People's Pilot, Volume 6, Number 11, Rensselaer, Jasper County, 3 September 1896 — The Currency Question [ARTICLE]

The Currency Question

BY HON. W. J. BRYAN.

The following prophetic paper was published in the Arena of March, 1895, republished this month, September, 1896, as illustrative of the keen insight and true statesmanship of this illustrious disciple of Thomas Jefferson: On the third day of December 1894, the president of the United States sent to Congress a message which concluded with the reeommendation of a plan for reforming the nation’s currency. Mr. Cleveland raises an issue which will not be finally disposed of until bank notes are substituted for all government paper, or, until government papaper is substituted for all bank notes. It may be interesting to note that the position taken upon this subject by the present Democratic president is exactly opposite to the position taken by the first democratic president Thomas Jefferson. Mr. Cleveland has elaborated the war cry. “The government must go out of the banking business” into the statement, ‘-The absolute divorcement of the government from the business of banking is the ideal relationship of the government to the circulation of the currency of the country,” thus declaring the issue of paper money to be a function of the bank. Mr. Jefferson, on the other hand, regarded the issue of paper money as more properly a function of government, and in a letter written to Mr. Rives, Nov. 28, 1819, declared in substance that the banks should go out of the governing business, saying, “Interdict forever to both the state and na tional government the' power of establishing any paper banks, for without this interdiction we shall have the same ebbs and flows of medium, and the same revolutions of property to go through every twenty or thirty years.” The plan proposed by Mr. Cleveland contemplates the annihilation of government paper, while that proposed by Mr. Jefferson contemplated the annihil-

ation of bank paper. Which plan should be adopted? If those who prefer Mr. Jefferson’s are disturbed by the expressions of contempt showered upon them by self-styled financiers, let them be consoled by a remembrance of the fact that the author of the declaration of In dependence did not escape attacks from the same source. In a letter written to ex-President Adams, Jan. 24, 1814, Mr Jefferson said:— I have ever been the enemy of banks, not of those discounting for cash, but of those foisting their own paper into circulation and thus banishing our cash. My zeal against those institutions was so warm and open at the establishment of the bank of the United States that I was derided as a maniac by the tribe of bank-mongers who were seeking to filch from the public their swindling and barren gains. “So persecuted they the pro- [ phets which were before you.”

The presidents plan, outlined in the report of Secretary Carlisle, and later embodied in a bill presented by the secretary to Mr. Springer's committee on banking and currency, is in substance as follows: Section I.—Repeals all laws authorizing or requiring the deposit of United States bonds as a security for national bank circulation. Sec. 2. —Authorises national banks to issue not to exceed seventy-five per cent of their paid up and unimpaired capital in notes, uniform in design, prepared by the secretary of the treasury (redeemable in geld for any bank that so desires,) in denominations of ten dollars and multiples thereof, such circulating notes to be a first lien on all assets of the issuing bank. Secretary of the treasury to keep on hand blank notes for each bank to avoid delay. Bank must deposit with treasurer of the United States United States legal tender notes and treasury notes to the amount of thirty per cent of bank notes applied for, same to be held as a guaranty fund. Sec. 3. —lmposes a semi-annual tax

of one fourth of one per cent on average circulation, in lieu of all existing taxes. Sec. 4. —Requires each bank to redeem its own notes at par at its own office and at such agencies as may be designated by it for that purpose, and provides for withdrawal of guaranty fund in proportion to notes returned for cancellation. Sec. 5. -Imposes a semi annual tax of one fourth of one per cent on average circulation, for the creation of a safety fund, until such fund amounts to five per cent of total national bank circulation. Now banks must pay into the fund their pro rata share, but retiring banks cannot withdraw any part. The guaranty fund of insolvent banks is turned into the safety fund, and all notes are redeemed from latter fund. Safety fund can be replenished when necessary by an assessment on all banks pro rata on the amount of circulating notes, and assessed banks shall have a first lien on the assets of failed banks for the redemption of whose notes assessment is made. Sec. 6. —Authorizes secretary of the treasury to invest safety fund in United States bonds, accruing interest to be added to the fund. Such bonds may be sold when necessary for redemption of circulating notes of failed banks. Sec. 7. Requires existing national banks to withdraw bonds and comply with this law on or before July 1,1895. Sec, 8. —Repeals Sections 9 and 12, of Act approved July 12,1882,and Section 31 of Act of June 3,1864. Sec. 9, to be repealed, limits the total withdrawal of national bank notes to three million of dollars in any calendar month, and forbids any bank increasing its circulation within six months after withdrawing any of its circulation (the purpose of the repeal being to give perfect freedom to banks to increase and decrease circulation at will.) Sec. 12, to be repealed, authorizes the issue of gold certificates on gold deposited in the treasury. (Secretary of the treasury thinks that the issue of gold certificates interferes with the accumulation of free gold in the treasury.) Sec. 31, to be repealed, requires national hanks to keep a reserve fund equal to twenty-five per cent of deposits and capital stock in reserve cities, and fifteen per cent in other cities (the object of the repeal being to leave each bank to determine for itself the amount of reserve to be held for the security of depositors.) Sec. 9. Authorizes the secretary of the treasury, in his discretion, to use any surplus revenue for redemption and retirement of United States legal-tender notes, but aggregate amount of such legal tender notes retired shall not exceed seventy per cent of national bank circulation taken out under this act. Here after no United States notes or treasury notes shall be issued in denominations of less then ten dollars, smaller denominations to be reissued in denominations of ten dollars and multiples thereof as they come into the treasury. See. 10. Exempts from present ten per cent tax notes of state banks which comply with certain conditions, substan.

tially like those provided for national bank notes issued under this act, but without requiring the five per cent safetyfund collected from all national banks. Sec. 11. Permits the use of distinctive bond paper for state bank notes, but provides that no state bank shall print or engrave its notes in similitude of a United States note or certificate, or natioral bank note. It will be noticed that provision is made for a national bank currency and for a state bank currency. There are three objections, fundamental in character, which apply with equal force to banks of issue whether organized under national or state laws. The fact that a considerable profit can be derived by a bank from the issue of its own notes as money explains the interest which bankers take in this kind of currency, and suggests the first criticism to be made against-the system. The principle enunciated in 1776 that “all men are created equal," is generally accepted in the abstract, but is difficult to secure its application in the concrete to all forms of legislation; And yet, who will deny that laws should be measured by this standard? All laws which grant valuable privileges to favored individuals are wrong, unless the real purpose of those laws is to advance the public good, leaving the special advantage as a mere incident, and even then it ought to be certain that the same good cannot be accomplished by impartial laws. The proposed plan confers a valuable privilege upon the bank of issue, and denies this privilege to other associations and individuals. If a bank organizes with a paid up capital of SIOO,000 it can secure $75,000 in bank notes by depositing United States notes, generally called greenbacks, and treasury notes to the amount of thirty per cent of the bank notes applied for. The money deposited offsets a like amount of bank notes issued leaving the net gain to the bank in bank notes, $52,500.

The bank must pay a tax of one half of one per cent annually upon the issue of $75,000 to cover expenses, and for the'first ten years must contribute an additional one half of one per cent to the safety fund. Without considering the indefinite liability which attaches to the assessments for failed banks, the issue is equivalent to a loan of the $52,500 net circulation at a little less than one and one half per cent for the first ten years and at a little more than one half of one per cent thereafter. If a farmer is willing to put up his farm instead of bank capital and accept all the conditions imposed upon a bank, why should he not in equity be allowed the same privileges? Is it fair to say to the farmer, “The government will rot loan to you, but it will loan to the banker at a low rate, and he can loan to you at from six to ten per cent”? If it is wise for the government to loan money on banking capital, why should it not loan to the business man on his stock of goods, to the professional man on his .library, to the street-car company on its franchise or to the railroad company on its road bed and rolling stock? Why not loan to states, counties, cities and townships on their bonds? This would save interest to the tax payers. In all these cases allowance could be made for the degree of security in the amount loaned. At this time, when political discontent is manifesting itself in many ways, when criticism of class legislation is becoming frequent and forcible, is it wise to enact laws so conspicuously