168 



CONGRESS, UNITED STATES. 



per cent bonds on deposit to secure their cir- 

 culation anil public deposits would be com- 

 pelled after the date named to withdraw them 

 and substitute bonds bearing 3 per rent, or go 

 into liquidation. It is almost impossible to 

 make mi argument against such a construction 

 as this; in. r i- it necessary to attempt it, as it 

 is now conceded, I believe, everywhere, that 

 there was not a shadow of foundation for it. 

 It was one of the devices adopted by interested 

 parties to alarm the hanks and to precipitate 

 a resort by them to the exercise of that dan- 

 gerous power ot' contraction conferred upon 

 them by the act of 1874; and in connection 

 with other statements equally groundless it 

 actually produced a rapid withdrawal of circu- 

 lation, "which for a few days threatened dis- 

 aster and ruin to all the business interests of 

 the people. 



>ir, this is not the first effort that has 

 been made in Congress to compel these creat- 

 ures and agencies of the Government to assist 

 it in reducing the interest charge upon the 

 people, and, if it shall fail now, it will not be 

 the first demonstration of their power over the 

 financial legislation of the country. It is a 

 humiliating confession for the representatives 

 of the people to make, but it is true, neverthe- 

 less, that ten years ago, when these institutions 

 were fewer in number than they are to-day, 

 when their organization was less perfect, and 

 when their combined capital was not so great, 

 they had power enough to defeat in this House 

 a provision which was designed by the present 

 Secretary of the Treasury to compel them to 

 aid in funding a large part of the public debt 

 at 4, 4|, and 5 per cent. On the 2d day of 

 February, 1870, Mr. Sherman, as chairman of 

 the Finance Committee in the Senate, reported 

 back to that body, as a substitute for a bill 

 previously introduced by Mr. Sumner, a bill 

 which after some amendments was finally 

 passed and is now known as the funding net 

 of July 14, 1870. The bill as reported by Mr. 

 Sherman provided for the issue and sale of 

 $400,000,000 of bonds bearing interest at the 

 rate of 5 per cent, $400,000,000 bearing inter- 

 est at the rate of 4$ per cent, and $400,000,000 

 bearing interest at the rate of 4 per cent ; and 

 in order to create a certain market for a large 

 part of these securities it contained in its 

 eighth section the following provisions, which 

 I beg leave to submit for the consideration of 

 gentlemen who have denounced what they 

 have been pleased to call the 'forced loan' 

 feature in the measure now before us. The 

 eighth section of Mr. Sherman's bill was as 

 follows : 



" ' And b it further enacted, That on and after the 

 1st day of October, 1870, registered bonds of any de- 

 nomination not less than f 1,000, issued under the 

 provisions of this act, and no other, shall be deposited 

 with the Treasurer of the United States as security 

 for notes issued to national-banking associations for 

 circulation under an act entitled " An act to provide 

 a national currency secured by a pledge of United 

 States bonds, and to provide for the circulation and 



redemption thereof," approved June 8, 1864 ; and nil 

 iKiti'Hial- bunking a-ssociulions organized under said 

 act, or any amendment thereof, ;uv la-ruby required 

 to de]>osit bonds is>ucd by this act, as security for 

 their circulating notes, within one year from the pas- 

 sage of this act, in default of which their right to is- 

 sue notes for circulation shall be forfeited ; and the 

 Treasurer and the Comptroller of the Currency shall 

 U- authorized and required to take such measures as 

 may be necessary to call in and destroy their out- 

 standing circulation, and to return the bonds held as 

 security therefor to the association by which they 

 were deposited in sums of not less than $1,000 : Pro- 

 fiili-.l, That any such association now in exi 

 may, upon giving thirty duys' notice to the Comp- 

 troller of the Currency, by resolution of its board of 

 directors, deposit legal-tender notes with the Treas- 

 urer of the United .States to the amount of its out- 

 standing circulation and take up the bonds pledged 

 lor its redemption : And provided further, That no 

 more than one third of the bonds deposited by any 

 b.ink as such security shall be of either of the classes 

 of bonds hereby authorized on which the maximum 

 rate of interest is fixed at 4t or 5 per cent per an- 

 num.' 



" The next section provided that the circu- 

 lating notes which any banking association 

 might receive from the Comptroller of the 

 Currency should not exceed 80 per cent of the 

 par value of the bonds deposited instead of 90 

 per cent, as they may now obtain under the law. 



u It will be observed that the section just 

 read is much more severe in its requirements 

 than anything contained in this bill. It pro- 

 posed to compel national banks not only to de- 

 posit the new bonds and no others as security 

 for circulation after a certain date, but it went 

 further and declared that their right to issue 

 notes for circulation should be absolutely for- 

 feited unless they should within one year with- 

 draw all the old bonds they then had on de- 

 posit and substitute the new ones in their 

 places. This was a sweeping and radical provis- 

 ion, which went to the full extent of asserting 

 the absolute power of Congress to legislate ac- 

 cording to its own conception of the public in- 

 terests concerning the character of the bonds 

 that should be deposited or permitted to re- 

 main on deposit as security for the circulating 

 notes of these corporations. That such power 

 exists in Congress has been asserted again and 

 again by some of the most eminent men in the 

 country, and by none more frequently or em- 

 phatically than Mr. Sherman himself. 



"These assertions are sufficient to show that 

 the policy indicated in the first clause of the 

 fifth section of the pending bill is not now pre- 

 sented to the country for the first time, and 

 that the right and duty of Congress to adopt 

 it when in its judgment the interests of the 

 Government and people require it have been 

 asserted and maintained, not only by men of 

 eminent ability as lawyers and large experi- 

 ence in financial affairs, but by a majority of 

 two to one in the Senate when the very first 

 attempt was made to fund our enormous public 

 debt at a reduced rate of interest. It was then 

 insisted and properly insisted, in my opinion 

 that those institutions which, in the language 

 of Mr. Sherman, had, prior to 1870, ' made on 



