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 LIBRARY 
 
 UNIVERSm o^ 
 CALIFORNIA
 
 UiNiVLnoilT Liur.nni 
 
 m;, ; ■( CF CALiFOKN'.A, SAN DIEGO 
 LA JOLLA. CALIFORNIA 
 
 The Essential Elements 
 
 MONETARY SYSTEM 
 
 ADDRESS BEFORE THE WORLD'S CONGRESS 
 
 OF BANKERS AND FINANCIERS, 
 
 CHICAGO, JUNE, 1893. 
 
 By R. M. WIDNEY, 
 
 President University Bank of Los Angeles, Cal. 
 
 CHICAGO : 
 RAND, McNALLY & CO. 
 
 1S93.
 
 He- 
 
 5-2P} 
 
 AlC 
 
 PREFACE. 
 
 SINCE the accompanying- address was prepared, financial 
 events have rapidly evolved. The effect of the panic 
 and stringency have demonstrated the insufficient sup- 
 ply of money. 
 
 The closed industries and the tramping tens of thousands 
 of unemployed seeking labor or food, forecast a great danger 
 to the country. 
 
 The laborer has nothing to sell but his labor, and the mar- 
 ket for that is destroyed. No law requires him to starve. The 
 consequence is apparent. 
 
 The remedy lies exclusively in the hands of Congress. And 
 Congress alone is responsible for the consequences. 
 
 Had proper financial legislation been enacted in 1891 or 
 1892 the past damages would have been averted, and to-day 
 the nation would be in the midst of prosperity. 
 
 The conditions will grow worse until our financial system is 
 reduced to a scientific system worthy of the intelligence of our 
 nation. 
 
 If our political parties will for a time stop trying to give 
 each other a " black eye," and unite in a patriotic effort to ben- 
 efit the people, by the best and speediest legislation possible, 
 they will succeed in solving the problem and in hastening the 
 day of national prosperity. 
 
 November 3, 1893.
 
 I 
 
 THE ESSENTIAL ELEMENTS OF A MONETARY 
 
 SYSTEM. 
 
 By Judge R. M. Widney, Los Angeles, Cal. 
 
 THE essential elements of a monetary system, as con- 
 ceded by text-books and writers, are money volume, 
 safety, elasticity, convertibility, uniformity, and cir- 
 culation ; but the essential principle underlying all of these 
 is that the monetary system must not omit any one of them, 
 and must have each as nearly perfect as possible. It is use- 
 less to discuss which wheel of a watch is essential, for if 
 you omit any one it don't go, and if you have an imperfect 
 wheel the watch is practically worthless. Assuming the 
 .above elements to be essential, I shall more particularly 
 ■discuss the essential factors of these elements and show 
 how they may be combined to produce the best system. It 
 must be borne in mind that our population is increasing, 
 our commerce is expanding, our industries are growing, and 
 the vision of the future is more brilliant than the facts of 
 the present. The future can no more be attained, or main- 
 tained, on present facts and conditions than the present 
 _growth could be attained, or maintained, on the facts of the 
 ■colonial days. We have outgrown the furnishings of the 
 past, and the future can not be provided for by our present 
 worn-out financial garments and appliances. 
 
 Writers generally concede that money as a mechanism of 
 ■exchange is one of the absolutely essential factors of 
 civilization. It is no exception to the foregoing truths, and 
 the present and future volume and methods of circulation 
 can not be adequately met by, and must not be limited to, 
 past methods and supplies. " Either our volume of money 
 must be increased to meet the wants of our growing countrv. 
 
 f5)
 
 or the business of the country must be periodically killed 
 off until it is within the compass of our circulation." There- 
 fore there opens up before us, there is presented to us, and 
 there is forced upon us, and not only upon us but upon each 
 nation, the proper solution of the financial question for the 
 present and future users of money. The essential elements 
 of a monetary system must be ascertained. The various 
 systems must be analyzed, and from the analysis we 
 must eliminate the non-essentials, and from the essentials 
 there must be constructed a system for international and 
 domestic use that will be free from unnecessary friction or 
 dislocation. It should possess as many reciprocating and 
 automatic adjustments as the uses of the age demand. In 
 fact it should stand in finances as electrical perfection 
 stands to-day among the sciences. 
 
 The use for money is domestic and international. A 
 government is a joint contract entered into by the people 
 for their mutual benefit, and the laws enacted are simply 
 the legal evidence of the terms and conditions of the con- 
 tract. Hence each nation can create and control its 
 domestic money relations, and can also dictate what it will 
 accept as money from other nations. But there is no inter- 
 national money agreement or compact between nations as 
 to what shall be used as money. Hence no nation can force 
 other nations to accept any particular article as money. In 
 fact payment in each nation can only be forced by using the 
 legal-tender money of that particular nation. 
 
 The inconvenience of having no legal international 
 money has led the merchants of the different nations ta 
 adopt, by common consent, gold and silver bullion as the 
 articles for the settlement of international accounts ; but 
 if the creditor should refuse to accept either the gold or 
 silver bullion, the debtor would have to sell it at its com- 
 mercial value for legal-tender money of the creditor nation 
 and pay him with that legal-tender. If, therefore, in con- 
 sidering the essential elements of a monetary system we 
 shall bear in mind that we have no power over the inter-
 
 national money system, and that our work must be limited 
 to the domestic system, it will materially aid in clearly 
 understanding what is essential and what is not essential. 
 
 INTERNATIONAL CLEARING HOUSE. 
 
 Before, however, dismissing the international questions I 
 would suggest that great commercial benefits would arise 
 from the establishment of an international clearing house, 
 thus avoiding all handling and risk of transshipment except 
 of final balances. This could be readily accomplished by 
 each nation designating its treasury or any other place, on 
 the responsibility of that nation, as the place of deposit for 
 balances. Owing to the large amount of these balances 
 merchants would not feel safe with less than a national 
 responsibility for the money. The banks in each nation 
 having international accounts of debit or credit could clear 
 in their local clearing houses, and deposit in the national 
 treasury gold for the balance. These national treasuries 
 would in like manner clear, and the final balance could be 
 shipped to the creditor treasury for payment to local banks 
 to which it belonged, or the balances could be held subject 
 to the order of the creditor treasury for future balances or 
 for future shipment on demand. vSuch a system would 
 make the volume of money in the world much more efficient, 
 and would eventually lead to an international money system 
 for the common good. 
 
 In the appendix to this address is a suggested form of a 
 bill for Congress including this subject, vesting in the Sec- 
 retary of the Treasury, with the approval of the President, 
 the power to establish, in co-operation with other nations, 
 such a clearing-house system. It should receive such 
 amendments and changes as will add to its efficiency and 
 safety. [See proposed bill. Sec. 5.] While the international 
 system of clearing will give great relief in finances from 
 the present crude and cumbersome method, it will not solve 
 the question as to what shall be used as domestic money,
 
 8 
 
 nor how it shall be issued, or circulated, or what the volume 
 shall be. As the citizens of each nation will have to settle 
 this as their local interests require, I shall confine ray- 
 further remarks on the subject to the financial needs of 
 this nation, leaving the representatives of other nations to 
 discuss the efficiency of their local finances. 
 
 IN THE UNITED STATES OF AMERICA. 
 
 It will probably be conceded without argument that 
 business demands the best money and the best system for 
 readily placing money at the point of use. The closest 
 approximation to these will give us the essential elements of 
 a monetary system. Money is that which will at all times 
 and under all circumstances perform the functions of 
 money. In fact, that which will not so perform every 
 money function is not money. The current definitions of 
 money are open to objections as either including non-essen- 
 tial elements or excluding that which is essential. I offer 
 the following as a definition that is correct in law and in 
 fact : " Money is that article in a nation with which a debtor 
 can extinguish his debt without the consent of the creditor 
 at a fixed unit of value." In other words, it must be a legal 
 tender by the supreme law of the land in the extinguish- 
 ment of debts within the jurisdiction of the law. Anything 
 not possessing the legal-tender element above is only an 
 article of merchandise. Hence gold or silver, copper or 
 nickel, however fine, whatever their form or device, without 
 the statuary y?^/ are not money and are articles of commerce 
 alone. And gold or silver, having the nation's legislative 
 fiat stamped upon them, cease to be money as soon as they 
 pass out of the jurisdiction of the laws, or when the Gov- 
 ernment becomes unable to enforce its fiat. The gold or 
 silver coins of England, Germany, or France, or of the 
 United States are not money in a foreign nation, but are 
 only received as bullion, at its commercial value, and even 
 then can only pass by consent of the one receiving it. This
 
 k 
 
 definition of money not only excludes gold and silver 
 bullion, but also all checks, drafts, clearing-house certifi- 
 •cates, State bank notes, or any other order fc^r legal-tender 
 money. In fact, they are only legal contracts or obligations 
 for the payment of legal-tender money, and the one signing 
 them in final settlement must obtain " legal-tender money" 
 with which to extinguish the contract. Private individuals, 
 •corporations, or vStates can not issue money. They can 
 •only contract to pay money. Only the concurrent agree- 
 ment of our sixty-six million people expressed in an act of 
 'Congress makes an article money for domestic use. The 
 statutory words, " This shall be a legal tender in satisfac- 
 tion of all obligations for the payment of money within the 
 jurisdiction of the United States," and impressed on gold, 
 .silver, copper, nickel, or paper, invests them with full money 
 functions and constitutes them money. It therefore appears 
 that this money function is purely a creation of statutory 
 ■enactment, and with it an article is money, without it the 
 .article is not money. Silver was demonetized. What does 
 that mean ? Why, that the money function given by statu- 
 tory enactment was removed from silver and it ceased to be 
 money. Therefore, we conclude that the essential element 
 •of money is its power to extinguish a debt at the will of 
 the debtor, without the consent of the creditor, at a fixed unit 
 ■of value. 
 
 For the purposes of this address the financial transactions 
 of the world may be divided into two classes, in one of 
 which the transactions may be satisfactorily consummated 
 without the use of money; the other can only be closed 
 up by the use of that which is legal-tender money. In the 
 first are embraced all cases where checks, drafts, clearing- 
 house certificates, and other non-legal-tender orders for 
 money are accepted by the creditor, he taking his chances 
 on finally getting legal-tender money. This class represents 
 about eighty-five per cent of business transactions with 
 safety and financial ease. When it reaches ninety per cent 
 there is a perceptible inconvenience and tightness in the
 
 10 
 
 money market, many finding accommodations difficult; 
 the financial reports stating that " the demand for money 
 is quite brisk and ruling at higher rates of interest," and 
 that selling on the stock market is active with the bear 
 influence predominating. As the percentage of credit 
 transactions advances beyond ninety per cent the dan- 
 ger rapidly increases, with more failures and general evi- 
 dences of distress, and terminates in a crisis and a panic at 
 ninety-five per cent. As money is not required in the above 
 transactions they may be dismissed from the discussion of 
 the subject. It is the remaining percentage of business, 
 the final liquidation of all the credits, that requires and can 
 only be closed up by the use of legal-tender money. Inter- 
 nationally the people by common consent use gold to settle 
 the final credit obligations. By a like common consent, 
 expressed in the form of an act of Congress, the people of the 
 United States use gold, silver, copper, nickel, and paper legal 
 tender to settle the final credits between individuals, leaving 
 really in its place a general credit obligation from the sixty- 
 six millions of people to the individual creditor. Gold has a 
 commercial value based upon its supposed cost of production 
 representing say twenty-three and twenty-two one-hun- 
 dredths grains of fine gold for a dollar in labor. When that 
 weight of gold is impressed with the money fiat of the nation, 
 it is supposed to be the best money, for the reason that if the 
 fiat of the nation should fail the owner would still have the 
 commercial value left. It is therefore said to possess intrin- 
 sic value ; but in fact there is very little intrinsic value, for no 
 one receives it except upon the belief that he can get rid of 
 it in exchange for other things. No one would accept it if 
 he were forced to finally keep it. It is properly denomi- 
 nated a mechanism of exchange. Any other article accepted 
 by common agreement for the purpose is equally valuable 
 as money for domestic use. However, so long as the mer- 
 chants of the different nations regard gold as having an 
 intrinsic value, so long will they accept it as a money of 
 final payment, at its commercial value as an article of final 
 payment of debts.
 
 K 
 
 11 
 
 NOT ENOUGH GOLD. 
 
 So long- as the people in the world desire to aecept gold 
 as an article of commercial value in payment of final bal- 
 ances, they will continue to do so. Therefore, if there was 
 enough to meet the business wants of the growing civiliza- 
 tion of the world, no question would arise as to the kind of 
 money. But the total volume of gold coin and bullion in 
 the world is only $3,984,256,589, a per capita of three dollars 
 and twenty-two cents for the world's population. This does 
 not equal the present money volume of the United vStates 
 and France. 
 
 The average annual production of gold for the eight 
 years 1881 to 1889 was $108,376,258, or eight cents per 
 capita. The annual consumption of gold in the industrial 
 arts is about $64,000,000, a per capita of five cents. This 
 leaves an annual increase for money purposes of only three 
 cents per capita. It will be conceded at once that these 
 small sums of stock and increase never can either supply or 
 keep pace with the growing business of the world. 
 
 In the United States the supply May i, 1893, was as 
 follows : 
 
 Gold coin and bullion ..$613,042,879 per capita of $9.00 
 
 Annual product 32,976,000 " " .50 
 
 Used in the arts 16,679,000 " " .25 
 
 Balance for money use 16,279,000 " " .25 
 
 Yet the United States is using a money volume of about 
 twenty-four dollars per capita, of which gold is only nine 
 dollars per capita, and her closing- banks, her failing mer- 
 chants, and crashing industries cry aloud for a greater 
 volume. 
 
 The present struggle for gold among the different 
 nations demonstrates that there is not enough of it to do 
 the money work of the world, both domestic and inter- 
 national. If freed from domestic money use the gold of the 
 world would about satisfy the international demand, until 
 such time as the nations by a common law shall adopt some
 
 V2 
 
 additional and other money. Therefore necessity forces 
 each nation to use other material for money in order to 
 give a sufficient volume for its domestic use. 
 
 HOW ABOUT THE USE OF SILVER. 
 
 The statistics show that it is not of sufficient volume even 
 if all the nations were to adopt it for money use. Its volume 
 in the world is : 
 
 Coin and bullion $4,512,754,655 per capita $3.65 
 
 Annual product 121,389,242 " " .09 
 
 Industrial uses 21,660,000 " " .02 
 
 Annual increase for money 99,729,240 " " .07 
 
 Combined with the former statistics for gold the two 
 represent $144,005,506, or ten cents per capita, as the annual 
 increase. 
 
 In the United vStates the silver volume of coin and 
 bullion is : 
 
 Stock $687,614,551 per capita $10.00 
 
 Annual product 64,768,730 " " .97 
 
 Industrial uses 8,767,000 " " .85 
 
 Annual increase for money $56,001,730 
 
 But it must be borne in mind that nearly the total stock 
 of silver in the United States is in money use either as coin 
 or as certificates issued for the silver bullion, these certifi- 
 cates aggregating ]\lay I, 1893, $326,806,504. 
 
 The total stock of gold and silver coin and bullion as 
 recently held by the leading six commercial nations was as 
 follows : 
 
 England $ 650,000,000 per capita $18.00 
 
 France i ,600,000,000 
 
 Germany 645,000,000 
 
 Russia - -- 200,000,000 
 
 Italy 200,000,000 
 
 United States 1,300,657,430 
 
 43- 00 
 14.00 
 12.50 
 6.00 
 20.00 
 
 This leaves about two dollars per capita for the use of the 
 other nations and peoples. Never before in the history of
 
 rs 
 
 the world has the human race so generally advanced to 
 commercial and civilized growth. Everywhere the unciv- 
 ilized and unsettled continents and regions are being 
 opened up and developed, and as this occurs they draw 
 coin money from the older nations. The new civilizations 
 can not issue a credit money, for they have not yet an 
 established community credit. They are therefore forced 
 to use gold and silver as money. This causes gold and 
 silver to flow to such new communities from the older 
 nations, and will continue to deplete their stock until more 
 of an equal distribution is reached. But silver labors under 
 another disadvantage. Explain it as you may, the fact still 
 remains that silver is not received largely as an article of 
 final settlement of debts. Its commercial value is such that 
 to overcome the objection of bulkiness it is necessary for a 
 nation to add a heavy per cent of its credit to the commer- 
 cial value to equalize a convenient weight, four hundred 
 and twelve and one-half grains to twenty-three and twenty- 
 two one-hundredths grains of gold. 
 
 FREE COINAGE. 
 
 It is urged that free coinage will give us more money of 
 final payment. The power of ultimate or final payment of 
 debt must be a commercial value equal to the debt. Gold as 
 a final payment is based on its bullion or commercial value 
 and nothing else. Gold coin of the United States when 
 used for final payment out of our jurisdiction as a nation is 
 used only as bullion by weight. The same is true when 
 foreign gold coins are used in the United States. In each 
 case the money power of the coins, which is only the fiat or 
 credit of the nation, ceases to exist at the boundary-line of 
 the nation coining it, and the commercial value as fixed by 
 the demands of commerce alone enters into the final pay- 
 ment. No act of Congress or of any government has power 
 outside of the jurisdiction of the nation ; therefore when 
 gold or silver coin crosses the high seas it goes as bullion at its 
 commercial value alone. According to the laws of nature
 
 14 
 
 gold, silver, pennies, nickels, or Chinese brass tokens as 
 articles of final payment between nations must each alike 
 lay aside its garment as money, and enter the scales of com- 
 merce as naked metal to be weighed in the balance, at the 
 international commercial value. Should this nation put its 
 fiat of free coinage on silver, sixteen to one, it will only add 
 the credit of this nation of sixty-six millions of people to the 
 bullion value, and this credit value will not extend beyond 
 our jurisdiction. When it goes abroad as a money of final 
 payment, the nation's fiat dies at the nation's boundary-line 
 and it goes as bullion at the market price. This is true 
 whether the money is gold, silver, copper, nickel, brass, or 
 iron. 
 
 What can free coinage do at sixteen to one ? It is com- 
 posed of two things, the bullion value of the silver added to 
 the credit value of sixty-six millions of people. The sixty- 
 six millions own their credit in fee simple absolute. It 
 is their property at its commercial value as certainly and as 
 righteously as the silver is the property of the silver owners 
 at its commercial value. Each thus under the law of nature, 
 being the owner of separate properties, neither one has the 
 right to rob the other. The sixty-six millions of people have 
 no right to appropriate or confiscate by act of Congress the 
 commercial value of the silver from the silver owners ; 
 neither have the silver owners any right by act of Congress 
 to appropriate or confiscate the credit or fiat value of the 
 sixty-six millions. 
 
 The commercial value of the silver output of the United 
 States is about $47,288,207 annually. The credit or fiat value 
 of the sixty-six millions of people which free coinage will 
 confiscate is $24,734,558 annually. The fight of the free 
 coinage interests is to appropriate or confiscate this credit of 
 sixty-six millions of people, worth $24,734,558 per year and 
 worth forty-five cents on every ounce of silver, by an act of 
 Congress, and add it to the commercial bullion value of silver 
 and make the silver owners possessors of both. When and
 
 15 
 
 where in the history of the race has such a transaction 
 received the approbation of study, reason, and justice? 
 
 But the free coinage men claim that in return they give 
 an increased volume of money to the masses, and that this 
 increased volume of money increases the value of wages 
 and property. The fallacy of such an argument is in assum- 
 ing that free coinage is the only way to increase the volume 
 of money. I agree that we must have an increased volume 
 of money and that such an increa.se of money is in the 
 direct interest of the masses ; but the increased volume 
 does not depend on free coinage of silver even if all the sil- 
 ver should be so u.sed. But if the sixty-six millions of peo- 
 ple buy the silver output at its commercial value, $47,288,207, 
 and then coin it into legal-tender dollars or issue legal-tender 
 certificates to the same amount, then the volume of money 
 would be the same as under free coinage, and the sixty-six 
 millions of people would save the credit value of $24,734,558, 
 annually. If the people are to be benefited, why not begin 
 the benefit by saving them this credit value of $24,734,558 
 annually which inures to the benefit of the people ; but if this 
 credit of $24,734,558 is to be donated annually to a class many 
 of whom are foreigners, let a proper committee be appointed 
 to see what class shall be most worthy to receive this royal 
 pension. Better donate it annually to the farmers and pro- 
 ducers until their farm mortgages are paid off, or pay it to the 
 laboring classes with which to buy homes for their tenant 
 families, or let the nation spend it among the laboring classes 
 on public works ; on our rivers, our highways, our navies, our 
 coast defenses, our public buildings, and our public educa- 
 tional and other institutions. Let us use it in making the 
 poor less poor, and not in making the rich silver owners 
 richer. We may not blame them for struggling for it. but 
 we are to blame if we give it to them. 
 
 No free coinage bill is offered or asked for by the silver 
 interest. The bill passed in the last Senate provided that 
 the owners of silver could deposit their silver in the United 
 States Mint and take out paper money, at the value of one
 
 16 
 
 dollar and twenty-nine cents per ounce instead of eighty- 
 three cents per ounce, the certificates redeemable in gold 
 or silver coin. During the year past, under the present law, 
 $49,961,184 was paid in certificates for silver, and there were 
 surrendered of these during the vSame time $47,745,173 for 
 gold coin at the United States Treasury. Under the 
 so-called free coinage bill the United States Treasury would 
 have paid out $76,756,817 instead of $49,961,184 for the 
 same silver. This would be a bonus of $29,795,633 to the 
 silver owners in the last six months paid by the dear 
 people. 
 
 THE TRUE SOLUTION, OUR CREDIT. 
 
 The true solution of our " more money for the benefit of the 
 people " question is, and will finally be found to be, a proper 
 use of the credit power of the sixty-six millions of people of 
 these United States. This credit is as good as gold in any 
 State in the Union, or at any bank counter, or at any sheriff's 
 office or tax collector's office, or at any counter, or transpor- 
 tation office. It is as good as gold in any foreign nation. Our 
 credit bonds, which are the naked promise of the sixty-six 
 millions of people to pay, are as good as gold, for the owners 
 of gold in Europe and America are ready at any moment to 
 exchange gold for bonds. Nay, wonder of wonders, with 
 all their talk about the " great gold " they will pay a pre- 
 mium for our bonds. Will pay one hundred and seventeen 
 dollars in gold for a one hundred dollar United States bond, 
 unsecured, payable with a low rate of interest fifty years in 
 the future. 
 
 Think of it ! Of this wonderful credit. Gold financiers, 
 cautious, nervous, far-seeing gold financiers, actually willing 
 to take this chance for fifty years in the future on the credit 
 of this nation. Take United States bonds without collateral 
 security on the naked promise of the Government to pay. 
 Investing hundreds of millions of gold on the fiat promise 
 to pay fifty years hence. In fact, millionaires, it is rumored, 
 are forming combined corners to force the United States to 
 
 14
 
 17 
 
 issue its fiat bonds, or promises to pay, so that they can get 
 rid of their gold at one hundred and seventeen dollars to 
 one hundred dollars for these bonds. Good as gold? Yes, 
 betterthangold, is the credit of this nation. Why? Because 
 back of these bonds, back of the fiat, back of the promises 
 to pay are the honest sixty-six million free, prosperous peo- 
 ple, and every acre of land in the United States, from north 
 to south and from east to west, with all of the cities, villages, 
 farms, workshops, railroads, and improvements thereon, 
 including all of our gold and all of our silver, our mines and 
 our labor and our future produce. No nation on earth has 
 such a credit record. Our war bonds and greenbacks issued 
 in war-times, payable in coin, which was honestly and 
 financially understood to mean whichever coin was most 
 valuable, though legally payable in whatever coin was 
 cheapest, were paid by this nation in gold, the highest- 
 priced metal, and would have been paid in silver if that 
 metal had been most valuable. We as a nation kept finan- 
 cial faith, honor, and integrity when it was to our disad- 
 vantage and when it cost us millions of dollars, and we have 
 established a credit among nations that is worth more mill- 
 ions to us than it ever cost, provided we now use that credit 
 and do not give it away. We have paid for that credit in 
 gold. It is now better than gold, for gold may fall in price, 
 but our credit will not fall. Let us keep it there and say to 
 the business world that we will pay our credit obligations 
 in whatever metal is most valuable, the credit of the nation 
 standingf o-ood for the commercial difference in the value 
 of the article used for money. 
 
 Now having pictured to you in brief outline this glorious 
 world-wide credit, as good as gold, better titan gold, let me 
 show you how this credit can be imbedded unchangeable in 
 our system and used to repay ten-fold, a hundred-fold, every 
 dollar it has cost, and how it will not only give us the vol- 
 ume of money we need, but will make us the banking nation 
 of the world. It can be ruined by allowing schemers to 
 cast a cloud upon it by creating the impression that we will
 
 18 
 
 go back on our credit, and pay our debts or promises in the 
 least valuable of two or more metals. Or it can be impaired 
 by allowing schemers or ignorance to so inflate our credit 
 that a doubt will exist as to our ability to pay all of our 
 credit promises, however good our intentions may be. Pro- 
 tect these two points so that financiers will never entertain 
 a doubt upon them, and our credit will continue as good or 
 better than gold so long as the nation endures. 
 
 WIlAr IS THIS CREDIT MONEY? 
 
 It is the promise of sixty-six millions of people, having an 
 aggregate wealth of $70,00x3,000,000, with the power of tax- 
 ation to fulfill the promise, as against the promise of a few 
 individuals liable on a check, draft, or State bank note. It 
 is made by common consent, in the form of law, a legal ten- 
 der in satisfaction of debt among all people in the jurisdic- 
 tion of this nation, and the nation will give gold to any 
 bearer who may specially demand it ; but as the legal-ten- 
 der paper will perform every function of money within this 
 nation that gold will, no citizen, for dome.stic use or busi- 
 ness affairs, will care to have gold. Only those who must 
 pay a foreign debt will desire to surrender paper legal ten- 
 der and call for gold or silver. One thing is certain, that the 
 joint promise of .sixty-six millions of people on a legal-tender 
 note is vastly more certain to be fulfilled on demand than 
 the promise of any part of the same people on a State bank 
 note or other promise to pay. But, says some one, if after 
 these legal tenders are issued gold should be exported, how 
 will the Government get gold to take up legal tenders pre- 
 sented for gold ? Just as any man, bank, or nation would 
 get it under the same circumstances. Buy it. There is no 
 other way. The nation can neither make gold nor steal 
 it; therefore it must buy it, just as it always has and 
 always must do. Issuing interest-bearing bonds is paying 
 a premium for gold. Why ? Because if the bond bore no 
 interest it would not buy gold, but adding interest makes
 
 19 
 
 the capital invested in the bond productive, and it then 
 becomes a premium on gold. It is just as well to buy gold 
 with non-interest-bearing legal tenders and pay a premium 
 as to pay with bonds and interest as a premium. The 
 legal-tender power is the premium paid for gold. This was 
 recently shown when the Secretary offered New York 
 banks bonds as collateral for gold. The banks refused, 
 because the bonds could not be used for money, but did 
 exchange gold for legal-tender paper money. Using legal- 
 tender paper money for domestic uses would free some 
 $300,000,000 of gold, or more, that is now scattered all over 
 the United States. Such a volume in our national Treasury 
 would meet every demand. 
 
 The plan of buying gold or silver with currency and pay- 
 ing a premium, and at the same time keeping currency on 
 an exchangeable par Avith gold, would require to be guarded 
 by allowing the United vStates Treasury discretion to 
 ■charge a premium on all gold or silver taken from the 
 Treasury for export. This right is exercised by foreign 
 nations to retain their gold at home. Our nation should 
 do the same. Our nation should also retain the prior 
 right at any time to buy at its market value for full 
 legal-tender currency any of the gold or silver taken from 
 the mines on public lands, or from such lands hereafter 
 -sold or patented. Possibly the better solution would be to 
 stop the coinage of gold and silver and run the bullion 
 into five hundred dollar ingots, buying and selling them for 
 legal-tender currency at their commercial value. 
 
 BUYING GOLD AND SILVER FOR MONEY. 
 
 All gold and silver is private property. The Govern- 
 ment does not own them. It can not appropriate or con- 
 fiscate them. It must go into the market and buy. This 
 purchase can only be made by using the national credit, 
 that is, the joint or common credit of our sixty-six million 
 people. The Government can not buy gold or silver with
 
 20 
 
 gold or silver. It can not buy with merchandise or produce, 
 for the Government is not a merchant or producer. It might 
 make all or a part of the taxes payable in gold or silver 
 coin ; but this would force citizens to pay a premium, thus 
 shifting the general burden of purchasing from the sixty-six 
 millions of people upon a few. There is therefore no just 
 or honest way by which the Government can buy gold or 
 silver except to issue bonds or legal-tender paper money. 
 In other words, the credit of the sixty-six millions of people 
 is the only thing that can be used to buy gold or silver for 
 money use. The premium on gold or silver in exchange 
 for bonds or legal-tender money is either the interest on 
 the bonds or the legal-tender function of the paper money. 
 
 WHY ? 
 
 Now if the credit of the Government is as good as gold 
 or silver for domestic money use, and can be exchanged for 
 gold or silver by paying interest for the use of them, why 
 should it be exchanged at all ? Why pay interest to use it 
 as a legal-tender money when we can use currency without 
 paying interest — legal-tender money being equally good 
 for domestic use ? During our present financial disasters 
 the banks readily exchange gold at par for legal-tender 
 paper money, proving it to be as good as gold for domestic 
 money use. Why not, therefore, let the nation issue this 
 legal-tender paper money as good as gold in sufficient vol- 
 ume to transact the business of this nation, and free the 
 gold from domestic use and allow it to meet the demand 
 for international use ? If a necessity arises, at occasional 
 times, to have gold for foreign payments, it can be had as 
 well by discounting non-interest-bearing legal tenders as by 
 issuing interest-bearing bonds. It is much more profitable 
 to the people to occasionally discount a non-interest-bear- 
 ing legal-tender note than to issue an interest-bearing 
 bond ; for a three per cent interest-bearing bond repre- 
 sents an annual premium of three per cent for gold, and
 
 21 
 
 if the gold is held as a reserve we continue to pay interest 
 on the bond and are losing interest on the idle gold, 
 whereas with non-interest-bearing legal tenders we only 
 pay a vsmall premium occasionally for the amount of gold 
 or silver actually needed for that case. As a matter of fact, 
 generally, we would not pay any premium, for the legal- 
 tender paper will perform all the domestic money func- 
 tions that the gold will. This is forcibly shown by the 
 fact that millions of gold and silver annually go t<^ the 
 United States mints for which the owners prefer to take 
 legal-tender paper money. 
 
 The enormous cost of buying gold and silver with inter- 
 est-bearing bonds is shown by computing the interest for a 
 century. A hundred million of three per cent bonds, inter- 
 est payable semi-annually, counting interest on the interest 
 as paid in and reloaned, will double every twenty-four 
 years. The account will so stand that at the end of twenty- 
 four years the $ioo,ooo,cmX) becomes $200,000,000; forty- 
 eight years the $100,000,000 becomes $400,000,000 ; seventy- 
 two years the $100,000,000 becomes $800,000,000; ninety-six 
 years the $100,000,000 becomes $1,600,000,000. In other 
 words, under the bond system of buying gold for money use 
 we pay $1,600,000,000 for the use of $100,000,000 for ninety- 
 six years, whereas by occasionally paying a small premium 
 for gold when required the cost would be vastly less per 
 ■century than the above. 
 
 In what is popularly but delusively called the free coin- 
 age of silver a premium is really paid by the people. That 
 premium is the cost of free coinage and stamping the legal 
 tender power on the metal. These transactions are based 
 on the common business rule that we must pay in some 
 form for what we get. We must exchange value for value, 
 unless we beg or steal. The gold and silver bullion is the 
 property of private individuals. The legal-tender function 
 is owned by the people. Neither one should be given to 
 the other. Each should sell it at the market value. The 
 nation should therefore clothe its dearly bought credit
 
 22 
 
 with a legal-tender money function in the form of a non- 
 interest-bearing currency, and with this buy gold or silver 
 when required, at its market value, as it buys lumber or 
 other supplies, and then use it as it deems best, either for 
 coinage, or resale for its currency notes, or for a reserve. 
 
 For domestic purposes we have no need for gold or silver, 
 except for subsidiary coins. No one wants either for itself. 
 People only want them because they believe that they can 
 get rid of them in exchange for something else. Not an 
 individual would accept gold or silver if he were forced to 
 keep them perpetually, or if he believed that he could not 
 exchange them readily for other things for the value at 
 which he received them, or use them to pay a debt. Here 
 is the bedrock trouble with silver to-day. People do not 
 believe that they can get rid of it, or exchange it for other 
 things, and therefore their unwillingness to receive it. If 
 by free coinage it were forced on the people of the United 
 States it could not be forced on the people of the foreign 
 nations. So long as this unwillingness exists in the minds 
 of men, it can not be used as a money mechanism of 
 exchange by itself, but must have added to it the credit of the 
 nation to make up any deficiency in the exchange of value. 
 Therefore the credit of the people, as good as gold, stamped 
 on metal or paper, backed by their promise to mutually 
 accept it at par as a medium of exchange, is the essence of 
 the transaction. The gold, silver, nickel, or paper is the 
 material body on which the exchange value and power are 
 impressed, and the common contract of the people among 
 themselves to use it is the vital force. 
 
 THE people's credit AS MONEY. 
 
 How can we best use this credit of the nation as money? 
 It has been created by our having kept faith with our cred- 
 itors. We received of them the highest-priced money and 
 agreed to pay in coin. It was implied in the contract that 
 it was to be repaid in the highest-priced money, but we
 
 2;i 
 
 could have paid it in the cheapest coin. This temptation 
 was publicly presented and powerfully advocated. Every 
 argument and statistic that talent and money could produce 
 to make the temptation succeed were produced and scat- 
 tered broadcast over the land. At first like a wave the 
 thought swept over the land that here was relief for the 
 struggling debtor, and popular applause greeted the offer; 
 but there came to the honest masses as second thought, 
 was it right, was it just, was that the agreement and the 
 equitable understanding. The farmer reasoned that when 
 he bought a plow or farm implement that it was understood 
 that it was to be a good article. He knew that when he 
 sold grain or hay to be delivered that it was tmderstood to 
 be good. And so the American debtor reasoned (nit that 
 his agreement as a nation was to pay money as good as any 
 other money, and by act of Congress he so declared his 
 understanding and his intention to pay in the best money, 
 whether it was gold, silver, or paper. The temptation 
 failed, and he said, " Get thee behind me, vSatan ; the king- 
 doms of the whole world are not worth my honor." We 
 Americans have placed honor above life ; we have freely 
 given life on ten thousand battle-fields for honor and right ; 
 and we will not exchange honor and right for the profit of 
 paying our debts with inferior money, but faith and honor 
 shall be as unsullied as the starry banner that typifies the 
 nation's honor. The integrity of this good faith and 
 honesty is our credit capital, and we must preserve it so 
 that it will never be questioned in the financial world. 
 
 What is the most stable, sacred, unchangeable form in 
 which we can affirm our credit pledge that every dollar 
 issued by this nation, whether gold, silver, or paper, shall 
 ever be held of equal value, and that this nation will always 
 pay its debts and obligations in the best money ? The con- 
 fidence of foreign capital in us has recently been shaken by 
 the agitation to pay in inferior money, and as a result mill- 
 ions of American securities have been rushed in upon us. 
 Nothing but the most sacred and abiding form of assurance
 
 24 
 
 can meet the demand and restore a confidence that will be 
 a safe foundation for the use of our credit. 
 
 BY A CONSTITUTIONAL AMENDMENT. 
 
 This is our best, let us offer nothing less. The Constitu- 
 tion of the United States is the highest, safest, and most 
 permanent obligation or promise that the Americans can 
 give. It is not only a declaration accepted by Americans, 
 but by the nations of the earth. The stability of its decla- 
 rations governs the laws and contracts of every State and 
 every man in the States. Counting on its stability, other 
 nations enact laws and contracts where their interests come 
 in contact with ours. We have no higher form for a pledge 
 of faith to give, either at home or abroad, than a constitu- 
 tional pledge. The confidence of this world in our constitu- 
 tional guarantees is as high and as fixed and abiding as it 
 is in the stability of our nation. Therefore, as our financial 
 credit rests on the stability of our promise and our ability 
 to keep all of our money upon par with the best money, we 
 should add one more element of confidence and place this 
 promise and faith of the nation in a constitutional amend- 
 ment, where it will abide for centuries free from political 
 legislation or judicial disturbances, where as a chief founda- 
 tion-stone it will exist, and on which will rest our financial 
 credit, and on which will be reared a financial system that 
 will meet the growing wants of this nation at all times. 
 For such purposes I drafted a proposed constitutional 
 amendment in 1 890. It was introduced in both Houses of 
 Congress in 1892, and met with the favorable consideration 
 of many of our ablest men, both in and out of Congress. 
 It was carefully studied by Judge Thomas R. Stockdale, M. 
 C, chairman of the vSub-Judiciary Committee of the House 
 of Representatives, to whom it was referred. After an 
 exhaustive study of the subject for some ten months as a 
 specialty, he made one of the ablest reports on the financial 
 subject that has been presented in Congress since our
 
 25 
 
 nation was formed, showing the absolute necessity of an 
 amendment such as the one proposed. The report was filed 
 a,nd printed March 3, 1893, too late in the session for further 
 action. The report should be in the hands of every Ameri- 
 can and should be studied exhaustively. Within it are 
 embraced the financial principles that will permanently 
 solve our financial problem. 
 
 THE PROPOSED AMENDMENT. 
 
 Article XVI. Section i. A national circulating medium shall be 
 issued to the amount of twenty dollars per capita, as shown by the census 
 ■of 1890, and by each succeeding census, for the proper redemption of which, 
 when required, the resources, the faith, and the property of the nation are 
 pledged; for which redemption. Congress, by a two-thirds vote of each 
 House, may provide for the collection of Government revenues and taxes in 
 gold and silver coin. 
 
 Sec. 2. Said currency with gold and silver coin of these United States, 
 of present weight and fineness, the dollar being the standard or unit of 
 values, and such currency notes of the same form and effect as may be 
 issued in lieu of gold and silver coin, or bullion held exclusively for exchange 
 for currency, shall constitute the only legal-tender money of these United 
 States, and shall be received at par in satisfaction of all obligations for the 
 payment of money within the jurisdiction of these United States. Said 
 gold and silver coin and currency shall be exchangeable at par value. 
 
 Sec. 3. Congress shall have power to enforce this article by appropriate 
 legislation, but shall not have power to increase or decrease said issue ; 
 provided that after the issue of 1900 Congress may, by two-thirds vote 
 ■of each House, reduce the additional issue at any census. 
 
 The volume of credit money is herein named at twenty 
 dollars per capita in addition to gold and silver. Some 
 think that it should be more, some less. That is a matter 
 that would be fixed by Congress after a full consideration. 
 The effect of this amendment is to make and forever keep 
 ■our gold, silver, and paper dollars at par with each other. 
 The faith, wealth, and credit of the nation are thus per- 
 manently pledged to pay whatever difference may exist in 
 the bullion or commercial value of the article used for 
 money. This is honest and just. For when this nation 
 issues a gold, silver, or paper dollar it is put in circulation 
 at par with the highest dollar issued, and the people receive
 
 26 
 
 that value for it, and they, by this amendment, stand ready- 
 to make that value always good to the holders by exchang- 
 ing any other dollar for it. Under this amendment the 
 Government can buy such gold or silver as it deems best to 
 hold at its commercial value, and the difference between 
 that commercial value and the money value is for the benefit 
 of the people, and when the nation takes up or redeems its 
 credit obligations in gold or silver it should be by return of 
 those metals at their commercial value at the date of ex- 
 change, and under wise rules and the discretion of the 
 Treasury Department. This amendment will forever pre- 
 vent the wild inflation of our credit money, which has been 
 the fatal objection to the currency theories. It renders- 
 impossible the financial dangers known as the French 
 Assignats, John Law, Mississippi, or Argentine Republic 
 Cedula schemes. They were inflations beyond the wealth 
 of the promisors to pay. 
 
 A credit issue of money of twenty dollars per capita rep- 
 resents a liability of less than two cents on the dollar of our 
 national wealth of seventy billions of dollars secured by a 
 constitutional amendment which is practically a constitu- 
 tional mortgage, would command confidence at par value at 
 home and abroad. This twenty dollars per capita would take 
 up and replace all forms of outstanding currency, giving us a 
 uniform issue with an increase of about twelve dollars per 
 capita above our present unsecured paper money. This 
 would be in addition to our gold and silver coin, and would 
 also be in addition to such as may be issued for gold or 
 silver coin or bullion held for general redemption or ex- 
 change. There would be no gold or silver certificates. All 
 gold and silver would go into a general fund for exchange 
 use for any of the currency. Our money would thus be of uni- 
 form legal effect, and every dollar held by any one would be 
 of equal use and value with any other in any part of the 
 nation. In the amendment the currency issue, in addition 
 to the gold and silver, is named at twenty dollars per capita. 
 This is a suggested sum, and before passage could be altered
 
 27 
 
 to any better amount. My own judgment is that twenty- 
 five or thirty dollars would be better, for the reason that 
 the export of gold might otherwise deplete our volume and 
 cramp our home money market. However, I believe that 
 the currency issued under this amendment would command 
 such confidence and be so efficient in its work that it would 
 go abroad to some extent in place of gold, and if our volume 
 were sufficient we would become the banking nation of the 
 world. With our vast resources and stable form of govern- 
 ment, and each man owning or using money having a 
 financial interest in the stability of the Government, our 
 currency would certainly have a maximum value and use. 
 Under the third section of the amendment the volume is 
 increased every census to correspond with the increase of 
 population. And if it were found by experience that the 
 volume were increasing too rapidly, it is provided that Con- 
 gress, by a two-thirds vote of each House, may reduce the 
 issue for that census. Such a discretionary power must 
 rest somewhere, and restricted as in this case it would be 
 very safe. 
 
 AS GOOD AS GOLD. 
 
 The gold in a dollar (twenty-three and twenty-two hun- 
 dredths grains) is supposed to require a dollar's worth of 
 labor, on the average, to mine it, and therefore it is said to 
 represent that value. A currency note, when printed and 
 deposited in the United States Treasury, like the gold in 
 the min-e, represents no value, but when some one gives 
 to the people, the Government, a dollar's worth of labor 
 or material, and receives a paper dollar, thereafter it rep- 
 resents a dollar's worth of labor as truly as does twenty- 
 three and twenty-two hundredths grains of gold after min- 
 ing. The only difference is that the labor is put forth for 
 the gold before it is minted into money, while the paper 
 dollar is minted, before the labor is put forth for it. Each 
 represents the same amount of labor.
 
 28 
 
 SYSTEM OF CIRCULATION. 
 
 How shall this volume of money be put in circulation ? 
 My reply is, that it does not need to be forced into circula- 
 tion. Whatever amount the business of the nation calls out 
 will pass into circulation. Let the balance remain idle in the 
 United States Treasury as a reserve. It costs no interest 
 while lying idle, as it is the joint credit of the sixty-six million 
 people. Secondly, when any one gives the Government 
 labor or material it will take out a corresponding amount 
 of currency. Under this branch let the Government pay 
 for its river, harbor, and coast defenses, its naval construc- 
 tions, its public buildings and improvements. This would 
 save taxing the people millions of dollars annually, and would 
 aid every oppressed mortgaged taxpayer to apply his part 
 <:»f the saved tax to pay off his mortgage. It would give 
 employment to hundreds of thousands of now idle laborers, 
 not only on Government works, but in all private industries 
 that have to furnish material and machinery to the Govern- 
 ment and to those who produce the raw material for the 
 manufacturers, and finally gives employment to the farming 
 element in producing food and clothing for the vast multi- 
 tude of laborers above referred to. The labor problem 
 would be largely solved by the increase in the volume of 
 money. While this volume of money was being put in cir- 
 culation by the above methods, the tax-paying citizens 
 would have immediate relief, and all laboring classes would 
 relieve their now critical wants by receiving employment. 
 Of course the above expenditures would be made under the 
 best judgment and discretion of Congress and the depart- 
 ments. If so done, very wise, desirable, and beneficial 
 results would be quickly realized. You will readily trace 
 out innumerable benefits to the whole community by this 
 method of placing the money in circulation on the basis of 
 a dollar's worth of labor or material for each currency 
 dollar.
 
 29 
 
 COMMERCIAL CHANNELS. 
 
 The other means of placing the newly issued currency in 
 circulation is through business or commercial channels. 
 This will require a carefully adjusted system, which should 
 utilize as many existing appliances as can be judiciously 
 used, and should have added such other appliances as will 
 produce the best results. Of course this would have to be 
 under the supervision of the nation for general safety, but 
 could be best executed in detail by private responsibility. 
 The object of the sub-treasury plan to furnish money to 
 citizens is good as far as it goes, but is objectionable in 
 being limited to a few, and because it is class legislation. 
 The machinery proposed with which to accomplish the results 
 might be taken advantage of by unscrupulous persons, and 
 might result in as much damage as good. A well-adjusted 
 banking system embracing all the benefits of our present 
 system, and adding others, would be the best of all ; an out- 
 line of which I will proceed to give. The nation alone 
 should issue money, and it alone should be responsible for 
 its redemption and exchange. This would relieve all banks 
 from responsibility for the circulation, and would never be 
 the occasion of a run on the banks. If the banks of the 
 United States were to-day operating under the old State 
 bank law, and each had in circulation its own notes and was 
 carrying the double load of indebtedness to depositors and 
 note-holders, nothing could prevent a run on every bank in 
 the United States and force an immediate suspension. This 
 was the cause of the general suspension of banks in 
 1838, 1857, 1868. In 1839 th^ bank-note circulation was 
 $149,185,800; the legal-tender money was $27,031,476; the 
 excess of bank notes was $122,154,324. The banks had a 
 double debt, one to note-holders and another to depositors. 
 When the depositors began to withdraw, the note-holders 
 rushed in, and the demands from the two quickly closed every 
 bank in the United States. In 1857 the deposits in the 
 banks were $120,764,757; State bank notes, $83,312,269; total
 
 ;s() 
 
 liability, $204,077,026. Specie held (the only legal tender), 
 $12,970,493. Excess of liabilities, $191,106,533. At the 
 same time there was due to the banks on loans and dis- 
 counts $320,252,890, leaving an excess of assets over liabili- 
 ties of $129,046,363. Notwithstanding their solvency the 
 combined run of depositors and note-holders again clovsed 
 every bank in the nation. 
 
 State bank notes are not a legal tender, are not money ; 
 they are only the promissory note of the bank payable to 
 the bearer without interest on demand. They are outstand- 
 ing certificates of deposit. Assets and securities back of 
 them are liseless in a panic. Assets and securities are not 
 money, and can not be paid either to note-holders or deposit- 
 ors. State bank notes, payable to bearer on demand, in 
 legal-tender money, by the bank, cause a double liability 
 without any means of meeting it, and will periodically close 
 every bank in the system using them. The only thing that 
 has prevented the general suspension of banks in the sev- 
 eral panics since 1861 is the fact that there were no bank 
 notes in circulation to be redeemed. The banks had only to 
 take care of depositors. The weak spot in all credit obliga- 
 tions used in the banking system as money is, that they are 
 deposited over and over again, and the banks give the 
 depositors credit on their books, to be repaid in legal-tender 
 money. And when depositors in large numbers call for 
 legal-tender money, the State bank notes or other credit 
 obligations are rejected by the depositors. Therefore it 
 may be laid down as an inexorable and infallible law of 
 finance, that no form of credit obligation, and no amount 
 of solvent assets, can take the place or perform the functions 
 of legal-tender money in final payment, and that the volume 
 of legal-tender money must be sufficient to avoid the neces- 
 sity of using too much personal credit obligation. 
 
 The object lessons of the present year should teach 
 our people that assets, however good, or checks, drafts, 
 State bank notes, or any other credit obligations, can not 
 take the place of a safe volume of legal-tender money. The
 
 31 
 
 fact that ninety-five per cent of our business was transacted 
 by checks and credit obligations, demonstrates, in view of 
 the failures of the last two years, that we must have more 
 legal-tender money and less of the ninety-five per cent per- 
 sonal credit checks. The nation, therefore, issuing the vol- 
 ume of legal-tender money must have some safe, practical 
 method by which it can furnish a circulating medium to the 
 banks, holding the banks in some way responsible, as Govern- 
 ment agents, to the people for the use of money. The sub- 
 treasury plan has an imperfect form of this principle. If the 
 large volume of this issue lying in the United States Treas- 
 ury were used as a reserve available to the banks, under 
 safely guaranteed requirements, and upon depositing in the 
 United States Treasury absolutely good securities, charging 
 the banks such a rate of interest as would prevent the 
 undue use of money, it would give flexibility in our volume 
 for our actual use. The rate of interest could be fixed on 
 an increasing scale on each successive amount drawn by a 
 bank. This rate could run rapidly up from one per cent on 
 the first $100,000 to ten per cent on all over $500,000 or 
 :$ 1, 000,000. This is the common method adopted by banks 
 to check speculation or to prevent an individual customer 
 from borrowing too heavily. It runs the rate of interest up 
 to a point where it does not pay to borrow the money. The 
 .same principle applied by the Government against the 
 banks would check all undue speculations or use of money. 
 When the banks did not need the money for the use of 
 their customers, they could return it to the United States 
 Treasury and stop interest. 
 
 WHAT SECURITIES. 
 
 Certaiii bonds of States, counties, and cities could be 
 used with perfect safety with some additional legislation. 
 Restrict their use to a class where the total bonded indebt- 
 edness did not exceed five or ten per cent of the averaged 
 assessed value of the real property in the State, county, or
 
 32 
 
 city for the preceding- five years, deducting any outstand- 
 ing bonds. Also providing that after the public issuance 
 and sale of the bonds, and payment therefor to the State, 
 county, or city treasury, that all contest as to the validity of 
 the bonds shall be forever barred, compelling all such con- 
 tests to be made prior to the public sale of the bonds. 
 Provide also that if the State, county, or city officers did not 
 levy and collect the tax to meet the payment of interest 
 and principal, that the Secretary of the Treasury could 
 appoint a proper officer, under proper bonds, to at once 
 levy and collect such a tax. These provisions would give a 
 bond as good as any United States bond ever issued, and 
 one that never could be repudiated or the payment thereof 
 avoided. Such bonds would bear a rate of interest as low 
 as two per cent, thus saving taxpayers a large amount. In 
 such bonds banks could safely invest a portion of their cap- 
 ital or of their depositors' money, for at any time, by deposit- 
 ing these bonds with the United States Treasurer, the bank 
 coftld obtain legal-tender money to repay depositors or to 
 loan to customers. I do not see how a safer or more con- 
 venient form of circulation could be devised. The solvency 
 and safety of the banks in the system would appear by the 
 following form of a statement, using for illustration the 
 last figures of the Comptroller's report: 
 
 Bank capital paid up.. $ 686,573,015 
 
 Deposits (total) _ 2,327,081 ,452 
 
 Surplus and profits 342,503,926 
 
 Total $3,356,158,393 
 
 Invested in bonds of States, etc., deposited with 
 
 United States Treasurer for re-loan, say 1,000,000,000 
 
 Loans on real estate 300,000,000 
 
 Commercial loans 1,500,000,000 
 
 Bank premises.. • 75,000,000 
 
 Cash on hand 481,158,393 
 
 Total $3,356,158,393 
 
 This gives an interest-bearing aggregate of $2,800,000,000 
 as against present total loans and discounts of $2,153,498,- 
 
 15
 
 3:^ 
 
 829. It also gives legal-tender cash on hand, $481,158,393, 
 as against a present cash on hand (;f $313,384,824. 
 
 To meet a depositors' run the present system gives : Cash, 
 $313,384,324; United vStates certificates and redemption 
 fund, $22,241,543; total, $335,625,867 with which to meet 
 $2,327,081,452 of deposits. In addition to this there could 
 be added the uncertain amount that banks call in on loans, 
 but whatever was called in by one bank would have to be 
 called out of some other bank and would not increase the 
 above aggregate, neither could it help the general situation. 
 Under the new plan the resources with which to meet a 
 depositors' run would be : Cash, $48 1 , 1 58,393 ; bonds in United 
 States Treasury on which legal tenders would issue, $1,000,- 
 000,000; total, $1,481,158,393. In other words, there would 
 be this vast sum available on hand to meet depositors' 
 claims of $3,237,081,452, instead of the present small sum of 
 $335»625,867. Such a financial system could never be 
 shaken. No panic could ever reach it. Runs would only 
 affect local cases of individual banks, where gross misman- 
 agement or intentional dishonesty had destroyed its assets. 
 Such a system would obviate the necessity of banks calling 
 in loans to meet depositors' checks, which, if carried to any 
 extent, cramps and crushes the borrower. The replenish- 
 ing would be from the reserve loan fund 'in the United 
 States Treasury to meet the temporary demand, to be 
 returned to the Treasury when repaid to the bank by the 
 customer. No system of private banking can withstand or 
 meet the colossal demands of this age. 
 
 In ordinary times and for local cases, the banks rediscount 
 with each other and fully meet the want, but when the 
 money vshortage is general all over the nation banks 
 can not sufficiently rediscount with each other. Here is 
 where the financial army is doubled up, its ranks broken 
 and thrown into confusion, followed by panic and disaster. 
 There is now no system of reserve for this point. One 
 must be provided, ample and available, to reach an}- weak 
 point in the financial line promptly. The entire reserve
 
 H4 
 
 power of our sixty-six millions of people for every subject and 
 emergency is in the Government, and should be used when 
 required. Banks generally have bonds of States, counties, 
 and cities that are not yet due. These will be paid, princi- 
 pal and interest, when due, but the bank can not in the 
 emergency wait. Neither will the depositors. Other banks 
 would purchase or rediscount these securities, but can not 
 for want of funds and from fear of running short on cash. 
 They are merchantable securities in any place where there 
 is idle money. The reserve or money power of sixty-six 
 millions of people as represented in our national credit 
 vested in a national issue of legal-tender credit money is 
 the only resource we have in such an emergency. It is 
 ample and practicable and should by act of Congress be put 
 in a position where it can be utilized. This power is the 
 joint credit of sixty-six millions of people. They own it, 
 and when they need it, what folly, what inexcusable folly or 
 -^rime against society not to use it ! We paid a great price 
 for it, and if never utilized it is a total loss. 
 
 BANKS SHOULD RECIPROCATE. 
 
 In return for the benefits of this system the banks should 
 reciprocate, and aid the United States Treasury when 
 required. Upon the order of the Treasury, approved by 
 the President, they should furnish a percentage of the 
 gold or silver held by them in exchange for currency for 
 public use. They should also be subject to such other 
 duties toward the Government as can be best performed by 
 them. 
 
 OUR MINES OF GOLD AND SILVER. 
 
 These also should reciprocate. It is worthy of considera- 
 tion whether Congress should not pass an act giving the 
 Government the prior right to buy with currency any or all 
 gold or silver taken from mines on the public lands or from, 
 mines hereafter sold or patented.
 
 85 
 
 Why should other nations be allowed to mine and export 
 a product of so much importance, and our nation stand by- 
 helpless and stupified ? Not only should this prior right to 
 purchase at a market value exist, to be exercised for the 
 public good, but there should exist a discretionary right in 
 the executive department to charge a tax, or commission, 
 or premiun, on gold or silver taken from the United States 
 Treasury for export. This right is exercised by the Bank 
 of England and in France and Germany. Why should we 
 not place the same self-protecting power in the hands of 
 our officers ? 
 
 The essential elements of a safe monetary system for 
 the United States therefore are : First, an international 
 clearing-house system to lessen the actual handling of 
 gold in settling the international balances among mer- 
 chants. Second, the issuing by the United vStates of a suffi- 
 cient volume of legal-tender currency, interchangeable with 
 gold and silver, based on the wealth of the nation, and 
 publicly guaranteed by a constitutional amendment, so as 
 to create absolute confidence in our currency. Third, a 
 banking system with a proper amount of its funds invested 
 in the bonds of States, counties, and cities that could be de- 
 posited in the United States Treasury, on which money could 
 be drawn by the banks to make loans or pay depositors. 
 Under such a system all idle money from all parts of the 
 United States would be by the banks returned to the 
 United States Treasury to avoid paying interest thereon, 
 thus keeping the idle money in its full strength at the 
 reserve point ready to go at a moment's call to any point 
 in the whole system. 
 
 BANK PROFITS. 
 
 The profit to a bank is not so much in a high rate of 
 interest as it is in the volume of business. Small profit 
 on the individual, quick sales, and a large business is the 
 rule of success, of live and let live, in banking and in all 
 other business. A large volume of money will prevent
 
 36 
 
 more failures than a small volume. A large volume of 
 money will create, develop, and sustain a larger volume of 
 business than a smaller volume would. A large volume of 
 money will give employment to more laborers than a small 
 volume. But volume will not prevent failures by stealing 
 or bad business acts. Failures generally occur for want 
 of money. The man failing seldom has a drug of money 
 at his command. Values and securities are generally 
 much more stable in the pressure of plenty of money than 
 when it is scarce. Values and securities advance under 
 the influence of either abundance of credit or abundance 
 of money. But when the advance is based on credit the 
 day must come when credit must be liquidated with money, 
 and when not forthcoming a shrinkage of values occurs, 
 bringing in its train all the calamities of a financial crisis. 
 Business must then be killed off until it is within the com- 
 pass of the volume of money, and then start to grow on 
 credit again, and again be killed off. When the advance 
 of values and securities is based on a sufficient volume of 
 money they must remain stable. There is no room for 
 shrinkage except upon the basis of non-productive or perish- 
 able commodities, and this is common to all financial condi- 
 tions. The beneficial effect of the volume of money reaches 
 a limit when it causes labor to produce more than the human 
 race can consume. But surplus products can largely find a 
 market in some part of this big world. The starving 
 millions of Europe can eat up all of our surplus food. The 
 volume of money gives no illegal advantage to one person or 
 set of persons against others as to price. A large volume 
 of money would advance pro rata all prices and labor. 
 Thus, where the farmer got an advance for his products he 
 would in turn pay an advance for all products he would 
 consume, and so of all others. This must be so. For if it 
 gave the farmer a perpetual advantage over all others it 
 would only be a question of years until the farmers would 
 be the billionaires, and, in fact, in time would own the whole 
 world and all its contents. A small volume of money 
 
 I
 
 87 
 
 enables the owners of it to charge for its use more than 
 the averaged profit on the industries of the country. 
 Here again it is only a question of years until that excess 
 of interest-rate above profit-rate shall eat up the industry, 
 close it up, and transfer it as a dead property to the money- 
 owners. This continued, wrecks the country and leaves the 
 money-owner losses that more than offset all of his unjust 
 excess of profits. The volume of money must be such 
 that the averaged rate of interest shall be less than the 
 averaged rate of profits on the industries of the people. 
 On no other basis can the industries of the people prosper. 
 This rate of interest can only be attained and retained by 
 increasing the volume of money to the proper limit. And 
 that limit will be discovered when the rate of interest is 
 reached and permanently retained all over the nation and 
 all over the world. If our volume of money were trebled, 
 •deposits would treble. There would be three times as much 
 money to loan. At a ruling rate of three per cent three times 
 the number of persons could borrow with profit to their 
 business. Banks, therefore, from this increased amount of 
 loans would realize per year the equal of nine per cent on 
 the present volume of loans. But in one case it is collected 
 from three customers, where in the latter it is collected 
 from one. There would thus arise stability all along the 
 financial line, and as much or more profit to the banks and 
 less losses. If from the bank profits since 1873 were 
 deducted all the losses banks have sustained by failure of 
 customers and shrinkage of securities, it would leave a net 
 rate of interest not to exceed three or four per cent. 
 
 To show how the principles referred to in this address 
 would practically work out when embodied in an act of 
 Congress, I have carefully prepared a bill, taking the general 
 act of Congress of June, 1864, as the frame-work and mak- 
 ing as few changes or additions as possible. It is hereto 
 attached for the inspection of those desiring to study it. 
 The words in italics show the suggested changes made in 
 the present law.
 
 38 
 
 In view of the financial emergency that rests not only 
 upon this nation, but upon all the nations, I would suggest 
 that this Congress express its judgment in the form of reso- 
 lutions on the necessity of Congress acting in the premises, 
 and enacting a law whereby the gold can be more freely 
 used for international purposes, and that for our domestic 
 use the credit of the nation, declared in a constitutional 
 amendment and based on the wealth and resources of the 
 nation to a safely limited extent, should be used in the form 
 of a legal-tender money. As soon as it became known that 
 Congress would take such action confidence would be 
 restored, and we would enter upon an era of permanent 
 prosperity such as we have never seen, a prosperity that 
 would be shared in by every other nation. 
 
 PROPOSED ACT OF CONGRESS. 
 
 This bill is known as Senate Bill 2,947, and House Bill 
 8,311, Fifty-second Congress, first session. The parts in 
 italics show where this bill differs from the currency act of 
 June 3, 1864. 
 
 A Bill TO Provide A National Circulating Medium and to Provide for 
 
 THE Circulation thereof. 
 
 » 
 
 Section i. That there shall be established in the Treasury Department 
 a separate Bureau, which shall be charged with the execution of this and 
 all other laws that may be passed by Congress respecting the issue and 
 circulation of a National circulating medium. The chief officer of said 
 Bureau shall be denominated the Comptroller of Finance, and shall be under 
 the general direction of the Secretary of the Treasury. He shall be 
 appointed by the President of the United States, with the approval of the 
 Secretary of the Treasury, by and with the consent of Congress, and shall 
 hold his office for the term of ten years unless sooner removed by the Presi- 
 dent with the consent of Congress. He shall receive an annual salary of 
 eight thousand dollars; he shall have a competent deputy appointed by the 
 Secretary, whose salary shall be four thousand dollars per year, who shall 
 possess the power and perform the duties of the Comptroller during a 
 vacancy in said office or during the absence or inability of the Comptroller. 
 The Comptroller shall employ, from time to time, the necessary clerks to 
 discharge such duties as he shall direct. Such clerks shall be appointed 
 and classified by the Secretary, and be subject to the direction of the Secre-
 
 89 
 
 tary of the Treasury, which clerks shall be classified in the manner now pre- 
 scribed by law. Within fifteen days after notice of his appointment he shall 
 take and subscribe the oath of office prescribed by the Constitution and the 
 laws of the United States, and shall give to the United States a bond in the 
 penal sum of one hundred thousand dollars, with not less than four respon- 
 sible sureties, to be approved by the Secretary of the Treasury, conditional 
 for the faithful discharge of the duties of his office. The Deputy Comp- 
 troller shall also take oath of office, and give a similar bond in the sum of 
 fifty thousand dollars. The Comptroller or Deputy Comptroller shall not, 
 either directly or indirectly, be interested in any association doing a banking 
 business under this act. 
 
 Sec. 2. That the Comptroller of Finance, with the approval of the 
 Secretary of the Treasury, shall devise a seal, with suitable inscription, for 
 his office, a description of which, with the certificate of approval by the 
 Secretary of the Treasury, shall be filed in the office of the Secretary of 
 State, with an impression thereof, which shall thereupon become the seal of 
 office of the Comptroller of Finance, and the same may be renewed when 
 necessary. Every document executed by the Comptroller, in pursuance of 
 any authority conferred on him by law, and sealed with his seal of office, 
 shall be received in evidence in all places and courts whatsoever; and all 
 copies of papers in the office of the Comptroller, certified by him to be 
 correct copies of the originals in his office, shall in all cases be evidence 
 equally and in like manner as the originals. An impression of such seal 
 directly on the paper shall be as valid as if made on wax or wafer. 
 
 Sec. 3. That there shall be assigned to the Comptroller of Finance, by 
 the Secretary of the Treasury, suitable rooms in the Treasury Building for 
 conducting the business of the Bureau of Finance, and shall provide safe 
 and secure fire-proof and burglar-proof vaults in which it shall be the duty 
 of the Comptroller to deposit for safe-keeping all plates not necessarily in 
 the possession of engravers and printers, and other valuable things belong- 
 ing to his department; and the Secretary shall from time to time furnish 
 the necessary furniture, stationery, fuel, light, and other proper conveniences 
 for the transaction of said business. 
 
 Sec. 4. That the Comptroller of Finance, under the direction of the 
 Secretary of the Treasury, is hereby authorized and directed to issue 
 currency notes in the name of the United States of America to the amount 
 of twenty dollars per capita of the population of the census of iSgo, in 
 addition to gold and silver coin. Upon ascertaining each following 
 cejtsus the issue shall be increased to said tiuenty dollars per capita. In 
 addition thereto he shall issue such additional currency notes of the 
 same form and effect in lieu of gold or silver coin of the United States, 
 or bullion deposited or held exclusively for exchange for currency notes 
 as may be provided by law. In order to furnish suitable notes for circula- 
 tion the Comptroller of Finance is hereby authorized and required, under 
 the direction of the Secretary of the Treasury, to cause plates and dies to 
 be engraved, in the best manner to guard against counterfeiting and
 
 40 
 
 fraudulent alterations, and to have printed therefrom, on paper or similar 
 material best adapted therefor, and numbered, the quantity of currency 
 notes, of the denominations of one dollar, two dollars, five dollars, ten 
 dollars, twenty dollars, fifty dollars, one hundred dollars, and five hundred 
 dollars, as may be required to supply the issue herein called for. The 
 number of each denomination in use shall be such that the needs of the 
 people shall be best subserved thereby. The notes of each denominatioti 
 shall be consecutively numbered in series. Said notes shall express on 
 their face that they are issued by the Government of the United States 
 of America as the circulating medium of the people of the United States. 
 They shall have the written or engraved signatures of the Treasurer of 
 the United States, and of the Comptroller of Finance, and the imprint 
 of the seal of the Treasurer, and shall bear such other statemeiits and 
 devices as the Secretary of the Treasury shall direct. Said notes, and 
 gold and silver coin of the United States, shall be received at par, in 
 satisfaction of all obligations within the Jurisdiction of the United States 
 for the payment of money. Said gold and silver coin aftd currency shall 
 be exchangeable at the face value thereof. 
 
 Sec. 5. That the Secretary of the Treasury with the approval of the 
 President may from time to time make such rules and regulations for 
 the exchange of gold, silver, and currency, at the Treasury or any sub- 
 treasury of the United States, in sums of not less than five hundred 
 dollars, as the interests of the people may require. Such rules and 
 regulations may require a premium to be paid on gold or silver taken 
 from the Treasury or sub-treasurie s , for export; said rules and regula- 
 tions may also at any time require that the gold or silver or any part 
 thereof taken from the public lands of the United States, or from any 
 lands hereafter sold or patented by the United States, shall be sold to 
 the United States at its market value; and there is hereby reserved to 
 the Government the prior right to buy all or any part of such gold or 
 silver for public use at its market value, and shall pay therefor in 
 legal-tender currency. 
 
 Such rules and regulations may further provide that each banking 
 corporation formed under the laws of the United States, and receiving 
 the benefit of such law, shall at such times as inay be ordered forward 
 to the United States Treasury or any sub-treasury designated, at the 
 expense of the United States, such a percentage of the gold or silver held 
 by such bank as may be named in such rules and regulations, or as may 
 be designated in any special order, and shall receive in exchange therefor 
 legal-tender currency. 
 
 Such rules and regulations may also provide for establishing a sys- 
 tem for clearing international commercial balances, under which the 
 balances due between domestic and foreign clearing houses or specified 
 banks may be deposited to the credit of such clearing houses or banks in 
 the United States Treasury. Provided that all foreign balances due 
 the United States Treasury hereutider shall be deposited in the custody 
 of the debtor nation.
 
 4i 
 
 Sec. 6. That it shall be the duty of the Treasurer of the United States 
 to receive worn-out and mutilated circulating notes issued hereunder, 
 which shall be destroyed by being burned to ashes in the presence of the 
 Secretary of the Treasury and the Comptroller of Finance or such other 
 person as the President shall designate. A permanent book of record of 
 the destruction of such notes, with sufficient description thereof, shall be 
 kept by the Comptroller of Finance. After said destruction of said notes, 
 new notes shall be issued to the owners of the destroyed notes. 
 
 Sec. 7. That for the purpose of put ti7ig said notes in circulation t/w 
 Comptroller of Finance shall be authorized to retire all outstanding 
 notes or curreticy of the United States, and to buy such legally issued 
 ionds of the States, counties, and incorporated cities of over five thousand 
 inhabitants as he deems proper. Said bonds to be issued by said States, 
 counties, and cities, for a valuation not to exceed five per cent of the aver- 
 age assessed value of the real estate in said State, county, or city, for the 
 five years preceding the issuance of said bonds, deducting from the said 
 Issue of bonds the par value of any other outstanding bonds issued by 
 said State, county, or city. Said bonds shall be a lien on all personal 
 and real estate in said State, county, or city, except public property, and 
 -shall bear interest at the rate of two per cent per year, and shall not 
 run to exceed twenty years. The interest shall be payable annually to 
 the Comptroller of Finance at Washington, and a sinking fund shall be 
 provided in each case sufficient to liquidate said bonds at or before 
 maturity. The public issuance of such bonds, their delivery to the 
 Comptroller of Finance, and the receipt of the circulating notes thereof, 
 shall be deemed conclusive evidence of the legal issuance and validity of 
 said bonds, and thereafter no defense shall be set tip to the payment of 
 principal or interest, or to the levying and collecting of taxes therefor. 
 All objections or defense to the issue of said bonds must be made by the 
 parties interested prior to the delivery thereof to the Comptroller of 
 Finance, otherwise they are forever waived and barred as a defense. 
 Said bonds may be sold by the Comptroller, and such bonds or any United 
 States bonds may be deposited at par by banks with Treasurer as reserve 
 security, on which said banks may obtain the use of money as hereinafter 
 provided. 
 
 If said State, county, or city shall fail or neglect at any time to lei'y 
 and collect a sufficient tax to meet the obligations of said bonds, there 
 shall be immediately due and payable to the Comptroller of Finance a tax 
 jon the real atid personal property in said State, county , or city in default, 
 />n its last assessment roll, sufficient to meet said payments and costs of 
 collecting the same; and the same shall be collected by any person or 
 persons appointed therefor by the Comptroller of Finance, who shall 
 have power, where said tax is not paid within thirty days after it is 
 levied, to collect the same by seizure and sale upon warrant issued by 
 any judge ex parte of any court of original jurisdiction. State or national, 
 /laving jurisdiction of the property. The United States may become the
 
 42 
 
 purchaser of stick property. Redemption may be made within one year 
 after sale, by paying the amount due on the sale, costs and interest 
 thereon at ten per cent. Provided that no bonds shall be purchased 
 hereunder except such as by State laws are made subject to the terms of 
 this act. 
 
 Sec. 8. That associations for carrying on the business of banking may- 
 be formed by any number of persons, not less in any case than five, who 
 shall enter into articles of association, which shall specify in general terms 
 the proposed name of the association, the object for which the association is 
 formed, and the proposed capital stock; and may contain any other provision, 
 not inconsistent with the provisions of this act, which the association may 
 see fit to adopt for the regulation of the business of the association and the 
 conduct of its affairs, which said articles shall be signed by the persons 
 uniting to form the association, and a copy of them forwarded to the 
 Comptroller of Finance, to be filed and preserved in his office. Attached to 
 said articles of association shall be a schedule of the botids offered and 
 known as " the reserve security" as herein provided for, which schedule 
 shall accurately describe said botids. Upon receipt of said articles and 
 schedule, the Comptroller of Finance shall proceed in whatever manner 
 he deems best to verify the facts set out in said schedule; and when satis- 
 fied that the average assessed value for said five years tie.vt preceding 
 is not in excess of the actual value of said real estate, and that the 
 schedule is otherwise correct as to its statement, he shall notify said per- 
 sons of that fact of the name approved by him for the association. 
 
 Skc. 9. That the persons uniting to form such an association shall make 
 a certificate of organization, v.-hich shall specify: 
 
 First — The name assumed by the association. 
 
 Second — The place where its operations of discount and deposit are to be 
 carried on, designating the State, Territory, or district, and also the partic- 
 ular county and city, town or village. 
 
 Third — Its capital stock, and the number of shares into which it shall 
 be divided. 
 
 Fourth — The name and places of residence of the shareholders, and the 
 number of shares held by each. 
 
 Fifth — An accurate copy of the schedule of bonds attached to the articles 
 of association provided for in Section 8. 
 
 Sixth — A declaration that said certificate is made to enable such persons 
 to avail themselves of the advantages of this act, and that said bonds are 
 for security as required in this act. 
 
 The said certificate shall be duly signed and acknowledged by each of 
 said persons, in the manner required by the law of the place for acknowl- 
 edging conveyances of real estate, to entitle them to be recorded. When 
 duly certified therefor said certificate shall be recorded in the proper 
 book of record of the county or district in which the association is situated. 
 When duly recorded the said certificate shall be transmitted to the Comp- 
 troller of Finance, who shall record and carefully preserve the same in his
 
 43 
 
 office. Copies of said certificate, duly certified by the Comptroller of 
 Finance and authenticated by his seal of office, shall be legal and sufficient 
 evidence in all courts and places within the jurisdiction of the Government 
 of the United States of the existence of said association and of every other 
 matter that could be proved by the production of the original certificate. 
 
 Sec. io. That 710 associatioji shall be organized hereunder with a 
 ''reserve security" greater than one milliofi dollars, or with a less 
 " reserve security " tha?i twenty-Jive thousand dollars, nor with a capital 
 stock of less tha}i fifty thousand dollars. 
 
 Sec. II. That whenever a certificate of organization has been received 
 and filed by the Comptroller of Finance, and is found by him to fully com- 
 ply with the requirements of this act, the Comptroller of Finance shall pro- 
 ceed to investigate, in the manner deemed best, the personal standing, 
 financial condition, and record of the persons seeking to form the associa- 
 tion, also the object of the association, and any other facts that may aid 
 him in determining the desirability of such an association and the probable 
 safety of its business affairs and management. The Comptroller of Finance 
 may use such special means as he deems best to safely ascertain the facts 
 above referred to. When it shall appear to the satisfaction of the Comp- 
 troller of Finance that the association is lawfully entitled to commence the 
 business of banking with safety to the Government and to the people, he 
 shall issue to such association a certificate under his hand and official seal 
 that such association has complied with all the provisions of this act ' 
 required to be complied with, and that such association is' author- ' 
 ized to commence the business of banking, designating the place of busi- 
 ness, fully naming the directors and officers thereof for the first year, and its 
 capital stock and character and amount of reserve security. The said 
 certificate shall be published in such local newspapers, for si.xty days, as the 
 Comptroller of Finance shall designate. From the date of said certificate 
 said association shall be deemed a body corporate to transact the business 
 of banking hereunder, with the usual rights, powers, and duties of banking 
 corporations, and shall exist for a period of twenty years from such date. 
 An impress of its corporate seal shall be filed with the Comptroller of 
 Finance and with the Secretary of the Treasur3\ 
 
 Sec. 12. That thereafter, upon the demand of said association, the 
 Comptroller of Finance shall issue io said association a luarrant on the 
 Treasury of the United States, for circulating notes of the Government 
 to the amount of ninety-five per cent of the par value of said bonds depos- 
 ited by said ba?ik, or for atiy part thereof, as demanded from time to time, 
 which warrants, upon presetitment duly indorsed, shall be paid out of 
 the Treasury in the notes issued hereunder. Said sum or any part thereof , 
 not less than five thousand dollars, may, at any time, be returned to the 
 Treasury. 
 
 Sec. 13. That the affairs of all associations for banking purposes formed, 
 hereunder shall be managed by its board of directors which maybe in legal 
 session on any Monday from 10 A. M. wherein a quorum is present, and oa
 
 44 
 
 any other day where, after notice, a quorum maybe present or to which a 
 regular session may be adjourned, a quorum being present. 
 
 Every director shall be a citizen of the United States during his whole 
 term of service; and at least three-fourths of the directors shall have resided 
 in the State or Territory or district in which such association is located one 
 3'ear next preceding their election or appointment as directors, and shall 
 be residents thereof during their term of office. Each director shall own 
 in his own right at least ten shares of the capital stock of the association. 
 Each director, when elected or appointed, shall take an oath that he will, so 
 far as the duty devolves upon him, diligently and honestly administer the 
 affairs of such association, and will not knowingly violate, or willingly 
 permit to be violated, any of the provisions of this act, and that he is the 
 bona-fide owner in his own right of ten shares of the capital stock of the 
 association, standing in his own name on the books of the association, 
 and that the same is not hypothecated or in any way pledged as security 
 for any loan, debt, or obligation ; which oath, subscribed by him and duly 
 certified as required by law, shall be immediately transmitted to the Comp- 
 troller of Finance and by him filed and preserved in his office. 
 
 Sec. 14. That the directors of any association first appointed shall hold 
 office until their successors shall be elected and qualified. All elections 
 shall be held on the second Tuesday of January of each year, and the 
 directors as elected shall hold their places until their successors are elected 
 and qualified. Any vacancy occurring by reason of a director ceasing to 
 own the required amount of stock, or from any other cause, shall be filled 
 by appointment by the board. If from any cause an election shall not be 
 held at the time designated, it may be held on any subsequent day by pub- 
 lishing thirty days' notice thereof in a local daily paper. 
 
 Sec. 15. That in all meetings of the stockholders each share of stock 
 shall be entitled to one vote on all questions. Shareholders may vote by 
 proxies, duly authorized in writing. None but shareholders can use or hold 
 a proxy. 
 
 Sec. 16. That the shares of stock may be transferred on the books of the 
 association in such manner as may be prescribed in the by-laws of the asso- 
 ciation. No transfer shall be made of stock where the holder is indebted to 
 the association in any manner ; but the association has a lien on all of its 
 stock for such indebtedness. Every person becoming a shareholder, by 
 transfer or otherwise, shall, in proportion to his shares, succeed to all the 
 rights and liabilities of the prior holder of such shares, and no change shall 
 be made in the articles of association by which the rights, remedies, and 
 securities of the existing creditors of the association shall be impaired. 
 The shareholders of each association formed under the provisions of this 
 act, and of each existing bank or banking association that may accept the pro- 
 visions of this act, shall be held individually responsible, equally and ratably, 
 and not one for the other, for all contracts, debts, and engagements of such 
 associations to the extent of the amount of their stock therein, at par thereof, 
 in addition to the amount invested in such shares.
 
 4r) 
 
 Sf.c. 17. That the capital stock or the reserve security of any association 
 formed hereunder may be increased or decreased within the limits fixed for 
 the capital stock or the reseri'e security by this act by a two-thirds vote of 
 its shareholders at any annual meeting in January. The increase or 
 decrease of capital stock or t/ie reserve security shall be made by comply- 
 ing with the requirements of this act as to the formation of such associations 
 in the first instance, and by complying with such additional requirements 
 as the Comptroller of Finance may deem best to secure the interests of all 
 parties concerned, provided that in the decrease of the reserve security 
 the association so decreasing its reserve security shall surrender to the 
 Comptroller of Finance circulating notes received thereon to the amoxttit 
 of the decrease. In such cases the Comptroller of Finance may, in his 
 discretion, release from the effect of this act a pro rata of the bonds 
 described in the certificate of organization, but this shall only be done in 
 cases where the Comptroller of Finance shall find the association to be 
 solvent. The maximum or niinimum of such ijtcrease or decrease shall 
 be determined by the Comptroller of Finance. 
 
 Any association organized hereunder may close up its business and dis- 
 solve its organization by a vote of its stockholders had at the annual meet- 
 ing in January. In such cases the association must first settle all of its 
 outstanding obligations and return to the Comptroller of Finance the 
 amount of circulating notes received on its reserve security. The Comp- 
 troller of Finance, upon receipt of a statement of the foregoing facts dulj- 
 authenticated by the directors of said association under oath, shall fully 
 investigate the matters pertaining thereto; and upon being satisfied that all 
 obligations of said association are fully satisfied and discharged, shall cause 
 said statement to be published for at least sixty days in a local newspaper, 
 and shall also cause a notice thereof to be inserted in the United States 
 Bulletin of Finance for the same period. If any objections to the dissolu- 
 tion are filed with the Comptroller of Finance before the expiration of said 
 sixty days, he shall determine and adjust any matters therein objected to ; 
 when so adjusted, or if no objections are filed with him, he shall issue a 
 certificate dissolving said association and releasing the bonds held under 
 the certificate of organization from any further claim or demand thereon. 
 Said certificate of dissolution shall be by him duly signed and acknowledged 
 so as to entitle the same to record in the office where the certificate of 
 organization was recorded. The Comptroller of Finance shall duly record 
 said certificate of dissolution in his oflfice, and thereafter shall transmit the 
 same to said association upon the same being duly recorded in the oflfice 
 where the certificate of organization was recorded. The association will 
 thereby be completely dissolved. 
 
 Sec. 18. Should the Comptroller of Finance at any time deem the aflfairs 
 of said association unsafe from any cause, he may appoint a special agent 
 or agents under, his hand and seal of office, who shall have power to inspect 
 all aflfairs of said association, and to close up its affairs to the best possible 
 advantage to all parties interested. To this end such agent shall have
 
 4(5 
 
 power to bring or defend any suit in the name of the association, and to 
 sell at public or private sale any or all of the property of the association, 
 and to execute proper conveyances thereof, and use the proceeds to close up 
 the affairs of the association. He shall also have power to collect from the 
 stockholders the amount for which they are responsible under this act, and 
 to use the same to close up the accounts. He shall perform such other 
 duties as may be necessary, and shall give such bonds for faithful perform- 
 ance of his duties hereunder as the Comptroller of Finance may require. 
 His certificate of appointment shall be duly acknowledged and recorded as 
 the other certificates are required to be. The Government shall be a pre- 
 ferred creditor in all such cases as are provided for in this section. 
 
 Sec. 19. That the directors may declare dividends from the net profits 
 of the association, but such association before it shall declare a dividend 
 shall carry at least ten per cent of its net profits to a surplus fund until said 
 reserve fund shall equal the capital stock of said association. 
 
 Sec. 20. That it shall be lawful for any association hereunder to pur- 
 chase, hold, and convey real estate as follows: 
 
 First — Such as shall be necessary for its immediate accommodation in 
 the transaction of its business. 
 
 Secottd — Such as shall be mortgaged to it in good faith by way of security 
 for debts previously contracted ox for loans made thereon. 
 
 Third — Such as shall be conveyed to it in satisfaction of debts previously 
 incurred in the course of its dealings. 
 
 Fourth — Such as it shall purchase at sales under judgments, decrees, or 
 mortgages held by the association, or shall purchase to secure debts due to 
 said association. 
 
 Such association shall not purchase or hold real estate for any other pur- 
 pose than as herein specified. Provided, that all such real estate acquired 
 other than for the purpose of the business of the association shall be sold 
 within five years after it is obtained by the association. 
 
 Sec. 21. That each association may charge such rates of interest as may 
 be allowed by local laws where the association is situated. Each association 
 shall keep on hand in cash an amount equal to at least twenty-five per cent 
 of the amount of its deposits. When the reserve amount shall fall below 
 said percentage, no more dividends or loans shall be made until the 
 amounts called in shall restore the said percentage. 
 
 Sec. 22. That every association hereunder shall make to the Comptroller 
 of Finance a report, according to the form which may be prescribed by him, 
 verified by the oath or affirmation of the president or cashier of such associa- 
 tion, which report shall, among other things, exhibit in detail, and under 
 appropriate heads, the resources and liabilities of the association, and the 
 last assessment valuation of its real estate, before the commencement of 
 business on the morning of the first Monday of the months of January, 
 April, July, and October of each year, and at such other times as the 
 Comptroller may order, and shall transmit the same to the Comptroller of 
 Finance within five days thereafter. And any bank failing to transmit such
 
 47 
 
 report shall be subject to a penalty of one thousand dollars for each day 
 after said five days that said report is delayed beyond that time. The 
 Comptroller shall cause abstracts of said reports to be published in the 
 United States Ihilletin of Finance, and the separate report of each associa- 
 tion shall be published by the association in a. local daily newspaper for at 
 least one week. Said association shall forward with each quarterly 
 report one-half {)4) of one per cent of the cash used on its reserve 
 security during the preceding quarter, as interest thereon, on sums not 
 to exceed one hundred thousand dollars, and three fourths of one per 
 ce7it per quarter on sums in excess of one hutidrcd thousand dollars and 
 less thaft two hundred thousand dollars; thereafter the rate shall 
 increase one per cent per quarter additional on each additional one hun^ 
 dred thou satid dollars used, or on any part thereof ; and in case of default 
 in the payment thereof, by any association, said interest may be collected 
 in the manner provided for the collection of United States duties of other 
 corporations. In addition to the quarterly reports required herein, every 
 association shall, on the first Tuesday of each month, make to the Comp- 
 troller of Finance a statement, under oath of the president or the cashier, 
 showing the condition of the association making such statement, in respect 
 to the average amount of loans and discounts, specie and circulating notes 
 on hand belonging to the association, clearing-house certificates, deposits, 
 and such other matters as the Comptroller of Finance may require. 
 
 Sec. 23. That no association shall make loans or discounts on the security 
 of the shares of its own capital stock, nor be the purchaser or holder of any 
 sucli shares, unless such security or purchase shall be necessary to prevent 
 loss upon a debt previously contracted in good faith; and stock so pur- 
 chased or acquired shall be sold within six months from the time of its pur- 
 chase. But no such purchase or sale shall relieve the former owner thereof 
 from his pro rata of responsibility for all debts incurred by the association 
 prior to sale and transfer to a new purchaser in good faith. 
 
 Sec. 24. That no as.sociation, or any member thereof, shall, during the 
 time it shall continue its banking operations, withdraw, or permit to be 
 withdrawn, either in the form of dividends or otherwise, any portion of its 
 capital or surplus fund. And if any losses shall at any time have been sus- 
 tained by any such association, equal to or exceeding its undivided profits 
 then on hand in cash, no dividend shall be made; and no dividend shall 
 ever be made by any association, while it shall continue its banking opera- 
 tions, to an amount greater than its net profits then on hand, deducting 
 therefrom its losses and bad debts and ten per cent for the reserve fund. 
 And all debts due any association on which the interest is past due 
 and unpaid for a period of six months, unless the same shall be well secured 
 and shall be in process of collection, shall be considered bad debts within 
 the meaning of this act. 
 
 Sec. 25. That the president and cashier of every such association shall 
 cause to be kept at all times a full and correct list of the names and resi- 
 dences of all the shareholders in the association, and the number of shares
 
 48 
 
 held by each, in the office where its business is transacted; and such list 
 shall be subject to public inspection during business hours of each day in 
 which business may be legally transacted. A copy of said list shall be sent 
 with each quarterly report to the Comptroller of Finance. 
 
 Skc. 26. That the directors of any hank incorporated under any 
 national or State law may, upon the autliorization of the owners of two- 
 thirds the capital stock, in writing, duly signed and ackriowledged, 
 ai'ail themselves of the provisions of this act and become a national asso- 
 ciation under their corporate name by complying with the provisions of 
 this act : the said directors being by said vote authorized to execute all 
 paper>. relating thereto. Any matters not herein provided for in such cases 
 shall be adjusted by the Comptroller of Finance in accordance with the 
 spirit and intention of this act. 
 
 Skc. 27. That all associations under this act, when designated for that 
 purjxise by the Secretary of the Treasury, shall be depositaries of public 
 money, except receipts from customs, under such regulations as may be 
 prescribed by the Secretary; and they may also be employed as financial 
 agents of the Government; and they shall perform all such reasonable 
 duties, as depositaries of public moneys and financial agents of the Govern- 
 ment, as may be required of them. And the Secretary of the Treasury- 
 shall require of the association thus designated satisfactory security for the 
 safe-keeping and prompt payment of public funds deposited with them, and 
 for the faithful performance of their duties as financial agents of the 
 Government. 
 
 Sec. 2S. That all transfers of the assets, or any part thereof, of any 
 association doing business hereunder, made after the commission of an act 
 of insolvency, or in contemplation thereof, with a view to prevent the appli- 
 cation of it as assets in the manner prescribed in this act. or with a view to 
 the preference of one creditor to another, shall be utterly null and void. 
 
 Sec. 29. That any director, officer, or employe of any association organ- 
 ized hereunder who shall knowingly violate, or permit any of such persons 
 to violate, the provisions of this act, shall be removed forthwith from his. 
 position, by the proper authority of the association, or by order of the 
 Comptroller of Finance. And any director, officer, or employ^; of such 
 association whf) shall so transact the business of such association, or any 
 part of it, as to intentionally defraud the association or any one else, or 
 with the intention to deceive or mislead any officer of the association, or 
 any agent appointed to examine the affairs of such association, shall be 
 deemed guilty of a misdemeanor, and upon conviction thereof shall be 
 punished by imprisonment for not more than ten years. 
 
 Sec. 30. That all suits and proceedings arising out of the provisions of 
 this act, in which the United States or its agents or officers shall be parties, 
 shall be conducted by the district attorneys of the several districts, under 
 the direction and supervision of the Solicitor of the Treasury. And that 
 all suits or actions arising under the provisions of this act may be had in 
 any circuit, district, or territorial court of the United States held within the 
 16
 
 4y 
 
 district in which the association may be established, or in any State, 
 county, or municipal court, in the jurisdiction of which said association is 
 established, which has jurisdiction in similar case. 
 
 Sec. 31. That if any person shall falsely make, forge, or counterfeit, or 
 cause or procure to be made, forged, or counterfeited, or willingly aids or 
 assists in forging or counterfeiting, any note in imitation of, or purporting 
 to be in imitation of the circulating notes issued under the provision of this 
 act, or shall pass, utter or publish, or attempt to pass, utter or publish, any 
 false, forged or counterfeited note purporting to be issued under the provis- 
 ions of this act, knowing the same to be fasely made, forged or counterfeited, 
 or shall falsely alter, or cause or procure to be falsely altered, or will- 
 ingly aids or assists in falsely altering, any such circulating notes issued 
 under the provisions of this act, or shall pass, utter, or publish, or attempt 
 to pass, utter, or publish as true any falsely altered or spurious circulating 
 notes issued, or purporting to have been issued, under the provisions of this 
 act, knowing the same to be falsely altered or spurious, every such person 
 shall be deemed and adjuged guilty of a felony, and being thereof convicted 
 shall be sentenced to be imprisoned and kept at hard labor for a period of 
 not less than five years or more than twenty years, and fined in a sum not 
 exceeding one thousand dollars. 
 
 Sec. 32. That if any person shall make or engrave, or cause or procure 
 to be made or engraved, or shall have in his custody or possession any plate, 
 die, or block after the similitude of any plate, die, or block from which any 
 circulating notes issued as aforesaid shall have been prepared or printed, 
 with intent to use such plate, die, or block, or cause or suffer the same to be 
 used, in forging (jr counterfeiting any of the notes issued as aforesaid, or 
 shall have in his custody or possession any blank note or notes engraved 
 and printed after the similitude of any notes issued as aforesaid with intent 
 to use such blanks, or cause or suffer the same to be used, in forging or 
 counterfeiting any of the notes issued as aforesaid, or shall have in his cus- 
 tody or possession any paper adapted to the making of such notes, and 
 similar to the paper upon which any such notes shall have been issued, 
 with intent to use such paper, or cause or suffer the same to be used, in forg- 
 ing or counterfeiting any of the notes issued as aforesaid, every such person, 
 being thereof convicted by due course of law, shall be sentenced to be 
 imprisoned and kept at hard labor for a term not less than five or more 
 than twenty years, and fined in a sum not exceeding one thousand dollars. 
 
 Sec. 33. That the Comptroller of Finance shall cause to be prepared 
 each month concise information showing the amount of circulating notes 
 issued during the preceding month and the approximate amount of cir- 
 culating notes, gold and sih'er coin reported in the banks in each State, 
 Territory, District, and in the principal cities of the L'nited States, and 
 also the amount in the various vaults or Treasuries of the L'nited States. 
 It shall also contain the name of each bank, the amount of its capital 
 stock, its reserve fund, and its losses for the preceding month, and such 
 other information as shall be deemed of sufficient value to the financial
 
 50 
 
 interest of the people to be published. Such information shall be pub- 
 lished monthly by the Department of Printing i>i pamphlet form, of con- 
 venient sise for permanent binding in book form. One copy of each issue 
 shall be sent monthly to each of the following parties: To each associa- 
 tion doing business hereunder; to the President and each member of his 
 Cabinet, to each member of Congress, and to such other officers of the 
 Government as the Comptroller of Finance may direct. Also to the 
 Governor of each State, Territory, or District, and to each public library, 
 university, or college applying therefor. Any person may have a copy 
 forwarded to his address for one year by first forwarding to the Comp- 
 troller of Finance the sum of one dollar. 
 
 Sec. 34. That as the currency notes shall accumulate in the Treasury 
 of the Government, from revenue or otherwise, they shall be returned to 
 circulation among the people, in addition to the ways hereinbefore speci- 
 fied, by paying the current expenses of the Government ; by the purciiase 
 of suitable grounds and the erection of suitable buildings for post offices 
 and other uses of the Government; by the construction of such other 
 works as shall be deemed by Congress for the best interests of the public. 
 The expenditures shall be made annually, in each State, Territory, or 
 District, as nearly as may he in proportion to the number of its inhab- 
 itants. The expenditures hereunder shall be as directed from time to 
 time by Congress. 
 
 Sec. 35. That all notes issued hereunder and all moneys received by 
 the Comptroller of Finance hereunder shall be deposited in the Treasury of 
 the United States. And the Comptroller of Finance shall keep an itemized 
 account of the sources from which received, with the dates thereof. 
 
 Sec. 36. That it shall be unlawful for any officer acting under the pro- 
 visions of this act to countersign or deliver to any association, or to any 
 other company or person, any circulating notes contemplated by this act, 
 except as herein provided, and in accordance with the true intent and mean- 
 ing of this act. And any officer who shall violate the provisions of this sec- 
 tion shall be deemed guilty of a high misdemeanor, and on conviction 
 thereof shall be punished by a fine not exceeding double the amount so 
 countersigned and delivered, and imprisoned for not less than one year and 
 for not exceeding fifteen years. 
 
 Sec 37. That if the directors of any association shall knowingly vio- 
 late, or knowingly permit any of the officers, agents, or servants of the 
 association to violate, any of the provisions of this act, all the rights, privi- 
 leges, and franchises of the association derived from this act shall be 
 thereby forfeited. Such violation shall be first determined and adjudged by 
 a proper circuit, district, or territorial court of the United States, in a suit 
 brought for that purpose in the name of the Comptroller of Finance, which 
 decree shall adjudge the association dissolved. Thereupon the affairs of the 
 association shall be closed up by the Comptroller of Finance; and in case of 
 such violation, every director who participated in or assented to the same 
 shall be held liable in his personal and individual capacity for all damages 
 
 I
 
 51 
 
 ■which the association, its shareholders, or any other person shall have sus- 
 tained in consequence of such violation. Such directors shall hereafter be 
 disqualified for the office of director in any association formed hereunder; 
 and any president, director, cashier, teller, clerk, or agent of any association 
 who shall embezzle, abstract, or willfully misapply any of the moneys, 
 funds, or credits of the association, or shall, without authority from the 
 directors, issue or put forth any certificate of deposit, draw any order or 
 bill of exchange, make any acceptance, assign any note, bond, or draft, 
 bill of exchange, mortgage, judgment, or decree, or shall make any false 
 ■entry in any book, report, or statement of the association, with intent in 
 ■either case to injure or defraud the association, or any other company, body 
 politic or corporate, or any individual person, or to deceive any officer of 
 the association, or any agent appointed to examine the affairs of any such 
 association, shall be deemed guilty of a misdemeanor, and upon conviction 
 thereof shall be punished by imprisonment not less than one and not more 
 than ten years. 
 
 Sec. 38. That the Comptroller of Finance, with the approbation of the 
 Secretary of the Treasury, as often as it shall be deemed necessary or proper, 
 shall appoint a suitable person or persons to make an examination of the 
 affairs of every banking association formed hereunder; which person or 
 persons shall not be a director or other officer or employ^ in any association 
 whose affairs he shall be appointed to examine, and who shall have power 
 to make a thorough examination into all the affairs of the association, and, 
 in doing so, to examine any of the officers and agents thereof on oath, and 
 shall make a full detailed report of the condition of the association to the 
 Comptroller. And the association shall not be subject to any other visi- 
 torial powers than such as are authorized by this act, except such as are 
 vested in the several courts of law and chancery. And every person 
 appointed to make such examination shall receive for his services at the 
 rate of five dollars for each day employed by him in such examination, and 
 two dollars for each twenty-five miles he shall necessarily travel in the 
 performance of his duty. 
 
 Sec. 39. That persons holding stock as executors, guardians, adminis- 
 trators, or trustees shall not be personally subject to any liabilities as stock- 
 holders, but the estates and funds in their hands shall be liable in like 
 manner and to the same extent as the testator, intestate, ward, or person 
 interested in said trust funds would be if they were respectively living and 
 competent to act and hold the stock in their own names. 
 
 Sec. 40. Thai hereafter no national associations for the purpose of 
 banking shall be for^ned except under the provisions of this act, and all 
 banking institutions now under the provisions of prior acts of Congress 
 shall be allowed to continue under such acts until their proper term of 
 existence has expired. The currency issued under the provisions of this 
 act shall be deemed a public use, and shall not be subject to taxation in 
 J he hands of citizens of the United States; but gold or silver coin or bull-
 
 52 
 
 ion shall be subject to taxation at its market or commercial bullion 
 7>alue. 
 
 Sfx. 41. T/iat the present Comptroller of Currency shall hereafter 
 be known as the Comptroller of Finance, under this act, and under such 
 name shall , 7vith the bureau now established, perform all duties required 
 under the Tarious acts of Congress relating to currency or a circulating 
 medium. 
 
 Sf:c. 42. That all acts or parts of an act in conflict with the provisions 
 of this act are hereby repealed, and Congress may at any time amend, 
 alter, or repeal this act. 
 
 Note. — In reference to this bill see House of Representatives document,. 
 Fifty-second Congress, second session. Report 2614, Part 2.
 
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