their rapidly increasing population and wealth ? Shall it be by an immediate increase of the volume of our paper money, to be followed by a greater depreciation of the whole mass, an increase of prices, and a great and disastrous disturbance of values and of all business transactions ? For myself I do not hesitate to declare that such legislation would be in every way ruinous to the interests and destructive of the credit of the country. I believe that the volume of our paper currency is already too large, and that a resumption of specie payments would reduce it. But, Mr. Speaker, whatever may be our individual opinions, it is clear that no measure of inflation can by any possibility be a law during the present session of Congress.---[we need to supply currency ?! are you saying that increasing population requires more medium of exchange ?! ]
The following resolution passed the Senate without a dissenting vote on the 24th February last, and indicates that no measure of inflation can meet the assent of that body. I quote the proceedings of the Senate on this subject as recorded in the Globe of February 23:
" THE CURRENCY.
"Mr. Williams submitted the following resolution for consideration:
"Resolved, That to add to the present irredeemable paper currency of the country would be to render more difficult and remote the resumption of specie payments, to encourage and foster the spirit of speculation, to aggravate the evils produced by frequent and sudden fluctuations of values, to depreciate the credit of the nation, and to check the healthful tendency of legitimate business to settle down upon a safe and permanent basis; and therefore, in the opinion of the Senate, the existing volume of such currency ought not to be increased.
"The Vice President. Is there objection to the present consideration of the resolution ?
" Mr. Sherman. I hope not. Let it pass.
"Mr. Sumner. Let it pass.
"The Vice President. The Chair hears no objection to the present consideration of the resolution, and it is before the Senate.
"The resolution wits agreed to."
It is equally clear that no measure for the resumption of specie payment that includes contraction of the currency as one of its provisions can pass this House during the present Congress. Shut up within these limitations, practically forbidden either to increase or diminish the volume of the currency, the Committee on Banking and Currency were instructed by the House of Representatives February 21, 1870, to perform the duty described in the following resolution :
"Resolved, That in the opinion of the House the business interests of the country require an increase in the volume of the circulating currency, and the Committee on Banking and Currency are instructed to report to the House at as early a day as practicable a bill increasing the currency to the amount of at least $50,000,000."
Under these circumstances the duty of the committee was very difficult to perform. Shut up between Scylla on the one side and Charybdis on the other, and propelled by this peremptory resolution, what could the committee do ? It must give more banking facilities. It must give more circulating currency. But it must neither increase nor decrease the volume of the currency.
There was one term that was the lamp by which our feet were guided. The language used was this: "the increase of circulating currency." That did not mean greenbacks; manifestly not, for my friend before me [Mr. Ingersoll] had again and again tried to get an expression of opinion of this House in favor of an increase in the amount of greenback circulation, and had failed every time on a direct vote by more than twenty votes. So that the House evidently did not mean that. Did it mean an increase of bank circulation ? The House could hardly have meant that, when we took into consideration the impossibility of getting such a measure through both Houses of Congress. "Circulating currency" was the term used; "circulating currency" was the key to the situation. They believed that in the circulating currency of bank credits, of checks, drafts, and bills of exchange, and certificates of deposits, there would be obtained all increase of circulating currency, and yet not a great inflation of the total volume of the currency.
Guided by these views, and thus limited, the committee introduced the bill now before the House.
This bill is the result of a compromise of many differences of opinion, and which perhaps suits no member of the committee in all its features; yet, on the whole, they believe it will give the needed relief with the least disturbance to the business of the country, and without injury the public credit.
I now invite the attention of the House to the provisions of the pending bill. It aims at two leading objects: to provide for a more equitable distribution of the currency without contraction or inflation, and without increased expense to the Government; and to provide for free banking on a specie basis.
The first of these objects the bill proposes to reach by the provisions of the first six and the last three sections of the bill. The second object is provided for in the remaining sections, being sections seven, eight, and nine.
The provision for the more equitable distribution of the currency and the increase of banking facilities are the following:
First. The issue of $95,000,000 of national bank notes in States having less than their proper proportion.
Second. The cancellation and retirement of the three per cent. certificates, which now amount in round numbers to $45,500,000, and the cancellation and retirement of $39,500,000 of United States notes.
Third. When the whole amount of the $95,000,000 of additional notes shall have been issued, the circulation shall then be withdrawn from States having excess and distributed to States being deficient, in such sums as may be required, not exceeding in the aggregate $25,000,000.
Mr. Cox [Samuel Sullivan Cox (September 30, 1824 -- September 10, 1889) N.Y. D] said:
Mr. Speaker: So many are the relations of the people to this Federal Government that every word, even of the humblest member, has as emphasis in matters of finance. On such subjects I find upon my files, as a member of the Committee on Banking and Currency, some two score of bills, Senate and House, pertaining to our fiscal affairs. It would be more gratifying to see this exhibition of congressional travail if the quality of the offspring was equal to the number. To these bills is to be appended the bill for funding, yesterday reported by and referred back to the Ways and Means. All these bills have two main objects: first, to increase the amount and alter the character of our currency; and second, fund the debt. These objects are not necessarily, either in their primary or incidental relations, of such near kinship as to be bound together like Siamese twins. But as gentlemen have so regarded them, in bills and debate, I propose to consider them together, even if in the process the formal ligature is severed.
The House instructed our committee to report $45,000,000 more of currency. What kind it did not, in its wonderful wisdom, instruct us. The bill was presented by the gentleman from Illinois, [Mr. Ingersoll.]
Mr. Ingersoll. The gentleman will allow me to make a correction. I introduced a resolution directing the Committee on Banking and Currency to report a bill increasing the legal-tender currency of the country to the extent of forty-four or forty-five million dollars. It was afterward amended so as to read "circulating currency."
Mr. Cox. Yes, sir; our committee could not tell for some time what sort of a currency we were to report. Some were for national bank currency, some for legal tender, and I was for gold and silver, as I am yet. Our committee found in their room a bill called Senate bill No. 378, for $45,000,000 and "coin notes," and to equalize the distribution of circulating notes. Many features of this bill are reported by the honorable chairman of my committee [Mr. Garfield] in his bill now under consideration. Our committee have reported for $95,000,000 of national notes for circulation, and have provided a funding system with new bonds, novel and untaxable.
While commenting on this bill I must refer to other cognate measures. I am opposed to the issue of any more national bank notes. If I could, I would repeal the present authorization and system. I would, since we must have paper for money, prefer the greenbacks, if redeemable, on principles of safety as well as economy. Of that hereafter. In all that I may say, my committee understand, as the House may, if it chooses, that it is my deliberate judgment, after much study, that all your measures, even your most matured, are mere makeshifts, cowardly, timid, halting devices to avoid the one "heroic remedy," which this Congress has not had the skill or courage to apply, to wit, resume specie payments. You owe it to the people to give them back their gold and silver. The Supreme Court have told you the legal relations of this question. Chambers of commerce and enlightened economists have given experience and philosophy to guide you. The history of the legal tender will show you a large account of broken promises, which you will have yet to pay. The people of both parties, who are not bankers or speculators, bondholders or gold gamblers, believe that preliminary to all relief, the sine qua non of all finance legislation is resumption. I am happy in having near me as a hearer Colonel Stebbins, of New York city, who was a prominent financier here in 1862, when the legal-tender act was passed. I think he gives me his acquiescence as well as his kind attention.
Gold and Silver.
You may tinker and tinker; you may expand or contract; you may crawl or jump; you may worry and work, but all your labor is in vain if you do not pursue the resolution which I had the honor to offer to an indifferent House on the 20th of December last. It is as follows:
"Resolved That among the evils growing out of the late civil war is that of an irredeemable paper currency; that it is one of the highest duties of the Government to secure to the citizens a medium of exchange of fixed and unvarying value; and that this implies a return to a specie basis, and no substitute for it can be devised; that it should be commenced now and reached at the earliest practicable moment."
I do not consider this resolution as peculiarly emphatic because it is copied from General Grant's annual message. You have disregarded about all that he recommended, including this; but this is a solution, because it represents the solid sense of the nation, which Congress and the President, in their schemes and jobs, seem latterly to ignore.
The other side of this House owe it to the nation to resume specie payments. You promised, and you broke faith. You passed a law against expansion and for a contraction of $4,000,000 per month. You began well; Mr. McCulloch recommended and you approved. Yet you had not the courage to carry out your law. You quailed before the elections. Ah ! you repealed the law.
The Currency, Gold Notes, etc.
The Senate bill (No. 378) from which the bill before us is taken, proposes to issue $45,000,000 of additional bank notes, and retire an equal amount of three per cent. Treasury certificates. Our bill also redeems and cancels these three per cents. This is objectionable, because it will increase the already redundant currency.
It is said that the withdrawal of the three per cents. will be tantamount to the issue of the new national bank notes, and therefore there will be no expansion; but this does not follow, because the banks will not be likely to retain $45,000,000 of their notes in place of the three per cents. They have at present a surplus of $48,000,000, and consequently can continue the same amount of circulation and yet have the requisite legal reserve. At present the banks, as they are drawing interest on a part of their reserve, readily hold a large amount; when they lose the interest on the whole of it they will not keep so large a surplus. Persons fully conversant with banking believe that such will be the result.
If this be so, then there would be an absolute expansion of the circulation. Under the Senate bill it will be $45,000,000.
But in addition to this, the effective currency would be still further inflated by the bank credits or deposits which the new banks would create. At the present time the national banks, with their $300,000,000 of circulation, grant discounts to such an extent that their deposits amount (October 9, 1869,) to over $523,000,000, and they were in July of last year $574,000,000.
If the new banks create as large a proportion of these credits or deposits, which are as effective in expansion as the notes themselves, and there is no reason why they should not, their deposits will amount to $78,000,000. This will increase the immediate liabilities of the whole banking system, as will be seen by the following statement:
Present circulation, (October 9) ...............$293,593,645
Present deposits ................................. 523,028,490
Immediate liabilities............................. $816,612,135
The banks hold of----
Legal tenders ............................... $85,810,022
Three per cent. certificates ...................... 45,845,000
Specie ................................................ 23,002,405
Immediate resources............................. $154,657,427
or nineteen per cent. of immediate resources.
When the new banks get into full operation the situation will be essentially as follows:
Present liabilities, as above ................. $816,612,135
New liabilities, currency ......... $45,000,000
Deposits ............................... 78,000,000
Increased expansion ,............................. $123,000,000
In the Senate bill, section four provides for a new currency; so does section seven of our bill. It is called "gold notes." We have already four legal currencies:
1. Gold amounting to ................................ $150,000,000
2. Gold notes ................ 40,000,000
3. Greenbacks ................................ 356,000,000
Fractional ......................................... 40,000,000
4. National bank notes ................. 300,000,000
Total ............................. $886,000,000
All the above is used in trade, or in paying duties and the interest upon the national debt. The bill under consideration provides for a description of currency heretofore unknown in this or probably any other country :
1. In that it establishes a national system of free banking.
2. That it is unlimited in extent, since the Treasury of the United States must issue notes to the extent of eighty per cent. upon any amount of bonds that maybe deposited by any company.
3. That while all the notes of the Government, except the gold notes, which are merely receipts for gold deposited, promise only paper in payment these promise gold.
4. That the Government guaranties that all the notes issued by these banks shall be paid in gold on demand, while it permits these banks to issue four dollars of its promises to every one dollar required to be held in gold.
5. That these notes form a mixed currency, which will, from its very nature, be constantly fluctuating in quantity, and, like the mixed currency existing before the war, be liable to cause great revulsions in the currency and business of the country.
6. That the issue of such notes will expand the present currency to an indefinite and unknown extent, making the general circulation still more redundant than it now is; for so far as the law is concerned, these banks may issue any amount they can succeed in getting out upon the indorsement of the Government, be it one hundred or one thousand millions.
To this new currency I object, then, because it would introduce an incongruous element into our present monetary system. These banks must and will, if they mean to make any profit by their peculiar system of banking, issue a much larger amount of notes than they hold of coin; and also they will create deposits in the same manner as other banks.
Suppose, these banks, then, get a circulation of $150,000,000, and deposits as large in proportion as the present national batiks, which are one hundred and sixty-seven per cent. on their circulation, they would have $400,000,000 of indebtedness, all payable in coin on demand, the Government guarantying the payment of all the notes, but not of the deposits. What would be the result in case of a panic or any suspicion of the solvency of these banks ?
Evidently the depositors having no security whatever except the ability of the banks would commence at once to draw out their deposits in gold. But as the banks would owe on demand $400,000,000, that is, for circulation and deposits, while according to law they need to hold for all this indebtedness only $37,500,000 of coin --twenty-five per cent. on their circulation-- it would be quite impossible for them to meet their engagements for a week, if even for a single day. Such is unquestionably the character of the new coin currency. That it will introduce an explosive element into the whole currency system of the nation is certain.
It is not a sufficient reply to this to say that these new banks will not extend their operations to the amount we have named; it is enough for us to know that the power is gramted to do it, and even more. We cannot safely assume how much or how little the new banks can get out of coin notes under the guarantee of the Government. Without supposing any extraordinary pressure or panic we can see what a pernicious influence these banks must exert upon the business interests of the country.
As things now are, our circulating currency is a fixed quantity; it is neither increased nor diminished by the operations of commerce or the laws of trade; but, with the introduction of these coin notes all this will be changed. If elasticity be an advantage, is it compensated for by what I shall hereafter show ? Sustained by only twenty-five per cent. of specie, four dollars of these notes must be taken in for every one dollar in gold paid out, and the banks will be compelled, in case of any call for gold, to withdraw their notes from use as fast as possible. Speculators will understand this fact, and will not be slow to avail themselves of the advantage it will give them. If they desire to raise the gold premium they have only to get hold of these notes and demand payment. For every dollar of these they can command they can contract the gold market to the extent of four dollars. Their power for operations will thus far be quadrupled; and if this kind of banks should become so numerous that a large amount of this currency is found in circulation they will be able to keep the gold market in a state of far greater perturbation than it has ever yet been, and consequently their chance for profitable corners will be better than ever before.
Another consideration is that the notes issued by these banks will circulate mainly in the cities and large commercial centers. They will not be wanted or used in the country, unless it be in the gold-producing States; consequently they will be always liable to a speedy demand for redemption in case of any gold movement. It has been urged that this issue of coin notes is demanded by California and the gold-producing States, since they do not use greenbacks, and gold is inconvenient as a circulating medium. This we cannot believe to be true, because such a circulation is forbidden in the most explicit and positive terms by the constitution of California, and cannot be introduced there except in utter defiance of the fundamental law of the State. Besides, if Californians or any others engaged in mining the precious metals wish for a paper circulation, the treasury at San Francisco will issue any amount of its circulating certificates or gold notes in exchange for their gold deposits, and the people can be thus supplied to the full extent of their wishes; so that there is not the slightest excuse for the issue of coin notes by the banks arising from any necessity in California. And further, there is not only no necessity for the issue, but it is directly and absolutely against the interests of all producers of gold, because every issue of substitutes for gold as currency reduces its value. Those engaged in mining have suffered greatly from the issue of paper substitutes, both in this country and Europe. Every extension of such issues depreciates the value of gold that is, raises the prices of all property for which the gold is exchanged. California has already suffered to the extent of many millions from this cause. The very last persons who can rationally desire the issue of fictitious money are those engaged in producing the genuine article. And here allow me to introduce a letter from a distinguished gentleman and banker in California, dated San Francisco, February 23, 1870:
"Your esteemed favor of 10th February is at hand, for which I am much obliged. The Senate bill which authorizes such a deluge of banks will be fraught with infinite mischief to the body-politic if it becomes the law of the land. You have rightly characterized it as a 'most shameful measure.' While the nation was struggling under the weight of responsibility, in waging war for its existence, measures were tolerated which even then seemed to be vast stretches of power. But in times of peace we have no excuse for such legislative usurpations. The principles of truth, equity, and justice cannot be trampled upon by a nation any more than an individual without certain retribution. You inquire whether Californians desire such legislation by the Federal Government. I say unhesitatingly the intelligent and honest portion of our citizens do not desire it. The vast majority do not desire it. There is, however, a reckless, irresponsible, and turbulent set among us, as you find in all parts of the country, who are ready to favor any measure that they suppose may bring them even temporary aid. We have speculators, rings, gamblers, and idlers, who are ready to shout for anything in the form of change.---[this was what a genuine hard-money man said, and this is what Garfield and other advocates of bank paper do not want to hear, much less enact into law: banks must not be allowed to issue circulating notes, not even if there is 100% gold reserve requirement (which idea enemy aliens in the 21st century try to float)]
"Fortunately, however, for California, her currency cannot be changed unless a majority of her citizens desire it. Her constitution positively forbids a paper currency. She has been taken into the Union by Congress with this constitution, and Congress has approved of this constitution, by her admission as a State, after a careful consideration of the same.
"Congress cannot amend this constitution. It is the work of the people of California. The present Legislature is two thirds Democratic, and hard currency by a greater majority even than the Democratic majority. It would take four years to amend the constitution even if the people wished to do it. Once in awhile there is an eccentric genius comes along, like George Francis Train, and tries to persuade the people that they are all wrong in measuring their values by the gold dollar, worth one hundred cents.
"The decision of the Supreme Court of the United States, holding that contracts made payable in gold coin of our mints are legal contracts, and can be enforced according to their tenor in courts of law, most thoroughly supports our 'specific contract law,' and will insure us a gold currency even if the constitution of California should be so amended as to allow a swarm of these hybrid paper-money makers to fasten their talons among our business men. They have had one of the national banks in Nevada, but that is now closing up its business. We are only twenty-one years old, and the population of San Francisco is estimated at one hundred and seventy thousand. But for our specific contract law we should have been floundering in all the troubles and bankruptcies of the States east of the Rocky mountains. We have passed through the war on the gold basis, and instead of finding fault with us for it, the nation should be proud that there is one bright spot that passed through such a fearful contest and preserved her honor and her currency untarnished. We have the best currency on the face of the earth, and it would be consummate folly to change it for one of the worst. You say truly, 'every dollar of paper substituted for gold as currency reduces the value of the real gold.' This is true as can be, and yet but an infinitesimal small fraction of our people, even of those who pretend to have given attention to the principles of finance, are able to understand it. It is this principle which renders it wholly improper to allow banks to issue notes for currency, even though they might by charter be bound to keep on hand dollar for dollar in coin for such issues. They would abuse the privilege and issue both paper and gold, being stimulated by the passion of avarice. But when the gold is in the United States Treasury no such duplicate use can be made of the money. The only question then remaining is as to the honesty of the guardians of the Treasury. While they are honest all would be well, but if they are dishonest I see no way but to come to the gold standard at once. I hope most sincerely, for the good of the country, the Senate bill will not pass."
To the seventh section of this bill there is no reasonable objection. It seems to recognize the fact that no more than $300,000,000 of national batik currency should be issued; but as some States have an amount in excess of their share instead of an increased issue, a redistribution should be made, those having an excess giving up a share to those who are deficient.
This is what should be done, and the only objection in the present case is that by this bill the amount to be distributed is limited to $25,000,000, while it should contemplate a general and equitable division of the whole $300,000,000, since not more than $300,000,000 of bank currency can be maintained at par with gold when the greenbacks are withdrawn.
The general effects of the redistribution of the bank circulation would be that those States which gave it up would get a larger amount of actual reliable capital in exchange for mere bank credits, while those who received the circulation would be obliged to part with a larger amount of real capital for the sake of a bank credit circulation. To the business public who gave up there would be a gain, to those who received the circulation there would be a loss of actual reliable capital.
This general redistribution should be made-
1. Because it would be an act of justice. The present inequality is a flagrant wrong, apparent to everybody, and ought not to be suffered to exist. There is no apology for it.
2. Because it would be greatly for the interest of the banks themselves.
Conciliation is their true policy. They have many enemies already; they should be careful not to increase the number. This measure of an equal apportionment of existing circulation would disarm a great amount of opposition in those States now most disaffected.
The banks should recollect that they have no charters; that they were created by an act of Congress, the last section of which provides that it may be amended or repealed. At least I believe so.
Mr. Randall. You are right. I can quote the section.---[Sec. 65. And be it further enacted, That Congress reserves the right, at any time, to amend, alter, or repeal this act.]
Mr. Cox. My argument as to the favoritism shown to sections in circulation is not to be taken as an estoppel against my voting at any time to amend and repeal these national banking charters.
3. This should be done, because it will prevent the calamity of a further increase of banknote currency. The disaffected States would be satisfied and no harm done the country.
4. Because this redistribution will benefit the business interests of those sections from which the surplus is taken, Massachusetts is an example. Her reduction would be about nineteen millions. Should it be made, the $21,000,000 of bonds now deposited as security with the Treasury will be released, and the banks can sell them if they choose at a premium of about fifteen percent. They will thus obtain many millions of real permanent capital, which they now loan to the Government, and can hereafter loan to their customers, instead of $19,000,000 of mere bank credits in the shape of their own notes, which are liable to be called in. This difference is a great one, especially in times of pressure or panic, when bank credits, whether in the shape of notes or so-called deposits, are certainty liable to be withdrawn from businessmen at the very moment they need them most. The security of the manufacturing and mercantile public will be greatly promoted by such a change.
The less bank credit there is in any community the better. I do not now say the less bank capital. The States to which the bank circulation is removed will gain nothing but bank credits. What they will thus gain will be realized as follows: the merchants of Mobile, for example, may purchase stocks to the amount of $1,000,000. This will require $1,000,000 in real present capital, as the bonds cannot be bought on credit. The bonds so purchased may be deposited with the Secretary of the Treasury, and $800,000, under the present bill, received in notes for the same. These notes now be loaned to the public. One million has been taken away to purchase the bonds, and $800,000 is restored to the business community. But the bank, after having loaned all its notes, may go further and create deposits, that is, may discount business paper and pass the same to the credit of its customers. This it can do, if as successful as the present national banks, to the extent of one hundred and sixty-seven per cent. more than its circulation, say $1,333,000. The bank will then be drawing its interest on the bonds deposited---
say ............................................... $1,000,000
On its circulation ................................... 800,000
On about two thirds of its deposits, say ..... 1,000,000
From this is to be deducted whatever greenbacks, &c., the bank may hold as a reserve; but after making all allowances it will be seen that the stockholders of the bank will get larger dividends, and bank officers good salaries; and these are the parties especially benefited.
Bank credit, but neither capital or moneys, have been transferred from one portion of the country to another. If this be a fair statement of the case, it would seem that if this national system is not altogether uprooted there could be no objection to a complete redistribution of the bank circulation, and that it is highly desirable in order to give satisfaction, at least, to certain parties in those States which have not at present their proportionate share.
I object, then, to this entire bill. The first section enlarges a currency already redundant and makes it weaker and more detrimental to the country than it is at present. The second section supersedes the three per cent. loan certificates by substituting national bank notes, instead of which they should be absolutely withdrawn. They were never intended by Congress to act as currency, and the use made of them by the banks has always been unlawful and injurious to the country.
The eleventh section is of little consequence, as it merely provides for the removal of banks from one State to another, a sort of carpet-bag arrangement, a very unbusinesslike proposition that would never be thought of if the currency were in a normal condition.
But the seventh section contains the principal and by far the most objectionable provision of the entire bill. If enacted it would establish the most dangerous and explosive currency ever known in this or any other country, and, as I have shown, would involve the business of the nation in the greatest difficulties, and the Government which guarantied the payment of notes in gold for which only one fourth of the amount was held for their redemption, in the gravest and most humiliating embarrassments.
The remaining sections are only such as are necessary to carry out the previous provisions of the bill, and contain nothing of any practical importance. They neither add to or diminish our objections to the measures proposed. Taken together the bills, Senate and House, are but a clumsy attempt to evade the great questions at issue before the country, and amuse and occupy the public mind until the dominant party has been enabled to tide over the next congressional elections. These bills are the mere pretenses of doing what the Republican party has signally failed to do-- give us a standard and stable currency. What is needed is resumption of gold and silver. On or before 1872 the Democracy will bear its old banner to success for gold and silver. This is our only hope. Gold and silver ! The words trip pleasantly on my tongue. They are music to my ear. Gold and silver ! They are the legal tender of commerce and the Constitution --I had almost said, what once before I said, and I say it now reverently-- the legal tender of God Almighty, who has made it precious ! Is there no one here to recur to the traditions of the party ? Ah! I see that Pennsylvania has its ear open. [Judge Woonward bowed to the speaker; and Mr. Getz, of Pennsylvania, approached the seat of Mr. Cox, presenting him two gold twenty dollar pieces.]
Mr. Getz. Here is the Democratic currency which Pennsylvania loves and longs after. [Laughter.]
Mr. Cox. I hear its chink. I see its beauty, I know it is precious. [Laughter.] It reminds me of the better day of the Republic, when the people knew what they had to "deal with."
It would be improper to discuss the Senate funding bill now and here. But the principle of the Senate bill and the present bill (section three) is the same. Both provide for a smaller rate of interest of the public debt by a new system of bonds. As the bill yesterday reported by the Ways and Means Committee has the same idea substantially, I propose by way of illustration to refer to some of the provisions of the Senate bill which it proposes to displace. Three classes of bonds are authorized by the Senate funding bill which has been sent to the House, namely: $400.000,000 ten-forties at five per cent., $400,000,000 fifteen-twenties at four and a half per cent., $400,000,000 twenty-forties at four per cent.
The first may be sold by the Secretary for coin at not less than par, or be exchanged for five-twenty bonds now outstanding, and for no other purpose.
The second class may be disposed of at not less than par for coin, or be exchanged for any outstanding obligations of the Government bearing a higher rate of interest in coin, the proceeds to be used for the redemption of such obligations bearing interest in coin as may become redeemable.
The third class, the four per cents., may be disposed of either in the United States or elsewhere at not less than four per cent. for coin, or, at the discretion of the Secretary, for United States notes, (greenbacks,) or may be exchanged for any obligations of the United States outstanding; and the Secretary, if he thinks advisable, is authorized to issue a larger amount of four per cents. for any purpose therein or thereinafter recited than would otherwise be authorized by the act, provided there shall be no increase in the aggregate debt of the United States in consequence of any issues authorized by the act; and these bonds of every kind to be exempt from all taxation by State, municipal, or local authorities.
The sixth section of the bill provides that $150,000,000 shall be appropriated annually for the payment of the interest and reduction of the principal of the national debt.
The seventh section provides that all existing national banks shall substitute bonds averaging four and a half per cent. for those they now have on deposit at the Treasury to secure their circulation. This will compel the banks to take four and a half instead of six per cent. upon their bonds deposited to secure their circulation. The banks are further, by the eighth section, allowed to have only eighty instead of ninety per cent. of circulation, as heretofore, upon their bonds deposited.
The ninth section authorizes universal free banking, by providing that any banking association organized, or to be organized under the currency acts, may deposit bonds and receive eighty per cent. in notes upon them; provided, however, as the circulating notes are issued an equal amount of United States notes shall be destroyed; that is, greenbacks are to be replaced by bank notes. Such, in brief, is the Senate funding bill. Such, in principle, is the House bill.
Mr. Hooper, of Massachusetts. You do not mean the bill yesterday reported by the Ways and Means Committee ?
Mr. Cox. No, sir; I have not seen that yet in print.
Mr. Wood. Here it is.
Mr. Cox. I do not care to read it now. The bill I comment on is the Senate bill, from which the bill of my chairman [Mr. Garfield] is modeled. The bill of the Ways and Means Committee is very different, as I perceive by the newspapers; but the bill under discussion is very similar to the Senate bill.
My objections to such bills may be briefly stated. In the first place, I regard any action of the kind as out of place entirely until the currency has been restored to par, because the credit of the nation is not and cannot be such as to fund the debt at the lowest rate of interest until that is done. Second, there should be but a single rate of interest, and that a low one. There need be no resort to tricks or contrivances about the matter. One uniform rate of four and a half per cent., with the exemption from taxation now permitted, would secure the sale of the whole debt as soon as the credit and currency of the country were fully restored; and there need be no "agents" appointed in this Country and Europe, as the fifth section of the Senate act provides, to advertise the national stocks, like patent medicines, in the newspapers and journals of both continents.
Mr. Hooper, of Massachusetts. The Ways and Means have struck that out.
Mr. Cox. So much more credit to that committee above our committee. I say this with entire respect to the Banking and Currency.
Increased Bank Taxation.
The banks will, of course, object to that provision of the act which requires them to hold four and half per cent. bonds instead of six per cent. This is simply an additional tax upon their franchise. Congress has an undoubted right to impose this condition, because the act under which they exist expressly says that "Congress may, at any time, amend, alter, or repeal it;" and the question, therefore, is simply as to the justice and expediency of the measure. It is just, if the privileges granted to the banks are so advantageous that they are in consequence as well able to pay the additional tax, (equal virtually to one and a half per cent. upon their capital,) as other departments of trade are to pay theirs. As a matter of fact the banks, according to a late official statement, are now paying over ten per cent. annual dividends above all expenses, taxes, and charges, and are besides adding ten per cent. of their income annually to their "surplus fund," which already amounts to over eighty-six millions, most of which, has been accumulated in this way; and they have also "undivided profits" on hand of over fprty millions; in all, $126,000,000 in addition to their large dividends. Now, what department of trade or industry has for the last six years done, or is now doing as well ? Have farmers, merchants, manufacturers, or ship-owners made ten per cent. clear profits each year and added ten per cent. more of their annual income to their capital ? No one will pretend this, and therefore it is clearly equitable that the banks should bear the additional burden. They can pay the extra tax and yet be better off than any other important interest.
As to the expediency of the measure there seems no other doubt than that which arises from the form in which the additional burden is imposed, namely in that of a forced loan. It does not appear very dignified in the United States Government, nor will it add greatly to its credit, to compel its citizens who chance to be bank stock holders to take a loan at four and a half per cent. when six per cents. are hardly worth par. There will be no need of such an indirection when Congress takes the true, manly ground of meeting all its engagements promptly, by withdrawing its dishonored promises, now circulating in all sums, from ten cents upward, to the amount of $396,000,000, or bringing them to par with gold.
To the principle of free banking which the act contemplates I do not object, provided it be done with a sound currency. Nor do I object to free banking upon irredeemable paper at the present time, since all other banking is now done upon the same basis, and we may as well have free as restricted banks upon a depreciated currency; but I think that such will be the excesses, and such the terrible losses and derangement of all business affairs, which free banking with irredeemable paper will eventually inflict, that the people will finally be brought to repudiate tile whole idea of fictitious money, and insist upon gold and gold notes as their only medium of exchange and standard of value.
Varieties of Currency.
One thing is certain, the bill in question gives us a new variety of currency. We have four already-- greenbacks, national bank notes, the "gold notes" issued by the Treasury, and gold, which is used more or less in large mercantile operations, and exclusively used in California.
The currency bill now before this House furnishes a fifth variety, by providing for unlimited issues to be called "coin notes," because the banks issuing them are to keep on hand one dollar of coin to every four dollars of their circulation.
And now by the funding bill we have a sixth kind in the notes of free banking companies. Generically speaking, however, there will be but three kinds or species, namely:
1. paper, or exclusively credit currency, consisting of greenbacks, national bank notes, and the new notes proposed by the Senate funding bill.
2. A value, or specie currency, consisting of gold and the "gold notes" of the Treasury, the latter amounting now to $50,000,000.
3. A mixed currency, consisting of the "coin notes" authorized in the currency bill of the Senate, and composed of one part coin to four parts of paper or credit.
Such are the different species and varieties of currency proposed with which the American people are expected to carry on the largest production and the most extensive trade, in proportion to population to be found on the face of the earth; a currency of the most heterogeneous character, that cannot fail to do great injury to all the industrial interests of the country, especially to those of agriculture, the value of whose products are and always must be measured by gold.
Connection of Debt and Currency.
The funding parts of the bill is but a labored attempt to evade the immutable laws of currency and finance. It mixes up funding with banking, two things that have no natural connection whatever, to the prejudice of both, and the great detriment of important national interests.
Mr. Hooper, of Massachusetts. But the bill of the Ways and Means Committee does not. We cut out the currency features of the Senate bill.
Mr. Cox. Therein your committee has shown itself wiser than ours. You have, in other ways, eliminated the errors of the Senate bill. But the bill under discussion fails to discriminate between the funding and currency questions.
There seems to be a strange hallucination in the minds of our leading men, in Congress and out, that somehow or other there is an inseparable connection between the public debt and the currency of the country. But there is no natural or necessary connection between these two subjects as matters of legislation, and they ought never to be linked together, as in this bill, because both are thereby endangered. Some persons will vote against the whole bill because of its funding provisions; others because of its banking clauses, and thus it is very likely to be rejected.
But in truth, shorn of that section which compels the banks to exchange their present six per cents. for four and a half per cents., there is nothing of much consequence left, for it is a great stretch of credulity to believe that any of the bonds authorized will be voluntarily taken except, perhaps, a few of the five per cents. Neither the four nor the four and a half per cents. can find a market at present except by compulsion.
It is a misfortune to the country that the time of the national Legislature is consumed in the consideration of a measure promising no useful result. The whole scheme is premature. The time has not arrived when the work of consolidation should be attempted. Not a dollar of the public debt is pressing for payment; not a dollar is due except at the option of the Treasury; and therefore while the circulating notes which the Government does owe, but which the people have not the power to demand in specie or anything else, but are compelled to use instead of a sound measure of value --while such notes are forced upon the country by an arbitrary, unconstitutional law, is it not quite insufferable that Congress should waste its time in the discussion of an unwise and impracticable scheme for refunding a moiety of the public debt, especially when the scheme seems to be in the interest of a monster bank monopoly ? Is it not unpardonable that the attention of Congress should be taken up by an impracticable scheme of refunding half of the national debt, which nobody who understands the condition of the national finances and the true interest of the people wishes to have meddled with at all until the currency of the Government and the banks has been restored to par ? Therefore, I raise the banner again of the old Democracy for gold and silver. Or if we must have paper, give us a redeemable paper, give us the redeemable greenback ! That brings me to the great problem--
Gold and Silver
Seldom has a greater crime against the interests of property and the rights of man been committed than when Congress, in the early part of 1862, enacted that the notes of the Treasury should be a legal tender for all debts and obligations, except for custom-house duties and the payment of interest upon its bonds. A legal tender is a forced loan. Every man is compelled to accept it, whether he is willing to do so or not. Debts contracted to be paid in the equivalent of gold are discharged with paper worth far less than gold, and the creditor is robbed of the difference.
Such an act of despotism can find no justification, not even in the stern necessities of war. Whether such a justification existed when the present legal-tender act was passed I shall not now attempt to prove or disprove. It is sufficient to say that many if not most of the intelligent financiers of the country disbelieve that any such necessity existed, or that if it did so, it was wholly owing not to the war itself, but to the false and defective currency in circulation when the war commenced, and which caused a great part of the banks to suspend upon the mere threat of secession. How weak the currency was, and how little adapted to perform its proper functions in time of war, may be seen from the statement that while the immediate liabilities for their circulation and deposits January 1, 1861, amounted to $459,000,000, their specie was but $87,000,000, so that the basis was less than nineteen cents on the dollar. Yet with such a miserably deficient currency was the nation compelled to engage in the greatest military struggle in modern times.
But fromm whatever cause the evils of our present debased monetary system have arisen, whether from the stern exigencies of war or the false condition of the currency at its beginning, it is sufficient for us to know that the time has long since passed when there remains any occasion for its continuance. As a people we boast, and justly, of having the largest resources and the most effective industry of any country in the world, yet have to-day a currency which for the purchase of commodities exclusively made and consumed at home is not worth more than sixty-five cents on the dollar, a currency that inflicts the most enormous evils upon every industrial interest in the nation, but bears with special severity upon the laboring and productive classes. This I have had occasion to discuss in the Gold Panic Report. My reflection and observation since confirm the judgment then made.
That I do not exaggerate the extent of these evils and their baleful influence I hope to make apparent by a brief statement of some of their effects upon the different industries and occupations of the people, and by so doing prove that it is one of the highest duties of Government to provide at once a medium of exchange of unvarying value.
Gold and Manufactures.
That the manufacturing industry of the country has been greatly injured by a monetary system so defective will be clearly seen if we take into consideration the fact that the cost of production is increased by it to such an extent as in many cases to render it quite impossible to compete advantageously with foreigners who make their goods under a sound currency.
Mr. Allison. You are not now considering the tariff.
Mr. Cox. No; irrespective of the tariff just now.
At the present time the American manufacturer is compelled to carry on his operations with the poorest currency in the world, that is, the most depreciated, and consequently he cannot send his commodities to other markets than his own except at great disadvantage. This is shown most strikingly in the falling off in the export of our domestic manufactures for the last ten years. In 1860 they amounted to $47,000,000; in 1869 to but $42,000,000. Had our currency been sound the exports of the last year might have been, and, according to the rate of increase prior to the suspension of the banks, would have been $70,000,000.
As an illustration of the truth of this, we find that our exports of cotton fabrics in 1860 amounted to $10,934,796, while in 1868 they were but $3,479,324, a falling off of $7,355,472, equal to almost seventy per cent. With a sound currency and a reasonable tariff our manufacturers would drive those of Great Britain out of every market in the world.
Another case in point is that of furniture and other manufactures of wood, which amounted in 1860 to $3,406,058, and in 1868 to but $1,491,537, a falling off of some sixty per cent. This description of exports we used to send to Brazil and other countries, and receive in exchange hides and other commodities we are now obliged to buy with gold. The manufacturing establishments of the country have been increased to a greater extent during the last ten years than the increase of population; hence the foreign export being largely curtailed by the influence of our false measure of value, an important department of the national industry is depressed, and must continue so until goods can be made and sold under an equal standard of value.
Gold and Trade.
There is another most important class upon whom our unreliable currency presses with great severity, namely, those engaged in conducting the exchanges of the country, our merchants and traders. What calculation can those engaged in foreign commerce, for example, possibly make when the premium on gold is constantly fluctuating, when the rate may advance or recede ten or twenty per cent. in a few days ? What safety in importing goods when the premium on gold may fall before they can be got into market to such an extent as to cause a serious loss ? What safety in purchasing flour or cotton for shipment when the premium on gold may change before the articles arrive at Liverpool ? Under a state of things like the present, it is no matter of surprise that all the operations of trade become mere gambling adventures resulting favorably or otherwise according to the vicissitudes of a gold market manipulated by gangs of unscrupulous speculators, and "modified" by th einterference of the Treasury Department. [Laughter.]
What do we find as the result of all this derangement of the industry and trade of the nation ? Universal despondency and doubt. Nobody knows what to do, because nobody knows what the fluctuations of the gold market may be. Gold has been down to 107, because the Secretary of the Treasury was pleased to sell it at that rate. The premium is now about 15. What it may be a month hence depends mainly upon Mr. Boutwell and the surplus of gold at his disposal. On "black Friday," last year, it fluctuated through forty per cent. in a few hours. All eyes are turned toward Washington to learn what the future trade and industry of the country are to be. Why is this ? Of all places in the United States, Washington is the last to which business men ought to be obliged to look for direction; and it would be the last, but for the absurd intermeddling of the Government with the trade of the nation by injudicious tariffs, and with the currency, by making its paper a legal tender, and so flooding the country with its depreciated notes as to impair the standard of value and throw the whole trade and industry of the nation into confusion.
All this mischief has been done. The past cannot be recalled, but the Representatives of the people should demand that an end should be put to all this and that the proper remedy be at once and rigorously applied. Remedial measures have been too long delayed already. The happy moment when the work should have been earnestly begun was at the first session of Congress after the close of the war. Then the country was in a good condition for the accomplishment of the object. The merchants were well prepared to meet the gradual fall upon their stocks which would have necessarily taken place, for they had made immense profits during the war and exnected and could well afford to suffer the shrinkage upon their stocks. They had no fear of heavy losses upon their debts, because they had but comparatively little due to them, as trade during the war was mainly carried on by cash transactions. The manufacturers, too, like the merchants, had made large accumulations and were ready to meet that reduction of prices they had the good sense to know must inevitably come, and for them the sooner the better, since the sooner would they be able to resume a regular and profitable business.---[Yes; in uncertain war times, business was carried without the good offices of bank-credit, for cash !!! how much more so could in peace business be conducted on cash basis, without fiscal agents and their credit and paper notes ?]
The farmers, too, were in a good condition for resumption, for the prices of their staples were very high, owing to an extraordinary demand from abroad and the deficiency occasioned by the destruction caused by the war at home. They were to a remarkable extent out of debt, and in the best possible shape for meeting any change which might occur in the price of their products. As a general fact, the agricultural class were desirous of a speedy return to specie payments. The whole country was expecting some decisive policy on the part of the Government that should secure a return to the specie standard; but what was done ? After much delay Congress enacted that the Secretary of the Treasury, who well understood the financial condition of the country and desired a gradual but efficient contraction, might reduce the currency by withdrawing greenbacks at the rate of $4,000,000 a month; but as soon as the work was commenced speculators in all parts of the country took the alarm, knowing that the contraction policy would put an end to their vocation, and through the agency of the press and the lobby brought such a powerful influence to bear upon Congress that the operation of the law was suspended, and the country has drifted on to the present moment, when resumption is tenfold more difficult than four years ago; because the speculation interest is tenfold more powerful than then, and has in its favor the influence of more than sixteen hundred banks with their $400,000,000 of capital.---[McCulloch did not reduce currency, he only reduced the amount of government issued currency while leaving bank issued currency alone, in fact bank-currency increased as Treasury notes and United States were removed from existence; Culloch & co. did not want return to coin payment, they wanted bank paper !!]
Gold and Ship-Building.
Ship-building, it is hardly necessary to state, has been nearly annihilated since the expansion of the currency. Great complaints are made, with good reason, against the exorbitant rates of duty charged by our tariff upon articles that enter into the building of ships; but were all these duties removed to-morrow the business could not possibly flourish until the currency is brought to par with specie, for the reason that labor would still be so much higher in currency than it is in other countries in gold that foreigners would continue to undersell us, while in the mean time our ship-builders will be out of employment. No mechanics before the war were better paid than these --none, perhaps, have lower wages now; indeed, most of them have none at all, except as they engage in other occupations; and it may be asserted with entire positiveness that no considerable improvement can be expected in ship-building until we have an honest currency. Let my friend from Maine [Mr. Lynch] remember this !
Much has been said and written since the assembling of the present Congress upon the depression of our commerce and the decline of American shipping interests, and many propositions for its relief have been made in the shape of bounties, exemption from taxation, and drawbacks upon materials used in the construction of vessels; but none of these remedies will be found at all adequate to meet the necessities of the case. It is a sound currency that above and far beyond all other things the shipping interests of the country demand and must have, or they can never flourish. In all the relations of foreign commerce we come into direct competition with those who produce under a sound and unvarying standard of value. Ships built on the Clyde or the St. John are built at gold prices, and of course are produced at a much lower rate than we can build them under a currency which inflates the cost of materials and labor fifty to seventy per cent. We can never compete with foreigners under such circumstances, and it is quite useless to try. So long as our present debased currency exists our only wise policy is to give up all attempts to recover our former greatness as a commercial nation.
Gold and Wages.
The theory was announced by an American writer on finance some twenty years since that wages never rose as soon nor to as great an extent as commodities under an inflation of the currency. That theory has been fully confirmed in the experience of the last ten years.
As the expansion occasioned by the issue of greenbacks and national bank notes was carried forward prices rose with great rapidity and to an enormous height, but wages advanced slowly and have never attained an elevation equal to that of commodities.
This is a matter of general observation, and has been shown very conclusively by Mr. Wells in his annual reports of the last two years. From these it appears that the laboring classes suffer a constant loss from the use they are compelled to make of a depreciated currency. If we were to affirm that the laborers of the country on an average lose at least the value of one day's work in every week in consequence of this state of things, it would be quite within the truth. Such a loss is a very heavy one for those who earn their daily living by their daily toil.
Gold and the Agricultural Interest.
But of all the great departments of our national industry that of agriculture is, as we all know, by far the most important, from the number of persons it employs and the amount of value it produces; and upon this, above any other department of production, a depreciated currency inflicts the greatest amount of injury and injustice. That this statement is unexaggerated will appear from a careful examination of the manner in which the surplus of all our agricultural products (and that surplus is large and constantly increasing) must be disposed of.
More wheat is annually raised in the United States than is needed for home consumption, and hence, the surplus must find a market abroad. Whatever it is worth for exportation will be the value of the whole crop, since there cannot be two prices for the same article, one for the home and another for the foreign market. The value of wheat will be its gold value for exportation plus whatever the premium on gold may be. If wheat is worth one dollar per bushel in gold to send to Liverpool, and the existing premium is fifteen per cent., the price of wheat will be $1.15, because at that rate it can be advantageously exported instead of gold. Wheat in fact, when reckoned in our present currency, bears a premium as truly as gold, and the farmer gains the existing premium in the price of his wheat. Of this there can be no doubt, and therefore the question fairly arises whether it is not for his interest to have such an expansion of the currency as will cause its depreciation to so great an extent that there will be a large premium on gold, since the larger the premium the higher the price of his wheat.
Certainly it would be to his interest, provided the currency he receives is just as good for his use in the purchase of commodities, the payment of taxes and debts, as it would be if it were not depreciated; or, in other words, if there were no premium on gold, for then he will gain the difference. If, on the other hand, in consequence of the existence of a depreciated currency, he has to pay a greater advance in price for all he buys, if the taxes are raised in greater ratio than the price of his wheat, if the debts he has contracted are larger than they would otherwise have bean, then, notwithstanding the advance of his wheat he may still be a loser. The following example will illustrate our point with sufficient clearness.
Suppose, as before, that the farmer has gained twenty per cent. on the price of his wheat by the premium; that is, he sells one thousand bushels of wheat for $1,200 instead of $1,000, making a gain of $200. Having got his money, what will he naturally do with it ? He will purchase such articles as he needs for himself and family, and will expend his money for farming tools, mowing and reaping machines and the like; for a wagon, it may be, or carriage and harnesses; for painting and repairing his buildings, for furniture for his house, for groceries and other merchandise.
But all these have been advanced in price by some seventy per cent. above what they were in 1860. He pays his taxes, but finds them as much higher as other expenses, for the good reason that all expenditures for roads, bridges, school houses, and public improvements now cost seventy to one hundred per cent. more in consequence of the depreciation of the currency. If we suppose that all the foregoing items have on an average been advanced only sixty per cent., which is a low estimate, then $1.60 of the currency will bring only as much as one dollar before there was any premium on gold. If we divide the $1,200 by 1.60 we have $750 as the sum of real money which the farmer has got for his wheat; in other words, he has got no more commodities for his $1,200 than he would have have got for $750 when the currency was at par with gold, making a loss of $450. But from this we must deduct the $200 he gained by the gold premium; yet he will still lose $250, a loss equal to two hundred and eight bushels of his wheat, or more than one fifth of the whole.
Such is the real position of the wheat growers of the West and the cotton planters of the South, and it is this which creates so much dissatisfaction. It is not merely that the farmers generally have to sell at lower prices than before the war, but that the currency in which they are paid is worth to them for the purchase of such things as they must buy only about sixty to seventy cents on the dollar.
This state of things, bad as it is, so far from growing better, is certain to grow worse until the currency is made what it should be, equal to gold. The high prices that ruled during the war will never return, and it is, therefore, of great importance to the farmer that he be able to buy as low as he will be obliged to sell; and that he can never do till the specie standard is restored, and that can never be while the currency is so redundant as at present.
It is of the utmost importance that those engaged in agriculture should understand the manner in which they are plundered by a defective currency, for as soon as they see this and demand a remedy they are sure to get it, since they form the great mass of the voters of the nation, and Congress must enact any law they desire for the restoration of a sound measure of value.
It matters little to the farmer in what particular branch of production he is engaged, whether grain-growing or stock-raising, every department of agricultural industry will eventually suffer alike. At present corn is much higher in proportion than wheat; and pork, beef, and other meats are higher than breadstufs; but this is a temporary difference occasioned by the war, the destructive effects of which, as far as cattle are concerned, have not been yet overcome; but the time is near at hand when all farm products will find a general level, and the price of all will be alike determined and influenced to the same extent that wheat now is.
Gold, how Restored.
If such, then, be the indisputable "evils" inflicted upon every industrial interest in the nation by an irredeemable and fluctuating currency, must, in the language of the resolution offered to the House, be "one of the first duties of the Government to secure to the citizens a medium of exchange of unvarying value." There can be no doubt on this point, and as a matter of fact there is no dispute in regard to it; but the great question at issue is, how and when shall this be done ? The first inquiry is how shall the desired object be accomplished ? Here we find a wide difference of opinion.
If the currency can be restored only by contraction, as has been insisted, in what form shall that contraction take place ? Here we come to the important question. Redemption may be reached in one of several ways.
I am not, as a critic and a Democrat, here to make plans. Without approving, however, I make some suggestions. They are not my plans. They are for the other side to consider.
First, Congress might enact that the national banks withdraw their notes at the rate, say, of $15,000,000 per month, and in twenty months their whole circulation would be taken in, leaving greenbacks as the only circulation. In that case the greenbacks would form the paper circulation of the country, and would probably be nearly at par with gold, the contraction having been sufficient perhaps to bring them to that point.
There are several considerations in favor of such a measure. In the first place, Government having the circulation, say, of $350,000,000, would gain the interest upon it, amounting, at six per cent., to $21,000,000. So much would be saved annually to the people in taxes, and the saving would be to that full amount if the currency was at par with gold.
A second consideration is that if the currency should be found deficient in quantity the requisite additional amount could be issued by the Treasury; or, if redundant, which would be indicated by its not being of the same value as specie, the surplus might be taken in. The whole matter of circulation would be just where most on the other side think it ought to be-- under the control of Government.
A third consideration is that, should it be thought best, the Treasury might continue to issue its gold notes, that is, its certificates for gold deposited, in the manner it now does, to any extent desired, withdrawing an equal quantity of greenbacks at the same time, until the whole circulating medium of the country consisted of the equivalent of specie, and thus a currency would be furnished having the convenience of paper and the security and reliability of gold. The Government would then act merely as the custodian of the money of the country, receiving its coin and becoming responsible for its safe-keeping.
Second. Contraction might be brought about, should Congress authorize the funding its own notes at a given rate per month, say ten or fifteen millions. In the course of two or three years, according to the rate of reduction, all the greenbacks would be withdrawn, and the $300,000,000 of national bank notes would be the only paper in circulation.
Third, or lastly, it has been proposed that Congress authorize the issue of compound-interest notes, like those formerly in use, at the rate of $10,000,000 per month, convertible at the end of two years from date into ten-forty bonds, five per cent., and as fast as they were put in circulation a corresponding amount of greenbacks should be destroyed. By this plan, with the constant tendency to hoarding, a very gradual and almost imperceptible contraction of the currency would be effected without the possibility of a panic or any severe pressure in the money market. These are not my plans. I suggest them for you, gentlemen, who are bound to give us back what you took away, our gold and silver ! [Laughter.]
The Near Approach of Specie Payments.
Much pains are taken in certain quarters to induce the belief that the country is rapidly approaching specie payments by the natural course of events. "The credit of the nation," it is said, "is rising, the premium on gold has fallen, the national bonds are nearly at par with specie, and the Government and banks are on the very eve of resumption." Such is the language of a large part of the press, such are the declarations often made by those who propose to lead the public sentiment of the country; yet there is no truth in the inference from admitted facts in relation to the fall of the premium on gold, and the rise of the national bonds, that the restoration of the currency is near at hand. Nothing can be further from the truth. This popular delusion has already done immense mischief. The business of the country has been to a great extent paralyzed by the vain expectation that but a few days or weeks at most were to elapse, before the whole money question would be settled. Those who accept this doctrine will, of course, transact as little business as possible until the anticipated day has arrived. In the mean time trade must languish.
The value of property has fallen to the extent of several hundred millions since September last, wholly in consequence of the decline in the gold premium caused by the operations of the Treasury and the false expectations it has occasioned. So great a greater decline in business and shrinkage in the value of property was never experienced in the same length of time in the past history of this country; and all for what ? For the improvement of the national credit ? Not at all, for every intelligent man knows that the fall of gold is the mere result of an arbitrary movement on the part of the Secretary that in no way benefits the nation. For the restoration of the currency ? Not in the least, for as far as the condition of the country is concerned, resumption is no nearer now than it was twelve months ago. For the benefit of trade and manufactures ? Certainly not, for both are greatly prostrated by it. Has it been for the benefit of the laborer and mechanic ? Ask them whether there is a better demand for their services at higher wages, in consequence of the flurry about gold.
No Substitute for Specie.
My resolution says that no "substitution can be devised" for gold and silver. There is in truth but one single and simple remedy, the restoration of the currency to par with coin. All attempts to evade this alternative are, and in the nature of the case must be, entirely futile.
The Government is entirely independent in its position in relation to its bonds, and without the slightest occasion to change or pay a single one of them except at its own option. Why, then, should it be regarded as necessary to resumption on the part of the Government or banks that the debt should be reconstructed by the issue of new obligations ? There is no necessity or apology even for anything of the kind as far as the currency is concerned; and the pretext that the rate of interest may thus be reduced is an idle one, because the debt cannot be refunded to the best advantage of the country until the public credit is restored, and that can be done only by making its notes equivalent in value to gold.
By forcing the present banks to take part of these bonds, and inducing the formation of free-banking institutions, with liberty to issue inconvertible currency upon the pledge of United States stocks, a part of the national debt may doubtless be worked off at a lower rate of interest than it now bears; but this can only be done at a great disadvantage to the nation; because if to issue these new free banking notes the greenbacks must be called in to make room for them, as is proposed, the country will gain nothing, for the new banks will have the use of the notes instead of the Government. Bank notes will merely be substituted for greenbacks, and the banks will get the interest upon them. What advantage this will be to the people is not easily perceived, nor how it will hasten the resumption of specie payments.
Another project for restoring the currency is by forcing down the premium by the sales of gold until the greenbacks shall be at par with specie. This has been attempted, and by the aid of favoring circumstances of a temporary character the premium has been reduced from 33 to 10.7; but what has this to do with the restoration of the currency ? If by this coercive process the premium could be entirely removed, neither the banks nor the Government could safely resume specie payments, because both together have only some $126,000,000 of gold, and owe, on demand, all payable in coin, more than thirteen hundred millions. They have less than ten cents on the dollar with which to meet their engagements; and hence, if they commenced the redemption of their notes and deposits they would soon be compelled to suspend.
The assumption that when gold and greenbacks are at par the people will not want the gold is a false one. Gold will be demanded very fast if $1,300,000,000 may be called for on demand, when everybody knows that the banks and Government together cannot furnish more than some $125,000,000. We need not doubt that most men will be shrewd enough to know that as soon as the gold reserve should be exhausted, as it would speedily be, gold would again bring a premium, and those who held it would make a a profit.
Nor is the often-broached project of issuing bonds and purchasing specie in Europe entitled to the least regard. All the countries of Europe put together could not part with $200,000,000 of specie without deranging their whole monetary system and causing general panic. The Bank of England, by far the ablest moneyed institution in the world, does not keep on an average over $100,000,000 in specie. How, then, could she spare any considerable quantity to us ? A call for $25,000,000 would cause an instant rise in the rate of interest to two or three times its usual rate.
So of any banking institution on the continent. Not one of them could stand any considerable drain of gold, for the good reason that they keep on hand no more than they need for their own immediate operations; and to meet the daily wants of their own customers. Besides, if it were possible to introduce two hundred millions of gold by such a process, it would all go back to Europe again if our currency should continue as redundant as at present. Gold will not, for by the laws of trade it cannot, remain in a country where there is a redundancy of what passes for money. That we may rely upon. Nor is the assumption true that it is more for the interests of the people that the circulating medium remain as it is, rather than be gradually contracted until at par with gold, because population and business are both constantly enlarging, and therefore the country will eventually grow up to it, any more worthy of regard.
Could we be assured that Congress would not permit any further enlargement of the currency for the next thirty years, and that the general prosperity and progress of the nation would be uninterrupted, we should at the end of the present century arrive at that point when there would be no redundancy in the monetary circulation; but everybody knows that no such reliance can be placed upon the national Legislature in relation to this matter. Nay more, does not everybody see, from present indications, that it will be nearly impossible to prevent further expansion ? Besides, if we could have such an assurance, would it be wise and economical for the people of the United States to go on for a third of a century with a currency wanting in the most essential element, namely, that of being a correct and invariable standard of value ?
The bill before us is but one of the many thousands of schemes which never fail to appear as remedies for disorders of the currency. Thus was France deluged with tracts and speeches after she had left the safe anchorage of specie payment and embarked upon the uncertain sea of paper money. Thus was England troubled with writings and schemes till she resorted to payment of specie. Thus was our own country vexed and annoyed during the era of the Continental Government; and now, as the members of this House can testify, the desk of every public man in the country groans with the weight of pamphlets on this subject --essays, speeches, dissertations, propositions, and Heaven knows what else, each of them professing to provide a certain remedy for the financial evils we are suffering under.
What was the result in France after all this quack advice ? A return to specie payment. What was the result in England ? A return to specie payment. What was the result after our own Revolution ? A return to specie payment. What has been the result in the many South American States which have tried nearly every phase of these dreams of ideal currency ? A return to specie payment. And what is obviously, both for good sense and experience, the only remedy for the evils which we now endure ? A return to specie payment. Gold and silver, give us them, and all will be easy. The only question should be, how shall it be effected ? Without attempting to solve this question, it may be of sufficient utility at the present moment to say the onus is not on Democrats. Yours, Radicals, is the responsibility ! Whatever means are resolved upon they must prove utterly abortive unless the expenditures of the Government are largely and speedily diminished. And in this regard, if you require a Democratic plan, I cannot do better than to quote from that valuable and comprehensive document, the annual message of Governor John T. Hoffman, of the State of New York, transmitted to the Legislature on the 4th of January, 1870. On the subject of the general finances, in recapitulating his indictment against the financial policy of the present Administration, he says:
"That it is one which fails either to strengthen the public creditor to diminish the people's burdens, that it keeps values uncertain and unstable, and thus baffles business foresight, and exposes the country to the constant chances of disastrous commercial panics. That it threatens to withdraw from the people what is now in use as money before providing a substitute. That it seeks to exert a control over the gold market. That it suggests no method of meeting the legal-tender promises. That it purchases at a premium bonds which the Government is under no obligation to pay for nearly fifteen years. That, forgetting that a contract cannot be made by one party alone, it assume, that the rate of interest on our bonds can be lowered at the will of the Government. That it indulges the strange fallacy of supposing that the holder of six per cent. bonds, the marketable value of which is less than par in gold, can be persuaded to voluntarily exchange them for bonds bearing a lower rate of interest, and only to be obtained at par; and that redeems its legal-tender notes at a price fixed by itself, which is to be less than the amount expressed upon their face."
In fine, I adopt the stalwart, earnest, honest language of the Democratic Governor of New York in his last message, which I read as the conclusion of his message and of my remarks:
"The earliest practicable return to the hard money of the Constitution is, therefore, desirable, as being, in every way for the interest of the people; but this return should be made wisely, by a process which will not cost needless suffering, under a declared and fixed policy, intelligible to the whole country, and which will insure that the change, when it comes, shall be permanent. A rash attempt would, by its failure, make our condition worse than it is now. But no time should be lost in adopting measures which shall lead by prudent steps to the attainment, at no very distant day, of a result to which, sooner or later, we must come.
"If the Federal Government does not try to accomplish an early return to the use of gold and silver, without spreading ruin among the people, it fails in its duty; if, with its abundant revenue, it cannot devise a method of doing so, it fails in wisdom."
In the spirit of this message and of Democratic principles, I, for one, even though alone here to-day, hold aloft the banner emblazoned with gold and silver !
Mr. Morgan [George Washington Morgan (September 20, 1820 -- July 26, 1893) Ohio, D; studied law, passed the bar, established law practice]. Mr. Speaker, in looking over this House to-day and seeing the number of vacant seats, from the time that the discussion began upon this important subject to the present moment, the conclusion has been forced upon my mind that in the judgment of this House the bill reported by my colleague, [Mr. Garfield,] the learned chairman of the Committee on Banking and Currency, is dead-born. Did I not know the sincerity of my honorable friend, the chairman of the committee, I should have supposed that the bill had been ingeniously framed so as necessarily to secure its defeat; for had that been the study of the honorable gentleman he could not better have attained the desired end.
The united opposition of the eastern States has been secured by taking away from their monopolists millions on millions of circulation to which they are not entitled; and the almost united opposition of the West and South are insured by contracting the currency to the extent of $9,000,000, although the committee was instructed by a resolution of this House to report a bill expanding the currency $50,000,000.
I do not intend to devote many words to the consideration of this bill, from the fact that I believe it to be practically dead, and that there will be but few mourners at its tomb, notwithstanding the learned and ingenious argument of my colleague [Mr. Garfield] to which I listened with great interest.
Before proceeding, however, to consider the question under debate, I wish to call the attention of the House to the condition of the currency of the country at this time, and its distribution among the States. The six New England States, with a population about equal to that of Pennsylvania, have $104,509,889 of currency, while Pennsylvania has only $38,000,000, but pays a larger internal revenue tax than all New England together. The twelve western States, West Virginia, Ohio, Indiana, Illinois, Michigan, Wisconsin, Iowa, Minnesota, Kansas, Missouri, Kentucky, and Tennessee, have only $60,663,967. Thus the New England States have an excess of bank circulation over those States of nearly forty-four million dollars. The eleven States of Louisiana, Mississippi, Florida, Georgia, North Carolina, South Carolina, Alabama, Texas, Virginia, and Massachusetts have $63,011,264, of which amount Massachusetts has over fifty seven million dollars.
Why is it, Mr. Speaker, that so large a number of the seats in this House have been empty during this entire debate ? There is a general paralysis of trade throughout the western and southern States, and a cry for relief comes to us from every quarter of the country. But regardless of the prostration of business, serene in the knowledge that banker and bondholder are fattening on the misfortunes of the people, the Representatives of the monopolists withdraw from their seats and refuse to aid, even by their presence, in giving that relief which the people so earnestly demand.
Sir, what is the cause of this distress which pervades the land ? Why this paralysis of trade ? Why is it that petitions for relief have poured in upon us by hundreds ? It is, sir, because the legislation of Congress for years past and is now solely in the interest of the banker and bondholder.
In 1866, within one year after the close of the war, at the very moment there was a demand for currency for the ten States of the South once more restored to commercial relations with us --at that very moment Congress and the Administration began to reduce the volume of currency. And all this, sir, has been done in the interest of banker and bond holder, and to the injury of the people. Why ? Because scarcity of currency makes high interest and high rents, with low wages for the workman and low prices for the farmer. Nor does the evil stop there. The merchant depends on the custom of the farmer and the mechanic, and if the price of the products of the one and the labor of the other are reduced their purchases must be reduced also; the family does with less; the goods of the merchant lie upon the shelves unsought; notes become due without money to meet them, and distress follows.
And, now, for a few moments I wish to call your attention to the bill reported by my honorable friend and colleague, [Mr. Garfield] to whose courtesy I am indebted for an opportunity to participate at this time in the debate upon his bill.
My honorable colleague coolly told us this morning that a resolution had been passed by the House requiring the Committee on Banking and Currency to report a bill to increase the currency of the country to the extent of $50,000,000. I think I do not misrepresent my honorable friend.
Mr. Garfield, of Ohio. "Circulating currency" was the term used in the resolution.
Mr. Morgan. Granted. What has the committee done ? Instead of introducing a bill to increase “the circulating currency" as directed --not as requested, but as directed by a solemn resolution of this House-- the committee has introduced a bill which, instead of increasing the circulation $50,000,000, actually decreases it $9,000,000. How is that done ? It is not pretended by the chairman of the Committee on Banking and Currency that the requirements of the House have been complied with, but he told the House in his opening argument the provisions of the bill increased the volume of the currency $13,000,000. But in that he is mistaken, for there is a clear contraction of at least $9,000,000. The bill provides for the issue of $95,000,000 of bank notes, and that is the whole expansion provided for. But it also requires the withdrawal from circulation of $45,000,000 of three per cent. notes, of $40,000,000 of legal-tender notes, and an average reserve for the new banks equal to twenty per cent. of the $95,000,000. Hence the total contraction is $104,000,000, and the total expansion $95,000,000, leaving an actual contraction of $9,000,000.
Further, the bill proposes to increase the bonded debt of the United States $114,000,000. It has become the belief of the country, as it is mine, that this Government, instead of being conducted in the interests of the people, is being solely and wholly "run” in the interests of the bondholder and banker without regard to the people.
Mr. Speaker, bankers and bondholders have rights. Have the people of the country none ? This bill provides not only that this $114,000,000 shall be exempted from State taxation and local taxation, but it undertakes to declare that Congress shall not have power to tax these bonds. I have not time to enter fully on this question of taxation. If, however, there is one question more than another concerning which the race to which me belong is peculiarly sensitive, it is upon taxation. It was unjust taxation which brought the head of Charles I to the block. It was taxation which produced the war of the Revolution in this country and secured the independence of the American colonies.
To put this bill in operation will cause a dead loss to the people of $94,000,000.
Mr. Garfield, of Ohio. A loss of what amount ?
Mr. Morgan. A loss of $94,000,000. I will tell my friend how. You authorize the banks to loan $114,000,000 to the Government and to take Government bonds to that amount. The Government becomes possessed of this $114,000,000, and you require the Government to take up $85,000,000 of currency, leaving in the Treasury $29,000,000 of the $114,000,000 exchanged for the bonds.
Now, sir, I have a word or two to say in regard to the first section of my bill, which proposes to abolish the national banks; for of all the schemes of legal plunder since the world began, the scheme of national banking in the United States is the most indefensible and the most infamous. Ah, gentlemen smile ! Well may they smile while their heels are planted on the breasts of the people and while, without laboring themselves, they are reaping the profits of the industry of others.
What is this scheme of plunder of which I speak ? A law was passed giving to a very few men compared with our, population $300,000,000 of something the law calls money. What did they pay for it ? Now, mark you this point. How much did they give for these $300,000,000 of bank notes ? Not one farthing ! They did not pay even for the paper on which the note is printed. They did not pay for the engraving. They did not pay for the ink. You gave to New England $104,000,000 of this bank money, which did not cost New England a farthing; and out of extreme generosity New England comes to Ohio and loans $50,000,000 at twenty per cent., money which cost her nothing, and she receives the fruit of all our labor and all our toil and all our industry, and in the space of a few years makes not only $300,000,000 but $1,200,000,000; and she will redeem her bonds at the Treasury, place them in her pockets, and have the neat little sum of $900,000,000 clear gain.
On this subject I have a word or two more to say. I have in my hand the statement of Jay Cooke & Co., published in 1869. It will be remembered that it was in June, 1864, the present banking law was passed. And the statement of Jay Cooke & Co. shows that in 1864 one dollar of gold was worth $2.03 in paper, while one dollar of paper was only worth forty-nine and a quarter cents gold. Then, with $171,287,550 in gold, the bunkers purchased double that value Treasury notes, and invested them at par in $342,475,100 of bonds. Those bonds they deposited in the Treasury as security, and obtained $300,000,000 bank notes, for which they paid not one cent. They have received six years' interest on the bonds which the people owed them, and six years' interest on the notes which they owed the people. That is, they drew interest on the money they have borrowed as well as upon the money they have lent.
Right here, sir, let me call your attention to a little account stated between the tax-payers in account with the banks:
To bonds ........ $342,475,100
To notes ....... 300,000,000
Interest on bonds .............. 122,291,036
Interest on notes ...... 108,000,000
Total ......... 873,766,136
Deduct. ...... 232,883,068
Profit .............. $640,883,068
Cost of bonds ................ $171,237,550
Six years' interest on same ................ 61,645,518
Total ......... $232,883,068
The amount of profit realized in six years on $171,237,550, is $640,883,068, or the sum invested has been increased nearly fourfold.
As the gentleman from the Lowell district of Massachusetts [Mr. Butler] has stated that there are from seventy to eighty bankers on the floor of this House, I should like to submit this little account for their examination over night, that they may enlighten us upon it in the morning.
Now, sir, I invite the special attention of honorable gentlemen who are kind enough to listen to me, and of those who may have the patience and still greater kindness to read my remarks, to the accumulative power of money. It is a question which to us Americans is of the very first moment. Our institutions are being rapidly undermined by the monopolists of whom I have spoken, and unless the people of this country grapple with these questions with a single desire to preserve their free institutions their day of doom is near at hand.
This bank circulation of $300,000,000 at
Mr. Randall [Samuel Jackson Randall (October 10, 1828 -- April 13, 1890) Penn D; voted against reconstruction]. Mr. Speaker, the time is coming when we must adjust our whole financial system and make it harmonious. I do not, however, believe or clearly see that the present time is opportune or calculated to produce, by any adjustment we can inaugurate in the present condition of finance and business, (both mercantile and commercial,) the same good results which will and can be accomplished if we let the system remain undisturbed for a period of one or two years and in the interim leave the subject to natural or trade causes and effects. I shall therefore, at the proper time, ask for a postponement of this bill to some future day.
Lest, however, my suggestion may not receive the concurrence of this House, I have deemed it prudent at this time to speak of the amendment I have offered, which, if action is had, should surely, in my judgment, be adopted, in view of the best interests of the whole country. In doing so I shall contrast it with that portion of the bill from the Banking and Currency Committee which appertains to my amendment. In fact, it is hardly necessary that I should at all discuss the remaining portions of the bill. The House will hardly, if they adopt at all any of the provisions of the bill from the committee, go beyond those sections which authorize an issue of $95,0000,000 of national bank notes for the taking up of $45,000,000 of the three per cent. certificates, (about forty-two million dollars of which are now held by the banks under the law allowing them to hold three fifths of them as part of their reserves,) and the remaining $50,000,000 to be used in retiring $50,000,000 of greenbacks.
My amendment gradually retires the $300,000,000 of national bank notes, and issues instead $300,000,000 of greenbacks, and the banks are compelled to redeem their national bank notes with lawful money, and receive back their bonds; or, if they refuse to do so, the power is given, after thirty days' notice to the Secretary of the Treasury, to make sale of a proportionate amount of bonds sufficient to redeem their circulation, and hand over to the banks who have the bonds on deposit the surplus realized by such sale above the amount of their respective issues, dollar for dollar. Neither proposition, that of the committee nor that of the amendment, expands or contracts the aggregate issue of circulating notes.
The one or the other may facilitate the transmission of these notes from hand to hand in trade, and thus expand the usefulness of the circulation and bring relief in this respect, or the one or the other may further limit the usefulness of the present circulation in the business market. I incline to the opinion that the bill of the committee will bring no such relief as those who advocate the scheme would have expansionists believe, but will probably produce a contrary effect. Both propositions, with the exception above stated, may be looked upon as keeping the aggregate of currency at its present volume. I believe it should so remain because it is sufficient, and if increased would retard an approach to specie payments. The Senate, in adopting by a unanimous vote what I may term an anti-expansion resolution, read yesterday by the gentleman from Ohio, [Mr. Garfield,] acted wisely.
I maintain that whenever we do make any change in our circulation it should be in the direction entirely of one or the other of the present classes of notes; that is to say, it should be either all greenbacks or else all national bank notes; and I may here state that my experience in mercantile pursuits leads me to the belief that if the entire circulation of the country had been all greenbacks, that we would ere to-day have reached specie payments. The banks have always been pecuniarily interested in postponing specie payments and are to-day directly interested in preventing any approach to specie payment. The moment they are required to redeem [their] issue in gold, the amount of their present heavy profits will decrease.
When suggesting this substitution of the greenback circulating notes for national bank notes, I am met with the objection that the Democratic party have always resisted paper money, and so that party would to-day if the proposition was to fasten on the people an irredeemable paper currency. I make no such proposition; but we are compelled to deal with this question as it is presented. I would have the Government redeem all its promises to pay, called greenbacks, in gold. If we had nothing but greenback currency, specie payment could be reached in twelve months. The resumption of the payment of specie is a question of credit and confidence. If we have to wait until we can pay out a dollar in gold for every dollar of circulating notes to all extent of either the present greenback notes or the present national bank notes, and let the gold remain away, we would never resume, and thus never realize that desired condition.
It has been said by some that the national bank note is more secure to the holder than a greenback, because behind the national bank note is the bond of the Government. Let me ask all such, what is behind the bond ? I will answer, the ability and the disposition of the people to pay the bond, and thus maintain the Government, its credit, and the honor of its citizens inviolate. Exactly the same relation exists as to the greenback. This claim of superior security of national bank notes over the greenback has only to be stated and examined into to exhibit its utter fallacy. What is experience to-day ? The greenback is at a premium over the national bank note in every money market of the country. Facts thus destroy theories.
The grand result reached by the amendment I have suggested would be an immediate payment of $300,000,000 of the public debt, and an annual decrease of our interest payments of $15,000,000 thus reducing it at once to $130,000,000, without hardship to the banks and with incalculable benefit to the people; this done, too, without the violation of any plighted faith. How long will the Representatives of the people refuse to do for their benefit that which not one of those Representatives would fail to do promptly if his own personal interests were in a like manner involved in the controversy ? The important feature to be secured to the paper-money circulation of a country is cheapness, volubility, security, and stability, all of which will be reached by the adoption of the greenback in lieu of the present divided circulation. And I therefore strenuously urge the adoption in whole of the greenback medium.
An appeal is made in favor of this bill, that it will benefit the West and South. True, you can establish additional banks there, and the capital of the North and East may go in each direction and give capital to organize such, the profits of which will be realized by the stockholders. But the circulation will not remain and cannot be kept there if the stern and undeviating rules of trade indicate otherwise. Bank notes, like all other commodities, I will go wherever they are of most value. They will be drawn from the debtor to go to the creditor. I desire to quote from the Philadelphia Public Ledger of a recent date, whose financial editor is one of the most practical and able writers on finance of the present day. The paragraph is as follows:
"Mr. Garfield, it is said, will present some figures showing the advantage of the bill to the West, and that it will furnish more currency to about twenty-five States. One of the gulls in this proposition is that by giving to the West more banks it will thereby necessarily have more currency, when the truth is well known that currency, as coal, cotton, or other commodity, invariably and all the time is in search of the best paying market for its use, and will no more remain at its point of issue at a low rate of interest when higher rates are bid for it elsewhere, than coal or cotton will remain at their points of production at very low prices when they will net good prices abroad in the open market. As our present currency is of the same value throughout the entire Union, it is of no sort of consequence at what particular point the notes bear date so far as regards their distribution. Currency will go just where it is worth the most to the owners of it, and the longer bank notes remain out the greater the profit to the issuing bank. Banks established in the West will, other things being equal, naturally send their circulation farthest from home."
That this would be the practical working of the bill if enacted into law I cannot doubt.
Gentlemen of the South, do not be deluded. It is better you should remain as you are than that you should in all the future suffer from these money corporations which have in the North accumulated wealth only to make money scarcer and dearer. So it will be with you if you accept of this proffered poisoned cup. You are doing well, and to-day you are in a better financial condition than any other part of our wide country.
In conclusion, let me urge that we establish a circulation based upon the credit and honor of the Government, valuable and profitable to all alike; granting no extra privileges, interests, or special protection to banks, bankers, individuals, or corporations of any kind more than to any other trade, labor, or business.
If the party of the majority shall fail to come up to this standard and produce this result, the people should and will look to other and more faithful agents to promote and protect their prosperity in the long future.
I offer the following substitute:
A bill to authorize the issue of Treasury notes, not bearing interest, to be used in providing a sinking fund for the extinguishment of the national debt.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That from and after the passage of this act it shall be unlawful for any individual, association, or corporation to issue as money any note or bill not authorized by act of Congress; and the Secretary of the Treasury is hereby authorized to issue, on the credit of the United States, such sums as may be necessary for the purposes set forth in this act, not exceeding in the aggregate amount $300,000,000, of United States notes, not bearing interest, of such denominations as he may deem expedient, not less than five dollars each, which said notes shall be lawful money and a legal tender for debts in like manner as provided in the first section of an act entitled "An act to authorize the issue of United States notes, and for the redemption or funding thereof, and for funding the floating debt of the United States," passed February 25, 1862. And the provisions of the sixth and seventh sections of said act are hereby reenacted and applied to the notes herein authorized.
Sec. 2. And be it further enacted, That the notes issued under this act shall be used only in exchange for the circulating notes issued to national banking associations under the provisions of an act of Congress, approved March 3, 1864, entitled "An act to provide a national currency secured by a pledge of United States bonds," &c., and for the purchase of such amounts of United States bonds as may be necessary to carry out the true intent of this act.
Sec. 3. And be further enacted, That all circulating notes of national banking associations which may hereafter be paid into the Treasury of the United States shall be retained in the Treasury and not again put in circulation; and the Secretary of the Treasury may pay out for circulation, as the wants of the Government may require, an equal amount of the United States notes hereby authorized to be issued. And the Secretary of the Treasury may exchange United States notes issued under authority of this act with any person or persons for a like amount of circulating notes of national banking associations. And the Secretary of the Treasury shall notify any banking association of the amount of its notes so accumulated, when such amount is not less than $900; and the said banking association is hereby required, within thirty days after the issuing of said notice, to redeem said notes at the Treasury of the United States in lawful money, and to present the notes so redeemed to the Secretary of the Treasury for cancellation. And the Secretary of the Treasury is hereby directed to cancel the said notes and to return to the said banking association the proportionate amount of United States bonds deposited as security for the same.
Sec. 4. And be it further enacted, That, in case any national banking association shall neglect or decline to redeem its circulating notes as provided in the preceding section within the thirty days therein specified, the Secretary of the Treasury is hereby authorized and directed to cancel said notes, and to pay said banking association in the United States notes authorized by this act the market value of the United States bonds deposited as security for said circulating notes, deducting the amount necessary to redeem said notes, and to cancel said bonds, first furnishing to said banking association a list of the numbers, dates, and denominations of the notes so canceled.
Sec. 5. And be it further enacted, That when the circulating notes of any national banking association shall have been so far redeemed and canceled at the Treasury that the remaining notes shall not exceed three per cent. of the whole amount of circulating notes originally issued to said banking association the Secretary of the Treasury is hereby authorized and directed to return to said bank the bonds deposited as security for its circulating notes, and said banking association shall be relieved from its obligation to pay said notes remaining in circulation, and the same shall be redeemed by the Secretary of the Treasury, and paid on presentation to the Treasury out of any money in the Treasury not otherwise appropriated.
Sec. 6. And be it further enacted, That so much of any law or laws as are inconsistent herewith shall be, and the same are hereby, repealed.
Tuesday, June 14, 1870.
Mr. Randall. I call for the yeas and nays on agreeing to my substitute.
The question was taken upon ordering the yeas and nays; and there were thirty-two in the affirmative.
So (the affirmative being one fifth of the last vote) the yeas and nays were ordered.
The question was then taken; and it was decided in the negative-- yeas 51, nays 111, not voting 68; as follows:Yeas--- Messrs. Adams, Axtell, Beck, Bird, Booker, Benjamin F. Butler, Calkin, Clinton L. Cobb, Cook, Covode, Cox, Crebs, Dockery, Dox, Eldridge, Fitch Fox, Getz, Gibson, Hambleton, Hamill, Hay, Hays, Heflin, Holman, Johnson, Lash, Marshall, McCormick, McNeely, Milnes, Morgan, Morrissey, Mungen, Niblack, Randall, Reeves, Rice, Ridgway, Rogers, Schumaker, Sherrod, Shober, Joseph S. Smith, Stiles, Strader, Sweeney, Trimble, Wells, Winchester, and Woodward ---51
Nays--- Messrs. Allison, Ambler, Ames, Armstrong, Asper, Atwood, Bailey, Banks, Barry, Beaman, Beatty, Bemjamin, Bennett, Benton, Biggs, Bingham, Blair, Boles, George M. Brooks, Buck, Buckley, Buffinton, Burchard, Burdett, Roderick R. Butler, Cessna, Churchill, Sidney Clarke, Amasa Cobb, Coburn, Conger, Cowles, Cox, Cullom, Dawes, Degener, Dickey, Dixon, Donley, Duval, Ferriss, Finkelnburg, Fisher, Garfield, Gilfillan, Griswold, Hawley, Hoar, Hooper, Hotchkiss, Judd, Julian, Kelley, Kellogg, Kelsey, Ketcham, Knapp, Laflin, Lawrence, Lewis, Black-jack Logan, Mayham, Maynard, McCarthy, McCrary, McGrew, Mercur, Eliakim H. Moore, Jesse H. Moore, William Moore, Morphis, Daniel J. Morrell, Newsham, Orth, Packard, Paine, Palmer, Peck, Perce, Phelps, Platt, Poland, Pomeroy, Porter, Potter, Prosser, Sanford, Sargent, Sawyer, Lionel A. Sheldon, Porter Sheldon, John A. Smith, William Smyth, Starkweather, Stokes, Stoughton, Strickland, Taffe, Tanner, Taylor, Tillman, Townsend, Twichell, Upson, Van Trump, Van Wyck, Ward, Calwalader C. Washburn, William B. Washburn, Whitmore, and Winans ---111
Not Voting--- Messrs. Archer, Arnell, Ayer, Barnum, Bowen, Boyd, James Brooks, Burr, Cake, William T. Clarke, Cleveland, Conner, Davis, Dickinson, Dyer, Ela, Farnsworth, Ferry, Haight, Haldeman, Hale, Hamilton, Harris, Hawkins Heaton, Hill, Hoge, Ingersoll, Jenckes, Alexander H. Jones, Thomas L. Jones, Kerr, Knot, Loughridge, Lynch, McKee, McKenzie, Samuel P. Morrill, Myers, Negley, O'Neill, Packer, Peters, Roots, Schenck, Scofield, Shanks, Slocum, William J. Smith, Worthington C. Smith, Stevens, Stevenson, Stone, Strong, Swann, Tyner, Van Auken, Van Horn, Voorhees, Wallace, Welker, Wilkinson, Willard, Williams, Eugene M. Wilson, John T. WIlson, Witcher, and Wood ---68.
So the substitute was not agreed to.
Mr. Kelley. The fifteen minutes allotted me will not be sufficient to enable me to examine in detail the bill before the House. But I beg leave to offer a few general suggestions on the subject. In the first place, permit me to say that the South and West need and ought to have increased banking facilities and more bank currency. The southern States have, if my memory is not at fault, but about two per cent., and the southwestern States but about two and three quarters per cent. of the national banking currency. They are entitled to more; and, in my judgment, it would be vastly to the benefit of the country if they could have considerably more.
Banks are found to be a convenience in New England, New York, Pennsylvania, and elsewhere, and their increase would promote the convenience of the people of the western and southern States. They would facilitate the development of the country, and promote its local trade and the forwarding of the crops. If the bill before the House contained but the first section, providing for the creation of $95,000,000 of banking capital in addition to the amount the country now possesses, with provisions subjecting it to the general banking law, and requiring it to have as its basis a deposit of the bonds of the Government now extant or those hereafter to be issued, and limiting its distribution to those States which have not a proper proportion, I would vote for it.
But I cannot sustain this bill; it proposes to construct an inverted pyramid; and I do not believe a thing of that form can be made to stand. The base ought to be broader than the apex and not narrower. The bill proposes to withdraw from the existing reserve of the banks the three per cent. certificates held by them and nearly fifty million dollars of greenbacks, and to issue $95,000,000 more national bank notes. This in itself would be a perceptible contraction. But the new banks in cities are required to hold a reserve equal to twenty-five per cent. of their circulation, and in the country fifteen per cent. These must necessarily consist of greenbacks. The effect would therefore be a contraction that would be felt by every bank and business man in the country.
Now, let me say with emphasis, in reply to gentlemen who maintain the opposite theory, that contraction is not the road to resumption, but rather to bankruptcy. Every $100,000 of your currency that you contract restrains the business and retards the development of the resources and the profits of the country. Gentlemen ask, how will you achieve resumption if you permit an expansion of bank paper ? Sir, I do not wish to attempt the impossible. I am not anxious to resume specie payments until the commercial relations of our country shall have improved. Few greater misfortunes could happen us than that under some impulse we should attempt resumption before the balance of trade shall be in favor of our country and large amounts of our bonds shall have been brought home from abroad.
We owe $1,000,000,000 of overdue debt to Europe. It is not overdue from the Government, but from the people of the country. Our five-twenty bonds have not yet matured. But if we should resume specie payments, and it should tempt the caprice or the cupidity of bankers, merchants, or manufacturers abroad to bring us to bankruptcy, all they would have to do would be to send ten, fifteen, or twenty million dollars of bonds home, to be sold at market rates, by which they would make a profit on their original investment and draw the purchase-money from us in gold.
Sir, our safety is in the fact that we conduct our domestic exchanges with a non-exportable currency. The gentleman from Illinois [Mr. Ingersoll] reminded us this morning of the fact that in 1857, when our banks were on a specie basis and conducted their business by specie payments, the draft of $7,000,000 of gold for Europe was the proximate cause of the great financial crisis of that year. And if, with our immense debt abroad and the balance of trade against us heavily, as it is, we were to resume, the unexpected draft by our creditors of from seven to ten million dollars would bring us to suspension and widespread commercial bankruptcy.
Let me contrast the financial history of 1866 with that of 1857. In 1866 gold did not enter into our currency; it was a commodity. We were using a kind of money which you could not, according to the idea of the gentleman from Ohio, [Mr.Garfield] put into the melting pot and after heating it to red heat find that it retained its original value. We were dealing exclusively with paper money. The precious metals constituted no part of our currency. Yet in the month of May in that year England drew from us more than three times the sum that had produced the suspension in 1857. She took from us in the month of May,1866, $23,744,194; in June, $15,890,956 more; and in July, $5,821,459 more. Yet we sustained the draft in three successive months --one quarter of the year 1866-- of $45,456,609 in gold, and it created not a ripple in our immense, complicated, and profitable domestic trade. No bank failed, no leading house suspended, no rail-road company was embarrassed. The business of the country went on growing and prospering as though no collapse had occurred in England, and no draft had been made on us. Why was it ? It was, as I have said, because our money was non-exportable; and unable to cripple us by contracting our currency, our creditor satisfied himself with taking a supply of one of the productions of the country. It was, as the gentleman from Ohio; [Mr. Garfield,] the learned chairman of the committee has said, because our money is as national as our flag. It is money wherever that flag floats supreme; it is money for all the purposes of the countless domestic exchanges between our citizens over all our broad land.
Mr. Garfield, of Ohio. How is it when it floats on the sea ?
Mr. Kelley. It is still money. When it floats on the sea it settles the seamen's wages and the pay of the officers. Beyond the sea, in foreign lands, it fortunately is not money: but, sir, when have we had such a long and unbroken career of prosperity in business as since we adopted this non-exportable currency ? When we were paying specie we had, at almost regular intervals of about seven years, crises that extended from one end of the country to the other, prostrating every branch of our internal trade and productive industry, and affecting our foreign commerce. These financial revulsions were brought about whenever the debtor nation needed money, as was the case in 1857. So it would be again with $1,000,000,000 of over-due indebtedness and the balance of trade heavily against us ever year, if we should be tempted or forced by artificial means into the resumption of specie payments. Resumption, under existing circumstances, would be sheer madness. It would doom many of the enterprising men of this generation who are adding by their energy to the wealth and power of the country to struggle for the remainder of their lives in poverty, or to escape from harassing creditors through the provisions of the bankrupt law.
I am not an expansionist, but I do not fear a slight expansion. The volume of currency does not, as is so often asserted, regulate the price of commodities. We have as much currency to-day as we had in 1866. It is true that some compound-interest notes were then held by the banks as reserve; it is true that more of the three per cent. certificates were then held as reserve, which have been extinguished. But let me also call attention to the fact that during last year and the latter part of the preceding year and the months that have passed of the present year, our receipt of foreign gold has increased, our production has been large, and the shipments of specie have been much diminished; and that as this also enters into the bank reserve we have probably as great or a greater volume of currency than we had in 1866.
But how have prices been affected? Are they as high as they then were ? No, sir. I ask gentlemen from the West how the price of wheat compares to-day with the price in 1866? I ask gentlemen from New England how the prices of cotton and woolen goods compare with those of 1866 ? You can now buy cotton and woolen goods of almost every form and character for currency at as low prices as you could buy them for gold in 1860, and for much less than you could in 1866. You can buy wheat at prices corresponding with those of the period before the war. But in 1866 wheat commanded double its present price; and the Commissioner of Internal Revenue delighted in holding up the high price of cotton and woolen goods and attributing it to the expanded condition of the currency. It was also the delight of Secretary McCulloch to set forth in his annual reports the effect of the inflated currency upon the prices of various commodities. There is scarcely an American product, save beef and pork, that is not as cheap now as it was in 1860, and which is not vastly lower in price than it was under the same volume of currency in 1866, and the price of beef and pork comes down each year, as the destruction war made of breeding stock is repaired.
I hope that this bill will be recommitted, with instructions to the committee to report a bill extending the banking system through the South and West, to the extent of from seventy-five to ninety million dollars, under the general provisions of the banking law, and providing that the bonds deposited as the basis of the circulation shall be those already in existence or hereafter to be issued by the Government. I believe such a measure would stimulate every industry, and that with such a measure carried out, some of the banks east of the Hudson might be willing to surrender either their charters or their currency. It would accomplish at any rate an equalization of banking facilities without a sudden or violent disturbance. It could injure no section of the country; it would benefit all its parts and people.
Sir, look at the present condition of California. I hold her up as an illustration of the point I am making, that an adequate volume of currency is essential to the employment of the people and the development of the country. With all the resources of that region, the like of which is not to be found upon the face of the earth, her working people, to the number of thousands, are idle. They congregate in the streets of San Francisco and other cities in want and idleness. Why ? Not because there are not adequate and profitable fields for their employment, but because there is not currency enough in California, which rejects paper money, to enable men of enter prise to engage in new undertakings. Using nothing but gold as a currency, they restrain in equal degree their enterprise and the development of the resources of their State. As well might gentlemen maintain that no more than a fixed number of pound weights or yardsticks should be used as that no more than a fixed number of dollars should be permitted to exist. Each of them is but a convenient instrument of trade, for the want of an adequate supply of which the public must suffer.
[Here the hammer fell.]
Mr. Kerr [Michael Crawford Kerr (March 15, 1827 -- August 19, 1876); Indiana, D; studied law; voted against reconstruction]. Mr. Speaker, I am opposed to the bill as reported by the Committee on Banking and Currency. I will state very briefly, and without full argument, why I am opposed to it.
In the first place, the bill is in no just sense a compliance with the order of the House. I think it is, on the contrary, an evasion of that order. The resolution referred by the House to the committee contained an imperative order to perform a specific duty, That resolution reads as follows:
February 21, 1870."Resolved, That in the opinion of the House the business interests of the country require an increase in the volume of the circulating currency, and the Committee on Banking and Currency are instructed to report to the House at as early a day as practicable a bill increasing the currency to the amount of at least $50,000,000."
This order is clear and definite in terms, and in my judgment means an increase of $50,000,000 in the greenback currency of the country, not in national bank currency. This bill contains no well-defined or definite proposition. It looks all ways, as an attempt to trap some, to satisfy others, and to mystify all, and in the latter purpose it is delightfully successful. The committee complain that the order of the House is intrinsically hard to execute, and that, in view of the opposition of the Senate to it they are placed between Scylla on the one side and Charybdis on the other. I think not. The duty of the House is to act upon the judgment of the House, not of the Senate, and execute the just and reasonable demands of the people. This bill does not discharge that duty. It does not propose even to advise the Senate what the people want. It amounts to an abdication, pro tanto, by the House of its independence and its equal functions. To this I object. In this view the bill should be rejected by the House, as well as for its other defects and purposes.
But waiving objections to the bill on that ground, I am further opposed to it, mainly because it offers no relief to the country. It offers no relief to the financial condition. It will accomplish nothing but the disturbance and unsettling of existing conditions, without affording any improvement or relief. It is utterly delusive as a measure of relief. It offers no better currency than we have. The best credit currency we now have is the greenback; but this bill reduces the amount of that by $40,000,000. It offers the expansion of the worst currency we have, the national bank paper. To that it would add $95,000,000. It were better to pass no law than this bill. Disturbance, without manifest improvement in financial policy, is always unwise and injurious. No great interest in any country is so sensitive to legislative interference or tampering as its currency; none so imperatively demands or so much profits by non-interference and absolute settledness.
This bill is also subject to the grave objection that it proposes to add directly and most effectively to the power of the system of national banks in this country. That brotherhood of corporations is now the most stupendous and powerful on the earth. It has never had an equal in pervading financial influence and power in any country. In the extent and certainty of its gains and dividends no pursuit of man, involving equal capital, affords a parallel. In direct and dangerous connection with the practical conduct, policy, and administration of the Government; it is equally without an example in the past or present.
Such a system, such a fearful agency for monetary and political control, is dangerous in the extreme in any country, but supremely so in a republic. It endangers the most vital interests and prosperity of the people. I have no prejudices against the owners of these banks. They are seeking, under the machinery supplied to them by the Government, to promote their individual interests and welfare. In doing this, unquestionably they do confer great advantages in some ways upon the people. But all these would be better enjoyed and more beneficial under a system of banking which should have no possible connection with the business of currency-making. In this important respect there should be an immediate and eternal divorce between the banks and the Government. Let them bank as much as they please, but only upon their own honest means, not on money made for them by the Government at the expense of the people. The Government has no right to espouse the cause or make itself the ally of one class of property owners or people against another, of the few against the many, or of aggregated wealth possessed by great corporations against individual wealth, or the people who have no wealth.
Mr. Eldridge. If the gentleman will allow me, I should like to ask him a question, that I may understand exactly what he means. I would ask the gentleman whether he is in favor of a national bank system in any form ?
Mr. Kerr. No, sir. Another of my objections to this system is that if it goes into effect this $95,000,000 may be used to create nine hundred and fifty additional national banks, with each a capital of $100,000; or four hundred and seventy-five additional banks, with each a capital of $200,000; or three hundred and eighty additional national banks, having each a capital of $250,000. The average circulation allowed to banks that might be authorized under this bill would render the ultimate increase in number at least five hundred. We have to-day in this country sixteen hundred and seventeen national banks. If you add these five hundred more you will have twenty-one hundred and seventeen of these banks. The present power of this system of national banks, when you consider its consolidated capital of $440,000,000, and its already distributed net earnings of more than ten per cent. in annual dividends, and its undistributed profits and surplus funds of more than $130,000,000 besides, may be only imperfectly appreciated. Let these vast additions be made to the number of banks and you will create a power in this country that will defy Congress and any other power which the people can organize against it; a power that may exert a most pernicious influence against the prosperity of the country, and may imperil the happiness and liberty of the people. You will make a system that will be able by its terrible power, at some day in the future, to strangle unto death republican government itself, and subject the people and their industries and liberties to the domination of capital and corporations.---[in spite of all his objections, Mr. Kerr did not bother to show up to vote against this bill]
I object to this system also because it will lead to a contraction of the currency. The country now demands an increase of the currency. If the system should be changed at all it should be by an increase of the currency, and not by contractions. This bill, if it goes into effect, will increase the currency $95,000,000. It will retire $45,000,000 of three per cent. certificates and $40,000,000 of greenbacks, making $85,000,000; and it will operate also in its practical working to retire $19,000,000 in the increased amount of reserves required by the national bank law, making an aggregate contraction of $104,000,000. Ninety-five million dollars will be added to the national bank currency of the country, leaving a net contraction of at least $9,000,000.
I insist, in addition to these figures, that in its practical working this law, if it be enacted, will result in greater contraction of the currency than is proposed by the bill in terms, and I will state why I believe so. The aggregate currency may be said to-day to be $700,000,000. Of that $700,000,000, I am informed, over two hundred and twenty-five million dollars have been locked up as reserves in these national banks and retired from the uses of the people. This amount is practically out of existence. It constitutes no part of the actual circulating medium of the country. About two hundred and twenty-five million dollars of this currency is thus locked up. About one hundred and sixty-five million dollars is by the national bank law required to be retired as reserve.
Mr. Speaker, I hold in my hand an official table from the Treasury showing that during the last fiscal year the average reserve required to be kept by the banks in their vaults was $168,298,870, and that the average of actual reserves always kept in their vaults was $227,740,983. I say, therefore, it is susceptible of demonstration that $500,000,000 of greenback currency would be much better for the country, would give it a better currency, a more suitable, more stable, less fluctuating, and more safe currency than $7,000,000 of such a mongrel sort as we now have. I would therefore retire every farthing of the national bank currency and such an amount of greenbacks, in redemption of bonds at par, dollar for dollar, as would make the aggregate amount of greenbacks equivalent in the uses of the country to the amount we now have and more. The unwise and disastrous policy of Radicalism in the country, by its reckless laws, oppressive burdens, swindling, tariffs, and extravagant expenses, has so burdened the people and aggravated the cost of production and of all things that the business of the country demands a greater volume of currency.
In 1860 the total taxes paid by the people of the United States for Federal, State, and local, purposes, as nearly as ascertainable, was $150,200,000. The total currency then was about four hundred and fifty-seven million dollars. In 1869 the aggregate of all taxes was about six hundred and ninety million nine hundred thousand dollars, while the total currency was only about eight hundred and fifty million dollars; including credit currency and the precious metals. Against these conditions this bill will afford no relief. Therefore I oppose it.
But I oppose it on still other grounds. I am opposed to this bill, Mr. Speaker, for another reason-- that while it proposes a redistribution of the currency of the country, that proposition is not made in good faith. And I will tell you why I say so. It proposes to these banks, that may in the future be organized in the West and South, a different kind of conditions and terms and privileges under which they may be organized there from those that now exist. It discriminates against the West and the South, and in favor of the States that now have such a great excess of the currency of the country.
I am opposed to this bill for the further reason that it proposes to redeem $40,000,000 of the existing greenback currency of the country; and because in redeeming that $40,000,000 it will be necessary to increase the present gold interest-bearing debt of the country. The Treasury will have to redeem a part of that $40,000,000, if not all of it, by the issuing and sale of new bonds. I believe that some gentlemen deny that the bill will require that result. But I am utterly unable to see, upon the most careful reading of the bill, how that result can be avoided. It requires the redemption, month by month, of these $40,000,000 after a certain point shall have been reached in the progress of carrying out this law. If there is not money enough in the Treasury at the command of the Secretary for the purpose of redeeming those greenbacks he must furnish that money by selling the public securities, including those he has purchased and laid by as a part of the sinking fund of the country, and which are as much at his command to-day as if they were new bonds, never sold. I am unable, therefore, to see how it is that this law, even if enacted to-day, can be put in practical execution without an actual increase in the interest-bearing debt of the country.
But I have another objection to this bill, because in redeeming the three per cent. certificates the Secretary will be compelled to sell bonds that will bear four and a half or six per cent. interest, and thus also increase the gold interest-bearing debt of the country, and increase the burdens of the people to the extent of the difference between three per cent. and four and a half or six per cent interest on the sum of $45,000,000. There is not much economy in this sort of financial policy. It appears to me that, if there existed a bona fide desire to comply with the popular prayer, and the order of the House, a brief and simple bill could be made effective for that purpose. Issue more greenbacks and redeem bonds, thus giving more currency and also reducing the annual interest on the public debt, giving the country more money and less taxes.
I am further opposed to this bill, Mr. Speaker, because the practical mode provided in it, by which its numerous requirements are to be executed, is a bungling one. It is uncertain and ambiguous. No gentleman here, with any degree of financial experience or ability, can with any preciseness tell this House how this law in its practical execution will work, or how it will affect the interests of the country. It may contract to-day and expand to-morrow; it will increase the currency in one hour, and contract it in the next; it will increase it this month, and diminish it the next month. In other words, its logical effect on the prosperity and welfáre of the country will be to unsettle the existing condition of things and to disturb the industries of the country, while giving no advantages or relief. Ay, it will even disturb and impair the usefulness of the existing national banks themselves in the process of compliance with the terms of this bill. I can well see, therefore, why gentlemen on this floor who own or are interested in, or are officers of the existing national banks, should oppose this bill. I believe they put their opposition on different grounds, grounds which, I think, come with a poor grace from them. I think the gentleman from Pennsylvania [Mr. Townsend] suggests that they ought to be let alone on account of their high patriotism. Well, their owners have, no doubt, an average amount of that article, but not more, certainly; and I fear the patriotism of many of them, as of too many other men, is of the same quality as that illustrated by Shylock.
[Here the hammer fell]
The next question was upon the substitute proposed by Mr. Morgan, which had been modified to read as follows:
Strike out all after the enacting clause and insert the following:
That all acts and parts of acts authorizing the issue of national bank notes be, and the same are hereby, repealed.
Sec. 2. And be it further enacted, That in order to meet the demands of trade, to secure a currency in quantity and value corresponding to the development of the material wealth and population of the United States, and provide for the people a means of paying their taxes, the Secretary of the Treasury is hereby required to cause to be executed gold Treasury notes, commonly called greenbacks, of convenient denominations, in manner and form as already proscribed by law, to the amount of $400,000,000.
Sec. 3. And be it further enacted, That the Secretary of the Treasury is hereby further required to cancel and destroy all matured United States bonds deposited by the national banks as security in the Treasury of the United States, and to redeem in said Treasury notes the national bank notes issued on said bonds, and return to said banks, in redemption for their notes, the non-matured bonds deposited as aforesaid; and he shall cancel and destroy all such bank notes which have been or may be received by the agents of the United States in payment of taxes, or otherwise, and substitute for the same an equal amount of gold Treasury notes, and pay to the depositors of said bonds a sum, at par, in Treasury notes equal to the difference between the nominal value of the bonds deposited and the amount of bank currency issued on them.
Sec. 4. And be it further enacted, That the Secretary of the Treasury is hereby also required to forthwith give notice, by publication, to the holders of the five-twenty bonds, so called, (which shall be designated by number, date, and amount,) of the largest denominations, and of such issues as have matured, that the same will be paid to the amount of $100,000,000, at par, in said Treasury notes on presentation, and that on failure to present said bonds for payment within six weeks after said notice interest on the same shall cease from that date.
Sec. 5. And be it further enacted, That in order to secure a uniform and stable currency, from and after the passage of this act all taxes, duties, and imposts of every kind payable to the Government of the United States shall be receivable in gold, silver, or Treasury notes, at the option of the person making the payment; and upon the redemption of the public debt all outstanding Treasury notes shall be redeemed at par, in gold or silver, in a manner to be provided for by law. And all acts and parts of acts inconsistent with the provisions of this act are hereby repealed.
Mr. Morgan. I ask the yeas and nays on my substitute. I should like to have it divided, and the question taken on the first four sections together, and separately on the last section.
The Speaker. Does the gentleman want the yeas and nays on both ?
Mr. Morgan. If it can be divided I will be content with the yeas and nays on the first four sections.
The Speaker. It will require unanimous consent to divide the substitute. Mr. Ingersoll. I object.
Mr. Morgan. Then I ask for the yeas and nays on the whole substitute.
The yeas and nays were ordered.
The question was then taken; and it was decided in the negative-- yeas 37, nays 127, not voting 66; as follows:
Yeas--- Messrs. Adams, Axtell, Beck, Biggs, Bird, Burr, Conner, Crebs, Don, Gibson, Hamill, Hawkins, Hays. Heflin, Holman, Johnson, Kerr, Knott, Lewis, Marshall, McCormick, McNeely, Morgan, Mungen, Niblack, Reeves, Rice, Ridgway, Rogers, Sherrod, Shober, Strader, Sweeney, Trimble, Van Trump, Wells, and Winchester--37.
Nays-- Messrs. Allison, Ambler, Ames, Armstrong, Asper, Atwood, Bailey, Banks, Barry, Beaman, Beatty, Bemiamin, Bennett, Benton, Bingham, Blair, Boles, Booker, George M. Brooks, Buckley, Buffinton, Burchard, Burdett, Roderick R. Butler, Calkin, Cessna, Churchill, William T. Clark, Amasa Cobb, Clinton L. Cobb, Coburn, Cook, Conger, Cowles, Cox, Cullom, Dawes, Degener, Dickey, Dixon, Donley, Duval, Ela, Farnswoth, Ferriss, Ferry, Finkelnburg, Fisher, Fox, Garfield, Getz, Gilfillan, Griswold, Hale, Hambleton, Hamilton, Harris, Hawley, Hay, Hooper, Hotchkiss, Ingersoll, Judd, Julian, Kelley, Kellogg, Kelsey, Ketcham, Knapp, Laflin, Lash, Lawrence, Logan, Maynard, McCarthy, McCrary, McGrew, Mercur, Milnes, Eliakim H. Moore, Jesse H. Moore, William Moore, Morphis, Daniel J. Morrell, Morrissey, Newsham, Orth, Packard, Paine, Palmer, Peck, Perce, Phelps, Platt, Poland, Pomeroy, Porter, Potter, Prosser, Randall, Sanford, Sargent, Sawyer, Lionel A. Sheldon, Porter Sheldon, John A. Smith, William Smyth, Starkweather, Stiles, Stokes, Stoughton, Strickland, Taffe, Tanner,Taylor,Tillman, Townsend,Twichell, Upson, Van Horn, Van Vyck, Ward, Calwalader C. Washburn, Whitmore, Willard, John T. Wilson, and Winans--127.
Not Voting-- Messrs. Archer, Arnell, Ayer, Barnum, Bowen, Lloyd, James Brooks, Buck, Benjamin F. Butler, Cake, Sidney Clarke, Cleveland, Covode, Davis, Dickinson, Dockery, Dyer, Eldridge, Fitch, Haight, Haldeman, Heaton, Hill, Hoar, Hoge, Jenckes, Alexander H. Jones, Thomas L. Jones, Loughridge, Lynch, Mayham, McKee, McKenzie, Samuel P. Morrill, Myers, Negley, O'Neill, Packer, Peters, Roots, Schenck, Schumaker, Scofield, Shanks, Slocum, Joseph S. Smith, William J. Smith, Worthington C. Smith, Stevens, Stevenson, Stone, Strong, Swann, Tyner, Van Auken, Voorhees, Wallace, William B. Washburn, Welker, Wheeler, Wilkinson, Williams, Eugene M. Wilson, Witcher, Wood, and Woodward--66.
So the substitute of Mr. Morgan was not agreed to.
Mr. Garfield, of Ohio. Mr. Speaker, few measures have had a more eventful career in the House of Representatives than the one which is now about to meet the fate of a final vote. Two days and an evening of stormy debate, and two more days of voting and maneuvering for and against it, have brought the bill to this hour, in almost precisely the shape in which it left the hands of the Committee on Banking and Currency. I shall not weary the House to-day with an elaborate speech, nor shall I reiterate any of the arguments hitherto advanced, demonstrating the necessity of passing this bill. I will first state the condition of the bill, the character of its leading provisions and of the pending amendments, and then review briefly some points made in the debate since I last addressed the House.
By unanimous consent it was agreed yesterday morning that several amendments in the nature of substitutes for the Senate bill should be voted on, before the vote is taken on the substitute offered by the Committee on Banking and Currency. All these preliminary votes have now been taken; and, under the order of the House, we have reached the substitute offered by the committee and the amendments thereto. Under the rules, as chairman of the committee, I am entitled to an hour; but I shall take only a part of that time, and yield the remainder to others. That the House may clearly understand the position of the bill, I ask gentlemen to send for the print marked printer's No. 967, (which is the substitute of the committee for the Senate bill,) and also for the sheet marked printer's No. 987, which shows all the amendments now pending. If gentlemen will follow my explanation for a few moments I think they will understand the situation.
This substitute consists of four sections. The first section authorizes the issue of $95,000,000 of national bank notes to banking associations organized, or to be organized in States that have less than their proper proportion, under the laws now regulating the distribution of national currency. It limits the circulation of any new bank to $500,000; and provides that if one of the States having a deficiency shall not take the full amount to which it is entitled, other States in deficiency may take the balance. That is the substance of the first section.
The second section provides that on the 1st day of every month there shall be reported to the Secretary of the Treasury the amount of notes which have been issued under this act during the previous month; and that the Secretary of the Treasury shall immediately redeem and cancel an equivalent amount of the three per cent. certificates, until the whole amount of $45,500,000 shall have been canceled.
Thus the inflation of the currency will proceed for one month, at the end of which the canceling of an equivalent amount of three per cent. certificates will take place. This process is to continue until the $45,500,000 of the three per cent. certificates are exhausted. As the bill stands, the process of issue and cancellation will then go on beyond the amount of the three per cents. until $95,000,000 of national bank notes shall have been issued, and $39,500,000 of legal tenders, in addition to the $45,500,000 of three per cents., are cancelled.
At this point the committee allowed a member of the committee, the gentleman from Illinois, [Mr. Judd,] to offer his amendment, which strikes out the clause requiring the cancellation of $39,500,000 of greenbacks. If the House shall agree to that amendment, the second section, in connection with the first, will authorize the issue of $95,000,000 of national bank notes and the cancellation of $45,500,000 of three per cents. This will leave, according to the estimation of some, an inflation of $50,000,000; according to others not so much; but according to all an increase to some extent.
Mr. Cox. I would like to inquire of the gentleman what, in his judgment, would be the amount of the inflation under the substitute of the committee, and what would be the effect as regards inflation of the amendment of the gentleman from Illinois, [Mr. Judd] ?
Mr. Garfield, of Ohio. I will state that two different calculations have been made which I will give. Ninety-five million dollars of national bank notes issued to the banks will require an average of twenty per cent. of the same amount of greenbacks to be locked up as a reserve in their vaults to secure the circulation; twenty per cent. of $95,000,000 would be $19,000,000. It cannot be said, therefore, that there would be an inflation to the full amount of the difference between $95,000,000 and $45,500,000. It would be an inflation to the full amount of $95,000,000, according to that calculation, less $19,000,000, or an increase of $31,500,000.
Mr. Judd. I ask the gentleman in this connection to explain how the place of the three per cent. certificates is to be supplied.
Mr. Garfield, of Ohio. I will do so. The three per cent. certificates, with the exception of two or three millions of them, have been held and are held as bank reserves in place of greenbacks. Therefore, when redeemed and canceled, their place must be supplied by the actual deposit of greenbacks, dollar for dollar, in their place. Therefore to cancel the $45,000,000 of three per cents. is a direct contraction of the currency by just that amount. So the issue of $95,000,000 of national bank notes will be an inflation of $95,000,000 of money, minus $45,000,000 of three per cents., minus $19,000,000 more of reserves required by it, which two together, subtracted from $95,000,000, leaves $31,500,000 as the amount of inflation. This is one view. The other is that taken by my colleague on the committee, [Mr. Lynch,] who insisted in his speech that we must make allowance also for the reserves required to secure deposits; because all the deposits of the new banks will require also an average of twenty per cent. of "greenbacks" locked up as reserves to secure such deposits. As a rule, the deposits exceed in amount the total circulation. If we take the amount of deposits in the new banks at $100,000,000, and consider the reserves required to secure them as a contraction, we must add $20,000,000 more to the amount of virtual contraction, thus leaving the resulting inflation at $11,000,000 I give these as the two estimates. I think that the deposits and banking facilities developed by the bill will more than balance the contraction caused by the reserves to secure circulation and deposits.---[the absurdity is clear: why have the greenbacks as reserve for bank-note circulation, why not circulate the greenbacks and leave out the middlemen ? and if it is admitted (and it seems to be admitted even by this goldite Garfield) that more currency is needed, why not increase the number of greenbacks ?]
Mr. Butler, of Massachusetts. I would inquire of the gentleman from Ohio whether the deposits are not $600,000,000 against a circulation of $356,000,000 ?
Mr. Garfield, of Ohio. I say that the cities hold a greater proportion of deposits, and as these new banks are to be distributed more in the rural districts than in the cities, it is not presumed that the deposits will be so great in the country banks as the average of all the banks. That concludes all I desire to say concerning tile second section.
Mr. Burchard. I ask the gentleman from Ohio if there would necessarily be an increase of deposits by the creation óf national, banks ? Would not these national banks take the place of the private bankers and brokers, and would there not be a transfer of the deposits from the latter to these new banking associations ? I ask him also whether these private bankers did not keep an average reserve of deposits for their business equal to that required by law for these banking associations ?
Mr. Garfield, of Ohio. I do not suppose there will be an increase to so full an amount as though there were now no private banks; but there will doubtless be an increase of deposits from private boards and from merchants who have not made local deposits before.
Mr. Hooper, of Massachusetts. Will the I gentleman yield to me for a moment ?
Mr. Garfield, of Ohio. Certainly.
Mr. Hooper, of Massachusetts. I understood the gentleman to say that twenty per cent. of the amount deposited in these banks would have to be reserved in greenbacks, and therefore this would in effect be so much contraction; and yet he states that probably all of these new banks would be located in the rural districts.
Mr. Garfield, of Ohio. Not all of them, but the great majority of them.
Mr. Hooper, of Massachusetts. The banks, in the country are required to reserve only fifteen per cent.; and of that amount three fifths may consist of balances due from other banks.
Mr. Garfield, of Ohio. The gentleman will remember that not all of these banks will be located in the country. Of course the cities of the West and South will receive a large share of this increase of circulation. And in banks in all the redemption cities the reserves may be twenty-five per cent. Twenty per cent. on the whole is a fair average.Mr. Hooper, of Massachusetts. A very large proportion of these banks would be in the country, where the reserve required is only fifteen per cent.
Mr. Garfield, of Ohio. I see the drift of the gentleman's remarks. I should be very I sorry to see anything become a law that would authorize inflation. I do not propose to argue that matter now, but merely to state it. The amendment of which I speaking of was not reported from the Committee on Banking and Currency; but the gentleman from Illinois, [Mr. Judd,] a member of that committee, was permitted to move it, that the House might have an opportunity to vote upon it. I have been merely trying to state, as well as I could, the effect of it.
Mr. Hooper, of Massachusetts, I am under the impression that the required reserve in these banks would not exceed ten per cent. in greenbacks.
Mr. Garfield, of Ohio. I think I have understated the total amount of deposits. I think they would amount to more than $100,000,000, and that would probably counterbalance the statement of the gentleman.---[between 1865 and 1913 the national currency banks held $190million to $170million greenbacks; in 1917 $170million greenbacks they exchanged at the Treasury for gold.
Now, in reference to the third section of the substitute; it provides that after the $95,000,000 shall have been issued, if there be still a further demand for national bank circulation in States now having a deficiency, there may be withdrawn an amount not exceeding $25,000,000 from States in the East having an excess of circulation; that amount to be withdrawn from two classes of banks; first, from those having an outstanding circulation of over $1,000,000 each is to be withdrawn the excess over $1,000,000. That would take about nine million seven hundred and fifty thousand dollars from banks in Boston, New York, and Baltimore. The ballance of the $25,000,000 will be withdrawn from banks having a circulation of more than $300,000 each, in States, having an excess of circulation. That will be taken from eighty-four banks situated in Massachusetts, Connecticut, and Rhode Island. If after the $95,000,000 has been distributed there shall be a call for more, then $25,000,000 will be withdrawn from two classes of banks in the manner I have suggested.---[what federal micro management of the currency it is]
The fourth section of the bill provides that any bank, in a State now having an excess of circulation, may remove, with all its rights, privileges, and obligations unimpaired, into a State where there is a deficiency. This section is precisely as it passed the Senate.
Mr. Butler, of Massachusetts. Would not such banks be commonly known as carpet-bag banks ?
Mr. Garfield, of Ohio. I think not. They would be compelled to locate with all the conditions and under all the guards and obligations that surround other national banks. We are frequently providing by special act for the removal of some bank to another location. This section permits a class of banks, under peculiar circumstances and within limited restrictions, to change their location.
Mr. Benton. By the fourth section of the Senate bill free banking is provided upon condition of depositing national bonds, and redeeming their circulation in gold. Is there anything in the substitute corresponding to that provision ? I am in favor of it, and we would like a bank upon those conditions.
Mr. Garfield, of Ohio. In consequence of objections urged in the House, and not because the committee were willing to leave those provisions out, they have been omitted from the bill. I am myself in favor of free banking on a gold basis; and in the report of a committee of conference between the two Houses we may have an opportunity to test the sense of the House on that point.
I have now stated in brief the provisions of the substitute reported by the committee, and the amendment offered by the gentleman from Illinois, [Mr. Judd.] I wish next to call the attention of the House for a moment to three amendments which are pending as additional sections. If the substitute of the committee, with or without the amendment of the gentleman from Illinois, [Mr. Judd,] shall prevail, the three amendments offered as additional sections will come up for action. The first, which is proposed by the gentleman from Iowa, [Mr. Allison,] provides that no bank shall pay interest on deposits made by another bank. I will not stop to argue this matter; but it will be remembered that the Secretary of the Treasury, in his annual report, calls attention to the fact that the banks of New York are now receiving interest on the deposits of other national banks, and recommends that the practice be forbidden. The western banks send their surplus deposits to Now York, where they receive interest upon them; and thus the country is drained of currency, much more than it would be if such interest were not allowed.
Without discussing the question, l simply call attention to the purpose to be accomplished by the amendment of the gentleman from Iowa.
The next amendment is that offered by my colleague on the committee, [Mr. Burchard.] It is, that when the banks receive the gold on their coupons from the bonds now deposited in the Treasury, to secure their circulation, the gold or gold certificates thus accruing shall be placed in the vaults of the banks as a part of their reserve. This would have the effect of strengthening the banks preparatory to resumption, and also of liberating greenbacks, and to that extent would increase the active circulation of the country. It may be said, on the other hand, that to lock up this large amount of gold would tend to increase the premium. But it seems to me that the provision is a wise one, as tending to strengthen the banks and preparing them to redeem their notes in gold.
The proposition next submitted is the amendment of my colleague on the committee, the gentleman from Indiana, [Mr. Coburn,] to issue $44,000,000 of greenbacks to replace the three per cent. certificates. I hope we shall not authorize a further inflation by the issue of $44,000,000 additional greenbacks. This proposition in its naked form we have voted down this morning by a decided majority, and I hope it will be voted down again.
I now call attention to the general course of debate on this bill, and to some of the doctrines announced.
Our Democratic friends do not seem to be ready to lead the country into green pastures and beside the still waters of financial peace. The distinguished gentleman from New York, my colleague on the Committee on Banking and Currency, [Mr. Cox,] said:
"It is my deliberate judgment, after much study, that all your measures, even your most matured, are mere makeshifts, cowardly, timid, halting devices to avoid the one 'heroic remedy,' which this Congress has not had the skill or courage to apply, to wit, resume specie payments. You owe it to the people to give them back their gold and silver."
This bold declaration roused the enthusiasm of some of his Jacksonian and old bullion colleagues; and a little scene, touching and dramatic, took place in the neighborhood of the orator, who continued his speech as follows:
"Ah! I see that Pennsylvania has its ear open. [Judge Woodward bowed to the Speaker; and Mr. Getz, of Pennsylvania, approached the seat of Mr. Cox, presenting him two gold twenty dollar pieces.]
Mr. Getz. Here is the Democratic currency which Pennsylvania loves and longs after. [Laughter.]
Mr. Cox. I hear its chink. I see its beauty. I know it is precious. [Laughter.] It reminds me of the better day of the Republic, when the people knew what they had to 'deal with.' "
But this sweet vision of peace and unity vanished when my Democratic colleague from the Mt. Vernon district [Mr. Morgan] took the floor. Turning to his specie-paying friend from New York [Mr. Cox] he said, scornfully :
"Sir, this talk of returning to a specie basis while this debt hangs over us is a mere cheat, set afloat for the express purpose of deceiving the people."
Rising in his noble rage above party, he denounced not only Congress, but the late Democratic Administration for having reduced the currency in 1866 and onward. He said:
And all this, sir, has been done in the interest of banker and bond holder, and to the injury of the people. Why ? Because scarcity of currency makes high interest and high rents, with low wages for the workman and low prices for the farmer.
Let us all stand rebuked for not having discovered before this how cruelly the people were wronged in having the volume of their paper money reduced in 1866, when its whole amount was only nine hundred million dollars !
But my colleague was not content with rebuking evil. He determined to show himself the chief champion of the people, by relieving them of one of their most troublesome necessities, that of paying taxes. He therefore introduced a bill, which the House voted on yesterday, and with singular blindness voted down by a vote of about five to one. His bill recites in its second section the various philanthropic objects which its author had in view, among which is "to provide the people the means of paying their taxes." Generous man ! How they will rise up and bless him when they learn of his noble bequest ! His method of doing this, is to set the printing presses of he Treasury agoing and print off $500,000,000 of greenbacks. Most people are so simple as to suppose that if the Treasury should issue greenback notes the Secretary would pay them out to the creditors of the Government; but it would seem, from the second section, that the $500,000,000 to be manufactured by my colleague will be distributed to those who owe debts to the Government in the form of taxes. I suggest whether it would not be better to cancel the taxes directly, and thus save the expense of printing and presenting greenbacks to the people, and giving them the trouble to pay the gift back into the Treasury.
He proposes to abolish the national banks, and declares in his speech that feature of his bill alone will save "over twenty million dollars annually now paid as interest on the bonds deposited by the banks as security for their circulation." I am puzzled to know how my colleague makes this out, and still more puzzled to know how the abolition of the banks will abolish the bonds held for their circulation.
Having begun this work of abolishing, why does he not take a step further and abolish all the bonds, whether held by the banks or by citizens ? His philanthropy ought to take a wider scope and accomplish this full measure of good for the people and not stint his charity.
The courage and gallantry of my colleague is most touching. He revives the exploded theory of his distinguished friend Pendleton; and in his hands it blossoms again into full life and vigor. I had supposed that the Pendleton theory of finance had perished with the defeat of its author in the New York convention of 1868. If not, the late decision of the Supreme Court must have finished it. The Democratic State convention that recently met at Columbus, Ohio, lacked either the will or the courage to revive or indorse that theory.
The arguments of my colleague [Mr. Morgan] and of the gentleman from Indiana [Mr. Holman] come up to us like voices from the tomb. These men still follow their old leader, and are the champions of the same greenbacks which Mr. Pendleton denounced in this Chamber in the most unmeasured terms. In 1862, when the first issue of legal-tender notes was authorized, Mr. Pendleton denounced them as unconstitutional, and concluded an elaborate speech against them in these words:
"You send these notes out into the world stamped with irredeemability. You put on them the mark of Cain, and, like Cain, they will go forth to be vagabonds and fugitives on the earth. What then will be the consequence ? It requires no prophet to tell what will be their history. The currency will be expanded; prices will be inflated; fixed values will depreciate; incomes will be diminished; the savings of the poor will vanish; the hoardings of the widow will melt away; bonds, mortgages, and notes, everything of fixed value, will lose their value; everything of changeable value will be appreciated; the necessaries of life will rise in value; the Government will pay twofold ? certainly largely more than it ought ? for everything that it goes into the market to buy; gold and silver will be driven out of the country. What then ? The day of reckoning must come. Contraction will follow, private ruin and public bankruptcy, either with or without repudiation, will inevitably follow.
It is manifest that this House is strongly inclined to an increase of the currency. Most of those who have spoken on this bill have favored some expansion.
At the risk of giving offense to fifty or sixty members who have changed their ground on this subject, I will remind them that on the 18th of December, 1865, this House passed, by a vote of 144 yeas to 6 nays, the following resolution:
That this House cordially concurs in the views of the Secretary of the Treasury in relation to the necessity of a contraction of the currency, with a view to as early a resumption of specie payments as the business interests of the country will permit; and we hereby pledge coöperative action to this end as speedily as practicable.
And yet the gentleman from Pennsylvania [Mr. Kelley] affirms that we had as much currency in 1866 as we have now.
But, Mr. Speaker, a change has come over the spirit of our dreams. Now there are scarcely a dozen men upon this floor who would vote for that resolution. It is a curious study to consider the various reasons given for this change.---[yes; what have these gentlemen learned since 1865 ?; we should study it]
Mr. Cox. I ask my colleague on the committee to indulge me in a question.
Mr. Garfield, of Ohio. Certainly.
Mr. Cox. Does he believe the legislation proposed to-day will have the effect he speaks of ? Does he believe there is any step taken here toward a resumption of specie payment ?
Mr. Garfield, of Ohio. I fear not, if the amendment of the gentleman from Illinois [Mr. Judd] prevails.
Mr. Cox. Then why does not my colleague on the committee stand upon the recommendation of the President [Grant], "that it should be commenced now and reached at the earliest practicable moment ?" I am sure, if my colleague on the committee were to speak frankly, he would be in favor of doing something to reach that end. It is our duty to come up to that heroic remedy.
Mr. Garfield, of Ohio. The gentleman from New York will remember in all these matters we have had almost the solid vote of his party in favor of the issue of more "greenbacks." I believe the gentleman himself voted yesterday for the issue of "greenbacks " to the extent of $300,000,000, to take the place of the national bank notes, which, according to his own opinion, would be an inflation of twenty per cent. of the whole volume of the currency.
Mr. Cox. I must do myself justice. I merely voted between "greenbacks" and naitional bank notes. I voted my preference between them; and I did so after the statement of the gentleman from Pennsylvania [Mr. Randall] that nothing was intended in opposition to the decision of the Supreme Court of the United States.
Mr. Garfield, of Ohio. I was saying, Mr. Speaker, that it was curious to consider the different reasons given for this great change in the opinion of the House since December, 1865. It is manifest to my mind that out of this remarkable pressure for more paper money, have arisen nearly all the crude and conflicting opinions on financial questions with which Congress and the country have been afflicted during the last five years.
It is an incontestable fact, which all advocates of inflation are compelled to meet, that we now have a paper currency one hundred and fifty per cent. greater in volume than the country had in 1860, a year of general prosperity, when free banking prevailed in many States, and the banks were issuing all the notes they could push into circulation. I have observed that when men have determined on a given course of conduct, the reasons alleged therefor are frequently afterthoughts, which formed no part of their original ground of action. For example, what man whose course of action was not already determined would defend a further issue of inconvertible paper money, by such a doctrine as this avowed by the gentleman from Indiana, [Mr. Holman]? He says:
"The gentleman who draws a distinction between money and the greenback as a promise to pay merely plays upon words. The stamp of current value on gold or silver is regulated by law; its value is fixed by law; and unless restrained by the Constitution, the law-making power of this country can fix that monetary value; the quality of legal tender, as well upon paper as upon gold and silver. In the one instance as well as in the other, the representative value is fixed by law, and this is clearly true while gold and silver are the common representatives of value throughout the world; but as lawful money in the United States, gold and silver and the United States note alike depend on the law of the land for their value."
If this doctrine be true, there can be no such thing as an absurdity. If this be true, then an ounce of silver coined into fifty pieces will have five times the value of an ounce coined into ten pieces. A piece gold stamped into the shape of a half eagle may be worth twice as much as the same piece stamped into the shape of a spoon. My friend is so dazzled with the "guinea stamp" that forgets that the gold is the money "for a' that."
Could anything but a predetermined purpose to defend, maintain, and increase our irredeemable paper money lead so able and distinguished statesman as the gentleman from Pennsylvania [Mr. Kelley] to say, as he did the other day, concerning the greenback currency:
"Beyond the sea, in foreign lands, it fortunately is not money: but, sir, when have we had such a long and unbroken career of prosperity in business as since we adopted this non-exportable currency ?"
It is reported of an Englishman who was wrecked on a strange shore that, wandering along the coast, he came to a gallows with a victim hanging upon it, and that he fell down on his knees and thanked God that he at last beheld a sign of civilization. But this is the first time I ever heard a financial philosopher express his gratitude that we have a currency of such bad repute that other nations will not receive it; he is thankful that it is not exportable. We have a great many commodities in such a condition, that they are not exportable. Moldy flour, rusty wheat, rancid butter, damaged cotton, addled eggs, and spoiled goods generally are not exportable. But it never occurred to me to be thankful for this putrescence. It is related in a quaint German book of humor that the inhabitants of Schildeberg, finding that other towns, with more public spirit than their own, had erected gibbets within their precincts, resolved that the town of Schildeburg should also have a gallows; and one patriotic member of the town council offered a resolution that the benefits of this gallows should be reserved exclusively for the inhabitants of Schildeberg.
The gentleman from Pennsylvania would reserve for our exclusive benefit, all the blessings of a fluctuating, uncertain, and dishonored paper currency. In his view this irredeemable, non-exportable currency is so full of virtue, that for the want of it, California is falling into decay. That misguided State has seen fit to cling to the money that all nations receive, and ruin impends over her golden shores. I doubt if the business men of California will ask my friend to prescribe for their financial maladies. Quite in keeping with the gentleman's other opinions on this subject is the following. He says "the volume of currency does not, as has often been asserted, regulate the price of commodities." According to this we have not only a non-exportable currency, but one regulated by some trick of magic, so as to defy the universal laws of value, of supply and demand, and that neither the increase or decrease of its volume can affect the price of commodities. Argument on such a doctrine is useless.
Mr. Speaker, I regret to see that it is the manifest opinion of this House that there shall be an increase in the volume of our paper currency. As to the amount there are differences of opinion. The figures range all the way from the $50,000,000 asked for in the pending amendment of my colleague on the committee [Mr. Judd] to the boundless inflation asked for by the gentleman from Illinois, [Mr. Ingersoll] who wishes to authorize the Secretary of the Treasury to issue what his inventive genius calls "coined paper dollars," whatever that may mean. My colleague from Ohio (Mr. Lawrence] has been kind enough to intimate to the country what the features of his inflation policy will be. He says:
"I believe we ought to have more currency, either by new banks or bonds at a reduced rate of interest, or by an issue of $50,000,000 of greenbacks, and then, when the outstanding 'five-twenty bonds' should be funded at a lower rate of interest I would annually increase the issue of currency, not by any unreasonable inflation, but so that the currency should only keep pace with the increase of population and business, without any inflation, and then gradually come to the resumption of specie payments."
This offers a pleasant prospect to the American people. He would have us issue $50,000,000 now, and afterward make a reasonable increase annually to keep "pace with the increase of the population, and then gradually come to specie payments !" How does my colleague hope to accomplish this ? On the doctrine, that "what goes up must come down," he must see that there will come an end to this process of inflation, and that his resumption will consist in coming down from high prices and fluctuating values to the solid basis of real value, to the money of the world. He tells us, in conclusion, what would be the outcome of his plan if continued to the end of the present century. He says:
"In thirty years from this time our population will reach over a hundred millions, and by the means I have suggested, at the close of this century the whole bonded indebtedness of the country may be taken up and exist only in the form of greenback currency receivable in payment of all public dues.
"No dollar of tax need be levied on the people to pay the principal of tho debt in the mean time, but it ought to be funded at a lower rate of interest as speedily as may be found practicable. When the business and population of the country will require the whole debt to exist in the form of currency, if 'a national debt' shall not be 'a national blessing' it will be an evil out of which some good at least may come."
I ask, Mr. Speaker, whether this Congress will thus, by a new issue of paper money, poured out upon the country, check the current that has been for several months setting so strongly toward specie payments; check the downward tendency of gold; check the gradual subsidence to old prices and solid values, and thus plunge the country back again into the uncertainty and confusion that are inseparable from a redundant and inconvertible paper currency ?
This House may well heed the words uttered by the gentleman from Pennsylvania [Mr. Randall,] when he said:
"It is shown, to rny mind, that we now have a sufficient volume of circulation for all business purposes -- I fear, for our own prosperity, too much. We certainly have all that is necessary. Whenever in our past history we have approached near our present amount disaster and bankruptcy have followed in the wake. This state of things occurred, as I have shown, in the years 1837-38 and 1857-55."
I counsel no act that will depreciate the currency of the country. If this bill, as reported from the committee, be passed, it will not cause inflation, but it will relieve the West and South, and it will remove from the national banks one of their most odious features, the present distribution of their capital and circulation.
The West and South are in a condition that cannot and will not be ignored. They must have relief. They must have increased facilities for credit. We cannot give them relief by the passage of a bill which will redistribute the circulation by taking it from the East and giving it to the West and South, with a serious shock to business. This House cannot, with safely or honor, authorize an increase of the greenback currency. The only safe and practical mode of relief is to increase the national bank circulation. Doing this, and getting rid of the three per cents., as this bill provides, we shall afford the needed relief. I hope the bill will pass without the amendment of my colleague, [Mr. Judd.] I may even feel constrained to vote for it with that amendment, in the hope that in a committee of conference there may be such an adjustment as will meet the views both of the House and the Senate and the wants of the country. I now yield for a few moments to my colleague on the committee, the gentleman from Illinois, [Mr. Judd.]
The main question was ordered; which was upon the passage of the bill.
Mr. Randall and Mr. Cox called for the yeas and nays.
The yeas and nays were ordered.
The question was taken on the passage of the bill, and it was decided in the affirmative-- yeas 99, nays 80, not voting 51; as follows :
YEAS--- Messrs. Allison, Ambler, Armstrong, Asper, Atwood, Bailey, Barry, Beaman, Beatty, Benjamin, Bennett, Bingham, Boles, Booker, Boyd, Buck, Buckley, Burchard, Burdett, Cessna, William T. Clark, Amasa Cobb, Clinton L. Cobb, Coburn, Cook, Conger, Cowles, Cullom, Degener, Dickey, Dockery, Donley, Duval, Dyer, Farnsworth, Finkelnburg, James Garfield, Gibson, Hamilton, Harris, Hawkins, Hawley, Hay, Hays, Heflin, Hotchkiss, Judd, Julian, Pig-iron Kelley, Kelsey, Knapp, Lash, Lawrence, Black-jack Logan, McCarthy, McCormick, McCrary, McGrew, McKee, McKenzie, Mercur, Milnes, Eliakim H. Moore, Jesse H. Moore, William Moore, Morphis, Newsham, Orth, Packard, Packer, Palmer, Peck, Perce, Phelps, Platt, Pomeroy, Rogers, Roots, Schenck, Shanks, Lionel A. Sheldon, Porter Sheldon, William Smyth, Stokes, Stoughton, Strickland, Taffe, Tillman, Tyner, Upson, Van Horn, Van Wyck, Welker, Wells, Wilkinson, Willard, John T. Wilson, Winans, and Witcher ---99.
Nays--- Messrs. Adams, Ames, Archer, Axtell, Banks, Beton, Biggs, Bird, Blair, George M. Brooks, James Brooks, Buffinton, Burr, Calkin, Churchill, Cleveland, Conner, Cox, Crebs, Dawes, Dixon, Dox, Ela, Eldridge, Ferriss, Fisher, Fox, Getz, Griswold, Haight, Hale, Hambleton, Hamill, Hoar, Holman, Hooper, Ingersoll, Ketcham, Knott, Laflin, Lewis, Marshall, Mayham, Maynard, McNeely, Morgan, Daniel J. Morrell, Samuel P. Morrill, Morrissey, Mungen, Niblack, Paine, Poland, Potter, Randall, Reeves, Rice, Sanford, Sargent, Sawyer, Shober, Joseph S. Smith, Starkweather, Stiles, Strader, Strong, Swann, Sweency, Tanner, Taylor, Twichell, Van Auken, Van Trumn, Ward, Cadwalader C. Washburn, William B. Washburn, Wheeler, Winchester, Wood, and Woodward ---80.
Not Voting--- Messrs. Arnell, Ayer, Barnum, Beck, Bowen, Benjamin F. Butler, Roderick R. Butler, Cake, Sidney Clarke, Covode, Davis, Dickinson, Ferry, Fitch, Gilfillan, Hadelman, Heaton, Hill, Hoge, Jenckes, Johnson. Alexander H. Jones, Thomas L. Jones, Kellogg, Kerr, Loughridge, Lynch, Myers, Negley, O'Neill, Peters, Porter, Prosser, Ridgway, Schumaker, Scofield, Sherrod, Slocum, John A. Smith, William J. Smith, Worthington C. Smith, Stevens, Stevenson, Stone, Townsend, Trimble, Voorhees, Wallace, Whitmore, Williams, and Eugene M. Wilson ---51.
So the bill was passed.