Mr. Speaker, the question of the currency is the most important question now agitating the public mind. It has been discussed by the press of the country throughout the land, and yet there seems to be no uniform opinion upon the subject. I do not propose to take up but a small portion of the time of the House in what I shall have to say upon this subject.
When Congress passed the national-currency act, two things were attempted to be done: first, to abolish all the banks of issue in the several States; secondly, to supply the country with the currency in place of that retired by the act. The former was successfully accomplished; the latter only in part — in part because the amount was limited under the act. Congress assumed the right to fix the limit to the currency of the country, and said to the people, "Thus far you shall go and no farther." The act created a monopoly of bankers, which is against the spirit of our institutions, and afforded privileges to the few and denied the same privileges to the many. If the act had provided that all should have the same privileges that are accorded to the few, the second proposition would have been accomplished, namely, the people would have had the privilege of supplying themselves with all the currency which business and commerce required.
The bill now under discussion aims to remedy some of the defects of the currency act. It proposes to remove the restriction upon the volume and amount of national-bank notes. I do not favor this proposition because it will increase the circulation of national-bank notes, but because it gives the people the option to decrease or increase the volume as their wants may from time to time require. I do not propose to consider the question of inflation or contraction in connection with this bill, but to favor such legislation as will enable the people to supply their wants. If the issuing of currency under the national-currency act is made free, the people will avail themselves of just the amount they want and no more. The great law of supply and demand will regulate the volume; legislation will not and cannot.
It is averred by many that the proposition to make banking free will have a tendency to inflate prices. This cannot be done under this bill, because under the third section an easy method of redemption is provided for, and any redundancy of national-bank notes will be checked by this section. Inflation begins and ends with the legal-tender notes. The legal-tender notes are the basis of our banking operations. They perform the same functions that gold does under a specie basis; and, as there is no law providing for their redemption or retirement at the option of the holders, as is provided for national-bank notes, an increase of their volume would tend to inflate prices. The amount now fixed by this House should not be increased for this reason. It is not necessary that the volume should be increased; in my judgment it would, be wise to reduce the volume of legal-tender notes provided the national banking system is to be continued and made free. At all events, the country should be made to understand that the volume of legal-tender notes is not to be increased at the will of the Secretary of the Treasury. I do not object to the sum of $400,000,000 fixed as the maximum; I would prefer that it be fixed at $358,000,000 with free banking, and I am not quite sure but that it would be wiser to fix the volume at $300,000,000. That amount, in my judgment, would be sufficient as a redeeming agent for any volume of national-bank notes that might be taken out under the national-currency act when we have removed the restriction.
The time will come when the legal-tender notes will be retired. They should never be retired by an act compelling the Secretary of the Treasury to pay them; but an act should be passed by Congress that would give the option to the national banks to fund them at a small specified rate of interest. When the time comes, when our exports shall exceed our imports, and gold shall thereby flow into the country, then the national banks would avail themselves of the option under an act of this kind. Until that time arrives, the legal-tender notes must continue to perform the functions that they now do, or else, if funded, the national banks must be permitted to suspend specie payment.
Specie payment cannot be maintained in this country with the balance of trade against us. This is not only my own opinion upon this subject, but was the opinion of all the distinguished gentlemen, except one, who have recently given testimony before the Committee on Banking and Currency upon this subject.
It seems to me that if this question was rightly understood, no one could object to what is called free banking. If there is too much currency in the country, under this bill all national-bank notes can be retired, and very speedily.
If this provision of the bill, which makes banking free, shall be adopted by Congress, it will do much to perfect our currency system. In fact, little else is necessary to be done.
I would suggest other amendments, but I do not expect them to be adopted at this time.
I would relieve the banks from the operations of the State usury laws and authorize them to lend money for what it is worth. Competition regulates the price of money as it does everything else. These laws are rarely obeyed, and while it is not within our jurisdiction to repeal them, we can exempt the banks from their operation.
I would go still further. I would repeal all those provisions of the national-currency act which interfere with the banks in any manner whatever. It is an assumption on the part of the Government to interfere in or in any way regulate the business of banking, unless it is what may relate to the currency which it issues to them. Permitting them to issue notes is only a very small portion of the business of banking, and if the Government desires to exercise a paternal care over these issues, I have no objection.
We have legislated the State banks out of existence. Having done so, it is our duty to permit the people to supply themselves with something in their stead. This we do by requiring them to secure their notes; but I would like to ask any man where we get the right to interfere in all the business of the banks? Does the issuing of these notes to these banks at ninety cents on the dollar upon our bonds confer any right to manage their other business? The aggregate circulation which we permit them to have, added to the whole volume of legal-tender notes, performs less than one-tenth of the business of the country. Why, then, I say again, should we interfere in the other nine-tenths of the business which these banks perform? The great bulk of business is done upon bank credits, and it is well known to you, Mr. Speaker, that in the transactions of the banks in New York City, amounting upon the average to $100,000,000 daily, only 3 per cent. of currency is employed. Now, when it supplies so small a part of the machinery of business, why should we interfere in the business of banking? If the United States were a stockholder in these institutions, even to a small extent, I could then see the reason why we should supervise their business; but as their capital is all their own, and the Government of the United States has no interest whatever in these institutions, why should they not be left perfectly free to manage their own affairs in their own way, precisely the same as all other business is managed?
It is well known that when a national banks fails, it is always found that it has violated the national-currency act, The security which our supervision is supposed to give depositors — and it is for them alone that this supervision is provided — is found to be absolutely valueless; the reserves are gone.
This supervision ought to be abolished for another reason. We often give credit and respectability to banks which their owners do not possess, leading people to do business with them which they would not do if this supervision was abolished. We should not give real or imaginary credit to banks or individuals which has the least tendency to mislead; but banking and bankers should have credit based only
2508upon capital, credit, honesty, integrity, and capacity. I need only refer to the notable instance of the First National Bank of this city, located in the very shadow of the office of the Comptroller of the Currency, to prove the absolute worthlessness of this governmental care and supervision over our banking institutions. We should not supervise banking, unless it is proposed to supervise all kinds of business.
When Congress has passed such currency laws as will secure the bill-holder, its duty is done. When the restrictions are removed, as provided for by the bill now under discussion, we shall have given to all the people the privilege now only accorded to the few. We can all of us obtain as much currency as is needed, provided always that we have something with which to buy it.
As I have before remarked, it is believed by some persons that to make banking free will be to flood the country with a vast amount of currency. This, in my judgment, is a fallacy. There can be no inflation of national-bank notes under this bill. I know of but two ways to get money: one is to exchange something for it; the other, to borrow it.
The West and South, it is claimed, want more money. That want, I fancy, is not confined to those localities alone. We all want more money. We at the West and South will have banks and money when we are rich enough to exchange something for them, and not before. Banks will be organized where there is capital, and where it can be profitably employed; and the demands of the West and the South for more money and New England for less money will be complied with by making banking free.
Now, much has been said about the character of our currency; it has been called irredeemable, dishonest, broken promises, and so forth. All the ills that afflict the body-politic have been charged to it. It was said before the Committee on Banking and Currency, by a distinguished writer upon political economy, that the price of labor in New England had advanced, since 1860, 54 per cent.; that the cost of living to their operatives had been increased from 60 to 75 per cent., all account of this much-abused currency; that prices were inflated thereby greatly in excess of the difference between gold and currency; and that the only road to prosperity was by contraction. Further, that while it would reduce the wages of their operatives, the prices of their living would be decreased in a greater ratio; that the increased cost of their manufactures had lost them their China trade, which could only be regained by the contraction of the currency, so that the articles exported to that country could be produced at a less cost. He also stated that the farmers of this country lost in the year 1873 $75,000,000 on account of this bad currency; that they were obliged to sell in Europe for gold; that the cost of production was paid for in currency, and that, he said, was the reason of their loss. And furthermore he informed the committee that pork, beef, and wheat, before the war, were as high, if not higher, in gold than they are at this time in currency. He was asked to explain how it was that the New England operatives were compelled to pay from 60 to 75 per cent. more for living now than before the war, when these articles of consumption were as low in currency as they were in gold before that time. He replied that he would answer at some future time, if the committee would give him an opportunity.
Now, I affirm that there is no difference in the price of cotton and woolen manufactures in this country beyond the gold premium. In making a comparison, in a list of sixteen articles of cotton manufacture, showing the prices on the 3d of March, 1860, in gold, with cotton at eleven cents a pound, and the prices of the same articles in currency with cotton at sixteen and one-fourth cents a pound, I find that the difference is about the difference between gold and currency. On two of these articles the prices were the same.
It seems to me that this comparison shows the fallacy of the position assumed by the distinguished political economist.
A return to specie payments is not necessary to the successful prosecution of business. The past decade was one of the most prosperous in our history, and I for one am content to let well enough alone.
Specie resumption will not be brought about by legislating about the currency. When we want to pay specie we must have the specie with which to pay. We could obtain it by exchanging our exports for it; and when our exports are not exceeded by our imports we shall have the wherewithal to do it, and we may resume. We may resolve as much as we please, and legislate as much as we please, but this will not create coin. If our industries can be kept profitably and constantly employed our needs for foreign articles will be lessened, and in a few years we shall grow up to that favorable condition of trade which will bring gold into the country and make it easy to resume. We may contract the currency to meet the wishes of those who desire resumption to be brought about in that way, and the result will be that our revenues will fall off and we shall be compelled to impose additional taxation to meet the expenses of the Government. Liquidation of this kind is wanted by those who desire to make the dollars they own worth more. Now, I suppose it is not our duty to legislate for this class to the exclusion of all others. They talk about dishonest promises, but who else complains. The active business men of the country do not desire to reduce their business, nor do the manufacturers desire to turn out their operatives to beg or starve. Forced contraction will produce both these results. When the labor of the country is employed all classes are prosperous and we have no bread riots.
It is not denied by the advocates of speedy and forced resumption but that the road is through privation and suffering. How often did we hear it said during the late panic, "We have suffered this much; let us suffer a little more, and we shall have specie resumption."
Specie resumption is no doubt desirable; but we cannot pay specie until we have it. We cannot pay gold unless we have gold. If we could transmute clay into gold, we could adopt Mr. Greeley's formula, "the way to resume is to resume."
In conclusion I desire to say, a settled policy must sooner or later be adopted, so that Congress can dismiss forever the subject of the currency. Until this is done our finances will be disturbed and our business will be paralyzed to a greater or less extent.
The country is waiting now in feverish anxiety to see what Congress will do upon this subject, and it is all-important that what we do shall be done quickly. When we shall have passed a free-banking law, we shall have taken the first great step, in my opinion, toward this settled policy.
When that favorable condition of trade shall come so that we shall accumulate gold, gold will take the place of legal-tender notes. Then we can give the option to holders of greenbacks to fund them, by an act for that purpose, and our legislation will have been completed.
Mr. Speaker, the bill reported by the committee provides as follows:
Section 1 relieves the banks from keeping a reserve upon their circulation, and ought to pass. The bill-holder is secured from all possibility of loss, and there is no good reason why this requirement should be continued, as there never was any reason for its enactment in the first place.
Section 2 removes the restriction upon the amount of national-bank notes, and permits banks to increase their capital and circulation to any amount; in fact, it makes banking free. It is the main feature in the bill, and I need not say that in my opinion this section, if all the others fail, should pass.
Section 3 provides an easy and rapid mode for retiring any redundancy of national-bank notes, and is a complete check to any inflation beyond the wants of commerce.
Section 4 permits banks to retire their circulation, and to withdraw the bonds pledged for their security.
Section 5 requires the banks to keep their reserves in their own vaults.
Section 6 requires the Secretary of the Treasury to print the charter number upon the bills of the respective banks. This is simply a regulation to facilitate the assorting of the notes when sent to the Treasury for redemption.
Section 7 authorizes the organization of banks without circulation, and in my judgment ought not to pass. It is not the business of Congress to confer either real or imaginary credit upon banks or individuals, as this section will do if passed.
Section 8 provides that the Secretary of the Treasury shall issue a new kind of notes, commencing on the 1st day of July next, at the rate of $2,000,000 per month, payable in gold two years after date, and to retire and destroy an equal amount of the legal-tender notes.
This is one of the many modes before Congress to return to specie payment.
While I am not in favor of this proposition, I am prepared to vote for it, and also for section 7, rather than have the bill fail. I believe that our legislation upon this subject will only be perfected by amendments made from time to time, and with this view I consent to those two sections, but I would much prefer that they be stricken from the bill.