"The wisdom of the Whole nation can see farther than the sages of Westminster Bell. The collective knowledge and penetration of the people at large are more to be depended on than the boasted discernment of all the bar. The reason is clear: Their eyes are not dazzled by the prospects of an opposite interest. The Crown has no lure sufficiently tempting to make them forget themselves and the general good." Edmund Burke.
The profoundest thinkers upon the subject of free government have always maintained that the common people are inspired by nobler sentiments of justice than that select class who arrogate to themselves all virtue and knowledge.
History has affirmed, time and again, that the collective - wisdom of the people is the safest guide for a nation.
The celebrated Edmund Burke, in that splendid defense of Woodfall, the publisher of the letters of Junius, goes so far as to declare, in the august presence of the highest court of England, that the sense of justice prevalent among the common people is truer than that entertained by those learned in the law.
The reason why the common people seldom err in their instincts of justice is, that they are not the highly favored subjects of special privileges, and that they are not continually seeking unearned advantages over their fellow men.
On the other hand the moving reason why the
wealthy, privileged, and aristocratic portion of mankind is not animated and governed as largely by the plain principles of justice, as the great majority of common people, is very apparent, as it is an established fact that the possession of great wealth and privileges render its possessors eager for added accumulations, and this results in a selfishness from which springs by far the larger part of the unnecessary evils of government.
With this latter class the desire of heaping up great wealth develops into a controlling passion - in many cases it degenerates into a mania.
This observation is true of the national banking money power. Notwithstanding it received a gift of the most valuable and profitable franchises ever conferred upon organized capital, it was continually demanding new concessions at the hands of Congress. It was insatiable.
This money power persevered in its vindictive warfare against the people, its subsidized press publicly threatened Congress with a visitation of wrath, and it utilized its control of the currency to oppress.
It asserted that the country needed a king, and that a strong government should be erected upon the ruins of American liberty.
The national banks continued their opposition to the coinage of silver, but without avail.
On April 16, 1879, the Committee on Coinage, Weights, and Measures, by Hon. A. H. Stephens, of Georgia, reported House bill No. 4, which provided that fractional silver coins should be a legal tender for any sum not exceeding tea dollars in any one payment.
On April 19, 1879, Mr. Springer moved an amendment to the third section of the bill, increasing the legal tender debt-paying power of fractional silver coin to twenty dollars in any one payment.
The bill so amended in its third section passed the House on the 22nd day of April, 1879, and it was transmitted to the Senate, where, on May 28th, an amendment offered by the Committee on Finance was adopted, striking out the word "twenty" and inserting the word "ten" in lieu thereof.
The bill thus amended passed the Senate, was concurred in by the House, and became a law June 9, 1879.
The effect of this measure increased the legal tender power of fractional silver coins from five dollars to ten.
On the same day the House passed a bill providing for the exchange of trade dollars for legal tender standard silver dollars.
It was sent to the Senate but that body buried it by a reference to the Finance Committee.
Had this proposed measure been enacted into law, a. large volume of full legal tender silver dollars would have been added to the circulation, increasing the amount of money at least thirty millions, and it would have removed a large mass of non-legal tender trade dollars as a disturbing clement in the silver market.
The national banks opposed this bill, and hence it was smothered in the republican Senate.
On June 27, 1879 Mr. Vest, of Missouri, offered the following resolution in the Senate: -
Resolved by the Senate (the House of Representatives concurring), That the complete remonetization of silver, its full restoration as a money metal, and its
free coinage by the mints of the United States are demanded alike by the dictates of justice and wise statesmenship."
On June 30th this resolution was referred to the Committee on Finance on motion of Mr. Allison, by a vote of 23 yeas to 22 nays.
This resolution was never reported from this committee back to the Senate.
One singularity which will attract the attention of the reader is, that every measure adopted by the House providing for the restoration of silver, was, on reaching the Senate, uniformly referred to the Finance Committee, from whence it never returned.
As it was then constituted, the Finance Committee was composed largely of Eastern Senators, and this fact affords an explanation of the wonderful facility with which this committee nullified all efforts of the House for remedial legislation.
In the meantime Secretary Sherman was administering the Treasury Department with a view of throwing discredit upon the silver coinage, and he persisted in the policy of refusing to pay out silver dollars, except where specific demands were made for that money. His object in following out this line of policy, aimed at a largo accumulation of silver dollars in the Treasury, and this condition would supply him with arguments to convince Congress, if possible, that no one desired silver as money. This intention was evidenced by a communication to Congress by him, in which he requested an appropriation for the construction of additional vaults for the storage of standard silver dollars.
At this period United States bonds were at a very
high premium, and this fact led to a severe contraction of the currency by the national banks.
It will be remembered that the original National Ranking Act of February 25, 1863, provided for a distribution of circulating bank notes, and as a consequence of that provision the power to suddenly contract or expand the volume of circulating notes was withheld from the banks.
This salutary provision was repealed by section 4 of the act of June 20, 1874, which authorized the national banks at any time, and for any reason which they chose to consider sufficient, to deposit United States notes and treasury notes to secure their circulating bank notes, and contract the currency to the extent of the substitution of government legal tenders for the bonds deposited as security by the national banks; these banks then withdrew their bonds and sold them for the high premium which they then commanded.
This power conferred on the national banks, by which they could contract the volume of currency, was a standing menace against the prosperity of the country; and armed with this destructive weapon they could, without any notice to the people, prostrate every industry in the country.
The extent to which this sudden contraction and expansion was practiced by the banks was clearly stated in a report made by Mr. Gilfillan, United States Treasurer, for the year 1880. Sir Gilfillan says: -
"Under the construction placed upon the lair, banks which have thus reduced their circulation have been permitted to increase it again as often and as largely as they chose, whether their legal tender deposits were exhausted or not. An example will better illustrate these operations. In January and February,
1875, a certain bank reduced its circulation from $308,490 to $45,000 by deposits of legal tender notes. Between September 26, 1876, and May 26, 1877, and before that deposit was exhausted, it increased its circulation to $450,000.Between August 14th and September 10, 1877, it again reduced its circulation to $45,000. On September 19, 1877, nine days after completing the deposits for this reduction, it again began to take out additional circulation, although $402,550 of prior deposits remained in the Treasury, and by the 26th of that month its circulation had again been increased to $450,000. July 22, 1878, it, for the third time, reduced its circulation to $45,000 and in August and September, 1879, again increased it to $450,000, at which it now remains, the balance of its former legal tender deposit then in the Treasury being $112,615."
This report exhibits the dangerous power placed in the hands of the national banks to unsettle values, disturb business, and inflict panics whenever it was to the interests of the national banking money power to exhibit their strength over the legitimate business of the people.
Mr. Gilfillan further says: -
"No one will contend that this was a legitimate and proper method of conducting business under the national banking system, and yet it can be resorted to every-day by every bank in the United States as long as the fourth section of the act of June 20, 1874, remains unrepealed. It disturbs values, affects the money market, and subjects the government to unnecessary expense, merely to gratify a spirit of speculation and gain on the part of the managers of the bank, and it ought to be peremptorily forbidden in the future."
This last extract clearly demonstrates that it was in the power of the thousands of national banks to effect a combination, or trust, for the contraction of the
volume of currency whenever such policy would be decided upon by them to influence the legislation of Congress.
During 1880 and 1881, a large amount of the national debt would fall due, and provision must be made for the payment of bonds aggregating $800,000,000. These bonds bore interest at the rate of 4, 4 1/2 and 5 per cent per annum.
During the session of 1879, Representatives Garfield, of Ohio, and Wood, of New York, both introduced bills in the House, providing for the exchange of these maturing obligations for bonds bearing four per mat. interest, and running from twenty to forty years. These bills were referred to the appropriate committee, wherc they remained until the latter part of 1880.
After the presidential election of that year the committee reported a substitute for the Wood bill, providing for the funding of these maturing bonds at three and one-half per cent interest, and running from ten to forty years.
A strenuous effort was made to push this bill through the House, but it was not successful, and it was amended by that body, mating the bonds redeemable at the option of the government after the expiration of Five years from their date of issue, and the rate of interest was reduced to three per cent per annum.
The bonds were to be sold by public subscription, at not less than par, and no contract or awkward of these bonds should be made by the Secretary of the Treasury to any syndicate, or bankers, or otherwise, until after the expiration of thirty days from the date of the announcement that public subscriptions would be opened for the sale of said bonds.
The Secretary was authorized to designate banks to receive subscriptions for bonds so offered.
Section g of this Pending Act was as follows: -
"From and after the 1st day of July, 1881, the three per cent bonds authorized by this act shall be the only bonds receivable as security for national bank circulation, or as security for the safe-keeping and prompt payment of the public money deposited with such banks: Provided, That the Secretary of the Treasury shall not have issued all the bonds herein authorized, or so many thereof as to make it impossible for him to issue the amount of bonds required: And provided
further, That no bond upon which interest has ceased shall be accepted or shall be continued on deposit as security for circulation or for the safe-keeping of the public money; and in case bonds so deposited shall not be withdrawn, as provided by law, within thirty days after the interest has ceased- thereon, the banking association depositing the same shall be subject to the liabilities and proceedings on the part of the Comptroller provided for in section 5234 of the Revised Statutes of
the United States: And provided further, That section 4 of the act of June 20, 1874, entitled 'An act fixing the amount of United States notes, providing for a redistribution of the national bank currency, and for other purposes, be, and the same is hereby, repealed; and sections 5159 and 5160 of the Revised Statutes of the United States be, and the same are hereby, reenacted."
This section was by far the most important part of the funding bill, and its provisions aimed to curtail the immense powers of the national banks. It required them to substitute the new three per cent bonds, authorized by this bill, as security for their circulating notes, in lieu of the maturing bonds
The feature of this measure which the national banks regarded as the most dangerous to their existence, was
in that part of the bill which made the bonds redeemable, at the option of the government, after the expiration of five years from the date of their issue.
This would place the power in the hands of the government to discipline the national banks whenever these corporations would refuse to obey the lairs, or conspire against the interests of the people. The bonds being redeemable, at the option of the government, after the expiration of five years, the latter could at any period after the lapse of the minimum time, call in those bonds deposited by the national banks to secure their circulation, and thus eventually rid the country of this gigantic money power.
Furthermore, this section would not permit national banks to deposit bonds, upon which interest had ceased, to secure their circulating notes. Neither would it allow them to continue bonds on deposit upon which interest had ceased. Were it otherwise, the national banks could perpetuate their existence against the will of the government, by continuing on deposit bonds that were past due. In case of failure on the part of the banks to withdraw their bonds which were due, and upon which interest had ceased, within thirty days after these bonds matured, the Comptroller of the Currency was authorized to call in the circulation of those banks refusing to obey this provision, and wind up their affairs according to the provisions of section 5,234, of the Revised Statutes of the United States.
Furthermore, the unlimited power of the banks to contract or expand the currency conferred upon them by section 4, of the act of June 20, 1874, was taken away by the pro re-enactment of sections 5,159 and 5,160 of the Revised Statutes of the United States.
The reenactment of these two sections would place the control of the circulating bank notes in the hands of the Comptroller of the Currency.
When this three per cent funding bill was before the House, the greatest pressure was brought to bear upon that body by the combined efforts of the national banks to secure the defeat of the measure. The halls of Congress swarmed with the agents, lobbyists, and attorneys of the money power who attempted to intimidate Congress and defeat the bill. Threats were openly made by these venal scoundrels, that, unless the measure was withdrawn, the national banking money power would punish the country by indicting a monetary panic upon it.
The New York Tribune, the leading organ of this money power, thus described the vast power of the banks of the East, and hinted at its possible exercise. It said: -
"The time is near when they (the banks) will feel compelled to act strongly. Meanwhile a very good thing has been done. The machinery is now furnished by which, in any emergency, the financial corporations of the East can act together on a single day's notice with such power that no act of Congress can overcome or resist their decision."
In its zeal to serve the purpose of the financial corporations of the East, it exposed the traitorous sentiments of the financial magnates of New York City. It said: -
"It is astonishing, yea, startling, the extent to which faith prevails in money circles in New York that we ought to have a king."
The banks of the East, in their efforts to coerce Congress into submission, at once commenced a rapid
contraction of the currency during the time the bill was under consideration by the House.
In the short period of thirteen days, the banks of New York City surrendered their circulating notes to the extent of $18,722,340 and conspired to precipitate a panic upon the country, with its accompaniments of bankruptcy, financial ruin, and suffering.
This concerted action of the New York banks produced such a flurry in the money market, that prices fell five, ten, and fifteen per cent in a fear moments; and interest at the rate of 472 per cent per annum was exacted for the use of money by these infamous conspirators against the human race.
The situation in Net York City became so acute, that the Secretary of the Treasury relieved the condition of the people by purchasing a large amount of bonds, and thereby increasing the volume of money by many millions; while the Canadian banks forwarded $8,000,000 to be thrown on the money market.
This course of the banks led to severe denunciation of their policy in Congress
In a speech in the House on the 1st of March, 1881, Hon. John G. Carlisle, strongly arraigned the New York banks as the bitterest enemies of the government and the people; he said: -
"But, Mr. Speaker, by far the most dangerous feature yet introduced into the national banking system is contained in that part of the fourth section of the act of June 20, 1874, which authorizes the banks at any time, and for any reason which they may choose to consider sufficient, to deposit lawful money with the Treasurer, contract the currency to that extent and withdraw their bonds; and, sir, it is not going too far to say that until this feature is wholly eliminated or
materially modified there can be no assurance of safety to any legitimate investment or business enterprise in this country. If there was ever a doubt as to e dangerous character of the power which this part of the law gives to the banks over the business and property of the people, the arbitrary and unjustifiable proceedings of the last week ought to dispel it forever. The power was conferred in the first instance, as I have said, for a special and temporary purpose, the equalization of the national bank circulation, but when the Resumption Act of January 14, 1875, was passed, which removed all restrictions as to the amount of such currency and made the system entirely free, there was no longer any necessity for this clause, and it should have been instantly repealed. It is a standing menace against the prosperity of the country. Armed with this destructive weapon the banks may at any time, without a moment's notice or a shadow of provocation, strike down every industry and every commercial enterprise of the people.
"The banks, or some of them at least, first began to pervert this section of the statute from its original purpose and abuse the power which it conferred upon them by depositing lawful money and withdrawing their bonds from time to time, in order to speculate upon them in the market They thus withdrew large amounts of their circulation and contracted the currency, not because the reduced demands of business made the outstanding volume of circulation unnecessary or unprofitable, but simply because they wanted to realize the high premiums on their bonds and speculate in the securities upon which the Government had already delivered to them go per cent. in notes. These notes would be left outstanding for the time being, but an equal amount of Treasury notes would, of course, bc withdrawn from circulation and held at the Department to redeem the bank notes as they might come in. The Treasurer, in his last annual report, describes this process by reference to actual transactions in his office; and as his statement on this subject cannot be con-
densed without impairing its force, I give it in his own words."
After quoting from the report of 1880, made by Treasurer Gilfillan, Mr. Carlisle continued: -
"Under this section the banks have it in their power to contract the currency and produce financial distress, involving every interest in the country and embarrassing the operations of the Government itself, whenever they may think it will promote their special interests to do so. If they do not like proposed-legislation in Congress or elsewhere; if they are opposed to the success of a particular political party; if they conclude that they ought to be exempt from all taxation, State and Federal; if they want additional privileges conferred upon them in respect to any matter connected with their business; in short, if their opinions and interests are not consulted in all cases whatsoever, they can resort at once to this tremendous power over the fortunes of the people and thus bring the timid to terms and ruin all who refuse to accede to their demands. A plausible pretext can always be found or invented for the exercise of such a power as this, and powerful influences can always be brought to justify and sustain it.
"The two Houses of Congress, representing the aggregate interests of fifty millions of people, have, after mature deliberation, passed a bill which the banks have chosen to consider obnoxious to them, and forewith - within thirteen days - they have contracted the currency to the extent of $18,722,340 and precipitated a crisis which would have been disastrous to the country had it not been met by measures which they had no power to prevent. The prompt action of the Secretary of the Treasury in purchasing a large amount of bonds at the city of Net York, and the course of the Canadian banks in throwing seven or eight million dollars of their loanable capital on the market, alone prevented a catastrophe from the effects of which we might not have entirely recovered for many years.
"When Secretary McCulloch, several years since, in pursuance of his contraction policy, began to retire and cancel legal tender notes at the rate of $4,000,000,000 per month, it produced such consternation in business circles that Congress was forced to intervene at once and arrest the process by the passage of a joint resolution; bat now we have seen nearly $19,000,000 of circulation withdrawn in less than half a month, not by the Government, but by institutions in the management of which the Government has no voice, and still gentlemen here insist that the power under which this has been done, and under which it may at any time be repeated, shall not be taken away. Why, sir, the whole contraction of legal tender Treasury notes under the provisions of the Resumption Act, from January 14, 1875, to May 31, 1878, when it was prohibited by 1aw, was only $34,318,984 not twice as much in more than three years as the bank contraction had been in less than two weeks.
"This experience warns us that we cannot safely permit this great power to remain in the hands of these institutions unchecked by legal restrictions. It is an engine of destruction standing in the very narrowest part of the way to permanent industrial and commercial prosperity in this country; for there can be no such prosperity anywhere, in the midst of sudden and enormous contractions of the currency; nor will prudent and experienced business men embark in large and expensive enterprises when the power to make such contractions is hold by private and interested parties
who acknowledge no restraints except public sentiment and their own views of the public welfare.
"By law the volume of legal tender notes is limited to $345,681,016, while under the policy of the Government nearly $150,000,000 in gold and silver coin are permanently withheld from circulation and hoarded in the Treasury. Of the $454,000,000 gold coin in the country the Government and the banks held, on the 1st day of November last, $254,000,000, and the people
only $200,000,000. The circulation of State banks is taxed out of existence; the coinage of silver is limited by statute to $4,000,000 per month; and so it appears that by statute or public policy every form of currency which the people can use in the transaction of their business is restricted, except national bank notes. They alone are perfectly free from all restrictions, legal or otherwise, and upon them the people are compelled to rely under existing circumstances for the additional facilities of exchange necessary to enable them to carry on their growing industries and conduct their rapidly increasing commercial enterprises.
"What a fatal policy it is, in view of these considerations, to retain on the statute book as part of our currency system a 1am which subjects all these great interests to the arbitrary will or mistaken judgment of two thousand corporations."
The dangerous powers conferred upon the national banks were so clearly pointed out by Mr. Carlisle in his magnificent speech that the bill passed the House by a decisive vote.
In the meantime, the policy of the banks in making war upon the public credit received criticism from many journals which were friendly to the national bank system.
We will quote a few extracts: -
"It is a question whether a clique of banters is to dictate to Congress and the country what is for the best interest of the country, and to manipulate the money market in order to depress the stock market." - New York Advertiser.
"It is rule or ruin with the national banks. When Congress gets down on its honorable knees to the national banks everything will be lovely. Fattening on the Treasury for years, the national banks have entered into a conspiracy to wreck the business of the country rather than submit to what they consider
unfavorable legislation. The people will remember this against them, and the day of reckoning is not as far off as they imagine."- Chicago News.
"Some of the national banks of this city have played a very contemptible part in the flurry of yesterday and to-day. It is not the first time that they have acted in this way against the public credit. In one instance, which we do not care to name at present, but which will be understood by most Wall street people, the want of loyalty to the public credit has shown itself on all occasions, from the outbreak of the civil war in 1861 down to the present time." - New York Commercial.
"It is understood that there is to be an amendment offered in the House to the bill providing for the issue of greenbacks to take the place of bank circulation that may be withdrawn. If this sensible precaution is taken it will instantly restore confidence and take permanently away from the banks this fearful power to withdraw in one day all their bills from circulation, or, what is worse, lock op an equal amount of gold and legal tenders and leave the street utterly without means of doing business. Such terrible power no set of men should for one instant possess."- New York Graphic.
The New York Tribune uttered the following implied threats against Congress should the bill pass. It said: -
"The country knows that it has escaped a great disaster. Everywhere there is a feeling of intense relief and thankfulness, as substantial people come to realize how terrible a revulsion the enactment of the Carlisle section would have caused. But it is not well to forget that the danger has been escaped only upon condition that the fatal section is defeated. If Congress or the President is led to believe that disaster has been and can be averted by any action of the Treasury Department, so that the pending bill can now be passed without causing a great calamity, the consequences of that
error may be incalulably disastrous. Let the situation be fully understood."
The toryism of the Tribune always shone forth conspicuously when it defended the lawless banks of New York City.
"The trade and general business of the country has been subjected to a strain during the past week more severe than any which has been put on them since 1873. This deplorable state of affairs was brought about by the selfish conspiracy of a certain number of national banks bent on opposing the national will in the matter of establishing a lower national rate of interest by such duly chosen representatives of the people of the United States as they have thought proper to adopt. Our Government and people who maintain it have submitted to great sacrifices to afford all reasonable support to national banks But the banks have not kept within the reasonable limits of their demand for compensation for such financial services as they have been able to render the country.
"A few of these banks have not hesitated to invite the destruction of the whole system and provoke popular anger by pursuing a course which must inevitably force on American citizens the question whether legislative and executive officers chosen to represent the people or a few bank officers are to administer the financial destinies of this country. It is not probable the natural resentment of the legislature against the attempted conspiracy will extend to the condemnation of the whole national system. But we have no doubt at the same time that when the indignation has cooled off, those conspirators against the prosperity and credit of the Republic will be subjected to such temperate and wholesome discipline as shall be a warning to them and their kind for years to come." - New York World.
"It strikes as that the gentlemen in Wall street, who are trying to prevent the Senate Funding Bill from
becoming a law, rather make a mistake. Undoubtedly they have a right to express their opinions about the bill, but when it comes to threatening that, unless it is modified to meet their viewers, they will wreck the trade of the entire country, they go a step too far. The average Congressman has no such fear of banks and bankers as to make him alter his vote to avoid their displeasure, and as to any possibility of the mischief they may do, he will soon find a may to prevent it. If the officers of the banks should attempt, as some foolish men here say they will do, to withdraw their circulation unless certain provisions in the bill are stricken out, it would be very easy to supply the deficiency with an additional issue of greenbacks, and if they try by underhand means to thwart the negotiation of the new bonds because the rate of interest is not high enough to please them, they can be deprived of the privilege of issuing circulation altogether.
"It is a dangerous thing for the tail to attempt to wag the dog, for if the dog gets angry he can switch the tail about in a very unpleasant may for the tail. The truth is, that in matters of national interest there is no set of le as stupid as the Wall street financiers. Absorbed in the business of buying and selling stocks and lending money, they only consider what immediately effects to-day's markets, without a foresight of the future or regard for what is going on elsewhere. In the present case they are evidently in blissful ignorance of the general hostility of the people of the West and Southwest to the national bank system and the slender thread of toleration on which it hangs. It needs only a good pretext to secure the sweeping of the whole thing out of existence, and the substitution for it of any exclusive national currency. That pretext all the Wall street banters seem bent on furnishing, and Washington will, we fear, bc only too glad to seize upon it." - New York Sun.
On March 1, 1881, the Chicago Express, which opposed the pretensions of the national banks, editorially spoke as follows: -
"The funding bill, as it passed both Houses of Congress, was, in the language of a Washington dispatch, 'The most serious blow the national banks ever received from Congress since the organization of the national banking system."
"The act of January, 1875, clothed the national banks with the power of unlimited and unrestricted contraction and expansion of the currency. It gave them absolute control over the volume of money, and consequently over the market value of labor and all kinds of property. It- gave them power to inflate the currency when they could make money through the inflation of prices, and when their interests could be better served by panic, depressed prices and general business stagnation and bankruptcy, they had power to accomplish their end through the contraction of their circulating notes.
"The provisions of the new funding bill materially interfere with their nicely-planned scheme, and deprive them of nearly all their power over sudden contractions and inflation. It puts a limit to their privileges, and bounds to their unwarranted powers.
"Without waiting even for the concurrence of the House in the slight Senate amendments, a large and powerful bank lobby from Wall street and the clearing house association at once bore down upon the White House armed with magazines, Gatling guns and infernal machines of dire calamities, which they threatened would surely explode in the very heart of the nation's business and industries from spontaneous ignition, in case he did not intense his prerogative to save. They were armed with authority from the national banks represented by the American Bankers' Association to inform his Excellency that in case he withheld his veto they would immediately retire their circulation, in which case a money stringency would follow which could be terribly disastrous to every business interest producing the most ruinous financial crash which ever befell the country."
Senator Plumb, who was one of the three republican Senators that voted for the bill, stated his opinion as follows: -
"I am a national bank president, so I can speak without prejudice. I tell you the crisis has come when we shall see whether the banks run the Government or the Government the banks. I think the Government has a right to fix the rate of interest it will pay, and it is no business of any set of men. It makes no difference to the people if Wall street gamblers do lose money, or railroad stoics stop rising. It would make a difference if the hoes in western cornfields should stop, and it is with the producers that the prosperity of the country rests. Let the bottom fall out of it if it will. It is an artificial movement to coerce the Government."
The funding bill passed Congress, and was presented to President Hayes, who, on March 3, 1881, returned the bill to the House of Representatives with his veto, accompanied by a message stating his objections to the measure.
The following extracts from the message will give the reader a correct opinion of the influence that forced the President to veto this measure, which was the result of the matured labor of Congress. The President says: -
"While in my opinion it would be wise to authorize the Secretary of the Treasury, in his discretion, to offer to-the public bonds bearing 3 1/2 per cent interest in aid of refunding, I should not deem it my duty to interpose my constitutional objection to the passage of the present bill if it did not contain in the fifth section provisions which, in my judgment, seriously impair the value, and tend to the destruction of the present national banking system of the country.
"This system has now been in operation almost
twenty years. No safer or more beneficial banking system was ever established. Its advantages as a business is free to all who have the necessary capital It furnishes a currency to the people which for convenience and the security of the bill holder has probably never been equaled by that or any other banking system. Its notes are secured by the deposit with the government of the interest-bearing bonds of the United States."
Further on in his veto message, President Hayes makes vigorous objections to section g of the act, on the grounds that it jeopardized the existence of the national banks, and there would be no inducement for the organization of additional ones.
He says: - "In short, I cannot but regard the fifth section of the bill as a step in the direction of the destruction of the national banking system."
Again he says: - "Under this section it is obvious that no additional banks will hereafter be organized, except, possibly, in a few cities or localities where the prevailing rates of interest in ordinary business are extremely low."
The extreme solicitude manifested by the President for the national banks is apparent.
Thus the timid Hayes quaked before this august banking monopoly, and vetoed this beneficial measure at the insolent command of an organized clique, whose greed was not even satiated with 472 per cent usury.
Furthermore, this bill would have resulted in a saving to the Government of many millions per annum by a reduction of the rate of interest.
It will subsequently appear that these bankers who threw the country into a state of panic; who threatened Congress; who forced the weak Hayes to veto this
bill; who wanted a king, mill, in the near future, constitute themselves the special guardians of that most sacred object - the public credit!
These conspirators, who prevented a reduction in the interest on the public debt, will, in a few years from this period, assume the championship of the public faith!
In the meantime, that powerful ally of the money power, the Secretary of the Treasury, was throwing the weight of his official influence against the silver dollar.
In one of his reports to Congress, he makes the following recommendation with reference to the silver dollar; he says: -
"The Secretary believes that all the beneficial results hoped for m a liberal issue of silver coin by issuing this coin, in pursuance of the general policy of the act of 1853, in exchange for United States notes, coined from bullion purchased in the open market, by the United States."
An analysis of this recommendation, in view of the resumption act of 1875, will illustrate the enmity of Secretary Sherman toward the use of silver as a standard money.
First, He would limit all silver coins, whether dollars or otherwise, as a legal tender, to the amount of five dollars. Second, With this limited legal tender silver coin he would redeem and retire the United States legal tender notes. Third, He would redeem said silver coin in what? - In gold. And that would be the sole redemption money.
This policy of the Secretary aimed at the complete withdrawal and cancellation of $346,000,000of legal
tenders, by a redemption in silver coin, the latter redeemable in gold.
This scheme of contraction would be followed by continual issues of bonds to secure gold for a redemption fund for this silver.
It will be noticed that this man, who was so anxious to mate United States notes and silver coin redeemable in gold, never, during his public career, once intimated that national banks should redeem their circulating notes in gold.
In 1880, Secretary Sherman again inflicted one of his usual recommendations on Congress, asking for the passage of a law to prohibit the further coinage of silver.
We quote his exact language in which he avers: -
"First, It is too bulky for large transactions, and its purpose is confined mainly for payments for manual labor, and for market purposes for change. The amount needed for these purposes is already in excess of the probable demand.
"Second, It is known to contain a quantity of silver of less market value than the gold in gold coin.
"This fact would not impair the circulation of such limited amount as experience shows to be convenient for use, but it docs prevent its being held or hoarded as reserves, or exported, and pushes it into active circulation, until it returns to the Treasury, as the least valuable money in use.
"For these reasons the Secretary respectfully but earnestly recommends that the further compulsory coinage of the silver dollar be suspended."
The phrase "compulsory coinage" clearly indicates the hostility of the Secretary toward silver.
An examination of his reasons, urging the suspension of the coinage of the silver dollar, furnishes the strongest argument against his position.
In the first place, the silver dollars are too heavy for 1arge transactions, therefore this fact places them beyond the control of the national banking money power.
The gold gamblers and bullion brokers of Wall street found it difficult to obtain control of those coins whose largest denominations were one dollar pieces.
At the very time that Secretary Sherman urged this objection against the silver dollar, the inconvenience, if any, of its she and weight was obviated by the issuance of silver certificates in denominations of from ten to one thousand dollars.
He says that it was the money of small transactions, such as the payment of wages to labor, and the purchase of provisions.
This is one of the strongest reasons that could be advanced for the continued coinage of the silver dollar. This money that paid the wages of labor was worth one hundred cents on the dollar.
Again, he says that it was of less market value than the gold in the gold dollar. This is true of it as a mere commodity, but as a legal tender, a medium of exchange, it was the equal of gold anywhere on the face of the earth.
But the true animus of the Secretary against the silver dollar sprung from the fact that it was not held, or hoarded, or exported, but that it was in active circulation.
This is the first time that an American Secretary of the Treasury advocated a theory as absurd as the one urgent by Mr. Sherman.
The principle upon which a true monetary system is based is that of circulation.
Mints are not established to coin money for the purpose of hoarding it up in the vaults of banks. It performs its true functions when it passes from hand to hand in exchange for the commodities and necessaries of life.
One hundred and fifty years ago the celebrated historian and philosopher, David Hume, in speaking of the effects of hoarding money, said: "As regards prices, money locked up in chests is as if it were annihilated."
He says, "It is not exported."
Just why Secretary Sherman desired a coin that can be readily exported to some foreign country, is not stated by him in his report and recommendations to Congress.
The objections urged against silver because of non-export of that coin, shows that it could not be readily shipped and re-shipped across the Atlantic, at the nod and beck of the stock gamblers, bullion brokers and panic breeders of the New York clearing house and London.
The Secretary said, "It is in active circulation."
This constitutes no crime on the part of silver. All money is coined or issued to subserve the purposes of man by being thrown into active circulation as a medium of exchange.
These weak and puerile reasons of Secretary Sherman against the continued coinage of silver dollars had no effect upon Congress. They were contemptuously ignored by that body.
The childish spite exhibited by Secretary Sherman against silver, his petty slanders against the standard dollar, and his slavish devotion to the traitorous money
power, disgusted many of the best men of the party to which he belonged; and, on March 30, 1880, the Chicago Tribune administered a stinging rebuke to his policy. It said: -
"Since the passage of the silver law Mr. Sherman has done everything to disparage silver; he has limited the coinage to the minimum; he refused to exercise the Government's option to pay out silver in any considerable amounts; he has restricted the issue of silver certificates; he made the Treasury Department a member of the New York Clearing House, from which silver is excluded; and has by word and letter and act done all in his power to discourage the use of silver in the United States."
The Tribune denounced his truckling policy on the financial question in the following language:-
"At the opening of the present Congress he made the extraordinary recommendation that Congress strike from $350,000,000of the greenback currency of the country its legal tender character. It was a high bid for the support of Wall street, but a fatal one addressed to the producing and industrial classes of the country."
The public career of John Sherman is the most remarkable in the annals of the nation.
When a young man, he turned his attention to the profession of the 1aw, in which he earned but meager fame and fortune. At this time he was a compar-
atively poor man. After a brief, or rather briefless experience as a lawyer, he determined to enter public life and was elected to the Thirty-fourth Congress in 1854.After serving in the lower House until the outbreak of the war, he was elected to the United States Senate. During the fore part of his career in that body, he served as Chairman of the Committee on Finance, the most important and influential position that can be conferred upon a member of the Senate.
He is the author of the present system of national banks, and he has left his impress upon the various financial measures of the Government from 1861 to 1875.
On the accession of Hayes to the Presidency, he was appointed Secretary of the Treasury at a salary of $8,000 per annum.
During his term of office at the head of that great department, he was a firm friend of the national banking money power which continually waged a war of extermination upon the currency of the United States.
As Secretary of the Treasury he executed those great funding operations, by which it was alleged the people had been saved a vast sum in interest, notwithstanding the singular fact that, during his incumbency, the national banks persuaded President Hayes to veto the funding bill, which reduced the rate of interest upon the national debt.
During these funding operations, he selected various national banks as depositories for the money received from the sale of bonds. One of these banks was known as the First National, situated on Broadway, in New York City. It had a capital of $500,000 and occupied offices that were humble compared with the palatial
quarters of the great financial institutions of that city. According to the sworn statement of the officials of this bank, its total capital was $500,000 on the 31st day of December, 1879; on January 1, 1878, the undivided profits, after the payment of dividends, were $142,670; on April 4th of the same year the undivided profits were $339.095.60;on June 14th, after the lapse of two months, the undivided profits were $679,018.88; on October ad, these profits reached the sum of $804,-511.26; on December 12, 1878, they were $267,700.84. The amount of dividends paid by this bank to its stockholders, during this time, has never been ascertained or disclosed, bet that it was very large admits of no doubt.
Here is a single national bank, the special protege of Secretary Sherman, that, in the short space of ten months, accumulated undivided profits which exceeded its capital stock by more than three hundred thousand dollars.
On January 1, 1878, this pet bank of the Secretary was the custodian of Government funds amounting to $24,759,948.50. On April 4th, of the same year, it held Government funds amounting to $69,927,704.43; on June 14th, those deposits were increased to $128,109,071.04; on October 2d, they were $3,601,550. It was from these deposits of Government funds that the bank accumulated those enormous undivided profits. Why this comparatively small bank should be made the depository of Government funds to two hundred and fifty-six times its capital has never been explained by Secretary Sherman.
At this time, the sub-treasury of the United States was situated in the same sty as this pet bank, and
could have been utilized as a depository for this money. It will be seen that this bestowal of official favor upon this bank was worth the immense sum of twenty-one thousand dollars per day.
The figures with reference to the amount of undivided profits of the bank, and the amounts of public money deposited therein, are taken from the report of the Comptroller of the Currency for the year 1880.
On January 1, 1880, Senator Beck, of Kentucky, called the attention of the Senate to these astonishing facts, and in the course of his speech said: -
"I came to the conclusion, looking over these statements, that the best banking capital a man can have is the good will of the Secretary of the Treasury. Suppose the Senator from New York were the best banker and I were to go to him and say, 'I want to go into partnership with you,' and the Senator should say to me, `What capital have you got?' - 'None.' 'What do you propose to do?'- 'I propose to bring you the good will and the deposits of the Secretary,' I think the Senator would take me into partnership, and he would make more money by doing it than he ever made in his life, and we would contribute largely to any campaign fund desired by the Secretary."
At the time when this bank was made, the custodian of these fabulous sums of public money, John Thompson, a large stockholder, was its vice-president. He was informed that this bank with a capital of only $500,000 had subscribed as a purchaser of four per cent bonds to an amount exceeding thirty millions of dollars. When acquainted with this fact, Mr. Thompson protested against the assumption of such a risk, and said: -
"If these bonds were to fall in value one per cent it would wipe out three fifths of our capital. If they
should fall two per cent, it would absorb more than the entire capital of the bank."
Mr. Thompson was assured by its president that there was no danger incurred, because of an agreement with the Secretary of the Treasury that the bank, in that case, would not be compelled to pay for the bonds. Mr. Thompson was astounded at this information, and he sold his stock in the bank, withdrew from its directory and organized the Chase National.
During the administration of Secretary Manning, the Treasury Department deposited sixty-three million dollars with the various national banks of New York City. At that time Mr. Sherman was in the Senate and denounced the act of Mr. Manning in the strongest language. Yet, Secretary Sherman had, while he was at the head of the Treasury, deposited more than four times that sum in a single bank.
During the entire public career of Mr. Sherman as Representative in Congress, as United States Senator, and as Secretary of the Treasury, he was not engaged in any other business With the exception of the four years that ho was Secretary of the Treasury, during which he received eight thousand dollars per annum, his official yearly income never exceeded five thousand dollars.
In a letter to one of his political friends in the State of Ohio, Mr. Sherman details the immense sacrifices he had made for the public during the forty years that he was its servant. He stated that his living expenses annually averaged ten thousand dollars during that time, and that his officia1 income never equaled his expenditures.
At the time of the writing of that letter, his residence in Washington was a palace whose sumptuousness rivaled that of the crowned heads of Europe. In addition, he was one of the most extensive owners of real estate at the capital. He is a very large holder of stocks in national banks and railroad corporations. The miraculous process by which a high official of the Government can expend twice the amount of his salary for ordinary expenses during the early part of his political career - at which time he was a poor man - and yet accumulate a magnificent fortune out of the surplus, has long been a mystery, for the solution of which Mr. Sherman has volunteered no explanation. His accumulation of millions evinces a degree of thrift that is wonderful; and the facts in the career of Senator Sherman surpass the fabulous story of King Midas, whose touch turned everything to gold.
Yet this man is revered by the national banking money power and its satellites as the ablest American financier of the age.
Since 1861, he has been on every side of nearly every political and financial question that has agitated the country.
To illustrate the facility with which he can change his position on public questions, we refer to his late action on the policy of the United States toward the recognition of Cuban Independence. In the month of January, 1897, he introduced a fiery resolution in the Senate demanding the speedy recognition of Cuban belligerency. He out-jingoed the Jingoes. Three days afterward, he withdrew said resolution, with the lame explanation that its adoption would be inexpedient at that time.
The profits of the national banking system up to and including the year 1880 were immense.
In a report of the Comptroller of the Currency for 1881, this official states that the net earnings of the national banks for the preceding twenty years were $512,825,325, besides a surplus of $130,000,000-thew hole aggregating $642,825,325; and that this enormous profit was earned upon an average capital of $500,000,-000,- a net profit of over twelve per cent annually above all expenses, including the princely salaries paid to the executive officers of the respective banks.
It will be asked, why should these financial institutions so often seek to bring on stringencies in the money market? The reason is clear to those who understand what class of men are at the head of the powerful national banks of New York City and other speculative centers. An examination of the directories of these great banks exhibits the startling fact, that the executive officers, directors, and heavy stockholders of these institutions are the largest operators on the Stock Exchange.
Having control of almost unlimited amounts of money, they are enabled to depress the value of stocks, bonds, and other securities when they are buyers on the market; and can enhance the value of stocks held by them when desirous of selling. Thus they are empowered to correct the fortunes of the smaller operators.
The entire property of the nation, both real and personal, is at the absolute mercy of these national bank money kings. The men, or combination of men, who control the volume of money of a nation are its masters, whether it is an absolute, or a constitutional monarchy, or a republic.
It is a recognized principle of finance, that the volume of money afloat in a country fixes the general level of prices of commodities; it is true that there are some exceptions to this general rule, but they arise from unusual and unforeseen circumstances.
The power of the national banks to suddenly contract the circulating medium of the country, and the tyrannical manner in which they have exercised that privilege in the past, has awakened the gravest apprehension of the thinking men of the nation.
In his report of 1880, Treasurer Gilfillan stated that the national banks since the 20th of June, 1874, up to the time of his rcport of 1880, had surrendered their circulation in a sum exceeding $85,000,000, by depositing legal tender notes for the redemption of their circulating notes.
In addition to this contraction spoken of by the Treasurer in this report, the national banks possessed additional means of creating a sudden scarcity of money. Besides the circulating notes which these banks were authorized to loan as money, they controlled deposits of more than a billion dollars.
Therefore the loanable funds of these banks could be transformed into a most deadly weapon against the legitimate enterprise of the nation.
All that w as necessary to bring on a monetary panic was a concerted plan on the part of these banks to call in their loans, and this action would be followed by a crisis as surely as night followers the day.