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Monetary Commission MSCEUJUN 1 QM — MONO. RED. THE BANKING SYSTEM OF JAPAN. 4*3 w .si BY MARQUIS KATSURA. Premier and Finance Minister of Japa n. The following brief historic and comprehensive state ment of the past and present banking systems of Japan is furnished exclusively for the purposes of this article by the courtesy of His Excellency Marquis Katsura, the Premier and Finance Minister of Japan. It brings the history up to the present year and will be found a valuable addition to the records and information hitherto pub lished. Marquis Katsura writes: With the introduction of the new regime, following the restoration of the Throne to actual rulership of Japan, in 1868, extensive developments occurred and advances were made in various branches of industry. National finance formed no exception; in fact it showed remark able progress. But to place the entire system of national finance on a perfect basis involved difficulties of very great magnitude, and could only be achieved by gradual progress, allowing each phase its full time to develop. During the early portion of the Meiji era (dating from A. D. 1868) the financial system of Japan was primitive, and such as then existed was local and limited. The amount of capital was insufficient, and the rate of inter est always upward. Private loans were handicapped, and the balance of trade was always unfavorable. After the establishment of the national banks and of the Specie Bank some improvement was made in the finan cial system of the country, but this was only a beginning when judged by the national standard. The improve ments and developments were only collateral, and with the growth of the branches the necessity of a trunk pow erful and strong enough to support them came to be felt. In other words, an urgent necessity arose, it was thought, for the establishment of a great central banking institu tion. What follows gives more fully the reasons for the establishment of the Central Bank in Japan. The banking business in Japan dates from the eleventh month Of the fifth year of Meiji (1872). (The Gregorian calendar came into use the following year.) The bjmk regulation? were promulgated at that time, aVv* in August Stfh*. i .'nt*.'lytmr amendment? were imVodueodAothose regulations and the number of banks increased to over 150. But the actual'state of the financial system during the first ten years, when over 150 banks existed, showed that united operations were wanted and that the banks with small capital stood apart and alone without cooperative facilities. As a remedy for some of the existing evils, the public favor strongly increased in favor of a central bank which might bring about smoother cooperation among the financial institutions by having in its hand the essential «• — * 1- * 4-t-*. *• • i t s increased to over 150. But the actual'state of the financial system during the first ten years, when over 150 banks existed, showed that united operations were wanted and that the 18 banks with small capital stood apart and alone without cooperative facilities. As a remedy for some of the existing evils, the public favor strongly increased in favor of a central bank which might bring about smoother cooperation among the financial institutions by having in its hand the essential machinery of the finance of this nation. B y establishing a central bank, it was expected that the evils of the finan cial system in vogue, and which might be termed the feudal system, would be removed, and it was also expected that by converting the national banks into agencies or branches of the Central Banking Institution, having a complete system of communication, a smooth operation would be attained, and the working of the entire machinery facilitated throughout the whole Empire. It was further believed that the small banks would come to rely upon the Central Bank and realize the advantage of cooperation with it. The capital of most of the banks in those days was very limited, and they were totally unable to cope with any sudden demand for any large amount of money, and when, on the occasion of a flurry in the money market, the de mand for the discounting of bills assumed unusual pro portions, or when deposits were withdrawn to a large extent, suspension of payment was not infrequent. Credit consequently was lowered, or at least was uncer tain, the result being an individual custody of cash. As a consequence, it was impossible to expect any financial system to work smoothly. As long as this condition of things prevailed it was impossible to inspire confidence or to draw out into circulation the volume of money individually hoarded. It was expected that with the establishment of a Cen tral Bank, with power to make adequate advances, the danger of a serious crisis or panic following financial stress would be averted, and the development and advance ment of commercial interests, which would call increased capital, would be amply provided for. It was believed that as a result of the aid extended by the Central Bank to the smaller banks the suspension of industrial or com mercial development on account of lack of necessary capital would be avoided. RED 2 Q M— MONO. ... In early days in Japan the issue and volume of cur rency, when compared with the standard of living and the state of commerce and industry, was rather excessive, but the circulation of that currency was far from being even and ample. The rate of interest was ever on the increase, due to the withdrawal of capital from circula tion and the fact that the banks were advancing large sums on long-term loans. A Central Bank, being exclusively engaged in discount ing bills and in making advances for short periods on the best bills, capital would be active and interest low. The Central Bank would, in fact, regulate the rate of discount and largely that of interest. In European countries the Government extends pro tection and assistance to a Central Bank, and Government money is deposited in that bank, which devotes the sur plus to the Government’s credit to the purchasing of foreign drafts or bullion. No effort is spared looking to the importation of specie. In Japan also it was seen that should a Central Bank be firmly established the monetary transactions of the Treasury and the redemption of Government bonds would be transferred to such a bank, and in case of a surplus it would be devoted to the purchase of national and foreign coins and bullion, which would be ultimately employed in converting the Government notes. This ac complished, a way would surely be opened for concen trating specie, and in years to come the system of placing notes on convertible basis would be- realized. The money paid in local districts in the form of taxes being mostlv brought to the Central Government, leaving only such a portion of it as is required for local governmental expenses and other small items, a deficiency in currency in, circu lation was felt severely each year at the tax* paying period, and the interest on money always rose. But it was felt that if the monetary transaction of the Treasury should be intrusted to a Central Bank the volufcie of cur rency temporarily in the one bank \yould be more speedily reduced by the discounting of bills and other processes, and the money market would be relieved promptly. Thus it was expected that the bank s operations would be adjusted to the actual needs of the market. Financial troubles in those days were generally attribu table to the overflow of gold abroad, caused by the un favorable state of the balance of foreign trade. But the experience of excess of imports over exports is not limited to Japan. There are times when European co untr*es have a like experience, and the reason why, in th|^se countries, the deficiency of specie is not severely felt, d v en under an unfavorable balance, m ay be found in the f a f t that there exists a financial institution for im p o rtin g specie from abroad. Japan, in those days, had no s u jf1 institution. There was an exit for specie, but] no inlet f c f it; in other words, foreign goods were paid for in JaiPanese sPecie alone, and no other means were available fo(r makinR the payment. It was realized that the estabHfshment of a Central Bank would open the way for bringilng in foreign money. In Europe the banks, by holding c J^ P o n d e n c e uuittv oraDK uaiance, m a y be found an tne exists a financial institution for importin' abroad. Japan, in those days, had no suil There was an exit for specie, but" no inlet fc f . f words, foreign goods were paid for in Ja r alone, and no other means were available fdr that there ipecie from institution. * it; in other making the payment. It was realized that the estab*shment of a Central Bank would open the way for brin J ng in foreign money. In Europe the banks, by holding ^rrespondence with other banks, are in close touch as t<|ihe volume of specie in different countries and are constantly adjusting the balance by rate of discount. Such woik can only be undertaken by a central banking institution, and such a bank once established, a financial organ would be brought into existence which could keep continual surveillance of the financial and commercial conditions of the world and would be able on the one hand to help smaller banks, and on the other hand open a gate for the incoming of foreign specie, so that even in case of import exceeding export, causing the outflow of the specie, no apprehension need be entertained. II. WHY THE BELGIAN SYSTEM WAS ADOPTED IN JAPAN. After careful study and comparison of the central banking systems of Europe we found that, although in extent of business, power, and influence in the financial world, the Bank of France and the Bank of England were unrivaled institutions, yet in point of perfection in the organization of the system the Bank of Belgium was peer less. With the exception of the Imperial Bank of Ger many, the Bank of Belgium is the most modern creation. It was organized after careful comparison of the banking systems of England, France, Austria, America, and other countries, and the best in all those systems was adopted, while the weak points were carefully avoided; conse quently it was decided by Japan to adopt the Belgian system. The Imperial Bank of Germany, being an institution adapted to the needs of a federation of States, it was found unsuitable for Japanese purposes, while the Bank of England and the Bank of France had all the charac teristics born of long usages and history, and consequently it was not possible to adopt their system in a country like Japan where no similar conditions exist. Though adopting the Belgian system, yet in note issuing capacity and the rate of reserve a system resem bling the German one was adopted. 3 Q M— MONO. RED THE BANKING SYSTEM IN GENERAL AND WHY THE SYSTEM WAS ADOPTED. With the establishment of the Meiji Government, one of the policies followed was to perfect as far as possible the financial system of the country and to promote and encourage production throughout the Empire. As early as the first year of Meiji (1868) a commercial office was established with the object of encouraging com mercial and industrial development. The organization of the office was afterwards placed on a more efficient basis. Under the jurisdiction of that office were placed the mercantile companies and the exchanges, which were the banks in those days. The Kawase or exchanges were the first real bankers in this country. The capital was supplied by wealthy mer chants by subscription, while the Government also advanced funds. The exchange received deposits, ad vanced loans, and issued drafts. It was also authorized to issue notes against the reserves. The object sought in the establishment of these ex changes was good, but the organization and the regulations being very deficient, and moreover it being a combination of the Government and private interests, the system was soon found to be unsuitable at a time when the country was undergoing a rapid transformation on account of the new regime. After several failures among the exchanges, hope of success was abandoned, and the Government saw the necessity for establishing a more perfect system. This mm was about 1870. In the fifth year of Meiji (1872) the regulations for national banks were promulgated. The American system had been adopted, and in March of the following year the regulations for national bonds convertible into gold were promulgated. With the establishment of the na tional bank system the exchanges were dissolved, except one in Yokohama, which was allowed to continue business after having been converted into a national bank; thus was the Second National Bank established. This bank, besides the privilege of issuing ordinary notes, was clothed with authority to issue foreign silver notes, which, however, was forfeited when the Bank of Japan was estab lished and issued convertible notes. Four banks were established at the time of the promul gation of the banking regulations of 1872, the First Na tional Bank being one. The amount of capital was 3,450, 000 yen, with right to issue notes to the extent of 2,070,000 yen. The volume of inconvertible government notes steadily increased, specie began to command a premium, and showed a tendency to leave the country. In those days bank notes were immediately brought to the issuing bank for conversion, and there was no prospect of a smooth or general circulation of the notes issued by the banks. Consequently the note-issuing privilege granted to the banks proved useless; on the contrary it was a detriment to the business of banking. Thus the first object of the showed a tendency to leave the country. In those days bank notes were immediately brought to the issuing bank for conversion, and there was no prospect of a smooth or general circulation of the notes issued by the banks. Consequently the note-issuing privilege granted to the banks proved useless; on the contrary it was a detriment to the business of banking. Thus the first object of the Government in promulgating the banking regulations in order to effect adjustment of the inconvertible notes was completely frustrated. In 1876 the Government introduced important amend ments in the banking regulations, and instead of requiring the conversion of the bank notes into gold, made it possible to convert them with currency. In other words, the banks could convert their notes with those of the Government, and the result was the introduction of inconvertible notes. The banks were also authorized to deposit eight-tenths of their capital in the form of government bonds valued at the market price and to issue notes equal to the amount of their deposits, while the remaining two-tenths of the capital was to be reserved in the form of currency to meet the demand for conversion. These amendments proved to be of great advantage, and the number of banks suddenly increased to 152, representing capital of 42,110,000 yen, and the note issuing reached the sum of 34,390,000 yen. The Satsuma rebellion of 1877 caused the Government to increase the issue of its inconvertible notes, and the new notes thus issued amounted to over 27,000,000 yen. Besides the Government also issued reserve notes to the amount of over 20,000,000 yen. The bank notes, as already stated, also increased, and reached the amount of over 34,000,000 yen. The total of inconvertible notes came up to 160,000,000 yen. Specie began to command a premium, and with the depreciation of the value of the notes, uneasiness spread on every side. It was im mediately and forcefully apparent that there was an urgent necessity for changing this state of affairs by re forming the note-issuing system. This brought about the introduction of further fundamental reforms in the banking system of Japan. With the increase in the volume of the bank notes the Government became apprehensive and saw the necessity for limiting the right of establishing banks. In 1877 the 1 .. , . bank regulations underwent fresh amendment. The Minister of Finance was invested with authority to place restrictions on the establishment of banks, to limit the amount of capital, and to lower the note-issuing capacity. This was followed by the policy of redeeming the incon vertible notes, which was carried out with great determi nation, nor were the bank notes left unredeemed. 4 Q M— MONO. In 1883 the bank regulations were again amended, and a clause was introduced whereby it was made impossible for a bank to continue existence as a national bank after the term of its charter expired, and it was also provided that no bank should have power to issue notes. Simulta neously measures were taken whereby the bank notes should be redeemed gradually. With the expiration of the terms of charter of the national banks an attempt was made to have the charters made renewable, but, this proving futile, the national banks very smoothly changed into private banks, so that by February, 1899, the national banks completely went out of existence. The disappear ance of the national banks, however, did not mean com plete withdrawal from circulation of the notes issued by the national banks, but by placing a limit for the period of their circulation they were completely withdrawn by December, 1904, after which the government and bank notes totally ceased to circulate, and the unification of the paper currency was thus effected. THE YOKOHAMA SPECIE BANK. The Yokohama Specie Bank was established in 1880, and the Bank of Japan came into existence in 1882. The former was organized on the joint-stock principle for the purpose of fascilitating foreign trade and also for the purpose of issuing convertible notes as the circulation of specie increased. But as there were signs of the deprecia tion of the notes the note-issuing license was not granted to the Specie Bank. From the time of its establishment the Specie Bank was exclusively engaged in foreign ex change and issuing drafts on commercial commodities, lh e history of the bank has not been a smooth one, but with foresight as to developments it increased its capital in 1887 to 6,000,000 yen. The Government extended special protection to the bank under its Yokohama Specie Bank regulations, and since that time the bank made steady progress and developed without a hitch until by 1896 its capital was doubled and made 12,000,000 yen. With this increase of its capital, necessity was felt for extending the sphere of its operations, and this called for further increase of its capital by 2,000,000 yen, making a total of 14,000,000 yen. The business of the bank is now in a thriving condition. The present regulations for the Yokohama Specie Bank limit the kinds of its business as follows: (1) Foreign exchange and issuing of drafts on commercial commodities. (2) Inland exchange and issuing of drafts on commercial commodities. (3) Advancing loans. (4) Deposits of money and custody of articles of value. (5) Discount and collection of bills of exchange, promis sory notes, and other securities. (6) Exchange of coins. THE BANK OF JAPAN. The Bank of Japan is organized and modeled after the Central Bank of Belgium. The purpose of the bank was to withdraw from circulation inconvertible notes, thereby unifying the paper currency of the country, to facilitate sory notes, and other securities. (6) Exchange of coins. THE BANK OF JAPAN. The Bank of Japan is organized and modeled after the Central Bank of Belgium. The purpose of the bank was to withdraw from circulation inconvertible notes, thereby unifying the paper currency of the country, to facilitate the handling and disposition of money belonging to the treasury and of the National Bonds, to adjust the mone tary conditions prevailing at home and abroad, and regu late the rate of interest. The bank was established in 1882 by virtue of Imperial Ordinance No. 32. Its author ized capital now stands at 30,000,000 yen and the bank is privileged to issue convertible bank notes. The maxi/ mum of the notes to be issued against the reserve was at first 70,000,000 yen, which was afterwards increased to 85,000,000 yen, and now further increased to 120,000,000. The governor and vice-governor of the bank are appointed by the Government. The bank is placed under several restrictions. The Government reserves the right to attach supervising officials to the bank, thus bringing the insti tution under the strictest governmental supervision. As already stated, the first Exchange Company ended in failure, while the national banks did not achieve what had been expected of them. The amendments to the bank regulations resulted in the increase of inconvertible notes, and this called for further amendments of the regu lations. The Yokohama Specie Bank was confronted with difficulties almost immediately after its establish ment, and when the financial condition of the country was in such a state the establishment of the Bank of Japan Was epoch making: It not only placed the fiscal policy of the Government on an entirely new footing, but it also exercised a wholesome and beneficial influence on the economics and finance of the entire country. The business now transacted by the Bank of Japan is as follows: < (1) To discount or purchase government bills, bills of exchange, and commercial bills. (2) To buy or sell gold or silver bullion. (3) To make loans on security of gold and silver coins and bullion. (4) To collect bills for banks, companies, and merchants who are its regular customers. (5) To receive deposits in current account and to accept the custody of articles of value, such as gold, silver, and precious metals, and documents. (6) To make advances in current accounts or loans for fixed period on security of. government bonds, treasury bills, and other bonds and shares guaran teed by the Government. The amount of such loans and the rate of interest are to be decided from j time to time by the conference of governors, vice governors, directors, and supervisors, subject to the u .... approval of the Minister of Finance. 5 DM— MONO. RED The Bank of Japan, besides engaging in the above stated business, is disqualified from engaging in the fol lowing transactions: (1) To make loans on the security of real estate or shares of banks or corporations. (2) To make loans on the security of shares of the Bank of Japan, or to purchase the same. (3) To become a shareholder of industrial corporations, or to engage, either directly or indirectly, in indus trial enterprises of any kind. (4) To become the owner of real estate, except so far as is necessary for establishing the head office and branches of the bank. In 1890 ordinary bank regulations were promulgated by law No. 72, which was followed by savings banks regu lations law No. 73. The promulgation of these regula tions opened a new epoch in the history of banking busi ness in Japan. B y the new regulations the banking business was clearly defined, and all those engaged in that and similar business were brought under special contract by those regulations. . . . Before the law came into force there existed no instrument for the control of private banks. Only special institutions, such as the Bank of Japan, the Yokohama Specie Bank, and national banks were under the control of the Government. When the national banks became private banks, after the expiration of their charters, they went out of the control of the Gov ernment. The new regulations promulgated put a stop to this. The necessity of creating a banking center in order to facilitate the manipulation of national finance, and the importance of government control and supervision and insuring a wholesome development, was what prompted the Government to put the new regulations into force, for it was feared that the national banks which were formerly under government control and supervision would, when they passed beyond that supervision, prove blocks to a wholesome development. THE SAVINGS BANKS. The savings bank, above all other banks, is the one that requires most careful supervision by the Government. In Japan the Government has a Postal Savings depart ment and also a deposit section in the Department of Finance. But the amount of the deposit being found too small when compared with the population and the stand ard of economics in general, the Government followed the policy of increasing the amount of the deposit by initiating a method for supervising, controlling, and improving the business of the private savings banks, and the new regu lations for savings banks were promulgated. According to these regulations, banks that receive deposits on the principle of compound interest are classed as savings banks, and their organization must be on the joint-stock principle. It is also made obligatory on those banks to keep a reserve as security for repayment amounting to not less than one- policy of increasing the amount of the deposit by initiating a method for supervising, controlling, and improving the business of the private savings banks, and the new regu lations for savings banks were promulgated. According to these regulations, banks that receive deposits on the principle of compound interest are classed as savings banks, and their organization must be on the joint-stock principle. It is also made obligatory on those banks to keep a reserve as security for repayment amounting to not less than onequarter of the whole amount of the deposit in the form of interest-bearing national or local bonds, and to have them deposited in the place authorized to receive them. In other respects the provisions of the ordinary Bank Regu lations apply to the savings banks. In 1896 the Hypothec Bank of Japan was created by Law No. 82, and in the same year the Agricultural and Industrial Bank was also established under the Law No. 83. These laws opened another epoch in the Banking Administration. The banks so far were engaged in making loans and receiving deposits for short terms, and also in discounting commercial bills, so that they were principally organs for commercial transactions. But the credit system not being fully developed in the country, strong necessity was felt for an institution where long-term loans could be obtained on security of movable and immovable property. Such a loan being incompatible with the practical working of ordinary banks, there were instances where some difficulties were experienced by some of the banks. Of recent years, however, the commercial credit system having considerably developed and the necessity of es tablishing a special institution for making long-term loans for the benefit of agricultural and industrial interests being felt, the Government made the necessary investigations to meet this requirement. Then the war with China broke out, with the result that a very large sum of money was scattered among the people. On the other hand, the postbellum measures called for a large amount of capital to be devoted to unproductive works, and it was thought most timely and necessary to open a way for absorbing small funds widely scattered throughout the country, and devote them to developing agricultural and industrial in terests. It was on that account the Hypothec Bank and the Agricultural and Industrial Bank were organized and established by the law issued in 1895. P 6 QM — MONO.\ RED. The Hypothec Bank of Japan, created by the law relatmg thereto, has for its object the advancing of funds , for the purpose of improving and developing agricultural and industrial enterprises, and the Bank is organized on joint-stock principles, with the president and vice-presi dent appointed by the Government. Its principal busi ness is to advance loans on mortgage of immovable prop erty which shall be redeemable by annual installments, and ini other businesses the Bank is placed under severe re- _ strictions. The Bank is authorized to issue mortgage debentures-bearing premiums to an amount not exceeding ten times its paid-up capital, provided the amount of such debentures does not exceed the total amount of outstand ing loans redeemable by annual installments. The Bank hais the privilege of the government subsidy to the exten t. ofcguaranteeing 5 per cent dividend for ten years after its establishment, in case the Bank’s profits fail to realize that standard of dividend. The Agricultural and Industrial Bank is a joint stock company established in every prefecture. These banks have for their object the advancing of loans for the pur pose of improving and developing agricultural and indus trial interests. Their business is similar to that of| the. Hypothec Bank, only on a small scale. The banks are also placed under the same restrictions and government super-: vision as the Hypothec Bank. The banks are authorized to issue agricultural and industrial debentures to an amount not exceeding five times the paid-up capital. The Govern- _ ment delivered a sum of about 10,000,000 yen to the pre-> fectural authorities for taking up the shares of the agri cultural and industrial banks of their localities, and on this amount the bank is exempted from paying a diyidend. The two banks above described being exclusively en- _ gaged in making long-term loans on the security of im -.. movable property, the need arose for a financial organ which could advance long-term loans pn the security of ^ government bonds, shares, and movable property. It wa^ also deemed advisable to combine in that financial organ the business of a trust company. The institution b o fn , of these requirements is the Industrial Bank of Japan, organized under the law relating thereto and issued • in , March, 1900, as Law No. 70. The Industrial Bank is a joint stock company, and t h e . governor and deputy governor of the Bank are appointed y by the Governments The capital of the bank;is 17,500,000 yen, and foreigners own no small portion of ..the shares of ; the Bank. It is acting as a medium for the introduction of foreign capital, and thus is engaged in adjusting and facilitating circulation of capital at home and abroad.. The Bank is authorized to issue debentures to an amount not exceeding ten times its paid-up capital, prqyidfjl the amount of such debentures does not exceed the total amount of outstanding loans and negotiable instruments. B ^ n k 'h i a government subsidy to the extent of guaranteeing , per cent dividend for five y e ^ - ^ - facilitating circulation of capital at home and abroad. The Bank is authorized to issue debentures to an amount not exceeding ten times its paid-up capital, provided the amount of such debentures does not exceed the total amount of outstanding loans and negotiable instruments actually in hand. The Bank has a government subsidy to the extent of guaranteeing 5 per cent dividend for five years. after its establishment in case the bank’s profit, fails to come up to that dividend. THE-BANK OF FORMOSA. The Bank of. Taiwan (or Formosa) was established! under the law relating thereto and promulgated in 1900. as the law No. 38. The bank is a private stock qompany With a capital of 5,000,000 yen, and its president is ap-, pointed b y the Government. The Bank is placed under several restrictions, and the Government exercises strict supervision over the management. The privileges granted, to the Bank consist in the Government taking up i,,000,000, yen of its capital, for which no dividend is claimed for five years; the authorization to issue notes against the. guaranteed reserve to the amount of 5,000,000 yen free of tax, and in the loan from the Government o f 2,000,090, yen without interest for five years, to be used as a reserve, against the issuing of notes. The purpose of the estab lishment of. the Bank was to reform the currency system of Formosa, to facilitate the receipts and disbursements, of the treasury, to develop the working of the process of exchange, and to facilitate the investment and subscrip tion for the Formosa public-works bonds. In the colonial policy of Japan the adjustment of finance is of prime importance, and it was at first thought that it could be carried out by intrusting the work to the Bank of Japan or to the Yokohama Specie Bank, but Formosa being a new territory, where special conditions prevail, it was thought better to establish a special institution. The result was the establishment of the Bank of Taiwan. The Hokkaido Colonial Bank was established as a jointstock company, with a capital of 5,000,000 yen, in 1899. The Government has an official attached to the bank, and exercises strict supervision. The object of the bank is tq supply the capital necessary for colonizing and develop ing the Hokkaido, by making long-term loans on the Security of immovable property, payable in anpual instal? 7 ' ■.- 4 > 7 Q M— MONO. RED. i ,biJk i%. »i, ments. The bank can also make other loans and issue drafts on commercial commodities. The Hokkaido being still undeveloped in agriculture and other industries, and being placed under conditions different from other parts of the Empire, it had been deemed necessary to establish this bank in place of the Agricultural and Industrial Bank, in order to meet the special requirements of the island. The system and^working of different kinds of banks in Japan, and reasons for adopting the systems, are as briefly stated above. The appended table shows the number, the amount of capital, etc., of those banks. It is based on actual conditions prevailing in December, 1907: 00 <* mO o fc S O ? « i * 2**. *S fc5 ji- „ . S •I * , C v v s §I y H H M sQ m M M 00 O O O • t £ 06 1&T33 O8, B O O IO « 0 IT ) **> O in n N o> OOO OOO OOO oo o* * I § I! Is < X * 0 r+ i 0 o> 0 0 0 0 0 0 0 M X fO X M 8 N X o> w N X ^ 0 n X n oO * 9 « oo O O l' N>b O O O o> »r «n O bm«n v) 9 10 vi n «« o 8O O o O O V) <0 o t O O O O O 0 O O O ««•> OO OO O O »» 00 «o O O 00 00 O' O O v) <0 <0 vi » 1 I I I m * RED. i 8 Q M— MONO. BARON SAKATANI, Ex-Minister of Finance, on THE BAN KING SYSTEM OF JA PA N . F* Baron Sakatani, who was for years Vice-Minister and Minister of Finance in Japan, and who possibly knows more of the detail of Japanese high finance than any other man in the country, regards the Central Banking System of Japan as at least approaching perfection. He admits, however, that there are some faults that might be eradi cated and is anxious to see the result of the consideration of the question by the Monetary Commission in America. Baron Sakatani during his recent visit to America, Eng land, and Europe went closely into this question of central banking systems. He believes that such a system is ab solutely essential to America, and has been watching with deep interest the various phases of the controversy within the last six or seven years. One of the faults found by Baron Sakatani in the pres ent system of Japan is that of the method of taxation of the bank. Of course the Bank of Japan is essentially a bank of issue, and at times is called upon to issue large sums of money in paper. The present system of taxation calls for a payment upon the entire amount of issue. This, Baron Sakatani thinks, is a serious drawback and is not a fair treatment of the bank itself. He points out that the Government being as a matter of fact a partner in the bank it is only entitled to a tax upon the profits made by the bank and not to impose a tax upon the bulk issue. Baron Sakatani says that this being in vogue in Germany And generally on the Continent, it is the first change that ought to be made in the present system of the Bank of Japan. There are, he says, a number of other amendments to be made, but in a general way he believes the present System of central banking in Japan is above all things excellent, and he is not advocating any immediate changes except that of taxation. In discussing the Yokohama Specie Bank, Baron* Sakatani points out that this bank, while being a tremen dously useful organization, is now getting away from its original object and is becoming somewhat an object of wrath on the part of other bankers, who claim that the Yokohama Specie Bank, originally established for the purpose of dealing only with foreign business, is now doing business in the interior, and so interfering (with the gov ernment support) with the legitimate business of other banks. On the other hand, foreign banks in Japan charge that it is not equal opportunity for the banking business if the Government enters into oartnershir»jjracHcn11v with a ♦ c Yokohama Specie Bank, originally established for the purpose of dealing only with foreign business, is now doing business in the interior, and so interfering (with the gov ernment support) with the legitimate business of other banks. On the other hand, foreign banks in Japan charge that it is not equal opportunity for the banking business if the Government enters into partnership practically with a bank of enormous power, doing business among foreigners as well as among Japanese. Baron Sakatani believes that the time has come when the Yokohama Specie Bank and the Bank of Japan should become one and the same bank, although he believes that there will be great difficulty in bringing such a thing about in view of the tradition sur rounding the Yokohama Specie Bank, which is, as it were, a landmark in the history of Japan, standing at the point where Japan opened her doors to foreign business when the necessity for a bank to handle those interests arose. Baron Sakatani submits the following paper on the general subject of banking in Japan: BARON SAKATANI’S VIEWS. The'banking system in Japan was at first modeled after the national - bank system of the United States. The banking regulations promulgated in 1872 very faithfully followed the American system, so that the regulations were almost a translation into Japanese of the American regulations. As it was found, however, that the above system did not work well on account of its being unsuit able to national conditions, the regulations were amended in 1876 and in 1882, when the central-bank system was adopted. The Bank of Japan was then established, and the national banks, at the expiration of their charter of twenty years, were not allowed to exist as national banks, but such as wished to carry on a banking business became ordinary banks. In 1890 the regulations for ordinary banks and the savings banks were promulgated, but the Bank of Japan, the Yokohama Specie Bank, the Hypothec Bank, the Agricultural and Industrial Banks, the Industrial Bank of Japan , the Bank of Formosa, and the Hokkaido Colonial Bank are placed under special laws, promulgated in ac cordance with their respective characters. The Bank of Japan is modeled after the Central Bank of Belgium, and the regulations concerning the issue of convertible notes were copied from the German system in order to create sufficient elasticity in its practical Operation. y 9 Q M— MONO RED RELATION OF THE BANK OF JAPAN TO OTHER BANKS. The relations of the Government to the ordinary banks are very simple. The Government for the purpose of pro tecting the interests of the creditors exercises supervision over the business of those banks. The Minister of Finance is invested with the authority to give official recognition to their establishment and to inspect at any time the actual state of the Banks’ business. The banks are also obliged to publish periodical balance sheets. The relations between the Government and the Bank of Japan are of a very close character. When the Bank was first established, the Government was a very large shareholder, but the shares were afterwards completely transferred to the Imperial Household Department. The Bank of Japan is responsible for the custody of the Govern ment’s cash and negotiable instruments. It is intrusted with the management of the treasury receipts and dis bursements; the investment of the treasury funds and the management of national bonds are also intrusted to the Bank of Japan. In this respect the Bank is almost a por tion of the Department of Finance, and consequently the work of this department is considerably simplified and facilitated. In consideration of the privilege of being in trusted with the receipts and disbursements of the treas ury the Bank is obliged to transact that business without remuneration, except in special instances. The business of the Bank of Japan is placed under very strict limita tions by law, in order to insure the stability of its business and alsofto prevent the misuse of its influence. The Gov ernment exercises strict supervision over this bank. The governor and the deputy governor of the Bank are appointed by the Government; the directors are also appointed by the Government from among candidates elected by the shareholders; the Government appoints official inspectors from among the officials of the Depart ment of Finance;, these official inspectors have a voice in the directors’ meetings and also in the meetings of the shareholders, but they have no vote in either of those meetings. The Bank of Japan has the privilege of issuing con vertible notes. This is considered the most important function of the Bank. The mode of issuing such notes and the duty to be paid thereon-are governed by very Strict laws. U a J , i& iS iiU si- THE 'YOKOHAMA SPECIE BANK: _ J , The Yokohama Specie Bank, was established. Count Okuma, then Minister- of Finance, advocated the estab lishment of the Bank.- Jap a n ’s national finances were at that time in a very bad shape.- The inconvertible govern ment notes had depreciated,, and specie was withdrawn from the market. In- order- to remedy this state of the money market a bank for transacting business in specie was established, so as to absorb the specie of the country. But this attemnt being fundamentally erroneous and its ♦ ' Okuma, then Minister of Finance, advocated the estab lishment of the Bank.- Ja p a n ’s national finances were at that time in a very bad shape.- The inconvertible govern ment notes had depreciated,, and specie was withdrawn from the market. In- order- to remedy this state of the money market a bank for transacting business in specie was established, so as to absorb the specie of the country. B u t this attempt being fundamentally erroneous, and its method of operation being faulty, the Specie Bank suffered a great loss and was reduced to very great straits. Afterwards, however, great improvements were introduced in the B an k ’s business methods by the efforts of Count Matsukata, when Minister of Finance, and since that time the Bank has recovered from the losses then sustained and is at present in a prosperous state. The directors of the Yokohama Specie Bank are elected by the shareholders and are subject to approval by the Government. The Government appoints official inspectors for the Ban k’s business. The Government was at first a large shareholder of the Bank, but the shares have since been transferred to the Imperial Household Department. The Yokohama Specie Bank has very close relations with the Bank of Japan. The latter therefore exercises Very strict supervision over the business of the former. The law directs the Government to make the deputy governor of the Bank of Japan act as governor of the Yokohama Specie Bank and to make the latter act as director of the Bank of Japan. A t present the deputy governor of the Bank of Japan is also the governor of the Yokohama Specie Bank. The Yokohama Specie Bank is exclusively engaged in foreign exchange for the purpose of facilitating foreign trade and for absorbing specie from abroad. For that purpose the Bank of Japan advances funds to the Yoko hama Specie Bank at a specially low rate, and also redis counts bills at the request of the Specie Bank. The Bank of Japan never engages directly in foreign exchange or in sending money abroad. Government bonds abroad and receipts and disbursements of the treasury funds abroad are managed by the Yokohama Specie Bank un der the supervision of the Bank of Japan. Such funds of the latter as are kept abroad are placed under the man agement of the Specie Bank. I 10 Q M— MONO. RED The Yokohama Specie Bank has not the privilege of issuing notes at home, but its agencies in China and Man churia are authorized by the Japanese Government to issue silver notes payable on demand. The entire banking system of Japan has the Bank of Japan for its center, with ordinary banks and savings banks, as well as the Yokohama Specie Bank, for foreign exchange. For mortgaging immovable property, and es pecially for the benefit of agricultural interests, the Indus trial Bank of Japan and the Banks for Agriculture and Industry were established. For the issue of shares and debentures and for trust business, and especially for in troducing foreign capital into this country, the Hypothec Bank is established. Besides those banks, there are the Bank of Formosa and Hokkaido Bank, which act as finan cial organs for the colonies. Financial negotiations be tween Japan and Korea will be transacted by the newly established Central Bank of Korea. Another system, de veloped to a very high degree of perfection, is that of Postal Savings, distributed throughout the country, for transacting small exchanges, and also for receiving small deposits. The banking system of Japan may be considered perfect at present and adequate to meet the prevailing condition of the country, and the efficiency of the Bank of Japan as the center of the banks of the whole country is very conspicuous. As a matter of fact, however, in spite of the power and authority absolutely vested in the Government to in spect the banks’ business the system for exercising that authority is still imperfect and leaves much to be desired in the way of enforcing that power vested in the authorities. There is another point which calls for improvement, namely, the imperfect and undeveloped condition of the stock exchange of this country. The system is liable to abuse, and consequently a considerable degree of incon venience is felt in mercantile transactions of negotiable instruments, which are so closely rated to financial busi ness in general. Am e n d m e n t s A M . J| 4JJ l i d d d &M d 4 p r o p o sed b y b a r o n s a k a t a n i. Regarding the present system of the Bank of Japan as the central bank, I propose the following three amend ments : i1. The augmentation of its capital. The present capital of the b an k is 30 ,0 0 0 ,0 0 0 yen. This capital was de cided on fourteen years ago. Japan's commerce and industry have since developed very rapidly, dnd the financial expansion has been correspond ingly great. Government bonds and treasury funds have increased several times over. More over, by the alteration of the currency system the original r yen now corresponds to 2 yen, so that this fact necessitates at least the doubling of the amount of the capital of the bank. 2 . The extension of the limit placed on the note-issuing % ft 1 £ SI „j 2. |fl. and industry have since developed very rapidly, and the financial expansion has been correspond ingly great. Government bonds and treasury funds have increased several times over. More over, by the alteration of the currency system the original i yen now corresponds to 2 yen, so that this fact necessitates at least the doubling of the amount of the capital of the bank. The extension of the limit placed on the note-issuing capacity of the bank against the security reserve. According to the present law, the amount of notes to be issued by the Bank of Japan without specie reserve, but against commercial bills and national bonds (which are classed as security reserve), is ' limited to 120,000,000 yen. This regulation is ten years old, and the present condition calls for an extension on the same grounds as stated in the preceding paragraph. It would be proper to in crease the sum to 150,000,000 yen. Alteration of the amount of the tax to be paid by the bank for the notes issued. According to the present law, the bank has^to pay a tax corresponding to 12/1,000 per annum of the average amount of the notes issued every month against the secur ity reserve, and in the case of being permitted by the Gov*ernment to issue notes beyond the maximum amount, the bank has to pay a tax at the rate of not less than 5 per cent per annum. Of the above two kinds of taxes to be paid by the bank that one which is levied on account of the issue of notes beyond the maximum amount requires no alteration, for this provision induces the bank to withdraw the issue as soon as possible, but with respect to the other the obliga tion o f paying the tax is apt to more or less obstruct the efficiency of the bank’s operations. It would be better to rescind this regulation and replace it with an arrangement whereby the bank on realizing an excess of profit over a certain fixed rate should be made to pay a certain amount to the Government. Such a method would be quite a proper one in taxing a privileged juridical person like the Bank of Japan. s* RED IT QM — MONO. CERTAIN COMPARISONS MADE. The system followed in the Bank of Japan having been modeled after the system in vogue on the European continent, as already stated, there is no very great differ ence from the European system in its operation concerning the issue of convertible notes, the maintenance of specie reserve, the method of absorbing bullion and the adjust ment of the rate of interest. There are, however, minor differences, according to the peculiar conditions prevalent in each of the countries where a similar system is followed. The Yokohama Specie Bank is an institution peculiar to Japan. When the country was, after a long exclusion, suddenly opened to foreign intercourse fifty years ago, there existed no financial organ for the newly opened foreign trade, and it was for the purpose of creating the necessary medium that the bank was established. Con sequently there is no bank in any other country that could be compared with it. In conclusion, I venture to say that without a central bank I do not see a n y > a y whereby national finances and the economic system can be smoothly developed. I have studied American finance for some years, and have come to the conclusion that the last solution of the prob lem can best be sought in the unification of the system by the issue of convertible notes and the establishment of a central bank. RED. 12 Q M— MONO. A GENERAL SUM M ARY PREPARED ON A CONSENSUS OF OPINION AMONG PRO GRESSIVE BANKERS. A summary of the history of banking in Japan, coupled with what might be considered a consensus of opinion of the most progressive and best informed bankers of Japan , has been prepared especially for this paper by Mr. S. Naruse, who may be classed as among the best financiers of this country. In preparing this paper he brought to his aid the very best practical talent available. The paper he so carefully prepared and so courteously submits is a valuable contribution. It is absolutely free from all possible taint of officialdom, and follows the lines suggested by myself in a number of prepared questions calculated to bring out the points most useful in a study of the efficiency of the existing banking system of Japan. Mr. Naruse wrote as follows: In giving an explanation of our present banking system in Japan, we will begin with the origin and history of the banking business in this country, and elucidate the original laws forming the bases for the present system. There were in operation in feudal days some organs resembling banks, under the names of “ Kwase-Gumi ” (Exchange Company), “ Kwase G oyotashi” (Exchange Contractors), “ K ak e-ya” (Credit House), etc., conducting business connected with the receipts and disbursements ©f the Feudal Government, or acting as financial agents for feudal lords, as well as giving pecuniary assistance to business men. But the advent of real banking business in Japan is with the promulgation of the national-bank regulation in November, the 5th year of Meiji (1872). The National Bank Regulations were based mainly ujkffi the National Bank Act of the United States of America. The regulations, in their original form, pro vided that the national banks should deposit with the Government paper equal to 60 per cent of their capital, for which amount the Government gave the Kinsatsu (paper money, or, literally, gold notes) exchange bonds, bn the security of which bank notes to the same amount were to be issued. A specie reserve equal in amount to 40 per cent of their capital was to be, on the other hand, provided for the conversion of these bank notes. B y this means the Government aimed at a speedy withdrawal of inconvertible notes and at giving satisfaction to the Monetary world. In those days there was no difference in value between paper and specie, and the system worked well and smoothly, . The conditions, however, became changed, when with the 7th year of Meiji (1874) the evil effects of the over issue of government paper money began to be noticeable, and as a natural result of the increase of the imports of the country there began to take place a greatly increased export of specie. In consequence of this the price of inconvertible notes and at giving satisfaction to the monetary world. In those days there was no difference in value between paper and specie, and the system worked well and smoothly. . The conditions, however, became changed, when with the 7th year of Meiji (1874) the evil effects of the over issue of government paper money began to be noticeable, and as a natural result of the increase of the imports of the country there began to take place a greatly increased export of specie. In consequence of this the price of gold coins daily rose, and the depreciation of paper money rapidly set in. , ^ Govfemffient paper money, in June of the 8th year of M« ji (1875), showed an exchange rate of yen 1,0 17 -1,0 18 for gold yen 1,000. The national banks, having specie re serve for the conversion of paper money according to Regu lations, the demand made upon them for the conversion of notes became exceedingly great. The notes issued were directly returned for conversion, having no time for circu lation, and the banks sustained considerable losses because 6f the necessity for continuing a supply of specie on hand for the purposes of exchange. They were obliged to use lessly heap up in their vaults the notes that were to be issued for circulation, and one of the four banks then ex isting had not been able to issue a note since its opening bf business. Such being the case, the specie reserves in the banks almost disappeared and paper money was gradually decreasing in circulation and losing its utility. The business of the banks became difficult, and no one dared to apply for the establishment of a national bank. What the Government at first hoped for was not realized, and it was apparent to everybody that the system of bank notes, convertible with specie, could not permanently be maintained. 1. * j { • • . A t this time the Government determined to apply the Hereditary Pension Bonds (by way of reforming the Han (Clan) system as a result of the restoration) to the Kwa2oku (Noble) and the Shizoku (Gentry or Samurai) for their hereditary pensions or their pensions for merit. In consequence, the issue of government loan bonds amountmt to yen 174,000,000 was necessitated. In order, there fore, to create a demand for these bonds, and also to stimulate the establishment of the national banks, the National Bank Regulations were revised in August, the 9th year of Meiji (1876), chiefly to the effect that bank notes should be issued by the banks to the same amount 13 Q M— MONO. RED. ' -/ \**. of and on the security of government loan bonds of over 4 per cent interest, deposited to an amount equal to 80 per cent of their capital, and that a currency reserve for the conversion should be provided to the extent of 20 per cent of the capital, or a quarter of the actual amount of issue. But this currency reserve meant in reality the government paper money, to which the bank notes be came convertible. By this revision the convertibility of the bank notes with gold was changed to their converti bility with currency. The bank notes thus becoming inconvertible notes, and the conditions of things being thus changed, the establishment of the national banks was greatly encouraged, and in a few years their number increased to 150. There was still a tendency to a further increase of the number, but the Government, seeing that if further establishments were granted the inevitable result would be the expansion of inconvertible notes and the evils thereanent would be disastrous, issued ’special Regulations, by which the Government was enabled to refuse the establishment of or restrict the number of national banks, and when they numbered in all 153 no more establishments were granted. On the other hand, there remained in circulation gov ernment paper money to the amount of over 100,000,000 yen, besides the national-bank notes of inconvertible character issued recently owing to the revision of the national-bank regulations. The difference between paper and specie became greater and greater. Prices rose and bonds depreciated in consequence of the depre ciation of paper. Both the Government and the people began to criticise the circulation of the inconvertible notes, as well as the bank notes. The Government now realized that there was nothing of greater importance in the country’s financial policy than the adjustment of paper currency, and felt the necessity of establishing a central bank, which should have the sole privilege of issuing convertible bank notes for the unification of the currency system. Consequently the Bank of Japan was created. Central banks in other countries vary one from another in their organization, but they are all alike in the point of serving as supreme organs for the regulation of the monetary circulation of the countries in which they are established. In introducing into this country the cen tral-bank system the Government studied the systems in Europe and America, and finally decided to adopt the system of the Central Bank of Belgium. It is needless to say that at the same time the Government fully con sidered the particular conditions prevailing in this coun try in framing the new central bank system in Japan after the system prevailing in western lands. Thus in June, the 15th year of Meiji (1882), the regulations concerning the Bank of Japan were issued, and the foundation of the Bank of Japan followed immediately. In May, the 17th year of Meiji (1884), the convertible bank-note regu lations were also issued. The circulation of the Bank of Japan convertible notes gradually increased, and the withdrawal of the govern ment paper money and the national-bank notes was simultaneously carried out. Although in July, the 21st try in framing the new central hank system in Japan after the system prevailing in western lands. Thus in June, the 15th year of Meiji (1882), the regulations concerning the Bank of Japan were issued, and the foundation of the Bank of Japan followed immediately. In May, the 17th year of Meiji (1884), the convertible bank-note regu lations were also issued. The circulation of the Bank of Japan convertible notes gradually increased, and the withdrawal of the govern ment paper money and the national-bank notes was simultaneously carried out. Although in Ju ly, the 21st year of Meiji (1888), some amendments were introduced into the convertible bank-note regulations, and other re visions followed several times afterwards, it must be noted that at this time the foundation of the present cur rency system of Japan was fixed. The following is a gist of the present Bank of Japan convertible note regulations: . The Bank of Japan shall keep gold or silver coins, or bullion of those metals, as a conversion reserve, equal in amount to the convertible bank notes issued. The amount of silver coin and silver bullion shall not exceed one-quarter of the whole amount of conversion reserve. The Bank of Japan may, outside the provisions of the preceding paragraph, further issue convertible bank notes, on the security of government bonds or treasury bills, or other bonds and commercial bills of a reliable nature, within the limit of 120,000,000 yen; of this amount, how ever, 27,000,000 yen shall be set apart to be issued after the first day of January, the 22d year of Meiji (1889),in in stallments, from time to time, in proportion to the amount of the national bank-notes redeemed. The Bank of Japan may, outside the provisions of the two preceding paragraphs, make still further an increase of convertible bank notes, in order to meet special emer gencies of the market, and with the special permission of the Minister of Finance, on the security of government bonds or treasury bills, or other bonds or commercial bills of a reliable nature. The notes shall be subject to a special tax of not less than 5 per cent per annum, the rate of interest to be fixed in each case by the Minister of Finance. i % J9 14 Q M— MONO. RED The Bank of Japan shall supply by way of loan not more than 22,000,000 yen to the Government, without interest, for the purpose of redeeming the government paper money. The period of time within which this loan shall be repaid by the Government and the rate of annual in stallment shall be fixed by the Minister of Finance. Now that the business organization of the Bank of Japan was complete, the national-bank regulations were revised to the effect that their term of business should expire at the end of twenty years, and that if they desired to con tinue their business thereafter they might only do so by becoming private banks. At the same time the rules for redeeming the national-bank notes were laid down and put into operation. At the expiration of their term of busi ness most of the national banks were reorganized and have continued their business till this day purely as pri vate commercial banks, acting as organs of general trade, in accordance with the bank regulations promulgated in August, the 23d year of Meiji (1890). The revision of the National Bank Regulations in the ninth year of Meiji (1876), side by side with the issue of the hereditary pension bonds, gave an impetus to the establishment of banks, and in about the twelfth year of Meiji (1879) the financial organs of the country for domestic purposes were nearly complete, but for foreign trade purposes there existed only two or three branches or agencies of foreign banks. At this time the paper money increased in circulation, the difference in value between paper and silver became considerable, and it resulted in the outflow of specie abroad, which brought about a scarcity of gold and silver coins and a consequent distress in commercial and financial circles. In order, therefore, to lay the foundations of the financial welfare of the country, the establishment of an organ for facilitating the monetary market was of paramount impor tance at this time, and in November, the twelfth year of Meiji (1879) the Yokohama Specie Bank was established. It was after the promulgation of the National Bank Regulations that this bank was created, and it was for the time being-controlled by the same Regulations. But, with the gradual expansion of its business, and in order to distinguish it in connection with foreign commercial intercourse from the ordinary banks, the Government issued the Yokohama Specie Bank Regulations in the twentieth year of Meiji (1887), and made the Bank assume a special position of its own. The Bank has since come under government control under the new regulations! and its chief object is to act as a financial organ for foreign tsade. It is now one of the most important figures in the financial world of the country. Seeing that the Central Bank was already founded, with numerous ordinary banks under it scattered all over the country, and that a foreign trade organ, the Yokohama Specie Bank, was also established, it seemed likely that the mechanism for commercial purposes was nearly complete. These provisions, however, viewed from the point of scarcity of capital, were found to be still insufficient, as similar organs were lacking in respect of agriculture and industry. The Government, then set » trade. It is now one of the most important figures in the financial world of the country. Seeing that the Central Bank was already founded, with numerous ordinary banks under it scattered all over the country, and that a foreign trade organ, the Yokohama Specie Bank, was also established, it seemed likely that the mechanism for commercial purposes was nearly complete. These provisions, however, viewed from the point of scarcity of capital, were found to be still insufficient, as similar organs were lacking in respect of agriculture and industry. The Government then set about establishing the Hypothec Bank of Japan and the Agricultural and Industrial Banks as monetary organs for agriculture, and of the Industrial Bank of Japan as a monetary organ for industry. These institutions were finally created. The Hypothec Bank of Japan mainly acts as financial medium for agriculture, and was founded after the system of the Credit Foncier de France. Its principal business consists in making long-period loans at low rates of interest on the security of real estate for the purpose of the im provement and development of agriculture and industry. It has as its local organs the Agricultural and Industrial Banks established for the same purpose, and they co operate to provide financial facilities for agriculture and industry, and by this means to enhance the national wealth. To get the funds for loans, these banks are authorized to issue debentures and conduct business under the Government’s special supervision. The Industrial Bank of Japan was founded (its organi zation being chiefly based on that of the Credit Mobilier of France) as a financial organ for industry just as the Hypothec Bank is for agriculture. According to law the limits of its principal business are to make loans on the security of national loan bonds, local loan bonds, or shares of companies, to receive deposits of money and keep custody of goods intrusted for safe-keeping, to undertake a trust business in relation to local loan bonds or the debentures and shares of companies, and to make loans to public bodies organized by law. The bank is thus unable to a certain extent to carry on business similar to that of ordinary banks, but it is endowed with the privilege of issuing debentures to an amount of ten times its capital. The business management of this bank is also under the direct control of the Government. if y 15 QM— MONO. RED 4 Besides the above-named banks there are the Colonial Bank of Hokkaido and the Bank of Taiwan (Formosa), but as these are special organs of colonial nature having little relation to the general economic situation we have omitted to deal with them. To explain first the relation of the Government with the Bank of Japan, we would say that its difference from that of ordinary banks lies in the bank having the privi lege of issuing currency notes, and it is by this privilege that the bank has various dealings with the Government. As already stated, the Bank of Japan was originally created for the purpose of withdrawing government paper money and national-bank notes, changing and unifying these into paper notes having specie reserve. The bank is therefore legally bound to make loans without interest to the Gov ernment to a limit of 22,000,000 yen for the purpose of redeeming the government paper money. It manages without any charge the receipts and the expenditures of the national treasury and transacts all business concerning the national loans. Formerly the receiving of moneys of the national treasury and their disbursement were intrusted to the so-called exchange dealers. These exchange dealers, however, were a group of private individuals, private banks, and national banks, and were considered doubtful as to their capabilities and credit. As the volume of cash receipts and disbursements increased the control of these exchange dealers became objectionable, and in the Bank of Japan act it was specified, in article 13, that the Government might intrust to the Bank of Japan the function of receiving and disbursing state funds. According to the government treasury regulations there are the central, the main, and the branch treasuries. The central treasury is located in Tokyo, the main treasury in each of the municipalities and prefectures and in .Sapporo, Hakodate, and Nemuro, and the branch treasury in various places where the minister of finance deems its location necessary. The branch treasuries are supervised by the main treasuries; the minister of finance exercises superintendence over all the treasuries, and as occasion may require he dispatches officials to any treasury office for the inspection of treasury books. Now this treasury business is managed by the Bank of Japan, and the bank is solely responsible for the custody, receipts, and disbursements of cash. The affairs of the main and branch treasuries in various places are dealt with at the branches or agencies of the Bank of Japan in the respective places. The governor of the Bank of Japan is the cashier of the government treasury, and the heads of the bank’s branches or agencies are his proxies. G n the convertible notes issued by the Bank of Japan on security reserve the Government imposed a tax at the annual rate of 1.25 per cent for the total issue, less the amounts lent to the Government or others without interest or at any annual rate of interest not exceeding 1 per cent. As for the issues in excess of the limits specified by law, a tax is levied at a rate of not less than 5 per cent per annum, fixed by the Minister of Finance at each time of such issue. of the government treasury, and the heads of the bank’s branches or agencies are his proxies. !0 n the convertible notes issued by the Bank of Japan on security reserve the Government imposed a tax at the annual rate of 1.25 per cent for the total issue, less the amounts lent to the Government or others without interest or at any annual rate of interest not exceeding 1 per cent. As for the issues in excess of the limits specified by law, a tax is levied at a rate of not less than 5 per cent per annum, fixed by the Minister of Finance at each time of such issue. Among the relations of the Government with the Bank of Japan, those specified by the Bank’s act are as follows: (1) Any person desiring to become a shareholder of the Bank of Japan shall obtain the permission of the Minister of Finance. (Art. 6 of the act.) (2) For the purpose of buying or selling government bonds the Bank shall obtain the permission of the Minister of Finance. (Art. 16 of the act.) (3) The governor and vice-governor of the Bank of Japan shall be appointed by the Government. The directors of the Bank shall be selected by the share holders of the Bank at their general meeting and shall be approved and appointed by the Minister of Finance. (Arts. 18 and 19 of the act.) (4) In making advances in current accounts or loans for a fixed period the Bank of Japan shall obtain the sanction of the Minister of Finance as to the amount of such advances and loans and the rates of interest to be charged. (Item C of Art. II of the act.) (5) The Government superintends all the business of the Bank of Japan and restricts or forbids the acts of the Bank not conforming to the Bank’s act or arti cles of association or contrary to the interests of the Government. (Art. 24 of the act.) The Yokohama Specie Bank is not directly endowed with any privilege by the Government, but has the con cession of getting a loan of 20,000,000 yen at the low inter est of 2 per cent from the Bank of Japan and utilizing the same for the foreign exchange funds. Although this is a connection of the Bank with the Bank of Japan, it should properly be noted that this special arrangement was brought about by the Government’s aid only. The Bank is charged, on the other hand, with the duty of handling, by the Government’s order, matters concerning the gov ernment loans and moneys in connection with foreign s 9 16 Q M— MONO. RED. countries. Thus the Yokohama Specie Bank’s connection with the Government is less than that of the Bank of Japan, but it is under the control of the Minister of Finance, whose approval or supervision is necessary in all the busi ness matters of the Bank, as well as in the appointment of its directors. Let us now dwell upon the relations between the Bank of Japan and the ordinary banks. It goes without saying that the business of ordinary banks consists principally in handling their own capital and the deposits of the public, but in case of further need of capital they approach the Bank of Japan for the discounting of commercial bills or loans on security. The Bank of Japan has made it a principle since its establishment to aid the ordinary banks, and there exists a considerable gulf between the rate of interest of the Bank and that of ordinary banks—that is, the discount rate of the Bank of Japan is, as a rule, much lower than that of the ordinary banks. The unavoidable result of it was that some banks, taking advantage of this difference, made it their chief business to earn the amount of difference for themselves by becoming intermediaries between private individuals and the Bank of Japan. We must here observe that the relations between ohr Central Bank and our ordinary banks differ greatly from those in foreign countries, especially from those in England, Ger many, or France. This difference lies in the special cir cumstances under which the Bank of Japan was first established, and this state of things has influenced the general banking system of this country not a little. The business methods of the Bank of Japan always tend to affect those of the ordinary banks. For instance, if, under Government’s financial condition, the capital of the Bank of Japan becomes tight, the money market will soon be affected thereby. Thanks, however, to the steady growth of this country’s economic conditions, the system adopted at the earlier stages by ordinary banks of making profit by the difference of interest is gradually disappearing. In considering the advantages and disadvantages of the banking system in this country, we shall study the two following questions: (1) Whether there should be special banks respectively fpr agriculture, industry, and commerce, or whether one bank should act for all three lines. (2) Whether the banks should be separately and inde pendently established, or whether the branch sys tem should be adopted. In England and America one bank performs the finan cial functions for agriculture, industry, and commerce, but on the Continent of Europe there are special monetary organs for each of the three branches. To arrive at a con clusion as to which of the two systems is superior to the other, we shall discuss the different ways in which the capital is utilized in the three cases. The following are the three points in which the nature of the capital varies in .England and America one bank perform* ute tinan* pial functions for agriculture, industry, and commerce, but on the Continent of Europe there are special monetary organs for each of the three branches. To arrive at a conplusion as to which of the two systems is superior to the other, we shall discuss the different ways in which the capital is utilized in the three cases. The following are the three points in which the nature of the capital varies in the three lines: (1) In the period of redemption, capital has the quickest return in commerce. The money invested is brought back immediately by the disposal of the merchandise, and again used for other goods, the term of credit not being in consequence neces sarily long. In industry the capital becomes fixed in machineries, factories, etc., but the money invested in raw materials is restored as soon as the materials are manufactured and sold. On the other hand, the capital for agricultural purposes is all spent on land, implements, etc., and becomes fixed, except a small portion spent on fertilizers, seeds, labor, etc. The return of capital is slowest in agriculture, it being effected only little by little annually. (2) Regarding the certainty of redemption, the capital invested in commerce is only influenced by arti ficial market fluctuations, which govern the busi ness profits, while agricultural pursuits are af fected by natural causes, uncontrollable by human energies, and the return of capital in agriculture can not be insured. (3) As regards the renewal of capital, agricultural pur suits, unlike the other two lines, require little, the period in which the capital becomes fixed being long, unless the land purchased meets with some catastrophe. In industry, renewal is necessary to J a certain extent on account of the wearing out of plants and buildings and of the sale of the articles of manufacture. In commerce the capital fixing term is shortest, and with the sale of goods the renewal will be necessitated. As the operations of capital thus vary in the three pursuits, there should accordingly be various kinds of banks for supplying the capital. In Japan we have as mercantile banks the ordinary banks with the Bank of Japan as their center; as industrial bank, the Industrial Bank of Japan; as agricultural bank, the Hypothec Bank of Japan. We believe in this respect that our system of monetary organs is perfect. ^ 17 Q M— MONO. With regard to the single and branch systent of banks there are different circumstances in different countries under which the banks have grown. In some countries there are numerous independent banks, and in others a few large banks have branches under them. For instance, the United States of America belong to the former and Scotland to the latter. The advantages and disadvantages of both systems can not be easily ascertained, but, endeav* oring to reach an unbiased judgment, we may say that in the branch system the advantages are more numerous than the disadvantages. Let us try to enumerate the advantages of the branch system : (1) By the branch system the efficiency of capital may be augmented; the kinds of capital may be aug« mented and also may be easily altered, Hasty change in the rate of interest may consequently be avoided and elasticity in business management may be secured. (2) The utility of the banking system may be extended to remote parts of the country. (3) Rash competition among banks does not take place, (4) Reliable and timely reports on economic conditions are obtainable from various districts. (5) Economization of business expenses is made possible. The above are the advantageous points of the branch system, and the following may be stated as the disad vantages in adopting the same system: (1) The controlling of the] branches is a matter of great difficulty. (2) The failure of one branch may work a change on the main bank as well as in the other branches. The advantages of the branch system as above pointed out are mainly those that are positively beneficial to the public interests, and the disadvantages are rather evils that may be avoided if proper care is exercised. In the banking system of this country, independent banks of small means are spread over the country, owing to circumstances special to the country, many of them being bequeathed by the old national-bank system. Men of experience in the country early urged the necessity of amalgamating banks, and a special law known as the Law for the Amalgamation of Banks has been issued. The number of the branches of banks has recently in creased, but we are not yet at the stage of the perfect branch system. We have so far gone over the general features in our banking system, and we shall now go on to treat of our central bank system. Our Central Bank, the Bank of Japan, is the only organ in the country for issuing paper notes, and is based on so-called centralization system of issue. « ** In the note-issuing bank system there are two systems— centralization and separation. To see which is superior to the other, we will here enumerate the different points in the former that are positively beneficial to the interests of the financial as well as to the political world. Viewed from the financial point, the centralization system is superior in the following respects: (1) A country has at times to make large payments in soecie to foreign ''o u n tries in with tr**^0 /i in the country for issuing paper notes, and is based on the so-called centralization system of issue. > In the note-issuing bank system there are two systems— centralization and separation. To see which is superior to the other, we will here enumerate the different points in the former that are positively beneficial to the interests of the financial as well as to the political world. Viewed from the financial point, the centralization system is superior in the following respects: (1) A country has at times to make large payments in specie to foreign countries in connection with trade or loans raised. In such cases, if the separation system is adopted, the specie reserves in different banks are collected, thereby affecting the money market in the same way as an outflow of specie would affect it. If the Central Bank system is adopted, and the specie reserve remains concen trated from time to time to provide for such emergencies, the effects will be minimized, (2) In the centralization system, the Central Bank has the power of influencing the other banks, and can readily accumulate the specie reserve by means of discounts, the elasticity of currencies being thus amply secured. (3) As the Central Bank handles immense capital, it has real power to supply capital, and its responsibility for the money market is unique, as it clearly stands as a public organ. If a panic sets in, the Central Bank will be able to restore order much more easily and more firmly than in the case where banks with little credit abound. Viewed from political and economic points, the central ization system is also superior in the following respects; (4) If the Central Bank carries on its business as the central organ in the market and continues to re ceive the public credit, the Government will be enabled in time of serious emergencies to meet its own requirements by borrowing the funds the Central Bank collects on its own credit. (5) As a country’s finances expand the receipts and dis bursements of the national treasury will surely have a most important effect on the monetary circle of the country, and if the Government makes the national treasury the custodian of taxes col lected and all the other revenue and continues to do so without moving them till their due dates of disbursements, it will, as a matter of course, greatly hinder the circulation of capital. In the separation system of banks, the above course of things may become unavoidable, but under the centralization system there is the reliable Central Bank, to whom the Government intrusts the national treasury receipts and disbursements, and the bank may utilize in the market the receipts till their due dates of disbursements, and the bad effects on the markets of the accumulation of receipt§ in the national treasury will be thereby minimized. 18 Q M— MONO. RED. The above are the general advantages attending the hank centralization system, and as our Bank of Japan is endowed under this system with the privilege of issuing paper notes, it may be said that our authorities have also left no stone unturned in this direction. As the Central Bank is the only bank privileged to issue notes, it is but natural that the Government should inter vene in the business management and the appointment of the governor, directors, etc., of the bank. Loans and discounts are the two lines to which the Cen tral Bank attaches special importance, as ordinary banks do. These form the chief source of profit for the Bank, and although if the Government interferes with the Bank’s business it may inconvenience the bank, still it must be noted that it is only proper for the Government to do so, as the bills, bonds, etc., received by the Bank in making loans and discounts constitute a part of the reserve fund for convertible notes. As the credit of convertible notes is secured and established by the regulations for issuing bank notes, the Government must control the selection of bills, bonds, etc., to be received, and direct the business of the bank and control the nomination of its staff. We shall now further touch upon our methods of issuing convertible bank notes. In the convertible note regula tions of our Central Bank the principle followed is to pro vide the full amount of specie reserve, a fixed amount of issue being also allowed against securities, and in case of further necessity of issue, an excess issue is allowed on the condition of paying a tax at a rate of not less than 5 per cent per annum. This is what is called the elastic limita tion mode of issuing, and much resembles the German mode, on which it was originally modeled. But the point in which our mode excels over all others is that the per centage of the tax imposed for excess issue is on each oc casion fixed by the Minister of Finance according to the circumstances then prevailing. The object of taxing ex cess issue is to check the over-issue in meeting the urgent requirements of the time when the money market becomes tight and the rate of interest tends to rise. If, therefore, a fixed rate is levied, and if the rate is too low, the excess issue will even be made at ordinary times, and if the rate is too high the excess issue will only be made after the ab normal rise of interest, and the proper time of making ex cess issue will be missed. The rate of the tax should not therefore be a fixed one, but should be, as in our own case, buoyant and changeable according to the needs of the time. In the German system commercial bills only are avail able for the reserve, but in our system the government bonds, treasury bonds, or other bonds of reliable nature are used for the purpose, besides commercial bills. E x perience having shown the uncertainty of refunding public loans in critical moments, the exclusive adoption of com mercial bills may be the proper measure to be taken; but here in this country, where commercial transactions are not yet fully developed and the supply of bills is insufficient, the use of public bonds as reserves can not for the time ^ _____ ’ T .- ' In the German system commercial bills only are avail able for the reserve, but in our system the government bonds, treasury bonds, or other bonds of reliable nature are used for the purpose, besides commercial bills. E x perience having shown the uncertainty of refunding public loans in critical moments, the exclusive adoption of com mercial bills may be the proper measure to be taken; but here in this country, where commercial transactions are not yet fully developed and the supply of bills is insufficient, the use of public bonds as reserves can not for the time being be totally excluded. Considering all points here explained, our banking sys tem may be said to be nearly perfect in the main, though in its details there is room for revision. However, we are still backward in our banking achievements as compared with those of Europe and America. This is to be attrib uted to the fact that our banking system is only a little over thirty years old, and the time is not ripe yet for its development, and that our commerce and industry in general, though they have made gigantic strides, can not yet vie with those in western, lands. We shall now recapitulate the system, administration, and business of our Central Bank, comparing them with those of the central banks in foreign countries, especially in England, France, and Germany. In issuing notes the Bank of Japan may do so on the security of government bonds, treasury bills, commercial bills, etc., to a limited amount, besides issuing convertible notes with specie reserve; further, if the market wants more currency for circulation,, the Bank is also enabled to issue notes with securities, provided the Government per mits it, and a tax of 5 per cent or over per annum is paid. In the case of the Bank of England the issue with specie reserve and the limited issue with security reserve only are permissible, and the excess issue as in our system is not allowed. It is customary in the Bank of England for its issuing department to have always the security reserve to its full amount, and the notes are issued to their full amount, which always remains without any increase or decrease, and the elasticity of notes is maintained by virtue of the deposit reserve in its business department. If a large amount of specie is required owing to a special market con dition, the influx of specie is invited by means of a move ment in the interest rates. 19 Q M— MONO. RED The system of our Central Bank is very much like that of the Imperial Bank of Germany. While in our system the providing of full amount specie reserve is the principle, the proportional reserve system of providing specie to the minimum amount of one-third of the amount of con vertible notes issued is to a certain extent adopted in the case of the German bank; and whereas the minimum rate of tax on excess issue is 5 per cent in ours, the rate being fixed by our Minister of Finance on each occasion, the same is fixed at 5 per cent per annum all around in the German bank. The Bank of France differs totally in principle from the Central Bank of Japan, Germany, or England. In France the maximum emission system of notes is followed, and the maximum amount of notes to be emitted is fixed. The kinds and amounts of conversion reserve are left entirely to the discretion of the note-emitting bank, there being no legal restrictions on same. As. to the administration of central banks, they are in every country under the strict and careful supervision of the respective governments. In the scheme of electing and appointing the principal officials, the Bank of Japan closely resembles the Bank of France. In both cases the nomination of the governor and vice-governor is made by the Government, the directors and officials under them being elected by the shareholders, and the discount com mittee for examining the bills to be discounted is elected from among the stockholders. The points of detail in which they differ from each other are that where there are one governor and two vice-governors in the Bank of France, the former being elected from among the stock holders holding 100 shares or over, and the latter from among those holding 50 shares or over, there are in our Bank one governor and one vice-governor, nominated exclusively by the Government, and only the directors and the officials under them are chosen from among the share holders and appointed by the Government. In our sys tem there is also a special provision for making the mem bers of the discount committee discharge the duties of the comptrollers. In the Imperial Bank of Germany the organization is like that of a government office, the or ganization being very rigorously drawn up. Its business management is supervised by the inspection board, the chairman of which is the state premier, and has four coun cillors, one of which is appointed by Imperial nomination, the other three being nominated by the Bundesrat, or Federal Council. The administrative board, under the control of the state premier, manages the business of the Bank, the state premier directing the] business, and the Bank in dealing with the public is represented by this board, consisting of a president and a few directors, whose decisions, made by a majority and approved by the state premier, are carried into practice. The president and directors of the administrative board are chosen by the Bundesrat and appointed by Imperial nomination. In the Imperial Bank of Germany the shareholders have only to elect a committee consisting of fifteen share holders, who express the opinions of the shareholders X' C U C I cil UAAWAA. A i*v control of the state premier, manages the business of the Bank, the state premier directing thej business, and the Bank in dealing with the public is represented by this board, consisting of a president and a few directors, whose decisions, made by a majority and approved by the state premier, are carried into practice. The president and directors of the administrative board are chosen by the Bundesrat and appointed by Imperial nomination. In the Imperial Bank of Germany the shareholders have only to elect a committee consisting of fifteen share holders, who express the opinions of the shareholders regarding the Bank’s business for the administrators’ ref erence. In the Bank of England a court of directors con sists of the governor, deputy governor, and twenty-four directors, all being elected from among the stockholders, but the governors from among the directors. According to the custom of the Bank of England, the governor consults with the cashiers of the bank regarding the management of the affairs of the bank. The cashiers are appointed and organized by one who was formerly the governor or deputy governor, or who is in position to succeed to either of the two positions. As regards the particulars of the management of the affairs of the central bank in this country and that in foreign countries, we can not here make detailed compari sons; still in all countries the central bank serves as the supreme organ in the money market and the center of the financial operations of the country, also as a medium for developing the country’s commerce and industry, and thus the principal object of a central bank is the same in every country. The kinds of business transacted by the central banks in different countries are as follows: THE BANK OF JAPAN. Discounting or purchasing of bills; buying and selling of gold and silver bullion; receiving deposits of all kinds; accepting the custody of coins and documents; making advances in current account or loans for a fixed period on the security of government bonds, treasury bills, or other bonds guaranteed by the Government. The bills dis counted by the Bank of Japan shall be such as are in dorsed by two or more persons and payable within one hundred days; provided that goods or warehouse certifi cates for the goods have been surrendered as security, the bank may discount bills carrying only one indorsement. 20 QM— MONO. THE BANK OF ENGLAND. Buying and selling of specie, bullion, and bills of ex change; discounting of bills; receiving deposits; and mak ing loans on securities. THE BANK OF FRANCE. Discounting of bills payable within three months; re ceiving deposits; accepting the custody of coins, precious metals, and documents; making loans on the security of government bonds and company debentures; issuing of short-term bills. THE IMPERIAL BANK OF GERMANY. Buying and selling of gold and silver bullion and coins; discounting, buying, and selling of bills payable within three months and carrying two or more reliable indorse ments, and of the debentures issued by juridical persons in the realm or states of Germany and redeemable for face value within three months; making loans with interest for not more than three months and on the security of movables; receiving of deposits. Besides the above, the receipts and disbursements of the national treasury funds and the handling of principal and interest of the national loans are the affairs intrusted to the Central Bank in every country. The kinds of business transacted by the Bank of Japan are as already mentioned, but twenty years ago, when the money market was under straitened circumstances, the discounting of bills with security of company shares was opened in order to facilitate the supply of capital for the company shares; and as the shares of companies of reliable standing are now accepted as securities for bills discounted, the restriction of rejecting the company shares as securities has been practically done away with. With reference to the discount tariff, the Central Banks in England, France, and Germany generally put the official rate at a higher point than the rate of ordinary banks, and if the market becomes tight and the rate of ordinary banks rises above that of the Central Bank owing to the scarcity of funds in the market, then the Central Banks, in these countries, come to the rescue of ordinary banks; but on the contrary, the Bank of Japan keeps the rate at a low point even in ordinary days, and makes it her constant object to prop up the ordinary bank. In regulating the influx and outflow of specie consequent upon international relations the Bank of Japan, the Bank of England, and the Imperial Bank of Germany all take the same steps in fluctuating the dis count rate— a measure which is evidently effectual. The Bank of France alone does not follow the same course and strives to keep a fixed rate. To control the outflow of specie, therefore, the Bank of France charges a certain rate of commission on the conversion of notes to gold. Although this conversion premium seldom exceeds seven or eight thousandths of the amount of conversion, it has J f W4*W ** ““ “*0 -' A Germany all take the same steps in fluctuating the dis count rate— a measure which is evidently effectual. The Bank of France alone does not follow the same course and strives to keep a fixed rate. To control the outflow of specie, therefore, the Bank of France charges a certain rate of commission on the conversion of notes to gold. Although this conversion premium seldom exceeds seven or eight thousandths of the amount of conversion, it has effectually controlled the specie outflow and protected the specie reserve of the Bank of France, lh e measure seems to be one that is necessitated in France owing to the coinage system of that country. The Yokohama Specie Bank is a special bank in this country carrying on business under regulations differing from those for ordinary banks. But the business done by the bank is similar to that of an ordinary bank, except that the bank has as its main object to aid foreign trade. The reason of its being under the Government control under special regulations is only because the bank is privi leged to borrow funds from the Bank of Japan at a low rate of interest for the purpose of facilitating foreign trade, and also because it deals with the government moneys abroad. The Yokohama Specie Bank is not the only bank in Japan engaged in foreign transactions. It transacts business as an ordinary bank as well, and we can not here see our way to specially compare this bank with the large financial organs in foreign countries. It may be sufficient, therefore, to give the essential points of the regulations and tlje articles of association of the Yokohama Specie Bank, as follows: “ The Yokohama Specie Bank shall be a limited asso ciation. The capital of the bank shall be 24,000,000 yen. The shareholders of the bank shall be Japanese subjects only. “ The number of directors shall not be less than five, the number of inspectors shall not be more than three, and they shall be elected at an ordinary general meeting of shareholders from among the shareholders. The election of the directors shall be sanctioned by the Minister of Finance. “ The president and vice-president shall be chosen by the directors from among themselves. Their election shall be sanctioned by the Minister of Finance.” The business of the bank is: The purchase and sale of foreign bills of exchange, credits and documentary; the purchase and sale of inland bills of exchange, credits and documentary; loans; deposits of all kinds, and custodies; discounting and collecting bills of exchange, promissory notes, and other negotiable paper; exchange of coins or moneys; purchase and sale of public bonds, gold and sil ver bullion, and foreign coin. The bank shall, when so ordered by the Government, act in all matters connected with public loans or government moneys in foreign countries, j j j u i . j ™ : . - ■ CITY, YP-' z m s w * ,■’ • I -i l - ’l i . ‘•.on. . H. V reai& no, V i c — C h ^ im a n N a t i o n a l Monetary Commit:3i o n . Dr. A. P. And roar, Ao a i a h in ^ S a cr a * a r y o f th e T r e a s u r y . Mr. a . ? . Duvinori, o f Haw York C i t y . Mr, L u t h e r Drak , F h r c h ^ n t s N a t i o n a l ra n k , Qmah&# Fob. Dr. Jrxrcoa B. Morgan, Plrot. t o n a l bank, Chicago* 1 1 1 . ; r . A. B a r to n H^pbu^n, Cliaoo F&tl. Bank, New York C ity • :' r . C l i f f o r d H u b b ^ ll , B u f f a l o * •’*.>■ York. Mr. 0 . H. K n t t l g * Third Hat. j.om*JL Biiauet S t . Louis* Mo. ?-r. Stod dard J o s s , t?irat M o tio n a l B*nk* Lua A n g e l a s , C a l . xudge J. . Jax 7k t d , 1 on ~j (ferni • <- Amo r i c ><•r; a n k f 3 r.. PanXt in n u e o ta * *:,r . Joaeph A, McCord* T hird -Lux. B&m:* A t l a n t a , d a. •T. C. S tjlteiri t*er*j,>n* P h i l a d e l p h i a , Punna. Dr. P. v . P r i n c e , F i r s t H a t l . lLur * . I n n o a y o l i a , F i n n . Mr# ’Di X i i n or* ' , o f •e-v York C i t y , r. ■o r g e : . n o l d o , Con i n \ 1 no C o r a e r c U u . io n x \v,nk, Chic.vo* Xlx. r. , fi ril Vatlon 1 Hr# JT. f« ■ | ' , P] r ■ ■| . I 1 nk9 8 I n c in i 1, 8» ■, . ■:: ’ . ’; , . r . r r a o o l o 1# l i a f i i W a tlo a a l f i a m t ^ank, B o sto n * Maas. Mr. "..rv . * in S t i on :* .‘fr. * ’•lc*t: . n■ r •• ' " . , York C i t y . Mr. . P. 8 ’inney * ^insfc N a t i o n a l B^nk* Kan»a..= f i t ; , F l a a o u r i . Mr. V« '. ' a ii r li P i President National City Dank, : Y< <•'; C ity. - . P t w r. Paul F. r. r. \ . . t -7 * » r c ' J ' . 1 1 ■. n J » ;■ , -r . I •;■• : , V . e;oburg, New York C i t y . tt r , ’jrat Natl :r , ;■n C 5 ..• , voh-viJ.,,.’ , ' n: . .. Motional Bankt Few Orloanaf La. i? TTTR WI3T0PY ANTI TtfR Pro POSKT) VPTIPP’FNT OF WF. u w m i STATE'S NDTKS. At t h e V'Op^ir^ing o f th e c i v i l war, a l l t h e h o l l a r s in t h e l o y a l S t a t e s c o n s i s t e d o f a b o u t $ 2 5 0 , 0 0 0 , 0 0 0 o f g o l d , and about $ 1 2 0 , 0 0 0 , 0 0 0 o f S t a +o hank n o t e s ; and more th a n h a l f o f t h a t g o l d was th e p r o p e r t y o f t h e ban V s, and was in t h e i r p o s s e s s i o n . At i t s o x i r a s e s s i o n o f J u l y , 1 8 6 1 , C o n g ress p a s s e d laws which a u t h o r i z e d t h e S e c r e t a r y o f th e T rea su ry xo borrow $ 2 ^ 0 , 0 ^ 0 , non, m e n to issu e i n t e r e s t - b e a r i n g b o n d s ; and a l s o $ 5 0 , ^ 0 0 , 0 0 0 in t r e a s u r y n o t e s , o f l e s s d e n o m i n a t i o n s th a n $50. and not. l e s s than $ 1 0 , p a y a b l e on demand, without, i n t e r e s t , leg a l tend er. and n o t In p u r s u a n c e o f t h o s e l a w s , and p r i o r t 0 F e b r u a r y , 1 8 6 2 , t h e S e c r e t a r y o f th e T r e a s u r y i s s u e d a l l t h o s e t r e a s u r y n o t e s ; and he a l s o borrowed $ 1 0 0 , 0 0 0 , 0 0 0 in g o l d f*rom th e banks in. i be p r i n c i p a l c i t i e s upon t h a t amount o f b o n d s , b e a r i n g s e v e n and t h r e e - t e ^ t hs p e r cent in terest; and be a*i s o t r i e d t o b orrow $ 5 o , 0 0 0 , 0 0 0 i n g o l d , bonds b e a r i n g s i x p e r c e n t ed b o n d s , at a d i s c o u n t in terest, on ue d i d n e g o t i a t e th e l a s t iirm ti™ of* o v e r -fen p e r c e n t ; but th e banks which a g r e e d t o ta k e 4hem, d i d net have g o l d e n o u g h , in a d d i t i o n t o the $ 1 0 0 , 0 0 0 , 0 0 0 which t h e y had g iv e n f o r th e f i r s t , b o n d s , t o pay th e $ 4 4 ,6 6 } , 230, i rh 4h e y a g r e e d t o g i v e f o r th e s ec o n d h e r d s ; and t h e r e f o r e t h o s e banks had t o m»ve up 4he d e f i c i e n c y w i t h t r e a s u r y n o t e s , ^whlch had come i n t o t h e i r p o s s e s s i o n in th e c o u r s e o f t h e i r b u s i n e s s , a f t e r b e i n g i s s u e d by th e S e c r e t a r y o f -he T r e a s u r y , government o'! i 1g^4 1 o r s . $44,0'. , i r j ayment o f But as soon a s th e banks had th u s made up th e h e y ^ e f u s e d t o r e c e i v e any more t r e a s u r y n o t e s on d e p o s i t or in payments o f d e b t s du« 4 a +b^ni. The S e c r e t a r y o f th e T rea su ry a l s o t r i e d , p r i o r 4 c February,1 8 6 2 , t o borrow a n o t h e r $ 5 o , no,0 , 0 0 0 o* i n t e r e s t - h e a r i n g b o n d s ; but he f a i l e d t o g e t a r y o f t h o s e bonds t a k e n , b e c a u s e n e i t h e r t h e banks n o r th e p e o p l e in th e l o y a l S t a t e s , had any su ch amount o f g o l d or t r e a s u r y 2 rc+or; l o f t t o l o r d . w a i f o f +h** in *bo c o u r t r y had a l r e a d y ‘boor lo a n e d t o 4 be S e c r e t a r y o f th e T r e a s u r y , by th e b*nbs wl i c h had owned it: er r th a t g o ld had been ^ c a t ^ r e d th r o u g h o u t t h e l o y a l payments f o r s e r v i c e s a re s u y y l i o s ; t h o s e who cv/r.ed f 4p States, in and t h o s e who had r e c e i v e d i t , lik e o t h e r halt* o f ’ the r.old in t h e TTrjted S t a t e s , n ee d e d 4Ve-*v, ai.i.s t r e s s , or 4 c \ a v t*or t h o - r l i v i n g , and t h e r e f o r e c r u l d ? f,,'rrr' +c ''oar if. t o 4he S e c r e t r r y o f the T r e a s u r y . The t r e a s u r y r e f ns had a l s o been d i s p e r s e d through 1he c o u n t r y ; and though sour o f *hom had p a s s e d t.c 4he p o s s e s s i o n h eor l o a n e d +c o f th e b a r b s , most, o f them had a l r e a d y 4-he S e c r e t a r y o f th e T rea su ry toward making uj th e # 4 4 , f i S l , S 3 0 , ard had n e a r l y a l l b een s c a 44e r o d a g a i n , b e f o r e F eb ru a ry 1 i P>&2, i r payv.:en t f o r suy y l i e s statu te an d ^ ervices • o f lo n g s t a r d i n g , which p r o h i b i t e d <h^ S e c r e t a r y o f th e T r e a s u ry r,r c n r e c e i v i n p ; S +a to barb n o t e s etio r v-ay. y in payment f o r b o n d s , And even i f t h a t e+r-tnte bad b e e r r n y o a l e d , ta le r n early h a lf o f m i 1 At t h i s t. inio, t h e r e was a t i e s t a t e barb r o t e s 'f>cr ' 5 n »s o o , 000 in b o n d s; ard n e a r l y a l l or in any it would have in th e l e v e l S t a t e s , to i h o s o S t a t e barb r o t e s were much b m cw p a r , b e c a u s e n e a r l y a l l th e b a r b s i s s u i n g them, bad ^us-fended s p e c i e p a y m en ts, /.f O p heg<i-v Secrc-t a r y o in or in i i e r e n h o r , i « s i . February, IftfiSl, f h e * l 4 4 , f i 6 J ,a.Vi, w h ich th e t h e T rea su ry h*>d harrowed or i n t e r e s t - h e a r i n g h e r d s , t 0- wi+h ‘ ho $*'% don,ooo i r t r e a s u r y n o t e s , w hich th e 1 w o f J u l y , 1 , rn a u 4 ; o n zed him 4 c i s s u e , Fed r e a r l y e l l h ear u s e d in p a y i n g t h e e x p e n s e s o f th e war ard o f th e government Uj t o t h a t t i m e ; and e e e . e o o o f a c c r u e d e x p a n s e s were s t m war exr e n . e s 1 each day. $18 0 , - u n p a id ; ard th e government and p c o c 4 iTn1rg 4 o a c c r u e , at th e r a t e o f n e a r l y £>2 , 00 ,0 , 0 0 0 I t was w e l l u n d e r s t o o d at t h a t t i m e , t h a t ro l a r g e amount money c o u ld he o b t a i n e d in l e s s a l x months by in c r e a s e d , t a x e s ; and tha* no g o l d c o u l d be horowed in F u r o p e , by th e U n i t e d S t a t e s , w i t h w hich <c p r o s e c u t e th e war f o r ♦ s u p p r e s s i o n o f th e r e b e l l i o n . The "’ c s r i n g j ewer o f th e l o y a l S t a t e s h a v in g a l r e a d y b e e n e x h a u s t e d , i t was Fl^ir. t h a t th e s u r p r o s s i c n o f *be r e b e l l i o n w ou ld have t o s t o p , w i t h o u t 1 a vine; mr'.ce a r y m a t e r i a l j r e g r e s s ; u n l e s s a lari-.e amount o f new p a p e r money c o u l d be j . r o v i d e d , t o be p a i d by t h e government t o t h e p e o p l e f o r s e r v i c e s and s u p p l i e s , and t o be p a i d b a ch by th e p e o p l e t o th e g o v e r n ment fo r ' a x e s a m f o r l o r d s . The e x i s t i n g S t a t e bark n o t e s c o u ld not answer t h i s p u r p o s e ; b e c a u s e ' h e r e were not enough o f them t o do t h i s ’ •crk, in a d ~ i + i o n t o a c ‘ in g as i n s t r u m e n t s o f ex c h a n g e among th e p e o p l e t h e m s e l v e s ; and b e c a u s e t h e y were n o t l e g a l t e n d e r , and d i d n o t p o s s e s s - o r much d e s e r v e , th e c o n f i d e n c e o f t h e p e o p l e . And th e p r o s e c u t i o n o f t h e war c o u l d ro+ w a i t t h e y e a r or more, which i t would have taker, t o e s t a b l i s h new or a d d i t i o n a l bank c u r r e n c y , t o an amount s u f f i c i e n t t o do th e n e c e s s a r y e x c h a n g i n g b e t w e e n the government, and th e p e o p l e , a t +he or,ormons r M o o f ces, w m ’ I t o , O n e . , 000 a d a y . Under t h o s e c i r c u m s t a n ♦here was e v i d e n t l y r o way t o s a v e th e u n i o n o f t h e S t a t e s , a t t h e h e g i ' T i n g o f F e b r u a r y , 1 8 6 2 , w i t h o u t t h e i s s u a n c e o f a l a r g e amount o f new p m e r money by 'h o U n i t e d S t a t e s g o v e r n m e n t . nnesM or The o n l y d e b a t a b l e was w h e t h e r th a t p a p e r money s h o u l d be -made l e g a l t e n d e r . q u e s t i o n was a t w o - f o l d s u b j e c t , in t h a t power o f C on gress t o a u t h o r i z e the it in v o lv e d the c o n s t i t u t i o n a l issu a n ce o f U nited S t a t e s l e g a l t e n d e r n o t e s , and i n v o l v e d a l s o the n e c e s s i t y , l e g i ' imncy and e x p e d i e n c y , That or at lea st o f making s u c h n o t e s l e g a l th e e c o n o m ic tender. 'h e q u e s t i o n o f n e c e s s i t y was r e a d i l y a n s w e r a b l e in. t h e a f f i r m a t i v e ; b e c a u s e t h e U n i t e d S t a t e s b a d, w i t h i n s i x m o n th s, t r i e d t h e e x f e r inert o f i s s u i n g U n i t e d S t a t e s n o t e s , p a y a b le on demand, w h ich were r o t Inga", t e n d e r ; -ot and t h a t e x p e r im e n t had shown t h a t su ch n o t e s would c i r c u l a t e as money, e x c e p t among t h e more p a t r i o t i c p o r t i o n s o f t h e r-o p le. *ccordin g i y , O m ,™ « ^ or ” W* t on January 2 9 , m» e c m t t '* , *"« •« « > « - 1 8 6 2 , S e c r e t a r y Chase w r o t e t o Mr. • *- w '- o r o r m k l „ 8 ,.h „ t t | fh s t M . p r o p M (!d „ o t „ ‘ ordpr; h r» c*u se ^h^rr* som e p e r s o n s a^d som^ in stitu tion s which r e f u s e d f o r ^ c ^ iv o a^d pay out t h e t r e a s u r y n c t ^ s o f J u l y , 1861: ^~d b e c a u s e t o omit t o make th e cow r o t e s a 1 <^gal +errtor, would t h e r e f o r e o ] o r a t e *o d e p r e c i a t e them u n n e c e s s a r i l y , and t o d i s c r i m i n a t e again st t h o s e g i v i n g a c o r d i a l s u p p o r t t o th e g o v e r n m e n t, and in f a v o r o f t h o s e who di'- - o t • 4 4rr And th e v i e w s o f S e c r e t a r y Chase on t h i s tjUo s - n e c e s s i t y were f u r t h e r on f o r c e d ur or. ^ o r & r e s s , hy th e o-r ♦v,r> p r i n c i p a l 1 'in ^ ^ ir] au th o rities j n ♦he lo.val N o r th . »v0 ron? i i +*ne o f P u M i c S a f e t y o f th e Cj 4 y o f Now vork; advice Among t h e s e the Cham- x>ors o f Coimerco o f Now ' To r k , P o s t e r , ere: P h i l a d e l p h i a ; and th e Boards o f Trado o f C h ic a g o , S t . L o u i s , C i n c i n n a t i , L o u i s v i l l e , and M ilw a u k e e . A-d no c o g e n t argument a g a i n s t t h e n e c e s s i t y o f making the p r o p o s e d ■Hhited S t a t e s n o t e s 1e g o l TTC U S o of t e n d e r , was made hy any o f t h e s e , s s , who or x osod t h a t m e a su r e . vhf‘ o f c o n s t j f Ut icr.al i t y was e l a b o r a t e l y d e b a t e d in t h e w° Ufl* ariri 1n t b * S e n a t e , when t h e M i l l^ g a l in e i t h e r t e n d e r r o t e s was under g l n n i r g - f •' e h r u a r y , i nfi3. f o r iermine; t h e U n i t e d s t a t e s f ion in C o n g r e s s , about th e h o And A t t o r n e y G e n e r a l R a te s gave s p a u l d i n g Of Rev; v o r h , v;ho was *he a u th o r o f *hat >m , opinion, i n f a v o r o f t h a t e o n s t i t i i f i o r a l i t y . t o Mr. an u n o f f i c i a l The A t t o r n e y G eneral s a i d +,’R+ M’f' r o r s M i , , M r p * oe>« r c t o x j r e s s T y y e r r . i t or p r o h i b i t , e i t h e r the issu a n c e o f U nited S t a t e s r o t e s , everyb ody. a g r e e d + h a f Of TTni +ed S t a t e s - o t e s ; or maMng them l e g a l consM *u tion i m p l i e d l y p e r m i t s th e i s s u a n c e and t h a t , in h i s T u r r i t s w r ing t h o s e n o t e s l e g a l tender. oy i n i o n , grant the was made by Mr. P e n d l e n, mrd nj or. th e f a c t th a t .0 ™ -r » ! » m a ls o im p lied ly b a s e d h i s argumeM u; on th e a b s e n c e o f an e x p r e s s i Vp Cf •Tr, t* it The l e a d i n g s p e e c h m - e u a o a g a i n s t +he c o n s t 1 * . . ♦ ! onal i t y o f th e M U ton o f o M o . ten d er, hut th a t < M ♦ of | w « r to omit n i l . th e c o n s t i t u t i o n a l ln sort tlv, c o n B t I f u . of croait: orfl u, on lh» 5 f*ct +h*.t Webster sni^i in a spn^ch in 3832, +hpt Congress has no power -•o maVo arythirg hut g o M ar<i silver a lor^i t*act •*Va4- vo American staffs man had the cors* i+ut jon v;aR rdo)tod, rnor: and upon the corf or nod, at ary f j.mo since to the contrary of V/ehater's opinion. -Ar d th e o t h e r oj p o n e n t s o f t h o c o n s t i t u t i o n a l i t y o f th e h i n , in b o t h ,Tcn.°op o f C o r p r e p s , t och subs* a>■* «a l l v t h e same g r o u n d s . Those who arpaied in f a v o r o f th e c o n s t i t u t i o n a l i t y o f th e 1 i n v'nro m M nfv i t s author, v r . S p a u l d in g o f Now vcri<, v r . Pirgham o f Ohio, evd r'r. S t o v e r s o f P e n n s y l v a n i a , in th e u o u s e ; a^d v r . Sherman o f Ohio. Surrror o f t ^ a s s a c h u s e t t s , and v r . tt0w rd o f M ichigan in the S e n a t e . There g e n tle m e n 4 0 0 b t h e ground, t h a t th e a h a e rCe o f ar e x . r e s s g r a n t in t h e c o n s 4 i-fut ion i s n o t c o n c l u s i v e , n or even w e i g h t y , b e c a u s e o f th e t i m i v o m a i i y admit t e d d o c t r i n e o f impi l e d r o w e r s ; and th a t *Vp c p r P M4 u + +ho f a c t t h a t ccnver. 4 ion v o t e d dorr a p r e p o s i t i o n t o i n s e r t in t h e c o n s t i * u t l o r , nr. « xt r ^ s s E rert o f1 power t o em it M l 3 s o f c r e d i t . i s m ateri 1, becau se i t a i s o r i ' f ' u s « d +c Insert, a p r o h i b i t i o n o f that, and b e c a u s e ar, i m p l i e d rower t o em it M i l s ir„- pow er/ o f c r e d i t , had r e p e a t e d l y b e e r exe 'c i ?’e d b.v C o n g r e s s , arrt^'as a d m i t t e d by e v e r y b o d y ; and t h a t 'e b s< e r'K oj i r i or. i r I B ? ,2 was not p a r t i c u l a r l y w e i g h t y , because n o t a p p e a r 1 e b e t h e r e s u l t o f any p a r t i c u l a r d e l i b e r a t i o n ; and i t did that th e +>rJ. *h»* r o s t a t e s m a n had e v e r p r o p o s e d , s i n c e th e c o n s t i t u t i o n was adopted, t o i s s u e u n i t e d S t a t e s l e g a l t e n d e r r o t e s , was u n i m p o r t a n t , f o r th e r e a s o n th a t no em ergency had a r i s e n , j r j o r t o t h e c i v i l war, t o n^bo su ch not.os n e c e s s a r y . TTaVinK *hns *'•«*»'«** m easu re; * hr> o b j e c t i o n s t o the c o n s t i t u t i o n a l i t y o f th e i t s advocates a f f i r m a t i v e l y s u s ta in e d that c o n s t i t u t i o n a l i t y , by a r g u i n g th a t th e power t o e m it U n i t e d S t a t e s n o t e s , and make them a legal tender, is I n c i d e n t a l t o s e v e r a l e x p r e s s powers c o n f e r r e d upon f e n r , r e s s by th e c o n s t i t u t i o n . Mr. Sherman h e l d t h a t th e P0We r t o issu e ‘ e- her n o t e s r e s u l t e d by i m p l i c a t i o n from th e e x p r e s s power t o 6 borrow money, • • o maint.ain o rm ies and *ut p*ort a navy • ' rr . Sumner s a i d c o r s * i +u 4 ionml t ov/^r o f C o n g ress to make t r e a s u r y r o t ^ s a l e g a l was s e t t l e d , as l o n g ago as rhe> migM. a u t h o r i z e th e i s s u e it \ as s e t *l e d , Ahat C o n g ress o f treasury r o te s : fVn two have gone + oge +h o r . ‘' f o r from f irrr immemorial *rr . mroward a rg u ed t h a t h a v i n g th e e x p r e s s power x o borrow money, C o n g ress h as righ t to place in th e hands o f t h e l e n d e r , a p a p e r p r o m is e t o re p a y the amount b o r r o w e d , and that, the power "O make t h a t p aper a l e g a l ex ercise f order, i s n e c e s s a r y t o th e p r a c t i c a l ol‘ the power t o borrow money; and t h e r e f o r e th a t C o n g ress has t>o c o n - * id u 4 i o r a l flower, u nder th e c l a u s e a u t h o r i z i n g i t t o borrow money, s o d e c l a r e J,h i s s p e c i e s o f p-aper c f dev-^s be t v;^er i r r' i v i d u a i s . 1e g a l 4e n d e r in th e payment v r . S p a u l d i n g s a i d "It. i s p l a i n l y w i t h i n 4-Up < c cp e o f 4 he c o n s t i t u t i o n t.Vm+ d-o t cvernment s h o u l d ma j r t ? in if seif; i \'r * 4 a i r e ' 7, v id e. ?,rr,y s b o u i r be sut p o r t e d ; +hat *he navy s h o u l ' be ma i n - Xv e ways and means of' d o in g 4v j s r re ]r>ft J o Cor g r o s s t o p r o I t may i s s u e t r e a s u r y r o t e s r a y a b l e on demand, and make them a l e ;v;?ii t e r d e r in payment c f d e b t s ." e x p r e s s grant su lta n t in t h e c o n s t i t u t i o n , from 4hat power, received Mr. Bingham s a i d "C o n g r ess h a s , bv rower t o r e g u l a t e commerce, and r e i t has a l s o t h e power t o d e c l a r e what s h a l l be in payment o f d e b t s . ” Ar e v r. S t o v e r s s a i d "Tf n o t h i n g c o u l d v n '7c* e by C ongress e x c e p t what i s en u m era ted in th e c o n s t 1t u t i o n , th e government, ecu In not l i v e , 'Therm v e r a r y law i s n e c e s s a r y t o c a r r y i n t o e x e c u t i o n a ry enum erated p ow er, duch law i s v a l i d . e ssity ex ists, gress i s s o l e l y f o r th e d e c i s i o n o f C o n g r e s s , i s f o r Con ^*de f i g h t Ao borrov r cr.ey, and t o p r o v i d e f o r th e g e n e r a l w e l - 4 o emit v i • i s c f r r e d i t , w hich the r cnvont jen e x p r e s s l y r e f u n d 4c grant as a s u b s t a n t i v e power, h a s , *hn r o’ rViOn c o n s e n t f o r f i f t y y e a r s , by of* ■be n a t i o n , b een pracf l e n d , a” d i s now c o n c e d e d by e v e r y o n - o n e n t o f ^ i s > i U . it 4 c r e t.e r m in e , w h e th e r t h i s > i 1 1 i s n e c e s s a r y t o r a i s e and support rrm i e s nrr r a v i e s , 11 ° • Whether su ch n e c With what g r a c e can th e c o n c o m i t a n t 0 7 r o v e r 1o 4hem a Tr;^"t ‘ e- rv-r, hr o b j e c t e d t o . " These : r(,u:rr.‘ s i r f a v o r o r ‘ be c o n s t i t u t i o n a l i t y o r t h e measure r r e v o i 1 o r ; and ’ r . S p a u l d i n g ' s i i l l 50 par f.oo tb e ou-ee 1 y a v o t e o r 9 3 t o , F ebruary 6 , 1 8 6 2 , and p a s s e d th e S o na ta by a v o t e o f 3 0 t o 7 , Feb ruary 1 3 , 1862: ar.d was approved and s i g n e d by P r e s i d e n t L i n c o l n , ruary 76, legal 7862. The s t a t u t o r y law t h u s Inaugurated, in r e s p e c t Feb o f th e t e n d e r q u a l i t y o f U n i t e d S t a t e s n o t e s , h as n e v e r boor, r e p e a l e d , anr; j s r.cw r e p r e s e n t e d by S e c t i o n 3588 o f t h e r e v i s e d s t a t u t e s o f th e ’ t*i f t e 6 S* a i r s , w h ich r e a d s : " U n ite d S t a t e s n o t e s s h a l l he l a w f u l money, a -d a le g a l , l e n d e r i n payment o f a i l d e b t s , m M i c and p r i v a t e , w i t h i n tbo T > o o d S + a t e s ; e x c e p t f o r d u t i e s on i m p o r t s , and i n t e r e s t on th e p u b lic debt." Ihe a r t o f F eb ru a ry 2 5 , 1 8 6 2 , p r o v i d e d f o r th e i s s u a n c e o f t h e s e TTr i J od S t a t e s l e g a l t e n d e r n o t e s , t o t h e amount o f $ 1 5 0 , 0 0 0 , 0 0 0 ; and in r r e r - . r i r g t h o s e n o t e s , a | la n which had n o t b een u s e d on th e s t a t e borV n o t e s t o a v o i d c o u n t e r f e i t i n g was a d o j t e d . That p l a n c o n s i s t e d in I t i n i i n g e l a b o r a t e d e s i g n s upon t h e i r b a c k s , as w e l l as upon t h e i r faces: a d th ose d e s i g n s , b e in g p r in te d w ith g r ^ n ink, d is t in g u is h e d t > e n o t e s s o o b v i o u s l y from th e s t a t e bank n o t e s then that in c i r c u l a t i o n , the p e o p l e gave them th e pare o f g r e e n b a c k s . In J u n e , 1 8 6 2 , t h e U n i t e d S t a t e s r o t e s which had b e e n i s s u e d i n p u r s u a n c e o f th e Act o f F eb ru a ry 2 5 , ->862, were s i x p e r c e n t b elo w par i r g o l d : b u t t h a t d e p r e c i a t i o n was ranch l e s s th a n the d e p r e c i a t i o n o f S t a - e bank n o t e s w hich had o c c u r r e d a f t e r th e s u s p e n s i o n o f s p e c i e p a y nn’U s i r December, 1 8 6 1 , and b e f o r e t h e p a s s a g e o f *he Act o f February 1862 . m a l l other r e s p e c t s , e c t e s u nd er that, Wl*h0U- i r t -r o s t ’ fo. th e i s s u a n c e o f t h e U n i t e d S t a t e s Act, had worked s o w e l l as a nr a re o f b o r r o w in g money tm r fu rn ish in g a r e lia b le he p e o p l e , t h e f S e c r e t a r y Chase, e a r l y in '’r e s s Ju re , currency 1 8 6 2 , a s k ed Con- a u t h o r i z e him t o i s s u e $ 1 .5 0 ,o o o , 000 more o f s u c h n o t e s , and t o 8 ’■ h im pc v 'rii as >111 4o )u f 4h^ra cut in d^r c m i r u M o n s 01 * five dollars and less, fori dollars and more. Accordingly* Mr. Stevens reported a for ft at, purpose from the u ays and foans Cci.imii t e e ; and v r . Love joy of Illinois, who had strongly 0} jfcsed the passage cl* 1he Act of February r>5, 1862, said in debate or. that i ill, "I do know that the people have rrc; t confidence in these gre^n-b^cV^d treasury rotes; and that the v do re* generally have if in 4he bark rote issues. I want a law to be passed to exclude the bark rote circulation, which is of much less value tv an 4he United States treasury notes." Harmoniously with this speech, t'r. Love joy r.ow voted tor the issuance of United States legal tender not es, vote ot* 76 and the >ill passed the wonse or < o 4V. And on July 2, 1862, the 24 cl* Jure, by a it passed tbe Set ate by a vote oh 2/ 4 o 1Z; a-d it was approved and .signed on July 11, 1862, by Presi de"! Lincoln. J •/u ry 17, 186/#, President Lincoln cl so aj p roved a joint res cl u •n^n oh Congress, authorizing the Secretary cl the Treasury to issue ?+T-nr U.l 00, 000,000. in legal .T, ];,6g, ho nfjrovori a m i , in n u r" o ' o h , United States rotor.. And on authorizing the issue of i-150»nno,000 irc'ir irg the hior,ore,ore, which had hoar provisionally authorized by 'bo join* rescMut ion of January 17, 3863. l>mt joint res olution ••an original ly foj cr*ni hy »<r. Stevens, from the committ e e on h'avs and ''cans, ‘o provide for ‘V issua-ce of only $50,000, (W) in legal terror United states rotes; hut that amour.t was increased t o $100,000.ooo, or. the mot ion o f Mr. I.,ove joy, and that resolution was p a s s e d by •‘ ho Mouse without, by a veto o f 38 t o ary opposition whatever; ar.d was p a s s e d by th e S en a te the yeas including the strongest o p p o n e n ts o f t h e original legal ‘sti^r Act o f 1862. And the a c t o f March 3, 1863, was passed by the rouse without opposition enough t o call f o r the y e a s and r a y s , a r t v as passed by t h e S e n a t e by a. vo'e o f 32 t o 4 . P lu s the i m e t i c a l w o rk in g arc r e s u l t s o f United s t a t e s leg a l ten- 9 n ^ + o s , d u r in g t h e f i r s t +n r r i v e r 1 n e a r l y a l ] y e a r a t ’^ r +h e i r o j p o n e r t s t h fai r o r i g i n , wore good enough i n t o 1‘r l e n d s . But th e new f r i e n d s ard t v e o r i g i n a l a d v o c a t e s o f +he s y s t e m were al ] c o n s e r v a t i v e e n o u g h , t o Vncw *bat e v i l may r e s u l t the c i v i l from an e x c e s s o f good t h i n g s ; and though war was not h a l f t h r o u g h , at t h e tim e o f th e p a s s a g e o f t h e Art o f ^ a r c ■ 1 3 , 1 8 6 3 , no a d d i t i o n a l sum o f U n i t e d S t a t e s r o t e s was e v e r a u t h o r i z e d a f t e r +hnt day; and o f th e 8 4 5 0 , 0 0 0 , 0 0 0 which were a u t h o r i z e d up to +h'-at t i m e , th e l a r g e s t amount e v e r o u t s t a n d i n g at o n c e , was on January 3 , 1 8 6 4 , and was $ 4 4 9 , 3 3 8 , 9 0 2 . An Act o f 0 o r g r a s s was a p r r o v e d v a r c h 1 2 , 1 8 6 6 , w hich a u t h o r i z e d t h e r e t i r e m e n t o f not mere t h e n $ l o , 0 0 0 , 0 0 0 o f t h e U n i t e d S t a t e s l e g a l -tender n o t e s , v-’i t h i n s i x months a f t e r th e p a s s a g e o f th e Act; and a f t e r th at, o f r of more than $ 4 , 0 0 ^ , 0 0 0 in any o^o month. t h e amount o u t s t a n d i n g was r e d u c e d t o $ 3 5 6 , years. oqo, Under t h a t Ac t , 000 in l e s s than two That amount in 4he judgment o f C o n g ress was s m a ll enough; and th erefore, ar.y f u r t h e r r e t irem en t. c f U n i t e d S t a t e s hy Aho Art o f J-ehruery 4 , Ir J v e a il o f 187^, > ot.es w p s suspended 1868. Jho S e c r e t a r y o f t h e T r e a s u r y , a t th e u r g e n t s o l 1c i*'' *• 1on o f C o r n e l i u s V a n d e r b i l t , a - d o t h e r g r e a t f i n a n c i e r s , and w i t h **■he ] e r m i ‘- s i i r of Presj^ert G ran t, r e i s s u e d e v e r &2 6 , o o o , 0 0 0 o f +ho U n i t e d S t a g e s n o t e s which had beer retired in 1866 and 1867; s o t h a t on January 15, 1 8 7 4 , th e amount o u t s t a n d i n g was $ 3 8 2 , 9 7 9 , 8 1 5 ; and on Jure 2d, 1874, t h e maximum amount t c he o u t s t a n d i n g t h e r e a f t e r , was f i v e d at $ 3 8 2 , 0 0 0 , 0 0 0 . IJ’e »•{'•' or J an uary 1 4 , 1 8 7 5 , w hich p r o v i d e d f o r t h e r e s u m p tio n o f s p e e , > payments t o o c c u r Ja n u a ry 1, 1 8 7 9 , a l s o p r o v i d e d f o r t h e r e t i r e ment o f $ 8 2 , 0 0 0 , 0 0 0 o f TJr.it.ed S t a t e s n o t e s , fo u r-fifth s t i o n a l hanlc c i r c u l a t i o n would i n c r e a s e u nd er t h a t ed f o r -’e dooming in c o i n , any or a n Act; and a l s o p r o v i d o u tsta n d in g U nited S ta te s n o t e s , on demand, at a r y tim e ^n or a f t e r Ja n u a ry 1 , 1 8 7 9 . as f a s t as n a That Act in t e n - 10 t t o n a l l y r e f r a i n e d from p r o v i d i n g w h o th er ar.y or a l l o f t h e $ 8 2 , 0 0 0 , 0 0 0 of U n i t e d S t a t e s r o t e s , which might he r e t i r e d or redeemed t h e r e u n d e r . s h o u l d t h e r e a f t e r he r e i s s u e d , or s h o u l d t h e r e a f t e r he car e e l l e d ; ard Oe^el cr Sherman c a r e f u l l y exyO aln ed in h i s sp^och s i u r c r t i n g t h e h i l l , that i t r e l e g a t e d +hnf cm^slon t o f u t u r e l e g i s l a t i o n . u r d e r s t ar d i n g , Jhe > n i o f 3P 4‘ o 14; ard it With t h i s clear p a s s e d t h e S e n a t e a f t e r a l o n g d e h a te hy a v o t e p a s - e d th e ^ouse hy a vet e o f 136 t o 9 4 . Under t h i s Act., & 85,8 1 8 , 9 8 4 o f U n i t e d St at r s n o t e s w e r e r e t i r e d , p r i o r t o May 8 1 , 1878; -'her P r e s i d e r t Hayes a j p r o v e d +he Act, w h ich h as h een th e jaw e v e r s i n c e , and w: i c h p r o v i d e d t hat w h ere v er t h e r e a f t e r , a ”.y U n i t e d S t a t e s l e g a l l e n d e r n o t e s s h o u ld ho redeemed hy th e S e c r e t a r y o f the Treasury, or s h o u ld o t h e r w i s e he r e c e i v e d hy him , t h e y s h o u l d not he r e f j r e d or c a n c e l l e d , hut s h o u l d he r e i s s u e d from tinr^ t o t i m e , ment o f government o b lig a tio n s, and th u s Vept in c i r c u l a t i o n . in p ay That *ct o f Uay 8 1 , 1 8 7 8 , p a r s e d th e v o u s e hy a v o t e o f 177 t o 85; Mr. M cXinlev v o t i n g in th e e t‘f irmat i v e ; 18. d i t p a s s e d th e S e n a te hy a v e t e o f 41 t o When +>>is A-Ct was s i g n e d hy P r e s i d e n t K a y es, t h e amount o f U n ite d S p a t e s n o t e s o u t s t a n d i n g was $ 8 4 6 , 6 8 1 , 0 1 6 ; and <haf has t h e r e f o r e heen t h e amount o f l e g a l 4e n d e r U n i t e d S t a t e s n o t e s a u t h o r i z e d hy lav/, e v e r <?i r c e t h a t t ime . On Jan uary 7 , 1 8 7 9 , John Sherman, then the S e c r e t a r y o f the T r e a s ury, hy near.a o f t h e s a l e o f $05,500, 000 o f f o u r per c o r f b o n d s , had p r o v i d e d th e T rea su ry w i t h $ 3 0 0 , O^o,000 ir. g o l d , a s a r e s e r v e w i t h which t o redoer,i s u c h o f t h e U n i t e d S t a t e s l e g a l sertec' fo r redem ption. But o n l y about * 5 0 , r.ne.,0 no o f t h o s e r,0t e s were p r e s e r .4en f o r r edempt i o n , Tr i o r deenie out ot +h e t e n d e r n o t e s , as might he Pre to vpreh s u r p l u s g o ld in 4h e , Ifftg; and t h o s e were a l l r e t r e a s u r y ; s o th a t <he V]0 0 , 0 0 0 , - o r e g o l d r e s e r v e was n e v e r d i m i n i s h e d h e l o w t h a t amount, u n t i l o cr a ' i c pnr+y a c q u i r e d c o n t r o l o f a l l b r a n c h e s o f th e f e d e r a l merit cn th?,+ ' a y . t ** . X- . • *> ^ — .1 th e u e mgovern- TVin.f ovoi t m a t e r i a l l y r t i m i n i a h ^ tho c o n f i'lo n c n of* -L.h^ p e o p l e in fV'o fti^urr ma ir.+or.p.r. ce of* tho Uritod. S t a i r s r o t e s at par w i t h g o l d ; bo cause i + f o s +^rod, tho or I r i o n , t h a t C ongress w o u ld p a s s , p-n«Mrpr ^ rou'id a p p r o v e , ‘a ir 1'- c h a r g e s a? d that, th e i r 4 v a t a r i f f la w , as would r e duce Jhe re v e n u e s of' the government. b e lo w 11s o u t g o e s , and would a l s o o.so laws + 0 American i n d u s t r i e s , r e d u c e *he p r o t e c t i o n a f f o r d e d by and t ■u ? i n c r e a s e im p o r ts from f o r e i g n co u n tries. i t was e a s y t o s e e t h a t such i n c r e a s e o f ini] o r t s would c a u s e p e o p l e t o p r e s e n t U n i t e d S t a t e s n o t e s t o t he t r e a s u r y 'o r redem ption wv ir b * c pay i n c r e a s e o f im p o r t s ; and i t was a l s o t o be e x ported, ' ° > th e TJr i t e d s t a t e s n o t e s th u s redeemed would be p n jd out ‘‘or 1 ha+ in g o l d , in o rd er t o get g e l d w i t h a g a i n , t o mate up f o r ^ n f i r i o r r v o f r e v e n u e , and th p.t thus th e g e l d r e ° ° rvo vtti V he p r p c t j r a / ' l y drewr uj on f o r th e payment porses, os a n e c e s s a r y r e s u l t enues. few i+ i s an o b s e r v e d f a c t , more y -Oird i s o f i n c r e a s e d im p o r ts and d i m i n i s h e d r e v tin t a p p r e h e n s io n that a p a rticu la r i b e i y t o he drawn down in th e f u t u r e , r : Pes some p e o p l e he g 1^ t o rIr aw i t down i ■lm^dia t.ei y , A c c o r d ir .g ly , d u r i n g +he l a s t o f u n ited o f governm ent e x - d ates in. o r d e r ! o get th e s t a r t , ci* e t h e r s . t o r months o r 189S , mom than $5 2 , 0 0 0 ,0 0 0 *ps were p r e s e n t e d t o th o t r e a s u r y f o r r a damp t io n in g o l d , a"d ’.••pro +1u s r e d e e m e d . Ir. 1894, tho app-pV’ondPd charts s in <ho tariff law wore made by *bo so-called Wilson act: and those charges began at once to operate, + c i r e re so i m j e r + s ; and a l s o t o r e d u c e r o v o n u e s b e lo w governm ent o u t g o e s : and in b o th tion ir t h e s e w a y s, t h o s e c h a r g e s promoted demand f o r redemp gold o f U n i t e d S t a t e s n o t e s . ^ e g i a l a 4 1 en i t s e l f The f e a r o f that, l e g i s l a t i o n , and ^supplemented t o some s m a l l ex te n t, d u r in g t h e l a s p e w weeks b e f o r e November 3 , 1 8 9 6 , by the f e a r w h ich was e n t e r * a i n et ‘ - n ‘ Mmn, by ‘-one m o i l e , tn 4V,° o f a forthcom ing f a l l t 0 a s ilv e r b a sis o t +h° e l e c t i o n o f u r . Bryan t o th e p r e s i d e n c y ) , caused the T e e t. d ton t o r red em p tio n jn g o l d , d u r i n g th e y e a r s 1 8 9 4 , 1 8 9 5 , and 1 8 9 6 , ana the e a r l y weeks o f 1 8 9 7 , o f a b o u t $ 5 9 0 , 0 0 0 , 0 0 0 o f U n i t e d Stf<*ns ro+f'S. T>’US, a b o u t $ 4 2 2 , ©00»0 0 0 o f U n i t e d S t a t e s le g a l tender "C*nf1WArp p r e s e n t M f o r rodemp+ton, and were redeemed m g o l d by t h e governm ent d u r i n g P r e s i d e n t C l e v e l a n d ' s l a s t , a * d r 1st r a t i o n , a s a g a i n s t abA,,+ fSo.odO.OOO d u r i n g '-a f'curtAAn y ^ a r s , two m o n th s, and i h r e e days 1879, and t h e h A tro o r th r rASumpticn o f s p o o l s p a y m e n ts , on January ] , of x ' + 'd r1' i n i s f r a + i cn.* on *^.rcVi 4 , 7 s 0 3 . ^^ i or J u l y ] 4 , ^ rA ctin g H a I 8 9 n , P r o s i d e n t w a r r l s o n approved an Act o f C o n g r e s s , purchase o f s i l v e r b u l l i o n , no^As t h e r e f o r : and or November i , iopb, and t h e i s s u e o f t r e a s u r y P resid en t C l e v e l a n d a p p ro v ed an »ct 4 c s t o p t h a t p u r c h a s e o f s i l v e r H P H e r and i s s u e o f t r e a s u r y rotes. W h ile t h a t Act was i r t u n force, $1 5 5 , 9 8 1 , 0 0 8 o f t r e a s u r y r o t e s o f 3 8 9 0 , were I s s u e d i r p u r s u a n c e t h e r e o f : and t h a t *rd s t i n p rovid es, Act. p r o v i d e d ^ ^ + t e A n o t e s s h a l l be r e d e e m a b le on demand in c o i n , and s h u n he a l e g a l t e n d e r in payment o f a i l d e b t s , p u b l i c and p r i v a t e , e x c e p t where o t h e r w i s e e x p r e s s l y s t i p u l a t e d in th e c o n t r a c t , and s h a l l he r e c e i v a b l e f o r a l l p u b l i c d u e s , and when s o r e c e i v e d may be r e I s s u e r . . Non. a o f ‘ h o s e t r e a s u r y r o t e s 0f 3 8 9 0 were redeemed in gold, ur .. . O c to b e r , 3891: but. i n ‘ h a t month t h e y began, t h u s t o he r e deemed in s m a l l am ounts, though n e v e r p r i o r t o March 4 , 1 8 9 8 , d i d t h a t r e d e m p t i o n amount t 0 enough t o n e c e s s i t a t e talcin g any g o l d out. o f t h e *3 0 ^ . 0 , aa0 i s t r a t ion, silv e r ,a t KCld r e s e r v e . Put d u r in g P r e s i d e n t C l e v e l a n d ' s l a s t admin- o v e r * * 0 , 0 0 0 , 0 0 0 o f t r e a s u r y n o t e s o f i 8 9 o were rod„ Bfid ln ‘ he r e q u e s t o f H e h o l d e r s , and wen. c a n c e l l e d : w h i l e about # B n , a e e , o . e C o f t r e a s u r y n o t e s o f i « 9 0 were r e d e ^ d e.n m ert, ir. " ™ i M c n in g o l d by th e g o v - ' o the ah ou t $ 4 2 2 , 0 0 0 , 0 0 0 o f U n i t e d S t a t e s l e g a l t e n d e r n o t e s , which were t h u s redeemed d u r in g t h a t t i m e ; and th e t r e a s u r y n o t e s o f 1890 Which were redeemed tn a in e’o lrt’ wpre r e i s s u e d from t jme t- in e, * " ** <n payment of* government ob i j g e t i o n s . ,e M tr .ftftu ry * M rV ,h “ of “ « " .'W '. o n c .-r o «■ <(m, n ,„ M . „ r , ep „„„ )?> +bo g e l C r e s e r v e , or out o f tb o s u r p l u s g o l d i r t h e t r e a s u r y , w hich furdn a g g r e g a t e d $ 1 0 3 , 0 0 ^ , 0 ^ 0 or v a r c b .% 1 8 9 3 , ard row a g g r e g a t e o v e r $143, 0 r , 0 0 0 . The r e p l e n i s h m e r t o f t h a t tr e a su r y g o ld , to enable i t to w ith sta n d th a t drain o f n e a r ly f i v e tim es i t s owr. amount, in f o u r y e a r s , ard I o he $ 4 0 , 0 0 0 , 0 0 0 l a r g e r at. th e end o f +hat d r a i n a g e , than at th e b e g i n n i n g : came p a r t l y from g o l d b u l l i o n s o l d t o the m i n t s , and p a i d f o r by c h e c k s which were u l t i m a t e l y p a i d in U n i t e d S t a t e s n o t e s ; ard p a r t l y from g o l d p a i d I n t o t h e t r e a s u r y f o r d u t i e s and o t h e r t a x e s ; e^d p a r t l y from g o l d which w a s ysajd i n t o the t r e a s u r y , TTr i t e d St a t e s n o t e s ; a^d ta r t 1 y fror^gold r e c e i v e d in e x c h a n g e f o r i n t e r e s t -■hear in g b o n d s , which were i s s u e d in t h r e e l o t s ard 1 8 9 0 , r e s p e c t i v e l y , in ex c h a n g e f o r in 1 8 9 4 , 1895, t o the a g g r e g a t e amount o f $ 2 6 2 , 3 1 5 , 4 0 0 , f o r th e purpose o f o b t a i n i n g g o l d f o r s u c h r e p l e n i s h m e n t . James TT. E c k e l s , th e c o m p t r o l l e r o f th e c u r r e n c y , C o n g ress o f oecember 7 , 1 8 9 6 , t o o k th e ground that /w in h i s r e p o r t t o the c o s t and 1 i a b - l'M'f.y, which the U n i t e d St^.+ ps had fh a r i n c u r r e d t o m a i n t a i n th e $ 3 4 6 , 6 9 1 , 0 1 6 o f Uni+ed S t a t e s l e g a l t e n d e r not on at p a r , amour t. ad t o $ 7 3 5 , 3 0 0 , 5 4 6 in add*t ion t o t h e o r i g i n a l and s t i l l h e r e a f t e r p a y $ 3 4 6 , 6 8 1 , 0 1 6 , on amount ex istin g th e n o t e s t h e m s e l v e s , 3 l a b i l i t y to i'o make up t h a t o f $ 7 3 5 , 2 0 0 , 5 4 6 , he added t o g e t h e r th e { r i n c i p a l o f XX a l l h e n d s , which ware a v e r i s s u e d t o c r e a t e th e g e l d r e s e r v e , ^ ^ 4r e a s u r y p.old; and +he i n t e r e s t trea su ry gold , est. or. p?i or t o r e p l e n - on t ha a v era g e amount oi* f r e e from Ja n u a ry 1 , 1879 t o January i , four l o t s 1 he o f h e r d s from January ] , 18 9 5 ; and the in ter 1895 t o th e f imes oi' t h e i r m a t u r i t y in 1 9 0 4 , 1 9 0 7 , and 1 9 2 5 , and 1 9 2 5 , r e s p e c t i v e l y . But t h a t e l a b - o m Ja c o c u l " t ; c n ct th e c o m p t r o l l e r o f th e c u r r e n c y was wrong; b e c a u s e t* r-jd n rcvarm art rt c r e d i t 4ha a c c o u n t w i t h the $ 3 0 0 , 0 0 0 , 0 0 0 in g e l d , w h ich th e f . e n had or hand cut 0f th e p r o c e e d s o f t h o s e h e r d s ; nor / with these United States notes, which, having been redeemed with other proceeds of those hond^had been reissued in payment, of government, ex- 14 p o rs'v * : r.cr wi+h t.ho^c 7.Trti +cd nr.rt r ,-u ar'3 b e c a u s e ricf ^s which hart h^ori th u s r^dc^mcd it ch^rg^d tVc a c c c u r t w i t h mere than i>'t^r^st. t o a cc r u e h ^ fo r^ F e b r u a r y , !c+ s c f 7 ends, a l l thr» u l + i m a t o p r o c ^ d s in th e j a .merit o f govermnert e x p e n s e s , ment y r c i e r t y ; and h e c a u ° e i t or th e l a s t t h r e e o f w h ich had e i t h e r b een u s e d , or were s t i l l or hand as g o v e r n c h a r g e d th e a c c o u n t w i t h January 1 , 1979 t o January 1, 1 8 9 5 , or. a l l r Je?r o f cr t ' e 1925, in terest from th e f r e e t r e a s u r y g o l d , jr- hi or,, rr r f pro g e l d r e s e r v e o n l y , which c o n s t i t u t e s o n l y a per-* e-e - n f r e o t r e a s u r y g o l d . These f i v e m i s t a V e s irtred uced e r r o r s amounting t o more than $ 6 7 0 , 0 ^ 0 , 0 ^ 0 i n t o the e l a b o r a t e c a l c u l a t i o n o f V7r . F c V e i s . T-e ru J h o f th e m a t t e r i s t h a t fV<e c o s t *» , r 7 8 , *hn r or - i hr^r ever o f carrying, s i n c e January Merest h e a r i n g g re e n b a c k debt o f $ 3 4 6 , 6 8 1 , 0 1 6 h a s l e s s then th e i n t e r e s t s i n c e t h a t +jme, on th e $ 9 5 , 5 0 0 , 0 0 0 c f bonds at f o u r p e r c e r t , which were i s s u e d t o c r e a t e th e o r i g i n a l . ? v v 'p n --,r!/'c g e l d r o s r r v o ; b e c a u s e t h a t f l 0 0 , 0 0 0 , 0 0 0 c f g o l d reserve Is rf l ° r g e s r d v a H i s h l e a p r o p e r t y o f t h e governnyrt. now, o.s i t was January 1 , 1879; and ha c a u s e t h e $ 2 6 2 , 8 3 4 , 4 0 0 o f b o n d s , which were i s suad t r i m " i l y ■'c r a p io r i s h t h e t r e a s u r y g o l d , r e a l l y d i m i n i s h e d the O'* t ar c * 1 i.L,r- ; c r .s , or i n c r e a s e d th e a s s e t s o f t h e g o v e r n m e n t, t o amounts en u - 1 ‘ e i r o c ^ r t s o f t h o s e b o n d s; and b e c a u s e th e government has m»fe 3 j-ro fit. o f s e v e r a l n i l M o r s o f d c M a r s out c f t h e greer-hacV c i r e m e M - n str.ee Ja n ua ry 1 , 1 8 7 9 , on a cc o u n t o f th e r o t e s which have b een hurnec’ Uy i r c o n f l a g r a t i o n s , or o t h e r w i s e l o s t M 'e. or d e s t r o y e d d u r in g t h a t I? e i n t e r e s t on th e $ 9 5 , 5 0 0 , 0 ™ o f b o n d s , from January ] , + c Jarir- ry 1, ' 8 9 7 amounted t o $ 6 8 , 7 6 0 , 0 0 0 ; and i t 1879 , i s almost, c e r t a i n t h a t th e y r o f i t w hich a c c r u e d t c the g o v e r n m e n t, d u r in g th e same t i n r , from r..e l o s s ar.d d e s t r u c t i o n c f n o t e s when in c i r c u l a t i o n , amounted + 0 at l e a s t . $ 8 , 7 6 0 , 0 0 0 . M is -rue +hat no d irect evid en ce e x i s t s +0 Tr o v e What amount, o f J s wmmmmmmmmmmmmmmmmmmmmmwmmm SMMMMMMfl 35 TTr 1 •»r* s* • t.os n o t e s wo th u s l e s t cr d e s t r o y e d d u r in g t h e s e e i g h t e e n y e a r s : hu+ a c o n s e r v a t i v e e s t i m a t e o f t h a t anicurt car, he i n f e r r e d from t h e l o s s and b e s f r u c t i o n o f t h e f r a c t i o n a l p a p e r c u r r e n c y w h ich was in u s e from 1 862 t o 1875* and t h e r e a f t e r * as lfc*o as J an uary 1* 1 8 7 9 . to a r a p id ly d im in ish in g e x t e n t, The l a r g e s t amount o f t h a t f r a c t i o n a l pa Te r eu'-'- o r r y vJ'ich was o v e r e u + s + a r ^ jr£ at ere t j r.io, was at cut £>50,o e n * o e r t c o n s i s t i n g o f about 2 5 o , o c o , c o o c f s o j a r e t e j j e c e s o f p a p e r ; th e a v e r a g e amount o f which was at out t w e n t y c e n t s . fic ia r y I t has b e e n o f e«:t imated in ^he T rea su ry department, that. $ 8 , 0 0 0 , 0 0 0 o f t h a t f r a c t i o n a l c u r r e n c y was d e s t r o y e d d u r in g t h e s i x t e e n c i r c u l a t i o n , w h ich would amount +o f h^ l o s s years i* was in c f about 4 0 * 0 0 0 , 0 0 0 p i e c e s o f f r a c t i o n a l p a p e r c u r r e n c y d u r i n g 4h a t t i m e . Now th e a v e r a g e amount o 4 e* ch o f t h e U n i t e d S t a t e s r o t e s , w hich were in c i r c u l a t i o n from J a n - +c January 1, 1 8 9 7 , was about $7, or about t h i r t y - f i v e l a r g e r -*bar. th e a v e r a g e amour t. c f th e f r a c t i o n a l n o t e s , w hich were in c ' r c i . P ' Mon f o r s i x t e e n y e a r s j r i o r t o January 1, T r o f a v i y u a fo t c assume +ha^ h o l ' e r s f i Vn * c a r e f ul ] 879. And i t o f t h o s e n o t e s were about t h i r t y — o f them, as were 4be h o l d e r s o f th e t r a c t i o n a l cu rr en cy * s o t h a t *e+ more fh a r one TTnit ed S t a t e s n o t e was l o s t f ' •*,dngb c a r e l e s s n e s s * rency. T° . Utf io n e y , or tv,o is other t o t h i r t y - f i v e p i e c e s Of f r a c t i o n a l or d e s cur hand, c o n f l a g r a t i o n s are not r e s p e c t e r s o f p a i - v more than o f p e r s ons , a n d v;i l l c onsrmie a t e n - d o l 1 ar K iiX S f a t o n r- ^ « ** r e m o r s e l e s s l y as a f e n - c e n t f r a c t i o n a l n o t e . On % 4V'> cV ' ’ 1h em v > ra , i s c o n s e r v a t i v e t o e s t i m a t e t h a t as many d o l l a r s w orth o r Uniter) S t a t e s r o t e s were t o s t and d e s t r o y e d p e r annum, during t^ e e i g h t e e n years ending J a n ia ry ] , of fra ctio n a l 3 « 7 9 , a s t h e d o l l a r s w orth n o t e s , which were l o s t and d e s t r o y e d p e r annum d u r in g t h e s i x * e e r y e a r s e n d i n g January 3 , 3 * 7 9 ; and t h a t amount h a v i n g b e e n at least $ 50 0 ,, or,A p e r annum, our e s t imat.e t h a t th e t i n t e d S t a t e s r o t e s l o s t ar.d d e s t r o y e d , d u r in g t h e e i g h t e e n y e a r s e n d i n g January 3 , 3 * * 7 , ♦ <r in a n o i r t.c fit if'Fv.st 760* 000 i s s u ffic i* » r .t.1 y suj y c r t o d . fi'h i » i t on o f p r o f i t r e s u l t i n g from th^ l o s s and. d e s t r u c t i o n o f paper money when i r c i r c u l a t i o n , i r an i n e v i t a b l e nystnui o f papor money: and where p a p e r money i s r b'i ac^rneR ^ e +e s r o t e s , ■» 0 fboin. To v e r money i s r,v,,,A<’ A0 1be i ove-rmertt Hut w hore, as in incident to every i s s u e d by ban V s , a l l J ho r a s e o f J be U n i t e d i s s u e d b.v t be g o v ernm en t, tba.t p r o f i t in t b e fir*- + jn s ta n .e e : but u l t i m a t e l y , rr,n o cr 4 * 'he ] e 0p i o , by re*) l o v i n g them o f th e t a x e s w hich t h e y ac- it acwou ld o t h e r w i s e have t o pay t o f u r n i s h funds f o r t i e r e d e m p tio n o f th e l o s t or d e s ♦r o ye d r o t e s . Cc’\1 r e v t o compare th e cost, o f c a r r y i n g t h e g re en b a c k d e b t , and m a i n t a i n i n g at par w ith g o l d , th e U n i t e d S t a t e s r o t e s which e v i d e n c e d +hat r Pn t , through th e e i g h t e e n y e a r s e n d i n g J a r u r r y l , lf r - m - have c o s t t o c a r r y +he same d e b t , 1 8 9 7 , w i t h what i f t h o s e n o t e s had been p a i d ° vr‘ ' ' ^ r ^ e i i e d J a n u rry 1, 18^9, w i t h th e p r o c e e d s o f fo u r p e r c e r t l e n d s , r V - rV 1 ' - ^ ' ° b r e r i s s u e d f o r t h a t yury-ose; the f i g u r e s w i l l be fmird *c be ns f e l l o w s . A'":r> ,f’ •'‘ r'r‘ V ***** r o t e * ! which w*rr> u r c a n c e i i e d ar.d wore s a i d *'* 1n o,,<-r* r ' ' ir p J ; n i ! ry *”r , r ' /r,/ ' 8 7 9 , ameurtrh * c $:,M6,6&] , o i 6 ; t h e a c t u a l ‘ 1 0f,° ’i r c a n c e i i a d r o t e s at t h a t tim e was p r o b a b l y o n l y about >r r r ‘’ b e c a u s e Ht l e a s t , $ 8 ,6 8 1 , o l 6 had u n d o u b t e d l y boor, d e s t r o y - od d u r in g th e p r e c e d i n g s e v e r , l e e r years. At t b e r a t e at which t o u r per cort bonds c o u l d have b een s o l d January 1 , 1 8 7 9 , ou -r1 c-r.ooi i t would have taker, , ' n r , rrr, o f such h e r d s , t o p r o c u r e g o l d enough t o redeem and th e ' r ^ , r r r , c r r c i TIr, 1+ort s t a t e s rotes; t h o s e b ond s •'ould have beer, $ 1 o o o , n o n p e r ar.rum, ard $2?>4, o o o , 000 in a l l , d u r i n g t h e e i g h t * * * y e a r s from January 1 , 1 8 7 9 t o Ja n ua ry ] , ard t h e c o s t It 1897; o f c a r r y i n g th e g r e e n b a c k d e b t , on t h a t p i an o f r e f u n d i n g i n t o b o n d s , -would t h e r e f o r e have b een $ 1 7 4 , 0 0 0 , 0 0 0 more, d u r in g th e e i g h t , e e n y e a r s e n d i n g January 1 , 1 8 9 7 , th a n i t h as h * e r,, cn th e p la n of ard th* j Crf 17 k o o p in g th e n o n - i n t n r e s t h e a r i n g TTnif^M S t a t e s r o t e s jr c i r c u l a t i o n , i u r i ’g f,,at t i m e , and k e e p i n g +hcni a t par w i t h g e l d , h y i,rar.s oi* t h e ,r.rr g clr3 r e s e r v e . Th e c cr c"t i t u t j or al r ,?' 'h"°wn in q u e s t i o n y o f +t o U n i t e d S t a t e s l e g a l ->o r d e r r o + e n , was in t h e Supreme Court i r t h e c a s e o f Fephurr v . ^ r i s v c M , b M ai"ace, 60«% TF7o; ar.d t h a t c a s e was d e c i d e d a g a i n s t th e c o n st j Ju* io n a i i t y o f +h o so ao-^es, hy a v c ; e o f f i v e J u s t i c e s t o t h r e e . Those who v o t e d a g a i n s t +he c o n s t i t u t i o n a l i t y were C h i e f J u s t i c e Chaise ard J u s t i c e s N e l s o n , G r i e r , C l i f f o r d , i r f a v o r o f t h e c o n s t i t u t i o n a l i t y were ue v i s . The e f f e c t a rc F i e l d : w h i l e t h e s e who v o t e d J u s t i c e s Swayne, M i l l e r , and o f t h i s d e c i s i o n ur or. t v e oj in l e n s o f s t a t e s m a n , and o f th e p e o p l e , was much weakened hv t h e f a r t t h a t C h i e f Jus + i c e C h ase, v'h°?’ k w o h r y o f T r e a s u r y in 1 8 6 1 , 1 8 0 2 , and 180S had c o n i a i t t e d him s e l f ir w r i t in g , u n ited 3+ -to s o v er ard o v er a g a i n , lerei t o the c o n s t i t u t i o n a l i t y o f th e ■<e r d e r n o t e s : ard hy th e f a c t th a t J u s t i c e s and G r i e r , ’were b o t h Vrowr to he a l m o s t l i t e r a l N elson, con stru ction i s t s c o n s t i t u t i o n , having h o f h concurred tw elve years b e f o r e , o f th e in th e b r e d . G c o t J d e c i s i o n , w hich d e n i e d the c o n s t i t u t i o n a l i t y o f any i n t e r f e r e n c e w i +h s i a v e r y ir '•h e t e r r 11 or i e r . 5-j- i.i-->forr> th e d e c i s i o n in uopburn v . O r is w o ld was r a r ^ m d , February, v a n i a and o n ;'; aft ei in 1b 7 0 , P r e s i d e n t nr a r t ha*4 s e l e c t e d W iU ia m S tro n g o f P e n n s y l Jose r ho t jh B r a d le y o f New j e r s e y , o r ii^ r +o take t o bp J u s 4 i c e s oi' t h e Suyrene th e p l a c e o f J u s t i c e c r i e r , who had resign ed ] r casp c t Hepburn v . Or is. v o i d was argued ar.d was d e c i d e d by th e c o u r t ., b u t b e f o r e that, d e c i s i o n was announced or became known; and the l a * f o r t e f l ' - i a v a c a n c y on th e b e n c h . Mr. S tr o n g ar.d v r . B r a d l e y wore b o t h n o m in a te d by th e P r e s i d e n t , ard were c o n f ir m e d by t h e S e n a t e , ar.d c o m m issio n ed hy t h e p r e s i d e n t soon a f t e r th e d e c i s i o n i* wepburn v . o r i s w o M was r e n d e r e d , ard p r o b a b l y w i t h o u t k n o w le d g e , on th e p a rt P resid en t of' G r a n t, o f t h e , r o, in Io n s r e s p e c t i n g th e c o n s t i t u t i o n a l i t y o f +he + Stofrs 1 o s &1 + o n d **r r . o f p s , S b o r f.lv <*ftor Mr. Ju k 4 ic^ S tro n g and *fr . Ju ^ M cp B r a d l e y t o o k t b e i r H^at.3 nr.or, tb^ b ^n ch , fb c c afios o f Knox v . Loo, and Parkor v . B a v i n , can 10 on fo r a rg u m ent, and woro found +o i n y o l v o tho q u e s t i o n o f t b e conat ifu> i o n o i i t y o f th e TTni*cd S t a t e s i p g r l ter.dor r c t o s , nnrv , rvora court rgu^d wi*b utmost, c l aboraf 1 on . and, as Jr t b r s c cai-'ps the d e c i d e d , by a v c t ^ o f f i v e t o f o u r , *ba+ 4bn u n i t e d .-.fates l o g a l +-°ndo r r o 4or. v:rro const- i +u* i o n a l , b o fb as t o cord r a c + s n n 'o a?'d O': ! r o c ' s nar> a f t e r tbo p a s s a g e o f t b e th eir issu e. Strong, bo f o r e , Ac f s which p r o v i d e d f o r The OTinion o f 4,ho co u rt was d e l i v e r e d hy v r . J u s t i c e vhc s a i d f h o r e i n , t h a t *ba r a s e o f Hepburn v . Orjsv;o3d had boon d e c i d e d Ly - c o u r t h a v i n g a l o s s number o f j u d g e s th*n th e law t h e n in e x i s 4 er co p r e v i d o d , and t h a t vdo- i t was c o n t r a r y t o cu sto m f o r t h e c o u r t «bus i r c o m p l e f o , t o h e a r ard d e c i d e c o n s t i t u t i o n a l qu*st i c n s : and t h a t t h e m a j o r i t y o f th e f u l l bench was t h o r o u g h l y c o n v i n c e d t h a t t h e d ecision lop;rj o f Hophurn v . G r is w o ld was wrong, and t v at J he U n i t e d S t a t e s t e n d e r n o t e s were c o n s t i t u + 1 o r a l . The cases th u s d e c i d e d by tho Supreme 0c'u r t- v;or° Imported a s th o L e g a l T e n d e r C a s e s , 12 W a l l a c e , 4 5 7 , lPhn, M’t o r th o p a s s a g e o f t h e who’h e r U n i t e d S t a t e s l e g a l p u r s u a n ce o f ♦hat Act o f Kay » ] , 3 0 7 8 , th e q u e s t i o n a r o s e t e n d e r r o t.e s which had beer, r e i s s u e d i r » c t , a f t e r t h a t h a y , were e q u a l l y c o n s t i t u t i o n a l w i t h t h 0n„ w h ic h had been o r i g i n a l l y i s s u e d d u r in g the c i v i l war: f o r some l a w y e r s t hought, t h a t s u c h n o t e s were c o n s t i* i,t t o r a l , as i n c i d e n t t o t h e war power o f th e g o v e r n m e n t , and were n o t const, i t u - t i o n a ] where i s s u e d in t im e o f Te a e e . ment in th e Supreme Court in 1 8 8 4 , That q u e s t i o n came on l o r a r g u in th e e a s e o f J u i l l i a r d v . oreenman, w hich i s r e p o r t e d as the I .e g a l Tender e a s e in l l o 1874. Ir. th a t c a s e , tj. s . R eports, 4 2 1 , th e c o u r t was u n a n im o u s ly 0f t h e or i n i o n , t h a t th e i s s u i n g o f U nited S ta te s l e g a l o n l y where i s s u e d tender r o t e s in. M r r o f r e a c e , cannot he dist irguished, i n ] oin.t o f c o n s t i t u t i o n a l i t y , In 4 ivy^ of* v n r i suet ro te s pt!''’ from i s s u i n g such n o t e s +V1o co u rt d e c i d e d by a v o t e o f e i g h t re f u l l y c o r s t it u t ional in ^ i + t ^ r M ils cf cred it, and m a ki n g 4hem a l e g a l . ' e r d e r , e x p r e s s c o n s t i t u t i o n a l pow^r o f Cop , r e s s , o f 4-v'e U n i t e d it ■-■‘ o s ; ard that The o i i r i c n ca se . c ~n r t v,rf»j. d e l i v e r e d h v j u « M c e u r a y , who s a i d t h a t to one, th a t of the t be p ower o f i s s u i n g is i n c l u d e d ir, t h e 4 o b o r r o w money on t h e c r e a i t t h i s rosiM.on i s f o r t i f i e d h y +he e x p r e s s c o n s 4 i t u 4 i c r • 1 p ower o f C o n g r e s s 4 c r e g u l a t e foreig n arc interstate COTV!r e r Ce . The c or.st i 4 u t i o r a l i t y o f TJni + e d S t a t e s f i n a l l y a d j u d i c a t e d hv t h e Supreme C o u r t , he on f i r s t t e n d e r n o t e s was t h u s f w ^ n J y - f T,;c .years a f t e r d e f e n d e d h y John Sherman i r t h e U n i t e d S t a t e s S e n a t e ; when f ‘ u s a d j u e l e a f e d , Sherman, h a d p r i n c i p a l l y power legal had and i t was m a i n l y b a s e d upon t h e g r o u n d w h i c h S e n a t o r invcVed, namely; t h e e x p r e s s c o n s t i t u t i o n a l o f C o n g r e s s 4 c b o r r o w money; b u t t a l k er b y v r . T'irgham o f Ohio i r p a r t l y u p o n 4he g r o u n d whi ch was 4he n o u s e o f P e p r e s e r t a t i v e s name ] y , t h e p o wer t o r e g u l a t e f o r e i s:r and j r 4e r s t a t e t h a 4- a d j u d i c a t i o n it in 1 8 6 2 ; c onine r c e . o f 1 8 8 4 h a s e v e r s ir.ee s t e e d , a r d w i l l And always remain as t be p e r m a n e n t embodi ment and a u t h o r i t a t i v e d e c l a r a t i o n o f c u r c o n s t i t u 4 i o r a l law upon 4 he s u > j o c t ed b y a f u l l b e n c h , 4 o whi ch i 4 r e l a t e s ; for it was d e c i d a r d was n e a r l y u n a n i m o u s , a n d h a s s t o o d l o n g e n o u g h t o b e s t a r e de c l c i s ; w h e r e a s t h e d e c i s i o n in t h e c a s e o f Hepburn v . wol d v;as r e n d e r e d by a s m a l l m a j o r i t y o f an i n c o m p l e t e c o u r t , i n r i e d i 4 e 1 y c h a l l e n g e d b y 4he jp c 4 h e r c a s e s , and p r o m p t l y an d e m p h a t i c a l l y r e v e r s e d hy t n o Supreme C o u r t . > future F or t h e s e d e b a t e u ^ on 4.he p u e s 4 i on c f xhn c c i',s 3 j-mp i o n a l power o f C o n g r e s s t o i s s u e U n i t e d S t a t e s l e g a l m e r e l y a c a d e m i c o r Hit l i e , t e n d e r n o t e s , must b e and ca n h a v e no p r a c t i c a l e f f e c t , u p o n t h e l aws *r f i n a n c e s o f 4 f e Tin it or; S t a t e s and was A t t o r n e y r/'t' orn], cf* 4 ho U n i t e d S t a t e s w i t h a m o t i o n f o r a r e - a r g u m e n t , and was s c o n r e a r g u e d reasons, G ris *ctns. THE PROPOSED RETIREMENT OF THE UNITED STATES NOTES Mr. C l e v e l a n d , and Mr. C a r ) i s l e , and Mr. E c k e l s , and t h e I n d i a n - a p c l i s Convent i o n o f b a n k e r s and b u s i n e s s men cl' Ja n u a ry i p , some o t c e r o i i i c i a l s 1897, and and c i t i z e n s , have b een a d v i s i n g c o n g r e s s t o r e t i r e the U n i t e d States l e g a l tender no* o r from ciroulation. in his last a n n u a l m e ssa g e o f December 7 , 1 8 9 6 , P r e s i d e n t C l e v e l a n d recommended t e a t th e U n i t e d S t a t e s n o t e s known as g r e e n b a c k s , be redeemed by t h e } r o c e a d s o f i n t e r e s t b e a r i n g bonds t o be i s s u e d i c r th e p u r p o s e . And i n h i s l a s t a n n u a l r e p o r t which was s e n t t o C ongress about t h e same t i m e , S e c r e t a r y C a r l i s l e made t h e same r e c o n m e n d a t i o n s ; and added t h a t t h e n a t i n a l banks s h o u l d a l s o be p e r m i t t e d to t a k e such bonds in e x change f o r U n i t e d S t a t e s n o t e s , and i o u s e th e bonds a s th e b a s i s f o r i b e same amount c i n a t i o n a l bank n o t e s , t o be i s s u e d by them . h i s annual r e p o r t o f December 7 , recomr . o n d a t i o n s , 1 8 9 6 , C o m p t r o ll e r E c k e l s e c h o e d t h e s e and a d d ed t h a t h e r e a f t e r th e banks s h o u l d h a v e t h e issu in g o f a l l c r e d it currency. And th e I n d i a n a p o l i s convention r e s o l v e d t h a t s t e p s s h o u l d be ta k e n to s e c u r e t h e u l t i m a t e a ll And in c l a s s e s or U n ited S t a t e s n o t e s , retirem ent o f and t o p r o v i d e f o r th e i s s u a n c e o f t h e f u t u r e p a p er money o f the U n ite d s t a t e s >y b a n k s . T his programme, i f e x e c u t e d upon th e U n i t e d S t a t e s l e g a l t e n d e r n o t e s o n l y , and n o t upon t h e t r e a s u r y n o t e s o f 1 8 9 0 , would make th e government H e r e a f t e r pay i n t e r e s t , . . a t t h r e e o r four p e r c e n t p e r annum, on what r e m a in s o f i t s n o n - i n t e r e s t b e a r i n g g r e e n b a c k d e b t , on th e one hand; and, on t h e o t h e r hand, would a i : o w b a r k s to r e c e i v e d o u b le i n t e r e s t ui on a. c o r r e s p o n d i n g amount o f t h e i r own c a p i t a l , sin g le in tere st, as a t p r e s e n t . w ould r e s u l t from th e f a c t t h a t , in stead o f And t ’-'«t r e c e p t i o n o f d o u b l e i n t e r e s t accord in g to t h i s p la n , th e hanks c o u l d t r u e about $ 3 5 0 , 0 0 0 , 000 o f the c a p i t a l , w hich th e y now have l o a n ed o u t to t h e i r c u s t o m e r s at s i n g l e in terest; and w i t h t h a t c *i l t a l c o u l d buy t h e i n t e r e s t b e a r i n g b o n d s , which a c c o r d i n g t o t h i s p l a n , government would i s s u e the in e x c h a n g e f o r t h e r e m a i n i n g o u t s t a n d i n g g r e e n - 4* b a c k s ; and on t he b a s i s o f t h o * e 1 e n d s , c u b ' d i s s u e , and 1oan t o t b e i r on i n t e r e s t c is tomers ,^/jan e q u a l amount o f b an V not^R, and a t t h e same tim e be r e c e i v i n g from It be g o v ern m en t, t h e i n t e r e s t is p o ssib le that on t h e v onds t h e m s e l v e s . 4M c; o p e r a t i o n c o u l d be c a r r i e d out w i t h v e r y lo n g * ime l e n d s b e a r i n g i n t e r e s t as low as t h r e e p e r c e n t ; its first ^ and i f s o , c o s t o f t h e pro grannie t 0 t h e g o v e r n m e n t, would be about >0 ./0 p e r annum. Rut t h e b a n k s would not make, nor th e g o v e r n ment l o s e s o nruch as t h a t from th e t r a n s a c t i o n ; b e c a u s e , accord in g to p r e s e n t l a w , th e y would have + 0 pay t o t h e g o v er n m en t, a t a x o r one p er c e n t p e r y e a r m on t h e i r new c i r c u l a t i o n , p ro fit, and s o t h a t the n e t bank n e t government l o s s from the p r o p o s e d prograirme, w o u ld , a c c o r d i n ; t o th e p r e s e n t la w , be o n l y about t w o - t h i r d s o f # 1 0 ,D 0 0 ,0 0 0 » p e r annul rn Rut S e c r e t a r y Carl i s l a m h is la s t annual r e p o r t , recom mended t h a t th e t a x upon the bark c i r c u l a t i o n be r e d u c e d from cent, 1o o n e - q u a r t e r o f one p e r c e n t ; and t h a t c h a r g e , one p er i f made, would i n c r e a s e th e p r o f i t s o f th e b ank s and +he l o s s o f the government from t w o - t h i r d s o f H O , 0 0 0 , 000 t o e l e v e n - t w e l f t h s o f *hat sum, o r ; somewhat o v e r 5 ^ , 0 0 0 , 0 0 0 p er annum. i u - i ’ fcppea r s , ar.d cannot be d e n i e d , t h a t the p ro p o sed p r o g r amue f o r th e r e t i r e m e n t o l t h e g r e e n b a c k s would tak e more than & 9 ,0 0 0 , 0 0 0 p e r ar. urn i n d e f i n i t e l y through th e f u t u r e , and c e r t a i n l y t w e n t i e t h c e n t u r y , out o f 4he t r e a s u r y o f *ho U n ite d i n t o . t h e v a u l t s and o w n e r s h ip o f +he b a n k s . ^ arl i ' l e , and T*eke I s , and at and put it C levelan d , l e a s t f he l e a d i n g gen flem en who at te n d ed mist u n d e r s t a n d t h a t w e l l en ou gh, though 1 he v ha v e i r v o r m e n tio n ed i t m essages, r e v e r ts , fates, And M e s s r s . th^ I n d ia n a , o i l s C o n v e n tio n o f ,T nuarv l;>, 1 8 9 7 , fact f a r i n t o th e in any o f t h e i r or r e s o l u t i o n s . d'lt j u s t i c e to n‘ 0 s e a c ^ i l o 4h er a d v o c a t e s o f t v,e r e t i r e m e n t o f f v,° U n i t e d S t a t e s l e g a l f e n d e r n o t e s , makes n ^ay, n e c e s s a r y t o i m m e d i a t e ly thaf- they h o l d t h a t t h e p e o p l e would r e a p from the proposed t r a n s - —- .J r7m, 2 a a ctio n , c e r t a i n indirect, b e n e f i t s , far g re a ter in v a l u e , ? 9 ,0 0 ',C T C p e r annum, which through t h e governm en t, would ca u se them to l o s e . I f t h e y are r i g h t th a n th e that tr a n s a c tio n in t h i s c o n t e n t i o n , t h e i r a d v o ca cy cl* th e p r o p o s e d r e t i r e m e n t o f th e U n ite d S t a t e s l e g a l te n d e r notes is r ig h t; tu t i f t h e y a r e wrong in t h i s con ten tion , wrong in t h a t ad vocacy; and w h e th e r t h e y are r i g h t , th e next q u e stio n for a n a l y s i s , ascertain m en t, t h e y are or are wrong, is and answ er. Those who f a v o r th e r e t i r e m e n t o f t h e U n i t e d S t a t e s l e g a l t e n d e r n o t e s , b a s e t h e i r arguments upon the f a c t t h a t t h o s e n o t e s w i l l work g r e a t i n j u s t i c e among th e p e o p l e , by v i r t u e o f t h e i r f u l l debt p a y i n g p ow er, u n l e s s t h e y are k e p t a t par w i t h g o l d ; and upon t h e f a c t t h a t t h e y cannot be k e p t a t par w i t h g o l d , u n l e s s th e government a lw a y s k eep s i t s e l f x r e p a r e d to redeem them in g o l d upon demand; and upon th e f a c t t h a t th e government cannot k e e p i t s e l f th u s p r e p a r e d , w i t h o u t k e e p i n g a l a r g e g o l d r e s e r v e f o r th e p u r p o s e ; and upon th e h y p o t h e s i s , th a t the government cannot be r e l i e d upon to be a b l e to k eep su ch a g o l d r e s e r v e . Now i t may be a d m itte d that, a l l t h e l i n k s i n t h i s c h a i n o f argu ment are tr u e and so u n d , e x c e p t +he l a s t one; but +h^re i s e v e r y r e a s o n for d isa ffirm in g that h y p o th e s is . Those r e a s o n s are th e f a c t t h a t a l w a y s , s i n c e J an uary 1 , 18*79, t h e government h a s been a b l e t o keexj s u c h a g o l d r e s e r v e ; and th e i a c t t h a t n ° v o r , of —a t t i m e , m ain tain in g d uring t h e f i r s t a i d t h e government m^ot t h e . s l i g h t e s t fo u rte en years in con vonein ce in tn at g o l d r e s e r v e a t $>100,0 G 0 ,000; and t h e f a c t t h a t d u r in g U )4, 18 f3, and 1 8 9 6 , though t h e governm ent borrowed money w i t h w h ich to m ain tain that gold r e s e r v e , i t u s e d , or w i l l u s e , a l l t h a t money, p l a c e oi" t a x e s w hich i t r e f r a i n e d from a s s e s s i n g and c o l l e c t i n g ; t h e f a c t t h a t i t has now become, and arc w i l l u n d o u b t e d l y rem ain th e p o l i c y o f th e g overnm en t, t o a s s e s s and c o l l e c t t a x e s enough to make th e government r e v e n u e s e q u a l t h e governm ent o u t g o e s ; and the f a c t t h a t t h e a s s e s s m e n t and c o l l e c t i o n o f t a x e s t o t h a t e x t e n t , may be in »0 . e x p e c t e d to o p e r a t e , as a l w a y s did o p e r a t e from J a n u a r y 1 , t o th e b e g i n n i n g o f P r e s i d e n t vent A *:/ - C lev ela n d 's la s t ad m in istration * any in c o n v e n ie n t , d r a i n a g e from th e g o l d r e s e r v e ; 1879, to p re and th e f a d , which VP,,.- s t a t e d by D a n i e l N. Morgan, t h e Tree s u r e r o f th e U n i +ed S t a t e s in h i s annual r e p o r t o f December 1 , o f g o l d toward th e t r e a s u r y , 1 8 9 6 , t h a t ‘' t h e r e i s a n a tu r a l flow which i s o f t e n l i m i t e d o n l y by t h e c a p a c i t y o f th e t r e a s u r y t o c a r r y the s p e c i e " : and t h e f a c t t h a t th is flow o f g o l d , v.r ich c o n s i s t s c f d o m e s t i c and f o r e i g n M i l l i o n and f o r e i g n c o i n , d e p o s i t e d in th e U n ite d S t a t e s mint f o r c o i n a g e , c o i n , which i s d e p o s i t e d in the t r e a s u r y n otes, i s a s t r e a m w h ich c o n t i n u e s a t a l l and U n i t e d S t a t e s in e x c h a n g e f o r U n i t e d S t a t e s tim es, and in d e e d which op e r a t e d , w i t h o u t any a s s i s t a n c e from borrowed or p u r c h a s e d g o l d , crease .^old to i n the t r e a s u r y g o ld from $ 1 0 0 , 9 5 7 , 5 6 1 , a t t h e end o f A u g u st, 1 8 9 6 , t o more than $ 1 5 0 , 0 0 0 , 0 0 0 now. These f a c t s lu sio n , are c e r t a i n l y enough t o s e n d back t o t h e domain o f de e v e r y f e a r th a t the government, cannot be r e l i e d upon t o be a b l e t o k e e p th e g o ld r e s e r v e s u f f i c i e n t in amount to m a i n t a i n a l l t h e U n i t e d " t a l e s l e g a l te n d er n o te s at par w ith g o ld ; c a s e and argum ent, and t h e r e f o r e th e e n t i r e in fa v o r o f t h e p r o p o s e d r e t i r e w * n t o f t h e U n i t e d S t a t e s l e g a l t e n d e r n o t e s , p l a i n l y a p p e a rs 1c b e w i t h o u t any r e a l f e u n d h t i on • Put s t r a n g e i v enough, i^ d o es n o t ap pear that any o f rhe a d v o c a t e s o f t h e s u b s t i t u t i o n o f bank n o t e s f o r U n i t e d s t a t e s l o g a l t e n d e r n o t e s , i n the c u r r e n c y o f t h e c o u n t r y , have p e n e t r a t e d f a r enough i n t o +he sub j e c t t o i n q u i r e whether the banks c o u l d be r e l i e d upon, tirem ent o f th e U n ite d S t a t e s r o t e s , a f t e r the re to redeem t h e i r n o t e s in g o l d . And t h e r e are good r e a s o n s f o r t h i n k i n g t h a t no r e l i a n c e w h a t e v e r c o u l d be p l a c e d upon t.ha banks redeem in g t h e i r n o t e s in a n y t h i n g b e f + e r th a n s ilv e r d o lla rs, ro les. a t any tim e a f t e r t h e r e t i r e m e n t o f th e U n i t e d S t a t e s Those r e a s o n s i n c l u d e tr o f a c t t h a t t M n a t i o n a l ban \ n o t e s , n a cco rd in g to the* n a t i o n ' ! b^nk l-iw, srp n o t retire nibble in g o l d o n l y , \ui. a rc r e d e e m a b l e in s i l v e r d o l l a r s a lso; and th e about 4 4 0 , 0 0 0 , 0 0 0 o l l u l l l ^ g a l t e n d e r s i l v e r d o l l a r s S tates i n the U n i t e d o b t a i n a b l e t o r u s e by t h e h anks in re d e em in g the f a c t n o t e s ; and ’ hat ^;old must go to a premium over s i l v e r so~n as th e p e o p l e g e n e r a l l y a c o u i r e t - e o i i n i o n , pe«- money w i l l much l o n g e r he redeemed i n g o l d ; ,v m 'ai v ?irfi ^ i r e t h a t o p i n i o n , a, e c a n c e l l e d , a lle t h a t u ^ r e a re ta ct in s i l v e r ; s i l v e r a-jl i a r s , ver o n ly , in i n i s c o u n t r y , ns t h a t no e x i s t i n g pa- and t h e f a c t ns s o o n as a l l ‘ h a t "hey ‘he government n o t e s an d t aey l e a r n t h a t t h e n a t i o n a l hank n o te s are redeem- and th e f a c t t h a t a s soon a s g o ld g o e s t o a premium o v er a l L the banks w i l l h a v e an enormous m o t i v e t o pay s i l and not g o l d , w henever t h e i r n o t e s are p r e s e n t e d tor redemp- t io n . in Thu« f a r * t h e a n a l v s i s oi* *he su bject, it appears s u b s t i t u t i o n oi* bank n o t e s f o r U n i t e d S t a t e s l e g a l th at tender the proposed n o t e s , would be s u b s t i t u t i n g a p a p e r c i r c u l a t i o n , which would b e a l m o s t c e r t a i n to s o .n f a l l to a d ep reciated s i l v e r b a s is ; f o r a p a p e r c i r c u l a t i o n which i s a lm o s t c e r t a i n to c o n t i n u e t o be a t par w i t h g o l d , and w ou ld b e pay in g the b a r k s i^u,0 0 0 , 0 0 0 each y e a r , ou t o f the t r e a s u r y o f t h e U n i t e d States, f o r d o in g t h e i r p a r t toward making that, c h a n g e . Uut. th e r e a d e r may t h i n k that, t h i s is too p la in a ca se o f a b su r d ity in p l a n n i n g , t o b e th e t r u e c h a r a c t e r o f t h e p l a n ; b e c a u s e h e may t h i n k it im p ossib le th a t P r e s id e n t C levelan d , Secretary C a r l i s l e , and comp t r o l l e r ’ c k e l s , and th e I n d i a r a p l o i s c o r ,v e n * ic n , would a l l o v e r l o o k t h e icir.t - bout, t be r e d e e m a b i l i t y o f n a t i o n a l bank n o t e s in s i l v e r d o l l a r s ; ar.d b e c a u s e b e ma.v t h i n k <hat t h e y do n o t m ention «hat p o i n t , b e c a u s e it i s w e l l x x Known to be someway i n v a l i d . Uut. t h e p o in t kno'-n »c be i n v a l i d , nor even f a i r l y a n s w e r a b l e ; most because is not w ell s e v e r a l o i th e e x p e r i e n c e d and d i s t i n g u i s h e d n a t i o n a l bank p r e s i d e n t s in th e U n i t e d o t - - t e s / who fa v o r *he p r o p o s e d programme, have b een a s k ed in p r i - « 0 v n t e c o r - » S t o n dence t o snswor the p o i n t , and have t r i e d to Mo s o , and h a v e f a i l e d t o show how th e b ank s c o u l d b e r e l i e d u p o n , a f t e r th e tirem ent o f th e U n i t e d S t a t e s ro t^ R , +o red eem Jh e i r r o t e s t h e g r e a t apparent s t r e n g t h o f t h e j o i n t re in g o l d . And i s f u r t h e r f o r t i f i e d by th e f o 11 owing f a c t s . 'Chf' n a t i o n a l banks do not redeem t h e i r n o t e s in g o l d row, and have n e v e r done s o ; and t h e y do n o t k e e p , and are not rr.(j . , i m d t o k eep any g o l d at:.w h e r e , as a fund or r e s e r v e out o f w h ich to redeem any o f t h e i r notes. The o n l y fund in e x i s t e n c e tor •‘ hat, p u r p o s e , i s the s o - c a l l e d " F iv e Per Cent Redemption Fund" p r e s c r i b e d by s e c t i o n t h r e e o f t h e amend mar,! o f June 2 s , 1874, t o t h e N a t i o n a l Bank Act o f June 1864. 'i’hat s e c t i o n p r o v i d e s t h a t e v e r y n a t i o n a l bank s h a l l a t a l l t i m e s have on d ep o sit, i n th e t r e a s u r y o f the U n i t e d S t a t e s , U rited S t a t e s , in l a w f u l money o f t h e a sum e q u a l to f i v e p e r c e n t o f i t s c i r c u l a t i o n , t o be h e l d and u s e d f o r t h e r e d e m p tio n o f such c i r c u l a t i o n . money* i n c l u d e s U n i t e d S t a t e s n o t e s , wen as g o l d ; The te r m " l a w f u l and s t a n d a r d s i l v e r d o l l a r s , and in d e e d f r a c t i o n a l s i l v e r c o i n i s l a w f u l money, as for t h e s p e c i a l p urpose o f p a y in g bank n o t e s , o r o t h e r d e b t s , amounting t o no more than f i v e d o l l a r s . Fver s i n c e June 20, 1874, it h as t h e r e f o r e b e e n oi u . to t h e n a t i o n a l b a n k s to h a v e t h e i r f i v e p e r c e n t r e d e m p tio n fund e i t h e r sol in g o l d , or in U n ite d S t a t e s n o t e s , or i n s t a n d a r d s i l v e r a r s , or in a.ll o f t h e s e k in d s o f money, and a l s o . a r t .ly in f r a c - tien et silv er coin . But th e a n n u a l r«j ort. of' U ecem ler 1, 1 8 9 6 , o f -h e Treasurer o f the U nited S t a t e s , i n d i c a t e s *hat t h e n a t i o n a l banks have n e v e r d e p o s i t e d any g o ld in t h a t Hind, and shows +h• t fund h a s c o n s i s t e d o f s i n c e J u l y 1 , 1 8 7 4 , o f t h o s e k i n d s o f money v.-er e p aid cut o f that w h at, k i n d s o f money and what amounts o f ea c h fu n d , in the re d e m p tio n o f n a t i o n a l o'-r.k n o t e s , d u r in g th e t w e n t y - t w o y e a r s en d in g w i t h June 1 ' “6 . i. f i g u r e s are as f o l l o w s ; U n ite d S t a t e s n o t e s , *>540,928,229; standard s i l v e r d o l l a r s , Checks i a y a l l e $,7,875,29?.; fraction al in U n i t e d S t a t e s n o t e s , s ilv e r co in s, $ 2 ,7 5 9 ,2 0 0 or stnr.""rd s i l v e r d o l l a r s , $ 1, 170 , 98,",, 2 & i . in a sm uch as t h e n a t i o n a l b ank s n e v e r have redeemed any o f t h e i r in - o l d u n d er e x i s t i n g law s, even during th e l a s t e ig h t e e n y e a r s , when g o l d h a s commanded no premium o v e r s i l v e r d o l l a r s ; he would be a credulous s t a t e s m a n who c o u l d b e l i e v e t h e 4 t h e y c o u l d be r e l i e d upon, u n d er e x i s t i n g l a w s , t o red eem a l l th e ir notes in g o l d h e r e a f t e r , if g o l d s h o u l d h e r e a f t e r command a premium o v er s i l v e r d o l l a r s . ^nd g o l d w i ' l h e r e a f t e r command a premium o v e r s i l v e r d o l l a r s , cai r.ct w h en ever gold^Rax be o b t a i n e d in t h i s c o u n t r y a t p a r , in exchan ge f o r p a i e r money, o r in e x c h a n g e f o r s i l v e r d o l l a r s , o f th o se ways. S ilv e r d o lla rs are n o t , or i n a t l e a s t one and n e v e r h a v e b een r e d e e m a b le in g o l d ; and th e o n l y h in d o f p aper money upon w h ic h g o l d h a s been ob ta in a b le in t h i s c o u n t r y , leg a l tencar n o t e s , not.es are r e t i r e d , in *h i s a t a r y time s i n c e 1 8 6 1 , a re th e U n i t e d S t a t e s and U n i t e d S t a t e s t r e a s u r y M i t e s . t h e r e w i l l , under e x i s t ing l a w s , be no p a p e r money c o u n tr y f o r which g o l d can he o b t a i n e d a t p a r , u n l e s s t h e na t ionaj books s h o u l d v o l u n t a r i l y redeem t h e i r r o t e s in 1 *ha in i o l d . ; o i d , u n l e s s th e n a t i o n a l b a rk s s h a l l remai n a t in f a c t redeem t h e i r in g o l d , v.^pr, at l u l i l i h e r y * 0 redeem them in s i l v e r d o l l a r s . ■Rut by s i u ] j v ro'ieeming 1 bo:;i in s i l v e r d o l l a r s o n l y , no-^t th erefore, o v e n t , and undor th o s e 3 rwh, s 1 I v e r d.0 1 1 a r s v.*i l } not ° r ^‘i ' h n otes A fter a l l th o se for one week, 4 vk - n a t i o n a l banks could d e p r e s s t h e v a l u e o f s i l v e r d o l l a r s f a r b e lo w par w ith g o l d , dol ] a r s fo>* one day, or at and c o u l d a l w a y s t h e r e a f t e r get. s i l v e r vi o w i^a ^0 redeem * h e i r n o t e s , iiuch c h e a p e r th a n th ey c o u l d g et gold for that purpose. * Them f o r e th e n a t i o n a l banks would be s u r e , a f t e r t h e r e t i r e m e n t o f a] 1 t h e U n i t e d S t a t e s n o t e s , and d u r in g the con tin u ar.ee s e n t n a t i o n a l monetary law s , t o redeem t h e i r n o t e s on ly, o f th e p r e in s i l v e r d o l l a r s and i r:us c a r r y !,11 ■ ‘ h e b u s i n e s s o f **e c o u n t r y t o a d e p r e c i a t e d s - n v o r bM.sis: u n l e s s t h e r e Is nonr m o t i v e which v 0ul<1 i n f l u e n c e them t o i 8 l 0 ”' g0 f ''e u n d e n i a b l e and enormous p r o f i t s w h ich t h e y would reap rede- mlng t h e i r n o t e s in t h e c h e a p e s t , a v c l i a b l e f o r the p u r p o s e . Ircm i n s t e a d o r in th e d e a r e s t s p e c i e Such a m o t i v e cannot be deduced from any b e n e v o l e n t p r i n c i p l e ; b e c a u s e t h e o f f i c e r s o f n a t i o n a l banks are not a t l i b e r t y t o g i v e away, or r e n o u n c e any l e g a l r i g h t , which t h o s e c o r p o r a - M o n s h a v e ; at: d b e c a u s e ‘h o s e c o r p o r a t i o n s are c o n d u c te d to make money for t n e i r s t o c k h o ld e r s , otver p eo p le. r a t h e r than, t o b e n e v o l e n t l y promote t h e of And .-uch a m o tiv e c a n n o t he deduced from th e p r o s p e c t , th R t ' hc redeu.pt io n o r th e n a t i o n a l bank n o t e s in s i l v e r d o l l a r s o n ly , w ? u l d make ’h e n a t i o n a l banks u n p o p u la r w i t h t h e p e o p l e ; b e c a u s e t h e banks knew t h a t t h e y h a v e done some u n p o p u la r t h i n g s in t h e p a s t , *i V haVe d r i v e n ; md and b e c a u s e t h e p r o s p e c t i v e u n p o p u l a r i t y would n o t p r a c t i c a l l y d im inish t h e i r b u s in e s s , f o r t h e i r r c t . e s , even when redeem ed in s i l v e r o n l y , would b e a s good a s ary o t h e r paper m0ney i n c i r c u la tio n , M on, in t h i s c o u n t r y , except and in d e e d would be a l l the u l v o r an o s i l v e r For the f o r e g o i n g r e a s o n s , , one y i n c i r c u l a - it'ir a te s. th e p r o o f seams c o m p l e t e , t h a t th e p r o - f 9* * 4 * M r e m e n t o r tt»e U n i t e d S t a t e s l e g a l t e n d e r n o $ e s , and • — : r v roteS, -ould r e s u l t v°r in ’ he n a t i o n a l banks r e d e em in g t h e i r n o t e s ir, s i l i o n l y » aurt would thus c a r r y a l l th e b u s i n e s s o r the c o u n t r y , t o a d e p r e c i a t e d s i l v e r b a s i s ; u n l e s s the law f o r t h e r e t i r e m e n t o f t h o s e U n i t e d S t a t e s n o t e s and t r e a s u r y n o t e s , s h o u l d be accompanied by some o t h e r l e g a t i o n , which s h o u l d p r a c t i c a l l y o p e r a t e t o p r e v e n t t h a t ^ i SftK to r • secretary C a r lis le , i n h i s annual r e p o r t o f December, 1 » 9 6 , s h a d owed f o r t h t h e p o s s e s s i o n by him o f some i n c o m p l e t e n o t i o n s , more or l e s s r e l e v a n t t o t h i s n e c e s s i t y , by s a y i n g t h a t " w h a tev er Plan may be f i n a l ’ y a d o p ted f o r the r e t i r e m e n t o f U n i t e d S t a t e s n o t e s and t r e a s u r y notes, again st it w ill r a i l t o a f f o r d c o m p le te p r o t e c t i o n t o the g o v ern m en t, demands l o r g o l d in the f u t u r e ; u n l e s s it in clu d es a p r o v isio n r e l i e v i n g th e t r e a s u r y irom the o b l i g a t i o n t o redeem n a t i o n a l bank n o t o s , e x c e p t such as a r e worn, r o u t i l a t e d , t a i l e d b a n k s , or r e q u i r e s t h e s e c e n t r e d e m p t i o n fund i n g o l d , or d e f a c e d , and t h e n o t e s o f i n s t i t u t i o n s to keep t h e i r f i v e per and t o d e p o s i t g o l d c o i n f o r w i t h d r a w a l o f b o n d s , when c r c u l a t i o n i s t o be s u r r e n d e r e d o r r e d u c e d , " But t h i s s u g g e s t i o n o f S e c r e t a r y C a r l i s l e r e l a t e s t o p r o t e c t i n g t h e governm ent from demands f o r g o l d , r a t h e r th a n t o p r o t c t i n g t h e p e o p l e from r e d e m p t i o n o n l y i n s i l v e r . His p r o p o s e d p r o v i s i o n r e l i e v i n g t h e t r e a s u r y from o b l i g a t i o n to redeem n a t i o n a l bank n o t e s , would be n u gatory tor e i t h e r o f t h e s e p urposes; becau se th ere upon t h e t r e a s u r y now, i s no o b l i g a t i o n to redeem any n a t i o n a l bank n o t e s i n g o l d ; and b e c a u s e i f t h e r e ware s u c h an o b l i g a t i o n , i t s rem o v a l would n o t do an y t h i n g tow ard making t h e banks redeem t h e i r n o t e s in g o l d . But t h e r e is more p o i n t i n h i s a l t e r n a t i v e recom m endation to r e q u i r e t h e s e i n s t i t u t i o n s t c k e e p t h e i r f i v e p e r c e n t r e d e m p t i o n lunri in g o l d ; b e c a u s e as l o n g a s t h a t lUnd i n t h e t r e a s u r y w o u ld l a s t , h o l d e r s o f n a t i o n a l bank n o t e s could p r e se n t th o se n o te s to i n g o l d , out o f t h a t fu n d . the t r e a s u r y , and g e t them redeemed But. t h a t fu n d would not l a s t p e o p l e came t o u n d e r s t a n d , a s t h e y s o o n w o u ld , lon g, after that n oth in g e l s e e x i s t e d o u t o f w h ich g o l d i n s t e a d o f s i l v e r c o u l d be o b t a i n e d in e x c h a n g e f o r n a t i o n a l bank n o t e s . There w e r e s e v e n d i f f e r e n t c a l e n d a r months i n P resid en t C lev ela n d 's l a s t a d m in istr a tio n , i n each o f which more th a n f i v e p e r c e n t o i th e U n i t e d S t a t e s l e g a l t e n d e r n o t e s were p r e s e n t e d t o t h e U n i t e d s t a t e s t r e a s u r y f o r r e d e m p tio n ; e v e n when p e o p l e knew t h a t t h e r e s t o o d b e tw e e n t h o s e n o t e s and s i l v e r r e d e m p t i o n , a g o l d iUnd from t h r e e t o s i x t i m e s more than f i v e p e r c e n t o f t h e n o t e s , and s t o o d a l s o a c o n s t a n t c u r r e n t o f g o l d f l o w i n g i n t o the t r e a s u r y from v a r i o u s s o u r ces. The a b s e n c e o f t h i s l a s t e l e m e n t o f c o n f i d e n c e in the m a i n t e n a n c e o f t h e g o l d fu n d, and th e r e d u c t i o n o f that, g o l d IUnd from as h i g h as t h i r t y per c e n t, t o as low as f i v e p e r c e n t , would so shake th e c o n f i d en ce o f t h e p e o p l e in the m a i n t e n a n c e o f g o l d p a y m e n ts , t h a t th e f i v e p e r c e n t g o l d iUnd p r o J o p o s e d by i o c r e t a r v Car] I s l e , f l r s * in sta n c e. w h ile, And e v e n w ould p r o b a b l y not i f t h e b a n k s s h o u l d k e e p it t h e r e w o u ld be s u c h a l a c k o f c o n f i d e n c e ke. p i t r e p l e n i s h e d l o n g , o n ce a week, in 'h a t i n o r d e r t o p revent, i t ^ ■ 1tl f un d , a ,v as o f t e n as Of l o n g , and th e day would so o n t o m a i n t a i n that, g o l d fu n d would b e g i n , prom th e i s a n o t h e r a r.a l.v s is w h ich shows t h a t . o l d r e d e m p tio n o f <»nv‘h ing by he o ir st. i ->,a hanks c o u l d n o t , v r , m aintain r o l t payment o f t.h* bank n o t e s , which w o i l d be in c i r c u l a t i o n c o u n t r y , a f t e r t h e new bank n o t e s , which i t in t h i s i s p r o i c » « d *o i s s u e p l a c e o f the U n ited s t a t e s l e g a l t e n d e r n o t e s , a id e d to as much as in g o l d , d 1'* i * co^,!1.i z e r ; i s h a v i n g b e e n i n e v i t a / l e And !h e r e w i t h on- in t h e i r a b i l i t y from b e i n g e x h a u s t e d e n t i r e l y . c o u r s e H*.> y c o u l d n o t s t a n d that, s t r a i n it', y.r i c h t h e i r f a i l u r e <u t h e r e p le n ish e d ior a t h a t t h e y would h ^ v e t o d e j o s l t f i v e p e r cent, o f t h e i r c i r c u l a t i o n c~me, 1 ast a *nok, and t r e a s u r y n o t e s , were t,o t e c n a t i o n a l bank n o t e s w hich are a l r e a d y i n e x i s t e n c e . t a k e f>e p l a c e s o f t h o s e which a r e s t i l l 016 U n i t e d S t a t e s l e g a l t e n d e r n o t e s , in in e x i s t e n c e , To o f the $ 3 4 6 ,6 a l , - and t h e * ( 1 3 4 , 0 0 0 , 0 0 0 t r e a s u r y n o t e s o f 1690; about * > 4 5 5 ,0 0 0 ,0 0 0 o f bank n o t e s would have t 0 be i s s u e d in a e d i ' i c n to th e $ 2 2 0 , 0 0 0 , 0 0 0 o f t h o s e n o t e s which are non e n c e , macing $ 6 7 5 , 0 0 0 , 0 0 0 a l t o g e t h e r . p l a u s i b l e plan for p r o v id in g fo r the in g o l d , w ith o u t v i d e that any a s s i s t a n c e in e x i s t , - Now any law which c o u l d make anv r e d e e m a b i l i t y 0 1' a l l t h o s e n o t e s from the g o v e r n m e n t, would h a v e t o p r o -he b ank s s h o u l d c r e a t e and m a i n t a i n a g o l d r e s e r v e l a r g e enough to g i v e c o n t i n e n c e to t h e p e o p l e th at t h e y c o u ld get. t h e i r bank n o t e s w henever p r e s e n t i n g them f o r r e d e m p tio n : g o l d r e s e r v e would have t o be at l e a s t as l a r g e , . o l d on and s u c h a in p r o p o r t i o n , a s the $ 1 0 0 , 0 - ‘ , 000 g o l d r e s e r v e , w hich t h e government a c c u m u la te d Ja n u a ry 1 , 1679, t o r th e p u r p o s e o f m a i n t a i n i n g g o l d payments o f t h e $ 3 4 6 , S a l , 016 of U n i t e d S t a t e s n o t e s ; and t h e r e f o r e such a tund o r iu n d s would h a v e t o a g g r e g a t e a t l e a s t $ 2 0 0 , 0 0 0 , 0 0 0 in g o l d . But th e banks do n o t h a v e . 11 r .s (hr governm ent d o e s , any in c o m in g c u r r e n t o f g o l d from t a x e s , I'rom d e p o s i t s oi' o 3<1 b i t 1l i o n a x c a j i to buy i t , or t o r e c e i v e i t custom* in mir.t.a, nor anv way t o g o t anv g o l d , s ..i 1j n o t dej c s i t g o l d on roj o s i t I'rom t h e i r c u s t o m e r s . But in 1 at V s, wheg. t h e y Hava timch. r e a s o n to f a a r or to none t h a t .sold i s g o i n g t o a premium: a n t •*'‘tided run cn ‘ he g o l d r e s e r v e s b e l o n g i n g to from g e t t i n g ar.y g o l d t o r tha 4 ‘V or tha replenishm ent l' a 'r !han t o buv i t a t a p r e m iu m th e re fo re any » x - b a n k s , would prayer.t o f those m w v e a , in And a s soon as the banks '""’’Id b e , i n to r 1V g o ld at, a premium, H o l d e r s o f go ld would put t he p r e mium up. for an e l b a t a d v a n c e would cau sa H o l d e r s o f bank n o t e s to p r e s e n t si t i o n , i n o rd er t o g e t g o ld t o s e l l a t t h a t premium, and thus e n d le s s chain would be put in o p e r a t i o n , s u r e en o u g h . b a - k s c o u l d r.ot endure t h a " e n d l e s s chain" p r o c e s s , can: them f o r t h e s i m p l e r e a s o n th a * And th e as t h e government "he governm ent has s e v e r a l great sources Of k~1 d s u p p l y which r.o barks can e v e r h a v e : n a m e ly , t h e s o u r c e s which a r i s e ou t, o f i< s t a x i n g power, and out o f i t s c o n s t i t u t i o n a l monopoly o f t h e r e c e p t i o n o f g o l d b u l l i o n for c o i n a g e . It i s somewhat s u r p r i s i n g ' h a t M e s s r s . C l e v e l a n d , C a r l i s l e , and K c k e l s , and the I n d i a n a p l o i s C o n v e n t i o n , s h o u l d a l l assume t h a t th e p ro b lem o i m a i n t a i n i n g g o l d pavemnts o r paper money in t h e U n i t e d S t a t e s c o u l e be s o l v e d , by s i m p l y s h i f t i n g t h a t burden from t h e government, o f t h e U n i t e d S t a t e s , which i s t h e most w e a l t h y and p o w e r f u l c o r p o r a t i o n t h a t e v e r e x i s t e d anywhere on t h i s p l a n e t , t o some banks now o r g a n i z e d or h e r e a f t e r to b e o r g a n i z e d , w i t h a v e r y s m a l l f r a c t i o n o f "he w e a l t h , and w i t h o u t any o f t h e power, which i s at th e command oi th e governm ent. But s u c h h a s a lw a y s b een t h e i r a s s u m p t i o n , and th ey have a lw a y s o m it t e d t o '"-se ' hat a s s u m p t i o n on any arg u m en t, or on any s t a t e m e n t o f anv ground t h » r e i o r . For ex a m p le , P r e s i d e n t C l e v e l a n d s a i d in h i s a n n u a l m e ss a g e o f December 7 , 1896 "The e n t i r e c a s e may be p r e s e n t e d by t h e s t a t e m e n t t h a t the day o f s e n s i b l e and sound f i n a n c i a l m ethods w i l l n o t 1 2 da*vn UiOn u s , u n t i l our government. abandons t h e b a n k i n g b u s i n e s s , and thp a c r u n n l a t i o n o r b i r d s . M But. he s a i d n o t h i n g l o g i c a l l y t e n d i n g to p r o v e th a t t h e l u s i n e s s o r m a i n t a i n i n g p aper money a t par w i t h g o l d can he s a f e l y c o n d u c t e d by b a r k s a l o n e . ceuher, 1896, And i n h i s a n n u a l r e p o r t o f T)e- S e c r e t a r y C a r l i s l e s a i d "The i s s u e and r e d e m p tio n o r c i r c u l a t i n g n o t e s i s n o t a p r o p e r f i n e * i o n o f t ho t r e a s u r y d e p a r t m e n t , nor o f any o t h e r departm ent o f t h e g o v er n m en t." But t h a t r e p o r t c o n t a i n s no attempt, to show t h a t any banks can. ta k e th e monopoly o f i s s u i n g •c i r c u l -nr, ing n o t e s , thoso n o te s . sa id and w i t h t h a t monopoly, can m a i n t a i n g o ld payment, o f And in h i s annual r e p o r t o f December 7 , 1 8 9 6 , Mr. F c k e l s A p o i n t must b e f i n a l l y r e a c h e d , when b a r k s s h a l l i s s u e a l l the c r e d i t , c u r r e n c y o f th e c o u n t r y , and s t a n d w h o l l y r e s p o n s i b l e , o f th e g o v ernm en t, whatever q u a n t it ie s in stea d fo r i t s r e d e m p tio n in g o ld c o i n , w henever and in p resented." But th at rep ort c o n ta in s xo statem ent or a rg u m e n t, *o show' t h a t th e p e o p l e can s a f e l y t r u s t t h a t trem en d ous r e s p o n s e - i l i t y w i t h any b a n k s . uary 12, 1897, And th e I n d i a n a p o l i s C o n v e n tio n o f J a n r e s o l v e d t h a t a b a n k in g s y s t e m s h o u l d be p r o v i d e d , tliri i s h a s a l e and e l a s t i c to c i r c u l a t i o n ; b ut the r e s c lu i ions o f th a t c o n v e r s i o n c o n t a i n r.o a tte m p t *o e x p l a i n , or e v e n sav that, banks can be r e l i e d on i c nia.ir.tain 1 o l rl redeinpu io n ot t h e j ^ cp o s ed c i r c u l a t i o n , that. r e t i r e m e n t o f a l l s+ ates r o t e s , c l a s s e s o f U n ite d a lter which t h o s e r e s o l u t i o n s a l s o demand. Tu d e r ** • h n p r i n c i p a l plans for future i s s u e s o f bank n o t e s , wh i c h have bean m^de and pul 1 i s h e d , by "those who a d v o c a t e t h e r e t i r e m e n t the United .States totes, i n c l u d e no p r o v i s i o n w h a t e v e r f o r t i o n o f t he p r o p o s e d bank n o t e s in s o l d . ah -j t e d a t 1 he a n n u a l m e e t i n g o f t h e in Baltimore in O c t o b e r , Amerirm" 18 9 4 , p r o v i d e d t h a t n o t e s s n o u l d be made a c c o r d i n g t o h a s a l r e a d y shown t h a t , The the a c c o r d i n g to A ssociation, held t h e r e de mp t io n o f a l l bank now e x i s t *hat red em p p l a n , whi ch was B altim ore Ba r ke rs the cf iu p , law; and t h i s e ssay l aw, n a t i o n a l bank n o t e s , while redeemable in sold at t h e option of the banks, are also redeem S ecretary able in silver dollars, and have never been redeemed in gold. C a r l i s l e ' s plan, which accompanied, or short.lv followed, his annual re port of lb94, required each national bank to deposit in the treasury, a guarantee fund to secure its notes, amounting to thirty p»r cent of t’-iOH^ notes, and to consist of other lawful quire m oney than gold, and re each national bank to a.lso redeem its notes at. its own office, or at its own office and agencies to be designated by it; but. that plan did not require that any rede ipt.ion should be jn gold. It hi-1-, however, been suggested that the national banks can be en siled and compelled to maintain gold redemption oi their old notes, and ot their new notes to be issued in place of +he United States notes, >w means of an amendment to the national bank act, providing that each national bank shall keep in its own vaults, a bind of gold amount in.-; to * c e n t of i t s outs »* ’’ eve-y u a ‘ ioual bank ' »e it it otes, Ion a ••hall redeem i t *or ym e ; ■, - >se of » flee; and totes in ,old ■■ i •. . tuch presen tation; and providing that no national bank shall be required to redeem its notes anywhere else than at. its own office. The argument in support of ‘his suggestion is, that it would be impracticable for anybody who wanted to get a large amount of geld for export or speculation, to col lect notes enough of any particular bank to exhaust, its f i v e per cent f,cl'’ rec mpt ion iund. The raj ly to this argument, is that it would not be impracticable for either of several g r e a t, handlers of money in New York City, to collect in a few davs, or at most in a few weeks, enough of the notes Of some one bank, which might be selected for t h e raid, to exhaust 'he five per cent gold redemption fund of that bank in one hour; and that, a few examples of such an operation would teach the public t ■-t ’Uch r. disaster night- happen t.o any hank, on any day, and thus put the notes of that bank below par in gold; and that, where the pub- 1 4 Me knows ‘.hat s u c h a d i s a s t e r -iny n a t i o n a l Dank, par, th e y w i l l is p o ssib le, i n respect o f th e notes o f a c c e p t the n o t e s o f no n a t i o n a l bank a t f o r f e a r t h a t s u c h a disaster may haj pen t o t h o s e p a r t i c u l a r n o t e s . And there is also a const.itutional doubt that national banks car. be compelled to redeem their own notes in gold only. That constitution al doubt if. connected with +he fact that there are silver dollars in the United States, which, pursuance of which they wore eoined, than 440,000,000 according to the lavs m are 1U11 legal tender for all > •l/'b ts, m ore v/h i cb including national bank nct^s. Mow a ] should provide t h a t national bank notes can be redeemed only in gold, would thereby repeal tV> laws which make silver dollars legal tender for all debts, as to some of' those debts; while leaving those laws in full force as, to all other debts; and there is a serious doubt of the constitutional power of Congress to make silver dollars legal tender tor some debts, and not legal tender for other debts. That doubt arises out of the express constitutional regulation of Congressional power on that, subject.; which power is "to coin money, and regulate the value thereof.” now the only way to regulate the value of a coin by law, is to ircvide that every body in the country, must take it at the prescribed value; because if the government does no more than certify to the weight and fineness of that coin, it leaves its value to be regulated in the market by •♦he laws of trade, just as the value of a bushel of wheat is regulated, after some reliable authority has certified to its grade a.nd measure. And t h e value of a coin cannot be regulated by a law which provides that it s h M « be legal tender lor some purposes, and r.ot legal tender for others; because such a law leaves the regulation of that value, for the latter p u n cses, to the laws of trade; ar.d (he i*+.< or regulation will always affect the general value of that coin to ever varying extents. .Therefore, a law which should provide that, ‘he 440,000,000 silver dollar.s i?i <>is country, should thereafter not be legal tender in payment 1 5 of national bank notes, while remaining 1>'ga 1 tender for all other pur poses, -oul l apparently be contrary to +he constitutional power and ^'•tt .v ol Congress fo regulate the value of’ those coins, hut aside from this constitutional point, it is plain that the government, having coined those 4 4 0 , 0 0 0 , 0 0 0 silver dollars, account at an enormous profit., with only about on its own filty cents worth of silver in each one, and having paid them all out at par, either in their own proper persons, or by their representatives, the silver cer tificates; it would be bad faith and partial repudiation for the govern ment to now deprive them of part of their legal tender the har.es of the public; power, while ln and he is a dreamer, who supposes that, the Congress oi 1ue United states will ever do that thing. Still 4here is one plan, by means of which all the United states >• notes, eeiter’, and ;reasury rotes oi’ 3.890, e kept at par with gold. Xhftt i]1, c © a * U t * ing lords, ing, -*♦ i-ed a.-.d cnn- r-,d nat ional bank notes be issued in "heir pieces, m.d iv-e i&t- ter n o 1e« 1 ,,^! ir-v te in exchange lr Issuing about -: 50,000 of in ereat-bear- for those of the *346,681,016 of United states tender notes, which are still m existence; and consists in sell for use in the arts, the remaining silver bullion w h iohwas pur chased With the now outstanding *124,000,000, or thereabouts, of treas ury t e ♦rs pi ±890; and consists in issuing about. *20,000,000 of interest bearing bonds with which to procure gold, to add to the *104,000,000, wVich n 'at Rilvpr ^billion might, retch; and consists in using the *124,000,ooo cl gold thus collected, to redeem and cancel the outstanding treasury notes of 1890. And that flan lurther consists in allowing and encouraging the national barks to issue *350,000,000 of national bank notes upon 'be security of those two sets 0f bonds; and consists m providing that the 440,000,000 of silver dollars m the United states, shall be redeemed by the United States in gold, whenever presented to 16 tho !roasury, either in their own proper persons, their representedives, the silver certificates; in the t r e a s u r y , or otherwise received time, in payment of government tion. or in the persons of and when thus redeemed, shall be reissued from + ime to obligations, and thus kept, in circula According to this plan, the government would have to keep the same $100,000*000 gold reserve lor that new purpose, w h ich it has here tofore kept lor the purj one of maintaining gold redemption ol' the United ot- •*•os : : te s ; and the oii+s tan d ing s i.1v e r d o *11a r s and could he used hereafter, used heretofore, just as +he United states rotes have been to draw gold out of i^e treasury. by 4he government o f gold payment .old payment And the maintenance of +>’e $ 4 4 0 , 0 0 0 , 0 0 0 silver certificates, would operate hereafter, government of silver c e r t ii ic a t.es of silver, and as the maintenance by the of United Spates notes has operated hereto fore, to indirectly maintain t>>e ra+ion' l bank notes at. par with g o l d , without ar v gold rede;apt ion of those notes themselves. The new r e s u l t s ^ ^ ^ r'9r ' ,0 0 0 ol i n t e r e s t hearing; debt., te r -o s t b e a r i n g d e b t , banks d o u b le o f t h i s p la n would c o n s i s t f o r ♦he o f +he U n i t e d s t a t e s ; in s u b s t i t u t i n g about r anr amount ol' non—i n — and in g i v i n g t h e n a t i o n a l i n t e r e s t upon about $ * 5 5 0 , 0 0 ^ , 0 0 0 o f t h e i r cap i t a l , o f s i n g 1e i n t e r e s t , in stea d as a t p r e,snn t * and in c o n t r a c t i n g th e c u r r e n c y ol' c o u n t r y about $ 1 0 4 , 0 0 0 , 0 0 0 , th ro u g h t h e retirem ent. o f t h a t amount o f t r e a s u r y n o t e s o f 1 8 9 0 , by means ol o f th e s i l v e r b u l l i o n , th e s a l e , f o r u s e in t h e ar t.s, to ♦ h a t com mercial v a l u e , which h o l d s as an a s s e t a g a i n s t t h o s e n o t e s . ah s e c o n d , v o u ld be i n j u r i o u s to e v e r y b o d y in the t r e a s u r y now 0 f t h e s e r e s u l t s except, th e c o u n t r y : and t h a t r e s u l t would be i n j u r i o u s 4o ev e r y b o d y e x c e p t t h e n a t i o n a l b a n k s . Tb.it ♦ h i s p la n fo r r e t i r i n g a l l t he U n i t e d S t a t e s l e g a l ro les, tender and t r e a s u r y n o t e s cl* 1 8 9 0 , when t h u s found to be e n t i r e l y e ffe r t iv e, as a measure *0 - e i l o v e <he government in- i rom m a i n t a i n i n g a g o l ^ rrs< r v e : c c u l d be su] i lei te sted by * tiir t a er i •!an which would have 1 7 p la cet. That i\x r t h e r p l a n would c o n s i s t OOO silv e r * h o l l a r s * and t h e s i l v e r in r e t i r i n g th e 4 4 0 , 0 0 0 , - i i i c a t e s w h ich r ^ | . r p s e n t s some o f them in c i r c u l a t i o n , w h i l e th e h o l l a r s w hich t h e y r e p r e s e n t are in treasury. That r e t irement would r e q u i r e t h e e x p e n d i t u r e o f the $ 1 0 0 ,0 - 0 ,0 0 0 gold r e se r v e ; and the s a l e , 4 4 0 , 0 0 0 , 0 0 0 s i l v e r d o l l a r s t o he 0 00 ,0 0 0 -e t i r e d ; o f i n t e r e s t hearing- l e n d s . tor use i n +he a r t s , o f the ■nd +he i s s u e 0 f about $ 1 2 0 , To d i m i n i s h - s much as p o s s i b l e , th e c o n t r a c t i o n o f +h e c u r r e n c y to t h e e x t e n t o f $ 3 4 0 , 0 0 0 , 0 0 0 which won"1'’ o t h e r w i s e r e s u l t from is op era tio n ; th is t h r t h e r p l a n would allcvr and e n c o u r a g e th e n a t i o n a l h a rk s to i s s u e $ 1 2 0 , 0 0 0 , 0 0 0 o f n a t i o n al hank n o t e s , upon the s e c u r i t y o f 4he l e n d s s o l d by th e governm en t, t o a i d in t h e r e t i r e m e n t o f th e 4 4 0 , 0 0 0 , 0 0 0 s i l v e r d o l l a r s . fir st; The new r e s u l t s o f t h i s I h r t h e r p l a n , would c o n s i s t ^ i n s u b s t i t u t i n g about § 1 2 0 , 0 0 0 , 0 0 0 o f i n t e r e s t b e a r i n g d eb t o f t h e U n i t e d S t a t e s , f o r second; t h e same amount o f n o n - i n t e r e s t h e a r i n g d e b t ; and^ in g i v i n g the n a t i o n al hanks r o u b l e i n t e r e s t on about $ 1 2 0 , 0 0 0 , 0 0 0 o f t h e i r c a p i t a l , i n s t e a d th ird ; d s i n g l e i n t e r e s t as at, p r e s e n t ; ard^ ir^bor t r a c t in g t h e cu rr e n c y o f th e c o u n t r y about $ 2 2 0 , 0 0 0 , 0 0 0 , on a c c o u n t o f th e d i f t o r e nee betw een th e 440,0^ 0,000 s i l v e r d o lla r s r e t i r e d , on th e one h a n d , and th e § 1 0 0 . 0 0 0 , 0 0 ° g o l d r e s e r v e r e l e a s e d , and the $ 1 2 0 , 0 0 0 , 0 0 0 n a t i o n a l bank r o t e s i s „ fourth; s u e d , on account o f t h a t r e t i r e m e n t , on t h e c +h er hand; and in r e l i e v ’ A ins, t h e governm ent from g o l f i n g -t o v ^ r p i n g r-i.y i;03o r e s e r v e h e r e a f t e r * fifth : ' p r ' W r! c c m p ^ U in g th o n a t i o n a l fcenVs t c m a i n t a i n •,olO r e d e m p t i o n o f ” ' ^ i r n o t e s , l o r want o f or.y o +* e r 1 0 ^ 1 l e n d e r : ,0n - v in <he country? s ix th ; ard ^ in d i s a b l i n g th e government from V r e ^ t ^ r m a i n t a i n i n g , or h e l p i n g + 0 t . a i r t r ir, r. old payments o f p a p e r money, s h o u l d i-rove fo be u n a b l e t o do t h a t g r e e t ib e tirst work a l o n e . and t h i r d ol t h e s e r e s u l t s would be i n j u r i o u s t o e v e r y body in th e U n i t e d S t a t e s ; and th e s ec o n d would be b ody, e x c e p t th e n a t i o n a l b a n k s . in c a s e t h e n a t i o n a l banks in j u r io u s to every rhe f o u r t h r e s u l t and th e f i f t h would IB go? o r a l l y b e n e f i c i a l ; p r o v i d e d t h e s i x t h r e s u l t s h o u l d n o t pro v e t o be an e v i l o u t w e i g h i n g a l l bene . f i t s which c o u l d f l o w from them or any oth ers. to d i s a b l e t h e g o v e r u n e n t from h e r e a f t e r m a i n t a i n i n g , or h e l p in s m a i n t a i n g o l d payments o f p a p e r money i n t h i s c o u n t r y , w o u ld be a v e r y i n j u r i o u s m easu re; b e c a u s e t h e r e w o u ld t h e r e b y be imposed upon t h e na t i o n a l b a n k s , t h e work o f m a i n t a i n i n g g o l d paym ents o f t h e i r p r e s e n t c i r c u l a t i o n o f $ 2 2 0 , 0 0 0 , 0 0 0 , p l u s t h e $ 3 5 0 , 0 0 0 , 0 0 0 which would be i s s u e d u i o n th e r e t i r e m e n t o f th e U n i t e d S t a t e s l e g a l t e n d e r n o t e s and t r e a s u r y n o t e s , and p l u s th e $ 1 2 0 , 0 0 0 , 0 0 0 , w h ic h would be i s s u e d upon t h e r e t i r e m e n t o f t h e s i l v e r d o l l a r s ; making $ 6 9 0 , 0 0 0 , 0 0 0 in a l l . W hile some o f t h e banks i s s u i n g t h e s e n o t e s would p r o b a b ly be a b l e t o main t a i n gold redem ption t h e r e o f , in g, for a w h ile; o t h e r s o f them would be f a i l from time t o tim e s o to do; and the p e o p l e would n o t know b e f o r e hand w h ich n a t i o n a l banks were t,o s u c c e e d , and which were t o f a i l . T h is u n c e r t a i n t y would n a t u r a l l y c a u s e th e p e o p l e t o d i s t r u s t , more or l e s s a c u t e l y or c h r o n i c a l l y , according' t o c i r c u m s t a n c e s , t h e n a t i o n a l banks t o redeem t h ^ i r n o t e s i n g o l d ; t h e p r o m is e s o f a l l ar.d t h a t d i s t r u s t would n a t u r a l l y c a u s e r u n s t o be made on sundry o f t h o s e banks from tim e t o tim e; cases; and th o s e runs o f c o u r s e would d e v e l o p f a i l u r e s and t h o s e f a i l u r e s would deepen s t i l l fu rth er, i n many Die p u b l i c d i s t r u s t o f th e r e d e e m a b i l i t y o f n a t i o n a l bank n o t e s . A d ep rec ia tio n o f those n o tes, f a r b e lo w par in g o l d , would be the in e v ita b le r e s u l t o f th a t d i s t r u s t , and t h i s n a t i o n would t h u s be p l u n g e d i n t o the e v i l s o f a d e p r e c i a t e d n o n - l e g a l t e n d e r paper t h e r ^ t o r e m a in , far in to the tw e n t ie th century. c u r r e r r v Col lection Title Series/Volume Shelf/Accession No. LC 77-38 (1/70)