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Thursday, June 3 0 , 1892.









Mr. BUTLER. A few days ago I gave notice that I should
to-day ask the Senate to indulge me in some remarks on a resolution which I offered in the early part of the session, which I
will ask may be considered at this time.
The PRESIDENT pro tempore. Is there further morning business? If not, that order is closed, and the resolution referred to
by. the Senator from South Carolina will be reported.
The Secretary read the resolution submitted by Mr. BUTLER
January 11,1892, as follows:
Resolved, That the Committee on Finance be, and it is lieTeby, Instructed
to report a bill repealing all taxes imposed by Congress on the circulation
of State banks of issue.

Mr. BUTLER. Mr. President, I propose to discuss this question in a spirit of perfect frankness, with no pride of opinion,
but with the sole object of endeavoring to afford relief to the
people, and with the hope of securing tar it that careful consideration so essential to a clear understanding of the relation it
bears to the economic questions now agitating the country. It
should not be flouted by the Committee on Finance of this body
because some of its members entertain views in opposition to
the principles involved, or to the ends sought to be obtained.
The people want the subject fairly and fully considered, and their
wishes are entitled to respect.
If it were practicable to ask every male adult in the United
States whether, in his opinion, the volume of our currency is
sufficient to meet the reasonable demands of business, seventenths, perhaps eight-tenths of them, would answer in the negative. And if the same persons could be interrogated as to
whether, under our present financiai system, there is a fair and
equitable distribution of wfiat cuiyrenoy we haVB, nine-tenths of
them would answer in -the negative. "I mdan by a fair and equitable distribution, siicb a distribution, as t£iat every honest man
would have it in his power to procure as much money as his
credit and circumstahcos would Justify anil he could profitably
use in his business and domestic concerns.
According to our present financial policy the greater part of
the circulation is periodically drawn away from the people and
hoarded in commercial and financial centers, to be let out again
upon such terms, in such amounts, and whenever those who control it may determine. As matters now go millions of men can
not-get money for their legitimate business transactions, however good their credit or financial standing, because the cur2


rency is not within their reach, or if within reach, is held with
•such severe legal restrictions as in a large measure to destroy
its usefulness.
I am not one of those dreamers who holds that there can ever
be an equal distribution of wealth until the millenium dawns upon
us, or until inequality in intellectual endowments and business
qualities is removed, but I do believe that the Government may
frame such laws as to give every man equality of opportunity in
securing for himself the goods of this world. I think I can
demonstrate that this rule is not observed in our existing laws.
The following is the statement of the Treasury Department
May 1, 1892, showing the amounts of gold and silver coins and
certificates, United States notes, and national-bank notes in circulation at that time:
statement showing the amounts lof gold and silver coins and certificates, United
Stales notes and national-bank notes, in circulation Map l, 1892.
coined or
'Gold coin
Standard silver dollars
Subsidiary silver
Gold certificates
Silver certificates—
Treasury notes, act July 14,
United States notes....
Currency certificates, a c t
June 8,1872
National-bank notes

Amount in Amount In
In Treas- circulation circulation
May 1,1892. May 1,1891.

$601,527,222 $193,911,273 $407,615,949 $408,862,781
413,055,360 355,500,903 57,554,457 61,692,818
77,433,950 14,600,427 62,833,523 57,368,507
175,644,879 21,931,180 153,713,699 138,890,799
330,499,002 3,209,106 327,289,896 312,933,440
172,476; 575

11,726,920 81,501,770
21,895,155 324,785,761



2,241,096,694 627,524,450 1,613,572,244 1,529,316,833

Population of the United States May 1,1892, estimated at 65,285,000; circulation per capita, $34.72.

It will be seen in-this table that the entire stock of money
"coined and issued" by the Government for the whole country
is $2,241,096,694, of which sum $627,524,450 remained in the Treasury, leavi ig $1,613,572,244 in circulation. The amount of circulation per capita is put down at $24.72. Dividing the amount
claimed to be in circulation ($1,613,572,244) among our sixty-odd
millions of population we should get that result, but it is fair to
assume that a part of the amount said to be in circulation, quite
an essential part, is held for reserves in banks, and is not in circulation. , But let us concede that we have $24.72 for each man,
woman, and child in the United States.
What does it prove? That each man, woman, and child has
$24.72? Not at all. Nobody would be simple-minded enough
to claim that. There are millions of pesple who have not $2
or 2 cents, much less $24.72. The statement is therefore misleading and delusive. In certain sections of the country, in the
principal financial and commercial centers, the per capita circulation would reach up into the hundreds of dollars, whereas in
other sections it will not amount to a hundred cents. To illustrate by my own county of Edgefield in South Carolina: W e
have a population of about 50,000, largely agricultural and rural,
and I venture the assertion there are not $2 per capita in circu586

lation among the people. What is true of this community is
true of all others similarly situated in the South and West and
the East as well, outside of financial centers.
Mr. President, the people have not money enough in circulation for their legitimate wants. This fact I want to emphasize,
however good their credit, or sound and acceptable their security, or urgent their demands, the money is not in the country, is
not accessible, or if accessible, is, I repeat, hedged about by such
restraints of the law that i t may as well riot be in existence. I
know the reply to this line of argument is that these conditions
are the.result not so much of scarcity ot circulation as the scarcity of capital, the lack of confidence, because there are not proper
inducements offered to attract money, etc.
But, sir, this is neither tenable nor true. In many of the regions of the South and West, where this stringency exists, there
is plenty of capital, but little money J Land is capital, and the
safest and soundest security. Live stock, personal property of
various kinds, personal credit, crops, are capital, but unavailable to a great extent, as a basis of credit, because money is so
scarce and so dear for seven months out of the twelve theycaii
not be utilized. I might cite many cases within my own personal
knowledge and experience, to establish this proposition, as no
doubt other Senators around me can; but it can not and will not
be denied.
I grant you that in the great financial centers money is abundant and readily obtained, but the agricultural population can
not procure it, except at the most ruinous and exacting rates, because they have not such security as is demanded, thereby having their progress and comfort and legitimate development
greatly retarded. And just in proportion as they are retarded
and restrained, in the same degree are all other industries, mining, manufacturing, and commercial, hindered and retarded.
It is quite the custom in our public discussions on financial
topics to launch off into disquisitions on political economy and
abstract propositions and theories, and befog the practical aspects of the subject. We hear a great deal about the 11 functions
of money," 44 What is money?" " W h a t are the objects and purposes of money?" etc. This is all very instructive and interesting for doctrinaires and schoolmen, and I would not discourage such discussions in a proper form, but here we have to
deal with an intensely practical question, and must seek practical facts and conditions to guide and control our actions. Of
course there are certain well-recognized, well-defined, fundamental principles of finance which can never be safely disregarded in financial legislation, but a man of the plainest intelligence and understanding knows what money is and what purposes it subserves.
All men may not fully comprehend the important fact, that in
order to attain its highest usefulness and be safe and effectual in
the hands of the people, money must have a sound, stable, and reliable basis. It is the duty of the legislator to impart those qualities to it. But hia duty does not stop here. He must see to it
that the circulation of money goes out to the people in sufficient
volume to satisfy the demands of their business, and has in it an
element of elasticity to meet unforeseen financial exigencies as
they arise.
I have asserted that our volume of currency is not adequate

for our business operations. I do not deny its soundness and
stability, but I do deny that under our present laws it has that
expansive capacity, if I may use that expression, so essential to
progressive business developments. I believe I am safe in saying that ours is the only one of the leading commercial nations
of the world where this elastic feature in the national currency
is wanted. The Imperial Bank of Germany is authorized by law,
upon well-defined conditions and within certain specified limits,
to increase its circulation to counteract the damaging effects of
financial stringency and distress.
The Bank of England and the Bank of France are endowed
with similar privileges, and so with other national systems, while
in our comparatively young country, rapidly increasing in population, material progress and development, with a proportionate increased demand for money , our national banks have no such
authority to supply it. The Government, reserving to itself the
power to issue currency, halts between the contentions of political parties, the demands and requirements of the people on the one
hand and the denials of capital on the other, and thus trifles with
the prosperity and progress of its citizens. I need not here, Mr.
President, enter upon a discussion of our national-banking system. It is sufficient for my present purpose to concede three things
in regard to it. It has furnished to the people the safest, soundest, and most uniform bank currency ever vouchsafed to them,
three most essential elements in every system of bank currency;
but it is unstable, inadequate, and inelastic, three other qualities equally important and indispensable. Let us see if I am correct in this last proposition.
Since the passage of the national-banking act, the amount of
national-bank circulation has varied from year to year. In October, 1882, it reached high-water mark, and amounted to $362,889.134. On the 16th of March, 1892, it had fallen to $172,533,762,
a loss of $190,355,372 in ten years, very nearly $200,000,000. This
contraction is still going on, falling on the 1st of May, 1892, to
$168,067,089, and must eventually wipe this currency out of
existence, while our population is increasing and the demand
for more money being accelerated in that proportion. I think,
therefore, I am safe in saying the national-bank currency is insufficient, unstable, and inelastic. I do not forget that this reduction in the national-bank currency has been measurably supplied by Treasury certificates based on coin in the Treasury—
but this supply, amounting to about $480,000,000, has not been
equal to the contraction and increasing demand.
The United States notes—greenbacks—have remained about
stationary at 346,000,000, in round numbers. If the national-bank
currency continues to diminish it must soon pass out of existence
and we shall have no paper currency except the Treasury certificates and greenbacks. I am sure it will not be insisted by the
most extreme contractionist or monometallist that they will prove
adequate to the wants of the people.
Great stress is laid upon the fact that 90 per cent or thereabouts of the business of the country is transacted by checks or
drafts or bills of exchange, and the argument is deduced therefrom that there is no occasion for a large volume of currency.
Here again, I submit, is a great fallacy.
The vpower to give a 9heck implies a bank account, and is limited to those who have money to their credit. How many milm

lions of people are there who have never had and can scarcely hope
to have a bank account? They must have the cash to discharge
their obligations, the currency to pass from hand to hand, so
that to them a bank is a sealed vault, and is of no use in their
daily transactions, especially if they are not banks of issue, and
are scarce of currency.
I could produce abundant proof, if necessary, to show that the
country banks are not supplied with currency enough by half,
or more than half, to meet the wants of the people who they
could otherwise accommodate. And furthermore it can be shown
that in those seasons of the year, when currency is most needed,
they can not procure it on any terms in sufficient quantities. I
know this is true in the South, and doubtless in the West. If
this is admitted, what should Congress do to correct the evil?
What is the plain duty of Congress in the premises? It is not a
sufficient answer to the cry of distress which comes up to us from
all directions, to say that one political party will not do this or
that, because the doing it might give the other party an advantage in some election. Or that by failing to adopt certain measures of relief, the party failing will be stronger in particular sections of the country? Will it do to answer this appeal for relief
from the laboring and industrial classes, to say, that it is clamor
instigated by demagogues and cultivated by ambitious politicians? This would not be wise statesmanship, Mr. President. It
is not only not wise, but approaches very close to the verge of
criminal neglect.
As a rule the people do not complain without a cause, for the
sake of complaining. They realize their wants and necessities
much better than is supposed. Their cries for financial relief
amount no\^ almost to a lamentation, and if not heeded and acted
upon will swell into a loud and irresistible demand, which will
assert itself in no uncertain manner at the ballot box.
Wild and untenable vagaries may rise to the crest of the waves
of popular agitation, but they will become tame and harmless
theories beside the storm of indignant protestations which will
press them aside for more positive and radical measures.
Various plans of relief have been, and are being, suggested.
Some of them, I think, are mischievous and dangerous, but they
are all symptoms of disease, of popular discontent, and unrest.
These complaints of the people are not imaginary. They are well
founded and based on a deep-seated cause. Our financial system
and policy is defective, unjust, ruinous to large classes of the people. It enables a few centers and a few persons to get possession
of the currency and hold it from millons of their fellow-citizens
upon their own terms. It enables them to hoard the money of the
country, and say how much of it shall go out, and upon what
terms. You may say that this will be true under any system,
but the financial history of this country does not sustain the proposition. It was never true prior to 1863—when the nationalbanking system went into operation, and the national Government delegated to a few persons the power to issue the currency
for all the people—except such as it reserved to itself the exclusive right to issue.
I have no war to make on the national banks. I have conceded
their value and advantages. They were valuable aids to the
Government at the time they were organized, but they have
served their purpose. They have been the pampered pets of the

Government, and after thirty years of existence if they can not
stand alone on their own merits they should go under. The Government laid the strong arm of its taxing power on State banks
for their benefit. It taxed the State banks out of existence; it
destroyed them for the benefit of national banks. These laws
should now be repealed.
I assume it can not be successfully argued that this tax by
Congress on the circulation of State banks is unconstitutional,
as the Supreme Court has held, in the case of Veazy Bank vs.
Fenno (8 Wall), that Congress may employ the taxing power to
destroy—but it is a question of very doubtful constitutionality
whether Congress may use the taxing power solely for the purpose of destroying, and without the raising of revenue being the
incident or purpose of its exercise.
The two sections of the statute under which this tax is imposed are as follows:
SEC. 3112. Every national banking association, State bank, or State bank,
ing association, shall pay a tax of 10 per cent on the amount of notes of any
person, or of any State bank or State banking association, used for circulation and paid out by them.
SEC. 3413. Every national banking association, State bank, or banker, or
association, shall pay a tax of 10 per cent on the amount of notes of any
town, city, or municipal corporation, paid out by them.

I have not examined the reports of the Treasury Department
to ascertain whether any revenue is collected under the provisions of this law, but I feel safe in saying not one dollar goes
into the public Treasury from this source.
The law, as was intended, has simply driven the objects of taxation out of existence in the interest of the national banks, and
nothing is left upon which it can operate. It is a matter of grave
doubt in my mind whether Congress may Constitutionally do
this. >
But let that pass and let us turn to the inquiry as to what would
be the Effect of the repeal. Would it destroy the national banks?
By no means. The tendency in national banking associations
is to reduce their currency or circulation to the lowest possible
limit. If some other security is not provided for their circulation they must cease to exist by operation of law when the United
States bonds held for security are redeemed, and the last of these
become due and payable in 1907. There is no indication that
Congress will substitute anything in their stead, and this currency must therefore eventually be withdrawn from circulation.
Possibly they may^ be continued as banks of discount and deposit, but not as circulation. I do not ksee, therefore, how the
repeal of this tax is to affect the national ^oanks. Will it restore
the State banks? This will not necessarily follow, but it will
open the door for their restoration if the people of the States
desire them.
My own judgment is the rehabilitation of the State banks of issue will meet the demands of the financial situation more effectually'and completely than any measure that can be undertaken.
It would decentralize the fiscal affairs of the country, localize
them, and bring about that fair and natural distribution of money
now denied under the present system. It would enable every
man of credit and standing to procure, in his own vicinity, the
money necessary for his wants.
I am fully aware of the arguments urged against State banks
of issue, and admit their force, Among other things, it is urged

that the currency will not be uniform, and on that account inconvenient and insecure to the holders of the bank bills; that
"wild-cat" banking will take the place of the present uniform
and safe system of national banking; that the security for the
bank bills will be inadequate and insufficient, thereby entailing
loss upon the bill-holders; that exchanges can not be safely made
and business in different sections can not be conveniently transacted. Those who advance these arguments, Mr. President,
lose sight of several important considerations which should have
weight in determining so important a question.
In the first place, the science or business of banking has made
great progress in the last thirty years; business methods have
been improved, and ventures then entered upon would not now
be tolerated for a day in the business and financial world. Why?
First, because of more accurate and superior knowledge; second,
because railroads and the telegraph have brought business men
into juxtaposition, and the touch is felt from one end of the country to the other—I might say from one end of the civilized
world to the other—we now have no frontier. Railroads and the
telegraph have obliterated that field for "wild-cat" banking,
and such enterprises would find neither home nor habitation for
their operation. Besides these general considerations, why can
not the States be trusted to provide restrictions for banking as
stringent and safe as those of the National Government upon
national banks?
The same supervision may be exercised, the same or similar
rules as to reserves, liability of stockholders, the same or similar
methods for the protection of bill-holders, may be imposed. Why
may not the State provide that its own bonds, if it has any, and
if not, such well-recognized solvent bonds as it may designate,
may be used by State banks as security for their circulation?
This would have the double effect*of improving the credit of the
State, retaining capital for investment within its own borders,
and at the same time furnishing a safe security for the circulation necessary for the people.
Clearing houses, as now employed by national banks, could be
instituted for State banks. They would enforce the greatest conservatism in bank management, and impart to the State-bank
currency a quality of safety and security that would cause it to
circulate generally without restraint. Why should it not?^ A
State could not afford to permit loose and reckless banking.
Every sentiment of interest and Sta te pride would forbid. Every
consideration of prudence and business experience would make
such a thing intolerable. I can recall the fact that the bills of
many of the banks of South Carolina and other States, for years
prior to year 1861, passed current in all parts of the country without question, because it was known they were managed prudently
and conservatively, and we should have a similar experience if
they were revived. •
But,, Mr. President, I am not so much concerned about the want
of uniformity in State-bank circulation. This quality, this lack
of uniformity, has its advantages, which, I think, outweigh the
disadvantages. It would result in bringing the currency back
to the locality from which it emanates, there, to be employed by
the people in their local wants, and in that way correct the evil
to which I have referred of accumulating the currency in reniote centers; from which it can not be recovered by the people

who must have it, except upon hard terms. I care not how much
you increase the volume of currency under the present system,
this same evil will confront us, this same ruinous ebb and flow of
money would obtain whatever the volume of currency. For the
sake of argument I will concede that the State-bank currency
may not be uniform, but it will answer for all local business purposes.
The insolvent laws, the divorce laws, the inheritance "laws,
the testamentary laws, the laws of evidence, the jury laws, the
criminal laws, the road and corporation laws, of the several
States are not uniform, and yet the whole country has prospered
and progressed and developed under them. It is this divergence of local State systems and uniformity of the paramount
Federal system which gives such strength to our fabric of Government. I, therefore, do not regard uniformity so essential,
although I believe a few years of prudent management would
remove whatever of inconvenience that might arise from this
But why depend upon State-bank circulation to regulate exchanges between the several States or for the convenience of
travel to and from different parts of the country? What is to
become of the one thousand six hundred millions of national currency now in existence? Is that to be destroyed by State banks?
Why can not this currency be used as at present in the matte*
of exchanges between the States if the State-bank circulation
could not be made available for that purpose? This currency
may eventually be reduced by the amount of the national-bank
circulation, but that amounts to only 8168,000,000. So that I apprehend no trouble in conducting our business transactions in the
several States, not only for the reasons I have just assigned but
for those given in another part of my remarks.
I believe, furthermore, that the rehabilitation of State banks
would settle all controversies over the silver question. Whether
they are reestablished or not, I have no doubt but that free
silver coinage may be safely resumed by the Government on the
present ratio, and I should cheerfully vote for a bill for that pui^
pose, but I shall not now enter upon a discussion of that question, further than to say, that in my opinion, the importance of
free and unlimited coinage of silver is greatly exaggerated by
both sides of the controversy. It would not bring the relief
claimed by its advocates, and would not do the damage contended for by its opponents. That good would result to the
whole body of the people, I have no doubt, and therefore, favor it. But that it will relieve the financial stringency under
which we are laboring, or cure the evils complained of, I do not
The free coinage of silver would,alleviate the distress very
greatly, and do no injury to any fair-minded, honest man, I care
not what form of contract he may have entered into. The suggestion that it would drive gold out of the country or operate as
a repudiation of obligations is, in my judgment, without substance or foundation.
When State banks were in existence, silver and gold coin were
used on terms of perfect equality as security for their circulation. Nobody ever questioned their equality, when they bore
exactly the same relation to each other, that they do to-day.
Nobody inquired, or cared to inquire, in those days. So long as

the banks had coin, whether of gold or silver, to support their
circulation, confidence was assured, and when it became necessary, under financial stress, to suspend specie payment, no preference was given to the one coin or the other.
Mr. COKE. Will the Senator allow me to interrupt him right
Mr. BUTLER* Certainly.
Mr. COKE. I ask the Senator if we had the free coinage of
silver would it not be a great auxiliary to the appliances for establishing State banks in giving them a coin basis?
Mr. BUTLER. I am just coming to that, Mr. President. In
my own State, and doubtless in others, banks were allowed to
issue three dollars of paper for one of coin, of gold or silver, and
even with this latitude they maintained their credit, when prudently managed, and supplied a currency that proved adequate
for all business purposes. Of course this latitude would not be
admissible at the present day; would not be expected, and would
not be allowed, but a plan of redemption could be required that
would make the holders of State-bank bills as secure as the holders of national-bank bills. The free coinage of silver would enlarge the metal money of the country, and thus furnish to the
banks whatever of coin might be required for their reserves,
give employment to all the silver that could be coined, and injure nobody. The simple truth is that metallic currency is only
fit to be used as a bank reserve or as security for circulation, except so much as may be necessary for actual circulation, and this
amount is necessarily very limited.
I repeat, therefore, that the repeal of this tax and reSstablishment of State banks of issue would settle all controversies over
the silver question. If I could get an international monetary
arrangement so much the better, but the best way to bring about
an international arrangement is to restore silver in this country
to its legitimate sphere of free and unlimited coinage, with full
legal-tender power.
Itmaynot'be entirely appropriate in this connection to dir '
cuss the constitutional authority of the States to create bar j
of issue, as this will not be denied, but it might be well to
fresh our minds on this point, and I will therefore read so* '
extracts from the opinions of the court in the case cited above
Yeazy Bank vs. Fenno. The court was not unanimous in ren
dering judgment sustaining the constitutionality of the 10 per
cent tax on State banks.
Mr. Justice Nelson and Mr. Justice Davis filed a dissenting
opinion, in which they say, among other things, on page 550,10
Wallace—I shall read rather freely from this dissenting opinion,
not, of course, with a view of claiming that it upsets the opinio /
of the majority, but with a view of giving some historicr*
formation which I think will be valuable in regard to t"
posed legislation:
The constitutional authority of the State to create these insl
to invest them with full banking powers, is hardly denied. B r
useful to recur for a few moments to the source of this authors <*. v, >
The tenth amendment to the Constitution Is as follows: The'p
r; -, - delegated to the United States by the Constitution, nor prohibited
the States, are reserved to the States respectively, or to the peopie.
looking into the Constitution, it will be found that there is no clause or provision which either expressly, or by reasonable implication, delegates this
power to the Federal Government, which originally belonged to the States,
nor which prohibits it to them. In the discussions on the subject of the

creation of the first bank of the United States, in the first Congress, and in
the Cabinet of Washington, in 1790 and 1791, no question was made as to the
constitutionality of the State banks. The only doubt that existed, and which
divided the opinion of the most eminent statesmen of the day, many of whom
had Just largely participated in the formation of the Constitution, the Government under which they were then.engaged in organizing, was, whether
or not Congress possessed a concurrent powerJo incorporate a banking institution of the United States.
Since the adoption of the Constitution down to the present act of Congress,
and the case now before us, the question in Congress and in the courts has
been not whether the State banks were constitutional institutions, but
whether Congress had the power conferred on it by the States to establish a
national bank, As we have said, that question was closed by the Judgment
of this court in McCulloch vs. The State of Maryland. At the time of the
adoption of the Constitution there were four State banks in existence and
In operation—one in each of the States of Pennsylvania, New York, Massachusetts, and Maryland. The one in Philadelphia had been originally chartered by the confederation, but subsequently took a charter under the State
of Pennsylvania. The framers of the Constitution were therefore familiar
with these State banks, and the circulation of their paper as money, and were
also familiar with the practice of the States that was so common, to issue
bills of credit, which were bills issued by the State exclusively on its own
credit, and intended to circulate as currency, redeemable at a future day. They
guarded the people aeainst the evils of this practice of the State government by the provision'in the tenth section of the first article: " That no State
shall * * * emit bills of credit," and inthe same section guard against any
abuse of paper money of the State banks in the following words: " N o r make
anything but gold and silver coin a tender in payment of debts." As bills of
credit were thus entirely abolished, the paper money of the State banks was
the only currency or circulating medium to which this prohibition could
have had any application, and was the only currency, except, gold and silver,
left to the States. The prohibition took from this paper all coercive circulation and left it to stand alone upon the credit of the banks.
It was no longer an irredeemable currency, as the banks were under obligation, including, frequently, that of its stockholders, to redeem their paper
m circulation in gold or silver at the counter. The State banks were left
in this condition by the Constitution, untouched by any other provision. As
a consequence they were gradually established in most or all of the States,
and had not been encroached upon or legislated against, or in any other way
interfered with, by acts of Congress, for more than three-quarters of a century—from 1787 to 1864.
But. in addition to the above recognition of the State banks, the question
of their constitutionality came directly before this court in the case of Briscoe vs. The Bank of the Commonwealth of Kentucky.
The case was most elaborately discussed, both by counsel and the court.
The court, after the fullest consideration, held that the States possessed the
power to grant charters to State banks; that the power was incident to sovereignty, and that there was no limitation inthe Federal Constitution on its
exercise by the States. The court observed that the Bank of North America
and of Massachusetts, and some others, were in operation at the time of the
adoption of the Constitution, and that it could not be supposed the notes of
the banks were intended to be inhibited by that instrument, or that they
were considered as bills of credit, within its meaning. All the judges concurred in this judgment except Mr. Justice Story* The decision in this case
was affirmed in Woodruff vs. Trapnall. in Darrington vs. The Bank of Alabama, and in Curran vs. State of Arkansas.

The PRESIDENT pro tempore. The Senator from South Carolina will please suspend. The hour of 2 o'clock having arrived,
it is the duty of the Chair to lay before the Senate the unfinished business.
The CHIEF CLERK. A bill (S. 51) to provide for the free
l i n a g e of gold and silver bullion* and for other purposes.
« Mr. HARRIS., I ask unanimous consent that the unfinished
business be informally laid aside in order that the Senator from
South Carolina may conclude his remarks.
The PRESIDENT pro tempore. The Senator from Tennessee
asks the consent of the Senate that the unfinished business bo
informally laid aside that the Senator from South Carolina may

continue His remarks. The Chair hears no objection, and the
Senator from South Carolina will proceed.
Mr. BUTLER. One other quotation, Mr. President, of a somewhat historical nature from the same decision:
The act of Congress, July 13,1866, declares, that the State banks shall pay
10 percent on the amount of their notes, or the notes of any person, or other
State bank, used for circulation, and paid out by them after the 1st of August, 1866. In addition to this tax there is also a tax of 5 per cent per annum
upon all dividends to stockholders, besides a duty of one-twenty-fourth of 1
per cent, monthly, upon all deposits, and the same monthly duty upon the
capital of the bank. This makes an aggregate of some 16 per cent imposed
annually upon these banks. It will be observed, the tax of 10 per cent upon
the bills in circulation is not a tax on the property of the institutions. The
bills in circulation are not the property, but the debts of the bank, and, in
their accounts of debits and credits, are placed to the debit side. Certainly
no government has yet made the discovery of taxing both sides of this account, debit and credit, as the property of a taxable person or corporation.
If both these items could be made available for this purpose a heavy national debt need not create any very great alarm, neither as It respects its
pressure on the industry of the country, for the time being, or of its possible duration. There is nothing in the debts of a bank to distinguish them
in this respect from the debts of individuals or persons. The discounted
paper received for the notes in circulation is the property of the bank and
is taxed as such, as is the property of individuals received for their notes
that may be outstanding.
The imposition upon the banks can not be upheld as a tax upon property;
neither could it have been so intended. It is simply a mode by which the
powers or faculties of the States to incorporate banks are subjected to taxation, and which, if maintainable, may annihilate those powers.

I observe that the Chief Justice, who was the organ of the
court, in delivering the opinion touched upon that suggestion,
and seems to have qualified somewhat the force of the opinion
as delivered. He says, on page 541:
There are, indeed, certain virtual limitations, arising from the principles
of the Constitution itself. It would undoubtedly be an abuse of the power if
so exercised as to impair the separate existence and independent self-government of the States or if exercised for ends inconsistent with the limited
grants of power in the Constitution.

Mr. Justice Nelson goes on in his dissenting opinion and says:»

No person questions the authority of Congress to tax the property of the
banks, and of all other corporate bodies of a State, the same as that of individuals. They are artificial bodies, representing the associated pecuniary
means of real persons, which constitute their business capital, and the
property thus invested is open and subject to taxation, with all the property,
real and personal, of the State. A tax upon this property, and which, by
the Constitution, is to be uniform, affords full scope to the taxing power of
the Federal Government, and is consistent with the power of the States to
create the banks, and, in our judgment, is the only subject of taxation by
this Government to which these institutions are liable.
• As we have seen in the forepart of this opinion, the power to incorporate
banks was not surrendered to the Federal Government but reserved to the
States; and it follows that the Constitution itself protects them, or should
protect them, from any encroachment upon this right. As to the powers
thus reserved the States are as supreme as before they entered into the union,
and are entitled to the unrestrained exercise of them. The question as to
the taxation of the powers and faculties belonging to governments is not
new in this court.

Again, on page 556:
It is true that the present decision strikes only at the power to create
banks, but no person can fail to see that the principle involved affects the
power to create any other description of corporations, such as railroads,
turnpikes, manufacturing companies, and others.
.This taxation of the powers and faculties of the State governments, which
are essential to their sovereignty, and to the efficient and independent management and administration of their internal affairs, is for the first time,
advanced as an attribute to Federal authority. Itfindsno support or countenance in the early history of the Government, or in the opinions of the
illustrious statesmen who founded it. These statesmen scrupulously ab586

tained from any encroachment upon the reserved rights of the States; and,
within these limits, sustained ana supported them as sovereign States.
We say nothing as to the purpose of this heavy tax of some 16 per cent
upon the hanks, 10 of which we can not hut regard as imposed upon the
power of the States to create them. Indeed, the purpose is scarcely concealed in the opinion of the court, namely, to encourage the national banks.
It is sufficient to add that the burden of the tax, while it has encouraged
these banks, has proved fatal to those of the States, and if we are at liberty
to judge of the purpose of an act from the consequences that have followed,
it is not perhaps going too far to say that these consequences were intended.

And now, Mr. President, once more recurring to the question
of the sufficiency of the volume of our currency, permit me to reinforce my opinion that it is not large enough by a comparison
which is striking and conclusive. I will make this comparison
in my own State, as I am more familiar with financial and business matters there than elsewhere.
The population of South Carolina in 1860 was 291,300 white and
412,300 colored, the latter slaves. It will be borne in mind that
the colored people, as slaves, had occasion or opportunity to
handle very little money as they were supported and maintained
by their owners. It will also be borne in mind that almost the
entire business of the State was conducted by the whites, so that
the 291,300 white persons may be adopted as the basis for estimating the per capita of circulation in that State.
The population in 1890, all free, was 1,151,149. Of course, more
currency would be required for the latter period than the former,
but we find a strikingly different condition of affairs. Sometime since I addressed a letter of inquiry to the comptrollergeneral of South Carolina, requesting him to inform me as to the
amount of bank capital and bank circulation in that State for the
decades of 1850-,60, and 188C-'90,with several collateral questions
of not so much importance.
The following is his courteous reply:

Columbia, S. GMarch 9,1892.
BEAR SIB: In reply to yours of the 6th instant, it is very much to be regretted that this office does not contain the information you desire. Unfortunately our laws do not provide any means or give any authority for the
collection and filing of statistics as you inquire about since 1880 and before,
and which in my opinion are of great public interest. Some of the older
banks or bankers of the State or the American Association of Bankers most
likely can give it.
Very respectfully,
Comptroller- General,
G e n . M . O. BUTLER,

United States Senate, Washington, D. C*

Accompanying this letter was a communication containing some
statistics, which, owing to incompleteness of the records, are
only partial, but I incorporate it, throwing as it does some light
on the subject of inquiry.

Columbia, S. C., March 9,1892.
DEAR SIR: The records of this office, as shown by the reports of the comptroller-general of the State, are not entirely complete, and such facts as I am
able to give you for the period from 1850 to 1860 (1880 to 1890 being already
given) may not prove altogether satisfactory to you, as it is not to myself.
The clercial force; allowed by law hinders very much the collating and getting together such information as you desire.



I will give you the amounts as shown by comptroller-general's report for
two extremes, viz: 1850 and 1860.
This reportshows for 1850, capital of bank of.State 11,122,460,63; banknotes
issued, Charleston and Columbia, 51,760,098. (From annual statement of bank,
October 1,1850.)
The last quarterly reports of banks for this year (ending 30th September,
1850) capital was 15,991,885.63; bills in circulation, 52,769,531.99.' This-includes
above figures, and it seems there were other banks in the State at this period
other than the eight reporting as above to comptroller-general. The report of
comptroller-general for 1858-'o9 and '60, are not to be found in office, but in 1857
the total amount of capital of banks reporting to comptroller-general, 30th
September, not including the Bank of the State, was $14,837,640.25; bills in
circulation, $7,105,170.51. Bank of State: Capital, $1,104,367.25, and bank notes
issued, 52,368.928.12.
The State librarian possibly could give you figures nearer your wishes, as
doubtless the records there are not broken as in this office as to this period.
I have depended for these figures entirely upon reports of comptroller-general, and not records of office as kept by bookkeepers, etc.
Regretting that my facilities are not better for complying with your request, I am
Yours, sincerely,
W . H . E L L E R B E , <7. <?.

G e n . M . C. BUTLER,

Per NORTON, C. C. <7. G.

Washington, D. O.

Not being able to procure the information as fully as I desired
from this source, for the reasons assigned by the comptrollergeneral, I addressed a similar letter to Mr. Thaddeus Street, long
a member of the Charleston Chamber of Commerce, an intelligent business man of that city, and the following is his reply:

CHARLESTON, S. C., March 14,1892*
MY DEAR SIB: Your esteemed favor of the 10th instant came duly to hand*
The information asked for is not easily obtainable owing to the loss of records, but after careful research I am able to give you fair answers to your
First. The banking capital in South Carolina for the decade from 1850 to
1860 was about 818,000,000.
Second. The circulation was about 510,000,000.
Third. The capital of South Carolina banks varied considerably between
1880 and 1890 as some of the Charleston banks found it advisable and profitable to reduce their capital, but in 1890 it amounted to about 54,200,000.
Fourth. I think the bank circulation in 1890 was about 5550,000, but you can
get the exact information by applying to the Comptroller of the Treasury at
Washington. You may be assured that I shallot all times be pleased to
serve you.
Yours, very truly,
H o n . M . C. BUTLER,



Senatorfrom South Carolina, Washington, J). C.

Not content to leave the matter here, I applied to the Comptroller of the Currency with a like request, and here is his answer:

Washington, D. (7., March 27,1592.
SIR; I have the honor to acknowledge receipt of your letter of 14th instant, contents of which have my careful attention.
I herewith inclose a statement which will give you the information asked
fc>r in the third, fourth, fifth, and sixth inquiries made in your letter.
It is regretted that the records of this office do not enable me to furnish
you the information asked for under inquiries one and two of your letter,
but you are respectfully referred to the annual report of Comptroller Knox
for the year 1876, which contains much valuable information on the subject
of State banks, and from which you may be able to obtain reference to some
work which will furnish the'statistics you desire.
Eepectf ully, yours,
H o n . M . C. BUTLER,

United Statet Senate.

E . S. L A C E Y ,


Statement showing amount of capital stock and amount of circulation outstandingfor national banks in the State of South Carolina for each year from 1880
to 1890, both inclusive; also number of such banks for each year.
No. of
banks. Capital stock. outstanding.






$1* 331,300

Maximum amount of national-bank circulation outstanding at
any time was, on October 1,1882
Amount of national-bank circulation outstanding on March 16,

A recapitulation of the foregoing facts shows that South Carolina in 1860, with a population of free inhabitants of 291,300 to
412,300 slave, had $18,000,000 of bank capital and $10,000,000 of
bank circulation, while in 1890, with a population of 1,151,000,
all free, she had only $1,798,000 of bank capital and $389,965
of bank circulation. I do not pretend that this is the only currency in circulation. The other kinds of national currencygreenbacks, gold and silver certificates, gold and silver coin—
circulate in that State as elsewhere, but not in quantities approximating $10,000,000. Just hpw much in addition to the
national-bank notes set forth above nobody can accurately estimate, but it is safe to say it will not reach the half the $10,000,000,
while there are nearly live times the free inhabitants.
Nor do I claim that the national-bank capital of $1,798,000 embraces all the bank capital in that State. We have about $4,000,000 of State and national bank capital against the $18,000,000 in
Now, Mr. President, the simple recital of these facts tells the
whole story of the currency famine in the South, for what is true
of South Carolina in a greater or less degree is true of the entire section and of the West also.
I am sure I have not overstated the situation at all. Ndr have
1 exaggerated the real conditioif of affairs. It can not be denied
that the exigency urgently demands Congressional action, and
that some measures of relief should be promptly afforded. In
my judgment no greater or more satisfactory measures of relief
could be adopted than the repeal of the 10 per cent tax on State
bank circulation.
If this is done I should expect to see a revival of 'prosperity
never before experienced. I should look forward with confidence to a long period of contantment and progress among the
people of all sections which would redound to the happiness of
It is encouraging to note that one of the great political parties—the Democratic—has, at its recent national convention at
Chicago, adopted, as one of the planks of its party platform, a
proposition to repeal this tax.

I should regret to see this made a party question; but it is a
most hopeful sign that the party which had 100,000 majority in
the popular vote at the last Presidential election has embraced
this within its party creed and made it a prominent feature of
its party policy.
Mr. President, I ask that the resolution lie over for the present. It is unnecessary to refer it to the Committee on Finance,
that committee having reported adversely on a bill introduced,
I believe, by my friend from Tennessee [Mr. HARRIS].
The PRESIDENT pro tempore. The resolution will lie on the