branches, might, if adopted here, with a multitude of small banks, each independent of the other, result in an unjustifiable invasion of the equitable rights of the depositor. The dangers in this regard are ably discussed and fully illustrated in the annual report of the Comptroller of the Currency. To his argument nothing need be added. While the question of terms is important in itself, it is nevertheless a subordinate

one.

The facts set forth by the Comptroller relate exclusively to the proposition that the notes of a failed bank shall be a paramount lien upon the assets for their full value before any rights accrue to other creditors.

The issue of notes upon the general assets of national banks may be made perfectly secure without the requirement that the notes be a first lien upon their assets. It would only be necessary to award to the note holder the same ratable proportion of the assets which went to other creditors, and to provide that the amount required to pay the difference be obtained by an assessment upon all the national banks, collected ratably in proportion to their share in the circulation of this character. The vital question is, What percentage of assessment upon this circulation would be required in order to cover the losses to note holders in the case of failed banks? The experience of the national banking system demonstrates that the assessment would be insignificant.

The total circulation of failed banks outstanding at the time of failure, up to October 31, 1897, was $20,893,827. The loss upon these notes, if the security for them had been impaired in the same degree as the security for other liabilities, would have been $5,379,165, or an annual average of about $163,000. This loss would have been made good by a tax of about one-twelfth of 1 per cent per year upon the circulation of the solvent banks. A tax of one-fifth of 1 per cent upon the average circulation of the national banks since the foundation of the system would have paid such losses up to October 31, 1897, amounting to $5,379,165 and left a surplus of about $9,000,000 in the guaranty fund." Whether preference be given to the note holder, as in Canada, or he be made to take his share of risk with the depositor, as in Germany, France, and Scotland, or whether the note holder shall be protected by the special pledge of security as now provided in our national banking act, these considerations affect the question relatively, not absolutely. Under either of these conditions provisions may be made which will furnish to the country a paper money adequate to commercial needs, economical to the people, and safe in its general workings.

In the nature of things, the banker is the proper agency for operating this important function. He must have motive for his action or he will not exercise it. Given this motive, he will, like the laborer, the merchant, or the professional man, be diligent in the employment of his powers. That this motive must be the motive of gain does not differ

See page 191.

entiate the banker from other working forces of society, whose actions are healthful and helpful to the social whole.

In my last report I ventured upon specific recommendations. These recommendations, if adopted and formulated into law, would, in my opinion, be curative of the evils herein pointed out. In House bills 10289 and 10333 are embodied a series of measures in some respects more meritorious. The measures therein proposed are the result of careful study by expert and experienced men. With some modifications the reasonable fruit of full discussion-they would, I believe, meet the country's needs. I commend the subject to the early and earnest attention of Congress.

WAR TAXES.

The report of the Commissioner of Internal Revenue1 possesses peculiar interest, indicating, as it does, the operation of the war-revenue act of June 13, 1898. It shows quite clearly that the aggregate revenue to be derived therefrom will form a smaller total than was estimated by the more sanguine of its supporters.

The Commissioner's estimate of $100,000,000 from this source seems to be fairly justified by the results to the Treasury during the period from July 1 to the present time. His report goes also to show the friction and embarrassments which have arisen from the need of interpreting obscurities in the act itself, and the application of such interpretation to specific cases coming under the same general head, yet differentiated from each other by more or less important particulars. Many complaints have arisen from those unreconciled to such interpretations or applications, and, granted a well-balanced relation between revenue and expenditures, it might be well to consider the propriety of repealing some of the more vexatious features of the act. Until more settled conditions, however, as to extraordinary expenditures for the Army and Navy are reached, even such repeal can not be recommended by this Department. Some verbal amendments, making more clear the intentions of Congress, are to be desired, and representations in this direction may be made the subject of a separate communication to Congress at an early day.

L. J. GAGE,

To the SPEAKER OF THE HOUSE OF REPRESENTATIVES.

Secretary.

See page 239.

TABLE A.-STATEMENT OF THE OUTSTANDING PRINCIPAL OF THE PUBLIC DEBT OF THE UNITED STATES JUNE 30, 1898.

TABLE A.-STATEMENT OF THE OUTSTANDING PRINCIPAL OF THE PUBLIC DEBT, ETC.-Continued.

Length of loan.

When redeem-
able.

Rate of interest.

Price
at which
sold.

Amount
authorized.

Amount issued.

Amount out-
standing.

LOAN OF JULY AND AUGUST, 1861.

The act of July 17, 1861 (12 Statutes, 259), authorized the issue of
$250,000,000 bonds, with interest at not exceeding 7 per centum per
annum, redeemable after twenty years. The act of August 5, 1861
(12 Statutes, 316), authorized the issue of bonds, with interest at 6
per centum per annum, payable after twenty years from date, in
exchange for 7-30 notes issued under the act of July 17, 1861.

LOAN OF JULY AND AUGUST, 1861.

20 years..

Continued at 3 per cent interest, and redeemable at the pleasure or Indefinite...
the Government.

OLD DEMAND NOTES.

Acts of July 17, 1861 (12 Statutes, 259); August 5, 1861 (12 Statutes, Indefinite.
313); February 12, 1862 (12 Statutes, 338).

3 years...

FIVE-TWENTIES OF 1862.

Acts of February 25, 1862 (12 Statutes, 345); March 3, 1864 (13 Stat-
utes, 13), and January 28, 1865 (13 Statutes, 425).

Aug. 19 and 7 per cent. Av. pre. Indefinite
Oct. 1, 1864.
of ies
5 or 20 years. May 1, 1867
6 per cent..

139,999,750.00

9,450.00

1000.

Av. pre. 515, 000, 000. 00 514, 771, 600.00 of

215, 850.00

LEGAL-TENDER NOTES.

On demand.

None

Par

450, 000, 000. 00

346, 681, 016. 00

The act of February 25, 1862 (12 Statutes, 345), authorized the issue Indefinite..
of $150,000,000 United States notes, not hearing interest, payable to
bearer at the Treasury of the United States, and of such denomi-
nations, not less than five dollars, as the Secretary of the Treasury
might deem expedient, $50,000,000 to be applied to the redemption
of demand notes authorized by the act of July 17, 1861; these notes
to be a legal tender in payment of all debts, public and private,
within the United States, except duties on imports and interest on
the public debt, and to be exchangeable for 6 per cent United
States bonds. The act of July 11, 1862 (12 Statutes, 532), authorized
an additional issue of $150,000,000, of such denominations as the Sec-
retary of the Treasury might deem expedient, but no such note
should be for a fractional part of a dollar, and not more than
$35,000,000 of a lower denomination than five dollars; these notes to
be a legal tender as before authorized. The act of March 3, 1863
(12 Statutes, 710), authorized an additional issue of $150,000,000, of
such denominations, not less than one dollar, as the Secretary of the
Treasury might prescribe; which notes were made a legal tender as
before authorized. The same act limited the time in which the

TEMPORARY LOAN.

Acts of February 25, 1862 (12 Statutes, 346); March 17, 1862 (12 Stat- Indefinite.. utes, 370); July 11, 1862 (12 Statutes, 532), and June 30, 1864 (13 Stat

After 10 days' notice.

4, 5, and 6 per cent.

Par

150, 000, 000. 00 a716,099, 247. 16

2,850.00

utes, 218).

CERTIFICATES OF INDEBTEDNESS.

Acts of March 1, 1862 (12 Statutes, 352); May 17, 1862 (12 Statutes, 1 year....... 1 year after
370), and March 3, 1863 (12 Statutes, 710).

6 per cent...

Par

No limit.

561,753, 241.65

3,000.00

date.

FRACTIONAL CURRENCY.

Acts of July 17, 1862 (12 Statutes, 592); March 3, 1863 (12 Statutes, Indefinite.
711), and June 30, 1864 (13 Statutes, 220).

On presenta- None tion.

Par

50, 000, 000. 00 a368,720, 079. 51

6, 884, 752. 14

LOAN OF 1863.

Acts of March 3, 1863 (12 Statutes, 710), and June 30, 1864 (13 Statutes, 3 years. 218).