172 



CONGRESS, UNITED STATES. 



On March 8<1 the following veto message 

 was received. 



The Spcakor: "The Chair lays before the 

 House the following message from the Presi- 

 dent of the t'njti-il >: 



The Clerk read as follows: 

 To th* I/OVM of Jffprtnittalirts : 



Having considered the bill entitled " An act to 

 facilitate the refunding of tlio national debt," I am 

 constrained t<> return it to the House of Representa- 

 tives, in which it originated, with the following state- 

 ment of my objection- t" it> passage. 



The tapen&Vt necessity for prompt action, and 

 the pressure of public duties in this closing week of 

 my term of ollicc, compel me to refrain from any at- 

 tempt to make u full and satisfactory presentation of 

 thf objection* to die bill. 



The irniH>rtance of the passage at the present ses- 

 sion of Congress of a suitable measure for the refund- 

 in.: of the national debt, which ia about to mature, is 

 generally recognized. It has Wen urged upon the at- 

 tention of Congress by the Secretary of the Treasury 

 and in my last annual message. If successfully accom- 

 plished, it will ttecure a largo decrease in the annual 

 interest payment of the nation ; and I earnestly rec- 

 ommend, if the bill before mo shall fail, that another 

 measure for this purpose be adopted before the present 

 Congress adjourns. 



Wuile in my opinion it would be \vise to authorize 

 the Secretary of the Treasury, in his discretion, to 

 offer to the public bonds bearing 34 per cent interest 

 in aid of refunding, I should not deem it my duty to 

 interpose mv constitutional objection to the passage of 

 the present bill if it did not contain, in its fifth sec- 

 tion, provisions which, in my judgment, seriously 

 impair the value, and tend to the destruction of the 

 present national-banking system of the c< >untry. This 

 system has now been in operation almost twenty years. 

 No safer or more beneficial banking system was ever 

 established. Its advantages as a business are free to 

 all who have the necessary capital. It furnishes a 

 currency to the public, which for convenience and the 

 security of the Dill-holder has probably never been 

 equaled by that of any other banking system. Its 

 notes are secured by the deposit with the Government 

 of the interest- bearing bonds of the United States. 



The section of the bill before me which relates to 

 the national-banking system, and to which objection 

 is mode, is not an essential part of a refunding meas- 

 ure. It is as follows : 



SECTTOX 6. From and after the 1st day of July. 1SS1, the 3 

 per cent bonds authorized by the first section of "this act shall 

 be the only bonds receivable as security for national-bank cir- 

 culation, or as security for the safe-keeping and prompt pay- 

 ment of the public money deposited with such banks; but 

 when any such bonds deposited for the purposes aforesaid 

 shall be OMJClMtAd for purchase or redemption by the Secre- 

 tary of the Treasury, the banking association depositing the 

 MOM shall have the right to substitute other issues of the 

 bonds of the United States in lieu thereof: Prorifterf, That 

 no bond upon which interest has ceased shall be accepted or 

 shall be continued on deposit as security for circulation or for 

 the safe-keep! ng of the public money; and in case bonds BO 

 deposited shall not be withdrawn, as "provided by law. within 

 thirty days after interest has ceased thereon, the banking 

 association depositing the same shall be subject to the liabili- 

 e MM! proceedings on the part of the Comptroller provided 

 fcr in section &M4 of the Revised Statutes of the United 

 Ptates : An ft prorbted further. That section 4 of the act of 

 Jane 20, 1-74 entitled " An act fixing the amount of United 

 States notes, providing for a redistribution of the national- 

 bank currency, and for other purposes," be and the same is 

 hereby repealed : and sections 5159 and 5160 of the Revised 

 Statutes of the United States be and the same are hereby 

 r*-*nacte<L 



Under this section it is obvious that no additional 

 banks will hereafter be organized, except possibly in 

 a few cities or localities where the prevailing rates of 

 interest in ordinary business are extremely low. No 

 new banks can be organized, and no increase of the 

 capital of existing banks can be obtained, except by 

 the purchase and deposit of 3 per cent bonds. No 



other bonds of the United States can be used for the 

 purpose. The one thousand millions of other bonds 

 rcecntly issued by the United States, and bearing a 

 higher rate of interest than 8 per cent, and therefore a 

 l.< tt. r security for the bill-holder, can not, alter the 

 1st of July next, be received as security for bank cir- 

 culation. This is a radical change in the banking law. 

 It take.- from the hanks the right they have heretofore 

 had under the law to purchase and deposit, as security 

 for their circulation, any of the bonds issued by the 

 I'nited States, and deprives the bill-holder of the best 

 security which the banks are able to give, by requiring 

 them to deposit bonds having the least value of any 

 bonds issued by the Government. 



The average rate of taxation of capital employed 

 in banking is more than double the rate of taxation 

 upon capital employed in other legitimate business. 

 Under these circumstances, to amend the banking law 

 so as to deprive the banks of the privilege of securing 

 their notes by the most valuable bonds issued by the 

 Government will, it is believed, in a large part of the 

 country, be a practical prohibition of the organization 

 of new banks, and prevent the exit-ting banks from 

 enlarging their capital. The national tanking sys- 

 tem, it' continued at all, will be a monopoly in the 

 hands of those already engaged in it, who may pur- 

 chase Government bonds bearing a more favorable rate 

 of interest than the 3 per cent bonds prior to next July. 



To prevent the further organization of banks is to 

 put in jeopardy the whole system by taking from it 

 that feature which makes it as it now is, a banking 

 system free upon the same terms to all who wish to 

 engage hi it. Even the existing banks will be in dan- 

 ger of being driven from business by the additional 

 disadvantages to which they will be subjected by this 

 bill. In short, I can not but regard the fifth section of 

 the bill as a step in the direction of the destruction of 

 the national-banking system. 



Our country, after a long period of business de- 

 pression, has just entered upon a career of unexampled 

 prosperity. 



The withdrawal of the currency from circulation 

 of the national banks and the enforced winding up of 

 the banks in consequence, would inevitably bring 

 serious embarrassment and disaster to the business of 

 the country. Banks of issue are essential instruments 

 of modern commerce. If the present efficient and ad- 

 mirable system of banking is broken down, it will in- 

 evitably be followed by a recurrence to other and in- 

 ferior methods of banting. Any measure looking to 

 such a result will be a disturbing element in our finan- 

 cial system. It will destroy confidence, and surely 

 check the growing prosperity of the country. 



Believing that a measure for refunding the na- 

 tional debt is not necessarily connected with the na- 

 tional-banking law, and that anv refunding act would 

 defeat its own object if it imperiled the national-bank- 

 ing system or seriously impaired its usefulness ; and 

 convinced that section' 5 of the bill before me would, 

 if it should become a law, work great harm, I here- 

 with return the bill to the House of Representatives 

 for that further consideration which is provided lor in 

 the Constitution. EUTHERFOED B. HAYES. 



EXECUTIVE MANSION, March 3, 1881. 



Mr. Tucker, of Virginia : u I move that the 

 message- of the President be printed, and that 

 it do lie upon the table, subject to be called 

 up at a future time for consideration." 



The Speaker: " The question is on the mo- 

 tion to postpone the present consideration." 



The question was taken ; and there were 

 yeas 138, nays 116, not voting 36. No further 

 action was taken on the bill. 



In the House, on January 5th, the bill to es- 

 tablish a board of commissioners of interstate 

 commerce was taken up. 



