I Jt \ i\ i 
 
 "As in 1858 Abraham Lincoln foresaw that this Government could not endure half slave and half 
 free, so noiv it is clear that the domestic prosperity and commercial supremacy of this country 
 among' all the nations of the earth ivait alone upon our unequivocal declaration and irrevocable 
 decision as to our monetary standard." 
 
 OUR 
 
 FINANCIAL DIFFICULTY 
 
 AND THE 
 
 REMEDY. 
 
 ADDEBSS 
 
 BY 
 
 HON. CHARLES N. FOWLER, 
 
 OF NEW JERSEY, 
 
 BEFORE THE 
 
 COMMITTEE ON BANKING AND CURRENCY, 
 
 ON 
 
 H. R. BILL 6442. 
 
 Your opinion of this Bill 
 at a n early da te 
 is earnestly solicited 
 
 WASHINGTON: 
 
 GOVERNMENT PRINTING- OFFICE. 
 189C. 
 
Avery Architectural and Fine Arts Library 
 Gift of Seymour B. Durst Old York Library 
 
ADDRESS OF HON. CHARLES N. FOWLER. 
 
 It will be comparatively useless to attempt to deal with the finan- 
 cial question unless the evils from which we are suffering are clearly 
 understood. 
 
 As well might the physician attempt to treat a patient without diag- 
 nosing his case. It is generally admitted now, I think, that treatment is 
 comparatively easy if you have discovered the cause and thoroughly 
 understand the disease. 
 
 As the treatment of any case depends upon the diagnosis, and as 
 treatment must diverge as opinion with regard to the difficulty diverges, 
 our first effort should be to find as many causes of our trouble as pos- 
 sible upon which we can all agree, so that ^ve can pnoceed along well- 
 established and well-recognized lines of treatment. 
 
 In the first place, I think all agree that our deplorable condition is 
 due to an organic weakness and a functional malady often reaching an 
 acute form, and that during the past three years our condition has been 
 chronically acute. Our trouble involves both our national finances and 
 the currency system of our banking institutions. We may administer 
 a few sugar-coated flour or dough x>ills ? like increasing the circulation 
 to par of the bonds, and allowing banks to organize with smaller capital 
 in out-of-the-way places, and thereby allay the apprehensions for the 
 atternoon; but unless we actually remove the organic difficulty on the 
 one hand with an unequivocal measure of value, and reenforce the blood 
 by infusing into the currency arteries the buoyancy and elasticity of 
 our vast but rapidly exchanging wealth, this old malady will ever 
 return in more and more malignant form, prey upon an ever weakening 
 constitution, produce greater and greater anarinia, and end in disorder 
 and ruin. 
 
 Let us inquire first, then, what the organic or constitutional weakness 
 is. It began by the Government issuing its first paper money, possi- 
 bly of necessity, but foolishly kept in circulation long after the necessity, 
 if any ever existed, had disappeared; and it is no guaranty of wisdom 
 simply because the Supreme Court has decided that Congress could make 
 nothing but a piece of paper, that was always being redeemed and yet 
 is never retired, a legal tender. There are a great many things that 
 Congress can do and does do that are supremely and superbly foolish, 
 and conspicuous among its acts of this character was the act perpetu- 
 ating the existence of the greenback long after its purposes, if born of 
 necessity, had been served. If a small portion of the money that was 
 used in paying off the Government bonds which could not annoy us 
 had been applied in liquidating our demand obligations, we would have 
 been saved an immense amount of financial trouble and a vast amount 
 of interest, too, before we have finished the greenback chapter. But we 
 were not satisfied even with getting 8340,000,000 for nothing through- 
 out eternity, so we started out upon the silver scent; and while we were 
 
 3 
 
c-Mj*/ c; 
 
 4 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 cunning enough in the act of 1878 to hide behind the coined dollar 
 deposited, we had the hardihood in 1890 of increasing our demand obli- « 
 gations at the astounding rate of $50,000,000 a year, with no way of 
 meeting them except the taxing power of the Government. We did 
 not even assure the people and the world of our good faith by putting 
 up a redemption fund corresponding with that lodged against the green- 
 backs. 
 
 What happened? We soon found that technically we had, including 
 the national-bank notes, about $1,000,000,000 of demand obligations 
 out, and only the same $100,000,000 we thought necessary to protect 
 the $316,000,000 greenbacks, when, in fact, we ought to have had at 
 least $300,000,000 of gold under the circumstances. 
 
 All classes of our people, to say nothing of the business men, and 
 particularly the bankers, were looking each other mysteriously in the 
 face and inquiring whether it might not be well to hide away some 
 gold. The foreign broker, wanting to appear conservative and protect 
 his client, and of course get another commission on an exchange of 
 securities, advised extreme caution, pointing out that it would be impos- 
 sible for the United States to maintain the gold standard, and that it 
 was in a position, in fact, to slide from under when the crash came. 
 
 What has been the result? The American people of every class 
 have been hoarding gold, while the foreigners have been withdrawing 
 their investments, and, what is quite as bad for an undeveloped coun- 
 try, withholding their money from us. 
 
 The large outstanding demand obligations of the Government enable 
 those who want gold at home or abroad to force the Government to go 
 on forever paying these greenback and silver demands over and over 
 again, and yet they may never be retired. The only remedy left to the 
 Government under the present circumstances is to sell bonds in advance 
 and corner the $500,000,000 greenbacks and Treasury notes, about which 
 there is no possible doubt as to what the Government has got to do, 
 and then wait for a test case of a silver certificate, which must result in 
 the same conclusion and the Treasury be confronted with $335,000,000 
 more of demand obligations, while the Government, which the un- 
 thinking call the richest in the world, in this very connection finds 
 itself without any of those resources of a bank to meet its debts and 
 literally stripped of every means of defense except its power to tax the 
 people. Was there ever a more pitiable spectacle in the world? 
 
 From the foregoing we have discovered some of the disastrous effects 
 growing out of our organic difficulties. 
 
 We have observed : 
 
 First. That on account of doubt gold is constantly leaving the Treas- 
 ury and the country. 
 
 Second. That our people are nursing their gold, and the United States 
 Treasury must furnish all the gold that is wanted for any purpose what- 
 ever, without having any resource except the power to tax the people, 
 and yet must continue an unlimited amount of the paying business of 
 a bank. 
 
 How shall we meet the first difficulty and turn the stream of gold now 
 flowing from our country to it, and stop the drain on the Treasury by 
 our own people? 
 
 There is and will be but one cure, and that is an unequivocal measure 
 of value approved and adopted by all the leading commercial nations of 
 the world, and determined by all human experience to be best suited 
 for settling the balances of trade. 
 
 So long as political parties straddle, and so long as it is possible for 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 5 
 
 * Members of Congress to declare that the bonds of the United States 
 are in terms payable in silver as well as gold, and so long as one branch 
 of Congress or the other shows its disposition by a vote to take advan- 
 tage of the word "coin," so long will a most expensive, indeed possibly 
 a ruinous, doubt hang over this country. 
 
 Of those who declare that we are on a gold basis and are going to 
 pay our obligations in gold I would like to inquire, Why do we not put it 
 in black and white and save this country millions in interest every 
 year, and secure hundreds of millions for investments to develop our 
 vast resources? For there is no country on the face of the earth with, 
 our citizenship, civilization, well-established laws, and natural resources 
 (which are the magnets that determine where capital goes), and there- 
 fore so assuring to capital, as our own, if the measure of value were 
 only unalterably fixed. 
 
 How shall we overcome the second difficulty that has made this great 
 country ridiculous and may render it financially impotent because the 
 people demand that this debt-doubling process shall cease, little dream- 
 ing of the consequences that must ensue. If we would escape the 
 incomprehensible trouble in either event, we must cease the anomalous 
 position of filling all the paying functions of a bank without any of its 
 natural resources. 
 
 In other words, the two remedies for our organic difficulty are these: 
 
 First. Refund our national debt in long-time 2 per cent gold bonds, 
 furnishing a basis of circulation for our national banks and thereby 
 giving to the people a money redeemable in gold over the counter of 
 the bank of issue, thus utterly destroying the gold-hoarding habit at 
 home and dissipating the last vestige of doubt and fear abroad. 
 
 Second. Get the Government out of the banking business by con- 
 verting the greenbacks and Treasury notes into metal reserves of the 
 national banks, and send the silver dollars whirling into the tills of 
 our merchants and over the counters of our banks. 
 
 This done, the credit of the nation can not be threatened in times of 
 peace and ought to be maintained unimpaired in times of war. Its 
 business would then be just what that of New York, Chicago, or 
 San Francisco is — the collection of money for the payment of current 
 expenses — and every dollar of the $G25,000,000 of gold in the United 
 States would be free money, and would be taken from the safe-deposit 
 boxes, drawers, and stockings and turned into the channels of commerce. 
 
 So far as I have been able to discover there is but one other view 
 entertained witli regard to our organic weakness, and that has been 
 entertained by my fellow-Republicans, indeed originated with them, but 
 which is far more political than philosophical, and which will not stand 
 the test of fact established by investigation. 
 
 Beginning with President Arthur, we were warned continually of the 
 danger that would grow out of expanding our demand obligations, and 
 all recognized economic writers pointed out the danger long before 
 President Harrison left his office. Even before there had been a defi- 
 ciency, Secretary Foster was panic stricken and the Republican Admin- 
 istration had prepared and was ready to issue $50,000,000 of bonds for 
 no other purpose than to build up the credit of the nation by increasing 
 the reserve. 
 
 I think it will not be denied by anyone who will take the trouble to 
 study the changes from 1878 to 1893, that had the Government begun 
 in 1878 to cover the depreciation of the silver coined with a proper 
 reserve of gold and continued that policy down to 1890 and through all 
 the operations of the Sherman Act to 1893, gradually increasing the 
 
G 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 reserve up to about 8300,000,000. there would have been no apprehen- 
 sion with regard to the ability of the Government to meet its demand 
 obligations, even though it was compelled to sell $150,000,000 of bonds 
 to cover the deficit growing out of the lack of revenue. 
 
 If this be true, then it is clear that it was simply the expanded credit 
 and not the lack of revenue. 
 
 After much honest and earnest investigation on my own part, I am 
 satisfied that the lack of revenue has been m no sense the cause of the 
 trouble, although I am of the opinion that it has served to scrape the 
 scab off a most angry, violent, malignant, and festering sore and kept 
 it a running one. The real trouble was in a lack of that prudence on 
 the part of the Government that a good banker usually exercises in 
 increasing his reserves as his demand obligations expand. 
 
 But what a frightful waste this prudent policy would have involved, 
 the locking up of 8300,000,000 of money for no other purpose than the 
 safe conduct of a most unwise and foolish policy. Nor would the pop- 
 ular will of the country remain silent while so vast a sum was being 
 withdrawn from the channels of trade and the currency correspond- 
 ingly contracted. This inherent or constitutional evil from either point 
 of view was to breed discontent and disaster. 
 
 While discussing this fundamental difficulty, it may be well to allude 
 to the objection, that has been urged to the gold cure here proposed, on 
 the part of the so-called bimetallist, but the more accurately described 
 silver inonometallist, and that is an international bimetallic arrange- 
 ment. 
 
 To these so-called biinetallists I think we may confidently say that so 
 far as the public sentiment of this country goes two things have been 
 established beyond all peradventnre — 
 
 First. That the American people are unalterably opposed to the free 
 and unlimited coinage of silver without an international arrangement. 
 
 Second. That if this country hopes to secure an international arrange- 
 ment for the free coinage of silver at any ratio, they will be far more 
 successful in their endeavor to do so if they place themselves squarely 
 upon the gold standard, showing to all the rest of the world that there 
 is absolutely no possibility of this country adopting the free coinage of 
 silver while the other great commercial nations of the earth take all 
 the gold and leave us nothing but silver. The way to reason with the 
 selfishness of nations is to exercise the power of compulsion, and the 
 mere possibility that this great country may in some moment of aberra- 
 tion adopt the free coinage fallacy stands in the way and will do more 
 to defeat an international arrangement than all other causes combined. 
 
 Then there is another class, who would sacrifice everything to con- 
 venience, instead of all convenience to principle, and who urge the 
 inconvenience of using metal instead of paper money, when, as a mat- 
 ter of fact, the salutary effect of having the metal among our people 
 offsets it tenfold. Among these are even those who would not propose 
 to have anything but good paper money, and yet urge the inconsequen- 
 tial consideration of convenience while a great principle is involved, 
 even the credit of the nation. The question of convenience can only 
 be considered after the problem has been solved upon sound economic 
 principles. 
 
 Having pointed out what seems to me to be the organic disorders, 
 and dissipated the erroneous diagnosis of those who claim that all our 
 woe is due to lack of revenue, and having pointed out that the very 
 objection of the theoretical bimetallist is really his best if indeed not 
 his only hope of success in securing an international arrangement, and 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 7 
 
 having brushed away the dewy suggestion of convenience, I think we 
 'have clearly discerned the true organic weaknesses from which we are 
 suffering. 
 
 These being the fundamental difficulties, there can be no question 
 about the remedies that have been suggested. 
 
 Assuming that our measure of value has been placed beyond the 
 reach of cavil and forever settled, and our Government has no connec- 
 tion whatever with the currency of our country except as trustee, let us 
 proceed to inquire what the functional trouble is affecting our monetary 
 system. 
 
 I am one of those who believe that we have one of the best banking 
 systems in the world in some respects, and who also believe that it is 
 equally bad in others. All the superficial defects, all the apparent 
 evils, like eruptions on the human body, which are due to disorders of 
 the blood, are due either to too much or too little money to handle the 
 commerce of this great country at any given time. 
 
 Any banking system like our own, which results in a currency panic 
 in one city or several localities or possibly all over the United States 
 every time there is the slightest commotion in any department of com- 
 merce, is like an epileptic patient, who goes into fits upon the slightest 
 provocation. 
 
 Everybody asks, "What is the trouble?" And everybody who has 
 taken the time and trouble to investigate the subject answers. "The 
 want of a sound, elastic currency." 
 
 VTe have reached a point in this matter that demands patriotic and 
 heroic action. 
 
 We should at once acknowledge every established fact and follow 
 every vein of truth wherever it may lead, if happily we may find a 
 solution to this intricate problem, and save our country from the stress 
 of a continual financial storm and bring back confidence in us through- 
 out the world and secure*the blessing of prosperity to our own people. 
 
 It has been with this spirit that I have pursued my study and indulged 
 my thought, which lias stripped me of some pet notions and dislodged 
 many of my preconceived ideas that were born of political bias or were 
 the children of wishes growing out of party zeal or the inheritance of 
 some tradition partially true or utterly false. And now, when I pass 
 my country in review and contemplate the stupendous losses and fright- 
 ful havoc of recent years, I am impelled to hope that Diogenes may 
 again appear with his candle and not cease his search until he has 
 found a clear, frank, and honest political platform upon which the 
 American people can fight this thing out, as they are longing to do. 
 
 As in 1858 Abraham Lincoln foresaw that this Government could not 
 endure half slave and half free, so now it is clear that the domestic 
 prosperity and commercial supremacy of this nation among all the 
 nations of the earth wait alone upon our unequivocal declaration and 
 irrevocable decision as to our measure of value. 
 
 The American people, strictly honest, highly intelligent, and supremely 
 brave, are in favor of the gold standard as a measure of value because 
 all history has shown it the most stable metal, all experience has 
 proved it best suited for settling the balances of trade, and all the lead- 
 ing commercial nations of the earth have approved and adopted it. 
 And while our people are in favor of the use of so much paper and silver 
 money as is consistent with prudence and the demands of business, 
 they are unalterably opposed to the free and unlimited coinage of silver 
 except upon the single condition of an international arrangement, to 
 which they are ready and anxious to give their hearty support. 
 
8 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 In discussing this question we can not take the position of the school- 
 master, the theorist, or the dogmatist; but with a full and perfect 
 knowledge of our present currency, our individual banking system, the 
 extent of our country, and the magnitude of our commerce, we should 
 attempt the solution of this most difficult problem. 
 
 The experience of other countries, so far as they have established prin- 
 ciples that are equally adapted to our condition, are valuable; but we 
 can not assume that everything that has worked well elsewhere will 
 necessarily work equally well here. It is a question very largely of 
 discrimination and adjustment. However, it is no evidence that because 
 conditions elsewhere are very different from our own, that their expe- 
 rience is of no value to us; or, that what has been well done there, can 
 not be equally well done here. Common sense here, almost more than 
 anywhere else, must serve as a ballast to theory. Prejudice must give 
 way to truth, and selfishness to principle. 
 
 To suppose that the people of the United States will give up a secured 
 currency in a day, a week, a year, or a decade even, for a credit currency, 
 is a most violent presumption, even if such a thing were sound in prin- 
 ciple. Again, even if they were willing to do so — and credit currency 
 is sound beyond a peradventure in principle — I do not believe that such 
 a step would be wise. 
 
 Banking is a development; it is the result of evolution; and each 
 of the great commercial nations has its own system of banking which 
 is still in the process of evolution. While our movement should be in 
 the direction of radical changes, the movement itself should not be 
 radical, so that what may be proposed may be tested and gradually 
 adjusted to the vast and complicated factors involved in our commerce 
 and banking. 
 
 That any system of secured currency does lack and must lack all the 
 elements of elasticity I presume no one here doubts. If, however, there 
 are those who think that our system has ever responded and con- 
 tracted as the demands of commerce required, they have only to con- 
 sult our bank-note circulation by years and be convinced that it has 
 practically been controlled by the normal demand of money on the one 
 hand and the profit on the bonds on the other, and has often been 
 lowest when it ought to have been highest, and highest when it ought 
 to have been lowest. There is no pretense that it has been taken out 
 every fall when the crops were to be removed and has automatically 
 contracted when they were disposed of. It was $14G,000,()00 in 18G5; 
 $340,000,000 in 1875; $301,000,000 in 1877; $352,000,000 in 1882, and 
 $122,000,000 in 1890. It is now about $200,000,000. 
 
 No system of currency will ever have the quality of true elasticity 
 which does not reflect commercial activitj'- and which must pay a tax 
 when it is idle, hence the normal demand throughout the year will be 
 the only material factor affecting the issue. 
 
 It will readily be seen why we have money panics somewhere nearly 
 all the time and everywhere some of the time. Under a properly regu- 
 lated system I think one may safely say there should never be a cur- 
 rency famine anywhere at any time. 
 
 The great bulk of the money, the normal money of any country, may 
 well be gold, silver, and secured currency, no one of which, nor all of 
 which put together, are elastic. But to properly and adequately pro- 
 vide for the extra demand for money to handle crops and manufactures, 
 to meet the disturbed conditions in commerce and the flurries in finance, 
 something more is needed and demanded. 
 
 Again, it is admitted that it will not be very long before the national 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 9 
 
 debt will be paid off. We all remember what eon stern ation there was 
 throughout the whole country about contraction when President Har- 
 rison was paying off the national debt at the rate of about $100,000,000 
 a year during part of his Administration. Our system had absolutely 
 no power of self- adjustment. Some were demanding that we have State 
 bonds for security; some suggested city bonds; some urged railroad 
 bonds; some sought relief in the repeal of the tax on State banks, while 
 the bankers met at Baltimore and issued the plan bearing that name. 
 All was confusion; all was chaos; nothing was done. 
 
 Now that there has been a slight increase in our bonded indebtedness, 
 some talk as though it were to continue throughout eternity. In the 
 light of a surplus revenue of $1,333,000,000 from 1879 to 1889, such a 
 suggestion is idle talk, for everybody knows that if the Government 
 were disposed to do so it could wipe out this entire debt in five years, 
 and that to distribute the liquidation over a period of ten years would 
 render the burden so light as not to be noticed. Nothing is more cer- 
 tain than the absolute necessity of some system to succeed the present 
 one in the course of time, and nothing is more important than that 
 there should be an evolution in passing from one to the other and not a 
 revolution, with all its shocks, misfortunes, disasters, and ruin. 
 
 As a preface to what I am going to say, I will venture the assertion 
 that you can not mention the matter of credit money in any chance 
 meeting of a dozen business men that some of them — indeed, in most 
 instances a majority of them — will not shrug their shoulders and think 
 of what they may remember, if age will permit, or what their fathers 
 have told them about "red dog," "yellow dog,' 7 or some other dog 
 money, as though they had heard or read all about all kinds of money, 
 when, as a matter of fact, all they know about it is that there really 
 was "red dog" money, and that the dog died. Neither the cause nor 
 the circumstances surrounding his death seem ever to have entered 
 their minds. 
 
 But, discarding the follies of the past, let us inquire into our necessi- 
 ties and misfortunes with a determination of overcoming them, if pos- 
 sible. 
 
 As a preliminary but fundamental truth, I suppose all my listeners 
 realize that there is not the slightest difference between a bank which 
 has $100,000 capital and $100,000 of deposits subject to check, with 
 $75,000 of its deposits loaned out on sixty-day two-name paper, and 
 $25,000 reserve, and a bank which has $100,000 capital and $100,000 of 
 credit notes outstanding, $75,000 of which having been loaned to 
 identically the same men as in the former case and on the same condi- 
 tions — sixty-day two-name paper, with $25,000 of notes turned into 
 cash for a reserve against the $100,000 of notes. 
 
 When there are abundant deposits there will be no notes issued 
 under ordinary circumstances, but where there is little wealth in the 
 form of money, but great wealth in other forms and much money needed 
 to develop it, there notes will be issued. 
 
 This fact can be illustrated by a comparison of the national banks 
 of the city of New York in 1884 having $40,000,000 of capital, with all 
 the national banks of the State of Massachusetts, outside of Boston, 
 having $45,000,00.0 of capital. In the former the deposits amounted to 
 $184,000,000, and the banks' circulation was but $13,200,000; while in 
 the latter the deposits were but $45,400,000, and the circulation out- 
 standing was $35,800,000 — about three times as great. 
 
 Again, during the operation of the Suffolk system at Boston, which 
 was before Yankee ingenuity was crystallized into millions, and every 
 
10 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 river, stream, and rivulet was turned into a source of wealth, the country 
 banks had no deposits to speak of, and many of them, considering the 
 inconvenience of travel and the slowness of mail, were, speaking from 
 our present facilities for both, thousands of miles away. Some of the 
 Maine banks with an actual capital and downright honesty, were, 
 though more remote then in a business sense than California is now, 
 issuing their notes and clearing at Boston, thus enabling the sturdy 
 sons of that then far-off region to develop the great resources of that 
 section. So it was with nearly all of New England, but the current 
 redemption which the system enforced kept their money absolutely 
 good. 
 
 Allow me to call your attention to the condition of the Bank of 
 France January 1, 1895. Its capital is $36,500,000, with deposits, public 
 and private, of $103,480,000; its outstanding notes, $701,140,000. The 
 amount of cash on hand is $636,980,000, showing that the bills receiv- 
 able taken in for the notes issued have been paid off and the notes are 
 still outstanding. 
 
 It must not be forgotten in passing that the legal note issue, at pres- 
 ent, of the bank is $800,000,000; but it do not seem to issue it and 
 foolishly loan it just because it can do so. It will be observed that it 
 had $100,000,000 still unissued. 
 
 Again, it must be remembered that there is not one dollar of specific 
 security for any part of the whole $800,000,000 issue, which is a legal 
 tender so long as redemption is maintained. This vast issue rests 
 upon and is protected by the bills receivable taken in exchange for the 
 notes, or the proceeds of those bills receivable which have already been 
 paid off. 
 
 Great Britain, too, has her system of credit notes and metal method 
 of expansion. The banks of England and Wales, outside the Bank of 
 England, have the power to issue credit money amounting to £4,813,400, 
 or about $25,000,000. But on the 1st day of January they had out- 
 standing only $10,000,000. leaving credit money to be issued, if needed, 
 amounting to $15,000,000. 
 
 The Scotch banks have an authorized issue of credit money amount- 
 ing to $13,381,750, and on the 1st day of January had outstanding only 
 $6,985,075, leaving to their credit and unissued about $7,000,000, which 
 could be put out if conditions called for it. 
 
 The Irish banks have an authorized circulation of credit money amount- 
 ing to $31,772,470, and on the 1st day of January there was issued only 
 $15,000,000, leaving to their credit and unissued $16,772,470. 
 
 From these facts is it not reasonable to conclude that the same degree 
 of caution is exercised in issuing credit notes as in loaning the deposits 
 of the banks? A careful conrparison of the figures shows that on the 
 1st day of January, 1895, they had issued less than 50 per cent of their 
 authorized credit circulation, which aggregates about $70,000,000. 
 
 It must not be forgotten in this connection that Ave are now dealing 
 with a country of vast accumulations and immense bank deposits. The 
 prudence of the credit issues of Great Britain are certified to by the 
 fact that in Scotland, the home of the system, there have never been 
 but three bank failures worth mentioning. 
 
 In the beginning of my comment upon Great Britain I alluded to 
 her system of metallic expansion. The position of the Bank of England 
 is a most unique one, in that when they need more money or gold in 
 England, London being the clearing house of the world, it is obtained 
 by simply raising the rate of interest to a point that will attract gold 
 from the money centers of the Continent, and against this the issuing 
 department puts out its Bank of England notes. 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 11 
 
 Notwithstanding the various facilities for meeting exigencies, tlie 
 Bank of England, owing to the fact that a limit Avas placed upon its 
 issuing power by the act of 1844, which it was supposed at the time 
 would forever end all panics, the bank suspended, as it is called over 
 there, and. the limit set aside October 25, 1847 ; November 12, 1857, and 
 May 12, 18GG. In February, 18G1, and in May and September, 1864, 
 the condition became critical also, while in 1873 the suspension of the 
 act seemed certain for some days. By many it is now thought that it 
 was a mistake to set a limit; for, on all occasions when the emergency 
 has arisen, she has suspended the act and issued the requisite amount 
 of money to meet the demand. 
 
 At the formation of the German Empire, when the financial arrange- 
 ment was being adjusted, the English act of 1844 was largely followed, 
 except in this particular power of issuing credit money, for they had 
 learned by experience and observation of the English system that 
 there was no limit except that set by necessity when the crises recur. 
 
 No limit was fixed, but rules and restraints were established to keep 
 it down to a certain point— 385,000,000 marks, or about $200,000,000 of 
 nionej- which was apportioned among the several banks, with the privi- 
 lege of passing the limit if cash of a certain description was held; but, 
 having passed the limit of issue fixed without cash to cover, the only 
 penalty was a tax of 5 per cent per annum upon the notes issued. 
 This limit has several times been passed by the smaller banks, and 
 also by the Beischbank itself, the institution representing the Empire. 
 This happened in the case of the Beischbank in December, 1881; in 
 September and October, 1882; in December, 1884; in January, 1885; 
 in December, 1886, and three times in the latter part of 1889. The 
 overissue September 30, 1895, was $9,200,000; October 7, 1895, was 
 $4,100,000; December 31, 1895, was $29,400,000. On some occasions 
 the issues were much beyond the fixed limit, and it is now certain that 
 in several instances the German community was saved from the shock 
 of panic and the spasm of contraction which would have been inevitable 
 if they had been acting under the English banking act of 1844. 
 
 But nearer home, even at our very doors, we can find an apt illus- 
 tration of automatic banking currency. 
 
 Canada has no mint of her own, but uses our gold pieces as her 
 standard money. The Canadian system is founded upon the Scotch 
 system, many of her leading citizens and most x>rominent bankers being 
 of Scotch origin. 
 
 The banking capital of Canada amounts to $62,190,391, or bears 
 about the same proportion to their population that our banking capital 
 bears to our own. 
 
 The Canadian banks have the right to issue credit money to an 
 amount equal to their paid up and unimpaired capital, which would be 
 $62,196,391. But, as a matter of fact, they have never exceeded 
 $38,000,000, and the greatest expansion in any one year to move the 
 crops was $7,000,000, while January 1, 1896, it was only $32,565,179, 
 about one-half the limit. 
 
 Each of the banks is interested in getting out its own money, and 
 therefore is equally interested in keeping the current of redemption 
 running strongly all the time over the counters of all the other banks. 
 
 It is a most striking fact that while we are scarcely ever out of a 
 money panic, and consequently a currency famine, Canada does not 
 know what either means. 
 
 It would seem from all these illustrations — the Suffolk system, the 
 Bank of France, the Scotch banks, the Irish banks, the English banks, 
 the German banks, and the Canadian banks — we may fairly conclude 
 
12 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 that credit currency is as good as any in the world, and, indeed, in 
 case of war, when securities often go out of sight, it is better, because 
 resting upon sixty-day bills receivable, which are almost certain of pay- 
 ment without delay or loss, at least a very great portion of them. 
 
 To the man whose reply is — and this is the only answer to this array 
 of evidence — the plan may work well in all the rest of the world but 
 would not do for us, I desire to say that such an admission is an impeach- 
 ment of our civilization — a plea of guilty to the charge that we are a 
 violent people — a confession that our prudence and money- saving qual- 
 ities are overshadowed by those of every other nation, which is not 
 true — a declaration that we are unfit for self-government, and conse- 
 quently self control, which more than a hundred years of the most glo- 
 rious history of the human race contradicts and rebukes. 
 
 Would any man seriously contend that the president, cashier, or 
 board of directors of a bank would be more foolish in loaning the 
 notes of a bank than its deposits, when circumstances will bring them 
 to its counter for redemption with the certainty and promptness of the 
 checks drawn against its deposits? 
 
 "But," said one of the Banking and Currency Committee the other 
 day, u such an expansion will lead to unwise speculations and all its evil 
 consequences." What has just been said clearly shows there would be 
 and could be no undue expansion of money calling for an immediate 
 metal redemption any more than there is to-day. 
 
 Have you ever inquired into the subject of booms and financial cata- 
 clysms with a view of ascertaining what, if any, connection they have 
 had with money — real money — money currently redeemed? Have you 
 ever thought it out to the last analysis and found that the increase of 
 money has had absolutely no connection with the great speculations 
 throughout the world during the past thirty years ; but that every one of 
 them has been due to our gambling instinct, encouraged by an undue 
 expansion of credit, and invariably long credit? 
 
 Have you ever thought of it? There has been absolutely no connec- 
 tion between the per capita circulation in the United States and the 
 various booms and consequent shrinkages. From 1865 to 1873 our cir- 
 culation contracted from 20.57 per capita to 18.04 per capita. In 1885 
 and 1893, respectively, our circulation was 23.02 and 23.85 per capita. 
 
 Increased circulation had absolutely nothing to do with the Birming- 
 ham, Dallas, Kansas City, Wichita, Omaha, Minneapolis, St. Paul, 
 Duluth, Spokane, Seattle, Tacoma, and Los Angeles speculations and 
 reactions; nor a thousand others in the United States and elsewhere. 
 
 Increased circulation had nothing to do with the Australian bubble. 
 Increased circulation had nothing to do with the South American gam- 
 bles. Increased circulation had absolutely nothing to do with that 
 unlimited buying of the London market, from 1886 to 1890, when you 
 could sell almost anything from a beer saloon to an undiscovered con- 
 tinent in that market. 
 
 Now, since a system of credits in the form of checks and drafts per- 
 lorms over 90 per cent of our work and constitutes the vital factor in 
 effecting nearly all our commercial exchanges, and since we have dis- 
 covered that all the leading commercial nations of the world have suc- 
 cessfully employed credit money based upon the liquid wealth of 
 commerce and have thereby escaped the difficulties and misfortunes 
 necessarily growing out of an inelastic currency, and since an errone- 
 ously supposed connection between currently redeemed credit money 
 and credit expansion does not exist, in fact that they bear no relation 
 whatever to each other, have we not found a remedy for our ever- 
 recurring panics and currency famines? 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 13 
 
 For these it will certainly prove a specific cure, while for our whole 
 people a source of profit and advantage that can not be measured or 
 comprehended because of a better distribution of the normal amount 
 of our money and a natural, constant, and adequate supply at every 
 point where it is needed to handle our products or develop our resources. 
 
 Having discovered our ills and the proper remedies, it is our task, 
 taking into account every fact and condition, to draft a bill that will 
 do what we have found necessary to preserve our financial honor and 
 conserve our commercial prosperity. 
 
 First. We have seen our vast national banking interest, consisting 
 of 3,712 institutions, with resources amounting to $3,423,029,343.03, 
 and transacting a business of more than $60,000,000,000 per annum, 
 between the rising and setting of the sun, pass from one political repre- 
 sentative of one Administration to that of another, when our banking 
 interests, as a matter of fact, should be free of and unaffected by politi- 
 cal caprice or change. 
 
 Second. We have found that there is a possibility of doubt about 
 our measure of value when it ought to be undoubted, unequivocal, 
 unchangeable. 
 
 Third. We have found our money hoarded by banks and individuals 
 and congested in the financial centers when confidence should take the 
 place of fear and money seek the channels of trade. 
 
 Fourth. We have found our Government with a bonded debt of 
 $847,362,920, bearing, mainly, 4 and 5 per cent interest, when it ought 
 to be funded into a popular loan at 2 per cent as a basis of circulation, 
 saving over $15,000,000 annually to our people. 
 
 Fifth. We have found our Government bound to redeem an unlimited 
 amount of obligations, with no power to meet them except by taxing 
 the people, when it ought to have no demand obligations except current 
 expenses. 
 
 Sixth. We have found our Treasury warehousing $500,000,000 of 
 silver coin value when it ought to be circulating among our people. 
 
 Seventh. We have found our Government a guarantor of the obliga- 
 tions of our banks when it should be acting only as trustee for the note 
 holders. 
 
 Eighth. We have found eight different kinds of money in circulation 
 when there should be but two besides gold and silver. 
 
 Ninth. We have found a system of currency as fixed in quantity as 
 the stars, never varying necessarily with the months or the years accord- 
 ing to the demand, but which may all be withdrawn to-morrow, if 
 the bonds don't pay, when our currency should increase and decrease 
 with the ever- varying exchanges of our wealth. In verification of this 
 it is well to observe that during those years of most wondrous devel- 
 opment—from 1884 to 1890— our note issues fell from $325,000,000 to 
 $123,000,000. 
 
 Tenth. We have seen legitimate commerce and development languish 
 because of the restraint and high rates resting upon money, when it 
 should automatically spring into activity at a reasonable rate of interest 
 as the demands arise and disappear when the work is done. 
 
 That all these difficulties may be overcome without in any way dis- 
 turbing present conditions, existing laws, or recognized decisions, 
 except so far as engrafting a credit system of money upon our present 
 secured one may do so, bill 6442 has been prepared, and the sections 
 will now be considered in their order: 
 
 Section 1. Be it enacted by the Senate and House of Representatives of the United 
 States of America in Congress assembled, That there shall he, aud there is herehy, 
 
14 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 created and established a Department of Finance, which shall have entire and exclu- 
 sive control and management of all national hanks, their right to take out secured 
 circulation and issue their notes. 
 
 Sec. 2. That there shall he three Ministers of Finance who shall take the place of 
 the Comptroller of the Currency and constitute a Board of Finance; and said Board 
 of Finance shall conduct the said Department of Finance. That said Ministers of 
 Finance shall he appointed by the President, by and with the advice and consent of 
 the Senate, and the term of office shall be for a period of twelve years at a salary 
 of $10,000 per annum. That the terms of the first three' Ministers shall be for twelve, 
 eight, and four years, respectively. The Minister being appointed for twelve years 
 and his successors shall be known as First Minister of Finance, and he shall preside 
 at all meetings of the Board of Finance; and the remaining two Ministers shall be 
 known as Associate Ministers of Finance. 
 
 These two sections refer to the same subject-matter, and while they ' 
 make no material changes in the law the effect of them would certainly 
 be to take the bauking interests of the country out of politics, as only 
 one Minister can be appointed during each Presidential Administration ; 
 and they also insure a continuing intelligent and wise supervision of 
 the banking interests and a most valuable aid in all future financial 
 legislation. 
 
 Whether under the supervision of a single individual, however capa- 
 ble, banks have not been permitted to drift into irretrievable ruin on 
 the one hand and often placed in the hands of receivers without war- 
 rant on the other, to the very great loss of all concerned, no one can 
 ever definitely know. But inasmuch as the national-banking act 
 requires the association of at least five persons to form a bank, the 
 Government has always presumed there was wisdom and safety in a 
 consulting board as against a single individual. 
 
 Sec. 3. That any national bank now doing business, or any other financial institu- 
 tion doing a similar business, or any number of persons, may in accordance with 
 existing law, so far as the same is consistent with this act, organize upon the follow- 
 ing terms and conditions : 
 
 If any corporation described as aforesaid shall deposit with the United states Gov- 
 ernment any of the United States bonds now outstanding, or any that may be here- 
 afterissued under existing law, which, at their market value, shall exceed the capital 
 of said corporation by 5 per cent, the United States Government shall issue to said 
 corporation, in lieu of said bonds so deposited, 2 per cent United States Government 
 bonds equal in amount to such market value, both principal and interest of said 
 new bonds being payable in gold; and said new bonds shall thereupon be deposited 
 with the United States Government, and circulation known as United States Govern- 
 ment bond notes shall be issued to said corporation in an amount equal to the paid-up 
 capital of said corporation, in denominations of $10 or multiples thereof. 
 
 The first paragraph of this section does not in any way alter the con- 
 ditions upon which a national bank may be organized. Under the 
 second paragraph any existing bank can convert the bonds it now 
 holds into gold bonds for circulation, or a new bank may deposit for 
 the same purpose any of the outstanding bonds, which, at their market 
 value, will exceed the paid-up capital by 5 per cent, and obtain therefor 
 circulation equal to its capital. 
 
 Why fund the national debt into gold bonds ? 
 
 First. To forever settle the standard for the measure of value in this 
 country, which will be in doubt in the minds of all foreigners so long as 
 men assert coin means silver as well as gold. 
 
 Second. To take advantage of what we are actually doing to-day 
 (maintaining a gold standard) at great expense on account of the doubt 
 existing, and save for the people in addition every year more than 
 $15,000,000 in interest. 
 
 Third. To have our secured circulation based on so low a rate of 
 interest as to preclude such an appreciation in the value of the bonds 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 15 
 
 as td induce banks to sell them and retire the notes, thereby contract- 
 ing tbe volume of money and disturbing the business conditions. 
 
 Why have no denominations of bond notes lower than 810? 
 
 First. Because the presence and use of the largest possible amount of 
 metal among the people exercises a most salutary influence. 
 
 Second. We have about $500,000,000 of silver on hand, and it could 
 be made to do the work of the one-dollar bills, amounting to $40,960,091 ; 
 of the two-dollar bills, amounting to $28,348,497, and of a large por- 
 tion of the five- dollar bills, amounting to $245,168,884, or a total of 
 $314,477,372. 
 
 Sec. 4. That said United States Government bond notes shall be a legal-tender 
 between all national banks and be redeemed in gold coin when presented for pay- 
 ment at the bank of issue; and that from the passage of this act all duties on 
 imports shall be paid in gold coin. 
 
 These United States Government bond notes are redeemable in gold 
 coin at the bank of issue and not by the Government for the following 
 reasons : 
 
 First. The Government should not be responsible for them beyond 
 the proper custody of the bonds securing them. 
 
 Second. These notes, constituting the great bulk of our paper money, 
 should be good enough to pass for their face around the entire globe, 
 and this could only be possible by making them redeemable in gold, 
 the accepted money of the world. 
 
 Third. They should be redeemable only over the counter of the bank 
 of issue, because they are as good as gold, being secured by the gold 
 obligations of the Government ; and the expense and trouble of Govern- 
 ment redemption would therefore be unnecessary. 
 
 Sec. 5. That at the same time that said corporation shall deposit United States 
 Government bonds as aforesaid it shall also deposit with the United States Govern- 
 ment United States legal-tender notes or gold certificates, or both, of such an 
 amount that it, together with the gold said'corporation has on hand, will equal 15 
 per cent of its deposits; and the United States Government shall deliver to said cor- 
 poration gold coin in lieu of said legal-tender notes and said gold certificates. Said 
 corporation shall also deposit at the same time, with the United States, United States 
 Treasury notes or United States silver certificates, or both, which, with the silver 
 coin then held by said corporation, shall amount to 10 per cent of its deposits, and 
 the United States Government shall deliver to said corporation in lieu thereof silver 
 coin of an equal amount; and said legal-tender notes, gold certificates, Treasury 
 notes, and silver certificates shall bo thereupon canceled. Said corporation shall 
 thereafter keep as a reserve 25 per cent of its deposits in the following kinds of 
 money, gold and silver: At least 60 per cent of said reserve shall be in gold coin, 
 and the remaining 40 per cent of said reserve may be in silver coin : Provided, how- 
 ever, That in lieu of one-half of such coin reserve deposits in reserve cities subject 
 to check may be held. 
 
 The purpose of this section is to convert all our paper money into gold 
 and silver reserves of the banks or put it into circulation, so that here- 
 after all the lawful reserves of our banks shall be metal, gold and silver. 
 The gold certificates and greenbacks are taken up and canceled, and 
 gold paid out in exchange for them. 
 
 The Treasury notes and the silver certificates, so for as they may 
 be required for the purpose of bank reserves, are also to be redeemed 
 with the silver now securing them and the notes and certificates can- 
 celed. 
 
 Kow, if all national banks, or a sufficient number of State banks to 
 make the total capital equal to the present capital of the national 
 banks, should organize under this law the result would be as follows: 
 
 First. With regard to the gold reserve in the banks, the following 
 
16 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 tabulated statement will show the various financial changes and the 
 result : 
 
 Capital of national banks $657, 135, 498. 65 
 
 Deposits of all reserve cities 1, 078, 766, 776. 00 
 
 Reserve of 25 per cent held agaiust them 269, 691, 694. 00 
 
 Deposits outside reserve cities 910. 533, 553. 00 
 
 Reserve of 15 per cent held against them *. 136, 580, 032. 00 
 
 The total reserve will then he 406, 271, 726. 00 
 
 Sixty per cent or the gold reserve would he 243, 763, 035. 60 
 
 Gold now held by national hanks 167, 000, 000. 00 
 
 Amount to he taken from gold on hand, or to be raised by tax 
 
 on imports 76, 763, 035. 60 
 
 Fortv per cent or the silver reserve 162, 508, 689. 40 
 
 Treasury notes 136, 000, 000. 00 
 
 The reserve will exceed amount of Treasury notes 26, 508, 689. 40 
 
 Hence all Treasury notes will be canceled in making- up the bank 
 reserves. 
 
 Amount of cash in Treasury $260, 000, 000. 00 
 
 Amount of greenbacks in Treasury to be canceled now 78, 000, 000. 00 
 
 Leaving balance of cash 182, 000, 000. 00 
 
 Deduct sufficient balance to carry on business 30, 000, 000. 00 
 
 And we have a net balance of 152, 000, 000. 00 
 
 The amount of greenbacks not yet canceled 346, 000, 000. 00 
 
 The amount supposed to be lost or destroyed $46, 000, 000. 00 
 
 The amount now in Treasury to be canceled and 
 
 destroyed 78, 000, 000. 00 
 
 The amount of cash balance to be applied after con- 
 version into gold ihrough the duties on imports 
 
 under this act, payable in gold 153, 000, 000. 00 
 
 . 277,000,000.00 
 
 Leaving balance to be retired from sale of bonds or revenue. . 69, 000, 000. 00 
 
 This amount will more than be provided for within the next year at 
 the present rate of redemption. 
 
 Second. With regard to the silver reserve of the national banks — 
 
 The amount required, as above stated, would be $162, 508, 689. 40 
 
 There are in the United States Treasury, in round 
 
 numbers, Treasury notes $30, 000, 000. 00 
 
 There is now in the national banks silver or silver 
 
 certificates 30, 000, 000. 00 
 
 60, 000, 000. 00 
 
 Leaving a balance of silver reserve to be raised 102, 508, 689. 40 
 
 But the amount of Treasury notes now outstanding is $102,357,636? 
 all of which will be taken up and canceled to obtain the above reserve- 
 In other words, all the Treasury notes will have been canceled as well as 
 the greenbacks, and the Government will have no demand obligations 
 out but the silver certificates, which, after a given date, are to be can- 
 celed as fast as received and the silver coin securing them issued in 
 their stead. Thus the Government will have gone out of the banking 
 business, all its demand obligations having been converted into coin 
 reserves of the banks, or put into circulation among the people, and its 
 guarantee taken from the bank notes. 
 
 Sec. 6. That any corporation organized under this act may, with the permission and 
 under the supervision and control of the Board of Finance, issue its own circulation, 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 17 
 
 which sllall be furnished by the United States Government and be known as United 
 States national-bank notes. Said United States national-bank note t shall be issued 
 in denominations of $5 and multiples thereof, and may be issued on y in the follow- 
 ing manner and upon the following conditions: 
 
 First. Every bank issuing United States national-bank notes shall at all times 
 maintain against the amount of such notes outstanding a reserve corresponding to 
 that required against its deposits. 
 
 Second. Any bank that has complied with the law may, with the consent and under 
 the control of the Board of Finance, issue an amount of United States national-bank 
 notes equal to 20 per cent, or one-fifth, of its paid up and unimpaired capital, and 
 shall pay upon such an amount thereof, as may be at any time outstanding, a tax at 
 the rate of one-half of 1 per cent per annum. 
 
 Third. Said bank may issue a second amount of notes equal to 20 per cent, or one- 
 fifth of its paid-up and unimpaired capital, and shall pay upon such an amount 
 thereof as may be at any time outstanding a tax at the rate of 1 per cent per annum. 
 
 Fourth. Said bank may issue a third amount of notes equal to 20 per cent, or one- 
 fifth of its paid-up and unimpaired capital, and shall pay upon such an amount 
 thereof as may be at any time outstanding a tax at the rate of 2 per cent per annum. 
 
 Fifth. Said bank may issue a fourth amount of notes equal to 20 per cent, or one- 
 fifth of its paid-up and unimpaired capital, and shall pay upon such an amount 
 thereof as may be at any time outstanding a tax at the rate of 4 per cent per annum. 
 
 Sixth. Said" bank may issue a fifth amount of notes equal to 20 per cent, or one- 
 fifth of its paid-up and unimpaired capital, and shall pay upon such an amount 
 thereof as may be at any time outstanding a tax at the rate of 6 per cent per annum. 
 
 So much detailed information lias already been adduced showing, in 
 the cases of Germany, France, England, Ireland, Scotland, and 
 Canada, that such a currency has always proved a safeguard against 
 panics and money famines, and that it has invariably proved safe, that 
 I shall only speak here of its adaptation to our condition and needs, 
 and the advantages that must grow out of its adoption by us. 
 
 first. As to our condition and needs, it is to be observed that a 
 comparison of our domain, commerce, and population with those of the 
 countries mentioned clearly establishes the fact that, if an elastic cur- 
 rency has proved of an inestimable advantage to them, it would be of 
 a still greater benefit to us. For, *o wing to our immense products at 
 great distances from our financial centers, it becomes absolutely neces- 
 sary that the local banks provide money by expressing bills of lading 
 and the notes of our merchants and farmers to the great commercial 
 centers and borrowing money upon them, ship it out to the various sec- 
 tions thousands of miles away, and when our crops and products are 
 marketed, ship the money back to the far-off centers and express the 
 notes and other collateral home again. What we do in this line of 
 business is without a parallel anywhere in the civilized world. 
 
 Lingering prejudice may breed pernicious suspicions, but experience, 
 common sense, and reason plainly point the way. 
 
 Second. What advantages will necessarily follow the adoption of 
 this system in this country may be more clearly seen by some concrete 
 illustration. Choose, if you will, the city of New Orleans, the cotton 
 center of the South; or Kansas City, handling the varied crops of the 
 central West; or Fargo, lying in the lap of our greatest wheat region 
 in the central North; or Seattle, struggling with the diversed products 
 of the great Northwest ; or Los Angeles, unable to handle the golden 
 fruits of southern California for the want of an adequate currency; 
 and what is true of these greater centers is equally true of every com- 
 munity having banking facilities throughout the entire length and 
 breadth of our country. Certainly it will not be denied that the notes 
 and bills of lading in the banks of New Orleans, or any other city, are 
 just as good security there for the redemption of any notes the banks 
 themselves may issue as they are tied up in bundles and held in New 
 York City for the security of the currency that may be shipped South. 
 fin 2 
 
18 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 The amount of money used in either case would be the same; the 
 amount of security the same. 
 
 Then, what is the difference ! Let us see. A New Orleans bank which 
 has a capital of $200,000 ties up in a bundle $125,000, or perhaps 
 8150,000, of its best notes and ships them to its New York correspondent, 
 and borrows, if perchance there is no panic on, $100,000 of money, 
 paying on an average about G per cent per annum for it, and loans it 
 out to move the cotton crop in its section. As it must pay the express 
 two ways on the $150,000 of discounts or notes and the express two 
 ways on the $100,000 borrowed, the producers of the South must pay 
 anywhere from 8 to 10 per cent for the money, and should do so con- 
 sidering the risks and what it costs the bank, for we must remember 
 that the banking business pays no great return upon the capital engaged 
 in it. The report of the Comptroller of the Currency shows that the 
 average earnings of all the national banks of the United States was 
 only 5.21 percent for the year ending September 1, 1895, which is a low 
 rate considering the risks involved. 
 
 Some of our people seem to think that national banks are favored 
 institutions. That this is a mistaken idea and that its advantages, if 
 any, are open to all of our people alike, let me call your attention to 
 the following facts: 
 
 First. If the national banks are specially favored, why do not the 
 several thousand trust companies, State banks, and private banking 
 firms organize at once under that law? 
 
 Second. No one who is a conservative adviser ever suggests national- 
 bank stock to the widow or aged, or those with limited means, because 
 the risk in holding it is so great. 
 
 Third. The shares are only $100 each, so that any frugal person may 
 invest in the stock of a national bank if he desires to do so. 
 
 Fourth. Wo must not forget that if banking under a national-bank 
 charter was so much more profitable than any other business, men of 
 means stand ready at all times to engage in it, bringing the profits 
 down to or below the level of all other investments. 
 
 This suspicion or misapprehension that the Government is extending 
 through the national banks to someone something that everybody else 
 can not get has given birth to a kind of prejudice — the child of igno- 
 rance — excited an unwarranted jealousy, and developed a groundless 
 opposition in some localities to a system that has raised the standard 
 of banking in this country and provided the American people with a 
 currency as sound as any in the world, and calling for the admiration 
 of all civilized nations. 
 
 Now, recurring to the special matter in hand, let us suppose that 
 this same New Orleans bank, with its $200,000 capital, was organized 
 under this bill. What could it have done under the section now being- 
 discussed? 
 
 The bank need not tie up and ship away $150,000 of its best securi- 
 ties, but keeping them in its own safe issue $100,000 of its own notes 
 as follows: 
 
 First. It would issue the money just as it needed it and no faster, 
 and therefore no part of it would ever be idle and a source of expense. 
 
 December 1, 1895, issued 20 per cent, or one-fifth of capital, $200,000 (tax one- 
 half of 1 per cent) $40, 000 
 
 December 15, 1895, issued 20 per cent, or one-fifth of capital, $200,000 (tax 
 
 1 per cent) 40,000 
 
 January 1, 1896, issued only 10 per cent, or one-tenth of capital, $200,000 (tax 
 
 2 per cent)..! ...... ! 20,000 
 
 100, 000 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 19 
 
 Certainly long before the 1st day of July, 1S9G, the crops will have 
 been disposed of and these notes retired, the money having- cost the 
 bank one-fourth of 1 per cent for the first 840,000; one-half of 1 per 
 cent for the second $40,000, and 1 per cent for the $20,000; or an 
 average cost to the banker of one-half of 1 per cent for the six months 
 the money was out. 
 
 $40,000 for six months at one-fourth of 1 per cent $100 
 
 $40,000 for six months at one-half of 1 per cent 200 
 
 $20,000 for six months at 1 per cent 200 
 
 Making a total of 500 
 
 Or one-half of 1 per cent on $100,000 for six months against 3A per 
 cent, at least, in the former instance for the same length of time. 
 
 Will it be necessary to state that this difference of 3 per cent in the 
 two instances will, every penny of it, amounting to $3,000, come out 
 of the merchants, farmers, or producers, and practically all of it out of 
 the farmers or producers? 
 
 Will anyone seriously urge that any portion of this heavy charge 
 will be borne by the bankers ? Xor will anyone at all familiar with the 
 laws of trade doubt that the people, farmers and producers, will ulti- 
 mately get every farthing of the advantage gained, for competition 
 would very soon bring the bankers' share of profit to a fixed limit, not 
 varying much from its present margin, thus saving to the people, the 
 producers of our country — farmers and laborers — anywhere from 1 to 
 5 per cent per annum upon the eaiutal borrowed to carry on the com- 
 merce of the country. 
 
 The value of our finished product, it will be remembered, now annually 
 exceeds $12,000,000,000. 
 
 Mr. Edward Atkinson, the statistician, has estimated that the trans- 
 formation from the unmined coal and iron, the unbroken forest and the 
 fallow fields to the homes in which we live, the things we wear and 
 those we eat, there are at least three transfers of this vast property, 
 or $36,000,000,000 passing from man to man. Is it not reasonable to 
 suppose that at least two-thirds of this amount is handled with bor- 
 rowed capital ? If so, even if the loans run but sixty days and 1 per 
 cent can be saved on this two-thirds, or $24,000,000,000, the people — 
 the producers — will be the gainers by $240,000,000 every year, or more 
 than all the greenbacks now outside the United States Treasury. Shall 
 we not cancel them if we can more than make up for them in every 
 succeeding year, to say nothing of the frightful loss they are entailing 
 upon the country every month, and the danger to which the Govern- 
 ment is subjected because of them? 
 
 Let the reader estimate what the gain to the producers would be if 
 the loaus on this $24,000,000,000 ran six months ! What if they ran for 
 each current month in the year, just three and six times, respectively, 
 the amount saved every sixty days. 
 
 Is it not a mere fetich to hang on to them, deceived by the hallucina- 
 tion that the Government can make something out of nothing, when it 
 has been proved in this case, as in all others, that mistakes and false- 
 hoods only lead to misfortune and disaster? If the experience of all 
 other great commercial nations added to this fatal delusion is not con- 
 vincing enough to determine our action now, we shall simply have to 
 wait to be taught by more bitter lessons still, and more crushing dis- 
 asters, what has already been demonstrated beyond the shadow of a 
 doubt. 
 
20 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 Under the operation of this provision of the bill there is still another 
 object to be attained that is founded in justice and conserves the wel- 
 fare of the people in all portions of our country alike. It is the equal- 
 ization of the rates of interest in every section of the land, from Niagara 
 Falls to the Gulf, from Cape Cod to the Golden Gate. Wherever there 
 is banking capital, a demand for money, and an equally abundant sup- 
 ply of equally good commercial two name, thirty, sixty, and ninety day 
 paper, there the rates should and will be practically the same. 
 
 Kates of interest will not then be, as now, particularly low in one 
 locality, because there is considerable wealth in the form of money and 
 securities and particularly high in another, notwithstanding there is 
 abundant wealth in the form of cotton, corn, cattle, wheat, and the 
 various other products of the earth simply because it awaits a better day 
 for disposition or sale. The question will not then be so much whether 
 it is stocks and bonds on the one hand and cotton and corn on the other 
 as whether it is good liquid wealth in some form, cattle, hogs, corn, cot- 
 ton, and wheat being regarded as good wealth, as quick assets if only 
 the banks have the facilities for carrying them. 
 
 It will be observed that the tax imposed upon the circulation is an 
 increasing graduation. The object is to give it a repressive effect just 
 in proportion as the expansion increases under the varying pressure 
 from the crop movement to the demands of an acute and general panic. 
 
 The same principle is illustrated in the 5 per cent tax imposed upon 
 the credit circulation of the German banks whenever it passes a cer- 
 tain limit. 
 
 It is also illustrated in the operations of the clearing houses of New 
 York, where they cbarge G per cent upon clearing-house certificates, and 
 in Boston, where they charge 7 per cent upon them, confident in all these 
 instances that the tax will compel the retirement of the issues. So far 
 this system has worked perfectly, the retirement of the circulation fol- 
 lowing quickly upon the disappearance of the cause. 
 
 Sec. 7. That all taxes so paid to the Government upon said United States national- 
 bank notes shall be set aside and held by the Government as a guarantee fund 
 exclusively for the redemption : First, of the United States Government bond notes ; 
 second, for the United States national-bank notes, in the event of the liquidation 
 of any bank organized under this law : Provided, however, That whenever said " guar- 
 antee fund" shall exceed 5 per cent of both the United States Government bond 
 notes and the United States national-bank notes, such excess shall belong to the 
 United States Government and may be used by it to defray its general expenses. 
 
 It is to be observed in this connection that if there had been no United 
 States bonds deposited to secure national-banknotes from 1864 down to 
 1891, the loss to note holders could not have exceeded $1,139,253, and of 
 this amount $958,247 were still unclosed accounts at the time of the state- 
 ment. I am informed by Hon. James H. Eckels, Comptroller of the 
 Currency, that a guarantee fund of one- quarter of 1 per cent per annum 
 during the past thirty years would have protected all note holders. 
 Certainly 5 per cent will cover the remotest possibility of loss, and then 
 the income will be covered into the Treasury for general expenses until 
 the fund is reduced below 5 per cent, when the tax will again be turned 
 to the guarantee fund account, bringing it up to the required amount. 
 I think no one will doubt that the provisions of this bill will produce 
 more than enough to cover the one-quarter of 1 per cent that the experi- 
 ence of our national banks for thirty years has shown to be sufficient 
 for all losses even if there had not been on* dollar of security deposited 
 to protect them. 
 
 Sec. 8. That the Board of Finance shall divide the United States into clearing- 
 house or reserve-city districts, and each corporation shall belong distinctly to some 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY 
 
 4 
 
 2L 
 
 one district, and the number of such district shall he plainly and prominently printed 
 upon the said United States national-bank notes issued by the banks located therein. 
 The several banks of each district upon receiving United States national-bank 
 notes belonging to any other district shall forward the same to a reserve city, which 
 shall return them to the district to which they belong. 
 
 The object of the foregoing section is to insure the constant redemp- 
 tion of the United States national-bank notes, to materially strengthen 
 our banking system, and becomes essential for the following reasons: 
 
 First. Our individual banking system does not in itself give us the 
 same facilities for forcing current redemption that large banks with, 
 branches in all parts of the country would. 
 
 Second. This system of districts will draw the normal money — gold, 
 silver, and United States Government bond notes — to the redemption or 
 clearing-house centers and keep it better distributed throughout the 
 year. 
 
 Third. The tendency will be to keep the credit money at home, so 
 that il: can be retired whenever the bank issuing it desires to do so, and 
 thereby save the tax when there is no further use of the money in 
 circulation. 
 
 Fourth. This system will enable every district of the United States 
 to furnish whatever credit money it needs by sending all credit notes 
 from other districts home and putting out its own, and thereby save all 
 the profit on circulation in each district to the district itself. 
 
 Fifth. But the most important and far-reaching effect of this provi- 
 sion is the advantage and protection it gives to every bank belonging 
 to a clearing-house district. 
 
 It is important to observe and remember that every bank belonging 
 to a clearing-house district is individually as strong as the combined 
 capital of all the banks included in the district; and it is not at all 
 likelv that there would be a clearing-house district with a capital less 
 than" 825,000,000, and probably none less than 850,000,000, while the 
 large cities would be many times stronger than that, even. 
 
 This plan would give us all the power of the most perfect centralized 
 system of banking in the world, with all the advantages of individual 
 banking institutions. In fact, I am of the opinion that in power and 
 facility it would surpass any system now in operation. While it would 
 be perfectly independent in its parts and responsive to the demands of 
 every locality, it would be free from the caprice and discrimination 
 of a management hundreds and, perhaps, thousands of miles away. 
 
 Sixth. It' the Scotch banks maintain gold payments by keeping only 
 5 or G per cent gold reserve, can anyone doubt for a moment that these 
 clearing house districts and every bank in them would have any dif- 
 ficulty in maintaining gold payments with a gold reserve of 15 per 
 cent? There can be no question about it, for everyone all over the 
 United States would then feel about every bank under this system as 
 the people now do about any of the banks in the Xew York or Boston 
 clearing houses, viz, that they can not fail. Therefore there will be no 
 such strain brought against the reserves as might otherwise happen. 
 The combined wealth of all the banks in any district is an absolute 
 guaranty 7 of every honestly managed institution within that district. 
 
 It will be admitted, I think, that any bank belonging to a clearing- 
 house district will exercise greater caution in loaning its funds, or in 
 issuing its notes, than it would were it not a member of some district, 
 for it must realize that it is in a measure under the surveillance of the 
 associated banks and can not afford to fall under any suspicion on 
 account of poor management; hence the moral effect must necessarily 
 
22 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 be to improve the character of all our banking, a matter that is always 
 of the very greatest importance to the commercial world. 
 
 Having discussed somewhat in detail all those sections of the bill 
 that pertain to the organization and operation of the banks under its 
 provisions, it becomes pertinent to inquire what the inducements are 
 for a bank to organize under this act. 
 
 First. It will do so because of the protection and moral support of a 
 clearing-house district, which can only be appreciated by institutions 
 which have participated in its benefits in most trying times. 
 
 Second. The power to issue its circulation without delay or trouble to 
 the extent needed, and at a cost of only 1 or 2 per cent, in normal times 
 when otherwise the money would cost from 6 to 8 per cent and be accom- 
 panied by very great inconvenience and often much annoyance. 
 
 Third. That while the peojde will save about one-half their present 
 interest on the national debt, or more than $15,000,000 per annum, the 
 banks will gain in freedom from various burdens now imposed amount- 
 ing to more than 1 per cent. This reduction will especially benefit the 
 masses, the farmers, and the producers in every department of labor. 
 
 Indeed, the sooner the American people learn to transfer all taxes 
 from money engaged in banking to other forms of wealth which they 
 can not use, the cheaper will they make the tools with which commerce 
 is carried on and the shops kept in motion. The earning capacity of 
 labor will be just that much greater, for in the last analysis money is 
 the real tool that fells the trees out of which we build our houses and 
 make our furniture, mines the coal, digs the ore, spins the wool, weaves 
 the cotton, makes our garments, and prepares our food, and should be 
 made as cheap as possible, so that labor can continue to get a greater 
 and greater share of its profits until a perfect adjustment of labor and 
 capital is reached. 
 
 Sec. 9. That the United States national- bank notes shall he a legal tender at par 
 between all national banks, and the same shall be redeemed upon presentation at 
 the bank of issue in gold, silver, or United States Government bond notes: Provided, 
 however, That no more than 40 per cent thereof shall be receivable in silver coin. 
 
 The first proposition of this section is the same as that now on the 
 statute books with regard to our present bank notes. 
 
 The object of making these United States national-bank notes redeem- 
 able in the United States Government bond notes, as well as gold and 
 silver, is to protect the metal reserve of the bank; and yet, since the 
 United States Government bond notes are themselves redeemable in 
 gold at the bank of issue, it amounts to a metal redemption. 
 
 The limitation placed upon the amount of silver anyone presenting 
 notes for redemption must take, is to equalize its distribution and insure 
 a predominance of gold everywhere, as the gold must carry a margin 
 of credit in the silver. 
 
 Sec. 10. That banks may be organized under this act with a capital of $20,000 or 
 any greater amount in multiples of $10,000; but no bank shall be organized in any 
 reserve city with a less capital than $100,000. 
 
 There are many localities needing the accommodation and advantages 
 of a bank and where a bank of less capital than $50,000 might do well; 
 but there is not sufficient business for a bank with $50,000 capital, the 
 present minimum limit. 
 
 Individual banks are recommended instead of branches, since our 
 whole system is an individual and not a centralized one. 
 
 Sec. 11. That all banks organized and doing business under this act outside of 
 the reserve cities shall keep as a reserve 15 per cent of its deposits, and 60 per cent 
 of said reserve shall be in gold coin, and 40 per cent may be in silver coin : Provided, 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 23 
 
 however, That in lieu of one-half of such coin reserve, deposits in reserve cities sub- 
 ject to check may he held. 
 
 The amount of the reserve here required is the same as tha*" now 
 provided for in the case of banks outside of clearing-house cities, and 
 there is no substantial difference in the amount of cash balances that 
 may be held in reserve cities. 
 
 Sec. 12. That each hank organized under this act and doing business outside of a 
 clearing-house city shall select some national bank in the clearing-bouse city of its 
 own district through which it shall redeem its United States national-bank notes in 
 gold, silver, or United States Government-bond notes. 
 
 This section is to facilitate current redemption and render it certain 
 that any bank will be able to obtain possession of its notes whenever 
 it wishes to retire them or assist a holder who wishes to present thein 
 for redemption. 
 
 Sec. 13. That the United States Government shall not pay out or reissue any 
 United States legal-tender notes from and after the 1st day of Jan'uary, 1897, but 
 the same, when received, shall be canceled and destroyed; and further, that the 
 United States Government shall not pay out or reissue any United States Treasury 
 notes or silver certificates from and after the 1st day of July, 1897, but the same 
 shall be canceled and destroyed; and the United States may put out an amount of 
 silver coin equal to the Treasury notes and silver certificates so destroyed. 
 
 • This section provides for the final step in the'retireinent of all the 
 paper money outstanding-, and the dates are postponed in order that 
 a practical adjustment shall have taken place before canceling the 
 remaining legal-tender notes, Treasury notes, and silver certificates 
 not required in providing for the bank reserves. 
 
 Sec. 14. That in the event of the liquidation of any national bank organized under 
 this act, the United States Government shall undertake as trustee, but shall not be 
 responsible for the redemption of the outstanding notes ; and the assets of said bank, 
 including the assessment upon the shareholders, shall be distributed in the following 
 order : 
 
 First. Sufficient gold coin, or its equivalent, shall be set aside and held by the 
 Government for the redemption of the United States Government bond notes. 
 
 Second. Sufficient gold, silver, and United States Government bond notes shall be 
 set aside and held by the Government for the redemption of the United States 
 national-bank notes, with interest thereon at the rate of 6 per cent per annum from 
 the date of suspension to the date fixed for the redemption thereof. 
 
 Third. That out of the proceeds of the United States Government bonds deposited 
 with it, and the guarantee fund credited as aforesaid, the United States Government 
 shall redeem, upon presentation, any of said United States Government bond notes, 
 or said United States national-bank notes, reimbursing itself out of said assets. 
 
 Fourth. The assets remaining shall be distributed among the depositors and all 
 others having claims in the same manner as now provided by law. 
 
 Sec. 15. That all acts or parts of acts inconsistent with the foregoing shall be, 
 and the same are hereby, repealed. 
 
 That the United States Government should not become responsible 
 in any way for the obligations of the several banks there can be no 
 possible doubt. However, as the interests of our country demand 
 uniformity in our banking system, it is highly important that the Gov- 
 ernment should maintain supervision over them and administer the 
 assets in the event of failure, thus giving assurance to note holders 
 and depositors alike. 
 
 That the note holders should have a prior lien upon the assets of the 
 bank in accordance with our present law is essential, as the notes leave 
 the immediate neighborhood of the bank issuing them. The fact of their 
 being a prior lien upon the assets of the bank justifies their passing cur- 
 rent, because the people know they are safe by experience. Again, the 
 note holder seldom knows the officers of a bank as the depositor does 
 who keeps his account with some particular bank becauseof his acquaint- 
 ance with the management. Then the depositors of banks are almost 
 
24 
 
 OUR FJXANXIAL DIFFICULTY AND THE REMEDY. 
 
 in variably the borrowers of tlie bank and the very persons who first get 
 the notes. It is therefore of the highest importance that the notes be 
 as good as possible in order that one may borrow money at the lowest 
 rate of interest possible, and the notes remain out until he is ready to 
 pay off his loan, for the better the notes the longer will they remain out 
 and circulate; indeed, if they remain unquestioned the tendency would 
 be to continue to circulate until called in by the bank issuing them. 
 
 It may be suggested by some that the notes should not be a prior 
 lien upon the assets of the bank, because that gives to the note holder 
 an advantage over the depositor; but the reasons already given justify 
 the principle. However, there is still another reason that forecloses all 
 discussion upon the question as a matter of actual practice, and that is 
 this: It will be admitted that a bank will not issue any of its bank 
 notes unless its customers need the money. Ndw, it is certain that if a 
 bank can not issue its notes it will bundle up a good margin of securi- 
 ties and send them to its correspondent in some distant city and get 
 the necessary amount of currency, giving the correspondent bank a 
 first lien upon all the securities turned over; so it will make no differ- 
 ence in the last analysis whether it issues its notes or borrows the 
 money. The currency used will be a first lien upon a sufficient amount 
 of the bank's assets to insure its redemption. The position of the 
 depositor is the same in both cases. The criticism arises from a mere 
 sentiment, and will always be without any foundation in practice. But, 
 as a matter of advantage to the borrowers of a bank, who are almost 
 invariably the depositors, in commercial banks at least, and as a mat- 
 ter of justice, considering the difference in the relation of the note 
 holder and depositor to the bank, the note should be a prior lien upon 
 the assets. 
 
 Now, I will reply to the gentleman who inquired how the banks are to 
 maintain gold payments when the Government finds such difficulty in 
 doing so. 
 
 The difficulty of the Government arises in two ways: 
 
 First. It has strained its credit and aroused doubts about its ability to 
 
 redeem its demand obligations in gold, thereby creating a great demand 
 
 for gold. 
 
 Second. It can only get the gold from the sale of bonds which are to 
 be paid off by taxing the people. It has no inflowing stream of wealth 
 measured in gold, hence our Government difficulties and dangers. 
 
 The banks in Scotland, Ireland, England, Germany, and Canada have 
 no difficulty in maintaining gold payments, although their reserve in 
 gold is much less than that provided for in our reserves. Now, why is 
 this ? Just because every note, draft, or bill of exchange signed by two 
 or more makers or indorsers are payable in gold or its equivalent on 
 demand, or in thirty, sixty, or ninety days, giving everybody absolute 
 confidence, and no one ever asks for gold unless it is needed for some 
 special purpose. 
 
 How would it be with our banks f Let us suppose that banks having 
 capital equal to the capital of our national banks were organized under 
 this law, and the act were in force. What would the condition be; 
 what the result? There would be about 8600,000,000 of free gold, 
 $000,000,000 of free silver, and $057,000,000 of United States Govern- 
 ment bond notes in circulation in this country. 
 
 The gold and silver would certainly take care of themselves, as they 
 are both legal tender and perform redemption work. 
 
 The SG57,000,000 United States Government bond notes, being 
 secured by United States Government bonds, themselves payable in 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 25 
 
 gold, would never be presented for redemption unless the holder had 
 some special use for gold, such as shipment abroad. 
 
 To put the strongest possible case against the banks, let us suppose 
 that they have issued the maximum amount of United States natioual- 
 bank notes also, viz, 8057,000.000, an amount equal to the capital, in 
 addition to the United States Government bond notes outstanding, 
 would the credit of the banks be strained ? Let us see. 
 
 First. Let us remember that every bank is a member of a clearing 
 house, and therefore, as long as it remains in good standing, as strong 
 as all the banks of the clearing-house district combined. 
 
 Second. Let us remember that on September 28, 1895, the capital of 
 all the national banks amounted to 6657,135,498.65. 
 
 For the purpose of a test case, let us suppose that every national 
 bank issued every dollar of secured and credit money this law would 
 allow — 
 
 First. United States Government bond notes $657, 135,498.65 
 
 Second. United States national-bank notes 657, 135, 498. 65 
 
 The total paper circulation would be 1, 314. 270. 997. 30 
 
 Which would be a first lien upon the entire assets the banks would 
 
 then have, or 4, 562, 074, 349. 76 
 
 As the total assets of the banks on September 28, 1895, were 3, 423, 629, 343. 63 
 
 They would be increased by the amount of the proceeds of 
 
 the bond notes and bank notes issued by all the banks, viz . 1, 138, 445, 006. 13 
 
 Let it be here noted that these banks would have, approximately, the 
 following among their assets: 
 
 First. United States Government bonds $689. 992, 272. 48 
 
 Second. Gold or balances in reserve — 
 
 Reserve against deposits 243. 763. 035. 60 
 
 Reserve against bank notes . . 78. 856, 259. 83 
 
 Cities 322, 629. 2°5. 43 
 
 Third. Silver or balances in reserve — 
 
 Reserve against deposits 162. 508. 689. 40 
 
 Reserve against bank notes . . 52, 570, 839. 89 
 
 Cities 215.079.529.29 
 
 Fourth. Stocks, securities, etc 195, 028, 085. 35 
 
 Fifth. Loans and discounts on demand, or running thirty, sixty, or 
 
 ninety days, about 7 3, 000, 000, 000. 00 
 
 All taken upon a gold basis and measured in gold values, or a total 
 
 amounting to 4, 227, 601, 097. 10 
 
 In cash, gold, silver, bank balances, and available assets to guaran- 
 tee and meet when presented 1, 314, 270, 997. 30 
 
 Or more than three for one. 
 
 This is the largest possible amount that could ever be issued under 
 any circumstances with our present banking capital, and there is no 
 probability that the circulation would ever reach two-thirds of it. 
 
 But if the last dollar were issued, everyone must know that th^se 
 bond notes and bank notes are safe, beyond a peradventure. 
 
 Compare this situation with that of our Government, which main- 
 tains the paltry reserve of $100,000,000 to meet demand obligations 
 amounting to eight times that sum, or 6800.000,000, and decide for 
 yourself which is the sounder financial proposition, and wlWner the 
 banks or the General Government can more easily maintain gold 
 
26 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 redemption, and in which there is the greater risk to our commercial 
 interests and national honor. 
 
 The one is a natural and automatic redemption effected by the cur- 
 rent exchange of propetty and titles to property, all measured in gold; 
 while the other is unnatural and mechanical and wholly dependent upon 
 the political caprice of any Administration that may be compelled to 
 buy its credit over and over again by borrowing as the successive waves 
 of doubt sweep over us. 
 
 Can anyone have a shadow of a doubt about the ability of the banks 
 to maintain gold redemption just as easily in this country as i t is done 
 in Germany, England, Ireland, Scotland, and Canada to-day, and as was 
 done through the Suffolk system at Boston before it was succeeded by 
 our national system, or as was done in Louisiana up to the very capture 
 of New Orleans during the war? Under that law Louisiana became, in 
 18G0, the fourth State in the Union iu point of banking capital, and 
 second in point of specie holdings. There was no security pledged for 
 the circulating notes, but not a single bank in Louisiana suspended dur- 
 ing the panic of 1857. 
 
 Having passed over the several sections of this bill, pointing out 
 their objects and effects, one question and the final one most naturally 
 presents itself at the conclusion; and that is, in what way, if any, will 
 the operation of the bill affect the amount of circulation now out- 
 standing? Will it expand or contract it? 
 
 The total amount of money of all kinds in circulation at the end of 
 the last fiscal year, June 30, 1895, was 81,004,131,968. The amount of 
 gold novi estimated to be in the country and which would then be in 
 circulation is about $600,000,000; the amount of silver now estimated 
 in the country and which would then be in circulation, $600,000,000. 
 Should the United States Government bond notes taken out be just 
 equal to the present national-bank capital there would be an expansion 
 of §257,000,000. 
 
 However, it is not reasonable to expect that all the national banks 
 in our great cities would take out the circulation, as their deposits are 
 so large that they would not need it. Were the circulation increased 
 or diminished, a perfect adjustment would be found iu the bank notes, 
 which would always automatically respond to the ever- varying condi- 
 tions of every locality of our great country. 
 
 It is therefore apparent that the change would be completely effected 
 within a very short time, and with only the most wholesome influence 
 upon the public mind, and absolutely without interfering with the busi- 
 ness interests anywhere, and as one banker wrote the other day, u We 
 would then have a banking system superior even to that of Canada, 
 which I now regard as the most perfect in the world." 
 
 To review the result in a word : 
 
 First. Our banking business would be taken out of politics. 
 
 Second. Our Government would betaken out of the banking business. 
 
 Third. Y\ T e would be saving the difference between 2 per cent and 4 
 and 5 per cent on our debt, or more than $15,000,000 annually. 
 
 Fourth. Hundreds of millions of dollars would come here for invest- 
 ment and vast sums now being withdrawn would remain, because there 
 could be no fear then as now among foreign capitalists that they might 
 get only 50 cents for each dollar they now have invested here. 
 
 Fifth. The great bulk of our paper money would be good enough to 
 travel around the entire world side by side with the Bank of England 
 note. 
 
 Sixth. The entire reserves of our banks would be gold and silver. 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 27 
 
 Seventh. A vast amount of gold and silver, taking the place of our 
 smaller bills, would circulate among our people with a most salutary 
 effect. 
 
 Eighth. Our smaller villages and more remote places would have the 
 advantage of banking privileges. 
 
 Ninth. Instead of our eight different kinds of money we would have 
 but two besides gold and silver. 
 
 Tenth. What is most important, there would be a lowering and 
 equalization of the rates of interest in the different parts of the United 
 States. 
 
 Eleventh. The people of every locality would be blessed with an elastic 
 currency based upon their own wealth. 
 
 Twelfth. Panics would be checked and currency famines would be 
 unknown. 
 
 Thirteenth. Our financial evils would be removed, and unexampled 
 prosperity would swiftly follow in the wake of the change. 
 
 Fourteenth. Doubt would give way to certainty; fear to hope; con- 
 fusion to order; hesitation to confidence; and upon our integrity and 
 intelligence would rest the beneficent smile of Providence. 
 
 • 
 
BILL (H. R. 6442) INTRODUCED BY MR. FOWLER. 
 
 54th Congress, 1st Session. H. E. 0442. 
 
 In the House of Representatives. 
 
 February 24, 189G. 
 
 Mr. Fowler introduced the following bill; which was referred to the 
 Committee on Banking and Currency and ordered to be printed 
 
 A BILL 
 
 To take the United States Government out of the banking business, 
 refund the national debt, reform the currency, and to improve and 
 extend our banking system. 
 
 Section 1. Be it enacted by the Senate and House of Representatives 
 of the United States of America in Congress assembled, That there shall 
 be, and there is hereby, created and established a Department of 
 Finance, which shall have entire and exclusive control and supervision 
 of all national banks, their right to take out secured circulation and 
 issue their notes. 
 
 Sec. 2. That there shall be three ministers of finance who shall take 
 the place of the Comptroller of the Currency and constitute a board of 
 finance; and said board of finance shall conduct the said Department 
 of Finance. That said ministers of finance shall be appointed by the 
 President, by and with the advice and consent of the Senate, and the 
 term of office shall be for a period of twelve years at a salary of ten 
 thousand dollars per annum. That the term of the first three ministers 
 shall be for twelve, eight, and four years respectively. The minister 
 being appointed for twelve years and his successors shall be known as 
 First Minister of Finance, and he shall preside at all meetings of the 
 board of finance; and the remaining two ministers shall be known as 
 Associate Ministers of Finance. 
 
 Sec. 3. That any national bank now doing business, or any other 
 financial institution doing a similar business, or any number of persons 
 may, in accordance with existing law, so far as the same is consistent 
 with this act, organize upon the following terms and conditions: 
 
 If any corporation described as aforesaid shall deposit with the United 
 States Government any of the United States bonds now outstanding, 
 or any that may be hereafter issued under existing law, which, at their 
 market value, shall exceed the capital of said corporation by five per 
 centum, the United States Government shall issue to said corporation, 
 in lieu of said bonds so deposited, two per centum United States Gov- 
 ernment bonds equal in amount to such market value, both principal 
 and interest of said new bonds being payable in gold; and said new 
 bonds shall thereupon be deposited with the United States Govern- 
 
 29 
 
30 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 ment, and circulation known as United States Government bond notes 
 shall be issued to said corporation in an amount equal to the paid-up 
 capital of said corporation denominations of ten dollars or multiples 
 thereof. 
 
 Sec. 4. That said United States Government bond notes shall be a 
 legal tender between all national banks and be redeemed in gold when 
 presented for payment at the bank of issue; and that from the passage 
 of this act all duties on imports shall be paid in gold coin. 
 
 SEC. 5. That at the same time that said corporation shall deposit 
 United States Government bonds as aforesaid it shall also deposit 
 with the United States Government United States legal-tender notes 
 or gold certificates, or both, of such an amount that it, together with 
 the gold said corporation has on hand, will equal fifteen per centum of 
 its deposits j and the United States Government shall deliver to said 
 corporation gold coin in lieu of said legal-tender notes and said gold 
 certificates. Said corporation shall also deposit at the same time, with 
 the United States, United States Treasury notes or United States sil- 
 ver certificates, or both, which, with the silver coin then held by said 
 corporation, shall amount to ten per centum of its deposits, and the 
 United States Government shall deliver to said corporation in lieu 
 thereof silver coin of an equal amount; and said legal-tender notes, 
 gold certificates, Treasury notes, and silver certificates shall be there- 
 upon canceled. Said corporation shall thereafter keep as a reserve 
 twenty-five per centum of its deposits in the following kinds of money: 
 gold and silver. At least sixty per centum of said reserve shall be in 
 gold coin, and the remaining forty per centum of said reserve may be 
 in silver coin: Provided, however, That in lieu of one-half of such coin 
 w i i ve, cash on deposit in reserve cities, subject to check, may be held 
 
 SEC. 0. That any corporation organized under this act may, with the 
 permission under the supervision and control of the board of finance, 
 issue its own circulation, which shall be furnished by the United States 
 Government and be known as United States national-bank notes. 
 Said United States national-bank notes shall be issued in denominations 
 of live dollars and multiples thereof, and maybe issued only in the 
 following manner and upon the following conditions; 
 
 first. Every bank issuing United States national-bank notes shall at 
 all limes maintain against the amount of such note outstanding a 
 reverse corresponding to that required against its deposits* 
 
 Second. Any bank that has complied with the law may, with the con- 
 tent and under control of the board of finance, issue an amount of 
 United States national -bank notes equal to twenty per centum, or one- 
 fifth of its paid up and unimpaired capital, and shall pay upon such 
 an amount thereof as may be at anytime outstanding a tax at the rate 
 of one half of one per centum per annum. 
 
 Thir<L Said bank may issue a second amount of notes equal to 
 
 twenty per centum, or oik 4 fifth of its paid up and unimpaired capital, 
 and shall pay upon such an amount thereof as may be at any time 
 outstanding a tax at the rate of one per centum per annum. 
 
 Fourth, Said bank may issue a third amount of notes equal to 
 twenty per centum, or one fifth of its paid up and unimpaired capital, 
 and shall payupOD such an amount thereof as may be at any time 
 Outstanding a tax at the rate of two per centum per annum. 
 
 Fift h. Said bank may issue a fourth amount of notes equal to twenty 
 per centum, or one-nil h of its paid up and unimpaired capital, and shall 
 pay upon such an amount thereof as may be at any time outstanding a 
 tax at the rate of tour per centum per annum. 
 
OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 51 
 
 Sixth. Said bank may issue a fifth amount of notes equal to twenty 
 per centum, or one-fifth of its paid up and unimpaired capital, and shall 
 pay upon such an amount thereof as may be at any rime outstanding a 
 tax at the rate of six per centum per annum. 
 
 Sec. 7. That all taxes so paid to the Government upon said United 
 States national-bank notes shall be set aside and held by the Govern- 
 ment as a guarantee fund exclusively for the redemption, first, of the 
 United States Government bond notes: second, for the United States 
 national-bank notes, in the event of the liquidation of any bank organ- 
 ized uuder this law: ProriVforf.fioirerrr, That whenever said guarantee 
 fund* 7 shall exceed five per centum of both the United States Govern- 
 ment bond notes and the United States national-bank notes, such 
 excess shall belong to the United States Government and may be used 
 by it to defray its general expenses. 
 
 Sec. S. Thar the board of finance shall divide the I nited States into 
 clearing-house or reserve-city districts, and each corporation shall 
 belong distinctively to some one district, and the number of such dis- 
 trict shall be plainly and prominently printed upon the said United 
 States national bank notes issued by the banks located therein. The 
 several banks of each district, upon receiving United States national- 
 bank notes belonging to any other district, shall forward the same to 
 a reserve city, which shall return them to the district to which they 
 belong. 
 
 Sec. 0. Thar the United States national-bank notes shall be a legal 
 tender at par between all national banks, and the same shall be 
 redeemed upon presentation at the bank of issue, in gold, silver, or 
 United States Government bond notes: Provided, however, That no 
 more than forty per centum thereof shall be receivable in silver coin. 
 
 Sec. 10. That banks may be organized under this act with a capital 
 of twenty thousand dollars or any greater amount in multiples of teu 
 thousand dollars; bntno bank shall beorgauized in any reserve city 
 with a less capital than one hundred thousand dollars. 
 
 Sec. 11. That all banks organized and doing business under this act 
 outside of the reserve cities shall keep as a reserve fifteen per centum 
 of irs deposits, and sixty per centum of said reserve shall be in gold 
 coin, and forty per centum may be in silver coin: Provided, however, 
 That in lieu of one-half of such coin reserve, cash on deposit in reserve 
 cities, subject to check, may be held. 
 
 Sec. 12. That each bank organized under this act and doing business 
 outside of a clearing-house city shall select some national bank in the 
 clearing-house city of its own district through which it shall redeem its 
 United States national-bank notes in gold, silver, or United States 
 national-bank notes. 
 
 Sec. 13. That the United States Government shall not pay out or 
 reissue any United States legal-tender notes from and after the first day 
 of January, eighteen hundred and ninety-seven: but the same, when 
 received, shall be canceled and destroyed : and further, that the United 
 States Government shall not pay out or reissue any United States 
 Treasury notes or silver certificates from and after the first day of July, 
 eighteen hundred and ninety- seven, but the same shall be canceled and 
 destroyed: and the United States may put out an amount of silver 
 coin equal to the Treasury notes and silver certificates so destroyed. 
 
 Sec. 14. That in the event of the liquidation of any rational bank 
 organized under this act. the United States Government shall under- 
 take as trustee, but shall not be responsible for the redemption of the 
 outstanding notes: and the assets of said bank, including the assess- 
 
32 
 
 OUR FINANCIAL DIFFICULTY AND THE REMEDY. 
 
 ment upon the shareholders, shall be distributed in the following 
 order : 
 
 First. Sufficient gold coin, or its equivalent, shall be set aside and 
 held by the Government for the redemption of the United States Gov- 
 ernment bond notes. 
 
 Second. Sufficient gold, silver, and United States Government bond 
 notes shall be set aside and held by the Government for the redemption 
 of the United States national-bank notes, with interest thereon at the 
 rate of 6 per centum per annum from the date of suspension to the 
 date fixed for the redemption thereof. 
 
 Third. That out of the proceeds of the United States Government 
 bonds deposited w T ith it and the guarantee fund created as aforesaid, 
 the United States Government shall redeem, upon presentation, any 
 of said United States Government bond notes, or said United States 
 national-bank notes, reimbursing itself out of said assets. 
 
 Fourth. The assets remaining shall be distributed among the depos- 
 itors and all others having claims in the same manner as now provided 
 by law. 
 
 Sec. 15. That all acts or parts of acts inconsistent with the foregoing 
 shall be, and the same are hereby, repealed. 
 
 C