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Page 84
'On the contrary, it is the Secretary's firm belief that by no
other path can the resumption of specie payments be so surely
reached and so certainly maintained. United States notes receivable
for bonds bearing a secure specie interest are next best to notes
convertible into coin. The circulation of banking associations
organized under a general act of Congress, secured by such bonds,
can be most surely and safely maintained at the point of certain
convertibility into coin. If, temporarily, these associations
redeem their issues with United States notes, resumption of specie
payments will not thereby be delayed or endangered, but hastened
and secured; for, just as soon as victory shall restore peace, the
ample revenue, already secured by wise legislation, will enable the
Government, through advantageous purchases of specie, to replace at
once large amounts, and, at no distant day, the whole, of this
circulation by coin, without detriment to any interest, but, on the
contrary, with great and manifest benefit to all interests.
'The Secretary recommends, therefore, no mere paper money scheme,
but, on the contrary, a series of measures looking to a safe and
gradual return to gold and silver as the only permanent basis,
standard, and measure of values recognized by the
Constitution--between which and an irredeemable paper currency, as
he believes, the choice is now to be made.'
Congress, however, was still unwilling to adopt the recommendations of
the Secretary, until the necessity was demonstrated by the course of
events. On reference to the laws, which are printed in the Appendix, it
will be found, that the great features of the system of the Secretary
were as follows:
1. A loan to the Government upon its bonds reimbursable in twenty years,
but redeemable after five years, at the option of the nation, the
interest being six per cent., payable semi-annually in _coin_, as is
also the principal.
2. The issue of United States legal tender notes, receivable for all
dues to the nation except customs, and fundable in this United States
5--20 six per cent. stock.
3. The authorization of the banks recommended in his Report, whose
circulation would be secured not only by private capital, but by
adequate deposits of United States stock with the Government.
4. To maintain, in the meantime, as near to specie as practicable, this
Federal Currency,--1st, by making it receivable in all dues to the
Government except for customs; 2d, by the privilege of funding it in
United States stock; 3d, by enhancing the benefit of this privilege, not
only by making the stock, both principal and interest, payable in
specie, but by making it gradually the ultimate basis of our whole bank
circulation, which, as shown by the census tables before referred to
(including deposits), nearly doubles every decade.
5. By imposing such a tax on the circulation of the State banks, as,
together with State or municipal taxes, would induce them to transfer
their capital to the new banks proposed by the Secretary.
6. To relieve the _new banks_ from all State or municipal taxation.
7. In lieu thereof, to impose a moderate Federal tax on all bank
circulation, as a bonus to be paid cheerfully by these banks for the
great privilege of furnishing ultimately the whole paper currency of the
country, and the other advantages secured by these bills.
This tax, as proposed by the Secretary, was one per cent. semi-annually,
which _in effect_ would have reduced the interest on our principal loans
from six to four per cent. per annum, so far as those loans were made
the basis of bank circulation. Congress, however, fixed this tax at
about one half, thus making the interest on such loans equivalent in
fact to five per cent. per annum, so far as such loans, at the option of
the holder, are made the basis of banking and of bank circulation. This
is a privilege which gives great additional value to these loans, for
the right to issue the bank paper circulation of the country free from
State or municipal taxes, is worth far more than one half per cent,
semi-annually, to be paid on such circulation. That this privilege is
worth more than the Federal tax, is proved by the fact, that many banks
are already being organized under this system, and by the further fact,
that more than $200,000,000 of legal tenders have already been funded in
this stock, and the process continues at the rate of from one to two
millions of dollars a day. It will be observed, that the holders of such
bonds can keep them, _if they please_, disconnected with all banks,
receiving the principal at maturity, as well as the semi-annual
interest, in gold, free from all taxes.
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