(nt 
 
Riggs House, Washington, I). C. 
 January 16, 1884. 
 
 I take pleasure in complying with the request of several 
 members of your committee, that I would write out the sub¬ 
 stance of the remarks made by me at the session this morn¬ 
 ing, on the subject of the contraction now taking place, re¬ 
 sulting from the retirement or surrender of their circulation 
 by the National Banks. 
 
 There were a few points, necessary to a complete state¬ 
 ment of the situation, which I could not present without 
 trespassing upon the time of the committee. These I have 
 added to what was said in your presence. I thank yourself 
 and the committee for the opportunity you have given me, 
 for the appreciative interest shown by every member in the 
 discussion of this critical and most important subject, and 
 especially for the purpose which animated the whole com¬ 
 mittee to arrest the contraction of the -currency, by the 
 wisest, most prompt, and most efficient measures of legis¬ 
 lation. 
 
 Yours very respectfully and truly, 
 
 L. E. CHITTENDEN. 
 
 To the Hon. A. H. Buckner, Chairman of the 
 Committee on Banking and Currency^ 
 
 House of Heps. 
 

 S Lh/?. / \fh2 &I ^ 
 
]^fr Chairman and Gentlemen of the Committee: 
 
 Under existing laws a contraction of the currency may 
 arise from two independent causes; expressed in plainer but 
 less accurate words, there may be two kinds o^ontraction. 
 One "may result from the surrender by the b^iks of their 
 circulation, the other from the accumulation of surplus 
 revenues to remain locked up in the Treasury of the United 
 States. There is no choice between the two. Both with¬ 
 draw from active business the money which its profitable 
 transaction requires, without which it must be suspended 
 or discontinued. Each, alike, disturbs the financial equi¬ 
 librium which is a necessary condition of the general pros¬ 
 perity. Both are undesirable, objectionable, and, if allowed 
 to continue, will depreciate values, destroy confidence, pro¬ 
 duce commercial disturbances, paralyze our industries, and 
 end in financial losses, disasters, and widespread distress 
 among the people. 
 
 No one desires contraction. No one doubts that it is 
 now in progress, that its rapid increase in the near future is 
 threatened, and that serious consequences must follow 
 its continuance. All agree that it should be promptly 
 arrested. How it can be arrested, what measures will 
 be adequate to that end, are questions upon which the 
 minds of legislators are not agreed. The measures pro¬ 
 posed are numerous-they differ widely from each other. 
 The desideratum is to bring the minds of members of the 
 present Congress, together with the least possible delay, 
 upon the most simple and effective measures to arrest con¬ 
 traction. When such measures are found, he will be a bold 
 man who takes the responsibility of preventing or even of 
 delaying their adoption. 
 
 THE FACTS INVOLVED. 
 
 We now have, or had on the first of September last, 
 bonds of the United States outstanding amounting, in the 
 aggregate, to thirteen hundred and fifty-seven million 
 
4 
 
 dollars, divided as followsThree per cents, subject to 
 call and payment, at the pleasure of the Government, 
 $30o,000,000; Four-and-a-half per cents, due September 1, 
 1891, $-250,000,000; Four per cents, due July 1, 1907, 
 $738,000,000; Currency Sixes, due from 1895 to 1899, 
 $64,000,000—total, $1,357,000,000. From these should be 
 deducted $50,000,000 Three per cents already called, 
 leaving an aggregate of $1,300,000,000, 
 
 Of these bonds the banks now hold, of Three per cents, 
 $201,000,000; of Four per cents, $106,000,000; of Four- 
 and-a-half per cents, $41,000,000 ; of Currency Sixes, 
 $3,000,000—a total of $351,000,000. These were the bank 
 holdings on the first of November last, and are accurate 
 enough for present purposes. Under proper legislation, 
 which will enlarge the percentage of circulation authorized 
 to be issued upon deposit of the bonds worth a high pre- 
 miuai in the market, and at the same time make it perfectly 
 secure, $350,000,000 will be quite enough for the present cir¬ 
 culation of the banks, with such additions as the growth 
 of the country will require during the next three or four 
 years. 
 
 These figures show that there is no present necessity for 
 the issue of any new form of U. S. bonds, to meet the 
 requirements of tlie National Currency—none whatever. 
 Such a necessity cannot arise while there are outstanding 
 bonds which cannot be called in for redemption in less 
 than from eight to twenty-four years, to an amount three 
 and a-half times that required for banking purposes. Con¬ 
 gress may, therefore, with safety, postpone wrestling with 
 the subject of providing new bonds, for a perpetuation 
 of the banking system, for some years, and devote its ener¬ 
 gies to the more pressing duties of the present hour. 
 
 We have a present revenue system which produces one 
 hundred million dollars annually, in excess of the wants of 
 the Federal Government. We may all agree that wise 
 statesmanship demands an immediate reduction of the 
 revenue to that extent. But the solid, inevitable fact re¬ 
 mains, that this surplus is probably fastened upon us for the 
 
next two years, and in the existing diversity of opinions 
 upon the subject, there is little hope or expectation among 
 reasonable men that the revenue can be or will be substan¬ 
 tially reduced by the present Congress. 
 
 Every measure to arrest contraction, therefore, must 
 take the surplus of the revenue into account, and dispose 
 of it, if the desired result is to be accomplished. For the 
 surplus must in someway be withdrawn from the Treasury as 
 it accumulates, and returned into tlie channels of business. 
 Otherwise, its accumulation in the Treasury will Inevitably 
 produce a contraction just as injurious as that resulting from 
 the deposit of legal tender notes in the Treasury by the 
 national banks, for the purpose of retiring their circulation. 
 I shall assume that this conclusion is so inevitable that it 
 will not be disputed by any one who understands the 
 subject. 
 
 HOW CAN THIS SURPLUS BE WITHDRAWN FROM THE 
 TREASURY ? 
 
 Under existing laws there is only one way of dispo.sing 
 of this surplus revenue, or of any surplus, accruing witl)in 
 the next seven and two-third years wliich must elapse be¬ 
 fore the Four-and-a-half per cents, $io0,0()0.O00, b-'come 
 subject to call and pa.yment in 1891. It can be paid out 
 for the remaining $255,000,000 of Three per cent bonds, 
 the only securities of the United States now subject to call. 
 Since last September fifty millions of the surplus have been 
 so appropriated. 
 
 I do not forget that another way of paying out this sur¬ 
 plus is claimed to exist—that it is asserted that the Sec¬ 
 retary has the legal power to go into the market and buy 
 for the sinking fund, U. S. bonds at any rate of ‘premium 
 for wMcJt they may he selling at the time. 
 
 But this is a constructive power—in my opinion a doubt¬ 
 ful power—bills have already been introduced to take it 
 away. Many of our strongest statesmen are bitterly opposed 
 to its exercise, and the indispensable necessity of arresting 
 contraction would be the only apology for its exercise at 
 
6 
 
 this time. I have not time here to discuss the subject of the 
 sinking fund. Many members do not agree with that con¬ 
 struction of its provisions which requires tliat we should 
 pay into it $50,000,000 or thereabouts, per year, in order to 
 dowliat the holders of our bonds do not want done (and it 
 was for their benefit alom^ that tlie sinking fund was cre¬ 
 ated), and they do not believe it wise for the Secretary to 
 go into market and pay the present high prices for our 
 bonds. The whole subject bristles with doubts and diffi¬ 
 culties. It may be a possible, way of paying out our sur¬ 
 plus revenues. It is not one to which you would wish to 
 see the Government restricted. 
 
 If then the Tliree per cents are funded or exchanged for 
 bonds on longer time—if their payment is in any manner 
 postponed, if anytliing is done with them except to leave 
 them payable at the pleasure of the Government, and pay 
 them with the surplus, as it accrues, that surplus must be 
 left to accumulate in the Treasury, and contraction, swift 
 and disastrous contraction^ to the amount of about one 
 hundred millions a year, is as inevitable as death. 
 
 It is, therefore, an unavoidable necessity of the present 
 situation that no present legislation should interfere with the 
 Three per cent bonds, that they should be left where they 
 are, and be paid as the Secretary is now paying them. They 
 are a providential means furnished by accident to return 
 this surplus of the revenue to the commerce and business of 
 the country which would otherwise suffer fjorn its accu¬ 
 mulation in the Treasury vaults. 
 
 THE BEGINNING OF COxXTRACTIOlSr. 
 
 The adjournment of the last Congress without repealing 
 the annual tax of one per cent, on circulation, and the 
 natural rise in price of Government bonds, drew the atten¬ 
 tion of financial men to the fact that contraction would 
 necessarily begin with the first call of the Three per cents. 
 Circulation was maintained by a slight tenure. The city 
 banks never cared much about it. Their deposits were 
 large, and more money was to be made by loaning them, 
 
7 
 
 than by carryijig circulation, even when it paid a profit 
 which made it attractive to country banks witli small de¬ 
 posits. When it paid tlie best, the city banks never took 
 out more than about half the amount which their capital 
 entitled them to carry. 
 
 Bank officers and financial men can determine when the 
 Treasury surplus will justify a bond call with almost as 
 much certainty as the Secretary of the Treasury. The rule 
 now is to maintain a Treasury balance of $138,000,000. 
 When the actual and estimated receipts above current de¬ 
 mands, show a probable balance of $10,000,000 within the 
 ensuing sixty days above this amount, everybody knows 
 that a call will soon be made. The figures during the 
 summer indicated that a call of tlie Tlirees would be made 
 about the first of September. 
 
 In April last, the banks began to consider whether they 
 could not make more money by retiring than by carrying 
 their circulation. By surrendering it, tiiey could sell their 
 bonds and realize the premium at existing high prices. 
 When the Threes began to be called, the banks holding 
 them could only continue their circulation by purchasing 
 other bonds at higher premiums, on which they could only 
 carry 90 per cent, of par value in circulation, and in this 
 they could see no substantial profit. There was scarcely 
 a bank in the whole country which did not consider the 
 subject, and the conclusion was generally reached that they 
 must begin to reduce their circulation with the calling in of 
 the Threes, because it would not, under existing conditions, 
 pay to maintain it. Some determined to reduce their bonds 
 deposited to secure circulation to 26 per cent, of their capital 
 —the minimum on which they could continue in the sys¬ 
 tem ; others to retire their whole circulation, cease to be 
 national banks, and organize without circulation under 
 State laws. This was done to some extent, and would have 
 been to a much larger extent but for the following reasons: 
 
 Business men had a common interest to prevent a contrac¬ 
 tion of the currency. Prom the adjournment of the last 
 Congress, their influences were all exerted against it. The 
 
6 
 
 daily and weekly press, and the magazines have teemed with 
 articles intended to lead the banks not to retire their 
 circulation. All possible forms of expression liave been 
 given to the hope and belief that this present Congress 
 would certainly repeal the tax and pass other measures of 
 adequate relief. It has been stated that the tax on circula- 
 lation was obsolete, unjust and injurious to the country; 
 that it was laid when government wanted the money, when 
 circulation was immensely profitable, and the banks were will¬ 
 ing because they could afford to pay it—that now when the 
 revenueisinot wanted, when there is no profit on circulation— 
 when the banks cannot afford to pay it, and will sooner sur¬ 
 render their circulation or withdraw from the system than 
 continue to pay it; Congress would certainly repeal the tax. 
 It has been said that the last Congress intended to take off 
 this with other internal revenue taxes—that its failure to do 
 so was the result of accident—that it did not intend to rele¬ 
 gate the notes which every citizen inses and wishes to use, to 
 the company of whiskey and tobacco in the matter of 
 taxation. 
 
 This public sentiment produced its effect upon many of 
 the banks. These conclusions were accepted because they 
 were reasonable and unanswerable. The tide of contraction 
 was practically stayed or materially checked for the time— 
 the banks generally resolved to wait and see what this Con¬ 
 gress would do before coming to the final act of surrendering 
 their circulation. 
 
 And when the first call of Three per cents, was made in 
 September last, the banks resorted to various expedients to 
 avoid this necessity^ Some of them deposited other .Three 
 per cents—others surrendered their circulation by depositing 
 legal tender notes in the place of their called bonds. Very 
 few of them deposited other than Three per cents, in their 
 place, because, as the law now stands, they could not afford 
 to pay the premium .which the bonds having any definite 
 length of time to run command in the market, merely for 
 the purpose of retaining a privilege in the exercise of which 
 there was no profit. 
 
9 
 
 TliH report of the Comptroller of the currency which 
 recommended the repeal of the tax, and an increase of the 
 notes 11)1 to ninety per cent, of the maiket value of the 
 bonds dej)Osited to secure them, endorsed by the o})inion of 
 the Secretary of the Treasury, and made the subject of a para¬ 
 graph in the animal message of the Pre.sident, created a 
 general belief that Congress would take early action to pre¬ 
 vent contraction. It went without saying that these simple 
 measures would be effective to this end, while they would 
 not affect or embarrass any other legislation. The amount 
 of the tax ($3,132,000 in 1883) was too small to affect legis¬ 
 lation on the tariff, or other measures for the reduction of 
 the revenue—its repeal made no additional tax necessary 
 on any other article—all similar taxes had been taken off, 
 and then^ was neither necessity nor excuse for retaining the 
 tax on circulation. The country, therefore, reached the 
 conclusion, that these two measures, so reasonable and 
 unobjectionable in themselves, and likely to be so effective 
 in averting the evils of contraction, would meet with the 
 favor of Congress. 
 
 The first call of Three per cents, was followed in quick 
 succession by two others, making, on the 17th November last, 
 an aggregate of $40,000,000 within a period of less than three 
 months. The effect was irresistible. In spite of the efforts 
 made to put off the evil day, contraction received a new im¬ 
 petus. The influences of which I have spoken diminished, 
 but did not wholly prevent its operation. Although 262 new 
 banks, with a capital of over $28,000,000, were organized 
 during the year ending November 1, 1883, the organization 
 of which ought to have added from twenty to twenty-five 
 millions to the national bank circulation in new sections of 
 the country where it was most needed, the aggregate circula¬ 
 tion of the banks during the same period was contracted 
 nearly ten million dollars. The circulation taken by these 
 new banks was less than eight million dollars. The law 
 requires a depo.^it of bonds to the amount of one fourth the 
 capital as a condition of becoming a member of the national 
 system. Most of the new banks took their minimum of cir- 
 
10 
 
 culation because it paid them no substantial profit. It thus 
 became certain tliat unless arrested b}^ legislation, a serious 
 contra(dion of the currency was certain to take place. 
 
 When the ])resent Congr.*ss UK't, the committees were 
 selected and members began to express their opinions, it was 
 found that these opinions were so diverse that the prospect 
 of a remedial legislation seemed very doubtful. Tlie chair¬ 
 man of this committee was understood to be opposed to the 
 repeal of the tax and an inci ease of the percentage of cir¬ 
 culation. Many of the banks came to the conclusion that 
 Congress would probably do nothing to arrest contraction, 
 and that it was the part of wisdom to adjust themselves to 
 the present state of the law. Contraction immediately set 
 in, and is now going on at the rate of about a million 
 dollars per week or fifty millions per year. 
 
 And yet many of the banks have waited, and are waiting 
 still, in the hope that Congress will realize the situation and 
 its perils, and adopt the obvious remedy. If this last hope 
 has to be abandoned the process of contraction will be still 
 further accelerated by the action into which these waiting 
 banks will be reliictantl}^ but inevitably driven. That the 
 country cannot stand this contraction for a very long time 
 without financial disturbance, is as certain as any future 
 event, or the relation of effect to cause. 
 
 On the 12th of the present month there was another call 
 for ten millions of the Three per cents, making fifty millions 
 since the first of September, a period of only four and a-half 
 months. This call must again accelerate the process of con¬ 
 traction, which will be increased by every future call. These 
 calls must be made whenever the surplus will justify them. 
 If the Secretary did not make them—if he suffered the sur¬ 
 plus to remain locked up in the Treasury—he would fill the 
 world of finance with genuine alarm and apprehension. 
 This condition of affairs must be changed—the current of 
 contraction must be checked, or it will sweep the business 
 of the country into the waters of a tempestuous financial 
 sea. 
 
11 
 
 the process of retiring circulation. 
 
 It is supposed by uiaiiy that this process is a gradual 
 Q,i( 3 _that when a bank decides to withdraw its circu¬ 
 lating notes, contraction only takes place gradually as its 
 notes come in and are redeemed in small sums through 
 a considerable period of time. This is not true. On tlie 
 contrary, so far as contraction is concerned, the effect is im¬ 
 mediate with respect to each bank. When a bank decides 
 to retire its circulation, it deposits legal tender notes in the 
 Treasury to the amount of its circulation outstanding, and 
 withdraws its bonds. Suppose a bank to liave a circulation 
 of $2o0,000. It makes a single deposit in the Treasury of 
 $250,000 in legal tender notes or gold, and its relation to the 
 process of redemption is ended. Tliese legal tender notes re¬ 
 main locked up and idle in the Treasury until they are paid 
 out in driblets as the circulation slowly comes in. Thus 
 the contraction is immediate, and it is a contraction of the 
 legal tender currency itself. There was thus deposited 
 during the year ending November 1st last, over twenty-two 
 million dollars in legal tender notes, of which $9,000,000 
 was deposited by banks in liquidation. There is now with¬ 
 drawn from circulation on this same account and locked up 
 in the Treasury, lying there dead and useless, a balance of 
 more than thirty-live million dollars in legal tender notes. 
 
 CONTRACTION MAY BE VERY SUDDEN. 
 
 It is evident therefore, that contraction to an amount quite 
 sufficient to create a financial convulsion may take place at 
 any moment. I do not wish to assume the role of an alarm¬ 
 ist, but I think it the wiser course to show plainly the con¬ 
 sequences that are not only possible but probable. Sup¬ 
 pose that during the next month of February, banks having 
 an aggregate circulation of fifty millions decide to retire 
 it, and without any concert of action or co-operation, but 
 influenced bj^ a common necessity—the absence of any ade¬ 
 quate provision to render its maintenance longer desirable 
 — they deposit as rapidly as the provisions of law 
 render possible that amount of legal tender notes 
 
12 
 
 in the Treasury. Tliis would be violent contrae.tion, an(j 
 it could not take place without serious financial disturf)ance 
 Or suppose that band of patriots known as the Bears of* the 
 stock market, whose meat is the country’s poison—and who 
 by false facts, false predictions, fals(* rumors, and- other 
 falsehoods, have depressed so many of our securities below 
 their intrinsic value, to the ruin of hundreds of our citizi-jis 
 should bring the wealth of their conspiracy to b(;ar upon a 
 combined attempt to produce contraction. To say the least 
 the existing conditions offer them this most tempting oppor¬ 
 tunity, which ought not to be left open for a da 3 ^ 1 have too 
 much respect for Congress to suppose that any of its mem¬ 
 bers can be used by the bear interests of the stock market 
 and yet lam i)erfectly aware that those interests are now 
 and will continue to be exerted to defeat legislation calcu¬ 
 lated to arrest contraction. 
 
 We have had one illustration of the ra})idity with which 
 contraction may take ])lace. In the Spring of 1881, in an- 
 tici])ation of what was known as the Carlisle ani(*ndment of 
 the Three percent, funding bill, and befort.' that bill reached 
 the President, the banks contracted their circulation over 
 118,000,000 in less than eighteen days. The financial dis¬ 
 turbance which this contraction caused is still fresh in the 
 minds of men. It was trifling compared with that which must 
 follow if the present conditions remain unchanged. 
 
 THK COUNTRY AND NOT THP: BANKS INTKKKSTED TO 
 ARREST CONTRACTION. 
 
 Many of the banks take but small interest i?i the subject 
 of circulation. The national banking system subjects them to 
 many unwelcome restraints, and when circulation ctuses to be 
 profitable, no bank has any object in maintaining it. Banks 
 located in the large cities are indifferent. Some think it 
 costs more than it comes to, and would ])i-efer to with¬ 
 draw and realize the premium upon their bonds, were it 
 not for the fact that by remaining in the national system 
 the deposits of country banks with them may be counted 
 as a part of their reserve. Some of the banks are now 
 
K.) To the Hon. H. Buckner, Chair¬ 
 man of Committee on Banking and Currency, House of 
 Representatives. Sirs: 1 take pleasure in complying 
 with the request of several members of your committee 
 that i would write out the substance of the remarks made 
 by me at the session this morning, on the subject 
 of the contraction now taking place, resulting from 
 the retirement or surrender of their circulation by 
 the National Banks."etc. (Caption title) 8 vo 30pp 
 Washington, Jan. 16, 1884 
 
 (Not a government publication.) 
 
13 
 
 exchanging their liigh premium bonds for threes of low 
 numbers, not likely to be called within a year or eighteen 
 months, and are thus temporarily tiding over their circula¬ 
 tion, awaiting the action of Congress. If measures are pass¬ 
 ed which will enable banks to maintain circulation at a 
 reasonable ))rotit on the bonds of the Government which 
 have any d“finite time to run, they will continue it by the de¬ 
 posit ofsncli bends; if not they will surrender it by tlie process 
 already described, and violent contraction will ensue. Tlie 
 country banks whose profits are in a larger degree dependent 
 on circulation are interested in maintaining it to the extent of 
 the profit it yields, and no further. When circulation ceases 
 to yield a profit, there is, from the standpoint of the banks, 
 no reason why they should maintain it for a day. 
 
 The apparent indifference of the banks, as a body, to 
 the present situation is thus explained. Should they ask for 
 their own benefit merely any relief from the burdens which 
 circulation now bears, they do not believe that Congress 
 would grant it. They are, therefore, preparing to rc^tire their 
 circulation, and many of them are already doing so. 
 
 The effort to secure timely legislation which will avert 
 this, is not in the interest of the banks, but in that of every 
 business interest and industry of the country, and of every 
 citizen who has any thing at stake on their continued pros¬ 
 perity. 
 
 The amount of currency in circulation is regulated by 
 the demands of business. If more is issued than is required 
 it must be forced into circulation, and then it becomes 
 unprofitable. This is proved by the fact that in years wdien 
 circulation showed an apparent profit of 12 to 15 per cent., 
 the banks did not take out within 20 })er cent, of the aggre¬ 
 gate which their capital authorized. The growth of^’new 
 States, the increase in population, the expansion of business 
 and its extension over new^ territory, call for a constant 
 increase in the amount of currency required, and the supply, 
 under reasonably favorable conditions, will just about 
 keep pace with this demand. The legal tender and national 
 bank notes now outstanding are not in excess of the present 
 requirements. 
 
14 
 
 It is, therefore, perfectly certain that any considerable 
 contraction of the existing cii-culation would be attended 
 with serious financial difficulties. The sensitiveness of the 
 country to anything tending to a contraction of the circulating 
 medium, is shown wlienever the surplus in the Treasury ex¬ 
 ceeds tlie amount now well understood by financial men as 
 the maximum established reserve. The Secretary is im¬ 
 portuned to disburse it by a new call for bonds whenever 
 he has ten million dollai's to spare. Let an increased 
 demand for currency arise to meet increased activity 
 in business, and such demands do arise at intervals not 
 distant from each other, and let the country awake to 
 the fact, that while Congress has slept, or wasted time over 
 impracticable schemes, we have lost fifty millions of circu¬ 
 lation, and we may well fear that the merchant will contract 
 his purchases, the banks their loans, the active men of the 
 country will contract their enterprises, the wheels of the 
 factory will stand still, the furnaces and the forges will be 
 silent, labor will no longer find employment, and the work¬ 
 ing man’s family will go hungry. For in this, as in all 
 cases of vicious or improvident legislation, or legislative 
 neglect, the burden falls upon him who is least able to bear 
 it—upon the man who lives upon the daily lal)or of his 
 hands. It cannot be necessary that I should pursue the 
 argument. Contraction is a present fact full of peril, it will 
 greatly increase in the near future, unless arrested by timely 
 legislation. Nobody wants contraction—no man and no 
 party is willing to be held responsible for contraction. 
 Every member of this Congress who desires to promote the 
 public interest (and I know of none who are not included in 
 that description), is willing to support such measures as 
 will effectually arrest contraction. 
 
 THE MEASURES PROPOSED. 
 
 The measures proposed to prevent contraction are numer¬ 
 ous and widely diverse. Their number shows the import¬ 
 ance of the subject and the wide-spread conviction that the 
 dangers of contraction must in some way be averted. All 
 
15 
 
 are proposed in good faitli, and their authors fully 
 believe that they are adequate and practicable. All 
 are in favor of the hesi measures for the time being. The 
 object for whicli all men, in or out of Congress, should labor 
 is. to bring the minds of members to a speedy agreement upon 
 tlie best measures which have any chance of passing the present 
 Congress. 
 
 RELATION OF THE TARIFF TO CONTRACTION. 
 
 The subject might be relieved of many embarrassments 
 by a prompt and sufficient reduction of tlie revenue for the 
 present and coming fiscal year. Can this reduction be had? 
 Is there the remotest belief lingering in the mind of the 
 most hopeful member tliat any substantial reduction of the 
 revenue will be made by the present Congress? 
 
 You ask one member if he vvill vote to take off a part of 
 the duties on sugar? “Not unless they will reduce the 
 tariff on iron and steel,” he answers. Another replies to the 
 same question, “ Do you expect me to vote to crush a great 
 and struggling industry of the South?” You propose to 
 anotlier a scaling down of the whole tariff ten or twenty per 
 cent! “Not unless they will take off all the duties on raw 
 materials and necessaries!” he responds. And so it is to 
 the end of the list. I criticise nobodjL I simply assert a 
 fact which seems to me indisputable, and that fact is, that 
 we are to have no material reduction of the revenue deriv- 
 (‘d from the tariff, and that for at least two years we must 
 deal with substantially the present rate of surplus. 
 
 If a reduction of the tariff were attempted, or even carried, 
 into effect, whether, and to what extent, it would reduce the 
 revenue is another question. It might increase the revenue. 
 It might do worse—for it might lead to such an increase in 
 imports as would turn the balance of trade against us, cause 
 a sliipment of gold, and hasten that happy day for Ameri¬ 
 can statesmanship when gold will be at a premium of 20 
 per cent., the actual difference between the real and the 
 imaginary dollar ! 
 
 If there is no reduction of the revenue, the Treasury sur- 
 
16 
 
 plus becomes the controlling factor in present legislation. 
 Let ns see how it affects some of the measures proposed : 
 
 CIIAIkMAN BUCKXKK’s PLA^T. 
 
 The proposition of your chairman is to replace the bank 
 notes redeemed, by Treasury notes. We need not. stop to 
 consider the legal, constitutional, or but one })ractical objec¬ 
 tion to this plan, for tliat one objection is insui mountable. 
 These Treasury notes are to be issued in exchange for some¬ 
 thing I suppose. For wliat ? We have the Three per cents 
 to give in exchange for them, and for the next seven years 
 we have nothing else. Mr. Buckner’s plan would retire the 
 Three percents, with his new Treasury notes, and leave the 
 surplus to accumulate in the Treasury. This would be con¬ 
 traction, inevitable, and of the most fatal description. 
 
 MR. potter’s plan. 
 
 I regret that Mr. Potter has not, for the reason stated by 
 him, been able to present his bill to the committee to-day. A 
 copy has been shown me which is in substance the plan 
 proposed by Mr. St. John of New York. I think I can 
 state its provisions with sufficient accuracy. 
 
 It creates a twenty-five year Two per cent, bond, which 
 
 the Secretary ma}’^ exchange for the Three per cents, at par_ 
 
 for the Four-and-a-halfs paying a premium of two per 
 cent.—and for the Fours paying a premium of seventeen 
 per cent. The tax is to be remitted on cirml?iiion secured 
 hy the new bonds only. These premiums are arranged upon 
 computed relative values of these bonds in connection with 
 an untaxed circulation upon the proposed Two per cents., 
 and a taxed circulation upon the other issues. 
 
 In effect this is a bill for the conversion of Three per cents 
 now payable, into Two per cents payable in twenty-five years, 
 by baiting the latter with a fictitious or artificial value, and 
 it is nothing more. It invokes the unyielding opposition of 
 that large class of members who will not increase the debt 
 one dollar, nor defer the option of the Government to pay 
 it for one day. It is founded upon what I believe are two 
 false assumptions, i. e., (1) that it is the demand for banking 
 
17 
 
 purposes that fixes the price of U. S. bonds, and (2) tliat the 
 banks will take out all the circulation which shows a possi¬ 
 ble profit. 
 
 The bill provides for the conversion of Fours and Four- 
 and-one-halfs into the new bonds. The holder of SI00.000 
 in Fours may go to the Treasury, and receive for them $100- 
 000 in the new Twos, and $17,000 in money. But he can 
 sell his Fours in the market for $124,000, with $100,000 of 
 which lie can buy that amount of Threes and exchange them 
 for $100,000 of the new-bonds at par, leaving him $24,000 
 profit instead of $17,000 ! If, as many believe, the Twos will 
 not be worth par, he can buy them in the market at a dis¬ 
 count, and make a still larger profit. The Four-and-a-halfs 
 will be governed by the same rule, only the difference in pro¬ 
 fit will be greater. They are now worth in the market about 
 114, and are being daily bought at this price by private 
 investors and by institutions, whose investments in them have 
 no relation to bank circulation, and yet this bill, based upon 
 some imaginary theory of value for purposes of banking 
 only, proposes to convert them at $102 ! This is simply 
 making water run up hill—expecting holders to submit to a 
 loss of $12,000 on each $100,000, from which any curbstone 
 broker will protect them at a cost of $12.60, or, covering com¬ 
 mission on both sides, of $26. I ask Mr. Potter whether 
 such must not be the practical operation of his bill ? 
 
 Mr. PoTTKU. I do not tliink it is. We leave it to the 
 discretion of the Secretary to exchange or decline to ex¬ 
 change either class of bonds. We give him the authority, 
 and leave him to use it as he pleases. 
 
 Mr. CiUTTENDEIST. But the Secretary cannot prevent the 
 purchase and sale of all the bonds at market prices. But 
 do you say that you leave the Secretary to determine, when, 
 to what limit and for whom he will exchange each class 
 of the bonds! 
 
 Mr. Potter. Certainly! 
 
 Mr. CiiiTTEN'DEN. Perhaps sucli an unlimited discretion 
 may command votes. But I should doubt whether it would 
 command the vote of Mr. Potter himself when he under- 
 
18 
 
 stands its extent. I think it is enough for me to say that 
 tliere is no precedent for such a power in our linancial legis¬ 
 lation—not even when Congress was giving Secretary Chase 
 extraordinary pow'ers. The Secretary could make a fortune 
 a week for his friends. I question whether either Re¬ 
 publicans or Democrats would risk such a grant to a 
 Secretary of their own political faith. 
 
 At all events the bill provides fora conversion of the Threes, 
 and, as I construe its ])ractical operation, of the Threes only. 
 If this consideration is fatal to the plan of the Chairman, it 
 is equally so to Mr. Potters bill, because it will not prevent, 
 it will inevitably accelerate contraction, by depriving th{‘ 
 Secretary of the only means of disbursing the surplus 
 revenue. 
 
 I think the provision relieving the circulation issued on 
 the new bonds from taxation, and retaining it on circulation 
 already issued, or to be issued on other bonds, would, if 
 enforcable otherwise, be a violation of the eighth section of 
 the first article of the Federal Constitution, which declares 
 that “Duties, impostsand excises shall be uniform through¬ 
 out tlie United States.” 
 
 I shall not argue this question before a committee com¬ 
 prising so many better lawyers than myself. I content my¬ 
 self with the statement that similar provisioris as to uni¬ 
 formity of taxation exist in many of the State Constitutions 
 and have frequently come under discussion in the State or 
 Federal Courts. As I read the decisions of all these Courts, 
 j)articnlarly of the Supreme Court of the United States, 
 from the case of Hylton vs. The United States, decided in 
 1790, and reported in 3d Dallas Reports, p. 171, they have 
 uniformly held that taxes of this kind are excises which 
 must be laid by the rule of uniformity, that is to say, they 
 must be uniform upon each class of persons, and each kind 
 of property. Taxes may be laid upon railroads, banks, 
 ferries, inns, etc., but they must reach all railroads, inns, 
 etc. alike. Taxes may be laid upon horses, cattle, pianos, 
 watches, or carriages, but all horses, pianos, carriages, etc., 
 must be subject to the tax. A tax upon horses would not be 
 
19 
 
 uniform if liorses purchased with Two per cent, bonds were 
 exempted. So tiiere must be one rule for all banks, and for 
 all circulation. I don’t think a tax is uniform which taxes 
 a national bank note secured by Tliree per cent, bonds, and 
 exempts the same note w hen secured b}* Two per cent, bonds. 
 Such I think is the law of the railroad tax cases reported in 
 92 U. S. Reports, 612: Yeazie Bank g. Fenno 8, Wallace, 
 533: United States v. Singer, 16 Wallace, 111, and many 
 State decisions, particularly those in the States of Ohio and 
 Massaclmsetts. 
 
 I am aware that the Treasury autliorities liave some¬ 
 times desired to assert tliis discrimination. It is a controll¬ 
 ing pow er. It amounts, in the case I am now considering, 
 to one per cent, annually, or to one-half the interest on the 
 bonds. It is compulsion concentrated. It is a device to 
 drive the banks to take the new bonds or retire their 
 circulation. I have never believed in the existence of such 
 a power. 
 
 At all events it is a doubtful power, often proposed but 
 never, I tliink, sanctioned b}^ Congress. It was proposed to 
 the Three per cent. Funding Bill in 1881, and rejected. I 
 can recall earlier instances. 
 
 I will close wdiat I have to say on this point by com¬ 
 mending to the Committee the remark of a great lawyer in 
 the year 1863: “Because I could find no other means of 
 preserving the Union of the States, I have once consented 
 to the assertion of a doubtful power under the Constitu¬ 
 tion. I certainlj^ shall not do it again where the necessity 
 does not exist.” The author of this observation w^as the 
 late CniKF Justice Chase. 
 
 I will add to this the objection made by Comptroller 
 Knox in 1881 to the Carlisle amendment. He said, “ It seems 
 to me that legislation of that kind has the appearance of forc¬ 
 ing the banks to buy the bonds; any one who is urged to 
 do a thing against his Judgment hesitafes, and, perhaps, de¬ 
 clines it altogether.” Instead of 3 H>lding to anything 
 having even the appearance of compulsion, many of the 
 banks would surrender their circulation, and the Act would 
 
20 
 
 produce the very contraction it was desi^rned to prevent. 
 Coinf)nlsion offends the instincts of tlie Anglo-Saxon nature. 
 
 The government is now using its surplus to pay the Three 
 per cent bonds. At the present rate of payment they will 
 all be paid wdthin two or three years. It would be 
 a positive loss to the United States to fund them into 25 
 year two per cent bonds, and leave its surplus revenues to 
 lie idle in the Tn^asury, drawing no interest and extinguish¬ 
 ing none; this loss would be equal to the interest to be paid, 
 amounting to very nearly $127,500,000, less the difference 
 b(^tween two per cent, and three per cent., for an average of 
 a year or two, on sucli proportion of the bonds as might be 
 funded earlier than their redemption would in the natural 
 course take place. 
 
 Aside from the question of contraction, it will never 
 profit the United States to fund a sum payable presently, 
 into an interest bearing bond having a fixed time to run, so 
 long as there is a surplus which might be applied to the 
 payment of such sum, and which surplus, because the 
 bonds which it might have redeemed have been so funded, 
 will remain in the Treasury drawing no interest at all. 
 
 Aside from all legal objections, and independently of the 
 question of contraction, I venture the suggestion, that the 
 discrimination in tax involved in Mr. Potter’s bill would be 
 fatal to its adoption by an intelligent Congress of American 
 citizens, imbued with a just sense of national self-respect. 
 A nation, the credit of which stands higher than that 
 of any other nation ever stood, and which requires nothing 
 but wise and statesmanlike legislation to increase its 
 strength, should not begin at this late day to introduce 
 elements of weakness and sources of distrust into its finan¬ 
 cial system. Such a novel policy would be inconsistent 
 with the dignity of a pow'erful government. It should offer 
 its bonds when it has bonds to sell, on the same terms, in 
 fact as well as in theory, to the whole public, on their 
 merits. To select a special class of corporations, and offer 
 them an inducement or a bribe to purchase its bonds—to ex¬ 
 tend to such a class a preference or advantage withheld from 
 
21 
 
 tlie citizen—to confess by tiie very terms of tlie act under 
 wliicli they are created, our want of confidence in our ability 
 to sell them without some enticing device, would be vicious 
 as well as unnecessary legislation, and to the last degree 
 humiliating and discreditable. It was never re.sorted to 
 under the pressure of war—it would be inexcusable in a 
 time of peace and general prosperity. It is not good h'gis- 
 lation to create an issue of bonds merely and exclusively 
 for the banks. It is no better to create an issue from which 
 the banks practically get the equivalent of Uirce^ and the 
 ordinary investor only two pet' cent interest. Such piefei- 
 ential legislation is inconsistent with onr traditions, our 
 policy and our interests—it would excite the slumbering 
 prejudices against the banks, and would be therefore as in¬ 
 jurious to them as it is unnecessary in fact, and vicious in 
 principle. 
 
 THE COUNTRY NOT PUErAKKD FOR A TWO PER CENT. ROND. 
 
 If the surplus revenue could be otherwise disbursed, and 
 if Mr. Potter’s bill was relieved of the constitutional objec¬ 
 tion to its compulsory feature, it might be entitled to con¬ 
 sideration as a funding measure merely. As a remedy for 
 contraction it w'ould prove an abortion. But 1 do not think 
 the country is read}'^ for a two per cent, funding bill; or 
 that a funding bill of any sort is applicable to the present 
 situation. The National bank system has firmly estab¬ 
 lished itself in public favor, for it is the best we have ever 
 had. The country will not give it up ; and it will be possible 
 to maintain it in full vigor and safety, even after our debt is 
 paid and without any bonds of the United States. 
 
 The time will come when a bond of the United States 
 ha ving twenty years of life and bearing two per cent interest, 
 will be worth par in all financial markets, for the investment 
 of that rapidly accumulating class of capital representing 
 trusts, savings, &c., which must have absolute security, ir¬ 
 respective of the rate of interest to be realized. It may then 
 be issued and negotiated without preference, compulsion, 
 discrimination or any of the objectionable machinery by 
 
22 
 
 whicli Mr. Potter’s bill proposes to force it upon the banks. 
 
 Some bank presidents and Treasury officers will, perhaps, 
 not assent to this statement. All the way from the time 
 when six per cent, gold interest could be derived from a 
 (jovernment bond bought at par, down to the time when 
 these bonds only yield to the ])resent purchaser an interest 
 of two and a half per cent, on his investment, these gentle¬ 
 men liave insisted that the bonds had about reached their 
 maximum value. They have followed the rate of interest 
 down, but they have been regularly two years in the rear. 
 I will not go farther back than 1881. Here is a senate docu¬ 
 ment which shows that in January 1881, the secretary of the 
 Treasury and the Comptrollei- of the Cui-rency were demon¬ 
 strating to the Senate (Committee on Finance, that the Fives 
 and Sixes of 1881, could not possibly be funded for 10 or 20 
 years at a lower rate of interest tlian three and a half per cent. 
 Investors were then realizing about three and three-eighths 
 per cent, on their investments in Government bonds. 
 “How,” it was asked, “could they be made to take less? 
 No country on earth had ever placed a three per cent, loan 
 at par. Could we do better than Germany, France or 
 Great Britain ? Even British consols were a better purchase 
 than our bonds at par, bearing only three per cent interest!” 
 
 There were persons then in Washington who sought to 
 a{)pear before that Committee to show that there was no 
 necessity for a higher rate than three per cent, and the opor- 
 tunity was denied them, although these officers so appeared 
 and their evidence was printed. Here is a letter which was 
 printed and sent to the Committee, for it was the only way 
 in which the writer could reach that body. In it he proves 
 that the country was then ready for three per cent interest 
 on U. S. bonds; that the credit of the United States was un¬ 
 rivalled in every linancialcommunity; that capital seekinga 
 secure, untaxed investment, irrespective of the rate of in¬ 
 terest, was largely increasing, while these bonds, the only 
 available security for the purpose, were daily diminishing 
 in amount; that our interest could be made lower, because 
 the national credit was higher, than that of any other coun- 
 
23 
 
 try. lie ie}jUed to the British consol argument as I reply 
 to it for the same argument is used now, that tliere 
 are certain controlling facts which seem to have esca})ed 
 the Secretary’s attention. The debt of Great Britain 
 is increasing while ours is diminishing. The income from 
 consols is subject to a tax which may be increased at 
 will, while onr bonds are untaxed. Tlie market for con¬ 
 sols is limited to Great Britain, wiiile the market for our 
 bonds embraces all the tinancial centres of the globe. 
 And he might have added that ours was a growing country 
 in the youth of its development, while Great Britain is full 
 grown and has passed the meridian of natural life and vigor. 
 
 The arguments of tliis letter prevailed, and the 
 Three per cent, rate was adopted. But the bill was vetoed by 
 the President, because of the clamor which had been raised 
 •igainst the Carlisle amendment, which was construed as 
 compulsory upon the banks. It was, in fact, less so than 
 Mr. Potter’s plan. 
 
 Again, in the following April, when the project of extend¬ 
 ing the Fives and Sixes of 1881 was before Secretary Windom, 
 many bank presidents and eminent linanciers insisted that 
 the extended rate must be four ])er cent., and, again, two 
 or three men claimed that three per cent, was all that it 
 was necessary to pay. Mr. Windom was satisfied that three 
 per cent, was enough, but he did not like to take the risk 
 against the opinions of all these gentlemen. He compro- 
 uiised on three-and-a-half, and his first call proved that 
 every bond could have been continued at three per cent. 
 
 The Three and-one-half per cent, extended bonds have 
 been paid. A three per cent, bond, with twenty years of 
 life would now be worth a premium of from 6 to 8 per cent. 
 Within three years from that time U. S. bonds have risen 
 to a premium, at which, instead of three and three-eighths 
 they pay the investor only two and one-halt per cent., and 
 they are still going up in the market. 
 
 The same tinancial laws and conditions are in force to-day 
 as in 1881 Every reason which then existed in favor of a 
 three per cent, rate now applies to a still lower rate. The 
 
24 
 
 capital seeking investment in these bonds is larger than it 
 was theti, and is increasing, whilst the aggregate of the 
 bonds diminishes year by year. If in three years the in¬ 
 terest on IJ. S. bonds has fallen from three-and-three-eighths 
 to two-and-one-half per cent., how long before it will reach 
 two per cent, 'i Btjfore the point is reached at whi(;h a 
 bond bearing a premium will yield but two per cent, on 
 the capital invested in it, ii two per cent, bond will maintain 
 itself at par. 
 
 Those who three years ago said that the Fours could 
 never rise above 116, will now claim and prove ihat i/iey 
 never can rise above 125. They will insist that at that 
 price British consols are a better purchase. I answer by 
 pointing to the facts. Tlie Fours will continue to steadily 
 appreciate in ])rice, relatively to the time they have to run, 
 up to the point at which they will not yield over two per 
 cent, per annum for their unexpired term if held to matu¬ 
 rity, which would be equal to 187.50, with the unexpired 
 term which is now before them ; or relatively in proportion 
 as the time of their maturity will then be nearer. There the 
 appreciation may cease, if there is a prospect that a two per 
 cent, bond may be issued at par. When they will reach 
 this point I do not know, but it will be long before you 
 need to make any radical changes in the bank system. 
 
 There are men who can look at only one side of a sub¬ 
 ject, and who make very extravagant statements about the 
 present situation. “ Why,” said one of them, “Do you 
 not know that under the Sherman bill, with the tax re¬ 
 pealed, Fours are worth 160'?” “There is a large syndi¬ 
 cate in New York holding Fours to an immense amount, 
 and working to put them up to that price ! ” 
 
 This gentleman had figured so much over his own 
 theory that he could not see how absurd this statement was. 
 I have shown you why the Fours need not rise above 
 187^ with their present unexpired term of twenty-three and- 
 one-half years, or proportionately hereafter as tliat term be¬ 
 comes shorter; and their price, or the premium they will 
 command, will not be widely different, whatever the action 
 
25 
 
 of Congress on the questions now before them may be, as it 
 will be influenced by causes in which the demand for bank¬ 
 ing purposes will cut but a limited flgure. 
 
 As to the alleged syndicate, if it existed, 1 should prob¬ 
 ably know it. It does not, and in the nature of things 
 cannot exist. The market price of the bonds is regulated 
 from day to-day hy the law of supply and demand, and 
 millions of dollars worth of them change hands in the oflices 
 of the large dealers at each one per cent, variation in price; 
 an advance of one-eighth of one per cent, tempting some 
 holders to sell, and the demands of new accumulations of 
 capital compelling others to buy. 
 
 No property which is the subject of bargain and sale, has 
 been more stable in price, in this country, than the 
 Pour per cent, bonds of the United States, since we 
 reached a specie basis. They have been gradually but 
 steadily appreciating in value from the causes above re¬ 
 ferred to. I do not remember any peiiod in which they 
 have fallen as much as three per cent., or in which they 
 have risen in price so rapidly that large amounts could not 
 be bought or sold within narrow limits of fluctuation. 
 There are always holders who decide that when their 
 bonds reach a certain jjremium they will sell and real¬ 
 ize their profit. They do sell, and their bonds for a 
 time supply the demand and moderate the advance, 
 and when it reaches another point, other lots of bonds 
 come out for sale. There were men who sold the Fours 
 at 115, 120, 122i, and there is another class who will 
 sell at 125—another at 125^^, another at 126, and so on 
 to the end of the chapter. The market is thus kept in a 
 healthy condition—the supply adjusts itself to the demand, 
 and fixes values of bonds by a law more regular and inflexible 
 than that which governs other values. The demand for 
 banking purposes is one only of the many elements which 
 fix these prices—the demand for certain other kinds of invest¬ 
 ment is much more powerful, and may be regarded as con¬ 
 trolling. 
 
 These facts the bank Presidents and Treasury officials 
 
26 
 
 have never appreciated, and I do not suppose they will ever 
 comprehend. Constantly dealing witli and concerning banks, 
 ir is natural tliat they should look upon banks as the regu¬ 
 lators of prices. Show them what a bond is worth for bank¬ 
 ing, and they assume that to be its value for all purposes. 
 Tlmy never see the farmers, the hoarders, the quiet, pru¬ 
 dent and silent investors, who come to the dealers with more 
 bonds than one would imagine them to possess, with every 
 considerable advance in the market price of these securities. 
 This is the supply which keeps prices regular, and prevents 
 any sudden or extreme advance. This supply is perennial 
 and fatal to the operations of syndicates or other combi- 
 tions to control prices. It renders it certain that the banks 
 would be able to secure a supply of the Four-and-a-half per 
 cent, and Four per cent, bonds to meet their requirements as 
 their Threes are called in, at prices at which, with the modi¬ 
 fications in tlie law to which I will presently calhyour atten 
 tion, they could afford to buy them. 
 
 PRESENT LEGISLATION SHOULD BE TEMPORARY. 
 
 If it be true that we must have the Treasury surplus for 
 two or three years to come ; that because of this surplus we 
 cannot defer payment of the three per cents.; that there is a 
 strong public sentiment against any postponement of the 
 payment of the debt—-against increasing it—against making 
 new bonds—and particularly against maintaining the debt 
 in order to maintain the banks, if it be true that contrac¬ 
 tion exists—that nobody wants contraction—that the mem¬ 
 bers or the party failing to arrest contraction while they 
 have the power, are certain to be visited with popular con¬ 
 demnation, why should not Congress take the shortest and 
 the easiest path out of the difficulty ? The way to stop con¬ 
 traction is to stop it. We do not want permanent or final 
 legislation upon the subject of the national currency now. 
 The conditions are not ready for it, and the necessity for it 
 does not exist. Let us preserve the volume of the currency 
 where it is, and natural laws will accomplish the rest. These 
 laws have brought the country to its present condition of 
 
27 
 
 ospenty. Aid them with such modifications of existing 
 P tutes as the changed circumstances from time to time de- 
 ® and and tliey will so raise the national credit, as to warrant 
 a Two per cent, bond whenever the interests of the Govern¬ 
 ment will be promoted by its issue, and before the year 1891, 
 when the Four and-a-halfs mature, the financial problem will 
 have solved itself. When necessary a way will be found of 
 maintaining the national bank system, without cost to the 
 country and with perfect safety to the people. 
 
 PRACTICAL MEASURES. 
 
 Two simple measures will arrest contraction. Measures 
 that Congress can pass without affecting legislation on any 
 other subject, without taxing anybody a penny—without 
 injury to any man, institution, section or interest. They 
 are both comprised in the bill of Mr. Hunt, a member of 
 this committee. They are the repeal of the tax on circula¬ 
 tion and the carrying out of the letter and spirit of the banking 
 law,’ and of all its amendments since the year 1864, by author¬ 
 izing the issue of circulation in some safe proportion to the 
 actual value of the bonds deposited to secure it. 
 
 These measures have most unquestionably received the 
 strong approval of those who have given most attention to 
 and have worked out all the details of the situatiou-of 
 those who from their connection with the subject matter, and 
 by long experience, are best qualified to form a mature and 
 
 correct judgment concerning the perils with which we are 
 
 confronted, and the best way to escape them They are recoin ■ 
 mended by the Comptroller of the Currency, by the Secre¬ 
 tary of the Treasury, by the President of the United States, 
 by the bankers who addressed the recent Louisville conven¬ 
 tion, by merchants, manufacturers, and business men inter-- 
 ested in a stable currency, and finally by the press almost 
 without exception-that great mirror which reflects the 
 nopular will. Whether the banks themselves desire these 
 meLures you know better than I. But I should be surprised 
 to find any member of this committee who represents a 
 district in the country, who has not been informed that both 
 
28 
 
 the banks and the business men of his district approve 
 them, 
 
 OBJECTIONS ANSWERED. 
 
 Why should not these measures pass? I have heard 
 some objections to some of their details, but I have yet to 
 hear one to their substance, I have heard men say that 
 they would suddenly inflate the currency—that they would 
 put the Fonrs up to 150, with other suggestions equally 
 crude and senseless. If those who urge them have no better 
 knowledge of the subject than their utterances would indi¬ 
 cate, they should bridle their tongues and leave the discus¬ 
 sion to those who think as well as talk. 
 
 Says one, “I object to a fluctuating security which 
 changes with the market.” But you have just the same 
 fluctuating security under the present law, and have had it 
 ever since the law was passed. The only difference is that 
 when the law was originally enacted, the fluctuations in the 
 price of government bonds were between ninety and par, or 
 some slight premium above par, because the Government 
 was weak. The fluctuations now are above par, because 
 the Government is strong. The market value of the Fours, 
 now at 124, is far more stable and assured than the price of 
 the Sixes was, at par, in 18t54, amid the varying fortunes of 
 the nation’s struggle. The existing limitation of the issue 
 of circulation to ninety per cent, of the par value of the 
 bonds, was designed to furnish a margin of ten per cent, to 
 insure against the decline in the price of the bonds below 
 par, a contingency which was then by no means unlikely 
 to occur. A like margin now, in the market prices of the 
 bonds, affords a far more certain and less fluctuating ele¬ 
 ment of security and protection than then existed under the 
 terms of the law as it was framed and now stands. 
 
 We have had twenty years of experience. It has proved 
 that 70 cents, in bonds would have secured $1.00 of the cir¬ 
 culation of the weakest bank that has failed in all those 
 years. With this fact before him, surely no one can say 
 that 10 per cent, of market value, with the additional insur¬ 
 ance furnished by the five per cent, of the circulation of the 
 
bank always in the Treasury as a redemption fund, and 
 power in the Comptroller to call up other security, if 
 required, wdll not secure the notes as well as $70.00 in bonds 
 would have secured every $100.00 of circulation during the 
 twenty years that have passed. 
 
 Although this is a sentimental objection, it is so easily 
 obviated, that it is not worth while to argue it. It is obvi¬ 
 ated by Senator McPherson’s amendment to the Sherman 
 bill, which makes a Three per cent, bond the basis, and 
 limits the amount to be issued on other bonds to their rela¬ 
 tive value. 
 
 This idea of fluctuation is the only objection I have 
 heard made from any source to the Sherman bill which de¬ 
 serves much consideration. The statement that it will run up 
 the price of the bonds, and that it will inflate the cur¬ 
 rency, are made by those only who ignore the law of de¬ 
 mand and supply, under which the banks will get all the 
 bonds they want at about present prices, or at a gradual, slow 
 and moderate advance. 
 
 Mr. Chairman and Gentlemen : 
 
 I have the same interest in this subject which you and 
 other citizens have—no more—no less, and that interest is 
 the common, public welfare. The minds of thoughtful men 
 to-day from one end of the country to the other are anxious 
 and disquieted. They fe ir the consequences of contraction, 
 and they know that without legislation, contraction is a 
 fixed fact. Financial disturbances, a hard money market, 
 business depression, silent factories and furnaces, unem¬ 
 ployed workmen, and hungry families are desired b}' none, 
 except the bear speculator upon the ruined fortunes of men. 
 The country looks to you for protection against these evils, 
 for immediate and effective action. Your delays, and your 
 diflerences of opinion already begin to discourage men. 
 When you are called to account for failure to arrest con¬ 
 traction, you will find that your plea that you could 
 not agree, will not go far in your justification. I appeal to 
 you to pass these measures because they are timely, just and 
 
30 
 
 right, because they v .11 be remedial and effective—they will 
 ensure the country against a very great danger—they are de¬ 
 manded by the interests of the whole country—they do not 
 commit you to any permanent policy-they do not affect legis¬ 
 lation on the tariff or any other subject—there is no sound ob¬ 
 jection to them—and finally, because I can see no reason why 
 you may not unite to support them on a common ground; 
 and I frankly admit that tliey appear to me to be the only 
 measures to arrest contraction upon which such union is 
 practicable. It is a subject of transcendant importance. I 
 hope you may deal with it in a manner creditable to your¬ 
 selves as individuals and to the Congress of which you are 
 members. ’