In the course of discussion relating to this resolution above quoted it was said by the representative from Costa Rica:

"I believe that undoubtedly if the United States desired to encourage commercial relations with our countries it would be necessary for it to offer us its capital, as has been done by the other nations-Germany, England, and France. Capital affords facility, and facility, as a natural consequence, encourages the commercial relations

between countries.'

In the course of the discussion of the same resolution the representative from Brazil remarked:

"We need to have such institutions because there is no connection to-day between the consumer and producer. We need just such institutions, so that we can take a bill to the bank and open the necessary credit. The necessary machinery in the way of these proposed institutions is lacking, and therefore I give my vote to a report which fills the necessary element in our relations."

The representative of Mexico in that conference said upon this subject:

"That bank, of course, needs the sanction of the Government of the United States for its establishment, for, needing branches in the other nations, these could not be established without this sanction.

"This may not be the most efficacious means to develop commerce, but as an institution of credit is always an advantage to the country having it, and as an international bank is proposed, I see no objection in carrying this idea out, which may give practical results to the countries interested.”

As the result of this discussion in the International Conference the report of the committee on banking was adopted, and was subsequently transmitted to the President and by him transmitted to Congress, and the letters of transmittal, with the report, are hereto attached and made part of this report.

It is apparent from the discussions which took place at the American International Conference, from the report of its committee on banking, which is submitted herewith, and from the resolution adopted unanimously by the conference, that the representatives of the Governments other than that of the United States united in advising the incorporation of the American International Bank by the Government of the United States, and intended to express the willingness of their Governments to cooperate in making the institution thus chartered successful in its operations in other countries. It was not within the expectation of the representatives of the Governments other than that of the United States that the institution, branches of which were to be established in their countries, should receive its charter from any other authority than that of the Government of the United States.

It is also to be observed from those discussions that the members of that conference were all of opinion that while such an institution was mainly an adjunct to rather than a cause of commerce, it could by the facilities which it would afford increase the profit of the commerce already existing and render profitable transactions which without it would be unprofitable. It was one of the instruments which, in the opinion of the delegates to that conference, would greatly improve the business intercourse and means of direct communication between the countries therein represented. A bill to carry out this recommendation of the International American Conference was introduced in the Fifty first Congress and reported favorably by the Committee on Banking and Currency, but failed to be acted upon by the House. In the opinion of your committee the time has arrived when some active steps should be taken to secure to this country control of at least such part of the exchanges connected with the commerce of the South American Republics as is occasioned by transactions between their citizens and those of this country. The business of dealing in such exchanges is a profitable one. The profit now goes to the English banker, and is practically a tax or added charge upon us. We believe also that the commerce is certain in the near future to greatly increase, and with its increase will come either added profit to us if we shall conduct the business of making these exchanges ourselves, or added loss for the benefit of the English banker if we shall permit the business to continue in its present channel.

The time is opportune for setting up the machinery necessary to do this business, both because the representatives of the South American Republics have united in recommending such a project and because our merchants are prepared to act upon the recommendation and to furnish the capital necessary to start the bank. No objection based upon any constitutional limitation of the power of Congress occurs to your committee against granting the charter provided for, because, first, it is intended strictly as an instrument to regulate and advance the foreign commerce of the United States, and because, secondly, it is intended to furnish a means by which the exchanges, not of one city or one community in the United States, but of all parts of the United States, with the South American Republics may be readily and safely done. No State charter would be accepted as adequate, because the foreigner looks to the Government of the United States, and under our system should look to that Government and to no other, as the source of authority for acts done by its

citizens outside of its territory. Nor would a State charter be adequate within the limits of the United States, because the powers of a State bank are limited to the State which charters it, and we have never seen the time when States were willing to allow the banking institutions of one State to invade the territory of the other. Your committee, taking the bill as prepared in the Fifty-first Congress as a text and the bill as introduced at this session as a further guide, have added to the bill such provisions restricting the powers of the corporation as the National-Bank Act and our experience thereunder seemed to require, and the bill as reported subjects the bank to the severest scrutiny and examination by the Comptroller of the Currency. The bill expressly prohibits the issuing by the bank of any currency or of anything to be used as a circulating medium by the bank, and it also expressly provides that the Government of the United States shall not at any time assume or be held to be liable for any acts of the bank or of any of its officers. Stringent provisions have also been introduced into the bill providing for the forfeiture of the charter in the event that the capital is not subscribed and paid in within a limited time, or in case after the bank shall have been organized it shall in any way exercise forbidden powers or exceed the limits placed by the bill upon the powers granted.

As thus guarded, your committee believe that the institution will answer the purpose for which it is intended and for the accomplishment of which its creation was recommended by the International American Conference. And it is the opinion of your committee that without the granting of a charter it would be impossible to obtain subscriptions of the necessary capital for the transaction of this business or to interest as large a number of communities and citizens of this country as is desirable for the success of the enterprise.

Your committee do therefore report the substitute bill with the recommendation that it do pass.

MESSAGE FROM THE PRESIDENT OF THE UNITED STATES TRANSMITTING A LETTER OF THE SECRETARY OF STATE RELATIVE TO THE REPORT OF THE INTERNATIONAL AMERICAN CONFERENCE IN FAVOR OF AN INTERNATIONAL AMERICAN BANK.

To the Senate and House of Representatives:

I transmit here with a letter from the Secretary of State, inclosing a report adopted by the International American Conference recently in session at this capital, recommending the establishment of an international American bank, with its principal offices in the city of New York and branches in the commercial centers of the several other American Republics.

The advantages of such an institution to the merchants of the United States engaged in trade with Central and South America and the purposes intended to be accomplished are fully set forth in the letter of the Secretary of State and the accompanying report. It is not proposed to involve the United States in any financial responsibility, but only to give to the proposed bank a corporate franchise and to promote public confidence by requiring that its condition and transactions shall be submitted to a scrutiny similar to that which is now exercised over our domestic banking system.

The subject is submitted for the consideration of Congress in the belief that it will be found possible to promote the end desired by legislation, so guarded as to avoid all just criticism.

EXECUTIVE MANSION, May 27, 1890.

BENJ. HARRISON.

The PRESIDENT:

DEPARTMENT OF STATE, Washington, May 27, 1890.

I have the honor to submit herewith the report of the committee on banking as unanimously adopted by the International American Conference recently in session in this city. It was the wish of the Conference that this proposition, of such great interest to every American Republic, should, as promptly as possible, secure the earnest attention of the Congress of the United States.

The foreign commerce of the nations south of the Gulf of Mexico and the Rio Grande amounts annually to more than $1,100,000,000. At present the people of the United States enjoy only a meager share of this market, but the action of the recent Conference will result, I believe, in the removal of certain obstacles which now tend to obstruct the expansion of our trade.

One of the most serious of these obstacles is the absence of a system of direct exchanges and credits, by reason of which the exporting and importing merchants of the United States engaged in commerce with Central and South America have

been compelled to pay the bankers of London a tax upon every transaction. Last year our commerce with the countries south of us amounted to $282,005,057, of which the imports of merchandise were valued at $181,058,966, and the imports of specie and bullion were $21,236,791, while our exports consisted of merchandise valued at $71,938,181 and $8,668,470 in specie and bullion. Of the merchandise imported into the United States, the greater part was paid for by remittances to London and the cities of the Continent to cover drafts against European letters of credit. For use of these credits a commission of three-quarters of 1 per cent is customarily paid, so that the European banks enjoyed a large profit upon our business with a minimum of risk. This system steadily results in losses to our merchants in interest and differences in exchange as well as in commissions. These losses would be largely reduced by the establishment of an international system of banking between the American Republics.

The merchants of this country are as dependent upon the bankers of Europe in their financial transactions with their American neighbors as they are upon the shipowners of Great Britain for transportation facilities, and will continue to labor under these embarrassments until direct banking systems are established.

The report of the committee, hereto attached, presents a simple and easy method of relief, and the enactment of the measure recommended will, in the judgment of the Conference, result in the establishment of proper facilities for inter-American banking.

Respectfully submitted.

JAMES G. BLAINE.

REPORT OF THE COMMITTEE ON BANKING.

[As adopted by the International American Conference, April 14, 1890.1

Pursuant to resolutions passed at the meeting of the Conference on December 7, 1889, your committee was appointed to consider and report upon the methods of improving and extending the banking and credit systems between the several countries represented in this Conference, and now has the honor to submit, as the result of its deliberations, the following report:

Your committee believes that there is no field of inquiry falling within the province of this Conference for the extension of the inter-American commerce more fundamentally important than that of international American banking, and that, in fact, the future of the commercial relations between North, South, and Central America will depend as largely upon the complete and prompt development of international banking facilities as upon any other single condition whatever.

In the opinion of your committee the question of the mechanism exchange is secondary, if at all, only to the question of the mechanism of transportation. Even after better means of transporation than those which exist shall have been established, it will be impossible for the commerce between American nations to be greatly enlarged unless there be supplied to their merchants means for conducting the bank ing business which shall in some measure liberate them from the practical monopoly of credit which is now held by the bankers of London and the European Continent. If there be an enlargement of the means of transportation, unaccompanied with an equal extension of financial facilities, only partial benefits will be derived from the former as compared with the benefits which might be derived were the two improvements to progress together.

Your committee is of the opinion that the commerce between the American countries might be greatly extended if proper means could be found for facilitating direct exchanges between the money markets of the several countries represented in this conference, even if there were no improvements in transportation.

The first effect would be to afford a more direct "clearance in account" of goods exported against goods imported.

The large amount of commissions now paid to the European bankers could not only be decreased, but such commissions would be paid to American bankers or merchants themselves, and in this way a share of the profits which now go almost solidly to the European money markets could be kept in the financial centers of this continent.

There does not exist to-day among the countries represented in this conference any organized system of bankers' exchanges or credits. For instance, drafts upon the United States are not attainable at all in many of the markets of South America, and in most of them are only salable at a discount below the sterling equivalent. In like manner drafts upon South and Central America are practically unknown in the money markets of New York, Philadelphia, Baltimore, New Orleans, Chicago, and Boston.

The point has been made that to extend business between our States long credits must be given. How is it possible for manufacturers and merchants at distant points to form relations of such a character as to justify the granting of long credits? At

present such relations are chiefly formed through the intervention of European banks and bankers, which are not interested in the extension of trade between the different countries represented in this conference except in a secondary and subordinate sense. The extension of trade between Europe and the Americas, not between the Americas themselves, is their first care. By the establishment of a well-organized system of international American banking our merchants and manufacturers would be able to establish improved credit relations, and those administering the system in the several money markets of the Americas would immediately become interested in fostering such relations and facilitating such business to the utmost extent.

The merchants of the United States now importing goods from the countries of South and Central America make such importations, as the investigations of your committee show, almost without exception, through the use of English bankers' credits.

The total foreign commerce of the West Indies, Mexico, and South and Central America amounted last year to about $1,200,000,000 United States gold. The committee have not been able to ascertain the amount of the commerce among the LatinAmerican States. The total exchange of commodities between the United States and countries to the south during the year ending June 30, 1888, aggregated $282,902,408, of which the imports into the United States amounted to $181,058,966 of merchandise and $21,236,791 of specie and bullion, and exports from the United States to $71,938,181 of merchandise and $8,668,470 of specie and bullion. Of the $181,000,000 of merchandise brought into the markets of the United States the greater part was paid for by remittance to London or the Continent, to cover drafts drawn in the exporting markets against European letters of credit.

For the use of these credits on Europe a commission of three-quarters of 1 per cent is customarily paid, and the foreign banks reap this great profit at a minimum risk, inasmuch as the drafts drawn against these credits are secured not only by the goods represented by the shipping documents against which the bills of exchange are drawn, but also by the responsibility of the party (generally the consignee) for whose account the letters of credit are issued, and without any outlay of cash, as the American merchant places the cash with the European bankers to meet such drafts at or before maturity.

This system results in the loss to America of interest and differences in exchange as well as of commissions, all of which could be saved to our countries if international American banking were so developed and systematized as to afford a market for drafts drawn against letters of credit issued in America, such as now exists for drafts drawn against European letters of credit.

At present, therefore, the situation is such that the merchants of this continent are virtually dependent upon European bankers so far as financial exchanges are concerned, notwithstanding the fact that there are ample capital and responsibility in the countries here represented, and it is the opinion of competent persons that such capital would be ready to avail itself of the opportunity of transacting this business directly between the financial centers of our respective countries without the intervention of London if the laws were such as to permit the conduct of the business of international banking under as favorable provisions as are now enjoyed by the European bankers. The prime difference would be that these transactions would be carried on by American instead of European capital, and that the profit would remain here instead of going abroad. This, however, is impossible of realization at present, in view of the fact that the banking houses of the United States doing foreign business are usually controlled by London principals, and that it is impossible, without some change in the legislation of the United States to secure a sufficient aggregation of capital in corporate form, and so free from the burdensome restraints and taxes now imposed upon moneyed corporations, as to permit competition on equal terms with the European bankers.

Many different plans have been discussed concerning the best means of facilitating direct banking business between our countries. Your committee has considered and dismissed a number of propositions relative to the establishment of banks by means of which the national governments themselves should afford financial facilities for inter-American banking. Such action, in your committee's judgment, does not fall within the proper sphere of government. There is no reason, however, why the governments represented in this conference should not severally charter banking corporations to carry on business of the class which is now generally done by the great banking corporations of London, that is, not in the issuing of circulating bank notes, but for the purchase and sale of bills of exchange, coin, bullion, advancing on commodities generally, and for the issuing of bankers' letters of credit to aid merchants in the transaction of their business.

In the United States, where capital exists in particularly large volume and would lend itself most readily to business of this class, and consequently to the facilitating of international commerce, the laws are not such as to encourage the aggregation of capital for such purposes. So far as your committee has been able to discover

after careful investigation there is no general statute of the United States nor of any of the States of the United States under which a banking company can be organized with ample capital which would have the power of issuing such letters of credit and transacting such business as is done by the leading banking companies of London, which virtually occupy the field. In the United States it will be necessary, in order to secure the proper facilities and the proper corporate existence, that there should be legislation granting a charter, and in most of the States such legislation is expressly prohibited by the terms of their constitution. Furthermore, the laws of the several States are such as to impose the severest restrictions upon moneyed corporations and to subject them to taxation so heavy that it would render it impossible to carry on the business of international banking in successful competition with the English, French, and German bankers.

Your committee believes that the best means of facilitating the development of banking business, and generally of financial relations between the markets of North, South, and Central America, as well as for improving the mechanism of exchange without calling on any government whatever to exceed its proper functions, would be the passage of a law by the United States incorporating an international American bank with ample capital, with the privilege on the part of the citizens of the several countries in the conference to take shares in such bank pro rata to their foreign commerce, which bank should have no power to emit circulating bank notes, but which should have all other powers now enjoyed by the national banks of the United States as to deposit and discount, as well as all such powers as are now possessed by firms of private bankers in the matter of issuing letters of credit and making loans upon all classes of commodity, buying and selling bills of exchange, coin, bullion, and with power to indorse or guarantee against proper security, and generally to do whatever can be done by the great banking firms who are carrying on their business without the aid of corporate charters under the laws of a general partnership. Your committee believes, upon well-founded information, that the capital to such a bank would be promptly subscribed.

The United States Government might and should reserve the largest visitorial powers. The business of such bank should be conducted with perfect safety and with profit to its shareholders, and the greatest benefit to our international commerce. Branches or agencies of such a bank could be established in all of the principal financial centers of America, with the formal recognition of the governments of the several States in which such agencies are established, or arrangements might be entered into with existing banking institutions of the other countries for transacting the business, thus at once affording markets throughout the two continents for the purchase and sale of bills of exchange, facilitating and improving credit conditions generally, and at once affecting a complete mechanism of exchange such as already exists between our respective countries and the European money markets, but which has as yet no existence between the money markets of North, South, and Central America for the reason already stated.

One of the direct benefits to be derived by all of the Governments represented in the International Conference from the establishment of such a bank would be that the investors in the several countries in different classes of American securities would have better means than any which now exist for making such investments. For example, a South or Central American State about to float a foreign loan would feel itself less dependent upon a single combination or syndicate of European bankers than at present. There would be open to such borrowing State two markets to which to apply for national loans as against a single market, to the mercy of which said borrowing Government is now virtually exposed. The same holds good as to all classes of State and municipal securities whatever. Latin-American investors would find means more readily at command for the investment in and investigation of all classes of North American securities, and the investors of the United States would also find means for the investigation of and in all classes of securities issued by the States, municipalities, or corporations of Latin-America.

Your committee recognizes the fact that London has for many years derived the largest possible benefits through its banking facilities with our several States in taking all classes of American loans, which have generally proved themselves to be of most stable and desirable character, but, nevertheless, upon terms which have yielded the London bankers abnormally large profits simply because the element of competition does not exist by reason of the absence of proper banking relations between the several American countries. The institution of such a bank as proposed would at once afford relief against this state of affairs, and would be of benefit not only to the merchants in the manner described, but to all classes of investors generally and without distinction.

In recommending the organization of an international American bank, the recommendation is based upon the present condition of trade. The establishment of better means of transportation and the promotion of trade in other ways will enlarge the demand for the class of facilities of a banking character which has already been