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Extracted from the report of the Secretary of the Treasury on the state of the finances, for the year 1864.




jjefort

46

on

t h e

'finances.

O F F I C E OF COMPTROLLER OF T H E C U R R E N C Y ,

November 25, 1864.
I n compliance w i t h tlie requirements of the 61st section of the national cur r
orcney act, I have the honor of making through y o u to the Congress of the
United States the following report:
•
Since m y last annual report two hundred and eighty-two new hanks have
been Organized, and one hundred and sixty-eight State banks have been changed
into national ones. Of the one hundred banks last organized, sixty-seven bave
been conversions of State banks, and nearly all the papers now being filed are
for the change of State banks into national associations.
„ .
There are now i n existence, under the national currency act, five hundred and
eighty-four associations, which are located i n the following States:
In
In
In
In
In
In
' In
In
In
In
In
In
In
In
In
In
In
In
In
In
In
In
In
In
In
In
In

Maine
New Hampshire
Vermont
Massachusetts
Rhode Island
ConnecticutNew York
New Jersey
Pennsylvania
Delaware
Maryland
District of Columbia
Virginia
West Virginia
Ohio
Michigan
Indiana
Illinois
Wisconsin
Minnesota
Iowa
Missouri
Kansas
Nebraska Territory
Kentucky
Tennessee . *
Louisiana

v

1
.

,

~
'

.

18
9
10
67
,
2
20
100
16
109
1
3
2
1
1...
2
84
15
34
1
38
15
4
20
7
1
1
1
3
1

T h e paid-in capital of the banks i n the respective States and Territories, the
currency delivered to them, (a considerable portion of which has not been put
into circulation,) and the bonds deposited w i t h the Treasurer to secure their
notes, are as follows;




.44

47 REPORT OK THE FINANCES.

State.

Maine
New Hampshire
Vermont
Rhode Island
Massachusetts
Connecticut
New York
Pennsylvania
Now Jersey
Delaware
Maryland
,
District of Columbia.
Virginia
West Virginia
Ohio
Kentucky
Indiana
Illinois
Michigan
..
Wisconsin
Minnesota
Iowa
Nebraska Territory
Kansas
Missouri
Tennessee
Louisiana
Total.

Capital stock
paid in.

Circulation.

$2,749, 800 00

81,887,880
552,700
1,311,800
414,000
12,536,850
4,084,050
12,584,950
10,193,830
1,756,170

$2,244 500
944,000
1,636,000
560,000
16,888,650
4,525,500
14,064,600
14,964,100

200,000

250,000
1,400,000
534,000

1 , 1 2 0 000 00

1,490, 000 00
700, 000 00
25,909, 040 00
5,176, 638 00
,20,599, 175 03
21,120, 148 88
2,141, 249 00
300, 000 00
1,560, 000 00

1,245,000
477,000
* 95,000
140,000
7,505,880

600, 000 00
95, 025 00

206, 950 00
10,035, 165 86

200, 000 00
4,201, 671 26
4,147, 837 25
1,165, 090 00
1,040, 277 00
590, 000 00
1,215, 000 00
40, 000 00

100, 000
1,621, 530
340, 000
500, 000

00
00

00
00

108,964,597 28

1

162,000
3,148,400
3; 396,560
797,800
774,500
442,000
945,900
27,000
49,000
722,000
234,380

180,000
65,864,650

Bonds.

2,011,000

112,000
230,000
8,749,850
184,000
3,924,100
3,794,600
943,500
903.050
603,000
1,092,000
30,000
55,000
865,000
263,000

200,000
81,961,450

A detailed statement o f the affairs o f each bank on the first Monday of October last, w i t h an abstract -of the condition of all* of them i n the aggregate on
that day, is herewith submitted, together w i t h the names and compensation of
the clerks, and the total expenses of the bureVu for the fiscal year.
A large proportion o f the circulating notes w h i c h haVe l?een furnished b y the
Comptroller was intended to take the place and is taking the, place of the circulation of such State banks as have been converted into national ones, or of those
whose notes have been voluntarily retired, or. have been returned from those
parts of the country i n w h i c h the notes of the U n i t e d States and of the national
banks are alone current; so that the currency delivered to the national banks is
not and w i l l not be altogether an addition .to the paper money of the country,
but rather, to a considerable extent, the substitution of i t for that of the State
banks.
I t is perhaps to be regretted that so many new banks have been organised
i n States where, before the passage of the act, there was no deficiency of banki n g c a p i t a l ; ' There would have been less cause for apprehension that banking
capital i n any o f the States was being too r a p i d l y increased, if, b y suitable
legislation o f the States, State banks had been4 sooner authorized to avail them*
- selves of the benefits o f the national currency act, and the managers o f banks,
. where the necessary legislation had been obtained, had more promptly discemcd
- the inevitable tendency of the public sentiment, And co-operated w i t h the government i n its efforts to nationalize the bank note circulation of the country.
I t was not the intention of the originators and friends o f the system, nor has i t
been the policy of the Comptroller, to swell, through the instrumentality of the
.national banks, the volume o f paper money. O n the contrary, the system was




48

REPORT OK THE FINANCES. .44

designed to check overissues b y requiring ample security for every dollar
which should be put into circulation, and it has been the aim of the Comptroller
so'to administer the law as to prevent, instead of encouraging, an unhealthy and
dangerous expansion of credits.
I am happy i n being able to say that m y apprehensions of a too rapid increase of national banks have been much lessened b y the recent action of jnany
State banks. The legislature of Pennsylvania, following the example of the
legislatures of Massachusetts, Connecticut, & c „ has recently authorized the
banks of that State to reorganize under the national system, and the stockholders of so many of them are availing themselves of this authority, as to render it
•quite certain that at an early day there w i l l be in this great central State, without a dangerous increase of its banking capital, but one system of banking. I n
fact, the indications are now unmistakable that the time is not far distant when
the people of the United States w i l l be everywhere relieved of a bank note circulation of limited credit and uncertain value, and supplied w i t h one of uniform
credit and as solvent as the nation. I t has been the earnest wish of tho Comptroller that this desirable result should be brought about through the agency of
1
existing banks, rather than b y the organization Of new ones, so that the national
circulation might be introduced w i t h as little increase of banking capital as possible. A national bank note currency w i l l be one of the compensations for the
heavy debt which has been incurred i n - the terrible contest i n which the nation
has been involved.; I f i t can be everywhere introduced, as now seems probable,
without creating a dangerous bank note inflation, i t w i l l prove to be a compensation which more than anything else w i l l reconcile the people to the burdens
which the war must necessarily impose upon them. I t w i l l be so by its tendency to regulate domestic exchanges, by the stability i t w i l l give to trade, in
preventing unsecured issues and bank note panics, b y saving the people from
losses i n the use of paper money, and by its influence i n securing and perpetuating that national unity which is the ark of our safety.
I t is an interesting fact-, that this great change i3 taking place—this great
financial revolution, i f I may so call it, is being accomplished, without disturbing the business of the country. State banks, whose conversions are facilitated
b y enabling acts, are being daily reorganized without a curtailment of discounts,
or even a temporary derangement of their affairs. Nearly a l l the banking capital of Philadelphia has been recently nationalized, w i t h scarcely an interruption
of the business of the banks for a single day. I n States where no enabling
legislation has been obtained, the change from tho State to the national system
is attended with more difficulty. But even i n these States, b y the organization
of national banks by the stockholders of State bankd, and the transfer of the
assets of the latter to the former, the change has been already, i n many instances,
.effected without loss to the owners, and with very little practical inconvenience
to the managers.
I t is also an interesting fact, that the stock of State banks which have been
changed into national associations -has not been depreciated b y the change; on
the contrary, the shares of most of them have been appreciated, and I know of
no instance in which their real or market value has been injuriously affected by
it. This fact sufficiently refutes the charge, sometimes u.rged against the system,
.that i t was being forced upon thfe country to the prejudice of the stockholders
of State institutions.
I t may be proper for me to state another fact' i n this connexion of interest
to the public, which is, that the national banks are, without any known exceptions, i n safe, although some of them are* i n inexperienced hands, and that the
fears that the national banking system would be the means of filling the country
w i t h banks of fictitious capitals, and be a reproduction, on a large scale, of the
«tock banking systems of States i n which they had proved to be a failure, i f
not a fraud, are, from present indications, without a real foundation.



.44
49 REPORT OK T H E FINANCES.
The fact that such apprehensions were entertained or were professed to he
entertained b y the bankers of a State, in which a system similar i n some of its
main feautres was in practical operation, intimidated, for a while, the capitalists of other States, and retarded the reorganization of State banks, but worked
no permanent injury to the national system. On the contrary, the expression
of these fears has led to a thorough examination of the act, and a careful observation of its administration, and tho result has been favorable to both. I t has
been discovered that in many important particulars the national system differs
from, and is an improvement upon, tho State system, which i t the most closely
resembles; that i t restricts circulation to ninety per cent, of the bonds on deposit with the Treasurer, and prohibits the banks from issuing notes to an amount
exceeding their bona fide paid up capitals, sworn to b y their officers; that
every interior national bank, in addition to redeeming its notes at its own counter,
is compelled to redeem at par, at some commercial centre, thereby tending to
prevent high rates of exchange between the different sections of the country,
and that, in case of the failure of a bank to redeem its notes according to the
provisions of the act, these notes, instead of being depreciated, would be at once
redeemable i n lawful money, at the treasury of the United States. I t has been
also ascertained that the Comptroller is requiring the most satisfactory references
or credentials i n regard to the standing and responsibility of the persons proposing to organize national banks, and is instituting a system of examinations
which w i l l do much to expose and check improper practices on the part o f the
bankers, and violations of the wholesome provisions of the law.
This examination of the act, and1 the observation of the manner i n which i t
i t is being administered, have resulted i n the entering up of a popular judgment
i n favor of the national banking system ; a judgment, not that the system is a
perfect one, nor free from danger of abuse, but that it is a safer system, better
adapted to the nature of our political institutions, and to our commercial necessities, giving more strength tu the government, w i t h less risk of its being used
b y the government against the just rights of the States, or the rights of the
people, than any system which has yet been devised, and that b y such amendments of the act as experience may show to be needful, it may be made as
little objectionable, and as beneficial to the government and the people, as any
paper money banking system that wisdom and experience are likely to invent.
I t promises to give to the people that long existing "desideratum," a national
currency without a national bank, a bank note circulation of uniform value
without the creation of a moneyed power i n a few hands over the politics and
business of the country.
Of course this system depends for its success upon the maintenance of tho
' faith and credit of the nation, which, in their turn, depend upon the preservation of the national integrity. I f these fail, the national banking system w i l l
f a i l ; but i t w i l l go down w i t h all other important interests, and w i l l be but a
part of the general wreck. T h a t such a calamity is not i n store for us is the
confident hope and belief of all true men of the loyal States. T h e anxieties
and apprehensions which have existed heretofore on this point are rapidly disappearing as the loyal mind of the United States has hardened to the inexorable resolution that the Union shall be preserved, and the public credit shall be.
maintained, no matter what sacrifices and burdens the execution of this resolution may involve.
I t is a common objection to the national banking system, on the part of some
who favor a national currency, that it w i l l deprive the government of the privilege i t might safely use, and the field it might profitably occupy, b y the continued circulation of its own notes. W h y , i t is asked, should not the government drive out of circulation all bank notes, and continue to issue, as i t has
done since the commencement of the war, its own notes, and thus save the
interest which otherwise w i l l go to the banks? I n answer, I would remark:
4

P




50

REPORT OK THE FINANCES. .44

T h e banking interest in the United States is an important one; it lias grown
with the business of the country, and has been largely instrumental in developing the national resources and i n increasing the national wealth. Banks of
issue, badly and dishonestly as many of them have been managed, and disastrous as have been the failures which bad management and dishonesty have
produced, have still been of unquestionable advantage to the people. The
capital of the country has been largely, and i n good faith, invested in' them,
and thousands of stockholders depend upon the dividends upon their bank
stock for support. I t is an interest which has stood b y the government in its
' struggles with a gigantic rebelfcon; and now, when it is indispensable that tlie
.government'should control the issues of paper money, there has been created
i a national banking system, not to destroy the State banks but to absorb them,
and that, too, without prejudice to their stockholders.
Governments should not be bankers. None has existed which could be safely
,trusted with the privilege of permanently issuing its own notes as money. Circulating notes have been issued under peculiar circumstances b y other governments, as i t is now being done b y that of the United States, but the judgment
of tho world is against i t as a permanent policy, and nothing but an overpowering public exigency w i l l at any time j u s t i f y it. Under popular institutions
like ours no more dangerous, no more corrupting power could be lodged in the
hands of the party i n possession of the government; none more perilous to
official probity, and free elections. Give to a party dominant i n the legislative
and executive branches of the government tlie authority of issuing paper money
for the purpose of furnishing the country w i t h its currency, subject as i t would
be to no restraint but its own pleasure, and what guaranty would there be that
this authority would be honestly and judiciously used? I f there were no risk
-in the preparation of tlie notes, and checks were provided to make fraudulent
issues an impossibility, the power of issuing government promises as a circulating
medium is too dangerous a one to be conferred upon any party, except under
extraordinary circumstances.
;
The present issue of United States notes as lawful money, and the decisions
of the courts sustaining the constitutionality of the issue, have been justified
b y the consideration that under a great public necessity, when the nation's life
is i n peril, policies must be framed and laws must be interpreted w i t h a view to
the preservation of the government. This is the paramount consideration to
which all others must bend. Whatever opinions may have been, i n times past,
entertained in regard to the propriety .of the issue of United States notes, and
the expediency as well as the constitutionality of the law making them a legal
tender, there are now, I apprehend, very few intelligent persons who are not
persuaded that without these notes, and the character of lawful money given
to them b y Congress and confirmed b y the courts, the credit of the nation
would have, given way at the very outbreak of the rebellion. W h e n the war
has been concluded, and the exigency which made the issue of government
notes a necessity has ceased to exist, there w i l l be very few to advocate the
continued use of them on the ground of economy.
I f , however, there were no objections of the k i n d alluded to, there are other
objections to the permanent issue of circulating notes b y the government, which
must be apparent to all who have considered the object and uses of a paper
currency.
;
, Paper money has been found to be useful, or rather an absolute necessity in
all commercial countries for the convenient transaction of business, and as a
circulating representative of values too large to be represented b y coin. Although
the fruitful cause of great evils, b y reason of its unregulated use, and of itsi
uncertain and frequently deceptive character, the general uti!ity of i t can hardly
be Questioned. Now, what is needed i n a paper circulating medium, is, that it
ehould be convertible into coin; that it should be sufficient i n amount to answer



51 REPORT OK THE FINANCES.

.44

the purposes of legitimate business; that i t should not, on the one Hand, b y
,being overissued, encourage extravagance and speculation and give an art ficial
and unreliable value to property; nor, on the other hand, by being reduced below
the proper standard, interrupt business and unsettle values. I t should be supplied to just the extent of the demands of a healthy trade. I t should be increased as the regular business of the country may require its increase, and be
diminished as the proper demand for i t is diminished.
I t is not pretended that banks of issue have furnished this kind of circulation.
Bank notes, with few exceptions, have been convertible into coin when there
was no demand for coin, and inconvertible when there was. T h e y have, too
generally, been issued for the exclusive benefit'of the bankers, and not for the
convenience of the public, and they have encouraged speculation, when their true
mission was to facilitate trado. I t has been the bane of a bank note circulation,
that it has been expanded by the avarice of the bankers, and contracted by the
distrust that overissues have created.
Now, this objection to a bank note circulation applies with much greater force
to government issues. There is always inducement enough for banks to keep
up a full circulation, and against excessive issues there aro tho restrictions of
law and the liability to redeem. Government notes, i n the issue - thereof, would
be regulated only by the necessities of the government or the interests of tho
party in power. A t one time they might bo increased altogether beyond the
needs of commerce and trade, thereby enhancing prices and inducing speculation; at another, they might be so ,reduced as to embarrass business and p r e cipitate financial disasters. T h e y would be incomparably worse in this respect
than a bank note currency, because the power that should control circulation
would be the power that furnishes it. Supplied by an authority not in sympathy j
with trade, they would not be accommodated to the requirements of trade*.
T h e y might be the fullest i n volume when there was the least demand for a f u l l
circulation, and the most contracted when there was a healthy demand for a m
increase. T h e y would eventually become an undesirable circulation, because •
there .would be no way i n which the redemption of them could be enforced
they would be a dangerous circulation, because they would be under the c o n trol of political parties; an unreliable circulation, because, having1 no connexionw i t h trade and commerce, they would not be regulated by their necessities.
There are objections to a l l kinds of paper money; but, i n some form, it is
commercial necessity, and no form has yet been contrived so* little objectionable,
as that which is authorized b y the national currency act. Under this act the •
government performs its proper functions b y exercising one of its constitutional!
powers for the regulation of commerce, by fixing the maximum of bank notecirculation, securing its solvency, and giving to it nationality of character and
uniformity of value. I t takes the promises, which are to go among the people *
through the national banks, put its seal upon them, and guarantees their
redemption, as i t takes the precious ore from the mines—the property of individuals—coins it into money of the United States and fixes the value thereof.
It
thus performs the proper offices of government. I n doing so i t interferes with?
no State rights, meddles w i t h no man's lawful pursuits. I t stands between the
bankers and the people, and while i t protects the latter from- imposition i n the •
use of a bank note currency, it trespasses upon no privileges of the former.
W i t h o u t becoming a banker, and without, as i n the case of tho charter of the
United States Bank, conferring peculiar i f not dangerous- privileges uppn a
single corporation, i t provides a national circulation, indispensable for its own
use and safety i n the collection of its internal revenues, and suited to the circumstances of the country.
B u t while the national currency act is restrictive i n its general provisions,
and is expected, when generally adopted to prevent expansions, there is still
danger that too much capitalnvill be invested under i t during the suspension*of



52

REPORT OK THE FINANCES. .44

specio payments, and in the existing unsettled condition of our political and
financial affairs. When money is plenty, and fortunes are being rapidly acquired,
the country is always in a feverish and unhealthy state. This is especially true •
at the present time, The enormous expenditures of the government, and the great
advances in prices since the commencement of the war, have made many persons
suddenly rich, and ,upon fortunes suddenly acquired, have followed reckless
expenditures, extravagance, waste. Speculation is taking the place of sober
and persevering industry, and thousands are deluded with the notion that the
wealth of the nation is being increased by the increase of its indebtedness. The
inauguration of a new system of banking, under such circumstances, is peculiarly
hazardous, and I have been, from the time of m y appointment, more apprehensive that too many banks would be organized, than that the system would
not be sufficiently attractive to induce capitalists to become connected with it.
The government is the great borrower. Its obligations compose a large portion
of the discount line of the banks, which are making large profits on government
securities at little apparent risk, and the danger is, that the national banking
system, with all its restrictions, may, during the suspension of specie payments,
and the continuance of the war, add to the plethora of paper money; and that,
when the war is over, the biinks, deprived of tho existing means of investment
i n government obligations, and finding no legitimate use for' their capitals, may
be tempted to use them in encouraging operations that w i l l eventually prove to
be as unprofitable to themselves, as they w i l l be injurious to the country. For
the double purpose, therefore, of keeping down the national circulation as far as
it has seemed possible to do it, consistently w i t h the establishment of the system
throughout the country, and preventing an increase of banking capital, that
might hereafter be instrumental in keeping up the inflation, and retarding the
resumption of specie payments, or prove unprofitable to its owners, I have felt
it to be m y duty to discourage, i n many instances, the organization of new
batiks, and in more inBtanccs to refuse my sanction to the increase of the capital
of those already organized. I n doing so, I may seem to have exercised a power
not warranted by the act; but i f not sustained b y its letter, I have been by its
spirit, and I am willing to let the future decide as to the correctness or incorrectness of m y course.
-i
But while I entertain the opinion that the currency of the country is already
too much expanded, and that i t would be a calamity i f the national banking
system should be the means of materially increasing it, I must not be understood
as sanctioning the notion, so generally prevalent, that the high price of coin is
to be altogether or chiefly attributed to it, or that gold and silver are, at the
present time, the standard of value in the United States. W h e n gold sold in
W a l l street, on the 1st of J u l y last, at 185 premium, many of the best stocks, a3
well as productive real estate, were no higher than they have been upon a coin
basis.
B y referring to the gold market in New Y o r k during the three past years it
w i l l be perceived that its value has been regulated b y other causes than the inflation of the currency.
I n January, 1862, gold in New York was at a premium of 1£ per cent. I t
soon fell to 1, from which it rose on the 10th of October to 37, and closed on the
31st of December at 34. On the 24th of February, 1863, it had advanced to
72J, but on the 26th of March (favorable news having been received from the
southwest) it went down to 40;}, but in twelve days, on the receipt of less favorable intelligence from that quarter, it went up to 59£. A few days after, upon
the report of the iron-clad attack upon Fort Sumterrit fell to 46, and on receipt
of the intelligence of the surrender of Port Hudson to 231. On the 15th of
October it rose to 54', but reached no higher point during that year.
;;
On the 1st of January, 1864, i t opened at 52, went up to 88 on the 14th of
A p r i l , and fell to 67 on the 19 th of the same moirth. On the passage of - the



.44
53 REPORT OK THE FINANCES.
gold bill, June 22, it rose to 130, and fell tho next day to 115. On the 1st of
J u l y i t was forced up to 185, but on the day following (the gold bill having
been repealed) it fell to 130. On the 11th of the samo month it went up again
to 184; on the 15th it fell to 144, and after various fluctuations dropped on the
26th of September to 87—thus rising between the 1st of January and the 1st
of J u l y , 1S64, from 52 to 185, and falling between the 1st of J u l y and the 26th
of September from 185 to 87. None of these fluctuations were brought about
b y an increase or* decrease of the currency; on tho contrary, gold rose the most
rapidly when there was no considerable increase of the currency, and fell in the
face of large additions to it. Nothing can be more conclusive of the incorrectness of the opinion that gold is always the standard of value, and that the high
price it lias commanded i n the United States during the progress of tho war is
the result of an inflated currency, than this brief statement of its variations i n
the New York stock market.
Hostility to the government lias been as decidedly manifested in the effort
that has been made in the commercial metropolis of the nation to depreciate tho
currency as it has been by the enemy in the field; -and unfortnately the effort of
sympathizers with the rebellion, and of the agents of the rebellious States, to
prostrate the national credit has been strengthened and sustained b y thousands
i n the loyal States, whoso political fidelity it might be ungenerous to question.
Immense interests have been at work all over the country, and concentrated in
New York, to raise the price of coin, and splendid fortunes have been apparently
made b y their success. T h e loyal importer and manufacturer of the east and
the produce and provision merchant of the west have locked hands with the enemies of the republic in a commou effort, although for a different object, and sometimes have produced results which have created serious apprehensions that tho
Union might be lost for want of means to prosecute the war, or rather on account
d t the excessive and unnecessary costliness of the war. The government in its
struggles with a gigantic rebellion has not only been contending with aimed
rebels in the field, but w i t h unarmed rebels in the loyal States, backed by an
immense interest in the hands of loyal citizens.
Gold has been a favorite article to gamble in. I t has been forced up and down
b y those tricks and devices that are so well understood at the stock board. The
reverses of .our arms have been used by the operators for an "advance" to send
i t up, and our military successes have been turned to the advantage of those
who were interested in a "decline." When the banks and the government suspended spccie payments, and a new standard of value was created in the legal
tenders, gold and silver, whose legal value had been fixed by the same authority,
became an article of traffic, subject to the influences that have control of the
market, and yet unfortunately everything necessary for use or consumption was
• made to follow their upward tendency, as i f they were still the proper and only
regulator of priccs.
The effect of all this has been, not to break down tho credit of the government, but to increase enormously the cost of the war and the expense of living;
for however small may havq been the connexion between the price of coin and
our domestic products, every rise of gold, no matter by what means effected,
, has been used as a pretext b y holders and speculators for an advance of prices,
to the great injury of the government and the sorrow of a largo portion of the
people. I t is unquestionably true that the abundance of money lias facilitated
the operations against the credit of the government, and that a more stringent market
would have tendfed to check and restrain them, but ic is a mistaken notion that
the high price of coin is an evidence of an overissue of currency or of its
depreciation. I f i t were generally believed that the war would be ended b y
the 1st of January, gold would fall before that time to 25 per cent, premium, i f
not lower, although the paper money i n circulation might i n the mean time be
largely increased.



54

REPORT OK T H E FINANCES. .44

T h e expenditures of the government have created a great expansion' of currency and of prices. There would have undoubtedly been an expansion, in a
|ess dcgreo i t is true, but still an expansion, i f tbe war had been carried on upon
a specie basis. Prices of all the necessaries of life as well as luxuries, and of
everything which the government must purchase in the prosecution of the war,
are enormously high, and the penalty is yet to be paid, for the inflation, in increased taxation, and the ruin which must overwhelm the thousands who believe,
and act upon the belief, that the apparent prosperity of the country is real, and
is not to be interrupted. Fortunate w i l l the country be i f the war can be closed
and prices reduced to former standards without a collapse, which w i l l as greatly
excel in the extent of its disaster that which occurred at the close of die last
war with England as the present war excels that i n costliness and magnitude.
A s long as there was any uncertainty in regard to the success of the national
banking svstem, or the popular verdict upon its merits and security, I did not
feel at liberty to recommend discriminating legislation again&t the State banks.
I t is for Congress to determine i f there is any longer a reasonable uncertainty
on these points, and i f the time has not arrived when all these institutions
should be compelled to retire their circulation. I t is indispensable for the
financial success of the treasury that the currency of tho country should be
under the control of the government. This cannot be the case as long as State
institutions have the right to flood the country w i t h their issues. As a system
has been devised under, which State banks, or at least as many of them as are*
needed, can be reorganized, so that the government can assume a rightful control over bank note circulation,* it could hardly be considered oppressive i f
Congress should prohibit the further is3ue of bank notes not authorized by
itself, and compel, by taxtion, (which should be sufficient to effect the object
without being oppressive,) the withdrawal of those which have been already
issued. M y own opinion is, that this should be done, and that the sooner i t is .
done the better it w i l l be for the banks themselves and for the public. As longas the two systems arc contending for the field, (although tlie result of the
contest can be no longer doubtful.) the government cannot restrain the issue of
paper money; and as the preference which is everywhere given to a national
currency over the notes of the State banks indicates what is the popular
judgment in regard to the merits of the two systems, there seems to Jbo no good*
reason why Congress .should hesitate to relieve the treasury of a serious em-,
barrassment, and the people of an unsatisfactory circulation.
Some important amendments are required to the act in order that it should
be fully accommodated to the wants and business of the country.
T h e provisions in regard to the lawful money reserve and the distribution of
the assests of insolvent banks require modification.
I am . still of the opinion that the rates of interest to be charged b y the
national banks should be fixed by Congress, and not by the States.
There are too many points at which the banks may redeem their notes. A l l ,
with the exception of those in Philadelphia and Boston, should redeem i n NewYork. The banks ought to be compelled by law to retain a part, i f not all the
coin received by them, for interest on their gold-bearing bonds, i n order that
they may bo prepared to lend their influence i n favor of a return to specie payments, and some provisions should, be introduced' by which, when specie payments are resumed, excessive importation of goods may be checked and dangerous exportations of coin may be prevented.
I t is of the greatest importance that the national currency system should be
independent of politics and freed from political influences. T o effect this, and
to facilitate the business of the banks w i t h the Comptroller, I am clearly of the
opinion that the bureau should be hiade an independent department, and
removed from Washington to Philadelphia or New York.




BEPOBT ON THE FINANCES.

55

I do not, however, recommend that any amendments be made b y the present
Congress. The act w i l l do well enough as i t is for another year. When tho
next Congress assembles, tho defects i n it w i l l be better understood, by the
practical working of the system, than they can be at tho present time. T h e
act cau then bo taken up, and, w i t h the light which the experience of another
year has thrown upon it, judiciously amended.
L i reporting the names aud compensations of the clerks employed in thi3
bureau, I should neglect a duty to them and to tho system i f I did not respect*
fully suggest that a general increase of their salaries should be made, and that
the increase of the salaries of those who occupy positions of high trust and
responsibility should be liberal. This bureau is alreaoy an important one, and
is not unlikely to be one of the most important i n the department. There is
not a desk in it which should not be filled by a man of intelligence, character,
and good business qualifications. Without such men the nffairs of the bureau
cannot be safely or properly administered, and expensive as living now is ia
Washington, it is questionable i f the services required can be secured without
an increase of salaries.
I f there were no doubt, however, on this point, i t is
not right that honorable and competent men should be faithfully serving the
government for such compensations as leave them, w i t h rigid economy/ in no
better circumstances at the close of a year than they were at its commencement.
There are undoubtedly, in the different departments at Washington, a great
many drones and incompetent clerks who do not earn the salaries that are paid
them, whose " attendance*' should be dispensed w i t h ; but m y observation, since
I have been in Washington, has satisfied me that there are i n all tho departments a body of clerks who, for intelligence, ability, and hearty devotion to
their duties have no superiors anywhere.
v T o them i3 the country indebted for the accuracy w i t h which an immense ,
business;—a business which has increased ten-fold since the commencement of
the war—is transacted.
The expenses of the departments would be largely
reduced i f only such were employed, and they were paid respectable salaries.
Cheap clerks are a costly article to the government—it is a poor economy that
drives away or starves competent ones.
The Deputy Comptroller of this bureau holds an important and responsible
position. I n the absence of the Comptroller he possesses the potfer and performs tho duties attached to the office of the Comptroller. The gentleman who
has charge of the vaults and the currency holds also a place of great-responsibility; and two or three other clerks are performing duties requiring rare
qualifications.
I am under great obligations to them, and so is the country,
for the prompt and able manner in which they are doing their work, and the
valuable services they have rendered in the organization of the bureau and
systematizing its business. Important duties are devolved upon them, while
they receive but a small portion of the credit which the proper performance of
their duties secures to the bureau. I n m y judgment, the salaries they are
receiving are wholly inadequate to the services they are rendering.
I respectully recommend, therefore, i n addition to a general increase of the
salaries of the clerks, that the Deputy Comptroller be paid a salary of thirty-five
hundred dollars per annum, and that tho comptroller be authorized, with the
approval of the Secretary of the Treasury, to employ three othe^clerks as heads
of divisions, at salaries not exceeding twenty-five hundred dollars, respectively.
A l l which is respectfully submitted.
H U G H M c C U L L O C H , Comptroller.
H o n . W . P . FESSENDEN,

Secretary of the Treasury<





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102