every dollar of the thousand millions of paper money now in circulation is an indirect tax first on the banks and doubly so on the people. That every dollar of it they hold in their vaults is a direct tax upon them, and through them on the people, in higher interest rates, as compared with the way of putting in circulation paper money in every other country. He knows as well as we that under the present method of issuing currency by the use of bonds, banks fatten on the misfortunes of the country; that it is made for their pecuniary interest to depreciate the credit of the country-first to make a profit on the bonds issued and that they may make more money on the currency issued upon the debt in bonds the country is compelled to issue in its misfortunes. That they did maintain gold payments as long as they possibly could and free of expense to the Government, from 1880 to 1892, under these circumstances, is CONCLUSIVE EVIDENCE OF THEIR HIGH PATRIOTISM. But they have succumbed. They have been unable to stand up as every clear-headed man knew they would be unable to when it cameand come it must-under the depressing conditions of the immediate past. How long shall we adhere to a financial and banking system that makes banking profitable in the proportion that damage is done to the credit of our country? When bonds paid their purchaser over 3 per cent net at 1173, in 1881, the bank circulation was over $312,000,000. At the price in 1890, paying an income of 2.45 per cent, the banks sold the bonds and reduced their circulation to $126,000,000, thus taking $186,000,000 out of circulation. Repeal the 1 per cent tax and also allow banks to issue circulation up to the par of their bonds, at their recent price, and the banks would soon add enormously to the gold embarrassments of the Treasury by carrying the paper money in circulation up and demanding gold redemption, by adding $200,000,000 to $300,000,000 of national-bank notes to the $1,000,000,000 paper money already in use, to be again reduced by hundreds of millions when the credit of the Government is good and the prices of bonds go up and the people need the money to use. This is not an elastic currency. It is A FREAK CURRENCY. A currency used against the people and wholly in the interest of the banks. A currency issued when the people do not need the money and can not use it, to be withdrawn when the people do need the money and can use it. The New York banks had only $3,500,000 in circulation on November 1, 1890, when bonds were high and $14,500,000 November 2, 1895, when Government credit was ruined. Appendix T, page 69. The bonds sold this month, on February 5, at 1.11378, were worth, the day they were sold, to yield 28 per cent semiannual interest, 1.3392, or 20.24 per cent more than they sold for. At this 28 per cent interest the income to the purchaser from them would be 3.62 per cent more than the income United States bonds paid the purchaser in the three years of 1887, 1888, and 1889 at their price in the market. (Appendix D, page 39.) The value of the existing 2 per cent United States bonds to run twenty-nine years, as compared with the 4 per cent twenty-nine-year bonds at 1.12, is only $75.06 for each $100 bond. All men in business are hungry for reduced taxation and Government money. Under these circumstances the 1 per cent tax on circulation should not now be repealed or reduced. There is no pretense that a single recommendation made by the Comptroller of the Currency would relieve the financial situation. They do not have that object in view. The bill proposed by me is THE ONLY MEASURE FORMULATED that makes any pretense of completely relieving the United States Treasury situation. The profits on currency notes of banks in normal conditions, say on June 30, 1892, are shown by Appendix E, page 39, in average condition, and also under Walker bill 171 are shown in Appendix H, page 43. If a bank held bonds for circulation one-third each in 2, 4, and 6 per cent, the then existing bonds, at their price in the market in the normal conditions on the date given, the figures of the actuary of the United States Treasury show that double the profit would come to banks under House bill 171 than under existing laws in 4 per cent interest localities; five and a half times as much in 6 per cent interest localities, and one hundred and twenty-one times as much in 8 per cent interest localities, and still more where interest is 10 per cent. Where interest is 10 per cent the present system is simply cruelly oppressive. How long shall we continue this hardship, especially to the South and Northwest? The people of each section of the country have an equitable right to secure bank currency without being discriminated against in the banking laws in favor of any other section. The profits in a 6 per cent locality over a 4 per cent locality should be one-half more and in an 8 per cent locality twice as much and in a 10 per cent locality twice and a half as much as in a 4 per cent locality. Were those things done that the bankers in 4 per cent localities are demanding shall be done, viz, the repeal of all taxes on currency, and they be allowed to increase their currency to the par value of their bonds, the facts prove that the profit on currency in 4 per cent localities in the conditions demanded would be 6555 per cent more than in 10 per cent localities and proportionately more than in 8 per cent and 6 per cent localities. This shows that the business of issuing currency in any proportion upon bonds is more inequitable than the worst enemy of that system of issuing currency has ever before proclaimed it to be. (See Appendix Q, p. 64.) I wish to call your attention to another fact, namely: That if every recommendation of the Comptroller of the Currency was adopted, not only would it fail to afford any relief whatever to the UNITED STATES TREASURY SITUATION, but that it would not change the disparity that now exists in favor of localities where rates of interest are 4 per cent to 6 per cent, like New York, etc., and against localities where it is 8 per cent, 10 per cent, and even 12 per cent, as it is in some parts of the South and Northwest. The same oppressive and blighting discrimination in favor of 4 per cent to 6 per cent localities on currency issued by the Government on the deposit of bonds, against the higher rates of interest sections and in favor of the lower, would exist. As the adoption of the recommendations of the Comptroller of the Currency would not relieve or change the relative expense of our currency as between the sections by the smallest fraction, is it not the duty of the Committee on Banking and Currency to take the responsibility of recommending a radical improvement in the financial and banking system of the country at once? When will a more opportune time arrive? It is rather the duty of the Comptroller of the Currency to recommend improvements in and to administer faithfully the existing system, however faulty he may feel it to be, than to devise a new one. Please examine Appendix I (page 42), and see the localities that suffer most in the existing law. But bankers say: "What inducement is there to me to change from banking under the existing law to banking under your bill? You do not expect us to change unless you can show us we can make more money in what you propose?" Certainly not; but the advantage to banks would be great in every way. It is certain that their income will be very largely increased, as well as EVERY EVIL OF THE PRESENT FINANCIAL SITUATION be corrected, by all the banks in the country going into it. Every business man and wage worker will also be benefited by uniting to secure the enactment into law of the bill I present in increased profit to banks and ultimately lower interest rates. Most beneficent to the banker will be the safety of banking. It will keep every phase of banking under the control of bankers, as every other business is under the control of those prosecuting it. They will then cease to be at the mercy of party politics and dependent on the skill and good judgment of men clothed with a brief authority by appointment to office. This one thing, of preventing unnecessary crises, will be a saving of millions upon millions to business men and bankers, which now occurs at all too brief intervals, as all bankers have abundant reason to know. But bankers say, HOW ARE NATIONAL BANKS TO COME UNDER the provisions of the bill? Simply by a vote of the board of directors. Then they can take up their bonds and retire their present circulation at their leisure with the new circulation they take out. As it only changes one form of their currency notes for another form, there is not an account in the bank to touch except the bond and currency note account. Divorce the United States Treasury from having anything to do with managing the money of the country and LESS DIFFICULTY WILL BE EXPERIENCED in the banking business than in any other business done. Whether the Government is collecting enough or not half enough revenue, paying gold, silver, or paper on its obligations, will be a matter of not the slightest concern to the business of banking as such, and its shortage in revenues will only affect the banking business as a secondary effect and as it helps or hurts the general business of the country. Had the bill been a law from March 4, 1893, to the present, it would have saved all necessity for the issue of bonds other than the few necessary to supply a deficient revenue, and they would certainly have been sold at rates paying an income of from 24 to 2 per cent instead of 33, at which rates our bonds have recently been sold. The enactment of the existing tariff would not then have been complicated with the Treasury situation, and there could have been no panic of 1893. Again, had this bill been law, and the Government needed more money to supply a TEMPORARY DEFICIENCY IN THE REVENUE, it would not need gold, and there is no reason to believe our bonds would not have sold for lawful money at a premium high enough to yield as low an income from them as they yielded at their market price for the eight years previous to the panic of 1893, namely, 2.462 per cent. For the exceedingly oppressive discrimination the present law makes against the high rates of interest in the southern and northwestern sections of the country, please examine carefully Appendix F, page 40. It is a question for each one to ask himself, especially if he is a banker, whether he would not protest with intense vigor against a banking system that made a difference of 5 per cent in the profit on currency issued to banks against him, as compared with New York and Boston, did we live in the HIGH RATE OF INTEREST SECTIONS of the Southwest and Northwest. Is it any wonder that the people living in those sections show impatience when called knaves or fools when they protest? Are not men living in those sections justified in demanding that the national-bank system be immediately reformed, that they may be relieved from such oppressive discrimination? Is there a man in Congress ready to face his constituents after deliberately voting in refusal of relief? Any system that works such injustice against any section of the country, and especially those which need most business encouragement and help, is repulsive to every right-minded man. It appeals to every right-minded man for immediate correction. All the figures I have given show average conditions as they are predicated on the sum of the aggregate resources and liabilities of all the national banks in the country in 1892, taking figures from pages 46 and 160 of the Report of the Comptroller of the Currency, and for the normal conditions of that year, and from the figures of the actuary of the Treasury, published on page 851, Appendix of the Congressional Record of the Fifty-third Congress, second session. As I have before said, these figures are made upon the assumption that the CURRENCY TAKEN OUT BY THE BANKS is secured by one-third each of the 2, 4, and 6 per cent bonds, bought at their price in the market on June 30, 1892. Because some bankers have bonds costing them more or less than their market price on June 30, 1892, or even had their bonds given them, is nothing to the points made. I am discussing normal and average conditions. Of course, not many banks were in exactly the condition given, but all the banks taken together are correctly represented. Of course, as has been before said, the competition between the existing banks and new banks that would spring up all over the country, should my bill become law, would soon reduce the rates of interest to the people and reduce the larger dividends to the banks I have shown, to a normal profit to banks, and thus in reducing interest rates reduce their cost, and so reduce the price to the people of every boot, shoe, coat, or gown they bought. How is the bill as a war measure? It is confessed by Senator Sherman, in his speech in the Senate on January 3, 1896, and in the April Forum, and all know, that WAR UNDER EXISTING CONDITIONS means national insolvency. Under this bill no finanical disturbance could come because of war. Because of our want of a sound financial system, the War of Secession needlessly increased its cost to the Government over $1,000,000,000, with only 30,000,000 of people. Now, any war would cost three times its normal cost under sound financial conditions. What would result? The War Department in ten years has spent $425,000,000. Of what avail is this without the sinews of war? The sinews of war to-day are sound bankers' funds, not gold or silver. Again, the Treasury condition paralyzes business. Why not reform it now? The history of the withdrawal of gold shows it never will cease. It has been as follows, and it will now go on, being once established, surplus revenue or no surplus. In eleven and one-half years gold redemption, from January 1, 1879, to August 1, 1890, was $28,250,000, because of $300,000,000 in the Treasury. In two years, from July, 1890, to July, 1892, about $15,000,000. In three years and five months, gold redemption, from July 1, 1892, to December 1, 1895, reached the enormous sum of $360,000,000. Appendix G (page 41) shows the total gold drawn from the Treasury to be $683,000,000 in three years. The average monthly receipts, and failure of receipts, of gold coin and gold certificates from CUSTOMS AT NEW YORK from January, 1889, to September, 1895, are very instructive and still more ominous. The troubles inherent in our system are now fully developed. No more gold will be paid on imports. After the silver act of 1890 became a law, on July 14, for the next six months they were Then came the repeal of the purchase clause of silver act of July 14, 1890, on November 1, 1893. (See Appendix S, page 68.) While the continuance of this act indefinitely would have put the country ON A SILVER MEASURE OF VALUE with Mexico, China, etc., there is no evidence that its enactment or repeal affected the then industrial or financial situation in the smallest degree. Neither would a sufficient revenue alone now change existing habits and give any relief to the Treasury gold situation. |