CONGRESS, UNITED STATES. 



153 



under the act of 1875 that stands as the corps 

 de reserve to enable the Government to pay 

 specie for its notes on demand, and cause them 

 thus to be an equivalent for specie. Under 

 the free-banking system now in existence, the 

 volume of our currency depends upon commer- 

 cial demand and not upon political exigencies. 

 Except for wise restriction as to the securities 

 for loans and supervision as to reserve, the 

 affairs of the banks styled 'national banks' 

 are managed and controlled by the rules only 

 of enlightened self-interest. They loan to whom, 

 and as often, and as much as the directors 

 elected by the private stockholders see fit no 

 more and not otherwise and the Government 

 has no voice or control in their affairs except 

 in the manner that I have referred to ; that is 

 to say, supervision of the securities for loans 

 and as to the reserve. In other words, to re- 

 strain them from conversion into trust and 

 loan companies instead of banks, and unfitting 

 themselves for the true functions of banking. 



" I say, then, if nothing else must be looked 

 to, the duty of placing resumption of specie 

 payment beyond doubt would be worth ten 

 times the amount of the difference between 3 

 and 3 per cent, and I hold that we have no 

 right to run any risks on this point ; and as I 

 have said and believe, the weight of opinion 

 is against our running such risks as we would 

 do if we adopt the rate of 3 per cent. Why 

 should we take a step in the dark when it may 

 be taken so clearly in the light ? Why should 

 we create a ripple upon this placid stream of 

 prosperity upon- which the affairs of our coun- 

 try are now floating? There is neither wis- 

 dom nor economy in taking steps that tend to 

 check in the minds of the American people 

 confidence in their progress and prosperity. 

 Let us only take such steps as we can to justify 

 that confidence, and secure them against retro- 

 gression. 



" Let us solidify our credit, and secure our 

 bonds and our credit moneys against depres- 

 sion and possible fluctuation. Wise, moderate, 

 and timely legislation can do this. 



" The rate of interest is, after all, controlled 

 by the average rate of profit derived from the 

 employment of capital. The profit of em- 

 ploying capital in industrious undertakings 

 controls the rate of interest. A high rate of 

 profit will always cause a high rate of interest. 

 There is history for that. Where you have a 

 low rate of profit, the interest for the employ- 

 ment of money necessarily will be less. The 

 Dutch were the leaders of the commercial 

 world in the seventeenth and the greater part 

 of the eighteenth century ; but they had re- 

 sorted to a system of overtaxation, and, bur- 

 dened by taxation, but little profit was left for 

 the employment of money; and the result was 

 that, as after all there is but a limited profit in 

 production, and that profit must be shared by 

 labor and capital, the rate of interest fell to an 

 extraordinarily low rate; but where taxes were 

 lighter, the employment of money was more 



profitable, and the rate of interest increases in 

 corresponding ratio with the profit on the use 

 of capital. 



" Under certainty of law for securing the 

 prompt repayment of loans, interest is low ; 

 for it is not the ultimate security, but it is the 

 punctual and reliable payment of money ex- 

 pected that makes the rate of interest low. 

 Money will be cheap where confidence is estab- 

 lished. The more absolute the security, the 

 lower will be the rate of interest. I hold it 

 that the demands for the employment of capi- 

 tal in legitimate enterprises all over the United 

 States under this all-pervading sentiment of 

 confidence that exists now, will make a Gov- 

 ernment loan at 3 per cent equitably low 

 enough. Money in the United States securely 

 invested will be worth on an average I am 

 speaking now of business investments any- 

 where 5 per cent, and in some parts of this 

 country from 6 to 7 per cent, and this last only 

 in the newly-settled districts. The United 

 States is a younger country than Europe; it 

 is more progressive ; newer enterprises in the 

 development of the natural wealth of this coun- 

 try necessarily exist here than in longer-settled 

 countries, and employment of capital will find 

 ' fresh fields and pastures new,' and the profits 

 of industry are greater in the United States 

 than elsewhere. The superiority in profitable 

 employment of capital, therefore, in this coun- 

 try justifies a rather higher rate of interest than 

 it would in Europe. 



" We are sometimes told, ' Look at the pres- 

 ent advanced value of the 4 per cent bonds ; take 

 them as your standard ; they are now worth 

 113 in the market; if a 4 per cent bond is 

 worth that, surely a 3 per cent is worth par,' 

 etc. Why, as a matter of fact, has not this 

 agitation of the issuing a 3 per cent loan 

 been diligently and clamorously used for the 

 last year I do not say improperly, but vigor- 

 ously used as a species of menace to enhance 

 the price of the 4 per cents? If there should 

 be a compulsory power exercised by this Gov- 

 ernment, which I deprecate, toward the stock- 

 holders of the national banks to force this loan 

 upon them as the single and arbitrary condi- 

 tion of their continuing in business or going 

 into ruinous liquidation ; if that power does 

 exist, necessarily men will value that which 

 pays them one fourth more interest, and the 

 price of the bond that secures it will be neces- 

 sarily advanced. Therefore I am compelled 

 to consider the present price one of those 

 fluctuating advances, temporary in its nature 

 and caused by the abnormal and unsettled con- 

 dition of things, that has given the 4 per cent 

 bond the advance from par, at which it was 

 sold, to the great premium which it now en- 

 joys. I do not think it is either sound judg- 

 ment or reasonable common sense to take the 

 present advanced price of the 4 per cent bonds 

 as a basis for calculation for the sale and main- 

 tenance of the price of 3 per cent bonds. 



" I would here note that section 5 of the 



