Pieasc accept the accompanying copy of 
 \onal Ba > com . 
 
 pliments of the author. It is the only complete 
 review of the system extant, and is sent honing 
 it may he useful as a hand-book of finance. The 
 author does not expect it to he the equivalent of 
 valuable space m your paper; though any no¬ 
 tice which your interest in the subject may 
 prompt you to give, will be aovreciated. 
 
National Banking 
 Examined. 
 
 1 BY 
 
 Geo. Wilson, Jr, 
 
 Cashier of the Lafayette County Bank of Lexington, 
 Missouri; Secretary of the Missouri Bankers’ 
 Association ; Author of Several 
 Works on Finance. 
 
 KANSAS CITY, MO.: 
 
 PRESS OF RAMSEY, MILLETT & HUDSON. 
 
 1880. 
 
* 
 
 COPYRIGHT BY GEO. WILSON, JR. 
 
 1880. 
 
 ALL RIGHTS RESERVED. 
 
 
 &: 
 
 t, 
 
 
 <XT ■ 
 
 <3 $ 
 
“Let the Americans adopt their funding system, and go into 
 their banking institutions, and their boasted independence will be 
 a mere phantom.”— Wm. Pitt. 
 
 “For the salvation of the country we must look to the farmers 
 and mechanics. The mercantile classes are so entangled in the 
 meshes of the banks that they can not yield much assistance.” 
 — Gouge’s History of the American Banking System , 1835. 
 
I. 
 
 THE PRACTICAL WORKINGS OF NATIONAL BANKING. 
 
 “The object of these pages is to protest against the doctrines and con¬ 
 clusions of those who proclaim our method of banking and currency, to be 
 the best in the world .”—Currency or Money. Samuel Hooper, Boston , 18pp. 
 
 The advocates of the present national banking system, make 
 for it the sweeping claim that it is the best in the world. Among 
 them we find names distinguished in the field of'financial thought, 
 as well as the other fields not less important. But the fact that all 
 the claims made for this system were made for previous systems of 
 federal banking in their day, and found to be false, will make the 
 careful and unprejudiced observer slow to accept the pretensions of 
 this one. And not alone for federal banking has this claim been made. 
 In Samuel Hooper’s pamphlet on .“ Currency or Money,” (Boston, 
 1855), he shows that the state banking system of that day, made 
 the same claim to perfection that the present national system now 
 makes. This claim is no doubt made for every-banking system as 
 it succeeds the last one. When the United States Bank was in 
 operation, large sums were paid to the press by it for aid in its de¬ 
 fense against the Democrats. To what extent this is true of the 
 present system is not now publicly known; but it is easy to get a 
 publisher for anything written in defense of it, and almost imposs¬ 
 ible to get one for anything opposed to it. Among its 
 principal defenders, are the comptroller of the currency, 
 John J. Knox, Ex-Secretary of the Treasury, Hugh McCul¬ 
 loch, George Walker, the distinguished financialist, M. L. Scud- 
 der Jr., of a “league” in the northwest, devoted to proving that 
 no other money but gold and national notes are “honest.” But 
 however the others manage about the expense of their publica¬ 
 tions, there must be serene satisfaction in the mind of the comp- 
 
6 
 
 NATIONAL BANKING EXAMINED. 
 
 troller, as he thinks that the people, whom he is trying to convert 
 to federalism in banking, are paying him whilst he writes, and pay 
 also for the printing and distributing of his arguments. Walker 
 gives the chief motive of a political party and all persons, in at¬ 
 tacking the national system as “jealousy of the banks themselves, 
 and of the money they have honorably accumulated.” Whether it is 
 jealousy or some other motive that prompts him to “compass the 
 overthrow” of the older State systems by making the national “ex¬ 
 clusive of all others,” he fails to inform us. The great banking 
 interests of the Atlantic cities that bitterly opposed the system at 
 its beginning, now resist any change in it, chiefly because bankers 
 dislike interruptions in the established order. 
 
 In the International Review for March, 1879, Walker says 
 Chase “builded better than he knew,” for his system of banking 
 has thrown “around the business such safeguards as had hereto¬ 
 fore existed only to a very limited extent.” He further depicts 
 the unsatisfactory condition of the “heterogeneous sytem of state 
 banks which Chase’s National Bank Act superseded.” Among the 
 safeguards thrown around banking, the examination by government 
 officials is generally considered an important one. If the comp¬ 
 troller would show, in his report on the failed national banks, how 
 long before each failure there had been an examination and what 
 the report was, ' it would be a ^est of what this law has accom¬ 
 plished. I suggested this to the comptroller before his last report, but 
 he thinks it would be no test of the system, but only of the faith¬ 
 fulness of certain examiners. Undoubtedly examination is over¬ 
 rated in importance for the simple reason that the gist of any 
 bank’s condition lies in the quality of its discounts, and it would 
 be impracticable to get an examiner who, were the portfolio put in 
 his hands, would be much the wiser. In estimating the value of 
 the custom of hiring an official to watch our banker we generally 
 overlook the fact that there is a tendency to cease to watch him 
 ourselves and leave it all to the hired watchman who in turn needs 
 a watchman. Though publications and examinations may be of 
 value, they are apt to be rated at a higher value than the facts 
 warrant or the case permits them to possess. If Jay Cooke & Co., 
 had not had charters for any bank, but had been private bankers, 
 never examined or publishing statements, experienced business 
 men would have earlier suspected them, and made others suspect 
 them to be undertaking too much when they began the Northern 
 
NATIONAL BANKING EXAMINED. 
 
 7 
 
 Pacific Road. Examinations and reports tended to lull every one 
 into security, and thus enabled them to involve more persons in 
 their fall, and create a greater alarm than could otherwise have 
 been done. For some time before failing, a country national 
 bank known to the writer, was paying 15% interest on its time 
 certificates in a state where the outside legal rate is 10%. Dis¬ 
 graceful failures have occurred under this system, equalling the 
 worst under any other. Yet from their published statements, no 
 one could see anything wrong. The weak point in this part of the 
 system is that these banks are all “pets” with the comptroller. 
 He is so ardent an advocate of the system that he is the last per¬ 
 son one may look to for the exposure of weakness or wickedness 
 in the system after examination has discovered them. The law in¬ 
 tended him for a servant of the people to watch the banks, but he 
 is a servant of the banks to defend them from the people. He is 
 a permanent “whitewashing committee” for them. When Jackson 
 and Benton destroyed the last lot of federal banks before these, 
 ''what has been before thought sound was found to be “a festering 
 mass of rottenness.” In his letter proposing the establishment of 
 a national bank as the sole source of issue of paper money, Alex¬ 
 ander Hamilton, of New York, says that the Bank Commissioners 
 of that State, just before the suspension of 1837, reported tri¬ 
 umphantly that everything was perfectly sound. Nobody now de¬ 
 nies that Biddle wilfully brought distress on the country when 
 the war between himself and Jackson was in progress. The comp¬ 
 troller is lest likely to injure the country in such way than by per¬ 
 mitting it to be honey-combed with institutions not properly based 
 and conducted. Fessenden said, (April 26, 1864), “ * * 
 
 * * * * During a recess of congress the great in¬ 
 
 terests of the community might be left at the mercy of the comp¬ 
 troller of the currency.” He thought the president should have 
 the absolute power of removal. The law as it now stands is as it 
 was when Fessenden made this objection. Had it been changed 
 as he desired, it would have left the country at the mercy of the 
 president. He said also of the comptroller, “He will wield an 
 immense power in the country over all these banks with this accu¬ 
 mulated capital, and he could in the course of a very short time, 
 if he were disposed to do so, produce the most disastrous effects 
 upon the currency of the country by his own motion.” The 
 comptroller at present in office can not conceal his impatience at 
 
8 NATIONAL BANKING EXAMINED. 
 
 the existence of state banks not entirely in his control. He wishes 
 the banking interest of the country to have but one neck and he 
 will halter it and lead it whithersoever he will. The security 
 which we have against his abuse of the power is the same as that 
 of the French against their former tyrant rulers : “The king is too 
 gracious to abuse his power over us.” 
 
 The comptroller even tries to show that the system is indis¬ 
 pensable if we desire banking statistics. The issues of state banks 
 will always be recorded in the states in some form. Statisticians, 
 commercial agencies and others, will always collect the facts and 
 publish them, along with other commercial information, for sale. 
 We will get them as well, therefore, without a national comptrol¬ 
 ler of the currency, as with him, aside from the objection that it 
 is not the business of the federal government to furnish this infor¬ 
 mation. We get the more important statistics of our annual pro¬ 
 ducts from other than federal sources. With his facilities for gath¬ 
 ering statistics, why has he never shown how much of the capital 
 now in the national system was already employed in banking and 
 merely changed over to this system from the various state systems; 
 and how much of it is new? Perhaps he does not want it known 
 that it is merely the state bank capital in a new dress; that the 
 state banks of which he and other advocates “think scorn,” gave 
 the national system nearly all the strength and respectability it has, 
 and could, by withdrawing, abolish it. 
 
 The enormous strength of the sound State banks at the begin¬ 
 ning of the war was too thoroughly tested in the assistance they 
 gave in taking loans, to be changed or underrated by the fact that 
 they were not under one system. The national banks hold but 
 little over half the amount of deposits held by the non-nationals. 
 The total deposits in the latter are nearly six times as great as their 
 total capital, whilst the deposits in the nationals are less than one- 
 and-two-thirds times their capital. The people, for whose 
 safety we are told that $337,000,000 in national notes 
 have been secured, deliberately- deposit in state banking 
 institutions and with private bankers $1,180,000,000 with¬ 
 out security. Taking the notes issued by the institutions that 
 Walker informs them have had special safeguards thrown around 
 them, the people deposit the entire volume and nearly three times 
 as much more in other funds in banks that are governed only by 
 their own state legislatures. Surely until the law suppresses all 
 
NATIONAL BANKING EXAMINED. 
 
 9 
 
 and forces the people to deposit in the less-trusted national banks, 
 the national bank act must be considered incomplete. This 
 preference of depositors for state banking institutions is 
 not without a sound reason. If by an amendment,to the constitu¬ 
 tion or a decision of the court, the government were to lose the 
 power to create legal tender paper, it might find itself with ninety 
 per cent, of the bonded debt, or about fifteen hundred million of 
 dollars in national notes payable at the treasury in coin on demand. 
 All of the banks in the country have suspended before; it is not 
 improbable that all the national banks after issuing all the currency 
 possible—ninety per cent, of the bonded debt—will suspend. The 
 government could scarcely fail to be obliged to-sell the bonds at a 
 sacrifice, and would be a preferred creditor and would make up its 
 loss out of the capital and other assets of the banks, leaving the 
 depositors whatever might be left. It is indeed strange that one 
 should deposit in a national bank under these circumstances where 
 'there is another kind equally $ good, unless he has confidence in 
 it irrespective of the dangers to the system and all connected with it. 
 
 Sherman pointed this out when the bill was first in the Senate. 
 He said the bill holder ‘ ‘ has not only a lien on the stock and 
 bonds deposited here, but he has a prior lien on everything owned 
 by the bank. * * * The United States, in any event, redeems the 
 note, seizes upon the property, and has a prior lien on all the property' 
 of the bank.” Should such a case ever occur the same events that 
 cause it will destroy some or all of the markets on which the govern¬ 
 ment depends for the sale of the bonds, from the proceeds of which 
 it expects to redeem the notes. And better bonds than those now 
 deposited once sold for forty cents on the dollar in coin, and these 
 may yet do so. For the demand may come when war is imminent 
 or is in progress, or under equally embarrassing circumstances. . 
 True, the law requires the banks to deposit additional security if the 
 bonds decline so much as to wipe out the ten per cent, margin; 
 but this during the times of paper legal tenders is a farce, and after 
 they shall have passed away will be impossible of fulfillment when 
 most urgently required, and if enforced will be in favor of note 
 holders to the injury of depositors. 
 
 Usually suspension is no misfortune to the national banks. 
 Those who before got notes from them are glad to get certified 
 checks at such times. In 1873, when the volume of national 
 notes was less than the legal tender notes they were payable in, 
 
10 
 
 NATIONAL BANKING EXAMINED. 
 
 national banks quit paying anybody anything but certified checks. 
 Gold has quit coming to us, greenbacks are to be retired and the 
 increase of national notes now occurring will continue. The re¬ 
 sult may easily be foreseen. 
 
 Hugh McCulloch considers “the essence” of the national 
 system “ a circulation perfectly secured and of uniform value in 
 all parts of the United States.” It is scarcely proper to so refer to 
 it inasmuch as a direct issue by the government possesses precisely 
 the same qualities. A characteristic of the national system 
 is keeping the notes at par on a one-ninth basis of coin. We can 
 do more inflating, and get more prudent persons to forsake the true 
 principles of finance on this plan than any other ever devised. 
 
 Walker says the idea of any Section of the country having a 
 sound local currency under State laws “is a stupid fallacy.” Its 
 supporters have such company as Nathan Appleton, one of whose 
 sayings has stood as a motto on the title page of the Bankers’ 
 Magazine as long as any young bankers can remember, and was 
 made before some of us were born. ‘ ‘ Every centre of trade can 
 establish and maintain a sound currency for itself, if it choose to do 
 so. * * * * This was fully proved in Boston, and the circle 
 of circulation controlled by it, during the suspension of 1814-15 -16.” 
 (Appleton’s Currency and Banking, p. 23, 3d edition, 1856.) 
 Appleton was a believer in the advantages of a national bank. The 
 Pacific states maintained a local circulation of coin and would no 
 doubt have had along with it a local paper currency had not federal 
 taxation prevented it. 
 
 Banking is a slow, safe, conservative business, when properly 
 conducted. It is, for this reason, not rushed into readily by 
 speculative and adventurous persons. To get men to go into the 
 national system extraordinary inducements had to be offered, or 
 extraordinary pressure had to be put on the men in other systems 
 to drive them out of them. Either is a prima facie condemnation 
 of the national system. If justifiable on the ground of emerg¬ 
 ency, it should be reversed when that has passed away. When 
 this system was under debate in congress in 1863, Geo. S. Coe 
 made the pertinent objection that it was calculated to bring adven¬ 
 turers into the business, a fear since seen to have been well-founded, 
 and an invariable effect of special privileges in banking. 
 
 During the long suspension of the Bank of England some of 
 the,soundest financialists there fell into Jhe error of thinking that 
 
NATIONAL BANKING EXAMINED. 
 
 11 
 
 there could be no excess in the issue of the suspended notes as 
 long as the discount of mercantile bills was confined to undoubt¬ 
 edly. sound bills, growing out of real commercial transactions and 
 payable at a fixed short period. This error was fully exposed in 
 the celebrated “Bullion Report” of a committee of the House of 
 Commons. The chief fallacy was in ignoring the effect of the ad¬ 
 ditions to the volume of the circulating medium by such issues. A 
 similar error grows out of our national system. The notes are 
 considered good whether many or few, from soujid banks or 
 broken ones, so the natural tendency is to think that the whole 
 debt might as well be in circulating notes as in any other shape. 
 So the banks issue with respect to ultimate soundness, not with re¬ 
 spect to present convertibility. And when people get excited and 
 want the money they cool them off with certified checks. 
 
 The security feature of the national bank currency is drolly 
 misunderstood. A prominent metropolitan editor dwelt on this 
 feature in conversation lately, yet every national bank note he had 
 was in a bank as a deposit. So if the bank failed, the fact that 
 the notes he deposited were well secured would matter but little to 
 him; and if the notes were not secured and the bank issuing it 
 failed, it could not be charged back to him by his depository bank. 
 The only interest he had was the general one of not wanting his 
 bank to be weakened by losing on the bills of other banks. Many 
 a man congratulates himself that the national notes he is taking in 
 for sales are so well secured: and before night he has deposited 
 them with a private banker or a state bank; or in a national bank 
 where, as a deposit, he has no security for it. Those chiefly bene¬ 
 fited by the security of the national bank notes are the banks and 
 bankers : they are protected against each other. Of course the se¬ 
 curity feature is valuable, but not in the way generally supposed. 
 
 Some who are giving up the federal paper money idea, who 
 agree that if gold and silver bullion were freely coined on the de¬ 
 mands of all persons, we would have enough constitutional money 
 and could dispense with all paper circulation except coin certifi¬ 
 cates, still think that the coin should be deposited with the treas¬ 
 urer at Washington, or at some sub-treasury, and the certificates 
 issued by the government. They know that funds are transferred 
 best by bills of exchange and that these bills are paid by shipments 
 of commodities, but think that the holders of the certificates will 
 be secured from loss if the government will store their coin, and 
 
12 
 
 NATIONAL BANKING EXAMINED. 
 
 subject to loss if the banks store it. But when they get the govern¬ 
 ment’s certificates they store them in bank. It is one of the most 
 remarkable and widespread hallucinations of which there is .any 
 record. The banks should store the coin and give its owners cer¬ 
 tificates fitted for circulation. The legislatures of the states could 
 pass such laws as would make it the safest manner of holding it; 
 aside from the lack of power in the federal government to ware¬ 
 house the coin solely for the convenience of its owners. 
 
 Country national banks do not pay any attention to redemp¬ 
 tion at all, but act as if their notes were in fact what they have so 
 long been—money. Tl^ey care little for having legal tenders on 
 hand, and as for coin they scarcely consider it. In the statements 
 for 1879, one bank has nearly $90,000 in circulation; $187.50 in 
 specie; $1,500 in legal tenders. Another has $447,400 circulation 
 and $1,611.60 specie; legal tenders $ 00. These are but speci¬ 
 mens of what the statements contain. 
 
 Nothing in this system has been more boasted of than its uni¬ 
 formity. Yet the law made a distinction in favor of the National 
 Bank of Commerce, because it was the largest in the country. Its 
 stockholders are not doubly liable as is the case with other national 
 banks. When this question was up, Grimes of Iowa, said: “This 
 idea of making a distinction in behalf of one great moneyed cor¬ 
 poration of the country when we are establishing what its friends 
 call a “uniform system of banking,” is so exceedingly abhorrent 
 to my sense of fair play, of justice, and equity among the differ¬ 
 ent corporations and citizens of the country that I think it incum¬ 
 bent on me to ask for the yeas and nays,” etc. The desire to 
 make these banks uniform was so great that they wanted them 
 subjected only to federal taxation. Fessenden said : “this idea of 
 making * * a sort of Procrustean bed for everything that is done 
 by the United States government * * is perfectly preposterous.” 
 Praise is lavished on this system because its notes are uniform 
 in value. For this M. de Tocqueville praised the notes of a for¬ 
 mer federal bank. But national notes were uniformly worth thirty- 
 five or forty cents on the dollar when the notes of some of the 
 state banks they superseded were worth at the same time par in 
 coin. The continental money was uniform in value until it be¬ 
 came uniformly valueless. 
 
 The only point on which uniformity is useful, is uniform par¬ 
 ity with coin. Who cares anything about the uniformity of bills 
 
NATIONAL BANKING EXAMINED. 
 
 13 
 
 of exchange except that they be uniformly paid on presentation ? 
 “It is a curious fact, that the general currency of the United 
 States Bank notes, in consequence of their being receivable every¬ 
 where in payment to the government, was considered a great evil, 
 both by the bank and the community.” (Cy. & Bk’g. Nathan 
 Appleton, Boston, 1841.) But a gentleman of much experience 
 as a state and national banker, assures me that this claim is not 
 true, that national notes when sent to New York correspondents 
 in large quantities are never credited at par, and usually not cred¬ 
 ited at all until converted. 
 
 The charge of heterogeneity againt the ante-bellum, banking 
 business of the country is in reality in its favor. A change from 
 the homogeneous to the heterogeneous accompanies every step in 
 the evolution of life. To prescribe a uniform plan of banking for 
 the lumber regions of Maine, the manufacturing districts of Mas¬ 
 sachusetts, the importing interests of New York, the fruit interests' 
 of Delaware, the tobacco raisers of Virginia and Carolina, the cot- 
 t on districts of Mississippi, the sugar lands of Louisiana, the stock 
 breeders of Missouri, Kansas and Texas, the wheat growers of 
 Iowa and Illinois, the miners of the Rocky Mountains, and the 
 railroad and other corporations of the entire community, is the 
 acme of absurdity. The one point of uniformity necessary—that 
 the medium of exchange possess uniform and steady value—is im¬ 
 possible of realization for any great length of time and when most 
 needed under this system. 
 
 In the “heterogeneous system of banks” before the war, the 
 “wild cat” banks became noted. They issued notes that were to 
 be redeemed out of the profits made from using them. This sys¬ 
 tem is now engrafted on the national and is found no longer in the 
 West, but in New York City. When the banks have used all of 
 their money and their dealers call for more, they create it by cer¬ 
 tifying checks. .The great point of superiority of the modern over 
 the ancient, of the cultivated over the rude, is not calling things by 
 their right names. In a month the city cashier can manufacture 
 as much wild cat paper as all the western states ever made in their 
 whole history. The wild cat system is forever dead in the west, 
 but it has been put in full blast in the progressive east by a bank¬ 
 ing system whose praises the presses of the government have 
 printed for us ad nauseam. The comptroller scolds and threatens, 
 and when the demand subsides the wild cat departments are shut 
 
14 
 
 NATIONAL BANKING EXAMINED. 
 
 down until another demand arises. “He knows that the charter 
 of every New York City bank was forfeited last September;” said 
 Hon. W. D. Kelly, of the comptroller in April, 1874. “He 
 knows that when they all transgress, and the enforcement of the 
 penalty would break up the whole system, he can not even threat¬ 
 en to punish them but must palter to their iniquity and lawless¬ 
 ness,” he continued. Another vice that grew out of the abund¬ 
 ance of paper created by the national banks, the antipodes of this 
 one was “lo.cking up’’ money. The operators borrowed the 
 notes and left them as security for the loans themselves, thus 
 making a tight money market and forcing prices down. This is 
 now forbidden by law; and that the system that caused the vice 
 was used to cure it, is considered by its friends a signal example of 
 its perfection. 
 
 One of the most important claims made for this system is that 
 by providing a currency of uniform value in all parts of the coun¬ 
 try, it prevents loss on exchange to which the diverse values of 
 state bank notes formerly subjected us. Those who make this 
 claim appear not to understand what the term “exchange” covers. 
 Comptroller Knox, in his report for December, 1878, estimates 
 the amount of exchange sold annually at four thousand millions 
 of dollars. The symbols known as bills of exchange only par¬ 
 tially register the amount of exchanging done, and their cost is 
 but a part of the cost of exchanging. Some money of course is 
 shipped by express, but the sale of four thousand million dollars 
 of exchange does not mean the shipment back and forth of the 
 entire volume of our “homogeneous” national bank currency an¬ 
 nually many times, to meet drafts. It means the exchange of so 
 much raw produce for so much manufactured goods. The cost of 
 exchange is properly the cost of exchanging the things, not that of 
 transferring the symbols. Of the circumstances going to make up 
 the proper cost of exchanging, the most important is the means of 
 transporting the things to be exchanged. In i860, and before, 
 when produce went forward from the South and West at a much 
 greater expense of money, and especially of time that represented 
 interest on money at high rates, and when manufactured goods 
 came back under the same conditions, the actual cost of excnang- 
 ing was very much greater than at present. Therefore we are in¬ 
 debted to our increased facilities for transportation and communi¬ 
 cation, for reduction in the proper cost of exchange, and not to 
 
NATIONAL BANKING EXAMINED. 
 
 15 
 
 any banking system. The question is narrowed down then to this 
 point: Did uniformity in the value of the currency save us from 
 loss in exchanging commodities, to which diversity of value in 
 former state bank currencies subjected us? Does it now? Will it in 
 the future ? Labor requires capital to support it while operating. The 
 general practice of producers of raw material is to buy goods to a 
 greater or less extent on credit, and pay with next crop. The 
 great masses of our people are producers of raw material and con¬ 
 sumers of the manufactured goods of foreigners, or of a small 
 class of home manufacturers at a higher rate than foreigners ask. 
 By buying their goods on credit and paying for them after raising 
 a crop, they have been steadily realizing losses as commodities 
 have steadily declined in price. They bought high and sold low 
 for twelve years—losing on exchange—chiefly on account of the 
 undeterminable value of the medium of exchange, the notes of the 
 government and the banks. The appreciation in the market value 
 of the currency from 1873 t0 l &79> representing the loss on com¬ 
 modities, is 15%, or 2 >% a year. In Mr. Fawcett’s “Handbook 
 of Finance,” he says: “From 1867 to 1872 there had been an 
 average decline in the currency prices of all leading commodities 
 in New York of from 30 to 35%. This, it is true, was mainly the 
 effect of the appreciation of the paper currency, * * * but I 
 
 think not wholly.” (p. 132). The loss from 1874 to 1879 * s X S% 
 on four thousand millions, or six hundred millions. From 1867 
 to 1872, by Mr. Fawcett’s lowest figure, it is one billion two hun¬ 
 dred millions. The total loss on exchange during the time the na¬ 
 tional notes have been circulating, then, is about two billions of 
 dollars. Thus the identical agency that we are told has saved us 
 from loss on exchange, has cost us annually four times as much as 
 the comptroller says the loss would now be if state bank circula¬ 
 tion were restored. 
 
 But it is not in agricultural products alone that we have been 
 thus steadily losing through years. A furniture manufacturer fur¬ 
 nished me, unsought, an example. He said that for years he had 
 been turning out furniture that when put on sale, would not invoice 
 enough at market prices, to cover the cost of material and labor. 
 This has been to a great extent true of all the other branches of 
 manufacturing. And the annual value of our manufactures is 
 about four thousand millions. It is probable that the loss on ex¬ 
 change caused by this currency was nearer four billions or eight 
 
16 
 
 NATIONAL BANKING EXAMINED. 
 
 times as much annually as the comptroller says the loss on exchange 
 would now be if state bank currency were restored. 
 
 Some one may say that the loss would have been the same if 
 there had been only greenbacks and no national notes in circula¬ 
 tion. If we grant him this, he is no better off; for the claim on 
 the part of the national bank advocates is that their system has 
 saved so many millions annually in exchange. 
 
 Under our present arrangement a redemption fund of one-third 
 keeps greenbacks at par, and a similar fund of greenbacks will 
 keep the national notes at par, so that one-ninth becomes a suf¬ 
 ficient coin basis for the latter. If $115,000,000 in coin is a 
 sufficient reserve to keep $346,000,000 in greenbacks at par, then 
 that amount of greenbacks will keep $1,038,000,'000 national cur¬ 
 rency at par. "Vyhether there might not be another kind of notes 
 redeemable in national notes, of which three billions could be kept 
 at par on a basis of one-third national note reserve fund and the 
 entire card-castle rest on the basis of $115,000,000 in coin, is an 
 inviting question for inflationists. 
 
 The comptroller and the national bankers seem to think that 
 the steadiness in the value of the public credit used by these banks 
 as currency, as shown by the steadiness and uniformity in the price 
 of inland bills of exchange, is due to the national system and the 
 comptroller. This is equaled by the claim that the credit of re¬ 
 sumption and refunding at a lower rate are due to the secretary of 
 the treasury, as some persons seem to think. It is in no sense the 
 national system that saves loss on exchange. It is the steady in¬ 
 dustry and economy of the people keeping the credit of the gov¬ 
 ernment up, that now makes exchange steady in price. 
 
 But we can not fully answer here the claim that in time of 
 peace, prosperity and the par of bank notes with gold, the national 
 system will save losses on exchange. The argument on the con¬ 
 stitutionality of the system, or its right to exist at such a time, will 
 show us that just at the only time the system has a shadow of a 
 chance to prevent such losses it can not constitutionally exist, if it 
 can so exist at any other time. 
 
 Was it want of uniformity in the value of the state 
 bank currency that caused loss in exchange? The law of 
 the cost of bills of exchange is one of the well defined ele¬ 
 mentary principles of finance. The cost can not be more than 
 hat of shipping the money from the one point to the other and in- 
 
NATIONAL BANKING EXAMINED. 
 
 17 
 
 suring it. But when the value of the medium received for the bill 
 by the seller of it, is different from that of the medium in which it 
 is payable, this difference affects the price paid for it. When a 
 purchaser of a bill of exchange on New York paid for it at St. 
 Louis in depreciated notes of state banks, it was entirely proper 
 that he should pay a sufficient premium to cover all differences in 
 value. If in Chicago in 1864 a buyer of a bill on New York paid 
 for it in the notes of that state bank in Milwaukee, or those state 
 banks in St. Louis, that never paid anything but coin for their 
 notes, he got a $250 bill of exchange for a $100 bank note. But 
 who would say the bank lost $150 by the operation? It was not 
 diversity in value, or heterogenity in the state bank currency, that 
 caused loss in exchanging, or loss on exchange, in any form, b,y 
 using it as a medium. It was instability of value, an inherent vice 
 of all “paper money.” The chief difference in the working of the 
 state and national plan, is the greater and more uniform loss the 
 latter can cause. Against the former, smaller communities can 
 avail themselves of their*own sagacity for their own protection; 
 against the latter only a number of states together, and specially 
 favored by circumstances—as e. g. the Pacific States—can protect 
 themselves. 
 
 To refute this important claim that national banking saves loss 
 on exchange, it is only necessary to analyze it. This claim has al¬ 
 ways been made by the national bank party from Hamilton’s day 
 to ours and has been as promptly exploded by analyzing it. 
 Gouge says, (Hist. Pa. Money and B’k’g, 2nd ed’n, p. 62), “It 
 would be as reasonable in a man to wish his flour transferred from 
 Pittsburg to Charleston by the public authorities, as to wish his 
 money transferred through such a medium from Pittsburg to Phila¬ 
 delphia.” If national banking would save the cost of exchange it 
 would not therefore be right to establish it, to make the whole peo¬ 
 ple pay what certain dealers and consumers ought to pay. If we 
 had only coin and no paper money at all, “exchange” would be 
 made chiefly by shipments of produce, which would be in favor of 
 producers. If the interior merchants would have to add to their 
 prices to compensate for higher rates in exchange this would fall 
 only partly on the producers in buying of those merchants, but the 
 advantage of getting better prices for their exchange would inure 
 to the producers, as it should. 
 
 We need only to look back and see that the reason the govern- 
 
18 
 
 NATIONAL BANKING EXAMINED. 
 
 ment endeavored to force out its legal tender notes and the bank 
 notes redeemable in them, was that its credit was below par in coin, 
 and the absurdity of the idea that there can be any saving on ex¬ 
 change by the use of such a currency becomes apparent. In time 
 of peace and with our present facilities for communication and 
 transportation, commerce will always provide against losses on ex¬ 
 change as well without assistance from a paternal government as 
 with it; and in time of war by forcing its credit into, the arena of 
 commerce as the only medium of exchange, government adds to 
 the misfortunes of the country by heaping the loss of property 
 upon the loss of life. In war or peace, past, present and to come, 
 the use of the credit of the government as currency in any form 
 adds enormously to the cost of exchange; it is especially injurious 
 in the point claimed as its special excellency. Nothing but the 
 heat of partisan zeal, or self interest, could have blinded so many 
 sensible men to the fact that losses in exchanging can not be saved 
 by a medium of exchange whose value is fluctuating and uncertain. 
 
 What would the people have thought if the states had inaugu¬ 
 rated systems of banks issuing three hundred millions of dollars in 
 new notes worth only sixty-six cents on the dollar the day they were 
 issued? Yet this was the case of the federal banks in 1866. 
 
 It is said that the government would have lost too much by 
 accepting for loans the notes of suspended state banks and the 
 depreciation of such notes in the war of 1812 is referred to as 
 proof. But in the last war it sold its bonds to the banks for notes 
 worth from 35 to 65 cents. Wherein is it. better to take one dis¬ 
 honored note from the bank in payment of purchases of bonds 
 than another equally depreciated ? 
 
 If systems of state banks had been continued and the national 
 system never been started, we would, beyond any doubt, have re¬ 
 sumed the use of coin long before we did. The clamor that was 
 raised against resumption by the government would have demand¬ 
 ed resumption by the banks. There would have been a rivalry 
 among the banks to resume as early as possible: as Geo. S. Coe 
 has said, they would have had to keep the day of redemption in 
 view. The commercial currency issued by the state banks would 
 neither have fallen so low nor continued below par as long as did 
 the credit of the government issued through national banks; hence 
 the loss of using it as a medium of exchange—loss on exchange— 
 would have been less than it has been by using national bank cur- 
 
NATIONAL BANKING EXAMINED. 
 
 19 
 
 rency. Yet in trying to get the bill passed, Sherman assured the 
 senate repeatedly that the “very moment” the war should end 
 these would be specie paying banks. According to the comptrol¬ 
 ler’s report for Oct., 1879, there is but 13% of specie to the notes 
 among them, and a large part of that is in New York to pay duties 
 on imports and not with reference to redemption. 
 
 Walker says that substituting national notes for legal tenders 
 “means” the reduction of the public debt to the amount of the 
 volume of national notes replaced. These two operations, usu¬ 
 ally considered together, are distinct and independent. If the 
 government pay the legal tenders it will substitute coin for them in 
 so doing; so the issue of national notes has nothing to do with it. 
 And whether the bank notes be retired or not it can only get out a 
 corresponding volume of legal tenders in such a way as to increase 
 the debt, by paying them for something. It was always proposed 
 that they be issued by purchasing interest-bearing securities, and 
 that would not increase the debt. 
 
 One of the invariable effects of federal banking seems to be 
 the demand that the government be made a bank for the general 
 benefit, instead of chartering banks for the benefit of certain ones. 
 In 1819, Bledsoe offered the following as one of a series of reso¬ 
 lutions in the Kentucky legislature: “That it becomes the duty 
 of the general government, and of every individual state compos¬ 
 ing it (gradually if necessary, but ultimately and certainly), to 
 abolish all banks and moneyed monopolies, and if necessary, to 
 substitute the impartial and disinterested medium of the credit of 
 the nation or of the states.” The abuse of any power seems al¬ 
 ways to result in the demand for its federal absorption, as the 
 abuse of power by railroads and telegraphs prompts the sugges¬ 
 tion that the federal government run them, and where partial com¬ 
 munism is practiced under the name of a tariff the worst form of 
 communism appears among us, as in Pennsylvania. Nothing is 
 more natural than for the people, on penetrating the disguises of 
 such schemes and seeing that they are for the purpose of using the 
 government credit for the special benefit of a few, to demand that 
 they be made equal in their workings for all. 
 
 From 1866 to 1879, during which time the borrowers have 
 had about $1,500,000,000, the notes rose 30% .in value, making 
 the loss to the borrowers about $450,000,000. The only defense 
 that can be made against this charge is that the loss would have 
 
20 
 
 NATIONAL BANKING EXAMINED. 
 
 occurred with any other paper money system. Besides asking us 
 to accept this as true without proof and against probabilities, they 
 confess their system to be no better than others in this respect. 
 Had the government confined itself to borrowing money on 
 the credit of the United States and issuing bonds and treasury 
 notes for its own needs, the banks could, after the war, have pro¬ 
 vided for the needs of trade, and government affairs and commer¬ 
 cial affairs could have sooner parted company. But the new nation¬ 
 al system of banking so tied them together and mixed them up, that 
 for the government to fund its notes or otherwise retire them was to 
 “organize hell” among the national banks and among their custo¬ 
 mers. Reverdy Johnson said in the senate May 9th, 1864: “The 
 mischiefs resulting from this system are, that it brings the govern¬ 
 ment more closely in connection with the moneyed interest of the 
 country.” As will be shown hereafter, the national notes tended 
 to depress the value of the bonds and of the treasury notes, thus 
 adding to the loss on exchange; and to increase the debt repre¬ 
 sented by bonds. The error of making the credit of the federal 
 government the measure of all values is inseparable from, and is 
 perpetuated by, this national banking system. 
 
 The comptroller says : ‘ ‘ The national banks have held almost 
 continually nearly one-fifth of the bonds of ' the United States, 
 thus increasing the value of these bonds and the credit of the 
 government, so that when recently returned to us in large amounts 
 from abroad, they could be taken at home without a depreciation 
 * * It has been the practice of a certain class to “fright 
 
 the souls of fearful adversaries” by warning them of reckless 
 foreigners ready to sell their bonds back to us at an awful sacrifice. 
 That bonds come back only when needed to pay for what Europe 
 has been compelled to buy from us, and can not spare the money 
 to pay for without cramping herself, is well known. The reason 
 we let any of them go to Europe at a discount, and buy them 
 back at a premium, is that we were not then able to buy them, 
 but have earned the money since—dug it out as bullion and raised 
 crops and sold them. The bonds come back because we have the 
 real value to give for them, not because we are rich in national 
 bank notes as the language of the comptroller would indicate. He 
 seems to think it«a piece of good fortune that these bonds bought 
 by Europe at fifty cents could, by the aid of the national banks be 
 sold back to America “without depreciation;” that is, at a hun¬ 
 dred per cent, profit to Europe beside interest. 
 
NATIONAL BANKING EXAMINED. 
 
 21 
 
 He says in his report for 1879, that the operation of exchang¬ 
 ing one set of bonds for another (for that is all there was in the 
 refunding operations), could not have been accomplished, except 
 for the national banks. Of course this is imposible, of complete 
 proof or disproof, because precisely the same experiment can not 
 be made twice, one under this system and one without it. But 
 we have only to remember that whilst dismembered and carrying 
 on the war, the government borrowed a sum of which the re¬ 
 funded debt he mentions was but a part, paid the interest on it 
 promptly, the national banks not yet in existence, and his asser¬ 
 tion is seen to have no particular character but its recklessness. 
 
 The comptroller shows annually that the banks make a very 
 small profit out of their circulation, and that hence the govern¬ 
 ment would make no saving by retiring national notes and substi¬ 
 tuting treasury notes. In his calculation he introduces the ‘ ‘ cap¬ 
 ital necessary to purchase the bonds pledged by the banks,” and 
 the interest on it. But the case of the government is not precisely 
 that of the banks. It is superior to them in credit to such an extent 
 that it would not have to invest capital in bonds and pledge them 
 to secure its notes. The cost to the government of keeping out 
 enough of its notes to replace $337,000,000 of national notes, 
 would be the interest at 3^% on a one-third redemption fund of 
 coin, or $3,931,666. It could take up, or buy on the market, 
 that many of its own bonds and carry the non-interest-bearing pa¬ 
 per at a cost equal to 1%% interest. What the banks come short 
 of making, in the role of makers and lenders of currency, they 
 must grind out of their dealers some other way. This is not 
 written in advocacy of the idea per se, but only to show that as the 
 government is loser and the banks but little gainers by the indi¬ 
 rect issue of its credit, it would do better to use it directly if at 
 all. If it is going into the banking business it does not need part¬ 
 ners nor intermediaries between itself and its dealers. 
 
 The objection is made to treasury notes as circulation that 
 they do not represent value, as circulation should, and as properly 
 issued bank notes do; but that they represent the want of property 
 and are a sign of property destroyed. If this is correct it makes 
 the national notes objectionable in the same way. For they are 
 also certificates of property destroyed, and the holding of bonds 
 to secure them is merely an expensive superfluity. Instead of is¬ 
 suing the bonds on which they are based, the government could 
 
22 
 
 NATIONAL BANKING EXAMINED. 
 
 have issued the same volume in legal tenders to the same effect. 
 It could have carried them in the years of suspension without the 
 cost of .a coin redemption fund, as it carried the national notes. 
 
 How much of the four hundred and fifty-five millions of na¬ 
 tional bank capital has been paid up, even in paper worth from 
 sixty to ninety-nine cents, and how much of it is fictitious? 
 Dr. Erick Bollman, desiring to show how extensively credit 
 can be stretched and still serve the purpose of money, by bank¬ 
 ing, said in 1810 that one payment on the capital of a bank was 
 all that was usual to pay in money when the law allowed payment 
 by installment. This practice was common to all systems of bank¬ 
 ing under state laws and to both Banks of the United States. The 
 rest was paid by hocus-pocus. To what extent this has been the 
 case in the present system it is difficult to tell, but that it has been 
 done to some extent is undoubted One case of a national bank 
 being started on half the required capital, came under my own ob¬ 
 servation, and it was indeed doubted whether it had any capital. 
 A vender of some of the stock expressed a fear that recourse 
 would be made on him for selling what had no existence. 
 Strict requirements are .evaded and actual perjury committed 
 in some such cases. In Gouge’s history (p. 44 2d ed’n,) he gives 
 a copy of the affidavit of the directors of the Sutton Bank in 1828, 
 that fifty thousand dollars of the capital was paid up in coin, and 
 the accompanying certificate of the commissioners of Massa*chu- 
 setts that they had examined it; yet this coin was borrowed on 
 their own bills issued contrary to law, and was given back in less 
 than an hour after the commissioners had seen it. Doubtless 
 these acts were not forgotten when the national system came in 
 vogue, and there was never so favorable an opportunity for such 
 operations as when the country was full of speculative properties 
 and of paper money, and choice opportunities for plundering the 
 government had been utilized and general demoralization had oc¬ 
 curred. Bank capital should be money. That the six hundred 
 and fifty-five millions of bank capital in the United States is not 
 money, is almost certain. Some; of the state banks that became 
 national, had never paid up their capital in money, and some of 
 the new nationals were paid up, wholly or partly, fictitiously. It 
 is said that borrowers pay as much for paper as for coin; but they 
 no doubt invariably pay more. For when notes are issued on fic¬ 
 titious capital or a part of the capital beyond the volume of the 
 
NATIONAL BANKING EXAMINED. 
 
 23 
 
 notes is fictitious, the bank must earn dividends rapidly out of 
 which the notes of the stockholders given in. payment of capital 
 are to be paid. The bank will offer high rates of interest on de¬ 
 posits and will pay and will encourage the speculative rise in the 
 rate by its loans to speculators. Men of the best credit and en¬ 
 gaged in the most legitimate enterprises are the greatest sufferers 
 by this. . For if there was nothing but real money in circulation 
 they would be the only ones who could borrow at all and the spec¬ 
 ulators would be no longer competitors to run up the rates of in- 
 'terest on them. 
 
 The old state banking tricks for keeping their bills away from 
 home—for making them fiat money—now belong to the na¬ 
 tionals; the most common one being that of sending their bills to a 
 distant part of the country for circulation. 
 
 The taxes paid by the national banks are not in their favor as 
 against any other system of banks. And as the comptroller shows 
 how small is the value of the privilege of issuing notes, we may 
 suppose that if deprived of this right the national banks would not 
 for that reason wind up, and quit the business, but would continue 
 under the state form and still pay a great part of their present 
 taxes- For instance, they would invest less of their capital in 
 bonds and pay taxes on capital at about the rate now paid by state 
 banks, which is about four times as great as they now pay. M. 
 L. Scudder Jr., (“National Banking,” p. 45,) takes this ground, 
 saying: “That capital would, in all probability, continue to pay 
 its state and local taxes as at present. 1 ' Whatever taxes are needed 
 must come. There is nothing to show that the national banks en¬ 
 able us to pay the taxes that go through them to the government, 
 but eventually come out of their customers, any easier than they 
 could be paid in other ways or under state banking systems. To 
 grant these banks charters because they pay taxes to the federal 
 government is merely another form of selling them charters on the 
 plan of the old United States bank. In 1856, J. B. Congdon, a 
 Massachusetts banker, defended the banks of that state in a pam¬ 
 phlet, and one of his arguments was, “The people, through the 
 tax upon the banking capital, are receiving a large share of the 
 profit arising from the circulation of bank notes.” 
 
 But whilst these banks are citing the large amount of taxes 
 they pay as a reason why they should exist, they are trying to get 
 rid of paying them. The following is a specimen sent June, 1880, 
 
24 
 
 NATIONAL BANKING EXAMINED. 
 
 from a national bank advertising circular: “We, the undersigned 
 shareholders in the -— National Bank of New York, respect¬ 
 fully protest against our interest in said bank being assessed or 
 taxed as personal property, for the reason that the money furnished 
 
 by us, was, on the-day of-, entirely invested in United 
 
 States bonds.” The circular continues^ “ The United States gov¬ 
 ernment taxes bank capital (bank shares), but when such capital is 
 invested in government bonds, to that extent the shares are exempt 
 from taxation: therefore we claim the state should make the same 
 exemption.” This question was discussed and settled in congress 
 in 1864. Sumner and Chandler claimed exemption for the banks 
 because their capital is United States bonds which are exempt by 
 law. Collamer (of Vt.,) fully answered this, as follows: “But when 
 you undertake to make a law by which you transfer them into 
 banking capital, and enable the man who holds them not to borrow 
 money upon them but to lend money upon them, that is entirely a 
 different affair; that is entirely a new privilege, and one to which, 
 when granted, the government may annex such conditions as it 
 thinks proper.” (Cong’l Globe, Apr. 27th, 1864.) The federal 
 government did not exempt from taxation that part of the capital 
 invested in bonds on the ground that it can not tax the bonds; and 
 that it has so exempted the capital is an additional reason why that 
 capital must be able to pay a good heavy tax to the state. But 
 bonds are no more untaxable than United States notes or national 
 bank notes, so the same argument is equally good for the exemp¬ 
 tion from taxation of all bank capital, for it all consists of notes of 
 one or the other kind, if not of bonds. 
 
 It seems to have been the intention of Chase that these banks 
 should pay their taxes as long as the national debt should last. In 
 his letter to the chairman of the senate committee on Ways and 
 Means May 2, 1864, he says: “Under ordinary circumstances 
 there might be no insuperable objection to leaving the property or¬ 
 ganized under the national banking law subject, as are almost all 
 descriptions of property, to general taxation, state, national and 
 municipal. But in the present condition of the country, I respect¬ 
 fully submit that this particular description of property should be 
 placed in the same category with imported goods before entry into 
 general consumption, and be subjected to exclusive national taxa¬ 
 tion. At the present moment, the duties on imports form the sole 
 reliance of the government for means to pay the interest on the 
 
NATIONAL BANKING EXAMINED. 
 
 25 
 
 public debt. If to these means the taxes to be paid by the national 
 banks shall be added, a most important addition will be made to 
 these resources.” (Cong’l Globe, May 6th, 1864.) 
 
 The supreme court decided (Tiffany vs. Mo,, 18 Wallace) that 
 the national bank act was partly intended to make a market for the 
 bonds. If that was a proper proceeding then, the reverse rule 
 should be put in operation now. Then the government was selling 
 and wanted to create a demand: now it is buying them up, it should 
 remove all artificial contrivances for raising their market value. It 
 should at once repeal that part of the law by which banks are ex¬ 
 empted from taxation on so much of their capital as is invested in 
 bonds. This would reduce the price of the bonds it is buying. It 
 should abolish national banking and that would reduce the price of 
 bonds, most probably, more than anything else could. 
 
 In the last report of the mint director he cites in affright the 
 fact that six hundred millions of silver now circulating in Europe 
 as legal tender might be turned upon us. This would be welcom¬ 
 ed by every body but national bankers, who now supply over half 
 that sum in currency. An examination disclosing the fact that the 
 valuation of one or the other of the metals generally occurs at the 
 time* when a federal bank’s interests are advanced by being able to 
 supply the deficiency in coin thereby caused, makes one suspect 
 the connection between the two. (See Gallatin’s Bks. & Cy., p. 63.) 
 
 Nearly all the defenders of the national system say that 
 national bankers will not combine to protect the system. If true, 
 this would be a significant testimonial to its worthlessness. Proba¬ 
 bly it is a warning to the people that unless they defend it they will 
 soon find banking facilities reduced to proportions that will be un¬ 
 comfortable. The act first establishing the system fail perfectly 
 dead; the banks had to be forced into it. It is the product of 
 tyrannical legislation and will in time show a tyrannical disposition. 
 
 The influence of national banking on the panic of 1873 is an 
 important and interesting question, as is that of former federal 
 banks on former panics, and the want of such banks on the panics 
 that occurred when there were no federal banks. Our panics are 
 almost always caused by going into debt for property that is not 
 quickly convertible into money and from which the returns are 
 slower than was expected. “But the money is still in existence, 
 why can it not still be had?” It can. But it has a limit to its 
 capacity to perform work. Its task is to run a given round and 
 
26 
 
 NATIONAL BANKING EXAMINED. 
 
 pay debts, the community that will receive it is its sphere of action, 
 and its velocity, of course, has a limit. When it has already reach¬ 
 ed that limit and its task is doubled by the duplication of engage¬ 
 ments to pay, such as is the case in seasons of speculative excite¬ 
 ment, it is simply a case of having more to do than it can do; and 
 part of it must be left undone. People generally meet their en¬ 
 gagements made in speculative seasons, with borrowed money; and 
 when the engagements have so multiplied that there is not money 
 enough for them all some must go without and must fail to meet 
 their engagements. There lies so much terror in the word “fail”, 
 that many having engagements not yet due, think best to get means 
 and keep them on hand so as to be safe. This diminishes the vol¬ 
 ume of active money, which is equivalent to increasing the task it 
 is already unable to perform. Hence more failures, and by that 
 time fear induces hoarding among those who usually deposit in 
 banks. Dishonest dealers take advantage of the opportunity to 
 hide their rottenness; weak houses think it the best time to plunge 
 into a fate that must soon come inevitably. It matters little then 
 whether the paper money is convertible or not; for if convertible 
 and the banks were able to redeem it, they would be afraid to^reis- 
 sue it; and if inconvertible it is hoarded if it has ah ultimate value, 
 and not having this it has no paying power. Then comes a full 
 stop to everything, for there is no money that can be induced to 
 perform any of the task at all. What must be done then ? All 
 must go back to a more primitive style nearly approaching barter. 
 Certified checks are issued, and a general going through bankruptcy 
 clears the field. Whatever draws money off from its circuit at such a 
 time, tends to hasten the crisis. Generally before such crises in our 
 country, wfe have been sending money to Europe largely, some of 
 it for perishable luxuries that we could not afford, and some for 
 such substantiate as iron rails. The latter, even when laid in the 
 wilderness where it brought no immediate return, has always re¬ 
 mained in the country and eventually made returns on its cost. 
 Such was our experience previous to 1857 and 1873. It is trans¬ 
 parent folly to try to obviate this by compelling the purchase and 
 use of domestic iron instead of foreign. This does not keep the 
 money in the county, but by enhancing the cost of the roads makes 
 it more certain that they will not at once pay interest on their cost, 
 and postpones the day when they can make such returns. Rail¬ 
 roads that were built when our treasury notes and national bank 
 
NATIONAL BANKING EXAMINED. 
 
 27 
 
 notes were at a discount, and bonded in dollars worth from fifty to 
 seventy cents, must now earn enough to pay the same interest on 
 the same amount of dollars worth one hundred cents each. Or 
 rather, we should speak in the past tense; for such, railroads have 
 generally been sold to the bondholders, ' not being able to pay 
 double the rate of interest originally expected. 
 
 To prevent panics is a problem that many a financialist has 
 wrestled with, and some pretend to have solved. They think that 
 when the task that the volume of currency or money has to per¬ 
 form becomes too great for it by reason of the duplication and 
 quadruplication of engagements to pay with it, the only thing 
 necessary is to increase the volume. Evidently this is true, pro¬ 
 vided confidence will expand with the volume of currency. But 
 nothing in nature can be forever increased. The physical 
 law of the “rhythm of motion” applies everywhere. We 
 ride up on a wave of apparent prosperity for everybody,, 
 but we must at some time reach the top of the wave: and then 
 we can not stop on it always. Some cause will bring us down, 
 sooner or later. The more solid the currency the less the violence 
 of the waves, and the greater the strength of the crafts. The 
 money used, whether coin or paper, convertible or inconvertible, 
 must possess qualifications that will cause it to be held in a given 
 estimation, and its volume would have to be sufficient to keep up 
 with the increase of engagements. The increase of engagements 
 would only cease when everybody had made enough to satisfy him 
 and retire. If one were to attempt to calculate the amount of 
 gain necessary to satisfy the traders,' speculators and business men 
 of this country, he would bury himself in figures. There is no 
 limit to covetousness and ambition. One of the soundest business 
 maxims is, “cut off your losses and let your profits run on.” If 
 the volume 6f money could keep prices from falling, no one would 
 have to sell to cut off losses : if it could keep them rising, every one 
 might hold what he has and buy more. The time would simp¬ 
 ly come, when having only the product of this year and part of that 
 of former years to pay with, the world would have debts due equal 
 to the product of the world for many years to come. Many 
 speculative engagements are made on hopes that can never 
 be realized, not on what deserves the name of credit. Some 
 one in such cases has paid something for nothing. When the 
 circle in which money runs to pay debts gets too large for it, this 
 
28 
 
 NATIONAL BANKING EXAMINED. 
 
 class realizes losses made before but not realized before. The de¬ 
 mand for money of any kind that possesses any more value than 
 waste paper, would eventually outrun the supply in any case. So 
 it might as well outrun it when the volume of coin or other money 
 equal to coin, has had -too great a task assigned to it. Every 
 body knows that it is not necessary that the volume of 
 money equal the sum of engagements to pay money, because each 
 dollar liquidates many dollars of debt by circulating. But just how 
 many dollars of money are required for a given volume of business, 
 is not easy to determine, because there are so many varying cir¬ 
 cumstances in different cases. But this matter settles itself auto¬ 
 matically by the business drawing the required money from some 
 source, or else accommodating itself to the volume of money pro¬ 
 curable. Banks and bank notes alone do not cause panics. They oc¬ 
 cur where there is no paper circulating as money. But when they 
 occur the banks are between the upper and nether millstones; be¬ 
 tween those demanding their dues and those out of whom the 
 means of paying must be made. They must crush worse than mill¬ 
 stones and be harder, or they will be ground to powder; at least 
 such is generally their fear and the action it inspires. Walker 
 praises national banking because ‘ ‘ while thousands of 
 prudent men have been ruined by the fall of prices and the stop¬ 
 page of production and trade, the banks have only in a few in¬ 
 stances had to succumb.” (Intern. Rev., Mch., 1879.) This is 
 certainly “ childlike and bland.” The usual complaint of banks is 
 not that they nearly all break in panics, but that everyone else 
 breaks and they stand. He might have used Gouge’s shorter ex. 
 pression by which he told the same story for 1818-1820: “The 
 bank was saved, and the people ruined.” (Hist. Pa. Money and 
 Bkg., p. 32.) 
 
 The panic of 1857 was brought to a climax by the deliberate 
 action of the merchants, who, refused accommodations by the 
 banks, showed their power by withdrawing their deposits, thus 
 forcing the banks to suspend. The advice to banks to “discount 
 freely” when panic threatens, if it could be followed would no 
 doubt be effectual; but it is not easy to discount when the deposi¬ 
 tors are running, or threatening to run, on the banks for more than 
 they have on hand. Banking is, to a great extent, loaning one 
 man’s money to another, loaning A’s money to B. But when A 
 threatens to draw out and hoard his money, and make the bank 
 
NATIONAL BANKING EXAMINED. 
 
 29 
 
 give him coin on its bills held by him, it is useless to advise the 
 bank to “ discount freely ” for B; that is, loan him the money that 
 is gone, or about to go, elsewhere. 
 
 The losses of the panic of 1837 are estimated at $847,000,- 
 000, which is not to be considered accurate; but,as the bank circu¬ 
 lation was (according to Condy Raguet’s Currency and Banking), 
 only about one-sixth of that sum, it is evident that the “wild cat” 
 principle has been charged with more than it deserves. Appleton 
 and Gouge charge this panic greatly to the unnecessary contrac¬ 
 tions of the Bank of the United States in 1834,and its correspond¬ 
 ingly improper inflation of 1837. In Appleton’s letter of October 
 12th, 1857, to the Boston Advertiser, he says: “The pressure of 
 1837 was wholly unlike the present. During a period of great 
 overtrade, a few London houses imprudently created an American 
 debt of fifty or sixty million dollars, by giving out their accept¬ 
 ances, to be met by other equally fictitious bills as they fell due. 
 These houses fell into discredit, and informed their correspondents 
 in America, that the whole debt mus,t be liquidated at once, or 
 they must become bankrupt. This was in March, when no remit¬ 
 tances could be made except in specie, which the banks were 
 called on to furnish. The New York banks went on for some¬ 
 thing over a month, when they found it impossible to continue.” 
 Professor Sumner says, among other things, of the panic of 1837 : 
 “The influence of politics on currency, and of currency on poli¬ 
 tics, was exceedingly mischievous on both.” (Com’l Crisis of 
 1837. Scribner’s Monthly, March, 1879). 
 
 We hear and read little of the panic of 1825 and 1819 but 
 they were charged directly upon federal banking at the time. In 
 the latter case there was added to the miseries of panic and hard 
 times that are familiar to us, another now unknown, as witness the 
 following cited by a committee of the Pennsylvania senate, Jan. 
 29th, 1820: “9. The overflowing of our prisons with insolvent 
 debtors, most of whom are confined for trifling sums, whereby the 
 community loses a portion of its effective labor, and is compelled 
 to support families by charity, who have thus been deprived of 
 their protector.” (Gouge, Hist. Paper Money and Bank’g, p. 
 34.) Gouge (Hist. Paper Money and Bk’g, p. 54), says that in 
 1825, “the Bank of the United States, after having lent as much 
 as it could to private traders, strained its credit and resources to 
 lend to government, and thereby put more notes in circulation 
 
30 
 
 NATIONAL BANKING EXAMINED. 
 
 than the state of trade required.” He considerd this a sufficient 
 cause for the panic of 1825, though not asserting positively that it 
 did cause it,-that being too difficult a matter to decide. Paper 
 money is the same kind of a trap for the community as that of 
 the African, who said it caught the animals “ gwine as well corn¬ 
 in’.” Inflating it entraps, and contracting it entraps. » , 
 
 Of the suspensions of 1814, Appleton says: “ It is a gratui¬ 
 tous assumption, that there would have been no suspension had a 
 national bank been in existence at that time. On the contrary, it 
 is but fair to presume that such an institution, acting in sympa¬ 
 thy with the necessities of the government would have been 
 the first to propose it.” (Currency and Banking, p. 27.) 
 Albert Gallatin was of the opinion that if the old Bank of the 
 United States had been in operation in 1814, the suspension would 
 not have occurred. (Bk’g and Cy. 1831, p. 46.) Yet he says 
 the suspension was apparently caused by the capture of Washing¬ 
 ton and the danger to Baltimore, (where suspension began). It is 
 difficult to see what this belief is founded on, or that it is anything 
 else but pure faith that asks no proofs and could not get them if it 
 asked. But what would Gallatin, who groaned over the twenty 
 per cent, depreciation of bank currency in the war, and when in. 
 vaders were burning our capitol, have thought of a national bank 
 currency beginning its life at more than double that depreciation, 
 and not getting up to as small a depreciation as that for about 
 seven years, as we have beheld in our day? 
 
 When the currency was inflated during the war and many 
 engagements entered into everywhere on the basis of dollars worth 
 less than coin, and all this was done by the government, many 
 thought they might expect reasonable consideration from it in the 
 matter of bringing everything back to a coin basis. Whilst con¬ 
 sideration ought to be shown to those who have made engagements 
 on the fifty cent basis, it is a very difficult matter to tell just how 
 fast the return to the hundred cent basis should be made, and it 
 is always impossible to get all to consent to the return at any 
 agreed time or rate. But it can not be made at once without 
 great suffering. It may ruin fewer persons to come back from a 
 seventy cent basis to a hundred cent basis in ten years than to 
 make that change in one. This matter, however, is not entirely 
 in control of government. The opinion of the public brings up 
 the value of the government paper, sometimes, irrespective of 
 
NATIONAL BANKING EXAMINED. 
 
 31 
 
 special action by the government. The opinion is based on other 
 events and probabilities. It was originally to the interest of national 
 bankers to depress the credit of the government as much as possible, 
 as they were buying it. And since the war the national bank party 
 has always been a rapid contraction party, it being a plain question 
 of getting the direct issue out of the way, and thereby enhancing 
 the interest value of their own and increasing their own. The vari¬ 
 ous attempts to prove that the currency was not contracted from 
 1865 to 1873 being impossible of accomplishment in the face of 
 the contrary facts, the attempt has been made to clear the contrac¬ 
 tion policy of any blame for the panic of 1873 by showing that the 
 purchasing power of a dollar was so increased from year to year, 
 that the purchasing power of the total volume of money was 
 rather greater in 1873 than in 1865. Let those who use this ar¬ 
 gument (especially C. K. Backus, of the Detroit Post and Trib¬ 
 une ), answer this question: Did the increased purchasing power of 
 paper dollars enable the debtors in 1873 to purchase their own 
 notes, given from 1865 to 1873, at less than their face value ? 
 They know it did not. And that was the trouble; for the things 
 bought by giving the notes had to be sold for less than the face of 
 the notes, prices being depressed by contraction. And 
 though it is not clear just how much of the debts incurred in 
 1865 were due in 1873, the principle worked steadily all that 
 time as well against all who had engagements to meet that had 
 been entered into about 1865 as against all who entered into 
 engagements to pay dollars from year or from month to month 
 between 1865 and 1873. Whilst manufactures and farm products 
 were put out on a falling market, and handlers of commodities were 
 selling on a falling market, their receipts, though of greater power in 
 the market, for purchase, were of no greater power in paying their 
 previously contracted debts. This system stands charged with 
 depressing the value of the government credit for its own benefit 
 lower than it would otherwise have gone, and of contracting the 
 currency without regard to any thing but its own gain. So that it 
 was, these things being true, the chief factor in the panic of 1873. 
 To say that other systems would have produced a panic does- not 
 prove that this one did not produce that panic. 
 
 The salient points brought out by the study of our commer¬ 
 cial crises with respect to federal banking, are these : The worst 
 ones we have ever had occurred in the times of federal banking 
 
32 
 
 NATIONAL BANKING EXAMINED. 
 
 and are indisputably chargeable to it, in a great measure. Instead 
 of being able to help the community in such cases it is, to use a 
 figure of our Aryan ancestors, “like an elephant sunk in the 
 mud.” Of those which have occurred when there was no system of 
 federal banking, that of 1814 was caused by the war and the New 
 England treason, and federal banking could not possibly have pre¬ 
 vented it; that of 1857 did the least injury and federal banking, 
 could not have prevented it, nor was it even mentioned, so com¬ 
 pletely was the system abandoned and forgotten. So that 
 we have one, the least important, occurring under state 
 banking; and four, the most distressing and destructive in 
 our history, occurring under federal banking; (that of 1814 left 
 out of both sides as a war crisis), the last, greatest and worst 
 being under the present federal banking system and in great part 
 caused by it. 
 
 To sum up : Only where the vaunted benefits of this system 
 turn out upon examination to be unparalleled injuries, can it claim 
 to be peculiar. In its really beneficial features it is nothing more 
 than a copy of other systems which, if undisturbed, would have 
 made it unnecessary. The figures show vastly less confidence in 
 it, on the part of the people, than in the other banks; and an 
 inherent danger in it to its dealers, shows the reason for it. Its 
 natural tendency is to improper inflation. It is a leech on the 
 government at all times and impotent to aid it when aid is required. 
 It has revived old financial vices and invented others. It depressed 
 other property to a resumption standard, but was an obstacle to 
 resumption. Its claim to have been a benefit is preposterous; and 
 upon ample experiment it is condemned. Forcible legislation was 
 necessary to get it into operation. This was enacted by a frac¬ 
 tional congress, amid arms, when laws were silent. Careful and 
 honest examination of its practical workings show that its claim to 
 being the best system of banking we ever had, is not made out, and 
 cannot be. 
 
II. 
 
 WHY CONTROL BANKING THROUGH FEDERAL MACHINERY 
 AND OTHER VOCATIONS THROUGH THE STATES? 
 
 “ Why should not men select the corporation or individual with which 
 they will deposit their money as freely as they select their doctor, their 
 lawyer and their clergyman ? Why should not the people select the banker 
 with whom they will intrust their funds just as they do their grocer, their 
 shoemaker, their tailor and their dry-goods merchant ? Whence does the 
 government derive the paternal right to regulate these matters for them ?”. 
 —Speech of Hon. Wm. D. Kelley , House of Representatives, April 4, 1874. 
 
 “ Banking is but a trade, and demands to be left unmolested, merely 
 exposed to natural influences.”— Henry Seligman. 
 
 What is there about the bank that makes it proper, upon com¬ 
 mon sense principles and expediency, to take it from among other 
 commercial institutions controlled by the states, and charter it 
 alone by the federal government ? Does it differ so materially 
 from them as to require it in the nature of things ? In the centen¬ 
 nial address of Geo. S. Coe to the bankers’ convention, he traced 
 the pedigree of the bank, on its American side, back to the 
 “ country store” and showed them to be essentially the same thing. 
 He said : ‘ ‘ Let us inquire how banks naturally grow out of the 
 
 necessities of society. No sooner does a new community grow 
 into numbers and in variety of productions, and begin to supply 
 its wants, than it naturally seeks an expedient whereby it can 
 barter and subdivide its industries, by some mode of exchange 
 other than by the use of money, of which it generally has little. 
 Until the time comes to form a bank, the country store is the chosen 
 spot where the deposits are made, in products at agreed value and 
 each one is duly credited to its owner, to be drawn out in mer¬ 
 chandise to the equivalent value, either by himself or it may be 
 transferred in whole or in part by written orders or checks to others. 
 
 3 
 
34 
 
 NATIONAL BANKING EXAMINED. 
 
 Here the identity of each article deposited is lost in the mass, and 
 passes under the general name of its equivalent in money. 
 Henceforth these various commodities in trade are all called 
 dollars, but the barter is none the less real. The only substantial 
 fact consists in this, that so much human industry expended, lies 
 behind each transaction. The written papers may all be destroyed, 
 the facts remain, and the record may with greater or less difficulty 
 be again restored. It is apparent that, by this simple device of 
 concentration, the exchange of commodities is facilitated 
 and subdivided almost beyond conception. Now if, in¬ 
 stead of recording against the name of each depositor 
 the credit, by which he may himself draw out or transfer 
 to others its value, that merchant were to divide some such de¬ 
 posits into smaller portions as desired, giving for each one a written 
 paper, promising upon its return to pay the specified value to any 
 bearer in merchandise, he would at once create circulating notes. 
 These notes could pass from hand to hand in that community, proper¬ 
 ly effecting all intermediate exchanges between the people, without 
 further trouble, and each owner, whether of the credit upon the 
 books of the merchant or of his separate promises to pay, when he 
 transfers it into other hands, actually passes over his equitable 
 share in the miscellaneous goods which the store contains, at its 
 money value, each check or each note being in fact portions of 
 loads of hay, or other products, or of family stores, for which they 
 may have been exchanged. The merchant is a simple trustee of 
 the citizen, performing a necessary service upon shares, and issuing 
 and recording upon papers, his engagements with numerous par¬ 
 ties, in the most convenient manner; exchanging and renewing 
 his stock from within and without, supplying the outside world 
 with what it desires, and bringing into the place other equivalents* 
 whether of necessary things or of money itself. And thus villages 
 grow into towns, and towns into cities and the people are enriched 
 by labor, upon a specie basis. And here we have, in embryo, the 
 bank of France, of Germany, or of England. The difference is 
 one only of degree and of development.” 
 
 Upon the nature and origin of currency he continued: “In 
 all this simple device for exchange and distribution of labor, cur¬ 
 rency, not money, is created, and its vitality consists, not at all in 
 the device itself, but solely in the fact, that it has given currency to 
 the fruits of industry, which otherwise could not be so readily 
 
NATIONAL BANKING EXAMINED. 
 
 35 
 
 moved. * * * * There is no important difference between 
 
 the two forms of currency supposed, whether represented by a 
 standing credit to a specific owner upon the merchant’s books, or 
 by his circulating notes of hand. * * * * * With the deposit 
 
 he avoids the risk of loss attending the personal possession of a 
 piece of paper. With the note, the holder has the same merchan¬ 
 dise as security, with only the superior advantage that he may 
 transfer the property by simply handing over the paper, and in 
 smaller transactions, this is mo'st convenient. It is especially so for 
 those whose reputation in the community will not admit of their 
 passing a check, but who may pass the name and responsibility of 
 the merchant where.it is unquestioned. ***** But 
 whatever slight difference there may be it is all alike— currency. 
 
 *** ******** 
 
 The function of general accountant for the whole people, which 
 one merchant-banker has hitherto discharged, can now no longer 
 as conveniently be exercised by either one of those who participat¬ 
 ed in the exchanges and trade of the place. * * * * But 
 
 its substantial character remains the same, whether performed by a 
 banker, resting upon his individual character and responsibility, or 
 by a bank combining many persons. The service required is in¬ 
 dispensable to be done. * * * * Those who do it stand in 
 
 the same relation of usefulness to society as the baker, the car¬ 
 penter or the blacksmith. 
 
 *********** 
 
 “Go into a well-conducted bank and examine its contents. 
 They consist for the most part of paper promises, which in them¬ 
 selves are worth nothing. But when you touch its portfolio, you 
 handle an untold amount of toil and sweat, of solicitude and care, 
 of industry and self-sacrifice, which lies behind these writings. 
 
 ***** Each promise has attached to it an invisible 
 line, running out into some community, to which is connected some 
 article of merchandise going into market. These apparently value¬ 
 less papers are thus tied to innumerable products of industry, 
 which are needed to gratify the desires, tastes or necessities of men. 
 They thread their way from the bank through every store, bind 
 every article with moral cords to its special obligation, follow every 
 form of transportation and travel by land and by sea, and com¬ 
 mand every possessor upon the peril of his reputation and of the 
 forfeiture of his good name, to exchange every article pledged, for 
 
36 
 
 NATIONAL BANKING EXAMINED. 
 
 •others of equal value, and faithfully to account for his stewardship 
 ■to the bank ; and this by generations of experience has proved to 
 be just as safe, as when the country merchant held in his hands 
 both promise and pledge.” 
 
 But when along with the general evolution of society, the ad¬ 
 vance of the village to a city, the country store has grown and 
 separated into great stores dealing in special lines and into banks 
 of deposit, discount and issue, by \yhat rule of common sense or 
 utility do we separate them so far as to place the merchant under 
 the state constitution and the banker under the federal constitu¬ 
 tion alone? Evidently there is none. There are some who, tem¬ 
 porarily holding positions as public servants and administrators of 
 the affairs of the people, imagine they are no longer of the people 
 but superior to them. They call themselves “our rulers,”—a 
 •name that has no place in our system—and begin ruler-like to 
 grasp for the purse, knowing that the sword is always for hire. 
 This is their reason for wanting to take banking from among the 
 other vocations and turn it over to the federal government entirely. 
 In other cases it is to ancient superstitions, to the misuse of lan¬ 
 guage and to the association of ideas, that we must attribute the 
 belief that has lately grown up that it is proper so to do. The 
 promises of individuals, corporations and governments, to pa j 
 money, have come to be called money and thought of as money; 
 and as the sole power to coin money has been delegated to the 
 federal government, some think that, it should have the sole con¬ 
 trol of all forms of credit that we have chosen to misname 
 “ money.” A compact statement of this fallacy is contained in a 
 letter to the author, from Mr. Buckner, of Missouri, now chair¬ 
 man of the Banking and Currency Committee of the House of 
 Representatives at Washington; and as it is the same that he used 
 in his speeches it is no breach of privacy to quote it here. 
 
 “ It is part of the sovereign power to issue money, and what¬ 
 ever is substituted for money and performs the functions of money, 
 should be under the direct and immediate control of the sovereign 
 power.” 
 
 This is used by him in his advocacy of the idea of making 
 the treasury a bank of direct issue. As the issue through the na¬ 
 tional banks is but a variation of the same idea the two can not 
 well be separated. The meaning of this is that as the govern¬ 
 ment acts in the matter of money, so it should act in regard to 
 
NATIONAL BANKING EXAMINED. 
 
 37 
 
 credit used as circulation or currency. The tendency of lawyers 
 is to trace the rights of man back through a long line of reluctant 
 concessions wrung by the people from rulers who claimed to have 
 received all power over them, from a superhuman source—“the 
 grace of God.” The rights always belonged to man,.were taken 
 from him by force, and he is slowly recovering his own. This er¬ 
 roneous teaching causes men still to talk about the power over 
 money being “incident to sovereignty.” If so, we would not have 
 conferred it by the constitution. The exercise of the power to coin 
 brass or other base metals, and call it money, as kings have done, 
 has no connection with our principles of coinage. The pedigree 
 of our coin dollar runs back to the private mint or assay office of 
 the Count Von Schlick of Joachim’s thal. The money mentioned 
 among the Hebrew patriarchs as “current money with the mer¬ 
 chant,” was no doubt current only on account of its intrinsic 
 value, and not because of any royal stamp. The natural right of 
 every man is to get the weight and fineness of his bullion certi¬ 
 fied wherever it best suits him, or to do it himself if he can ac¬ 
 quire the necessary reputation for reliability. Simply for con¬ 
 venience we have made it the duty of the federal government 
 to perform this service for all. Before the attempt to abolish 
 constitutional money by act of congress, this was as plain to 
 most men as to the fathers, who in establishing the mint, never 
 dreamed of attempting through it to nullify any part of the consti¬ 
 tution. But as the attempt by Bland to revive the constitutional 
 money, resulted in a bill to run the mint on the communistic plan,, 
 just as Hamburg once had a drug store, for profit, we must in this, 
 illustration, consider gold only as money. Let us apply the doc¬ 
 trine. No creditor can be compelled to take uncoined bullion, 
 even if it is worth intrinsically as much as the debt amounts to. 
 The debtor can send his bullion to the mint, get it coined and its 
 value thereby certified, and then it must be accepted by every 
 creditor. But the government has no property in it nor control 
 of it. It gains no more title to it than it gains to all the produce 
 of the country by fixing the standard of weights and measures by 
 which the quantity of that produce is, determined. In order to 
 act towards the paper substitutes for money as it does toward gold,, 
 the government ought to have an office, and stamp all the bills of 
 credit of individuals or corporations that are “substituted for 
 money, and perform the functions of money.” Credit is not as 
 
38 
 
 NATIONAL BANKING EXAMINED. 
 
 easily tested as money. But if tested and determined to be good, 
 it would then be the duty of the government to stamp each quan¬ 
 tity of credit and return it to the owner; and all into whose hands 
 it would come, could use it thenceforth as a circulating medium. 
 To perform' the corresponding function to assaying in the coin 
 department, we would need a seer in the credit department of the 
 treasury, who, as each individual would come in to get his bills of 
 credit stamped with the stamp of the government, could look into 
 the future and see which ones would always redeem their bills. 
 As A would come in, the seer perceiving that he would always re¬ 
 deem his bills of credit to the extent of one hundred dollars, 
 would put the seal of the government on that much of his paper. 
 Casting the horoscope of B he would find him safe for ten thou¬ 
 sand, and would stamp so much for him, and so on with the other 
 applicants; and the bills would be issued in denominations to 
 suit them. Just so one man now hands in a few nuggets, 
 worth a hundred dollars, and another a gold brick worth a thou¬ 
 sand, and the mint returns to each, coins of the desired denomin¬ 
 ations. But as it is impracticable to get a seer, or an expert in 
 credits, able to tell whose credit is good beyond peradventure, we 
 could only arrive at that degree of confidence in the credits neces¬ 
 sary to enable them to circulate as money, by requiring each one 
 who desires to use his credit as circulation, to deposit with the gov 
 ernment some valuable and easily convertible property. With 
 this property in its own hands and itself made the agent with 
 power to sell the pledge and pay the bills of credit if the promisor 
 do not, the government could safely stamp so much of the paper 
 of the owner of the credit as equals in value the property left. 
 After looking over all his property, the man wanting to issue his 
 bills of credit to circulate as money, would find that it would suit 
 best to pledge government bonds. So he would leave his govern¬ 
 ment bonds in the hands of the government officer, who would 
 stamp a like amount of his private notes and return them to him. 
 His bills of credit would then circulate like money, and the terms 
 of Mr. Buckner’s proposition would have been strictly complied 
 with. The national system, if the national notes were simply the 
 notes of the banks and the government were only the trustee, 
 would also be a strict compliance with the terms of his proposition. 
 But the need for currency will continue long after the national 
 debt is paid, so the person desirous of turning his credit into 
 
NATIONAL BANKING EXAMINED. 
 
 39 
 
 money as he turns his bullion into money, must either be unable to 
 do so or else must be allowed to deposit something else besides 
 bonds of the government as a pledge that he will redeem his notes. 
 This system should not depend upon anything but the proper 
 wants of those who want currency. The United States must there¬ 
 fore apcept the commodities or labor or lands or promises of those 
 who want to issue bills of credit, and stamp their bills; and must 
 hold the labor or commodities or lands or promises until the notes 
 are paid by their makers, selling them if they fail. In order to do 
 this the United States must assume the function of exchanging its 
 credit for labor and commodities, and to answer the wants of the 
 people it must so exchange its credit whenever anyone is desirous 
 of exchanging labor or commodities, and not confine itself to so 
 exchanging its credit to such times as it needs the labor or com¬ 
 modities or money for war purposes, or any other purposes of its 
 own. Both of these parties are trying to reconcile constant wants 
 with inconstant supplies. They do not generally demand that the 
 government be formally declared a bank of issue forever. Britton 
 A. Hill is the only writer of note consistent and bold enough to 
 avow this principle and contend for it. The others are forced to 
 use expedients to accomplish their purposes : the national bankers 
 try to extend the debt in refunding and others try to get back losses 
 on the pay rolls of the soldiers paid now by new issues. To exer¬ 
 cise the power over currency thus glibly laid down for the govern¬ 
 ment, it would have to be a labor contractor and a dealer in real, 
 personal and mixed property. It is easy enough to lay down 
 financial principles in such general terms as will answer the pur¬ 
 poses of a stump speech, but to put the details in practice is scarce¬ 
 ly possible in the case of any of those that are proposed nowadays. 
 In the three cases of federal banking in our history there has been 
 a pretense of using bank notes, but there has really been nothing, 
 or almost nothing, but the public credit in the notes. In the pres¬ 
 ent system there is nothing but the public credit in them. 
 
 In saying that the same power that issues money should issue 
 circulation it is evident that Buckner does not intend that we shall 
 manage private bills of credit as we manage private gold bullion 
 brought to the mint—do with credit as we do with money. He in¬ 
 tends that the whole people shall put their hands to a promissory 
 note to be used as a circulating medium; or, which is the same 
 thing, a government officer acting under a power of attorney from 
 
40 
 
 NATIONAL BANKING EXAMINED. 
 
 all the people shall issue a great number of such notes, of conve¬ 
 nient denominations, and pay them out as money. If we were to 
 manage money as he would have us manage credit, each one would 
 have to contribute so much gold to the government. This fund of 
 gold it would coin, and no other gold could be coined on the de¬ 
 mand of any private person. That is the way we now manage 
 silver. Instead of each person making a direct contribution to the 
 fund, our agent, the government, takes bills of credit, which we 
 have all given, buys silver bullion with them and coins the bullion 
 into money. One objection to this arrangement is that it does not 
 answer the wants of trade and the convenience of the people in re¬ 
 spect to the volume of money got into circulation. There is only 
 one way to get the money thus owned by the government into cir¬ 
 culation, and that is to pay it out on appropriations for the ex¬ 
 penses of the government. There may be a great demand for 
 more circulating medium to answer the needs of trade, but it can 
 not be got into circulation except through government expendi¬ 
 tures for government needs. And the needs of the government 
 and those of trade do not often run so that the former can inci¬ 
 dentally relieve the latter. More frequently they run counter to each 
 other. This is precisely the objection to Buckner’s plan of having 
 all the people sign a promissory note, or, which is the same thing, 
 having their attorney, the government, sign a lot of bills of credit, 
 for use as money to the exclusion of all other bills of credit. They 
 would not pour out into circulation in response to the demands of 
 trade unless the government loan them to those engaged in trade. 
 If the government loan them it must have security, and the best 
 security for such loans made by the government to individuals and 
 corporations would be government bonds. Walker has shown that 
 issuing notes directly from the treasury to answer the demands of 
 trade would only be another form of the national bank system.. 
 Their idea seems to be this: A sufficient volume of credit to 
 supply the wants of trade, and uniform in value in all parts of the 
 country, can not be got together and utilized except by using the 
 public credit. This is not true. It is not necessary that men 
 should have the use of the public credit to enable them to carry on 
 their commercial transactions with each other. 
 
 Reference to Coe’s explanation of the nature of currency, 
 shows that the commodities make the currency. If the real thing is 
 there, the owner of it in getting the bank’s bill in exchange for his 
 
NATIONAL BANKING EXAMINED. 
 
 41 
 
 own note merely gets the bank to endorse for him. There is no 
 more reason why the federal government should be surety to him 
 that the bank’s bill is good than it should be surety to the bank 
 that his note will be paid. It may as properly do the latter as the 
 former “for the wants of trade,” and in that case must become 
 the holder and handler of the commodity, out of which the trans¬ 
 action grows. (An important point should be kept in mind though 
 it is not necessary here to elaborate it. In a normal condition of 
 affairs there'will be so much money present that the owner of the 
 commodity will get money for it at once and circulate it in pur¬ 
 chasing what he wants, and hence need not go through the ex¬ 
 pense and form of giving the bank his note and getting its bills 
 and circulating them by purchasing what he wants. In other 
 words, the currency analyzed by Coe, can only properly be a me¬ 
 dium of exchange supplemental to money, when there is not 
 enough money to perform the required service. The tendency o 
 all systems is to drive out money and use paper that costs the bor¬ 
 rower as much as money.) 
 
 In thought we associate money and currency so closely as to 
 consider them the same thing, and the wording of the doctrine 
 laid down by Buckner is well calculated to catch the attention of 
 superficial thinkers. The treasury is now the bank of issue; the 
 national banks are brokers, handling the public credit used as cir¬ 
 culation. They borrow it on deposits of bonds and pay one per 
 cent, per annum for it and lend itin smaller lots at the rates of in¬ 
 terest allowed by the local laws for the use of money. This is 
 national banking. Another party demands that the government 
 confine not itself to lending to these brokers, but that it lend to 
 any one who applies. 
 
 This was substantially Kelley’s inter-convertible bond scheme. 
 He wanted it so that any one could convert his bonds into currency 
 at any time and to any amount without organizing a bank for the pur¬ 
 pose. On the national bank plan the redemption of the notes comes 
 primarily on the banks. On the other plan the redemption would 
 fall entirely on the government, and it would reserve the option of 
 redeeming in coin or in interest-bearing bonds. 
 
 The general proposition on which the demand is made that 
 government paper money be the only paper money allowed, when 
 reduced to its most convenient shape is: The United States attest 
 the value of all private gold before it can circulate as money; therefore. 
 
42 
 
 NATIONAL BANKING EXAMINED. 
 
 the United States should not allow the circulation of any credit as money 
 but its own. This is the basis of the issue of the public credit 
 as currency either directly or through the national banks. It is a 
 syllogism of the categorical class, in the inductive manner.' But 
 the conclusion necessitated by the premises, is quite different from 
 the one given. It is: The United States attest the value of all private 
 gold before it can circulate as money ; therefore , the United States should 
 attest the value of all private credit before it can circulate as money. 
 The proposition that the currency ought to be furnished by the 
 federal government because the coins are struck by it, is therefore 
 the well known fallacy named in text books of logic the ignoratio 
 elenchi , or the irrelevant conclusion. As a general proposition, 
 the fallacy is dangerous, but as a rule for constitutional construc¬ 
 tion, for inferring a power not expressed from an express power, it is 
 worse. As we have just seen the inconvenience and almost the im 
 possibility of the United States attesting the value of private 
 credit intended for circulation, the conclusion is that the United 
 States should be antagonistic to the use of any credit as money; 
 should confine its efforts to preventing coin being displaced by 
 credit money of any kind, or confining credit money to the nar¬ 
 rowest limits necessity can accept. The belief that the govern¬ 
 ment imparts to money its value by legal enactment, like the belief 
 that the world is a level plain, will probably always exist in the 
 minds of some persons. In trying to excuse our fathers for the 
 circulation of continental bills, Gouge cites the prevalent opinion 
 “ that money was something that derived its value from the au¬ 
 thority of government.” “Primeval man ” will probably always 
 exist right among us, and with him, primeval ideas; and so will all 
 intermediate grades of men and of ideas. 
 
 The term “issue” is often used to cover several actions of to¬ 
 tally different natures. And paper money is “substituted for 
 money and performs the functions of money,” to a less extent 
 than is generally supposed. It is the coin ultimately to be got for 
 it that gives paper money its power. Where it becomes really a 
 substitute for money instead of a promise of money, its valuation 
 by the community falls at once. Unless money backs it, it can 
 not perform money’s functions. We saw the attempt to perform 
 the money function of a standard of value, by United States 
 notes. It scarcely came nearer succeeding than would an attempt 
 to use the column of mercury in a thermometer as a linear meas- 
 
NATIONAL BANKING EXAMINED. 
 
 43 
 
 ure. The difference between that measure and a steel tape is about 
 that between coin and any credit: neither measure is absolutely 
 unchangeable, but one is very much more so than the other. The 
 summer of prosperity that keeps credit steadily at a great height 
 or elongation, may be a long one; but the winter of disaster will 
 certainly come and change it. Chief Justice Chase, in the case of 
 the People of the State of New York, ex rel. The Bank of New 
 York vs. The Board of Supervisors of the County of New York, 
 ■delivering the opinion of the court, says: “Nor is it easy to see 
 that the taxation of these notes, used as money and held by indi¬ 
 vidual owners, can control or embarrass the power of the govern¬ 
 ment in issuing them for circulation more than like taxation embar¬ 
 rasses its power in coining and issuing gold and silver money for cir¬ 
 culation.” Here is an evidence of the same mental confusion about 
 money and something substituted for money. In coining money, 
 the government stamps the gold of private owners; in issuing 
 United .''States notes as money, it exchanged its own credits for 
 value. If these are untaxable, it can get more of the value for 
 which it originally issues them, but it is no concern to it whether 
 the coin owned by private persons is subject to state taxes or not, 
 or at least its interest is much more remote than in the case of ex¬ 
 changing its own notes for value. The government does not fur¬ 
 nish or issue weighing scales and yard sticks to whoever wants 
 them: it fixes the standard of weights, measures and values. Its 
 duty in respect to coins is the same in essence and in fact as this 
 duty; but it goes further in the matter of a standard of value, by 
 specified power given to it, and attaches to each piece of bullion, 
 the certificate of its weight and fineness. 
 
 It is strange that any one who has analyzed the commercial 
 operations by which currency grows, or who has looked over the 
 history of bankers’ bills and seen how the circulating note grew 
 out of the bill of exchange and is essentially the same thing, 
 can suppose any government other than a commune can prop¬ 
 erly issue currency. Some who see and know all this, are 
 deceived by the subtle disguises of the national currency 
 act. As we have seen, Coe assimilates the deposit and the bank 
 note perfectly. Gallatin was of this belief and noted the differ¬ 
 ences between a bill of exchange guaranteed by every one who en¬ 
 dorses it, and a bank note for whose payment the bank alone is 
 responsible. But so far as the bank, that intends to, and always 
 
44 
 
 NATIONAL BANKING EXAMINED. 
 
 does pay, and the owner for the time being, who expects to and 
 always does receive value promised (where there is no failure), are 
 concerned, the differences are unimportant; the main fact in all 
 three is the same. The bank note is purposely fitted for everybody 
 to use: the deposit and bill of exchange are purposely unfitted. 
 for everybody except certain ones to use. 
 
 In his pamphlet published in 1831, called “An Examination 
 of the Banking System of Massachusetts,” Nathan Appleton says:. 
 “ The issuing bank notes for circulation is incidental to the busi¬ 
 ness of banking, but does not make a necessary part of it. ’ r 
 In Kelley’s speech quoted at the head of this chapter he says, 
 “the power to issue money (meaning paper money) does not in¬ 
 here in banking.” And Buckner, in the letter referred to says, 
 “it is difficult to rid ourselves of the idea that issuing money is a 
 necessary element of banking,” (he also meaning circulating 
 notes). Does it inhere in government? Is it a necessary ele¬ 
 ment of government? Can it ever properly be practiced by 
 governments for any other reason than a desperate necessity for 
 providing for their own needs when every other resource has 
 failed ? 
 
 The powers of every just government are derived from the 
 consent of those whose public affairs the public servants manage 
 and administer. Those who recognize the truth of this principle, 
 cannot believe any arrangement to be properly a government at all 
 in which there is a ruler exercising powers not thus derived. Be¬ 
 tween such rulers and the people there is a constant struggle to get 
 power away from each other. Every such government is dual in 
 its composition. But governments that are only arrangements for 
 carrying out the wishes of the people, are monistic. In them 
 there is but one source of power. If the people act upon the rule 
 of justice among themselves, there can be no cause of complaint. 
 In nearly all the dual, or pseudo-governments, the rulers have 
 claimed the right to monopolize some branch of business and carry 
 it on for profit, or farm it out to individuals or corporations. In 
 monistic societies it would be right, as among the individuals com¬ 
 posing them, if all agree to and prefer it, to allow no individual to 
 carry on any business for profit, but to carry on all business as a 
 government and share the profits among all. Or they all have a 
 right to agree together that a part of the business projects be un¬ 
 dertaken by individuals at their will, and a part be reserved to be 
 
NATIONAL banking examined. 
 
 45 
 
 ^undertaken only by the whole people as a government. But inso¬ 
 far as the government (the people in that capacity) engages in busi¬ 
 ness projects, it is communistic. Communism does not necessarily 
 mean the knife and the torch. Peace, happiness and thrift some¬ 
 times co-exist with it. The study of society, however, has lead 
 those who wish to act justly, to conclude that it is best for each 
 and all that each individual be allowed to carry on his business as 
 he sees fit, and that the government compete not with him in it. 
 For communism, though right as among ourselves if all agree to 
 it, is wrong as regards nature. She has set the seal of condemna¬ 
 tion on it. It is incompatible with the highest development of 
 society. To reach that, individualism must be the rule, and all 
 changes must be growth away from communism. Communism 
 corresponds to low organization among animals, such as having 
 one organ for all purposes; individualism to high organization, or 
 the possession of a special organ for each separate purpose, as is 
 approximately true of man. Going back into communistic prac¬ 
 tices in societies professedly acting on the principles of individual¬ 
 ism, works greater injustice than complete communism. For in 
 such a case the government taxes individuals for its support, yet 
 enters into competition with some of them in the callings in which 
 they engage and in which they are best fitted to succeed; or mon¬ 
 opolizes some branch, or the whole, of such callings, and thereby 
 renders it more difficult for them to contribute their share of taxes 
 for its support: but a complete commune means the consent of all 
 .and the equality of all in respect to contributions and benefits; 
 such, at least is its professed object. But it is impossible for all 
 contributions to be made equally, and if the benefits are equal then 
 what is given to some must be taken from others. Hence the dis¬ 
 tinctive feature of practical communism, is taking the property of 
 one and giving it to another. Under such conditions the whole 
 force of an abler individual will not be exerted to gain a surplus, 
 because he must give it away; nor will the whole force of a weaker 
 individual be "exerted, for what he lacks the common fund must 
 ■ supply. Carrying this to all the individuals, we see that the whole 
 power of a commune will never be exerted, and like muscles not 
 sufficiently used, it will not develop, but will retrograde. A true 
 and just commune is only possible when composed of individuals 
 of uniform ability and disposition: which is an impossibility. 
 r Where each one is secure in the enjoyment of the fruits of his 
 
46 NATIONAL BANKING EXAMINED, 
 
 labor, the greatest force of society is exerted; it grows strong and 
 able to resist attack, and to help when help should be given. It 
 is plainly an error to carry on any branch of business communist- 
 ically, that is, through the government, when it can, as conven¬ 
 iently to the whole society, be carried on by individualism, that is, 
 by each one who so desires engaging in it alone, or by voluntarily 
 associating with others for the purpose. Common sense tells us 
 that, as far as is possible, every organ of society should be exercised 
 in order to produce equal and natural development; that none of 
 its organs should be atrophied by disuse, or by the exercise of its 
 functions through some other organ or the whole organism, or by 
 otherwise robbing one organ of its due to give to the others. Lib¬ 
 erty is nature’s wisdom; law is often man’s folly. Liberty is the- 
 sun, toward which all life, from that of the plants in darkness and 
 lowly places, to man in all conditions, turns. Individualism re¬ 
 turns man his birthright of liberty in the midst of the protection 
 and pleasures of society. Communism demands that man enter¬ 
 ing society for the protection of his liberty, shall begin by sur¬ 
 rendering it. If this is not correct; if communism is allowable, 
 is beneficent, when it enters partially into the administration of the 
 external affairs of a government, then the advocates of communis¬ 
 tic banking are under obligation to show why the government, 
 should not be a complete commune. Whenever our government 
 enters the commercial arena and engages in business for profit, 
 and competes with individuals and corporations in any calling, it 
 thereby forfeits its character as a proper government, for it no 
 longer rests on consent. All the needs of our government ought 
 to be supplied by the individual citizens and corporations in the 
 way of taxes, excises, etc. When the money is needed in larger 
 quantities than the people can conveniently pay at once as taxes, 
 we can extend it through a series of years by borrowing. In the 
 exceptional cases of the postoffice and mint our government 
 undertakes what are properly private commercial projects, not for 
 saving nor for profit 'nor because either is ‘ ‘ a high act of sover¬ 
 eignty,” but simply for convenience. Both are acts of servitude 
 performed by the hired servants of the people. Neither is prop¬ 
 erly the act of a government, and both will doubtless be event¬ 
 ually given up to whomsoever wishes to carry them on. 
 
 Banking is a private calling, and no more the business of a 
 government than any other calling whatsoever. Having traced the 
 
NATIONAL BANKING EXAMINED. 
 
 47 
 
 pedigree of the bank on its native side, let us trace it on its foreign 
 side. The banker was originally a man who sat on a banco , or 
 bench, and kept a stock of coins, giving to strangers, traders from 
 abroad or religious pilgrims the coins current in his own city for 
 their coins that were good, but that on account of their strange¬ 
 ness would not pass readily in payment of lodgings, food, clothing, 
 or other purchases, and charging a certain sum for the accommo¬ 
 dation. He also lent them on interest, though the taking of inter¬ 
 est was practiced before metals acquired additional value by their 
 use as mediums of exchange and standards and representatives of 
 value. But as coins came to represent needful commodities so the 
 promises of coin, or credit, comes to represent the coin and re-rep¬ 
 resent the commodities; and the banker lends his current credit to 
 those whose credit he knows to be good but not current, or ex¬ 
 changes credit with them as he formerly exchanged coins. In the 
 modern bank the customer leaves his promissory note for a lump 
 sum and gets in exchange the promissory notes of the bank for 
 the same sum, less’ the interest, divided up into small notes. 
 This is a part of the banker’s business that he can strongly claim 
 as his ancient and natural right, the essence of his vocation, 
 Buckner and Kelley to the contrary notwithstanding. This part 
 of the banker’s business supplies an early and frequent want of 
 every industrial community. Thus, adapting himself to the chang¬ 
 ing environment, the banker has come down to our day, an exam¬ 
 ple of the survival of the fittest. It is the natural right of every 
 one to sit on a bench and exchange his good current coins for un- 
 current ones, or to associate himself with others and occupy a large 
 house and loan his good current credit on the uncurrent credit of 
 others, and charge them for the use of it. In his “Considera¬ 
 tions on the Currency and Banking System of the United States,” 
 (p. 28,) Gallatin says: “It is difficult to distinguish a note on 
 demand drawn by a private individual from a bank note, in 
 countries where- every individual, is left at liberty to throw such 
 notes in circulation as part of the currency. * * * * 
 
 * * The same liberty seems to have originally existed 
 
 in the United States, but has subsequently been restrained by their 
 several laws to' incorporated banks.” Thompson’s Bank Note 
 Reporter , in congratulating the nationals on their success in Octo¬ 
 ber, 1864, said: “A state can no more emit a paper currency 
 than it can coin money. A state can no more charter institution’s 
 
48 
 
 NATIONAL BANKING EXAMINED. 
 
 to emit paper currency than it can grant power to coin money.” 
 Here is the same superstition that the king got his power from 
 the grace of God, and grants it to his subject. It would be as 
 true to say that an individual got the power to give his promis¬ 
 sory note from the state; or that he got it from the king; or that 
 the king never could have given his own promissory note except 
 for receiving a grant through the grace of God, and the subject 
 never could have given his note except for the two grants. Nearly 
 every writer in favor of exclusive national control of banking rests 
 his argument on this impious and fraudulent claim of kings. The 
 natural right was acknowledged by the states. They did not 
 attempt to deprive men of it, but on the contrary they offered an 
 inducement to those who had credit to use it in that way: they 
 limited their liability. Banking laws only prescribe the manner in 
 which the right shall be exercised. Their only grant is that of 
 partial instead of natural liability. They grant also to all who 
 circulate the notes complete immunity from any liability in the 
 nature of a vendor’s guaranty that the thing sold is actually what 
 it purports to be. 
 
 It is not a sufficient reason for depriving men of the use of 
 their credit in a certain useful, legitimate and profitable way, that 
 pretended credit has been used for purposes of swindling in imita¬ 
 tion of that way. The injustice of so doing is still greater when 
 we perceive that the swindlers could never have floated their pre¬ 
 tended credit but for a certain standing given them by legislative 
 action and the limitation of their natural liability by the same 
 means. “The business of lending money is no part of the duty 
 of any government, either state or federal. If a government has 
 more funds than are required for public purposes, its duty is to 
 remit part of the public taxes. Banking and brokerage are the 
 proper pursuits of such private citizens as choose to engage in them, 
 protected by the same laws that protect men engaged in other 
 business.” (Gouge’s History of Paper Money ahd Bkg., p. 39., 
 New York, 1835.) As it is not the business of a government to 
 lend money, so it is not its business to “furnish” it in any other 
 way; nor to give, nor to lend, nor “issue” any substitutes for 
 money under any form whatevey, because those who need them in 
 their business can not get them otherwise. He who needs money 
 and gets a substitute for it from the government is merely getting 
 it from his neighbor at second-hand. 
 
NATIONAL BANKING EXAMINED. 4 ST 
 
 The business of banking is properly then, among other things, 
 the loaning of his current credit to his customers, by the banker. 
 To deprive him of this right, and place it in the hands of the gov¬ 
 ernment, is communism. This may be allowable if all agree to it 
 and desire it, however unworkmanlike or unnatural. But when 
 done against the will, and to the injury of the business, of any por¬ 
 tion of the society, it is injustice. The whole society must show 
 that it is essential to the common defense, or the general welfare 
 —that of the bankers included—that this right to the use of their 
 own credit shall be forbidden the owners of it and the credit of all 
 shall be used communistically, by the whole people acting as a 
 government. The claim that it is desired by the people for pro¬ 
 tection against the bills of credit of the bankers bears error on its 
 face, for we have already seen thht as depositors they trust a 
 greater sum to the banks than all the bills of government credit 
 amount to. Neither national nor state legislature ever met in this 
 land without an attempt being made to get injustice done to some 
 citizens. Yet there is probably not a man who ever thinks at all, 
 who does not know that injustice is incompatible with permanent 
 peace. The only way to permanent freedom from discord here or 
 elsewhere, is to have each one free to labor and allow none to de¬ 
 prive him of its fruits. Credit is one of the fruits of labor. Every 
 individual has by nature as good a right to the use of his own 
 credit as he has to eat the bread he has raised out of the ground 
 by his own labor. 
 
 There is no essential difference between the use of the public 
 credit for currency by a direct issue by the government and an in¬ 
 direct issue through the national banks. The only difference made 
 out by the advocates of the national bank system, is that their plan 
 is more convenient. The first is undoubtedly communistic. It is- 
 impossible for the other to escape the same condemnation. That 
 the two plans are one and the same, is acknowledged by Geo. 
 Walker in his defense of the national bank system in the Inter¬ 
 national Review for March, 1879. He says: “ Both classes are 
 strictly notes of the government, since it issues both, and is equal¬ 
 ly obliged to pay both in constitutional money. The obligation to 
 pay the so-called bank notes is not quite so direct, but it is just as 
 absolute.” And he admits that there is no considerable advant¬ 
 age in “ear-marking” the notes, and that their local redemption 
 is a sham. And the law of congress declaring that national bank 
 
50 
 
 NATIONAL BANKING EXAMINED. 
 
 notes are government securities settles the matter. So the bond¬ 
 holding national bankers are caught in the act of communism, but 
 their alleged communistic assailants are thus far only so in theory. 
 And the remark of M. L. Scudder, Jr., in his “National Bank¬ 
 ing,” that stockholders in state banks “like the communists * 
 * * must be met and vanquished * * * at 
 
 the polls,” is grossly unjust, and intended for an insult; but a dis¬ 
 passionate train of reasoning proves him to be a defender and 
 practicer of communism. Hitchcock, in his “Socialism,” says of 
 French communism: “It denies and violates sacred natural rights 
 of the individual.” But neither he nor any other of our promi¬ 
 nent writers on communism can see the same denial and the same 
 violation in the prohibitory tariff laws, the prohibition of coinage, 
 the prohibition of the proper use of private credit. For too many 
 of them the starving bread-rioters, the underpaid railroad em¬ 
 ployees and the tariff-robbed grangers, are the only communists. 
 They find the word ‘ ‘ communist ” a convenient bludgeon with 
 which to strike down everyone who raises his voice against tariff- 
 communism, and mint-communism and bank-communism. But 
 the tariff-protected manufacturer and the national banker, who are 
 communists, and who keep communism alive in our country and 
 by their example teach it to all other classes, are entirely slighted 
 by these venders of advice. Their sole remedy is more power. 
 They forget that Napoleon, who had more power than their party 
 can ever hope to have, said at last, ‘ ‘ verily, there is no power 
 without justice.” 
 
 Not only is Walker right in calling the national notes “so- 
 called bank notes,” but the national banks are not really banks. 
 One branch of the banker’s business is loaning his own credit. 
 This is now totally absorbed by the federal government. Banking 
 is in a curious condition. The state and private banks are de¬ 
 prived of one of the functions of banking. The nationals the 
 same. The government only issues circulation, receives deposits 
 in certain ways, discounts only to national bankers, sells no ex¬ 
 change. So that there is no such thing as a bank proper in the 
 United States. 
 
 The argument for securing the convenience and protection of 
 the people by a federal banking system on the direct or the indi¬ 
 rect plan, proves too much. It shows that left to themselves, the 
 people can not successfully attend to their private business, but go- 
 
NATIONAL banking examined. 
 
 51 
 
 by ceaseless blundering on the way to inevitable bankruptcy at the 
 end; that the only way to avoid this is by some system of ma¬ 
 chinery under federal officials. Aside from natural causes, all mis¬ 
 fortunes in business may be traced to want of ability and honesty 
 in individuals. The presence in society of many persons of im¬ 
 perfect mental and moral development, causes the difficulties that 
 Knox, Walker, Buckner and others tell us can best be avoided by 
 congressional management. But the mentally and morally incom¬ 
 plete, are still in the social body, and mingle with and are a part 
 of, the government functionaries, and their influence or the force 
 they exert, and the sum total of the ultimate result thereof, is sub¬ 
 stantially the same, when the cost is measured in dollars. Those 
 who think the one weak point in our system is the circulation of 
 bills of private credit; that the people are incompetent to protect 
 themselves from spoliation by such means, and that only a pater¬ 
 nal federal government can, may have overlooked the fact that 
 since the immoral can no longer fleece the incapable by “wildi 
 cat” bank notes, they have caused greater loss by means of state,, 
 county and city bonds; by railroad, mining, insurance, oil and 
 other companies. From the Sedalia Democrat the following is 
 taken: 
 
 “ Nine years ago there were six life insurance companies in 
 St. Louis, with a capital of over $10,000,000. They were swal¬ 
 lowed up by two companies—the Life Association of America, 
 and the Columbia Life. Then the Tatter was swallowed up by the 
 former, and now the Life Association has swallowed up itself. And 
 so the policy holders are swindled out of millions, and the widow 
 and orphan are robbed of their last dependence. The biggest 
 steal of the nineteenth century.” 
 
 This is in one line only, and in one state, and does not give 
 the amount of premiums paid, nor of policies of which widows 
 and orphans have been robbed. A late newspaper account gives 
 the losses in Wall street in one week, by shrinkage in stocks, as fifty 
 millions of dollars. Yet it would not prevent these things to man¬ 
 age them all by federal laws only. Overbanking alone is not re¬ 
 sponsible for the losses in former years under state banks of issue. 
 As Tilden says, if credit is a lunatic, there is no use in putting its 
 little finger only in a straight jacket. No fact is better proved 
 than this: when banks were chartered by the states to issues large 
 amounts of notes on the specie basis, it was not to please and ben- 
 
52 
 
 NATIONAL BANKING EXAMINED. 
 
 «fit the small class of bankers only, but was in accordance with the 
 ■demand of the people for more means of speculation and devel¬ 
 opment of the country. If congress could have controlled the 
 issues of paper, it would have made no difference, for the people 
 control congress. We simply repeated the mistakes of England 
 through many legislatures instead of one. Wells, opposing the 
 second Bank of the United States in the senate, said: “The dis¬ 
 ease, it is said, under which the people labor, is the banking fever 
 of the States ; and this is to be cured by giving them the banking 
 'fever of the United States.” 
 
 If the federal government substitute the public credit for all 
 other credit money in time of peace for the convenience of trade, 
 it will be so much less able to use its credit for the common defense 
 in case of war. Any borrower whose paper is already out to a 
 considerable extent, will find more difficulty in putting out more of 
 it; and if when a good deal of it is out a desperate emergency 
 arise in which more of it must be used, the lenders will demand 
 higher rates. Aside from lack of mental power, or want of acquaint¬ 
 ance with the subject, there is only one reason why anyone should 
 want to delay the payment of the obligations of the government and 
 getting it clear of all entangling alliances with traders and bankers, 
 and ready to use its credit whenever the next emergency of war 
 ■shall demand. That reason is: the intolerable selfishness of those 
 national bankers who want to keep the present debt hanging over 
 and crippling the government as long as possible, for their own 
 private benefit. 
 
 Is it better for the banks to emit, bills for the government to 
 use than for the governmerU to emit bills for the banks to use ? 
 The former is sometimes advantageous and even necessary : neither 
 Is ever true of the latter. The history of all the countries and of 
 all the great banks of Europe, shows us a uniform set of causes 
 inducing a uniform plan in cases similar to ours in and after our 
 war between the states. On the decline of the government credit 
 the government makes a bargain with bankers whereby it gets the 
 use of their money and credit, and strains its sovereignty and 
 power to help to sustain their credit by the grant of certain privi¬ 
 leges. But in the national bank act this principle is exactly re¬ 
 versed; the government takes the whole field, farming out a part 
 to the national bankers. 
 
 In debating on the bill, Sherman thus referred to the well- 
 
NATIONAL BANKING EXAMINED. 
 
 53 
 
 known letter of Napoleon I. in which he said the Bank of France 
 was “ coining false money” : “The idea expressed by Napoleon 
 Bonaparte embodies the real objection to bank paper money issued 
 in time of war when specie payments are suspended. It is a power 
 that ought never to be exercised by any but the government. It 
 is the power to coin money; because when a bank issues its bill 
 without the restraint of specie payments, it substantially coins 
 money, and false money. Sir, this is a privilege that no nation 
 can safely surrender to individuals or banks. It is a privilege that 
 ought only to be exercised by the highest power in the government. 
 It ought only to be exercised by the state itself, and that only when 
 the state is in danger.” ( Understood: and congress is th'e judge 
 as to when the state is in danger.) 
 
 Imagine the framers of the constitution listening to a senator 
 proposing to exercise under it the power of coining false money as 
 its privilege, congress having declared the state in danger and the 
 coining of false money the only thing that would, in the opinion of 
 the senator, save it! Happy for us had Sherman read them more, 
 and Bonaparte and the London Times less. Chase asked aid of 
 the banks of the great cities of the north and they freely gave it. 
 Without their aid he could not have accomplished his object. But 
 whilst they were aiding him he crippled them so as to. injure their 
 credit. Then he appears with his national bank system, forbids 
 them the use of their own credit and confines them to the use of 
 the government credit. The country, instead of combining its 
 private credit and its public credit, confined itself to the latter;, 
 which was no more sensible than for a wrestler to tie up one of his 
 arms in the midst of a desperate struggle. Among the best finan¬ 
 ciers, who also sincerely desired the conquest of the Southern 
 States, this was the opinion a priori , and long years of observation 
 and contemplation of the facts seem only to have strengthened 
 them in the belief. 
 
 “To manage its own fiscal concerns and manage them well is 
 as much as is in the power of any government. The financial 
 operations of the United States government should be limited to 
 the collecting, safe-keeping, and disbursing of the public moneys,, 
 and the transferring of them from the places where they are col¬ 
 lected, to the places where they are disbursed. Further than this, 
 government should have no more concern with banking than it has 
 with baking or tailoring.” (Gouge’s Hist. Pa. Money, p. 62.) 
 
54 
 
 NATIONAL BANKING EXAMINED. 
 
 If when congress put the tax of ten per cent, per annum on 
 the circulation of state banks it had excepted such as were secured 
 by deposits of United States bonds, we would have had a circula¬ 
 tion as good as N the one the comptroller praises, and very much 
 better in some respects. And it would have been only banking) 
 and would have required no stretching of the constitution. State 
 banks did not suit the ideas of the architects of the national sys¬ 
 tem. Perhaps they believed with Chase, that the plan would pro¬ 
 duce “an increased security of the union, springing from the 
 common interest in its preservation, created by the distribution of 
 its stocks to associations throughout the country as the basis of 
 their circulation.” That involves the absurdity that the people 
 should hire themselves to support the government of their own 
 free choice. Otherwise it is an acknowledgment that it is not their 
 own free choice. This is one of the oldest revolutionary survivors, 
 and one may say to it, “Venerable fallacy , you have come down 
 to us from a former generation.” When the Continental Congress 
 at its second session, 1775, referred to the colonies for advice the 
 question of an issue of paper money, the Assembly of New York 
 advised an issue by congress for all of the colonies, and declared 
 it would be a “ bond of union.” Bollman found use for the same 
 argument in 1810, in favoring the old bank of the United States. 
 (Paragraphs on Banking, pp. 56, 68.) 
 
 Doubtless, like other fables, it comes to us from Asiatic an¬ 
 cestors. Mr. Alexander Hamilton, of New York, in proposing a 
 national bank as the exclusive source of issues, gives the same 
 argument in somewhat different language: “A further, and not 
 an unimportant consideration, as a guarantee for the security of 
 such a public bank, will be the general interest that must naturally 
 exist in every well-regulated community to protect the solidity of 
 an institution so absolutely essential to the prosperity and welfare 
 of the whole.” James Gallatin, in his pamphlet on the “National 
 Debt,” etc. (p. 49), in 1864, took the secretary to task for using 
 this argument in favor of an issue of legal tender notes, thus: “To 
 assert that the patriotism of the people required the excessive 
 issues of legal tender notes, in order to give them this ‘ direct in¬ 
 terest ’ in the country’s welfare, betrays a distrust of that patriot¬ 
 ism which the secretary, on mature deliberation, will, no doubt, 
 readily disavow.” The value of the entire property of the coun¬ 
 try rests on the existence of a government of the people’s choice 
 
NATIONAL BANKING EXAMINED. 
 
 55 
 
 properly administered. To suppose a man to change his real estate 
 or coin for bonds, and thereby become a friend of the constitutional 
 union, to change back and thereby lose his interest in it, is simply 
 absurd, as applied to the many. Such men would be less danger¬ 
 ous as free enemies than as purchased friends. A few men are 
 influenced by such considerations, but the experience and observa¬ 
 tion among speculators during our inter-state war, is that their 
 sympathies directed their financial operations and were not con¬ 
 trolled by them. Taking our present debt and our present popu¬ 
 lation, this argument amounts to this: the price of the devotion of 
 the Americans to their government is $40 per head. The use of 
 this argument, of a “firm anchorage for the union,” is a gross 
 insult to the people, and shows a want of acquaintance with them. 
 In all of the pamphlets in favor of the national system that swarmed 
 out in 1861-2-3-4, this ancient absurdity is pleaded with amusing 
 gravity. Hamilton, in his first plan of a national bank (1790), 
 makes no use of this argument, though if applicable in this case 
 it was applicable in the case he was considering. As its first ap¬ 
 pearance was in his day and state, and he was collecting all the 
 arguments he could get in favor of a national bank, he must have 
 known this one and thought it worthless. Ultima ratio regum has 
 been found so efficient in preserving the union, that the well-worn 
 argument of the New York Colony may be henceforth dispensed 
 with as superfluous. 
 
 The unmitigated misfortune of having the question of paper 
 currency in politics, is apparent to every one acquainted with our 
 history. How many unfaithful servants owe their place, to-day, 
 to the shamelessness of their professions of a desire and intention 
 to work for the “issue of more money,” will never be known. 
 Yet they had only the crudest and cloudiest ideas of the way in 
 which it could be accomplished. How utterly absurd to think the 
 paper currency can be issued or controlled exclusively by the 
 federal government, directly or indirectly, and the currency 
 question ever be anything but a source of perpetual discord. Dis¬ 
 honest office-seekers and demagogues, could ask nothing better; 
 the honest and industrious get nothing worse, than to have that 
 question kept in national politics. Nothing is so favorable to a 
 corruption of the government as to put the paper currency ques¬ 
 tion in its hands, for in a few years it can be so confused by legis¬ 
 lation, that the average voter will find it so difficult to understand 
 
56 
 
 NATIONAL BANKING EXAMINED. 
 
 that he will look on it as purely a question for experts, and refuse 
 to try to understand it. 
 
 Thus common sense and utility show no more reason for con¬ 
 trolling banking through the federal government, merely because 
 bank credits are sometimes used in lieu of money, or for any other 
 reasons, than they do for managing all other business through that 
 means. It is neither useful to trade in time of peace, nor to gov¬ 
 ernment in time of war, but is injurious in both cases. 
 
 To sum up: the demand that banking be separated from the 
 other vocations and controlled only by federal authority, ignores 
 the nature of currency; it assumes an identity in money and cur¬ 
 rency that does not exist; reasoning from that assumption it does 
 not even reach a logical conclusion; it rests on a false assumption 
 as to the confidence of men in each other and their ability to attend 
 to their own business, and on a failure to understand the true func¬ 
 tions of governments. And the proposition that the federal gov¬ 
 ernment control and manage banking, results in it doing the bank¬ 
 ing itself; this makes its credit least available when most urgently 
 needed by itself, and is undisguised communism. 
 
IS NATIONAL BANKING CONSTITUTIONAL? 
 
 “Public credit for public purposes solely .”—Democratic Platform , Cin¬ 
 cinnati, 1880. 
 
 In examining the act to provide a national currency, to see 
 whether it is a law made in pursuance of the constitution or not, 
 it is more convenient to divide the question in two parts. At the 
 time it was passed there was an endeavor to put it on the ground 
 of a war measure, an exercise of the power to borrow money on 
 the credit of the United States for the constitutional needs of the 
 government. In the case of Veazie Bank vs. Fenno (8 Wallace), 
 the court distinctly claimed the necessity of raising funds to carry 
 on the war as the ground of constitutionality of the act. In ad¬ 
 vocating it in congress, Sherman and others called attention to the 
 low credit of the government, and said that if it continued to issue 
 United States notes, and did not charter banks to issue a uniform 
 currency, the result would be a continued decline in the govern¬ 
 ment credit. Sherman’s remarks on Feb. xo, 1863, show him to 
 have been looking to the banking scheme to save the country from 
 the legal tender monster brought into being by congress. But 
 there is no evidence that it helped matters any to start national 
 banks. The Missouri Senator, John B. Henderson, made a long 
 speech attacking the bill. He said the local banks could loan the 
 secretary money if he could satisfy them of the security, and 
 asked if they would demand less security if they were changed 
 into nationals. “ Does the mere organization of capital * 
 
 * * enable the secretary to lay his hand on the surplus 
 
 capital of the country?” “ Falsehood and blunders will follow it 
 all the days of its life. Its history will be one of corruption.” 
 Geo. S. Coe, of the American Exchange Bank, approved “the- 
 
58 
 
 NATIONAL BANKING EXAMINED. 
 
 able remarks of Senator Henderson.” The amount of the coun 
 try’s credit was a given sum. When bills were kept within that 
 sum it would have a high market value, but issued over that its 
 market v-alue would decline. Manipulating it could not affect this 
 fact nor, conceal it. To expect the national notes to sustain the 
 credit of the government, was expecting water to leave its level 
 and run up hill. After state banks, private bankers and investors 
 had done all they could in the way of buying bonds, it was no 
 additional aid to the government to induce bondholders to form new 
 national banks and lend their new circulation to the government. 
 In the letter of H. H. Van Dyck, supt. of banking department of 
 New York, to the Evening Post, April 19, 1864, he says, “Nearly 
 all the currency that can be furnished by the ‘national banks’ is 
 borrowed by the treasury.” To borrow back these bank notes it 
 must issue bonds for them and pay interest on them. Why not 
 issue its own directly ? The same inflation occurred by this oper¬ 
 ation as if it had issued its own notes, and the debt was contracted 
 fn interest-bearing bonds instead of non-interest-bearing notes. If 
 the money was not in existence, or not to be had to buy bonds 
 with, and it was necessary to create it through means of the 
 national banks, it was as well for the government to create it itself. 
 Has congress entire discretion in the matter, so that it may borrow 
 the worst way or the best way? Suppose ourselves back in, 1863 
 or 1864. The government wants a hundred millions in current 
 paper money. Shall it print it in legal tenders and pay them out, 
 or shall it issue bonds and sell them for the legal tenders already 
 in the hands of the public ? It is objected that there are too many 
 legal tenders out already, and a further issue will greatly reduce 
 •the purchasing power of the proposed issue itself. It is decided 
 that it is better to sell bonds on the market for the legal tenders 
 already in the hands of the public. As an additional inducement 
 to purchase the bonds, bankers are allowed to issue circulation on 
 •them to the extent of ninety per cent. The transaction is made, 
 and what is the result? The currency is inflated about as much as 
 the issue of legal tenders would have inflated it, and the purchas¬ 
 ing power of the paper received for the bonds is thereby reduced. 
 The government is simply out the interest on the bonds by the 
 ^transaction. The new issue of bonds also has a similar effect on 
 the purchasing power of the paper money received, for it makes it 
 •seem less likely that so immense a debt as ours will ever be paid. 
 
NATIONAL BANKING EXAMINED. 
 
 59 
 
 So that the operation of selling a given quantity of bonds, and 
 allowing the purchasers to issue currency on them, is not far from 
 depressing the government credit as much as the issue of double 
 as many treasury notes would have done. In the debate Reverdy 
 Johnson showed that the evil complained of — embarrassment of 
 the money market by inflation — would not be remedied by with¬ 
 drawing the treasury notes and substituting bank notes guaranteed 
 by the government. Suppose the government takes the other 
 alternative, issues new treasury notes, and instead of paying three 
 millions interest in gold at the end of six months, uses the gold to 
 buy up its own notes. It gets from six to seven and a half millions 
 or takes up twelve or fifteen millions of the notes the first year. 
 This would strengthen the credit of the government and raise the 
 value of its subsequent issues of treasury.notes, i. e., would aid it 
 in carrying out the constitutional power to borrow money on the 
 credit of the United States (for the issue of notes is now considered 
 borrowing money). The other plan is not an appropriate method 
 of exercising that power, but is plainly an impediment to it. The 
 morality of buying up its own notes whilst fundable into interest- 
 bearing bonds, has at least the sanction of Hamilton. (Report on 
 Public Credit, p. 20, Child & Swaine’s Folio Edition, 1790.) Or 
 suppose the circulation of state banks had been taxed ten per cent., 
 but all such notes as were secured by deposits of the bonds of the 
 United States had been excepted: the same inducement to buy 
 the bonds would thereby have been offered to bankers. The ease 
 with which this could have been done made it the most proper and 
 made the other unnecessary in any degree. The following circular 
 came into the house, and was read by Griswold, April 28, 1864 : 
 
 “New York, April 22, 1864. 
 
 The excessive issue of paper money in various forms is now 
 rightly the subject of special alarm throughout the country. Any 
 further issues should be promptly arrested, and the amount existing 
 be gradually, but not too hastily, contracted. 
 
 * * * * * * * * 
 
 First, by the withdrawal of all bank-note circulation, as well 
 national as state, relying entirely upon legal tender notes of gov¬ 
 ernment now in circulation, which are quite sufficient. 
 
 Or, secondly, 
 
 1. By prohibiting the issue of any bank notes after this date, 
 unless they are secured by government bonds, say at ninety per 
 
NATIONAL BANKING EXAMINED. 
 
 60 
 
 cent. (This may be effected by a government tax on all notes not 
 thus secured.) 
 
 2. By requiring all banks having outstanding circulating 
 notes to withdraw them and secure those issued as above. 
 
 3. By limiting all circulating notes to amount outstanding. 
 
 4. By repealing the national bank act, making provision for 
 the national banks now existing. ***** 
 
 This plan, it is believed, will secure all that is really beneficiali 
 in the national bank system. ****** 
 Many Bank Officers.” 
 
 Senator Henderson, in April, 1864, worked vigorously against 
 the national bank act, and openly charged that it would inflate the 
 currency already complained of by everybody as redundant. No- 
 one, not even Sherman,, the champion of the bill, denied this. 
 Henderson said: ‘ ‘ When they put the notes of their banks in cir¬ 
 culation, do they not clog the very operations of the treasury ? Do- 
 they not produce the difficulty of which the Senator (Sherman) 
 now complains, und that is that the currency is redundant; that it 
 is in his way; that he has too much of it ? And further: ‘ 4 The plan 
 now proposed will, unless strangled by the future legislation of 
 congress, postpone for twenty years at least all hopes of a con¬ 
 vertible currency.” (He came within four years of it.) 
 
 The debate in the senate over the first bill, shows Sherman 
 and others contending for the system, chiefly because the amounts 
 of currency would be arbitrarily limited by law of congress. But 
 when one understands what currency is, he at once see the absur¬ 
 dity of attempting so to limit it. But what does a congressional 
 limitation amount to ? A limitation from one session to another 
 only, for the next congress may alter or remove it entirely. So 
 that to have a real limitation would require a fixedness in the com¬ 
 position and disposition of congress that no sane man expects; 
 and if it could be made, it would be absurd and incongruous with 
 the nature and uses of currency. Yet this was Sherman’s chief 
 argument: On one hand a system of state banks that had issued 
 $167,000,000, and with no limit to the amount they might issue ; 
 on the other, the new national system limiting the total issue to 
 $300,000,000. So far as he gained any advantage from the argu¬ 
 ment it was an advantage gained under false pretenses. 
 
 If there was any expectation of making a market for the bonds 
 by creating this system of banks, it was not realized. Less than 
 
NATIONAL BANKING EXAMINED. 61 
 
 «one-fifth of the bonds have been continually held by the national 
 banks. If we take out the state banks converted into nationals, 
 we will find that the new nationals made a market for less than ten 
 per cent, of the bonds; and if we take out of these the amount 
 that would have been held by those who became stockholders in 
 the national banks, but who, even if they had not been able to start 
 national banks with them would have held them as investments, the 
 .amount marketed by the creation of the system dwindles into in¬ 
 significance. But on this point a most emphatic and reliable dec¬ 
 laration was made by Col. Joseph L. Stephens, President of the 
 Central National Bank of Boonville, Mo., President of the Mis¬ 
 souri Bankers’ Association, and late Vice-President of the Ameri¬ 
 can Bankers’ Association, who has w.on for himself a prominent 
 place among American financialists. In his address to the Mis¬ 
 souri Bankers’ Convention at Sweet Springs, Mo., July 9th, 1879, 
 on “Popular Delusions in Regard to Finance and Banking,” he 
 said: “The incorporation of the banks simply made them the pur¬ 
 chasers of a small portion (less than a fourth) of the bonds that had 
 been antecedently issued and sold to others." 
 
 Sherman stated (Apl. 26, 1864) in the senate that the Bank of 
 Commerce of New York already had $16,000,000 in bonds of the 
 government, and Henderson of Missouri showed that there could 
 be no advantage to the government by inducing it to come into the 
 national system as it had bought all the bonds it wanted. May 
 •6th, 1864, Henderson said: “It cannot and will not be argued 
 now that it will enable the secretary of the treasury to sell bonds, 
 .as an inducement to commence banking, * * * be¬ 
 
 cause the banks of the country already hold bonds enough to pro¬ 
 cure all the circulation authorized by the bill.” “ How does it en¬ 
 able him to borrow money that he could not otherwise borrow.” 
 On the passage of the second bill, Ganson of New York, said that 
 the banks of his state had purchased over three to one over what 
 the national banks had purchased, of national bonds. Van Dyck, 
 superintendent of the banking department showed that they had 
 purchased more than the amount of their capital in United States 
 bonds. The plan of securing circulating notes by deposits of 
 bonds was already in successful operation under the laws of New 
 York, and of other states. United States bonds were already used 
 for this purpose among other bonds. The system would have 
 grown from one state to another, and these bonds would have be- 
 
62 
 
 NATIONAL BANKING EXAMINED. 
 
 come the favorite security, and the notes been always as good as 
 greenbacks, and some of them better. (Thus in passing the charge 
 is again disposed of, that state bank notes would have been so 
 much below par that they would not have been capable of use as 
 the currency of the country, during and since the war.) The state 
 banks would have gone naturally and willing into this arrangement; 
 and that we would, long before this time, have had a complete 
 system of state banks issuing notes all secured by deposits of 
 United States bonds, is almost certain. But coercion was neces¬ 
 sary to drive capital into the national system and it has never com¬ 
 pletely succeeded. On the payment of the debt, such state banks 
 would substitute other good bonds as security and continue with¬ 
 out interruption; but by that event the nationals will be dissolved, 
 hence they try to postpone it. 
 
 Chase distinctly acknowledged that the system could not be 
 expected to give the government any aid of importance, at the 
 time it was most imperatively necessary to sell bonds. The lan¬ 
 guage of his report in December, 1862, as quoted in Spaulding’s 
 Financial History of the War, is as follows: “Little direct aid is, 
 however, to be expected from this plan during the present, nor 
 very much during the next year.” (p. 167.) That substantially 
 put off any hope of aid from it until 1865, in Chase’s opinion. 
 Twenty banks took out charters in June, 1863, forty-three in De¬ 
 cember, 1863, forty-three in January, 1864, and sixty-seven in 
 February, 1864. A meeting of state bank officers at the New 
 York clearing house, in Dec. 1863, reported, among other things, 
 as follows: “It must have been observed by all, that the applica¬ 
 tions for banks under this law, though numerous, are for small 
 amounts, many of them of only $50,000, or $60,000, capital. 
 Your committee know of very few which are designed to do a le¬ 
 gitimate banking business. There may be others, but from the 
 small amount of capital of more than a hundred of them, and the 
 localities of several, your committee strongly suspect them of be¬ 
 ing intended for banks of circulation only, not regular business 
 banks for deposits and discounts, but what are known in our wes¬ 
 tern states by the expressive term “Wild Cat Banks.” One of 
 the subscribing committeemen was John E. Williams, of the Me¬ 
 tropolitan (now National) Bank. Thomas W. Olcott, President, 
 Mechanics and Farmers Bank, H. H. Martin, Cashier, Albany 
 City Bank, Rufus H. King, President New York State Bank, E. 
 
NATIONAL BANKING EXAMINED. 63 
 
 Wicks, Cashier Commercial Bank, all of Albany, addressed to 
 Lucius Robinson, comptroller, a communication, April 8th, 1864, 
 in which they pointed out that the national banks were only leeches 
 on the government. They said: “ These national banks live and 
 move and have their being on treasury pap. Their plates and pa¬ 
 per and printing are given to them. Money which the govern¬ 
 ment is borrowing at high rates of interest is deposited with these 
 banks without interest. They are also exempt from taxation, 
 which is equal to 2^ or 3% more. But all these advantages and 
 largesses heaped upon them by the secretary, are scarcely one- 
 third in comparison with the field of circulation which the govern¬ 
 ment has surrendered to them. They can circulate three hun¬ 
 dred millions upon government 6 per cent, stock, payable in gold, 
 which is more than 10 per cent., or thirty millions a year clear 
 profit, and for which the people are to be yearly taxed. This vast 
 amount could be saved by the issue of government legal tender—a 
 better currency—and the people relieved from a tax of thirty mill¬ 
 ions a year, given to foster and build up the most stupendous, ill- 
 devised and alarming system of banking which the world has ever 
 known. Already the condition of the currency and of our na¬ 
 tional treasury admonish us of appalling dangers—dangers in view 
 of which it were wise to pause, and prudent to reflect.” Some¬ 
 what less than one-twentieth of the total federal indebtedness was 
 represented by the national bank capital during the war. Even 
 Spaulding saw that it could be of no assistance at that time. He 
 said : “ It is anticipated that in the course of a few years, and cer¬ 
 tainly as soon as the system goes into operation, United States 
 bonds will be deposited to this amount ($250,000,000). * * * 
 
 Will this materially aid the government in the present exigency ? 
 I think it will not, and the secretary frankly admits that ‘ little di¬ 
 rect aid,’” etc. (Fin. His’t War, p. 171.) The “degree of ne. 
 cessity”—one-twentieth of the debt—was, like the degree of ne¬ 
 cessity for establishing a branch of the Bank of the United States 
 at Albany to furnish a place to deposit the $2.50 of government 
 money there, a very small one. Why did these men who knew 
 the bank act would not be of sufficient benefit in the exigency to 
 compensate for the “largesses ” bestowed on the banks in order to 
 induce them to organize, thus waste precious time over an act 
 which was not of present importance, and raise up questions that 
 provoked the ill-will of the bankers who were doing all in their 
 
■64 
 
 NATIONAL BANKING EXAMINED. 
 
 power to take the government bonds? There can be. but one an¬ 
 swer to this. They knew that unless they got the work done by 
 this fractional congress, wrought up to a pitch of frenzy in which 
 it was capable of doing literally anything alleged to be necessary 
 by anybody in accord with it, that the time would come when 
 reason would resume its sway, and respect for the known condem¬ 
 nation of federal banking by the public opinion, would make the 
 passage of the act impossible. They were rogues at a fire. And 
 it turned out worse than Chase said. The act to provide a national 
 currency was insufficient to give the system a hold on the country. 
 That by which a tax of ten per cent, was put upon state bank 
 notes, and which by its terms took effect July, 1866, did the work, 
 as the comptroller and McCulloch both state. The war was over 
 and the army paid before the national system had got to work. 
 Wherein, then, was it an aid to the government? 
 
 Notoriously, congress did not think it necessary to establish 
 the new system of banks proposed by Chase, but did so out of 
 deference to his judgment. The law passed the senate by a vote 
 of 23 to 21, but if those who did not believe it either appropriate 
 or necessary had voted as they thought, instead of voting as Chase 
 thought, the bill could not have passed. So we have taken another 
 long step in addition to the one taken in McCulloch vs. Maryland: 
 to-wit, congress need not decide the degree of necessity in order 
 to incorporate a federal bank or banks; the secretary of the treas¬ 
 ury may decide it and congress put it in force against their own bet¬ 
 ter judgment, and it will be declared constitutional. Chandler said: 
 ‘ ‘ This is not a question of banks or no banks. This is a question of 
 government or no government. It is very well known to every sen¬ 
 ator on this floor, that we must have money to carry on this great 
 government or it will go down. * * * The secretary of the 
 
 treasury comes before us and tells us this bill is necessary to carry on 
 the financial operations of the government.” “In this great emer¬ 
 gency shall we hesitate to take what is necessary to save the gov¬ 
 ernment?” * * “We are to-day in the very crisis of our fate. 
 If we fail at all, we fail financially. ” Henderson voted for the bill in 
 1863, understanding that the secretary of the treasury thought it 
 “a measure absolutely essential to enable him to get along with 
 the finances of the country.” Sumner said it was to “enable 
 the Republic to go triumphant through all its perils.” Sherman 
 said: “We think these banking associations essential to maintain 
 
NATIONAL BANKING EXAMINED. 
 
 65 
 
 the national credit. They are agents of the national government. 
 They are only justified as agents of the national government to 
 protect the national credit.” Sumner said: “At this moment 
 the national banks are not less important to our defense than our 
 navy yards.” Against, Sumner, Sherman, and others, who tried to 
 keep the power of taxing national banks out of the hands of the 
 states, Lane, of Kansas, said: “The time may come, as it once 
 was, when the people of this country will not want a United States 
 Bank; and I desire to give to every city, county and state, the 
 power to destroy it if that time shall come. * * I opposed it 
 
 when it was in existence; I spat upon its grave after it was bur¬ 
 ied; and 1 am now induced to support it because my country de¬ 
 mands it.” 
 
 The convenient plea has been put in that the negotiation of 
 foreign loans was impossible on account of the sympathy of for¬ 
 eigners with the Confederate States. Doubtless there was much 
 more in the assumption of power to make legal tender at will and 
 the general blundering of congress that prevented it, than in this 
 supposed sympathy. It is impossible thus to hide the follies that 
 produced the result. Instead of looking at the situation coolly and 
 reasonably, congress acted like run mad revolutionists, made the 
 most foolish utterances possible and those calculated to injure pub¬ 
 lic credit most severely. Nothing in folly and demagogism uttered 
 since the war, but may be duplicated by extracts from the congres¬ 
 sional records of the war period. What good could result from 
 proclaiming to the world that if the southern states were not forced 
 back into the union there would be no government nor constitution ? 
 Why not say, like men, that the remaining states were amply able 
 to pay the debt, and would pay it to the utmost farthing, with or 
 without the south? How could it help damaging the credit to 
 inform the whole world that a mistake had been made hitherto 
 in supposing nothing but gold and silver could b.e money under 
 the supreme law of the land, and that such a daft set as congress 
 appeared to be, could make one thing or another money for past, 
 present, or future contracts. 
 
 There is strong evidence to show that a set of cold-blooded 
 conspirators intended all the time to fasten the debt on us forever, 
 for the purpose of having the privileges of these banks perpetuated. 
 In a pamphlet issued from the government printing office, in 1861, 
 in which only fictitious names are signed, one writer signing 
 
 5 
 
66 
 
 NATIONAL BANKING EXAMINED. 
 
 “Patriotism,” says: “Thus it may be that the people of this 
 country will demand of the government that the whole of this 
 amount of bonds shall remain as a base for currency, and thus 
 relieve you from the unpleasant necessity of laying a tax to pay 
 them off. Let us all, with one accord , unite in building up for our¬ 
 selves and posterity the most substantial and beneficial system that 
 has ever been adopted, and which is built entirely upon public 
 credit, public intelligence, and a united self reliance and indepen¬ 
 dence. Esto perpetua.” The pamphlet was called “ Notes explan¬ 
 atory of Mr. Chase’s Plan.” Numerous other propositions suggest¬ 
 ing the perpetuation of the debt were made at the time. But after 
 the country regained its balance by the return of all the states, the 
 restoration of free speech and the decline of military rule, these 
 were silenced. The proposition has lately been revived in the most 
 respectable journals of both parties. There is one of the old 
 parties that such journals do not represent. What must have been 
 the effect of such doctrines, when the government may be said to 
 have had hundreds of thousands, even millions, of men stealing 
 from it? Evidently this doctrine, which impregnated the very 
 atmosphere at the time, not only quieted the conscience of every 
 rogue, great or small, eminent or obscure, military or civil, but 
 made him regard himself, in increasing the debt, as starting a mint 
 and furnishing the bullion for general use. He was no rogue at 
 all, but a generous and philanthropic benefactor of the public, 
 furnishing the means of perpetuating money for everybody. 
 
 But what except the most reckless disregard of truth could 
 induce men to urge the adoption of the national system on the 
 ground of the supercession of a “wild-cat” system. The igno¬ 
 rance of the London Times , from which Sherman quoted, could be 
 expected and over-looked as a part of the general European igno¬ 
 rance of American affairs; but the moral, or immoral, aspect of its 
 use as an argument in the senate, is quite different. Fessenden 
 showed that the stock-holders of New York state banks were indi¬ 
 vidually liable on the notes of their banks. Cowan showed that 
 it was not a legislative provision, but was in the constitution of 
 that state of 1846. Sherman said it was “engrafted on the con¬ 
 stitutions of many of the leading states of the Union, * * * 
 
 New York and most of the western states.” Wilson, of Massa¬ 
 chusetts, stated that stock-holders were personally individually lia¬ 
 ble on the circulation in his state. (April 26, 1864.) The framing 
 
National banking examined. 
 
 67 
 
 of the bill so as to except the Bank of Commerce of New York 
 from the double liability to which the other banks were subjected, 
 was very objectionable to the senate, and Sherman said that the 
 only reason he favored it was that they were “compelled to do it 
 or forego the advantage, to be derived from this very large bank 
 leading off from the state to the national banking system.” Fes¬ 
 senden made the pertinent inquiry, why the Bank of Commerce 
 declined to issue notes under the laws of New York, but wanted 
 to get into the national system for the purpose. It would not be 
 likely to increase its accountabilities to law, or to leave a liberal for 
 a stricter system. Its action indicated that the national system did 
 not as strictly hold the stock-holders as the new system. As he 
 then spoke the constitution of Michigan had for thirteen years 
 contained a clause forbidding the legislature to pass any act per¬ 
 mitting the banks to suspend specie payments. In parts of the 
 country the state bank notes were worth more than the treasury 
 notes. In Kentucky they were three per cent, higher when the 
 national bank act was under debate than treasury notes. Hender¬ 
 son dared Sherman to allow a proviso in the. bill, that national 
 banks be required to keep on hand one-tenth as much coin as the 
 Missouri state banks then had in their vaults. (May 9, 1864.) 
 Henderson continued, “The very state bonds that were filed with 
 the register in Wisconsin and Illinois and other states in the west, 
 to furnish a basis of circulation in those states in 1857 and 1858, 
 never sunk so low below gold as United States sixes to-day, 
 although the people suffered so much by the depreciation of those 
 bonds.” It was said that the notes of the Minnesota banks were 
 ruined by the secession of the states on whose bonds they were 
 issued. The state banks then were not to blame; and it was the 
 less likely that they had means to start the new system on a sound 
 basis. Here was a condemnation of a system of banking, because 
 it had been unable to protect itself against the effect of the seces¬ 
 sion of the southern states! But the new system felt the effect of 
 the same cause at its birth — its notes first went into circulation at 
 a discount of about 50 per cent. Grimes, of Iowa, said the state 
 system of Iowa was “ entirely satisfactory to the people” of his 
 state. (May 5, 1863.) Doolittle said: “I understand there is 
 not a better managed institution in the country than the State Bank 
 of Indiana or the State Bank of Iowa.” Farnsworth, of Illinois, 
 distinctly plead the “baby act” for his state. He wanted congress 
 
68 
 
 NATIONAL BANKING EXAMINED. 
 
 to manage banking for his people, because they were unable to 
 grapple with the question themselves, according to him. Replying 
 to Farnsworth, who represented'his state as having a “general 
 smash of all the bank circulation, once every two or five years,” 
 Kernan said, “If it be true that in certain states the people wish 
 to suppress the state banks, should they come here and suppress 
 also the banks in other states, where the people are better satisfied 
 with their state banks than with the proposed so-called national 
 banks.” Henderson said (May 6, 1864), “I have heard it given 
 as one reason why this bill should be passed, that the state banks 
 have suspended specie payment. * * * If the state banks had 
 
 suspended specie payments, without any action on our part making 
 it necessary for them to do so, would that be any reason why we 
 should pass here a system of banking which is already suspended 
 in its inception. If bank suspension is a bad thing, it is bad only 
 because notes of the banks are not convertible into coin. * * 
 
 * They (state banks) have enough coin in their banks to buy 
 greenbacks in sufficient quantity to redeem every dollar of it, to¬ 
 day, and have all their loans, exchange, and other assets, on hand 
 besides.” On the same day, Reverdy Johnson called attention to 
 the fact that the failure of a state bank to redeem its issues in coin 
 was an act of bankruptcy, and congress could reach the case by 
 passing a bankrupt law. Garret Davis, of Kentucky,'said: “If 
 the government had not interfered with the banks, it is a problem 
 whether they would have been driven to the suspension of specie 
 payments at all; certainly not in the condition in which the coun¬ 
 try and business then were.” Henderson showed that in i860 the 
 state banks had in circulation $207,102,477, and coin on hand 
 $83,564,528, or over 40 per cent. The nationals had out on Oct. 
 2, 1879, circulation, $313,786,362; specie, $42,173,731; legal 
 tenders, $69,196,696, or nearly 36 per cent, counting legal tenders 
 and specie; or thirteen per cent, of specie alone. The coin value 
 of the legal tenders is par, as long as the people do not want to 
 pay express charges on them to New York and charges on the 
 coin back. If the arrangements were such that they were redeem¬ 
 able without this discount of an average of at least five per cent., 
 their coin value would not be par, because there is not coin enough 
 to redeem them. When, in Jan. 1, 1866, the national circulation 
 was first greater in volume than the state bank circulation, the 
 nationals had on hand less than twenty millions of specie. H. H. 
 
NATIONAL BANKING EXAMINED. 
 
 69 
 
 Van Dyck, supt. of the New York banking department said, in his 
 letter to the Evening Post , April 19, 1864, in defense of the New 
 York banks : “The aggregate circulation issued and outstanding 
 at this time, is more than a million dollars less than it was in 1854; 
 although the banking capital has increased more than twenty-six 
 million of dollars within that period. The secretary of the treas¬ 
 ury stands confessedly at the fountain-head of irredeemable paper. 
 
 * * * Standing far above all state banks on the stream of 
 
 irredeemable paper issues, he complains that these institutions be¬ 
 foul the currency so that he cannot abide it, and redress can only 
 be had by forcing them into liquidation through onerous taxation: - ” 
 Henderson said, “If you, to-day, repeal your legal tender law, 
 there will stand the state laws, compelling the banks to redeem in 
 coin, and they have got the coin to do it.” And, “The secretary 
 of the treasury says he is injured in all his financial operations, be¬ 
 cause he cannot stop the banks from inflating the currency, when 
 the fact is that the banks are contracting their currency every day, 
 and we know it; and yet gold goes up as the state banks contract 
 their currency. Then somebody else is expanding the currency, 
 and not the state banks.” Sumner said: “Gold will assume its 
 normal place; business will be sure; values will be fixed, fluctua¬ 
 tions will cease; inflated prices will pass away.” This was not the 
 first time Missouri had to teach Massachusetts true finance, and it 
 recalled the day of Benton and Webster. It was clear that the 
 senate knew that it was not substituting a sound for an unsound 
 currency. The contrary was near the truth. It could not rest the 
 plea of “necessary and proper” here. 
 
 The banking system could not be of any aid to the govern¬ 
 ment in paying the debt after the war was over. There was noth¬ 
 ing to do then but to collect taxes and apply them honestly. The 
 tendency has always been to keep government money lying idle 
 on deposit in these banks while the government is paying them in¬ 
 terest on the bonds. It is said they were necessary for deposito¬ 
 ries of government funds, taxes raised in the interior, etc. But 
 such depositories already existed; state banks would have given 
 ample security and been glad to get the deposits. The national 
 system only put a uniform on them. Does any one pretend that 
 the Bank of Commerce is a safer depository for having put on the 
 national uniform ? The degree of necessity is, according to Mc¬ 
 Culloch vs. Maryland, a matter for congress to decide. But where 
 
70 
 
 NATIONAL BANKING EXAMINED. 
 
 a system already exists under the state laws and congress can util¬ 
 ize that, there is no degree of necessity for it to start a new one. 
 A method “appropriate and plainly adapted to the end” would 
 have been for the government to select a bank already established 
 and make it a depository, requiring it to give security for the gov¬ 
 ernment funds deposited. Where the natural demands of business 
 had not already justified the presence of a bank the hope of be¬ 
 ing a depository for the purposes of the government would scarce¬ 
 ly be sufficient to cause a national bank to be founded. We have 
 only to look over the country and see that the failure of the sys¬ 
 tem to become generally adopted proves conclusively that it is not 
 adapted to the purpose of providing safe depositories for funds 
 raised by internal taxation. In a large part of the country where 
 the law of congress has failed to bring into existence such depos¬ 
 itories, better ones already existed and still exist under state laws. 
 In fact the system flourishes most in the part of the country that 
 pays the least tax in proportion to its wealth, showing that like all 
 other cases of federal banking, this is in the interest of capitalists 
 more than in the interest of the government. Perhaps some one 
 may answer with the venerable error of the great dead, who said 
 in McCulloch vs. Maryland, that for the- execution of the powers 
 assigned to it, the federal government is not dependent on the 
 state governments. It depends upon the state governments for 
 the very organ by which it uses its powers—congress itself—and 
 for the executive no less. The originator of that must have meant, 
 “for the exercise of its implied, inferred and doubtful powers,” 
 it is not dependent. Similar grounds were advanced for charter¬ 
 ing the former Banks of the United States, but by long practice 
 we demonstrated that they were unnecessary as aids to the govern¬ 
 ment in transacting its business.. In the financial debate in con¬ 
 gress in 1857, the Democrats charged the Republicans with being 
 secret friends of the idea of a government bank, and they reiter¬ 
 ated Webster’s plea of oblivion for it as “obsolete.” If a law is 
 unnecessary and improper and tends to defeat the exercise of one 
 of the constitutional powers urgently necessary to be exercised, is 
 it the less unconstitutional because its fatal defect is not seen at 
 the time of its passage; or because it is passed in good faith? 
 Does it make any difference in its constitutionality whether it is be¬ 
 gotten of the shrewdness of money lenders desirous of fattening 
 on the extremity of the government, or the dullness and ignorance 
 
NATIONAL BANKING EXAMINED. 
 
 71 
 
 of finance and law on the part of congress and the secretary of 
 the treasury? 
 
 The evidence, then, is that the founder of the system gave 
 notice that no aid of importance could be expected from the sys¬ 
 tem during the war; the most important service, an indispensable 
 one to the success of the war, was rendered by the state banks; 
 the notes were not worth as much in estimation or in respect to 
 the ability of banks, as those they superseded; no new market for 
 the bonds was created; no service was rendered by the banks that 
 those already existing would not have rendered; the currency was 
 inflated by the system; the price of bonds was depressed by it; 
 the prices of what the government needed were made higher; it 
 was believed unnecessary by those without whose votes it could 
 not have passed but was passed, because the secretary of the treas¬ 
 ury thought it necessary ; its effect showed it to be improper : hence 
 it was at the time it was passed as unconstitutional as if specifically 
 forbidden. Has it become constitutional since ? 
 
 In his report for 1879 the comptroller says: “It is certain 
 that if the national banking system had not existed, and United 
 States notes had alone been issued, the refunding operations here 
 described and the consequent large reduction of interest upon the 
 public debt would not have been possible.” This claim is that 
 these holders of the bonds became disinterestedly anxious that the 
 government cease paying them six per cent, and only pay four. 
 The industry and economy of the people and their prompt and 
 cheerful contributions of taxes so improved the credit of the gov. 
 ernment that the loan could be refunded at a lower rate and these 
 banks reluctantly exchanged their bonds, which constituted a small 
 portion of the debt. This is the fact. The kind of money circu¬ 
 lating played no part. In this connection it would be interesting 
 to the taxpayers to know whether the sale of four per cent, thirty, 
 year bonds, resisted by the secretary of war on the ground that 
 the rate was too low, bonds which have gone to about ten per 
 cent, premium in the hands of the purchasers, is to be considered 
 solely a lack of judgment on the part of our officials. For if the 
 interests of the national bankers (which the present secretary could 
 not more carefully guard if he owned all of them) affected it in 
 oven a very slight degree, it touches the question of constitution¬ 
 ality ; still more if they effected it entirely. The demand has been 
 made during the progress of the debate on refunding in the first 
 
72 
 
 NATIONAL BANKING EXAMINED. 
 
 part of 1880, that the debt be perpetuated for the benefit of these 
 banks; that a three per cent, interminable stock like the English 
 be saddled on us. The attempts to spin the debt out as long as 
 possible, and the ill-concealed determination of congressmen, sen¬ 
 ators and treasury officials to have the new bonds bear a higher 
 rate of interest than is necessary, is unquestionably due to the na¬ 
 tional bank influence. In refunding, or borrowing at a lower rate 
 to pay existing debts, this system has been a hindrance, again 
 proving its unconstitutionality. 
 
 If this system tended directly to cement the Union, it would 
 fiave a better argument for its constitutionality than it has ever 
 been able to show in any other way. This point was fully treated 
 in the last chapter, and it was seen there that there is nothing in 
 the claim. Mr. Watmough, a Pennsylvania dwarf, who, repre¬ 
 senting the bank district, attempted to oppose the Missouri giant 
 who was battering down the United States Bank, said the stability of 
 the Union itself depended on the bank. Subsequent events made 
 this speech the prize jest of our financial history up to 1861. And 
 what is Chase’s statement, persistently kept before the people at 
 their own expense in the comptroller’s reports—that the national 
 system would furnish “ firm anchorage to the union of the states” 
 —but a rehash of Watmough’s ancient gravely uttered jest? The 
 national system was most favorably received in the north and east, 
 the sections where the most devotion to the objects of the war was 
 felt; but in the south where other considerations outweighed the 
 geographical integrity of the Union, in California and Oregon, 
 that did not raise a regiment for the war, the system has never 
 taken any considerable hold. So that the a priori absurdity of this 
 argument is made palpable by the facts. 
 
 Is the act to provide a national currency constitutional, regard¬ 
 ing it simply as what its title indicates it to be ? Can the national 
 system permanently exist in time of peace as the monopolist of the 
 right to issue currency ? The doctrine of the present day is that 
 the act is simply what its title states: “An act to provide a 
 national currency; ” that it has no special reference to a state of 
 war or the exigencies thereof, but is justified on the ground of the 
 impossibility of having a sound and homogeneous currency by any 
 other means. The demand is that it be made the sole and perma¬ 
 nent currency of the country. Its constitutional warrant is some¬ 
 what obscure, even in the minds of its advocates, and is variously 
 
NATIONAL BANKING EXAMINED. 
 
 73 
 
 inferred; from the power to coin money by some, from the power 
 to regulate commerce among the states by others, and from both 
 these powers by others. April 26, 1864, Sherman said : “We think 
 these banking associations essential to maintain the national credit. 
 They are agents of the national government. They are only justi¬ 
 fied as agents of the national government to protect the national 
 credit.” (Cong’l Globe, pt. I., 1st sess. 38th Cong.) To take 
 him at his word, these banks are not now justified at all, for the' 
 national credit does not depend on them. The industry and fru¬ 
 gality of farmers, miners and others, has thoroughly established it. 
 
 The friends of this scheme knew that to charter banks to issue 
 their own bills would be so plainly a resurrection of the old con¬ 
 demned Banks of the United States, that they had to get up a plan 
 by which the bills of credit of the government could be issued 
 through banks. In trying to prove the constitutionality of making 
 the notes of the first federal bank receivable for taxes, Hamilton 
 said: “The appointment of the money or thing in which the 
 taxes are to be paid, is an incident of the power of collection. And 
 among the expedients that may be adopted, is that of bills issued 
 under authority of the United States.” But was it ever “necessa¬ 
 ry” to invent a new medium for paying taxes? Was it “neces¬ 
 sary ” to set up the huge machinery of the bank for the purpose ?• 
 Every body knows that the bank was wanted for other reasons. 
 Besides, the various parts of the constitution consist with each other. 
 The power to coin money has a direct bearing on the question of 
 what the taxes shall be paid in, and makes the inference of a power 
 to appoint some other thing unnecessary. Among Chase’s reasons 
 for asking the passage of the bill, in the fall of 1863, were: “its. 
 utility at all times in protecting labor, cheapening exchanges, facili¬ 
 tating travel and increasing the safety of all business transactions; ” 
 none of which are true of it, as we saw in the first chapter. 
 
 Sumner and Chandler went over the weary road of proofs 
 that the states cannot delegate to banks the power to issue notes, 
 because they do not possess it themselves, all unconscious that 
 their proofs had been many times exploded; especially by Davis, of 
 Mississippi, in the senate in 1857. Much mental confusion occurs 
 from men supposing that the state can confer upon individuals in 
 certain bodies, or corporations, the new power of issuing circulat¬ 
 ing notes; or as some choose to state it, the sovereign power of 
 issuing money. Sherman said (Feb. 9, 1863), “there is not a 
 
74 
 
 NATIONAL BANKING EXAMINED. 
 
 ■single act done by any banker that cannot be done by any individ¬ 
 ual, except the issuing of circulating notes.” And a few moments 
 later, “I would ask my friend to tell me a single advantage the 
 banks of the state of New York have, a single charter privilege 
 which they have, except the power to issue circulation.” And in 
 the same speech, “ the only power they (banks) derive from incor¬ 
 poration not granted to all citizens, is the power to issue notes as 
 money.” As we saw in the last chapter, it is the natural right of 
 every man to use his credit in the form of circulating notes, and 
 none of the states has destroyed it. They provide the manner in 
 which it shall be exercised, through corporate organizations. The 
 old decisions in the cases of the former banks of the United States 
 were to the effect that congress could also provide the manner of 
 exercising this right, whenever it is necessary for it to do so, in 
 order to exercise one or more of its powers; and that the states 
 could not hinder it in so doing. But, as we have seen, the present 
 national banks are not using any private credit in the issue of their 
 notes, but are using the public credit. Their notes are the public 
 credit disguised as bank notes. Where in the constitution can we 
 find the power to so use the public credit for the convenience of 
 trade? Nowhere, for it does not exist. 
 
 No doubt one of the original intentions in passing the act, 
 was the paternal and centralizing one of providing a national cur¬ 
 rency for the safety and convenience of trade and of the people 
 generally. Lincoln’s message of December, 1862, and Secre¬ 
 tary Chase’s of almost a year previous, as quoted from by the 
 comptroller, on pages 26 and 27 of his report for Dec., 187-8, 
 establish this fact beyond any doubt. When the bill was in con¬ 
 gress Fessenden probed the ignorance of some and the duplicity 
 of other senators thus: “Gentlemen argue as if this was a mere 
 matter to last during the war, for a year or two more or less. Is 
 ■it so? Does not the secretary of the treasury dream and does he 
 not believe that it is t.o extend through all time; * * * it is 
 
 To be a matter for peace, for a long series of years.” Knox, 
 Walker, McCulloch, and all of the other defenders of the system, 
 keep strictly in line with this original design of the act, in that they 
 -endeavor to prove it safer and more convenient than state banking, 
 and more convenient and but little more expensive than a direct 
 issue of currency by the government for the uses of trade. In 
 every case of federal banking, from Washington’s day to ours, there 
 
NATIONAL BANKING EXAMINED. 75 
 
 has been a feint and a real movement. The feint has always been 
 the needs of the government. The real movement it has always 
 covered, has been the convenience of trade. A former writer on 
 the United States bank said : “ It is difficult to believe that such 
 
 a measure would have been even so much as thought of, if it had 
 not in itself been calculated to promote certain private interests." 
 ■(Gouge. Principles of the American Banking System, p. 55, N. 
 Y. 1835.) The old laws and decisions construing the constitution 
 to permit the chartering of corporations, that were wiped out, and 
 whose authors were rebuked by the people at Jackson’s reelection ; 
 that all parties acknowledged were obsolete; that are not appli¬ 
 cable to the present case, are still invoked by the defenders of 
 these “ so-called banks.” If it were constitutional to use the credit 
 •of the United States alone in the bills issued through the present 
 national banks, it might be claimed that to issue bills, as in the two 
 former Banks of the United States, would be constitutional; be¬ 
 cause the whole includes a part. But the claim that because the 
 credit of the United States was a part of the credit represented by 
 the bills of the former banks, therefore, the United States in issu¬ 
 ing its credit as the sole credit money now allowed, is justified by 
 the decision in the cases of McCulloch vs. Maryland and Osborn 
 vs. the United States, does not follow. The old cases on which it 
 tries to rest do not support it, for the reason that a part does not 
 include the whole. The decision would certainly have been the 
 same in those cases if the government had only chartered those 
 banks and owned none of the stock. But for it to have owned the 
 whole bank, i. e. for the government to have been the bank, was 
 never thought of and would not have been tolerated. A decision 
 that the government may be the bank, so far as the circulation is 
 concerned, cannot be made to rest on a decision that it may char • 
 ter a bank to act as its fiscal agent. Deprived of its foundation 
 upon the needs of the government and defended on the ground of 
 the needs of trade, the present system has all the odious features 
 of the old Banks of the United States, with the additional feature 
 of an unconstitutional manner of using the credit of the United 
 States. 
 
 The decision in the case of McCulloch vs. Maryland was not 
 a judicial but a political and expediency decision, like that in the 
 legal tender cases of Knox vs. Lee, &c. It received in its day as little 
 respect as the latter in our day, and was riddled again by Benton 
 
76 
 
 NATIONAL BANKING EXAMINED. 
 
 in his war against the bank. He showed that the branch in Mary¬ 
 land over which the suit arose, could only exist “ after two contin¬ 
 gencies have happened in the state; neither of them having the 
 necessities, or even the convenience of the federal government” in 
 view. He showed that congress had decided that a necessity ex¬ 
 isted for a branch at Albany, according to the court, though the 
 government deposit was only $2.50. “The degree of necessity”' 
 was a very small degree in that case, but, according to the court,, 
 congress was the judge of that and its judgment could not be ques¬ 
 tioned. For a man to have demanded the re-establishment of 
 federal banking ten years before the passage of this law, giving the 
 McCulloch vs. Maryland decision in support of its constitutionality, 
 would have been to make himself an object of ridicule. Yet in or¬ 
 der to make out the constitutionality of the present system it is ab¬ 
 solutely necessary to bring up that decision long since repealed by 
 the higest power in the land—the people. .The subject never came 
 up in congress, or elsewhere, on any important occasion, that the 
 one side did not claim and the other acknowledge that the people 
 finally and effectually reversed the decision in favor of federal bank¬ 
 ing and that it was an obsolete idea, until the day of the fraction 
 of a fractional congress that passed the present law. Sup¬ 
 pose the proposition to found this systerfi of banking had been 
 made as a plank for the Chicago platform in i860. Its mover 
 would have been thought crazy. Suppose the month of December 
 1859 had seen a proposition in congress to start a third system of 
 federal banks, reviving the “obsolete idea.” Voters for it could 
 scarcely have returned to their constituencies with safety from writs 
 de lunatico inquirendo. No doubt in founding this system Chase 
 felt that he was reviving the old United States bank, by which in¬ 
 stitution he was in early life employed as counsel. And the morsel 
 from the Egyptian flesh-pots became the sweeter under his tongue, 
 as, in rolling it, he thought of the sharp letter of John E. Williams 
 and the blame cast on him by all the New York bankers. 
 
 Jefferson said of the first Bank of the United States : “It is 
 known that the very power now proposed as a means was rejected 
 as an end by the convention that formed the constitution : a propo¬ 
 sition was made to them to authorize congress to open canals, and 
 an emendatory one to empower them to incorporate; but the whole 
 was rejected, and one of the reasons urged in the debate was, that 
 then they would have power to create a Bank, which would render 
 
NATIONAL BANKING EXAMINED. 
 
 77 
 
 the great cities, where there were prejudices or jealousies on this 
 subject, adverse to the reception of the constitution.” 
 
 The doctrine of the court in Veazie Bank vs. Fenno is that 
 ■the tax on State bank circulation is not a direct tax but that “ it 
 may well be classed under the head of duties.” (8 Wallace p. 547.) 
 The power to lay and collect duties is given for the purpose of rais¬ 
 ing revenue. To use it for the purpose of reducing or cutting off 
 entirely a source of revenue is absurd, dishonest and unconstitu¬ 
 tional, being so plainly an abuse of the power as to make it in fact 
 quite a different power from the one conferred and pretended to be 
 used. It may be said that the taxation of national circulation 
 would be a source of revenue equal to that destroyed with the state 
 banks. The answer to this is the obvious one that to destroy one 
 kind of circulation and substitute another that pays the government 
 no more revenue, is not necessary in any degree and is hence un¬ 
 constitutional. Doubtless the court imagined itself on an immov. 
 able foundation when it placed this tax among duties and not 
 among direct taxes, for it had in view the prohibitory duties on im¬ 
 ports as a precedent. The practice of prohibiting a business under 
 pretense of making it pay its share of the public revenue, is equally 
 absurd, dishonest and unconstitutional no matter to what object it 
 is applied. It might be used so as to close up all breweries, distil¬ 
 leries and wine presses, and to prevent the raising or importation of 
 tobacco, which certainly was not intended in giving the power to 
 tax them. Previous to the constitution the archaic and barbar¬ 
 ous policy of restricting and hampering trade was general. This 
 power was exercised against foreign nations and against each 
 other by the several states. The constitution destroyed this power. 
 It also gave congress the power to regulate commerce among the 
 states, wjth foreign nations and with Indian tribes. When the con¬ 
 stitution was adopted no one would have been so foolish as to claim 
 that it merely transferred the power to hamper the commerce among 
 the states from state to federal authority; nor would such a claim 
 be made now. Yet the equally foolish claim is made that the pow¬ 
 er to hamper the trade between all the states and any or all foreign 
 countries has merely been transferred from many heads to one, from 
 state to federal authority. Before the constitution the states coined 
 money, emitted bills of credit as money and made other things be¬ 
 sides gold and silver a legal tender. By the constitution they 
 surrendered it. At the same time congress was empowered to coin 
 
78 
 
 NATIONAL BANKING EXAMINED. 
 
 money and to regulate its value and the value of foreign coins. 
 The natural conclusion from this is that congress must protect its. 
 coinage, or at least must not in the exercise of any implied power 
 issue a paper currency that is inseperable from abuse and that in¬ 
 variably displaces its coinage to a greater or less extent. Nor can 
 it lawfully depress the value of foreign coins, for this makes an im¬ 
 pediment to trade with foreigners, thus transgressing the constitu¬ 
 tion in two particulars. The sole reason for its present policy of 
 depressing the value of foreign silver coins is that they must be 
 kept out of the country to make a demand for the national bank 
 currency; certainly not an argument in favor of the constitution¬ 
 ality of national banking. 
 
 In the pamphlet called, “Notes explanatory of Mr. Chase’s 
 plan,” printed at the government printing office in 1861, the fol¬ 
 lowing occurs: ‘ ‘ Hence, the only reason for investing the na¬ 
 
 tional government w r ith power to coin money, was to get the high¬ 
 est and best known authority stamped upon our medium of ex¬ 
 change, and as by common consent we use paper instead of coin 
 as a currency, it becomes the absolute duty of the government to 
 furnish us with evidence of its value.” 
 
 It is stated on good medical authority that when laws prevent 
 or reduce the consumption of beer in certain parts of the Unite'd 
 States, the consumption of laudanum increases correspondingly. 
 The collectors of internal revenue, ought on this principle to make 
 the druggists pay a liquor license without any law to that effect, 
 because the consumer has substituted opium for beer and made it 
 perform the functions of beer in one respect, and it should as a 
 matter of course perform its function in raising revenue. In Eng¬ 
 land it was the custom to give to servants who took the total absti¬ 
 nence pledge additional wages corresponding to the value of the 
 beer no longer consumed by them, but this was abandoned on dis¬ 
 covering that their consumption of bread increased so as to equal 
 the value of the beer renounced. An exciseman as skillful in con¬ 
 struing law as these men are in construing our constitution, would 
 have been at no loss by this change but would have made the bread 
 pay the beer tax. The fallacy of this construction was fully ex¬ 
 posed in the last chapter. 
 
 In the case of Veazie Bank vs. Fenno, replying to the argu¬ 
 ment that the tax “is so excessive as to indicate a purpose on the 
 part of congress to destroy the franchise of the bank and is there 
 
NATIONAL BANKING EXAMINED. 
 
 79 
 
 fore beyond the constitutional power of congress,” the court 
 said: “ The first answer to this is that the- judicial cannot pre¬ 
 scribe to the legislative departments of the government limitations 
 upon the exercise of its acknowledged powers. The power to tax 
 may be exercised oppressively upon persons, but the responsibility 
 of the Legislature is not to the courts, but to the people by whom 
 its members are elected. So if a particular tax bears heavily upon 
 a corporation or a class of corporations, it cannot for that reason 
 only, be pronounced contrary to the constitution.” The court 
 here turned its grave judicial eyes away and refused to see the truth 
 or speak what every member of it knew to be the truth, namely 
 that this act of congress was not for the purpose of raising reve¬ 
 nue from the state banks by a duty, but for the purpose of des¬ 
 troying them and building up a system of national banks. 
 
 In the next paragraph, however, the court went on to answer 
 the objection another way, and to make the justification for estab¬ 
 lishing these banks that it doubtless saw was required by the facts. 
 It said: ‘ ‘ But there is another answer which vindicates equally 
 the wisdom and the power of congress. It cannot be doubted that 
 under the constitution the power to provide a circulation of coin is 
 given to congress. And it is settled by the uniform practice of the 
 government and by repeated decisions that congress may constitu¬ 
 tionally authorize the emission of bills of credit. It is not impor¬ 
 tant here to decide whether the quality of legal tender in payment 
 of debts, can be constitutionally imparted to these bills; it is 
 enough to say, that there can be no question of the power of the 
 government to emit them ; to make them receivable in payment of 
 debts to itself; to fit them for use by those who see fit to use them 
 in all the transactions of commerce ; to provide for their redemp¬ 
 tion ; to make them a currency, uniform in value and description, 
 and convenient and useful for circulation. These powers, until re¬ 
 cently, were only partially and occasionally exercised. Lately they 
 have been called into full activity, and congress has undertaken to 
 supply a currency for the entire country.” 
 
 It continued that “both descriptions of notes may be de¬ 
 scribed as bills of credit, for both are furnished by the govern¬ 
 ment ; both are issued on the credit of the government; and the 
 government is responsible for the redemption of both.” 
 
 It is startling to notice that in less than a century from the 
 time that the convention to frame the constitution positively re- 
 
80 
 
 NATIONAL BANKING EXAMINED. 
 
 fused and rejected the proposition to give congress the power to 
 “emit bills of credit,” the supreme court decides that congress has 
 that power in the very words. It shows the utter futility of paper 
 constitutions against those determined on robbing the people of 
 their liberties. The phrase “ emit bills of credit” was in our early 
 history almost solely the synonym of the present phrase to ‘‘ issue 
 circulation.” The power to borrow money and emit bills of credit 
 was given by the articles of confederation and both powers were 
 exercised, but under the constitution only one is given but both 
 powers are exercised under the pretense that they are both in¬ 
 cluded in one. Then a congressional majority is all that is neces¬ 
 sary for repeating the continental money deluge. 
 
 Money existed before the constitution. That instrument 
 speaks of it as something already known. It empowers congress 
 to see that money is genuine, certify to its weight and fineness, 
 coin it. To declare what quantity of money shall be its unit and 
 to give tfye unit a name are not unreasonable powers to infer from 
 the power to coin it. The constitutional power to coin money 
 does not convey with it the power to name anything else money, 
 and treat it as money. The constitution declares that no state 
 shall emit bills of credit, but congress can, as soon as the bills are 
 ready and before they are emitted, declare them to be “lawful 
 money.” Then the states can emit them and they would be pay¬ 
 ing out money. This is the kind of reasoning our most important 
 interests now depend on. If congress may decide the meanings of 
 words in the constitution and change the meanings when necessary 
 and be the judge of the necessity, it has unlimited power. 
 
 The power to emit bills of credit, whose usurpation by con¬ 
 gress is here justified by the court, is not as the court indicates, 
 rooted in the power to coin money, but in the power to borrow 
 money and issue certificates of indebtedness therefor. The greed¬ 
 iest of the bankers have added to the opinion of the court but one 
 point—that the debt be perpetuated for the benefit of the banks. 
 The opinion of the court assumes that congress may do this,though 
 it does not express it. The court in deciding afterwards that the 
 legal tender quality could also be added, only took another step 
 in the path in which Chase led them. Inasmuch as the court says 
 here that it had been the uniform practice of the government to 
 emit bills of credit and that it may fit them for use in all the 
 transactions of commerce, make them a currency for circulation, 
 
NATIONAL BANKING EXAMINED. 
 
 81 
 
 it is worth while to examine the various acts to authorize the 
 issuing of treasury notes. The first act is that of June 30th, 
 1812. It provided that the notes should bear interest at the rate 
 of 5f per cent., should be transferable by delivery and assign¬ 
 ment endorsed thereon by the person to whose order they were 
 payable on the face. • The president was authorized to borrow 
 money on them and could pay them to such banks as would re¬ 
 ceive them at par and give credit to the treasurer of the United 
 States. Such portion as the president might think expedient 
 could be issued in payment of supplies or debts due by the 
 United States to such public creditors or other persons as might 
 choose to receive them at par. They were made receivable for all 
 duties and taxes and sales of public lands. The persons paying 
 them in were required to give duplicate certificates on the books 
 of the collector, receiver or other public officer or agent, stating 
 the number and amount of principal and interest of each note. 
 Such agents were to be charged with the interest from the day they 
 received the notes until the day they should pay them over. 
 But no such charge was to be made if the notes were paid by the 
 collectors into such banks as would receive them as specie and 
 give credit to the treasurer of the United States for the face and 
 accrued interest to date of payment. The notes were to run one 
 year; the amount authorized, $5,000,000. The next was the act 
 of Feb. 25, 1813, authorizing five millions, and if necessary five 
 millions more. “The amount of money borrowed or obtained by 
 virtue of the notes” was to be part of sixteen millions authorized 
 to be borrowed by another act. They were to run one year and 
 bear interest at the rate of sf per cent., and the other provisions 
 were substantially the same as in the act of June 30, 1812. The 
 next, that of May 4, 1814, authorized the issue of five millions, 
 and five millions additional if deemed expedient by the president. 
 They were to run one year, bear 5-f per cent, interest, were paya¬ 
 ble to order, assignable by endorsement, receivable for taxes, and 
 persons paying them in must give certificates as in the act • hereto¬ 
 fore quoted. The next, the act of Oct. 12, 1837, was for not 
 more than ten millions, to run one year, and bear 6 per cent, in¬ 
 terest. The bill was substantially the same as the previous ones, 
 and a proviso was added forbidding the re-issue of the notes. The 
 next, that of May 21, 1838, authorized the issue of notes to re¬ 
 place those issued under the last act, .and paid in and cancelled. 
 
 6 
 
82 
 
 NATIONAL BANKING EXAMINED. 
 
 The next, of March 2, 1839, was for the remainder of those au¬ 
 thorized by the last act. The next, of March 31, 1840, was ad¬ 
 ditional to the last one. The next, of Feb. 15, 1841, was for an 
 issue under the act of Oct. 12, 1837. The act of April 15, 1842, 
 for the extension of the loan of 1841, provided that the due and 
 unpaid treasury notes of Oct. 12, 1837 or subsequent acts, or any 
 treasury notes that might be issued under them, should bear six 
 per cent, interest, payable semi-annually. The next, of July 22, 
 1846, authorized the issue of treasury notes not to exceed ten 
 millions, under the provisions and limitations contained in the act 
 of Oct. 12, 1837. They were not to bear interest at a higher rate 
 than 6 per cent. This act contains a provision for “paying the 
 amount of certain treasury notes, (which, having been received or 
 redeemed by any authorized officer of the government, were sub¬ 
 sequently purloined or stolen and put into circulation without evi¬ 
 dence on their face of their having been cancelled, )to the respect¬ 
 ive holders,” if innocent holders and purchasers for full considera¬ 
 tion. This is the first case where the word “ circulation ” occurs 
 in any of the acts. The independent treasury act was then passed, 
 Aug. 6, 1846. An act, Aug. 10, 2846, for the special purpose of 
 taking up treasury notes stolen before being cancelled,luses the word 
 “circulation” twice. The next, of Jan. 28, 1847, provided for 
 the issue of twenty-three millions of treasury notes of denomina¬ 
 tions of not less than fifty dollars, to run for one or two years, and 
 bear not more than 6 per cent, interest. They could be issued 
 “to such creditors as might choose to receive them;” the presi¬ 
 dent could “borrow money on the credit of s-uch notes,” but none 
 of them could be “pledged, hypothecated, sold or disposed of in 
 anywise ” for less than par and accrued interest. They were sub¬ 
 ject to the same rules as those issued under former acts and in ad¬ 
 dition all officers and agents receiving them for the United States 
 were requested to take a receipt on the back of the note from the 
 person from whom it was received. The next, of Dec. 1857, was for 
 twenty millions, no note less than $100, to run one year, and bear 
 not less than 6 per cent, interest. The register and treasurer were 
 to keep separate accounts showing the number, date, amount and 
 rate of interest of each note paid out and each one taken in. The 
 next, of March 3, 1859, authorized the president to issue and re¬ 
 issue notes under the last act. The next, of Dec. 17, i860, au¬ 
 thorized the issue of notes of denominations of not less than fifty 
 
NATIONAL BANKING EXAMINED. 
 
 83 ' 
 
 dollars, to run one year and bear interest. They were transfera¬ 
 ble by endorsement of the person to whose order they were pay¬ 
 able and receipts were to be taken on the back when paid. The 
 next, of July 17, 1861, provided for the issue of treasury notes of 
 not less than fifty dollars each, bearing 7-^ per cent, interest. 
 This was the first act making the treasury note transferable by de¬ 
 livery only. It specified that the seal of the treasury was not re¬ 
 quired. It also provided for the issue of notes as low as ten dol¬ 
 lars, not bearing interest, to be paid for coin or for dues from the 
 United States. The next, that of Aug. 5, 1861, authorized the 
 issue of non-interest-bearing treasury notes as low as five dollars. 
 The act of Feb. 12, 1862, the next one, was for the issue of 
 “United States notes” of denominations not less than five dollars. 
 The next, of Feb. 25, 1862, was for $150,000,000, of denomina¬ 
 tions not less than five dollars, non-interest-bearing “United States- 
 notes,” and declared “lawful money and a legal tender in pay¬ 
 ment of all debts, public and private, within the United States, 
 except duties on imports and interest” on bonds and notes. Caesar 
 was now across the Rubicon. A curious feature is, that when the 
 president issued them, as was the original practice, they were 
 “treasury notes,” but soon after, the custom of authorizing the 
 secretary of the treasury to issue them was adopted, their name 
 was changed to “United States notes.” The act of Feb. 12, 
 1862, was for United States notes by its title, but only “notes” in 
 the bill. That of Feb. 25, 1862, called them United States notes 
 in the body of the bill for the first time. The acts of May 21, 
 1838 and March 2, 1839, authorized the secretary “with the ap¬ 
 probation of the president,” to issue the notes. That of May 10, 
 1846, relating to stolen notes authorized the secretary to issue notes 
 in lieu thereof. The text of the old bills shows as plainly as 
 possible that the intention of the law was that fitness for the im¬ 
 portant commercial use known as circulation, like bank notes, be 
 carefully withheld from these notes. Imagine the holder of one 
 of the present legal tenders receipting on the back of it, even 
 when not worn, crumpled and greasy. The issue of non-interest- 
 bearing notes as low as ten dollars showed an intentional abandon¬ 
 ment of borrowing money, and the adoption of a plan for making 
 fiat money. A certificate of debt is not necessarily intended for cir¬ 
 culation because transferable by delivery, nor does bearing in¬ 
 terest prove it was not intended for circulation, nor does its small 
 
84 
 
 NATIONAL BANKING EXAMINED. 
 
 denomination show it is meant for paper money and not for an in¬ 
 terest-bearing investment. But when the notes are non-interest- 
 bearing, of small denominations, and payable to bearer, they are 
 certainly meant for paper money and will be such when paid out. 
 None of these qualities ever appeared in any of the acts previous 
 to July 17, 1861; all of them were combined in some notes issued 
 then and under every subsequent act. So that in one of the material 
 assumptions on which it founded its decision, the court was in the 
 plainest error. This assumption being false, the whole decision 
 falls, for it virtually assumes that a long practice of issuing paper 
 money has been settled by frequent decisions, whereas no such 
 practice ever existed. Considering their uses, there is more differ¬ 
 ence between the old treasury notes and the new national bank 
 notes than between the latter and coin; and the Greenbackers’ 
 doctrine that congress may coin paper or coin credit, because it 
 can coin money, is rather more logical than the supreme court 
 doctrine that because congress can borrow money and give evi¬ 
 dences of indebtedness, it may therefore charter banks for the pur¬ 
 pose of supplying the country with a paper currency of the public 
 credit and may tax all private bills of credit out of existence. 
 
 From this decision, and from that of Knox vs. Lee, it is seen 
 that congress may make the bills of these banks a legal tender if 
 it choose to do so. Under the three decisions of McCulloch vs. 
 Maryland, Veazie Bk. vs. Fenno, and the legal tender decisions, 
 together with its practice under usurpation of the power of restrict¬ 
 ing the coinage at will, congress may intentionally and persist¬ 
 ently drive out and keep out coin and refuse to coin any more, 
 thus refusing to perform its only constitutional function with re¬ 
 spect to money—coin it and regulate its value. And it is the sole 
 judge of the necessity of doing it. 
 
 The use of private credit as circulation is now impossible, on 
 account of the ten per cent. tax. Congress may repeal the national 
 bank act at will, and the president and the senators from thirteen 
 states may prevent the repeal of the ten per cent. tax. Congress 
 may put a ten per cent, tax on the capital and on the deposits of 
 state banks, if we are to believe the court, and may thus destroy 
 all banking in the United States. Yet the court all the time holds 
 that states can constitutionally charter banks. The states can 
 charter them but congress can destroy them. In the work of 
 Britton A. Hill, called “Absolute Money,” he advocates the issue 
 
NATIONAL BANKING EXAMINED. 
 
 85 
 
 of paper, not promising to pay money but declared by congress to 
 be money itself, and the total disuse of coin. He does not need 
 a syllable more to 'justify him in putting his doctrine in practice 
 than he finds in those three decisions of the Supreme Court of the 
 United States, if his party can get control of congress. How 
 necessary then for the people to put some restraint on this mad or 
 venal court. 
 
 Nelson, and Davis, JJ., dissenting, said That the power 
 claimed in Veazie Bank, etc., was a power that might annihilate 
 the power of the states to incorporate banks. In this they held 
 the same opinion that the court expressed in McCulloch vs. Md., 
 that the power to tax the circulation of the branch of the United 
 States Bank in Baltimore, would be an acknowledgment of its 
 power to drive out that branch. But the court in holding that the 
 federal government may put a tax of ten per cent, on the circula¬ 
 tion of state banks abandons the doctrine of McCulloch vs. Md., 
 for it is a power acknowledged by the court to be constitutional in 
 both cases. Thus, a Bank of the United States is constitutional, 
 and no state can tax its notes: state banks are constitutional (here 
 the court reverses itself), but the federal government can tax them 
 out of existence. Each decision is not only vicious itself, but 
 lacks the virtue of consisting with the other. 
 
 At the first glance, it seems plain to any one, from the well 
 known principle that a corporation can not exercise any powers 
 but those granted it by its creator, that a state bank, having no 
 natural power, and no power conferred by the state, to ‘ ‘ become M 
 a national bank, can not “become” a national bank by mere con¬ 
 gressional invitation to do so by a simple summersault. But the 
 national bank act provides that a state bank may exercise powers 
 not granted it by the state : it may “become” a national bank and 
 as such congress may, in its discretion, free it from state taxation. 
 The majority of the supreme court sanctions this, as it does all the 
 other usurpations of congress. It decides that this conversion is 
 only a change but no dissolution of the original corporation. If 
 the United States can throw out enabling acts for inducing state 
 banks to get out of the control of their creator, why may it not do 
 so with all other state corporations? Some discussions on the 
 propriety of putting the railroad corporations under congressional 
 control have lately occurred. This practice under the na¬ 
 tional bank act shows how it may be done, under the power to reg- 
 
86 
 
 NATIONAL BANKING EXAMINED. 
 
 ulate commerce. But almost every branch of business that is car¬ 
 ried on, is carried on by means of corporations: they, too, may¬ 
 be stolen by the federal government in the same way, grocer com¬ 
 panies, candy, cracker, live stock, iron and steel, furniture, agri¬ 
 cultural implement, boot and shoe, millinery, baked bean, pre¬ 
 pared baby food, condensed milk, clothing, “patent” medicine, 
 and every other imaginable company, might be by a law of con¬ 
 gress allowed to turn its back on the state and become national 
 and be exempted from state taxation. There is no need of con¬ 
 gress using its discretion as to the “degree of necessity,” it could 
 invoke the power to regulate inter-state commerce. As seen in a 
 former chapter, it could give the monopoly of these things to cer¬ 
 tain ones. It is useless to say that congress will never exercise this 
 power. If the republic have a long life, no one can foresee what 
 congress may attempt to do. And if we were assured that the 
 use never would be attempted, it is important to show the absur¬ 
 dity of claiming the existence of the power. The sanity of the 
 makers of the constitution ought not to be permitted to be thrown 
 in doubt by such explanations of the meaning of the instrument, 
 as the majority of the court has seen fit to give. 
 
 By a very little trouble, the court might have saved this de¬ 
 cision from one incongruity: doffing the gown and donning the 
 cap and bells, before delivering it. 
 
 Putting together Hamilton’s claim that congress may appoint 
 the thing in which taxes shall be paid or may order them paid in 
 kind, and the doctrine of McCulloch vs. Md., that the power to 
 tax is the power to destroy, one may logically conclude that con¬ 
 gress may collect poll taxes in kind, and the degree of necessity 
 for so doing is decided by congress, and there is no appeal from, it 
 except to the people, who might be effectually disfranchised by the 
 decapitation tax before they could elect a new congress. Those who 
 object to the ridiculous conclusions forced on them by their prem¬ 
 ises may say that their declarations are subject to such well-known 
 principles as that life cannot be taken under pretense of taxing. 
 
 It is no less true that people cannot be robbed of property rights 
 by servants under pretense of administering their master’s affairs. 
 
 One of the powers in the constitution from which they infer 
 the power for congress to charter banks for furnishing permanently 
 a safe and uniform currency for the wants of trade, is that of reg¬ 
 ulating commerce among the states. But what sort of a right can 
 
NATIONAL BANKING EXAMINED. 
 
 87 
 
 the federal governme nt set up to charter banks for this purpose 
 when it destroyed the state banks’ circulation and is now prevent¬ 
 ing a return to the natural commercial currency ? Can it allege 
 the weakness of banks through which it lived to carry the war to 
 a successful issue ? Suppose that upon the inauguration of bank¬ 
 ing or financial systems, by the several states, tending to impede 
 “commerce among the states” — that is, from one state to another, 
 not within a state — the federal government can charter banks 
 under the power to regulate that commerce: the exercise of that 
 power would not depend on the existence of a public debt. Yet, 
 that it does so depend is the absurd proposition of the advocates 
 of the present system. And its not only depends on the 
 existence of a public debt, but requires some event as 
 extraordinary as the last war in order to create a debt 
 sufficient for the purpose. Secretary Chase’s report in Dec., 1861, 
 showing the advantages of the bank plan over the issue of notes 
 directly, for the purpose of raising means to carry on the war, 
 contains the following: “If the secretary has omitted the discus¬ 
 sion of the question of the constitutional power of congress to put 
 his plan in operation, it is because no argument is necessary to 
 establish the proposition that the power to regulate commerce and 
 the value of coin includes the power to regulate the currency of 
 the country,” etc. The war was to be carried on by means of the 
 power to regulate commerce among the states, with foreign nations 
 and with the Indian tribes! How fortunate that the federal gov¬ 
 ernment has the power to regulate commerce in these three cases, 
 otherwise it could not get the means to carry on war. Whatever 
 congress may do under the power to regulate inter-state commerce, 
 it can only do one thing with the credit of the United States — 
 borrow money on it. It can neither bank on it nor farm it out to 
 others to bank on, for the convenience of traders. Men engaged 
 in inter-state commerce it can free from the shackles put on them - 
 by state authority; but it cannot give certain of them, nor any of 
 them, the use of the credit of the United States as currency and 
 forbid all others the use of their own credit in the form of cur¬ 
 rency. It can permit commerce for that is liberty; it cannot force 
 or impede it for that is paternalism or tyranny. If it were to be¬ 
 come necessary for the federal government thus to charter banks 
 under the power to enforce freedom of trade among the states and 
 with foreign nations, it could not, for another reason, allow them 
 
NATIONAL BANKING EXAMINED. 
 
 to use the credit of the government as their currency: it is of un. 
 stable value, and would not accomplish the purpose of furnishing 
 a medium of transacting business between the states and with 
 foreign nations, of “fixed and uniform value.” During the war 
 and for many years after, the holder of notes of a failed national 
 bank had to take, instead of dollars, promises to pay dollars, which 
 were at a great discount. This was an impediment to commerce 
 between the Pacific states and others, and between the United 
 States and foreign nations. The government in chartering banks 
 and compelling them to use its credit was thus engaged in perpe¬ 
 trating a wrong which it is its duty to prevent the states doing, and 
 which it certainly has no constitutional power to do itself. And 
 the states have the power to protect themselves against it, as the 
 Pacific states did to some extent. Because the bills of a certain 
 state institution are not current all over the United States it is 
 alleged that it shall be forbidden the use of its credit in the form 
 of circulating notes and the federal government shall supply them 
 under the power to regulate commerce between the states. But 
 on the same ground we may depose the federal government, for its 
 bills are not current in foreign nations and are everywhere subject 
 to fluctuations in value from time to time. 
 
 Suppose it is claimed that congress has the power to regulate 
 commerce among the states and in order to do this it must con¬ 
 trol banking and the currency ; that it may do this while the nation¬ 
 al debt exists for this reason and because it is a continuation of the 
 assistance to the government in respect to the debt ; and that it may 
 amend the present law when the debt is paid off and still control 
 banking and the currency and forbid the states having anything to 
 do with them. The dissenting justices in Veazie Bank etc. said: 
 “It is true, that the present decision strikes only at the power to 
 create banks, but no person can fail to see that the principle invol- 
 red effects the power to create any other description of corporations, 
 such as railroads, turnpikes, manufacturing companies, and others.”' 
 The court had said that the freight receipts, bills of lading and pas¬ 
 senger tickets were equally subject to taxation with bank-notes. If 
 congress ever think it necessary, then, it may charter ‘ ‘ national ” 
 railroad companies and tax all others out of existence as it tries to 
 do with banks. Recur now to Coe’s analysis of banking and re¬ 
 member that the country store is the same thing as a bank. Then 
 if the federal government can charter corporations for the one pur- 
 
NATIONAL BANKING EXAMINED. 
 
 89 
 
 pose why may it not for the other ? Upon some such grounds it 
 might be claimed by the constitution-stretchers that under the power 
 to regulate commerce among the states and with foreign nations 
 congress could charter corporations for carrying on all the various 
 branches of trade and tax all private parties or corporations char¬ 
 tered by the states to do the same business, or otherwise restrict 
 them, permitting them only to buy and sell or transact any business 
 within their respective states, or to engage in handling within the 
 state only those things that originate in it. Their principle is that 
 congress is the sole judge of the necessity of so doing. 
 
 As first introduced, the bill allowed a total bank capital of 
 $200,000,000, but as passed it was $300,000,000. By the Resump¬ 
 tion Act all restriction was removed and the amount of the public 
 debt might be turned into national bank notes. But it is in the 
 power of congress to restrict the amount of circulation again. Here 
 we have the objection so well taken by Coe in full application and 
 it can not be too often brought to notice. Sherman tried every 
 way to keep the national banks out of the reach of state taxation, 
 and Chandler assured the senate that three bankers had just told 
 him that such taxation would kill the system. (Cong. Globe, Apl. 
 27th 1864.) Sherman said : “ My own preference * * * is to 
 
 establish a uniform rate of interest by our law, but having been 
 overruled” etc. (Congl. Globe May 5th 1864.) 
 
 Banking is not essentially different from any other business, 
 and if congress can control this and take it entirely out of the hands- 
 of the states it can do the same with every business that exists, 
 down to the humblest peanut stand or match-peddler, not for its- 
 own needs but out of a paternal disposition. But national bank¬ 
 ing, at the time of the decision that it was constitutional, was a 
 monopoly. Its advocates were as much in favor of it then as now. 
 Putting all these together we see that the whole claim is that the 
 federal government may control the entire commerce and trade of 
 the country, that passes from state to state, every sort and kind 
 carried on by man, and may give the monopoly of any part or all 
 of it to such persons, many or few, as it may please, and congress 
 is the unquestioned and unquestionable judge of the necessity of 
 doing it. The only escape from the utterly absurd position into 
 which the advocates of the system are driven, is to acknowledge the 
 truth however unpalatable, that the act to provide a national cur¬ 
 rency is not, never was and cannot under any circumstance possibly. 
 
90 
 
 NATIONAL BANKING EXAMINED. 
 
 be a law made in pursuance of the constitution. There are some 
 who would consider it a great gain to thus absorb the entire powers 
 of the states and exercise them through the United States. With¬ 
 out arguing the question of the relative advantages of the two 
 forms of administration of our affairs, it is sufficient to say that the 
 absorption can not take place without changing the constitution, 
 lawfully or lawlessly. 
 
 In McCulloch vs. Maryland the court decided that congress 
 could charter a bank as a necessary means of carrying out some 
 power it possesses. But it is scarcely possible for such a necessity 
 to arise. It is the duty of the federal government to forward the 
 mails, but we cannot imagine that it will ever be necessary for it 
 to build railroads primarily for the exercise of this power. It 
 must provide cavalry horses for the army, but it is not likely that 
 it will ever be necessary for it to breed them for this purpose. 
 And as it can always use the lines of transportation owned by cor¬ 
 porations and can buy all needed supplies from citizens, so the 
 state banks and private bankers will always be able and willing to 
 aid it in its financial operations. Yet some in high places would 
 have us believe that congress may either build railroads especially 
 for carrying the mails or hire the mails carried on those already 
 built, and no one can question it, because it is the judge of the 
 degree of necessity. 
 
 In the concluding lines of his paper Walker says, “ the integ¬ 
 rity of the national banking system can only be maintained, and its 
 great advantages to the people secured, by making it exclusive of 
 all others.”. In McCulloch vs. Maryland it was decided that, if 
 certain means to carry into effect any of the powers expressly given 
 by the constitution to the government of the Union, be an appro¬ 
 priate measure, not prohibited by the constitution, the degree of its 
 necessity is a question of legislative discretion, not of judicial cog¬ 
 nizance. But not only is there at present no dispute on the degree 
 of necessity for the national-bank system under the law as expoun¬ 
 ded in the case of McCulloch vs. Maryland, but there is no pretense 
 of any necessity at all, so far as concerns the government. There 
 is only a claim that it is better adapted—not to the constitutional 
 purpose of borrowing money, but—to the profit of lenders and 
 the convenience of borrowers and traders. At this time this is the 
 sum and substance of all of the arguments in defense of the sys¬ 
 tem. Its defenders say that the retirement of national notes will 
 
NATIONAL BANKING EXAMINED. 
 
 91 
 
 result in the issue of state bank notes. They are fighting for a na¬ 
 tional system that will save the people from state banks. Walker 
 only pretends to show that the issue of notes through the so-called 
 banks costs a little more than to issue them directly from the treas¬ 
 ury, and that the former is more convenient for commerce. His 
 chief fear is that state banks will again arise and plunder the 
 people with pretended bills of credit. But were we threatened with 
 a flood of “wild-cat” notes to-morrow, the fact remains that the 
 federal government has no power to use the public credit primarily 
 for the convenience of traders and the safety of the people in this 
 respect. It is to be noted here that the premises of one of the old 
 parties, supporting federal banking, and those of a new one support¬ 
 ing the “absolute money” idea, are the same. The chief differ¬ 
 ence in the details of their plans is that one can only keep its rep¬ 
 resentatives of the power, wealth, sovereignty etc. etc., at par by 
 complex and stringent laws and the payment of immense sums as 
 interest on the securities; the other party offers to do the same by 
 law alone. Whatever color of constitutionality may have been 
 claimed for the act when it was passed, as necessary to the power 
 ■to borrow money on the credit of the United States, there is not a 
 shadow of right now to charter a new national bank or to renew 
 the charter of an old one. During the war the question for con¬ 
 gress to decide was, whether for the needs of the government it 
 should use the public credit one way or another—by a direct issue 
 •of bills or by issuing them by means of the national banks. But 
 whether congress may grant these banks the use of the public cred¬ 
 it in the form of the so-called bank notes, for the convenience of 
 trade, forbidding the use of private credit in this way, or shall 
 cease to do so and leave those engaged in trade to the management 
 of their own bills of credit is a question for the courts. But it is 
 useless to bring it before a court made up for the purpose of decid¬ 
 ing it a certain way. There is neither common sense nor consti¬ 
 tutionality in taking people off their own feet and putting them on 
 the back of the government; refusing them the right to the use of 
 the private credit they may possess and requiring them to trust all 
 and confine all to the public credit. To do so for their convenience 
 and safety is not provided for in the constitution and is communism. 
 
 There is a great deal of human nature even about the chief 
 justice of the United States, and we must remember that in pass- 
 ing judgment on the constitutionality of the legal tender acts, 
 
92 
 
 NATIONAL BANKING EXAMINED. 
 
 Chase decided against a law to which he had never agreed; but ins 
 declaring in Veazie Bank vs. Fenno that the national bank act was 
 constitutional, he was passing upon his own case and merely giving 
 another approval to the great hobby of his life. The Dred Scott 
 decision is not more completely overthrown to-day by the people, 
 the masters of the supreme court, than is the McCulloch vs. 
 Maryland decision reversed by the same power. The only differ¬ 
 ence is that in one case the point has been made secure by a con¬ 
 stitutional amendment, and in the other that necessary barrier 
 against usurpers is yet to be erected. The greatest defect in our 
 system is the want of a plan for enforcing the will of the people 
 against the supreme court. When the people reverse the decision 
 of that court all but the dissenting minority should resign from the 
 bench,- in cases of such importance ^.s whether the government 
 shall be communistic or not. Probably the reason the people did 
 not at once amend the constitution so as to forever prohibit federal 
 banking, but did make sure of the popular reversal of the Dred 
 Scott decision, is that they are more careful and decided on the 
 question of personal freedom than on one that appears more as a 
 question of property only. The objection to amendments is always 
 pertinent that with each amendment a thousand doors are opened 
 to usurpation under the name of implied powers. 
 
 Chase may have determined to show the bankers that he knew 
 more about finance than they did and to accomplish a feat that 
 would put his fame as a financier forever above that of the bankers 
 who differed from him and who charge him to this day with the great 
 financial error of the war. Chandler said : “It did seem to me 
 three or four days ago that the eastern -banks were going to succeed 
 in defeating this great banking scheme.” (May 5th, 1864.) Sum¬ 
 ner said the currency would “constitute an epoch in the history of 
 the world’.” He spoke of Colbert, Peel and others of other coun¬ 
 tries, and predicted for Chase immortality of fame when he should 
 have triumphed over the “mutiny of state banks” and the “ luke 
 warmness of senators.” This was Sumner’s return to the state 
 banks for making it possible for him to be in Washington when 
 Early and others were about driving him and .the rest of the inhab¬ 
 itants out. If Chase had in the national bank notes intended only 
 an expedient to last during the life of the legal tender paper in 
 which they were made redeemable, the system might perhaps be 
 considered a justifiable experiment in financial legerdemain. But 
 
NATIONAL BANKING EXAMINED. 
 
 93 
 
 as the government is only safe in making the guaranty while it can 
 ■exercise the power of creating money by fiat; knowing as he did 
 that this power is a gross usurpation; knowing as he ought to have 
 known that the notes of the banks do not represent the credit of the 
 kanks but that of the government, yet attempting to build of such 
 materials a permanent system of banking to suit the purposes of the 
 government and of commerce, he is materially lacking in what con¬ 
 strues a great financier. Conceding him great intellect and hon¬ 
 esty of intention, he was no match in their own line for the trained 
 giants of finance in New York with whom he failed to agree. And 
 when this third and last attempt at federal banking shall have be¬ 
 come a memory, as it inevitably must, the difference of opinion 
 between the New York bankers and Chase, that occurred in 1862, 
 will be forever settled in favor of the former. The state banks that 
 ■so faithfully served him, that were rewarded by having their coin 
 base taken from under them by him, forcing them into a suspension 
 and disrepute that was then used as the justification for putting 
 them into an unconstitutional, irksome and unpopular uniform, 
 and depriving them of their ancient privileges, will then be vindi¬ 
 cated. 
 
 Over no pages in our history is one forced to blush for our 
 “great men” as we must over the belittling of themselves by 
 Hamilton, Marshall, Webster, Clay and others, in their attempts 
 to discover the power to incorporate banks in the federal constitu¬ 
 tion, and their defences of the power after it was usurped or unnec¬ 
 essarily used. Upon no subject have so many men of so respecta¬ 
 ble an order of mental qualifications, and so many of the highest 
 grade of statesmanship, ever been deluded into uttering such col¬ 
 ossal absurdities as upon the subject of federal banking. Jackson 
 himself wavered on this point. Not so with that faithfulest of all 
 the friends of liberty, Jefferson. This is the train of usurpation ; 
 the government can borrow money and can emit evidences of in¬ 
 debtedness therefor; can issue them in any denomination (even as 
 low as three cents); can make them non-interest-bearing and trans¬ 
 ferable by delivery; can fit them for circulation as money; can 
 ' issue them through banks; can charter banks for the purpose; can 
 forbid the use of any other credit in a way that would or might 
 compete with them as circulation; can allow these banks to per¬ 
 form other functions usually performed by banks ; ought not to per¬ 
 mit any other banks; can do this for war purposes; can continue 
 
94 
 
 NATIONAL BANKING EXAMINED. 
 
 it in peace; can make the currency useful for commerce; can make 
 it sole and permanent; can forbid the use of any other credit in 
 time of peace and for commercial uses as circulation except this; 
 can make the national debt perpetual for the purpose of furnishing 
 a uniform currency; can make the national notes a legal tender for 
 all debts; (here it is reinforced by the power to refuse to coin 
 money, inferred from the power to coin money); can drop silver 
 from the coinage, and can drop gold in the same way or can put 
 on prohibitory mint charges. Here is a power given notably for 
 the purpose of enabling us to get rid of paper money, especially 
 legal tender paper, and securing a coin circulation, interpreted by 
 the highest legal tribunal to mean precisely the opposite thing. The 
 argument for the constitutionality of the system is curious as an ex¬ 
 ample of pseudo-logic and as an illustration of insidious usurpation 
 of power. First: It is an exercise of the power “to borrow 
 money on the credit of the United States,” made during and on 
 account of war, for the needs of the government. The war ends; 
 the debt is all in the hands of holders perfectly satisfied with its 
 terms, and the needs of the government do not require the system. 
 Then under the pretended demands of trade it continues, resting 
 on the power “to coin money and regulate the value thereof,” and 
 the power to ‘ ‘ regulate commerce among the states and with for¬ 
 eign nations.” On examination it is opposed to the exercise of any 
 of these powers. 
 
 On the point of constitutionality the matter may be summed 
 up thus : First: The act to provide a national currency was never 
 a law necessary or appropriate fto the power to borrow money on 
 the credit of the United States. Second: There was never any 
 necessity for congress to provide a currency for the convenience 
 and safety of trade, and if there had been congress cannot consti¬ 
 tutionally use the public credit primarily and solely for that purpose. 
 
IV. 
 
 IS THE NATIONAL BANKING SYSTEM PERMANENT ? 
 
 The comptroller says, p. 26, of his report for Dec., 1878 : “The 
 business interests of the country demand a permanent system of 
 finance.” Suppose the national bank act to have been a necessary 
 exercise of the power to borrow money at the time it was passed ; 
 that it works perfectly or as well as any other for all purposes ; that it 
 were to day the exclusive system of the country, how could it be 
 made permanent ? It could only be made permanent by making the 
 national debt permanent. When the debt shall have been paid there 
 will be no pretext for the federal government to charter these banks. 
 Doubtless it was thought by many at the time the system was put 
 fairly into operation that a debt so unprecedented for us, would never 
 be paid. Spaulding the author of the legal tender acts, in his let¬ 
 ter in favor of the national system, Feb. 22d, 1866, referred to the 
 notes of the Bank of England secured by gold and government 
 stocks. But the debt of England will never be paid. We will 
 probably pay ours by the close of this century and reduce it largely 
 in the meantime by purchases of bonds. But our only source of 
 a currency supply is this debt, portions of which are from time to 
 time metamorphosed into currency. And thus as the country is 
 growing and there is need for a greater volume of currency the sup¬ 
 ply will be diminishing. Twenty years hence we may need a 
 thousand millions of money and only have a hundred millions of 
 debt. When the debt is paid we will be without currency. If this 
 be made the sole system we will then be without banks, for with 
 the debt will have passed away the flimsy excuse for chartering 
 them, as well as the debt out of which their currency is manufactu¬ 
 red. In that one sentence the comptroller has made a complete 
 and concentrated condemnation of the national banking system. 
 
96 
 
 NATIONAL BANKING EXAMINED. 
 
 Having this point in my MS. six months before, I. brought it out in 
 the convention of Missouri bankers in July, 1879. Col. Stephens' 
 position was : “ And some object to the national system, ‘because 
 
 its continued existence contemplates the permanency of the national 
 debt.’ I hope the day will come when this objection will be oppor. 
 tune ; at present it is ‘ far-fetched ’ and untenable.” Seven months 
 afterwards the perpetuation of the debt for the purpose of furnish¬ 
 ing the banks a basis for their currency was boldly advocated 
 again, as was done by many of those who favored it when it was 
 first proposed. Sherman said (Feb. 10th, 1863) “we are about to 
 choose between a permanent system designed to establish a uniform 
 national currency based upon the public credit, limited in amount, 
 and guarded by all the restraints which the experience of men has 
 proved necessary, and a system of paper money without limit as to 
 amount, except for the growing necessities of war. ” 
 
 When in 1862 the allied banks let Chase know that the ab¬ 
 straction of the coin from their vaults would force them to suspend 
 they gave an enemy the keys to their gates. To show the ineffi¬ 
 ciency of the state systems, was the most important point to establish 
 in favor of the necessity of a national system. And to re-establish 
 federal banking was scarcely less to him than the one other great 
 ambition of his life—the presidency. This may seem like ingrati¬ 
 tude in him after the aid he received from them, but it is not neces¬ 
 sarily so. It is not cruelty that causes parents to beat their chil¬ 
 dren and tell them “ you will thank us for this as long as you live.” 
 Benevolence made men burn the bodies of some men to save the 
 souls of others. Chase considered himself a doctor giving the sick 
 banking systems of the country a disagreeable but absolutely neces¬ 
 sary alterative. A defense of a direct or indirect issue of govern-, 
 ment bills of credit in a desperate emergency, after the coin of the 
 country has been necessarily sent abroad, is entitled to charitable 
 consideration. But to attempt to fasten it on the country forever, 
 is an entirely different matter. 
 
 But we will not be without banks. In Veazie Bank etc. it was 
 decided that the federal government may tax the notes of state 
 banks out of existence in order to make room for the circulation of 
 its own, when borrowing money by issuing its own through the na¬ 
 tional banks. But when the debt is paid this law must fall to the 
 ground, and it is but a question of time when state banks will again 
 have a right to use their own credit in the form of circulating notes. 
 
NATIONAL BANKING EXAMINED. 
 
 97 
 
 Those engaged in banking will then go back to where they left off 
 when the national system was inaugurated, and lend their own cred¬ 
 it instead of that of the government. Thus it is but a question of 
 time when the national system will die a natural death, when the 
 heavy hand of the federal government must be taken from private 
 credit, and the bete noir of the comptroller and so many others— 
 state banks with circulating notes—will spring up like a long repress¬ 
 ed “jack-in-the-box.” It is probable that on a test of the case in 
 nourt it would even now be found that the government can no lon¬ 
 ger tax state bank notes out of existence, as the necessity on its 
 own part has passed away and it may not constitutionally discrimi- 
 ate against them for the alleged convenience of trade. This sup¬ 
 poses, of course, a court not organized to make certain decisions 
 and no others, on certain subjects. 
 
 Here pausing to look back at the argument on the cost of ex¬ 
 change it becomes plain that when the conditions are present in 
 which we can use the public credit as currency without loss in ex¬ 
 changing, the opportunity so to use it ceases; or the right to sup¬ 
 press the use of private credit as currency ceases and it must, if 
 justice be done and communism abandoned, quickly drive out pub¬ 
 lic credit from the field for this use. Thus under our constitution 
 national banking, if it can exist at all, is in its very nature ephe¬ 
 meral, and state banking is permanent. 
 
 The time is at hand when the Pandora’s box of finance—paper 
 money—must be handed back chiefly to the control of the states : 
 the abundant bullion product of our country should be utilized, and 
 credit money which in practice is found under all systems to con¬ 
 tain a large “fiat” element should be kept in the closest bounds, 
 if it can not be entirely dispensed with. 
 
OUR FORMER CASES OF NATIONAL BANKING. 
 
 There exist among men two types of political faith. From 
 the two great teachers of these faiths among us, we call them the 
 Hamiltonian and Jeffersonian schools. The extremes or ideals of 
 human government or society, are, one in which one person has un¬ 
 limited power over all the others, and another in which no person 
 exercises power ov$r any other. The Hamiltonian type is a modi¬ 
 fication of the former, and its constant tendency is to travel back 
 to that ideal; the Jeffersonian is an attempt to approach the latter 
 condition as nearly as the moral and mental development of man 
 at the time permits. The school of sociologists now led by Her¬ 
 bert Spencer is nearly the same as what we call the Jeffersonian; 
 that of which the Russian czar is the present head in Europe, de¬ 
 termined on ‘ ‘ saving the people from the baneful effects of too 
 much liberty,” differs from our Hamiltonian only in degree, being 
 the same in kind. The Hamiltonian school have always thought it 
 necessary to have a national bank as a sort of partner or supporter 
 of the government and for the convenience of the people in com¬ 
 merce. The Jeffersonian school maintains that for its own use the 
 government has control of the credit of the whole country, and as 
 the credit and means of a national bank contain nothing more than 
 the government already controls, such a bank can add nothing to 
 the ability of the government; and that as the government is cre¬ 
 ated by the people and is unable to impart to them anything but 
 what it has first drawn from them, such a bank cannot be in any 
 degree commercially necessary. (Certain powers that might other¬ 
 wise come under this principle are withdrawn from its operation by 
 being specifically conferred on the government by the constitution.) 
 
NATIONAL BANKING EXAMINED. 
 
 99 
 
 Under the influence of Robert Morris, of the Hamilton 
 school, the Continental Congress chartered the Bank of North 
 America (without the slightest authority to do so), and some writers 
 would have us believe that to it we are greatly indebted for the suc¬ 
 cessful termination of the revolution. This ignores the use of the 
 continental issues which, bad as they finally became, answered the 
 purposes of money during three fourths of the war. The bank was 
 not opened until four months after the surrender of Cornwallis; it 
 began business on forty thousand dollars in coin; individuals never 
 contributed but seventy thousand dollars of its capital, and it never 
 advanced to the government over $150,000 above the balance to the 
 credit of the government on its books. (See Gouge’s Hist. Paper 
 Money and Banking, chap. 4, 2d ed’n.) Hamilton says in his re¬ 
 port on the subject of a national bank in 1790 that “the aid afforded 
 to the United States by this institution, during the remainder of the 
 war, was of essential consequence.” For an exact man like Ham¬ 
 ilton to use this phrase instead of giving numerals and dollar 
 marks, is significant. The capital of the bank was only four hun¬ 
 dred thousand dollars. It is even doubtful whether there was ever 
 a dollar of the capital paid by any one but the government, as the 
 seventy thousand claimed to have been contributed by individuals 
 was subscribed stock, transferred from a state bank started before 
 the congressional charter was given and on whose foundation the 
 Bank of North America was built. It afterwards got a charter from 
 Pennsylvania. If individuals had contributed a capital of four 
 hundred thousand dollars in coin and conducted the bank with 
 ability, it could have greatly aided the government, but the govern¬ 
 ment could not benefit its own credit by diverting coin from the 
 payment of its many past due debts in order to open a banking 
 business, as it did in this case. The disinterestedness of Morris in 
 starting it is doubtful He had tried to get a charter for the same 
 purpose in 1763 but failed. The founding of this bank gave him 
 an eclat that was of value to him after the war, in his personal bus¬ 
 iness. This bank now issues national circulation but has not the 
 word “national” in its name. 
 
 Hamilton’s report on the subject of a national bank in 1790, 
 was chiefly an argument in favor of the general commercial utility 
 of banks and was directed towards a large party then opposed to 
 any kind of incorporated banks. If this part of his argument be 
 sound, it does not necessarily follow that the government should in 
 
100 
 
 NATIONAL BANKING EXAMINED. 
 
 any manner interest itself in banking; but without this he would 
 have been confined to the point of the usefulness of the bank to 
 the government. But if so confined his report would have been 
 of insignificant proportions, for he could only give as state reasons, 
 that the European nations had national banks and that this one 
 would be a convenience to the government in managing its fiscal 
 concerns. But that Europe has these banks, is a no more conclu¬ 
 sive reason for us to have one than to have kings because Europe 
 does; and as for the management of fiscal affairs, his plan of get¬ 
 ting the public debt in proper shape, which became the policy of 
 the country, preceded his report on the subject of a national bank 
 more than a year. The “ act making provision for the debt of the 
 United States,” was passed August 4, 1790; and that creating the 
 Bank of the United States, not until February 8, 1791. It was 
 provided that the United States could make its subscription within 
 eighteen months from April 1, 1791. Thus it played no part in 
 getting the debt into shape. 
 
 He claimed “ greater facility to the government in obtaining 
 pecuniary aids, especially in sudden emergencies,” as one of the 
 advantages of a bank, but acknowledged that the government “ as 
 well in some of the most critical conjunctures of the late war, as 
 since the peace, has received assistance from those established 
 among us, with which it could not have dispensed.” The appro¬ 
 priate thing to do, then, would be to let the banks referred to grow 
 in their own means and credit so that they could again be of use 
 when needed, and not found a public bank to take .part of their 
 business from them, and whose credit would be tied to the govern¬ 
 ment credit. To be such an aid in emergencies the bank must 
 have been a great reservoir of capital from other than governmental 
 sources. In fact it never was such. Its capital was not real and 
 in emergencies it could only have crippled the commerce of the 
 country in unavailing attempts to aid the government. Its own 
 paper and that of the state banks kept coin from accumulating in 
 the country, and but for its presence and example public opinion 
 would sooner have reduced the state banks to a sounder basis and 
 to rational practices in the matter of circulation. 
 
 According to Hamilton, it would “facilitate the payment of 
 taxes ” in two ways. First: By enabling those who could, to bor¬ 
 row in bank; and second, by the greater convenience for trans¬ 
 mission possessed by bank notes over specie. As the capital of the 
 
NATIONAL BANKING EXAMINED. 
 
 101 
 
 bank was to be largely composed of government credit here were 
 two ingenious plans for filling the coffers of government with its 
 own credit instead of what was most needed—coin. Applicants 
 for bank loans to pay taxes, are surest of all others to be refused. 
 To give facilities for payment of duties on imports was to hasten 
 the needed coin out of the country and to encourage importations 
 of foreign goods. “ The payment of the interest of the public debt 
 at thirteen different places,” made it necessary to have a light port¬ 
 able medium; and trade would be injuriously affected “by the with¬ 
 drawal and accumulation of these amounts of coin.” In other 
 words, government credit must put up with paper; but traders, who 
 depend for protection to life and property on the government, must 
 have the coin. 
 
 His argument, showing the superiority of an issue through a 
 bank, instead of directly by the government was, that the latter is 
 opposed to the spirit of the constitution, that it is more liable to 
 abuse, and that no standard of what is enough can be found. But 
 the offense against the constitution is the same in essence in both 
 cases, differing only in directness. His statement of the argument 
 is substantially this: it is safer for a government bank to emit bills 
 in the regular way of discounting, than for the government to issue 
 bills for its own needs; for nobody proposed that the bank be re¬ 
 stricted to discounting for the government or that the government, 
 if the bank were not started, discount for the public. He was 
 comparing the bank as a commercial institution to the government 
 as a government. If we grant that the return of bills to the bank 
 for redemption will keep it from over-issues, and that the issue of 
 treasury notes has no such check, what have the two to do with 
 each other. The bank issues bills as trade demands them: the 
 treasury pays out its notes on account of its own needs only. It 
 proved also that the bringing of its bills back to it by the holders, 
 would limit the capacity of the bank to afford that aid that might 
 be urgently demanded by the government in exigencies. Hence, 
 if the emergency occurred when the possible volume of bills was 
 already out in the hands of public, the government had merely 
 lost the use of so much of its credit as was invested in the bank, 
 and that, tpo, when most urgently in need of it. But the two state¬ 
 ments are not true. Nothing has been more fully proved than 
 that a rising tide of speculation, such as preceeds a panic, will 
 carry out far more bills than any bank ought to emit; and if the 
 
102 
 
 NATIONAL BANKING EXAMINED. 
 
 bank depends on the return of its bills as an admonition that they 
 are becoming redundant, it will learn that a pit is near, by falling 
 into it. And when treasury notes are issued in too great volume, 
 they fall below par. Hamilton seemed to think it possible to make 
 the abuse of credit a physical impossibility by means of a bank. 
 It is pleasanter to find excuses than blame for such men as Ham¬ 
 ilton, and it is but just to say that he probably knew that the use 
 of treasury notes for circulation would too quickly remind the peo¬ 
 ple of continental bills, and that he considered it necessary to mix 
 up the public credit with private credit, so that the people would 
 not so easily discover it and treat it with suspicion. 
 
 Congress chartered the bank recommended by Hamilton, in 
 1791. One-fourth of its capital, or $2,500,000, was to be cash. 
 Hamilton acknowledged that coin enough to pay up the whole 
 capital was not to be had. How much of its capital was paid by 
 actual money, and how much by stock notes and other hocus-po¬ 
 cus, will probably never be known. Dr. Erick Bollman, a de¬ 
 fender of federal banking, says that the capital of the bank was to 
 be paid one-fourth in specie, but “this specie was not to be paid at 
 once, but in four six-monthly installments, of six hundred and 
 twenty-five thousand dollars each. The bank, therefore, begah 
 its business with six hundred and twenty-five thousand dollars 
 specie. * * * The question is, whether it can be 
 
 presumed that its specie capital increased much by the payments 
 of the second, third and fourth installments I answer it is highly 
 improbable. [Here follows explanation of the hocus-pocus.] No 
 more, or little more than the first installment, can ever be consid¬ 
 ered as having been received by the bank in hard money.” (Par¬ 
 agraphs on Bkg., Phila., 1810, pp. 22, 35, 64.) It began after 
 one war and ended before the next; so its usefulness in war was 
 never tested. Had it existed in the war of 1812, its insufficiency 
 would doubtless have settled the question of federal banking for¬ 
 ever. It taught some people such dependence that they thought 
 the heavens would fall if its charter were not renewed, and were 
 greatly astonished that neither event occurred. Eleven Democrats 
 out of twenty-five voted for the original charter, and fourteen 
 against it; twenty-eight Federalists for and six against it. At the 
 next session, the Democrats having gained in members, came 
 within one vote of passing a resolution declaring the charter un¬ 
 constitutional. When the bank asked for an extension of its char- 
 
NATIONAL BANKING EXAMINED. 
 
 103 
 
 ter, merely to wind up its business (a full charter having been re¬ 
 fused), Henry Clay, as chairman of the house committee, reported 
 that they considered the existing charter, or any other, repugnant 
 to the constitution, and declined even that. 
 
 It is usual for those who prefer national banking to natural 
 banking, to point to the insufficiency of the support given by the 
 banks to the government in the war of 1812. There can scarcely 
 be a doubt that if New England had aided with as much earnest¬ 
 ness as she opposed the government, there need have been no 
 trouble on the score of finances. Her banks took all the coin 
 they could from the other banks and sent part of it to Canada by 
 buying British bills. They literally adhered to the enemy in time 
 of war and gave him aid and comfort. The notes of the banks 
 did not fall as low in the war of 1812 as the government notes did 
 in our inter-state war. 
 
 When the idea is prevalent in this country, that fiat can create 
 value, it will manifest itself through the £tate legislatures, if its ac¬ 
 tion be repressed by congress. One of the beliefs in those da>s 
 was that banks created value instead of merely collecting means 
 for use. Dr. Bollman said, in reference to the constitutionality of 
 a national bank: ‘ ‘ But banks are mints ! Might not the constitu¬ 
 tionality of banks incorporated by state authority, be more- justly 
 questioned?” (Par. on Bkg., p. 73.) They were improvements on 
 mints, furnishing material for coinage without cost or labor. State 
 banks considered respectable, had a nominal capital, in 1813, ag¬ 
 gregating about eighty millions. 
 
 In 1814, after the state banks had been under suspension for 
 the enormous period of forty-four days, Dallas, the secretary of 
 the treasury, fled in dismay into the arms of federal banking. 
 Webster opposed the scheme, and it was defeated by the Speaker’s 
 vote. Another bill was introduced and passed both houses, but 
 was vetoed by Madison, because it did not oblige the bank to 
 lend to the government, and because it forbid the bank to suspend 
 specie payments. Another bill was got up that suited him. It 
 allowed the bank to begin under suspension, and gave congress 
 power to authorize suspensions, in certain contingencies, in its dis¬ 
 cretion. The news of peace was received four days before the bill 
 came up in the house, and it was indefinitely postponed by one 
 vote. Gouge says we were thus saved from a “ National Bank 
 with a paper capital of fifty millions, issuing notes redeemable in 
 
104 
 
 NATIONAL BANKING EXAMINED. 
 
 paper." We have since had the same tiling, exaggerated nearly 
 ten-fold and lasting nearly twenty years. 
 
 The last bank chartered by the federal government was de¬ 
 stroyed by the bull-dog tenacity of Benton, after seven years of 
 war against it. It is not worth while to refer to it further than to 
 say that men grew more and more thankful for its death, until no 
 man in the Union could be found to defend it. 
 
 If these systems of banks, founded on the inability of nations 
 to meet their outlays, are so excellent, so beneficient, why do we 
 wait to be forced into them by war? Why not go into them when 
 the nation is free from debt? Why do foxes wait to be accident¬ 
 ally beautified by losing their tails in traps? When gold and silver 
 become plenty, why do they lose their sourness ? It is a strange 
 principle to go into the banking business only after one’s capital is 
 exhausted, or before one has any. 
 
 It would scarcely seem more strange to find oneself under the 
 necessity of again refuting the right of the English to tax us, than 
 to be forced to assail again the claims of constitutionality in fed¬ 
 eral banking, yet this necessity is upon the people again, notwith¬ 
 standing they once thought it as completely settled as they now 
 think the slavery question is. The national banks to-day rest on 
 Hamilton’s pamphlet of 1790, and on the puerilities that were ad¬ 
 vanced against the great Missouri senator. 
 
VI. 
 
 WHEN SHALL NATIONAL BANKING BE ABOLISHED, WHAT 
 SHALL TAKE ITS PLACE; AND LASTLY WHO WILL ABOL¬ 
 ISH IT? 
 
 As the banks in this system were chiefly brought into existence, 
 and into a high condition of excellence as banks, under the state 
 laws, and the national bank act merely but a uniform on them, they 
 can be changed back to their former condition at any time without 
 any shock to the business of the country. The national system 
 should be abolished at once and forever. No pretence of necessity 
 for party success should excuse any one from pressing this matter. 
 We must have permanence in finance and not. continue dodging 
 into and out of a short-lived system of federal banks once in every 
 generation. There is but one political party in this country that 
 can be expected to abolish federal banking. The other under all 
 names, has favored the continued absorption of power by the fed¬ 
 eral government and its leaders do not at heart favor popular gov¬ 
 ernment. They despise all republics, and have no faith in any 
 theory of government but imperialism. If it be universally agreed 
 to put all power in the federal government, the change ought to be 
 made in the constitution first. To make it mean any and every¬ 
 thing desired, is to bring it into contempt. Those who thus stretch 
 the constitution are afraid to risk a proposition to change it, before 
 the people. A law of congress approved by a prepared supreme 
 court is a surer way. No doubt the people will part with federal 
 banking rather than with the constitution. 
 
 The strength of the argument of these banks for existence is 
 that they already exist. “What will you substitute for them?” 
 We are supposed to be under the necessity of a direct issue of 
 treasury notes or else “ wild-cat ” bank notes issued by state banks, 
 
106 
 
 NATIONAL BANKING EXAMINED. 
 
 if this system be abolished. Before an existing system of any 
 kind can be abolished there must generally be a substitute proposed 
 for it. It is plain that the banking business belongs to the states, 
 along with all other businesses. People generally fear this because 
 few in this generation remember the facts of state banking; and 
 the power of the government and of the national bankers has been 
 used to falsify history in regard to state banking. There is ample 
 power in the states and the union to prevent the abuse of credit 
 such as occurred formerly under state institutions. We have seen 
 how the states themselves were working in the direction of a sound 
 currency, and that the note holders were held to a stricter personal 
 accountability than under the federal banking act at present. 
 According to the national bank party the uniform value of the 
 paper money is the point to be secured. In trying to make a bank¬ 
 ing system that would be uniform in all its workings congress 
 attempted a good many absurdities. The only essential point in 
 using credit as a medium of exchange is that it be always worth 
 what it promises to pay — so many coin dollars. All attempts to 
 do this heretofore have failed; all attempts to do it hereafter will 
 fail. Under no possible circumstances can credit be used as a 
 medium of exchange and always be equal to coin in steadiness or 
 in ultimate security, taking the whole volume of circulating credit 
 into account. 
 
 In the constitutional power to certify the weight and fineness 
 of the bullion a man leaves at the mint, and to give it back to him 
 in the shape of coin, there resides no power to injure him under 
 any possible circumstances ; but in exercising what is claimed as a 
 constitutional power over bills of credit, congress has robbed and 
 impoverished many and has permitted banks to rob and impoverish 
 many, and these results are inseparable from the exercise of the lat¬ 
 ter power by congress. The unconstitutional power used to restrict 
 coinage by any means is the same in fact as if congress were to 
 restrict the planting of wheat or cotton to what is necessary for 
 home consumption, under the power to regulate commerce with 
 foreign nations. What are we to conclude then ? That the exer¬ 
 cise by congress of a certain constitutional power is essentially mal- 
 efficient or that it does not possess the power and its exercise hith¬ 
 erto has been in every case a usurpation ? For we cannot escape 
 this dilemma. Undoubtedly losses do occur to an enormous extent 
 and will always do so as long as credit is given in trade and that 
 
NATIONAL BANKING EXAMINED. 
 
 107 
 
 will be always. But because a custom voluntarily in use among 
 those engaged in commerce or trade invariably causes some losses 
 it does not excuse congress from inferring the power to do a thing 
 that is confessed to be impossible to separate from harmful results, 
 whatever good results it may otherwise produce. This test of the 
 implied powers and inferred powers of course cannot be applied to 
 the specified powers for there is no question about them, whether 
 their results are good or bad. But to infer from an essentially 
 beneficient specified power an essentially maleficient one, is evi¬ 
 dently doing violence to common sense no less than to logic. 
 
 What power then is to be inferred as resting in congress on 
 this subject ? Beyond doubt the fathers desired to get rid of paper 
 money of any kind, as a standard, and have the standard metallic. 
 Whether they intended, by adopting the constitution, to allow the 
 channels of trade and the pockets of the people to be filled with 
 a hard-money currency only, and exclude bank notes is not certain. 
 It is tolerably plain that they did not, but that they expected that 
 the people themselves and the state constitutions, would manage 
 that part of it. They simply meant that by having one coinage 
 and standard, the people would be put in the way of enjoying 
 the best possible currency if they chose; but they do not seem to 
 have intended to exercise the paternal power of making it impos¬ 
 sible for the states or people to drive away the coins and injure 
 themselves with paper money. I would prefer to think that the 
 power to coin money implies the power to secure to those who do 
 not wish to dabble in paper money the benefits of the circulation 
 of coin, by whatever means might be necessary. If this were an un¬ 
 doubted power of congress it could at any time have passed an act 
 declaring that no person or corporation issuing bills for circulation, 
 should be limited as to his common law liability for their payment, 
 by any power whatsoever. The use of his credit in the form of 
 circulation being one of man’s natural rights of which he cannot 
 properly be deprived, yet the exercise of the right under the pro¬ 
 tection of artificial limitations of his liability always leading to 
 abuses, there is but the one remedy of leaving him, as to rights 
 and responsibilities, about where nature placed him. There seems 
 to be no doubt that the power to limit his liability resides, if any¬ 
 where, in the constitutions of the states only and the power to 
 restore it in the same places. When congress limited the liability of 
 the incorporators of the first and second Banks of the United 
 
108 
 
 NATIONAL BANKING EXAMINED. 
 
 States and of stock-holders in national banks it claimed it as one 
 of the necessary and appropriate incidents to the exercise of the 
 power of borrowing money and managing its fiscal affairs, and not 
 as one of its general powers. The necessary thing would seem 
 then to be an amendment to the constitution forbidding the states 
 to limit the liability of any persons in anywise engaged in issuing 
 their credit in the form of circulating notes. No doubt this would 
 be the most effectual plan. This, with the other machinery of law 
 now in operation, would reduce the abuse of paper circulation to 
 the minimum, for each man would then watch himself under pain 
 of his whole estate, and, 
 
 “ ff every one would see 
 To his own reformation, 
 
 How very easily 
 We might reform a nation.” 
 
 For, the habit of inferring so many things from the constitution 
 whenever they are wanted, is the most dangerous, demoralizing and 
 destructive one into which we can fall. But on the other hand it 
 is important not to tinker too much with that instrument, for with 
 every newly-conferred specified power, will creep in a hell-brood of 
 implied and inferred powers, excuses for other usurpations. There¬ 
 fore let us see what powers congress and the states possess, that 
 can be used for the purpose, and what the probabilities are that they 
 will be used. New York had already provided that the stock¬ 
 holders of banks of issue should be personally liable for the re¬ 
 demption of the circulation by her constitution when the national 
 bank act was passed. Massachusetts had done the same. Many 
 of the other states had also. Nothing was more apparent than that 
 the states were steadily advancing toward a sound currency, the 
 chief obstacle and one that is still present, being the speculative 
 disposition of our people and their desire to have the means of 
 speculation ample. Except as to the power of the states to make 
 foreign coins a legal tender, the federal government is the only 
 power from which money can come and it must be coin. Banks 
 can promise to pay money and so can individuals, and if people 
 choose to circulate them by accepting and paying them out it is 
 their own business. But when a bank fails to redeem its promise 
 to pay money on demand and still tries to circulate it as money, it 
 thereby changes its bills from promissory notes to fiat money and 
 invades the domain of the federal government. That government 
 can provide against this by making suspension an act of bankruptcy. 
 
NATIONAL BANKING EXAMINED. 
 
 109 
 
 But is it even necessary for it to wait for this ? If a bank issues 
 more bills than it has coin on hand to pay, it has committed an act 
 of bankruptcy of the same kind but differing only as to time. It 
 has three dollars in bills out, payable all on demand in dollars but 
 it can only pay them provided they are not all presented at once. 
 But they are all due at once. A banker may show ample resources 
 available if time to convert them be given. A merchant may do 
 the same thing, but his promise to pay dollars is due and his cred¬ 
 itor will not or cannot wait. It cannot be said that the merchant 
 with notes due at various times, stands in the same category as the 
 emitter of bills, nor that the relations between the bank and its de¬ 
 positors are the same as between it its note-holders. For the emis¬ 
 sion of bills is between the emitter and the community, but the 
 deposit is only between the banker and the depositor. 
 
 Thus it seems probable that no power exists in our country to 
 issue credit money as has been done. It can only be a certificate 
 of deposit of coin, and the coin must lie in vault whilst the cer¬ 
 tificate is performing its functions. This does not prevent the issue 
 of all the promises to pay other promises to pay, or promises to pay 
 assets, that any one may desire; but no law ought to declare them 
 money or permit them to take its place when the money can pos¬ 
 sibly be induced to keep the place itself. Credit money ought only 
 to be a supplement to money when absolutely necessary, never a 
 substitute for money. To substitute anything for money, keeps 
 money out of the country if already out, and drives it out if not 
 already out. Credit money ought to be kept distinct from money, 
 and each should perform its function. A ‘ ‘ mixed currency ” ought 
 never to be so badly mixed as we have generally had ours. A civ¬ 
 ilization that drives coin into the hands of the barbarians of Asia, 
 may well be brought to bar to show why it shall not be called some¬ 
 thing besides civilization. The various advocates of credit money 
 think it as good, or better than money. Let them use it, but let it 
 be distinctly known as credit money; and do not restrict our lib¬ 
 erty to use money. 
 
 The power of coining is not a necessary one to vest in con¬ 
 gress. It is there for convenience only. The scales and weights 
 by which the amount of metal is determined, would be a sufficient 
 standard if we had no coins. The coining of it simply makes it 
 more convenient for payments by tale. The actual standard after 
 all, is pure gold and pure silver; and the actual units are grains, not 
 
110 
 
 NATIONAL BANKING EXAMINED. 
 
 dollars. The national bank act is strictly in opposition to the ex¬ 
 ercise of the power to provide a circulating medium of coin, im¬ 
 posed on congress by the constitution. It kept coin out when it 
 was ready to return to circulation; it is now keeping out silver coin. 
 Bankers who are coining credit money out of bonds that are already 
 returning them good interest, cannot be expected to do anything but 
 “ let their profits run on.” 
 
 The only legal tender power in congress is the power to coin 
 money. Gallatin and Jefferson both denied that congress has the 
 power to make anything a legal tender. But congress can coin dol¬ 
 lars in money. And all our money contracts are for dollars in 
 money. All judgments are solvable in dollars. No state can make 
 anything but gold and silver a legal tender. It goes without saying 
 that no state can make a foreign coin worth less than a dollar a le¬ 
 gal tender for a dollar So that without possessing in so many words 
 the power to make anything a legal tender congress only can coin 
 money and money of its coinage and foreign coinages of equal 
 value only, can, by any power in our system, be made a legal tender. 
 It would have been superflous to give congress the power to make 
 money a legal tender, for it becomes a legal tender by our highest 
 law when it becomes money. Congress declares the unit of money, 
 men promise to pay so many units and no other power can make 
 them pay more or their creditors receive less than the law of con¬ 
 gress has fixed. For congress to declare gold and silver coins of 
 our own mints a legal tender is superfluous ; for it to declare any¬ 
 thing but gold and silver a legal tender is false, and to enforce it is 
 always tyranny and generally robbery. Money should take the place of 
 national notes ; the money of the constitution, gold and silver coin. 
 If we would adhere to its use, alone, we would find it generally 
 nimble enough to travel the circuit and perform the required labor 
 of buying and paying debts. Our bullion supply would be ample 
 for those engaged in sound business; and speculators, not being able 
 to get it, would have to go to work. When absolutely necessary it 
 could be supplemented by credit money, distinctly known as such. 
 The handlers and dealers in money should be on a footing with 
 those engaged in other trades and the natural liability of issuers of 
 credit money should not be restricted by any exemption laws what¬ 
 ever. 
 
 As long as the absurd idea prevails that the constitution trans¬ 
 ferred the power to hamper and restrict trade, for the benefit of 
 
NATIONAL BANKING EXAMINED. 
 
 Ill 
 
 certain classes, from state to federal authority, it will be difficult if 
 not impossible to be freed from the abuses of paper money. Pro¬ 
 hibitory tariffs compel us to pay foreign countries full dollars, and 
 accept from them fractional dollars inflated so as to be apparently 
 full dollars. This constant association of tariffs and the abuse of 
 paper money, has been exposed by Professor Sumner. The power 
 of the tariff and national bank interests is by no means a 
 trifling one to assail. It requires unfaltering trust in the ultimate 
 triumph of liberty, to give anyone, who knows their strength, the 
 courage to attack these formidable tyrants. 
 
 To undertake the work we need a leader of sublime courage 
 like Benton, and no such man is now in the public vision. When 
 he shall have been found he will need the strongest support. As 
 to the source from which this must come, there is with me no ques¬ 
 tion. It is the same now as nearly fifty years ago. “ For the sal¬ 
 vation of the country we must look to the farmers and mechanics. 
 The merchantile classes are so entangled in the meshes of the 
 banks that they can not yield much assistance. For similar rea¬ 
 sons little must be expected from public journals in towns where 
 banks are in operation. If the editors are not in debt to those in¬ 
 stitutions, they are dependent, in a great degree, on the patronage 
 of the bank interest for support; and it would be unreasonable to 
 wish them to sacrifice the means of subsistance of themselves and 
 families to promote a public object, while the great body of the 
 public is disposed to make no sacrifice at all.” Insert national 
 twice, and this reads as if written for our day. 
 
 When once we get organized for the attack, the state bank in¬ 
 terest, at first secretly, then boldly, will aid the overthrow of the 
 national system. This interest will furnish a refuge for those edi¬ 
 tors and mercantile men who will begin to desert an army sure of 
 defeat. 
 
112 
 
 NATIONAL BANKING EXAMINED. 
 
 NOTE. 
 
 The following is of interest on the point of bank examiners : 
 “It is now estimated that the losses occasioned by the defalcations 
 of the cashier of the First National Bank of Newark, New Jersey, 
 and the president of the First National Bank of Brattleboro, Ver¬ 
 mont, will amount to $450,000 and $400,000 respectively. In 
 each case the frauds by means of which these unpleasant results 
 were reached extend back over a long stretch of years, but seem 
 never to have been suspected until the final crash came. It is 
 difficult for the lay mind to understand how it happened that the 
 bank examiners, whose duty it was to make frequent and thorough 
 examination into the conduct and condition of these institutions, 
 failed so utterly to discover what was going on. The provisions 
 of law for the regulation of national banks are so complete that if 
 the bank examiner does his duty properly it is almost an absolute 
 impossibility for the bank officials or employees to convert the funds 
 to their own use, except by a resort to burglary. But it almost 
 invariably appears, whenever one of these institutions is wrecked, 
 that the examiner either did not attend to his duty, or that he 
 allowed himself to be imposed upon by means that would excite 
 the suspicions of a child. An examiner of bank examiners is next 
 in order.”— St. Louis Globe-Democrat, June 19, 1880. 
 
APPENDIX. 
 
 GOVERNMENT PAPER MONEY IN CONGRESS IN .857, 
 
 Howell Cobb, then secretary of the treasury, asked for an act 
 to issue twenty million of dollars of treasury notes for “supplying 
 the treasury with the means of promptly meeting the lawful claims 
 upon it.” A question arose about the printing of the bill and Sim¬ 
 mons (sen.) of Rhode Island said, “ I should like to see it printed. 
 I do not want to vote for the issue of $20,000,000 of treasury 
 notes, to be kept in circulation as long as the executive may think 
 proper, without knowing exactly what I am doing.” 
 
 Hunter (Va.), chairman finance committee, said that one dif¬ 
 ference between this bill and that of 1847 was that the older one 
 contained a. provision for funding the notes, which was left out of 
 the bill of 1857, and said, “the impression is, that if it were put 
 there they would be funded, and not perform the office desired.” 
 The next time it came up he further explained on the same point, 
 “That is not found in this bill for the reason that if put in, it was 
 apprehended the notes would be funded and converted into a loan; 
 and for the further reason that an inconvenience was found lately, 
 when we were redeeming the public stock, from that clause which 
 existed in the bill of 1847. The holder of the note, instead of 
 claming what the law designed only to give him — what was due 
 on its face — first funded into stock under that provision, and then 
 claimed a premium on the stock.” In reference to the rate of in¬ 
 terest he said the intention was, “not to make the interest so high 
 that the notes will be hoarded as an investment, and not to make 
 it so low that they will be below their par value in specie, and thus 
 
114 
 
 NATIONAL BANKING EXAMINED. 
 
 come into the treasury in payment of the revenue.” He referred 
 to the fact of a large amount of imported goods lying in the custom 
 house in the city of New York, on which the duties, amounting to 
 six million dollars, were unpaid on account of the derangement of 
 business, and said the secretary would be enabled “to use those 
 means which the British Treasury have'found so useful, by issuing 
 notes called exchequer notes, which enable them to anticipate their 
 revenue. * * * He spoke further of “using the 
 
 credit of the government for a limited amount, for the purpose of 
 supplying its temporary wants;” and whether, if it should turn 
 out that the wants were permanent, they should use other means 
 “ to replenish the treasury.” 
 
 Seward said, “that owing to the derangement of commercial 
 affairs and the collection of the revenues consequent upon it, there 
 is a necessity for an issue of treasury notes to relieve the treasury, 
 
 I think it is clear enough that it is commercially desirable that such 
 an issue of treasury notes should be made in this conjuncture, I 
 believe is also true; * * * I suppose all will agree 
 
 that the smallest issue ought to be made which can be made, be¬ 
 cause it is to inaugurate a feature in the fiscal system of the country 
 which must not be permanent, and ought to be indulged in as 
 sparingly as possible. * * •* The great object the 
 
 commercial world has in the issue of the notes at all now, is that 
 they may be used for the purpose of exchange, while the exchanges 
 of the country are deranged. * * * While we thus 
 
 benefit the government, we afford incidentally the best aid we can 
 afford to commerce, and to those banks which are attempting to 
 resume specie payments.” 
 
 Fessenden said that, “ in the bill that was passed in 1847, and 
 which was strictly a loan bill to meet the then exigencies of the 
 government, the power of the president to issue the notes was 
 limited to six months after the close of the Mexican war.” 
 
 Simmon’s commented at length on the condition of the country 
 and said “we have bought more than we have been able to pay 
 for. No ingenuity in framing treasury notes or bank notes will 
 liquidate our debts. We must look to that exhaustless source of 
 wealth, the labor of the people, extracting it from the bowels of 
 the earth and fabricating it into forms essential for society. What 
 we save over and above that which is consumed by this labor is 
 aggregated from century to century, and forms the wealth of the 
 
NATIONAL BANKING EXAMINED. 
 
 115 
 
 world.” He said that he was proud of the England that fought 
 from Agincourt to the Nile, but expressed dislike for “note-shav¬ 
 ing England,” and referred to the order allowing the Bank of Eng¬ 
 land to transcend the law, and the advice which accompanied it, 
 to maintain the rate of interest at ten per cent (in 1825). “Then 
 1 have doubts as to the propriety of issuing government paper as 
 a currency. We do not say this government must be prohibited 
 from doing a thing in order to make it unconstitutional, because 
 we construe the constitution as a delegation of power, and we are 
 bound by what it delegates to us. If it does not delegate the power 
 to issue paper money, we have not that power. It is clear to me 
 that this measure is hardly constitutional.” He then branched off 
 on an advocacy of a savings institution connected with the treasury 
 department and supporting “ our own industry against the pauper 
 labor of Europe,” and got back to the subject and said, “ I would 
 prefer that this should take the form of a loan, and then I 
 think it would get into the hands of the savings banks, or some¬ 
 where else, where it would not disturb the currency. Tell us just 
 what you want and I am willing to vote it. I only ask that you 
 will not make a bank out of this. That is the worst and most 
 •unconstitutional form of paper money ever devised by the wit of 
 man; it will corrupt the government and corrupt the people.” 
 
 The chairman of the Committee on Finances, Hunter, said: 
 “I am no more in favor of a permanent issue of treasury notes 
 that the senator from Rhode Island. I design only to provide for 
 the present exigency ; provide for the temporary wants of the gov¬ 
 ernment, until the times shall become easier and the machinery of 
 commerce shall be onee more restored, and we shall be able to 
 derive from the ordinary sources, as I believe we can, revenue 
 enough to carry on this government economically.” 
 
 Crittenden said : “I wish we were agreed that no interest is 
 necessary. I do not believe it will be necessary; but yet, as it 
 seems to be contemplated that this money shall not be used by the 
 government as an immediate currency to the whole extent of it, 
 but that they shall give it out as securities for gold and silver, and 
 use that, then it may be necessary for them, when bargaining for 
 money, for all I know, to give a little interest. It presents a very 
 singular spectacle, that after the great commercial and monetary 
 crisis through which we have just passed, just at the moment when 
 the banks everywhere are resuming specie payment, the govern- 
 
116 
 
 NATIONAL BANKING EXAMINED. 
 
 ment is suspending specie payment.” After referring to the issue, 
 and the means of extinguishing it speedily, he continued: “One 
 of the circumstances, at this time, to the issue of a paper currency 
 by the government, is the ease and alleviation it may give to the 
 commercial and pecuniary distresses of the country. I confess 
 that that has its reconciling effect on me. If, at the same time, 
 you can provide for the payment of it by a measure that will press 
 on no American citizen, but, by a proper adjustment of the in¬ 
 creased duties on articles of foreign commerce which enter into 
 competition with the industries of our own country, we can, not 
 only aid the man who wants money, but aid the man who wants 
 labor; then, indeed, we shall be doing something that is benignant, 
 and something that is to alleviate the condition of the country. I 
 desire to see both. While I supply the government with money, I 
 want, at the same time, by a corresponding measure, to pay that 
 money by a duty which shall give the laborer labor. That, as the 
 senator from Rhode Island said, is the source of all wealth; but 
 now, in the present condition of the country, we are not required 
 so much to look at it as a source of wealth. We are obliged to 
 bring down our calculations; we are obliged to calculate what is a 
 necessary provision for the poor, now out of employment by 
 the thousands—a fact which we know. If these laborers can be 
 brought to work and made comfortable during this long winter, or 
 made comfortable more permanently than they have been, and the 
 means of subsistence supplied, will not that be a great recom¬ 
 mendation to a measure which shall afford them some protection 
 and some encouragement to their labor ? We want it for revenue. 
 It would not be a measure for protection, but a measure essentially 
 for revenue. No gentleman here, on any constitutional ground, 
 can have any objection so to apply and adjust the duties, as to 
 afford to the suffering manufacturers and mechanics of our country 
 all the protection which a proper adjustment of the tariff on the 
 articles that ought to be protected, would give them. I mean to 
 vote for the bill.” 
 
 Bell (Tenn.) said: “ If I had the confidence of the honorable 
 senator from Kentucky, in what he supposes will, almost as a 
 matter of course, follow after the granting of this relief, I would 
 express the same sentiment he has done, and give my support 
 cheerfully to this bill; but I have not the smallest confidence that, 
 if we pass this bill, allowing this amount of notes to be issued by 
 
NATIONAL BANKING EXAMINED. 
 
 117 
 
 the treasurer, any such thing will follow. As far as I can gather 
 from the expression of the executive, * * * there is no other 
 
 measure of relief to be proposed. * * * It is not contem¬ 
 plated by those in whose power we are, to relieve the people. If 
 I could anticipate or suppose that, when we authorize the issue of 
 these $20,000,000 of treasury notes, they will be thrown into circu¬ 
 lation and afford a temporary relief to the distressed in every sec¬ 
 tion of the country, and particularly in that section which is now 
 most suffering, perhaps that would be an inducement to me to sup¬ 
 port this bill. What is the proposition ? To relieve the govern¬ 
 ment from bankruptcy; to provide for the government in the true 
 spirit, and according to the original theory of that sublime inven¬ 
 tion, the sub-treasury! It is to take care of the government at all 
 hazards. I do not deny this is a proper means to support the gov¬ 
 ernment; it has been resorted to before.” 
 
 December 19th, Wilson said: “I am willing to supply the 
 temporary wants of the treasury by this mode. These treasury 
 notes, if the interest is low enough, will not be taken or held by 
 the capitalists, but will be used by the banks and merchants as 
 remittances.” 
 
 Benjamin (La.) said: “Mr. President, I do not wish to enter 
 into any debate upon the general financial condition of the 
 country. I suppose this is not the time for so doing. The exigen¬ 
 cies of the treasury are represented to us as being so imperative, 
 that the executive officers of the government require immediate 
 relief in order to enable them to sustain the credit of the govern¬ 
 ment, by the payment of its debts incurred under appropriations 
 made by us, not by them. The proposition now is to sustain the 
 credit of the government. Upon some other occasion I think we 
 may more appropriately enter into the cause of the financial dis¬ 
 tress, and into the question of the proper mode of providing, a 
 regular and established revenue for the government.” 
 
 Seward said: “The issue of treasury notes for an unnecessary 
 amount is indefensible, for that would be to constitute the govern¬ 
 ment of the United States a national bank.” “Feeling a strong 
 desire to benefit the commercial interests of the country in its re¬ 
 construction from embarrassment, I feel a very strong desire that 
 the notes which shall be issued by the country shall not take the 
 character of a permanent loan, but that they shall go into the cir- 
 
118 
 
 NATIONAL BANKING EXAMINED. 
 
 culation of the country immediately as an equivalent of gold and 
 silver. 
 
 Davjis (Miss.) said: “I look on the proposition that is sub¬ 
 mitted to us as simply a proposition to borrow money for the im¬ 
 mediate use of the government. If the government is censura¬ 
 ble for the fact that the treasury is empty, or about to become so, 
 then I can perceive the point of the inquiry as to the cause which 
 has produced the financial distress and thus prevented the receipt 
 of revenue into the treasury. I would say, however, that I have 
 heard not yet assigned what I believe to be the true reason for the 
 diminished revenue of the United States. Among the remarks 
 that have been made, there have been some directed to that inter¬ 
 est and to that section of the country which I, in part, represent. 
 The honorable senator from Rhode Island, yesterday gave warn¬ 
 ing and advice to those who represent the cotton growing region. 
 To-day, time after time, we have heard one cause and another as¬ 
 signed, and among them, chiefly, the great imports of the country. 
 Now, sir, that, as the country increases in its wealth and popula¬ 
 tion, imports increase, should excite the surprise of no man. I 
 am sorry that it should excite the regret of any one. It is a fact 
 that the imports of last year did not exceed those of the preced¬ 
 ing year as much as those of the preceding year exceeded those 
 of the year before it. There is a steady progress, owing to the 
 very great prosperity of the country, and something is also due to 
 that excitement which over-banking produced. The sale of cotton 
 is usually transacted by bills of exchange. That is the ordinary 
 commercial course ; and the whole embarrassment which fell on 
 the southwest and the lower Mississippi, was due to the fact that 
 the goods were imported into the city of New York which were 
 consumed in that section, and the cotton was bought with bills 
 which were to pay for the goods imported into New York. “When 
 New York, by her extravagance, by her speculation in railroad 
 stocks and western lands, became bankrupt, and was no longer 
 able to pay for the goods she imported, not because there were not 
 consumers in the country, but because they had proceeded on 
 credit alone in their importations, and could not therefore buy the 
 bills of exchange which were to move the cotton—then it was and 
 for that reason entirely, that commercial distress came upon the 
 country.” “But I am glad to find that instead of these notes 
 being issued, as has been recommended in some of the commer- 
 
NATIONAL BANKING EXAMINED. 
 
 119 
 
 cial portions of the country, merely to throw specie into circula¬ 
 tion, to become a safe deposit, they are to bear interest. That in¬ 
 terest, and the necessity of assignment from hand to hand as each 
 passes, will perhaps prevent these notes from going into general 
 circulation, and assuming as has been asserted, the character of 
 bank notes.” Simmons, on learning that the notes were, after the 
 first endorsement, to pass from hand to hand without further en¬ 
 dorsements, said: “Then this measure proposes to make the treas¬ 
 ury a bank of issue. I do not object to furnishing money for the 
 purposes of the government; and if treasury notes are to be is¬ 
 sued, my desire is that they be put in such a shape as to be a 
 medium of exchange between the different parts of the country, 
 and not used as a medium of circulation, passing from hand to 
 hand.” “Let them be issued in such a form that they may an¬ 
 swer the purposes of the government, facilitate the business of the 
 country, and alleviate the existing distress about the causes of 
 which we shall probably never agree. I think we should allow no 
 treasury note to be issued for less than $100; and we should re¬ 
 quire them to pass only with the endorsement of the holder.” 
 
 Hunter, after protesting against the wide range the debate 
 was taking, and against attempts to amend the tariff, appraise¬ 
 ment, warehouse, and revenue laws, and the whole monetary sys¬ 
 tem of the country by this bill, said: “What we want to know is 
 whether the Senate of the United States will vote for an issue of 
 treasury notes to supply the wants of the government.” “If we 
 depart from the simple question, whether we will supply the gov¬ 
 ernment in this form and shape, to enter into debates on the tariff, 
 or the warehouse system, or the monetary system of the country, 
 there will be no end to them.” 
 
 Not heeding this appeal of the chairman of the Committee on 
 Finance, Dixon (Conn.) saying he should oppose no factious op¬ 
 position to the bill, “that the treasury wants money, and must 
 have it,” went to a considerable length in discussing the condition 
 of the country and the causes of it. “We see in the first place 
 the business of the country paralyzed, its commerce, both foreign 
 and domestic, almost entirely destroyed. We see its industry un¬ 
 employed.” “We see, further, the banks of the country compell¬ 
 ed for sixty days to suspend specie payment. We see England 
 herself, and every commercial nation of Europe which has had any 
 dealings with us, feeling the effect of our troubles. We find that 
 
120 
 
 NATIONAL BANKING EXAMINED. 
 
 the excess of trade, stimulated by our own legislation, has at last 
 wrought its effect in every country which has traded with us; and 
 that now through our inability to consume and pay for what we 
 have purchased from them, they are suffering themselves; showing 
 that our system is not only injurious to us, but is also injurious to 
 those nations who have been supposed to reap a benefit from it. 
 Furthermore, at last we see a bankrupt government. Only ten 
 months ago when I came here to take my seat, I found the senate 
 discussing the question how they might deplete the treasury, how 
 they might reduce the sum of our revenues; and now this proud 
 nation, by its representatives here, is attempting to borrow money 
 and proposes to do it by the issue of paper money.” After saying 
 “the financial system inaugurated and established at that time 
 [ten years before] by the senator from Virginia and his political 
 friends, on the ruins of another and very different system” had, in 
 his opinion, caused the trouble, he continued : “ Now, sir, the sec¬ 
 retary of the treasury comes in with his report, stating that ‘a re¬ 
 vulsion in the monetary affairs of the country always occasions 
 more or less of distress among the people.’ I think we may agree 
 on that point. ‘The consequence is that the public mind is direct¬ 
 ed to the government for relief;’ and he goes on to say that no re¬ 
 lief can be furnished by the government. What does he offer ? 
 What is his measure ? He proposes (I do not say that it is not at 
 this time a necessary measure; perhaps it is, in the present state of 
 the country), the issue of $20,000,000 of paper money, in the 
 strictest sense of that term; money which is to be paid out by the 
 government for debts due by the government; money which is to 
 pass by delivery; which is to circulate from hand to hand; which 
 is inconvertible into specie; which will not anywhere command 
 specie, except the voluntary exchange of it for specie. In every 
 sense of the term, by every definition, it is paper money in the old 
 sense. That is what the government now proposes to issue. I 
 wish it, furthermore, to be understood that this issue of paper 
 money is to be locked up, as I suppose, in the sub-treasury. I 
 take it that this paper money, which is to be engraved and adorned 
 so as to bear the semblance of bank bills, the semblance of curren¬ 
 cy and act the part of a currency, is to be locked up in the sub¬ 
 treasury, or is to be exchanged for specie which is to be locked up 
 there. This and the sub-treasury ane to act hand in hand, the two 
 are to go together. Is not that an abandonment, temporarily, of 
 
NATIONAL BANKING EXAMINED. 
 
 121 
 
 the entire sub-treasury system.” “We were told that the sub¬ 
 treasury system was to prevent all contraction or expansions; that 
 it was a great conservative power; that it was to prevent over-im¬ 
 portations ; that it was to protect our country; that it was to save 
 the banks, or at least to save the government.” “It has shown 
 itself unable to prevent expansions, unable to prevent contrac¬ 
 tions, unable to prevent over-importations, unable to prevent the 
 ruin and distress which have spread far and wide throughout the 
 country. Furthermore, it has failed in that last benefit which it 
 was said it would at last confer; it has been unable to save the gov¬ 
 ernment; and we now find, under this sub-treasury system, the 
 government unable to collect its duties and in a bankrupt condi¬ 
 tion. We see, in the greater portion of the country, the ware¬ 
 houses filled with foreign importations which an impoverished 
 people at this very time are unable to consume.” “ In that part of 
 New England from which I come, in the state of Connecticut, the 
 troubles of the day are by no means over. Indeed, sir, if not at 
 their height and intensity, there is at this time no symptom of re¬ 
 covery. The only want of money is for liquidation for the pay¬ 
 ment of debts. The banks have money. They can loan money 
 to-day; but the difficulty with them is to find paper of a business 
 character on which they think it safe to make their loans. There 
 is no apparent relief thus far from what we have already suffered.” 
 
 ‘ ‘ The secretary of the treasury says that no relief can be furnish¬ 
 ed ; that the people, although they suffer more or less in a revul¬ 
 sion, must not look to'the government for relief. That is the old 
 story; it is not new.” He then went on to say the tariff would re¬ 
 lieve the country, ■ &c., &c. “I believe if you would give the 
 American laborer the poor privilege of doing American work, you 
 will at once restore this country to prosperity.” 
 
 Collamer, of Vermont, said: “The act of 1847 authorized 
 the borrowing of $23,000,000 as a loan, and the provision for 
 treasury notes was interwoven with the other provisions for a rea¬ 
 son then given and which I well remember. The treasury note 
 system was shaped with a view of enabling the common people to 
 get hold of a portion of the loan; for it was provided in the law 
 that whoever held treasury notes might fund them in the general 
 loan. I say then, that that law furnishes no precedent for this, 
 because the object now is avowedly to issue these treasury notes to 
 circulate from hand to hand and they are to be put at a very small 
 
122 
 
 NATIONAL BANKING EXAMINED.. 
 
 rate of interest for that purpose. The object (of making them 
 pass by endorsement) was, that the treasury notes should not be 
 regarded as a circulating medium, but as bills payable to order and 
 indorsed by the payee, and to be used in that way in order to 
 escape the charge of having in any way over-ridden the provisions 
 of the sub-treasury system.” Under the advice of the president’ 5 
 message, Collamer said, the states should “take nothing but hard 
 money for taxes, and pay out nothing but hard money. By-and-by 
 a pinch comes, and they cannot get hard money. Suppose they 
 follow the example of the general government, and issue bills; 
 what are they? Nothing but bills of credit, which the states are 
 forbidden to issue. If you can give a man a treasury note, pay¬ 
 able in a year, what is it ? It is a bill on the credit of the govern¬ 
 ment, for which the faith of the government is plighted. When 
 the states comes to this point, the constitution interposes; they 
 cannot follow the president any further; he leads them into a 
 slough; he gets himself out of it by asking congress to exercise its 
 power of issuing bills of credit, which the states are forbidden to 
 do. I do not make these remarks with a view of finding fault with 
 the independent treasury system or a hard-money currency; I am 
 merely endeavoring to show how palpably and grossly that system is 
 violated by this bill. Is a different system of ethics to be applied 
 to the dealings of the government with its creditors from that 
 which is applied between man and man ? Certainly not. You may 
 say the people are not obliged to take these treasury notes. They 
 have Hobson’s choice. I say the necessities of the government’s 
 creditor compel him to take the notes, and thus you force him to 
 get the cash for them. If he (sec’y of treas.)’ has drawn money 
 out of the treasury and applied it to the redemption of the public 
 debt, he acted no doubt with a view to relieve the country. It 
 did that in some measure. He supposed, perhaps, that by antici¬ 
 pating the debt due in 1868, and paying it now at a premium, he 
 might possibly so far relieve the commercial community as to en¬ 
 able the importations to go on, and thus keep up the revenue. In 
 that object he has failed. I am not finding fault with him for not 
 having had more foresight than anybody else in the country. This 
 result has come upon us unexpectedly; but I say that, when it has 
 come, there should be fair dealing, and consistent conduct. Now, 
 what is proposed ? It is said that the object is to pay debts that 
 we now owe. We have not the money. Then borrow it like an 
 
NATIONAL BANKING EXAMINED. 
 
 123 
 
 honest debtor and pay interest for it. Go and buy gold, put it into 
 your treasury, keep up your sub-treasury, do not abandon your 
 constitutional currency. The issuing of these notes is an aband¬ 
 onment of the constitutional currency, and the more you make 
 them circulate the greater is the abandonment. You deny the 
 power to establish a national bank. We once had such a bank, 
 with a capital of $30,000,000, and you said it was a great monster. 
 Here you are making a national bank without checks, without any 
 hypothecation of securities, based on nothing except the public 
 credit. If we borrow four or five million of dollars, we shall be 
 no more in debt than we were a year ago; we shall draw money 
 from where it is now hoarded, and by being put in circulation in 
 payment of demands against us, it will go to relieve the people by 
 putting in circulation money that is now sequestered from use. 
 These treasury notes, however, give no relief; they do nothing 
 but run round and round in the circle of the treasury business; 
 they destroy your system of constitutional currency, and leave your 
 creditors to whom you pay these notes, to get them cashed as well 
 as they can. To such a system I am utterly opposed.” 
 
 Hunter replied, denying any abandonment of hard money or 
 the independent treasury system, or admission that there was not 
 enough specie in the country, and said: “ It is not as a monetary 
 measure that the treasury note is resorted to, but because it is the 
 cheapest mode by which we can borrow money; and it is not only 
 the cheapest mode by which we can borrow money, but, incident¬ 
 ally, it will relieve the community more, or, to speak more properly, 
 it will operate less onerously on trade and commerce than any 
 other mode by which we can borrow money. Nor do we propose 
 to force it on anyone. Is it not specially provided that it shall not 
 be paid to any creditor of the United States except at his option. 
 And is it likely that there will be any necessity for the government 
 to force it on its creditors. This is one form of using the govern¬ 
 ment credit; it is the cheapest form; and if it follows, as an inci¬ 
 dental consequence, that we relieve the community more by using 
 the government credit in this form than any other, are we to be 
 accused of a departure from principle, because we do not suffer 
 that consideration to drive us from what, in other respects, looking 
 only to the good of the treasury itself, is the best mode to which 
 we can resort? Surely not.” 
 
 Davis (Miss.): “I think the advantage of a loan for a short 
 
124 
 
 NATIONAL BANKING EXAMINED. 
 
 time is, that we are soon to be out of debt. I hope that with re¬ 
 turning prosperity, we shall soon have revenue enough to support 
 the government.” 
 
 Collamer (Vt.): “Does the gentleman propose to borrow 
 himself out of debt ? ” 
 
 Davis: “No sir, but I expect, with returning prosperity, to 
 have revenue enough to pay the loan. When I addressed the senate 
 before, I was under the impression that these notes, like the notes 
 issued under the act of 1837, must be assigned from hand to hand 
 as long as they traveled; that they were never to pass as money— 
 never to be in the nature of bank notes' passing by delivery. It is 
 exactly in that view that I think it is to relieve the country. 
 
 * * * When confidence has been lost, when there 
 
 has been a failure of the incorporated institutions to answer the 
 purpose of furnishing money on the credit of individuals, then the 
 government comes and draws the money from those places in which 
 it has been locked up, throws it into circulation again, and thus in 
 the ordinary transaction of its own functions, brings relief to the 
 community. This is the only mode in which the government can 
 properly interpose, and it is an effective mode at a time like this, 
 when specie enough is locked up in the country to answer all our 
 wants, and it merely requires some hand strong enough to draw it 
 out and throw it into circulation.” 
 
 Trumbull referred to them as “an issue of shinplasters.” “ I 
 am opposed to issuing this paper currency.” “I prefer, in the 
 first place, that we should borrow the money, rather than issue a 
 paper circulation.” * 
 
 Pugh, (Ohio), said: “ It does seem to me this bill, as it now 
 stands before the senate, affords a very serious ground of indict¬ 
 ment against those of us who profess the principles of the Demo¬ 
 cratic party. Here is a proposition to issue $20,000,000 of shin- 
 plasters.” “If it is to become a circulating medium, it is worse 
 than any bank note, which the president has denounced in his 
 message, for there is no provision for its redemption.” “If the 
 payee is to let them pass by delivery, they are nothing but bank 
 notes, and they ar^ bank notes, without any three dollars in coin 
 for one of paper to redeem them.” 
 
 King, of New York, said: “ I shall vote for this amendment 
 [to issue no note less than $100]. I regard it as one of the best 
 tests which have been presented to determine whether this is a bill 
 
NATIONAL BANKING EXAMINED. 
 
 125 
 
 to bring money into the treasury as a loan, or whether it is a bill 
 to make a treasury bank, and authorize the treasury to issue paper 
 for circulation.” “I think of all the paper which is to circulate 
 in this country as money, the worst is paper based on the credit 
 and faith of the government, and not upon coin. I would rather 
 have the responsibility of individuals than that of the government, 
 because they are limited by the courts, and by their liability to be 
 brought up by a stronger power than themselves, and they become 
 insolvent there is an end of them; but the government has no end 
 to its credit except an utter prostration like that which resulted 
 from the issue of continental bills. The issue of government paper 
 does not require means; by a simple determination of the repre¬ 
 sentative body ef the legislature, to increase the amount of their 
 circulation, the capital of the bank can be doubled. It depends on 
 the judgment and opinion of the legislative body, and I think that 
 the most dangerous mode in which paper may be issued for circula¬ 
 tion. It has been tried by most of the governments of the world 
 and has failed. The bill itself * * looks to me as if it 
 
 had been framed for the purpose of establishing permanently a 
 treasury bank.” “ My objections to this bill are the bank features 
 of it, and I shall there fore, as I think I should under any circum¬ 
 stances with these provisions remaining in it, vote against this bill.” 
 “ I was opposed to the old bank of the United States, although it was 
 in the hands of individuals; and yet I am free to say that if we are 
 to have a bank, I doubt very much whether it would not be better 
 that it were in the hands of individuals, and not have the credit of 
 the government complicated with it in any way. But I am opposed 
 to any bank of the United States, in any shape or form that issues 
 paper.” “ I know that those [treasury notes], of 1847, were fund- 
 able into permanent stock, which was another feature that looked 
 to the creation of a loan instead of the issue of paper for circula¬ 
 tion.” 
 
 Pugh said: “I now offer an amendment * * to 
 
 insert ‘and by subsequent special endorsement of each holder.’ 
 The object is to prevent the circulation of this paper as currency.” 
 
 Hale said, objecting to the amendment: “I think it sepa¬ 
 rates the measure entirely from that character of relief to the com¬ 
 mercial community which may incidentally be given to it by a loan 
 in the form in which the chairman of the committee on finance has 
 presented it. It is the fact that, while it has a tendency to relieve 
 
126 
 
 NATIONAL BANKING EXAMINED. 
 
 the necessities of the government in the shape in which he has 
 presented it to us, it has also a tendency to relieve the necessities 
 of the commercial community, which commends it to my judgment. 
 If you strip the bill of this feature, you make it simply a relief for 
 a distressed government, ignoring entirely the fact that there are 
 distresses in the commercial community. 
 
 Hunter said: “ If we adopt this amendment, it seems to me 
 
 it would be better to provide for a loan at once, because we des¬ 
 troy that which enables us to raise money more cheaply by treas¬ 
 ury notes than by a loan. 
 
 Bayard objected to the amendment because it would require 
 every government officer to be sure of every endorsement on every 
 note or take the risk himself. “ It is no sound objection to this bill 
 that it proposes to issue a paper currency.” “You may, if you 
 choose, call these treasury notes, ^shinplasters,’ * * I 
 
 care not.” “ Surely it is wisdom to put them in that form which 
 will give them their highest value. Much as I am opposed, and I 
 think I am quite as much opposed as the senator from Ohio, to a 
 paper currency, strongly as I believe it would be better for us if 
 no bank note, or any other kind of note which could pass as money, 
 were ever issued for a sum less than $100 ; yet in this emergency, 
 with a view to raising a loan, not looking at it as a permanent 
 mode of raising revenue or contracting loans for this government, 
 I am willing to vote for this issue of treasury notes.” 
 
 Pugh said: “ The senator from New Hampshire [Mr. Hale], 
 says he will vote against my amendment because it will not relieve 
 the community. What relief does the community want? What 
 relief can this government give the community by issuing a parcel 
 of irredeemable paper dollars ? Will that relieve the community ? 
 It never relieved any community, it simply prolonged the present 
 unnatural state of affairs, when men who have exhausted their 
 means are endeavoring to keep up their expenses without having 
 resources sufficient to pay their debts.” “The old proposition 
 comes back. The senator from Virginia wants it, though he does 
 not avow it, because he wishes to make it a circulating medium. 
 The senator from New Hampshire wants it because he wishes a 
 circulating medium. Then I say it is worse than bank paper.” 
 “ If you want to issue paper money, call it paper money.” 
 
 Davis of Mississippi said: ‘ ‘I shall vote for the amendment of 
 the senator from Ohio, for the simple reason that I concur in the 
 
NATIONAL BANKING EXAMINED. 
 
 127 
 
 propriety of meeting that which has been treated as objectionable. 
 
 I wish to prevent these notes from circulating as money; to strip 
 them, as far as possible, of the character of bank notes; to make 
 them investments which will be sought for by those persons who 
 now hold specie.” “I do not fear that there will be any special 
 difficulty in the public officers determining whether the successive 
 endorsements are valid or not.” “ It may occur that this treasury 
 note will fall into hands surreptitiously, * * * and [be] paid 
 when fraudulently presented; but that will be an extraordinary 
 case for which we can provide after it occurs. I prefer to encoun¬ 
 ter that hazard rather than make this government the issuer of a 
 paper currency. I believe there is money enough in the country— 
 and when I say money I mean gold and silver—to answer all the 
 wants of commerce. It only requires to be thrown into circula¬ 
 tion.” “Against paper money issued by the federal government, 
 I would raise my protest in every form. It was not contemplated 
 by our fathers, who were a hard money race. The men who insti¬ 
 tuted this government gave congress power to borrow money. 
 This is one form of borrowing money, or otherwise I would not 
 vote for it. Make it in any degree an issuance of paper money by 
 the federal government to circulate throughout the country, and I 
 would vote against it.” [The amendment was rejected. Davis 
 voted against the bill.] 
 
 House of Representatives, Dec. 19, 1857. Ritchie (Penn.) 
 said: “Theoretical Democracy disdains treasury notes; it-would 
 touch nothing but gold and silver; practical Democracy will use 
 whatever it can get to answer its purpose. If it has no gold or 
 silver, it will use treasury notes; * * * they come into the 
 
 house here and propose that these notes are to be kept in circula¬ 
 tion as bank notes, and nothing else.” 
 
 Banks said he would vote for the measure, “if the govern¬ 
 ment of the United States is, at this time, in such a condition that 
 it can obtain no relief for its immediate necessities and wants ex¬ 
 cept through the issue of treasury notes,” but said that the issue 
 of said notes “had been declared by the eminent men of all 
 parties from the beginning of the government, as, inexpedient and 
 dangerous in character, and false in principle.” 
 
 Millson (Va.) defended the Democrats from Ritchie, who he 
 said “seemed disposed to taunt the Democratic members with 
 a seeming or imputed inconsistency—for it was rather an imputed 
 
128 
 
 NATIONAL BANKING EXAMINED. 
 
 than even a seeming one—in protesting in their theoretical expos¬ 
 tulations against a paper currency, while practically they are found 
 . voting for the issue of treasury notes, which he described as a new 
 form of a paper currency.” “Is he an advocate of the hard- 
 money system? I do not think he is.” “What sort of resem¬ 
 blance is there between treasury notes bearing interest and a paper 
 currency ? Does not the gentleman know that there is scarcely a 
 feature of resemblance between these treasury notes of the govern¬ 
 ment and what he calls a paper currency ? ” “Is this a paper cur¬ 
 rency ? It is but the borrowing of money; it is but the payment 
 of the public creditor by giving him an acknowledgment of his 
 debt, and promising to pay him interest for the delay of payment.” 
 
 Washburne of Maine, said: “Why is it that these men who 
 have been always heretofore opposed to paper currency, paper 
 money, and paper promises in any form and in all forms, are now 
 in favor of it ?” 
 
 Bishop (Conn.) said: “Now the gentleman from Virginia 
 (Millson) suggests that these treasury notes will not go into circula¬ 
 tion.” “I believe they will go into circulation, and that they will 
 be made a medium of exchange throughout the country, and that 
 the business of the country will be greatly benefited in conse¬ 
 quence; and it is for that reason as much as for any other, that I 
 prefer the issue of treasury notes to the issue of United States 
 stocks, as a measure of relief.” “For while the issue of these 
 notes will be an advantage to the government, I know that so far 
 as my section of the country is concerned, they will be of wonder¬ 
 ful advantage to the business of the state.” “ There may be money 
 in t,he country, but it cannot be made available for the benefit of 
 the business men of the country, except at a high rate of interest.” 
 
 Covode asked Bishop, “Whether the simple reason why this 
 gold is not in circulation is not that paper money has taken the 
 place of it ? Then if you put more paper money into circulation, 
 by the issue of treasury notes, do you not drive more gold out of 
 circulation, and not only out of circulation, but out of the coun¬ 
 try ?” Bishop replied that if the “ treasury notes are the same de¬ 
 scription of currency as the paper issued by the banks throughout 
 the Union, perhaps his argument may amount to something.” 
 “ I am no more in favor than the gentleman from Pennsylvania of 
 making the United States government a machine for the manufac¬ 
 ture of paper money.” 
 
NATIONAL BANKING EXAMINED. 
 
 129 
 
 Davis of Maryland, said: “Whether the gentleman who drew 
 this bill intended it or not, that they have accomplished exactly 
 what the notes of the Bank of the United States acconjplished.” 
 “There was money in the treasury three months ago; why was not. 
 that money kept there ? It was paid out, we are told, to relieve 
 the necessities of the country. I presume that it has relieved the 
 necessities of the country by transferring the necessities to the gov¬ 
 ernment. I suppose that, if there was a necessity for specie in the 
 country at that time, it scarcely comports with the theories of the 
 other side of the house, or the relations of the government to the 
 country in its financial matters, to supply that currency.” “ Was 
 it that people wanted money in the country, and that therefore the 
 government let it go ? If so, then I say that the government is re¬ 
 sponsible, to the extent of the money in the treasury under the 
 sub-treasury scheme, for the necessities of the country.” 
 
 Dec. 21, Abbott (Me.) said: “Gentlemen on the other side 
 of the house and the secretary of the treasury demand the passage 
 of this important measure upon the ground, as I understand it, of 
 relief to the treasury—a mere relief bill.” “I am opposed to this 
 bill in to to." “I am not in favor of converting the general gov¬ 
 ernment into a great national bank for the purpose of circulating 
 a paper medium to the extent of $20,000,000.” “It proposes 
 * * to flood the country with $20,000,000 of circulating me¬ 
 
 dium.” “I would have this deficiency in the national treasury 
 furnished in some better way than by converting this government 
 into a great national bank, and flooding this country with $20,000,- 
 000 of paper currency, in addition to what is now in circulation, to 
 inflate the currency and aggravate the present commercial embar¬ 
 rassment.” 
 
 Letcher (Va.) said : “It is the very fact that it is not a bank ; 
 that it does not possess the features of a bank, that it does not is¬ 
 sue the currency of a bank, that makes it objectionable to them.” 
 
 Lovejoysaid: “ It will be called a loan but in reality it is con¬ 
 verting the government into a great shinplaster machine, to flood 
 the country with an irredeemable currency, which has, as I sup¬ 
 posed, always been as the broth of abominable things to the Demo¬ 
 cratic party and which is so to me now.” “It proposes to convert 
 the government into a great banking concern.” He then went into 
 an extended tirade against everything; said this bill was unconsti¬ 
 tutional ; that there was no constitutional power to issue treasury 
 
130 
 
 NATIONAL BANKING EXAMINED. 
 
 notes; that the president wanted money to force the Lecompton 
 constitution on the people of Kansas; that the Democrats were 
 converting the government into a despotism and the treasury “into 
 one grand banking system.” 
 
 Dec. 22, Smith (Va.) said, that Ritchie undertook to demon, 
 strate “ that there was a hard-money and a rag-money Democracy 
 on this floor.” 
 
 Adrian (N. J.) said: “The secretary asks us that $20,000,000 
 of treasury notes be issued as the exigencies of the government re¬ 
 quire.” “The chief objection that has been raised by gentleman 
 upon the other side is, that if these treasury notes are allowed to 
 issue they will add to the paper currency of the country.” “Gen¬ 
 tlemen upon the other side must not .suppose that the Democratic 
 party is opposed to banking institutions. It is not true. They are 
 only opposed to those institutions when they do not confine them¬ 
 selves to the legitimate objects of banking.” 
 
 Morris (Pa.) said: “ I am in favor of this bill, * * * 
 
 because I recognize in it the first step toward the return to a system 
 which, as long as it existed, was adequate to all parts of the nation. 
 It is the first step to the return to that policy with which the 
 government commenced—the policy of providing by the federal 
 government a national currency.” 
 
 J. Glancy Jones (Pa.) said: “ Objections are raised to them on 
 one side because they will be currency, and upon the other side 
 because they will not be currency. We want money; we do not 
 want to furnish currency.” 
 
 Stanton (O ) objected to the bill: “It looks like an attempt 
 upon the part of the government, to establish a national paper 
 currency, to take the place of the banking institutions of the 
 States.” 
 
 Taylor (La.) said : “ On all occasions when there has been a 
 need of a temporary supply of money, it has been the practice of 
 the government of the United States to issue treasury notes. In 
 1837 there were repeated acts passed for the issue of treasury 
 notes to supply what was supposed to be the temporary necessities 
 of the government.” 
 
 Quitman offered an amendment that no note be issued for less 
 than $1,000, and said it would “keep these notes, as they ought 
 to be kept, out of circulation.” 
 
 J. Glancy Jones favored the leaving of it discretionary with 
 
NATIONAL BANKING EXAMINED. 
 
 131 
 
 the secretary of the treasury to issue them from $100 upward: “I 
 am convinced that he is just as much opposed to making these 
 notes current as any gentleman here can possibly be.” 
 
 Seward (Ga.) said: “I prefer to see them all in $50 notes, 
 because I want them to go into circulation as money in the present 
 financial condition of the country. The uses that the people make 
 of these treasury notes, if issued, cannot effect the constitutional 
 power of the government to issue them. They are not bank bills, 
 because they are paper, payable twelve months ahead and bearing 
 interest.” 
 
 Warren (Ark.) offered an amendment that no note should issue 
 for less than $1,500: “ It is to provide that these treasury notes 
 shall not, by any possible contingency, be made a circulating me¬ 
 dium in this country. It has been the policy of the party to which 
 I belong, as I have understood it—it has been my policy, at any 
 rate—to oppose any proposition on the part of this government, 
 by virtue of which anything other than gold and silver shall become 
 a circulating medium. I propose, therefore, by the amendment 
 which I have introduced, to make the lowest limit for these treasury 
 notes so large as to prevent the possibility of such an occurrence.” 
 
 Washburn (Ill.): “I am opposed to the amendment * * * 
 
 I am opposed to the issue of any of these notes * * *.” 
 
 Banks read from a letter from Gen. Jackson, July 23, 1837; 
 “I hope no treasury notes will be issued. The treasury drafts 
 upon actual deposits are constitutional, and do not partake of paper 
 credits as treasury notes, which are subject to depreciation by 
 merchants and banks, and shavers and brokers; and will be if 
 issued, and the government cannot avoid it.” 
 
 During the progress of the debate Letcher had said: “But 
 say gentlemen on the other side : ‘ we are opposed to government 
 paper money. We dislike the idea of making the government a 
 great bank, investing it with the power and authority to circulate 
 notes throughout the country, while the president himself is de¬ 
 nouncing the banking institutions of the States.’ Now, I main¬ 
 tain, in the first place, that this bill does not create a bank. I 
 think there is one fact that clearly and conclusively settles that 
 point. How many of our friends on the other side, who have 
 engaged in this discussion, are in favor of a bank of the United 
 States ? Are they not all for it ? ” 
 
 Lovejoy.—“ No, sir.” 
 
132 
 
 NATIONAL BANKING EXAMINED. 
 
 Letcher.—“ How many of you are opposed to it ?” 
 
 Lovejoy.—“Three-fourths.” 
 
 Foster. — “ It is an obsolete idea.” 
 
 Letcher.—“ The gentleman says it is an obsolete idea. Then, 
 I suppose, the gentlemen have embraced a new idea, and that 
 they are now for a hard money currency.” 
 
 Foster.—“Yes, sir,” 
 
 By this debate we can see how complete a summersault con¬ 
 gress made on the subject of paper money four years later, and 
 how far the country still is from the point of departure. 
 
WM