156 



CONGRESS. (THE PRESIDENT'S MESSAGE.) 



cent, of the bonds deposited to secure their circu- 

 lation, but in no event beyond the amount of their 

 capital stock, and they are obliged to pay 1 per 

 cent, tax on the circulation they issue. 



I think they should be allowed to issue circula- 

 tion equal to the par value of the bonds they depos- 

 it to secure it, and that the tax on their circula- 

 tion should be reduced to one fourth of 1 per cent., 

 which would undoubtedly meet all the expense 

 the Government incurs on their account. In addi- 

 tion they should lie allowed to substitute or deposit 

 in lieu of the bonds now required as security for 

 their circulation those which would be issued for 

 the purpose of retiring the United States notes and 

 Treasury notes. 



The banks already existing, if they desired to 

 avail themselves of the provisions of law thus mod- 

 ified, could issue circulation in addition to that 

 already outstanding, amounting to $478,000,000, 

 which would nearly or quite equal the currency 

 proposed to be canceled. At any rate, I should 

 confidently expect to see the existing national 

 banks or others to be organized avail themselves of 

 the proposed encouragements to issue circulation 

 and promptly fill any vacuum and supply every 

 currency need. 



It has always seemed to me that the provisions 

 of law regarding the capital of national banks 

 which operate as a limitation to their location fails 

 to make proper compensation for the suppression 

 of State banks, which came near to the people in all 

 sections of the country and readily furnished them 

 with banking accommodations and facilities. Any 

 inconvenience or embarrassment arising from these 

 restrictions on the location of national banks might 

 well be remedied by better adapting the present 

 system to the. creation of banks in smaller commu- 

 nities or by permitting banks of large capital to es- 

 tablish branches in such localities as would serve 

 the people so regulated and restrained as to secure 

 their safe and conservative control and manage- 

 ment. 



But there might not be the necessity for such an 

 addition to the currency by new issues of bank cir- 

 culation as at first glance is indicated. If we 

 should be relieved from maintaining a gold reserve 

 under conditions that constitute it the barometer 

 of our solvency, and if our Treasury should no 

 longer be the foolish purveyor of gold for nations 

 abroad or for speculation and hoarding by our citi- 

 zens at home, I should expect to see gold resume its 

 natural and normal functions in the business affairs 

 of the country and cease to be an object attracting 

 the timid watch of our people and exciting their 

 sensitive imaginations. 



I do not overlook the fact that the cancellation 

 of the Treasury notes issued under , the silver-pur- 

 chasing act of 1890 would leave the Treasury in 

 the actual ownership of sufficient silver, including 

 seigniorage, to coin nearly $178,000.000 in standard 

 dollars. It is worthy of consideration whether this 

 might not, from time to time, be converted into 

 dollars or fractional coin and slowly put into circu- 

 lation, as in the judgment of the Secretary of the 

 Treasury the necessities of the country should re- 

 quire. 



Whatever is attempted should be entered upon 

 fully appreciating the fact that by careless, easy de- 

 scent we have reached a dangerous depth, and that 

 our ascent will not be accomplished without labo- 

 rious toil and struggle. We shall be wise if we 

 realize that we are financially ill and that our resto- 

 ration to health mny require heroic treatment and 

 unpleasant renir 



In tlio present stage of our difficulty it is not 

 rasy to understand how the amount of our revenue 

 receipts directly affects it. The important question 



is not the quantity of money received in revenue 

 payments, but the kind of money we maintain and 

 our ability to continue in sound financial condition. 

 We are considering the Government's holdings of 

 gold as related to the soundness of our money and 

 as affecting our national credit and monetary 

 strength. 



If our gold reserve had never been impaired ; if 

 no bonds had ever been issued to replenish it ; if 

 there had been no fear and timidity concerning our 

 ability to continue gold payment s; if any part of 

 our revenues were now paid in gold, and if we could 

 look to our gold receipts as a means of maintaining 

 a safe reserve, the amount of our revenues would 

 be an influential factor in the problem. But un- 

 fortunately all the circumstances that might lend 

 weight to this consideration are entirely lacking. 



In our present predicament no gold is received 

 by the Government in payment of revenue charges, 

 nor would there be if the revenues were increa>i I. 

 The receipts of the Treasury, when not in silver 

 certificates, consist of United States notes and 

 Treasury notes issued for silver purchases. These 

 forms of money are only useful to the Government 

 in paying its current ordinary expenses, and its 

 quantity in Government possession does not in the 

 least contribute toward giving us that kind of safe 

 financial standing or condition which is built on 

 gold alone. 



If it is said that these notes if held by the Gov- 

 ernment can be used to obtain gold for our reserve, 

 the answer is easy. The people draw gold from the 

 Treasury on demand upon United States notes and 

 Treasury notes, but the proposition that the Treas- 

 ury can on demand draw gold from the people upon 

 them would be regarded in these days with wonder 

 and amusement. And even if this could be done, 

 there is nothing to prevent those thus parting with 

 their gold from regaining it the next day or the 

 next hour by the presentation of the notes they re- 

 ceived in exchange for it. 



The Secretary of the Treasury might use such 

 notes taken from a surplus revenue to buy gold in 

 the market. Of course he could not do this with- 

 out paying a premium. Private holders of gold, 

 unlike the Government, having no parity to main- 

 tain, would not be restrained from making the best 

 bargain possible when they furnished gold to the 

 Treasury ; but the moment the Secretary of the 

 Treasury bought gold on any terms above par he 

 would establish a general and universal premium 

 upon it, thus breaking down the parity between 

 gold and silver, which the Government is pledged to 

 maintain, and opening the way to new and serious 

 complications. In the meantime the premium would 

 not remain stationary, and the absurd spectacle 

 might be presented of a dealer selling gold to the 

 Government, and with United States notes or Treas- 

 ury notes in his hand immediately clamoring for its 

 return and a resale at a higher premium. 



It may be claimed that a large revenue and re- 

 dundant receipts might favorably affect the situa- 

 tion under discussion by affording an opportunity 

 of retaining these notes in the Treasury when re- 

 ceived, and thus preventing their presentation for 

 gold. Such retention to be useful ought to be at 

 least measurably permanent; and this is precisely 

 what is prohibited, so far as United States notes are 

 concerned, by the law of 1878 forbidding their fur- 

 ther retirement. That statute in so many words 

 provides that these notes when received into the 

 Treasury and belonging to the United States shall 

 be " paid out again and kept in circulation." 



It will, moreover, be readily seen that the Gov- 

 ernment could not refuse to pay out United States 

 notes and Treasury notes in current transactions 

 when demanded and insist on paying out silver 



