# U. S. Senate Speeches and Remarks of Carl Schurz/Banking and Currency

Remarks of March 31, 1874, before the Senate of the United States of America from the Congressional Record, 43rd Congress, 1st Session, pp. 2647-2650.
BANKING AND CURRENCY.
The Chief Clerk read the amendment to the amendment, as follows:
That so much of section 23 of the act of June 3, 1864, as provides that national-bank notes shall be received at par in all ports of the United States in payment of the taxes, excises, public lands, and all other dues to the United States, and for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations within the United States, is hereby repealed: Provided, That every association formed or existing under the provisions of this act shall take and receive at par, for any debt or liability to said association, any or all notes or bills issued by any association existing under and by virtue of this act, unless such notes or bills shall have been issued by an association which has failed to redeem them as required by this act.
That every association organized, and whose operations of discount and deposit are carried on at any other place than in the cities of New York, Albany, Boston, Philadelphia, Baltimore, Washington, New Orleans, Saint Louis, Louisville, Cincinnati, Pittsburgh, Cleveland, Detroit, Chicago, Milwaukee, Leavenworth, and San Francisco, shall select, subject to the approval of the Comptroller of the Currency, an association in either of the cities above named nearest its location, or in the city of New York, or in both, at which it will redeem its circulating notes at par in legal-tender notes or coin; and every association organized, and whose operations of discount and deposit are carried on in either of the said cities above named, shall select, subject to the approval of the Comptroller of the Currency, an association in the city of New York at which it will redeem its circulating notes at par in legal-tender notes or coin as aforesaid; and the Comptroller shall give public notice of the names of the associations so selected at which redemptions are to be made by the respective associations, and of any change that may be made of the association at which the notes of any association are redeemed; and the associations so selected and approved shall be entitled to receive as a compensation for the services of such redeeming agent, and the redeeming association shall be bound to pay such agent therefor, 1/8 of 1 per cent. on all of its circulating notes redeemed; and such redeeming agent shall have a lien on the notes redeemed for such compensation, and have a right to deduct the same therefrom before delivering them to the redeeming association, unless some other rate or mode of compensation is agreed upon by the parties. If any association shall fail either to make the selection or to redeem its notes as aforesaid, the Comptroller of the Currency shall, upon receiving satisfactory evidence thereof, appoint a receiver in the manner provided for in this act to wind up its affairs: Provided, That nothing in this section shall relieve any association from its liability to redeem its circulating notes at its own counter at par in lawful money on demand.
Mr. FENTON. As will be seen by those who have given attention to the reading of the amendment, it simply proposes a practical plan for redemption, which the amendment of the Senator from Georgia fails to do. Under the provisions of the national banking law the plan is indeed a failure, in that the national bank note currency and the legal-tenders, or United States note currency, are used for one and the same purpose.
The first sentence of this amendment proposes to divest the national-bank notes of their semi-legal-tender character, except so far as debts due to the banks. Further than that the amendment only intends to accomplish a redemption of the national-bank notes in legal-tender currency or coin. It is, in a word, the principle that was so effectual in the free-banking law of New York which was adopted in 1837, and which worked so well for more than twenty years.
The PRESIDENT pro tempore. The question is on the amendment of the Senator from New York to the amendment.
Mr. FENTON. I ask for the yeas and nays.
The yeas and nays were ordered.
Mr. MORTON. This amendment provides that the national-bank notes shall not be receivable by the Government for taxes under the internal-revenue laws, and that the Government shall not be at liberty to pay them out in discharge of its debts. It proposes to depreciate the national-bank notes by law, to take from them certain functions they now have so that they will be less valuable, and everybody that has to pay taxes must go to the trouble of getting legal-tenders for that purpose, and thereby the banks are to be called upon continually for the redemption of their notes. There is great anxiety for a redeemer. If Senators were as anxious for the redemption of souls as they are for the redemption of greenbacks, this would be a very pious body indeed. [Laughter.] I see no merit in that part of this amendment. So far as it provides for free banking, I am for it.
Mr. FRELINGHUYSEN. I would ask the Senator from New York whether he will not divide his motion. I agree with the Senator from Indiana that there is no propriety in our depreciating these national-bank notes. They will be weak enough and poor enough at the rate we are going on, without any legislation to make them any less acceptable.
Mr. FENTON. I do not admit that the effect of this amendment will be to depreciate the value of the national-bank note. It makes a distinction between the legal-tender note and the national-bank note; and to that end it would serve to call the national-bank notes into the localities in which the banks are situated, but it would not depreciate their value. They would, in other words, be returned from the redemption centers to the bank for redemption, and the effect would be to keep them nearer home. Unless there is some such arrangement as that, and which has been observed under all our banking laws hitherto, wherever they have been conducted upon any safe or sound system, I do not see how you are to establish redemption, because a national-bank note having the legal-tender character of the United States note will go wherever it goes, and will not be returned for redemption. The only object of that feature of the amendment is to secure a practical plan, not to depreciate the national banking currency. It does not do that, nor does it preclude the collection of taxes in the national banking currency, although the bank that is designated as a depository of the United States cannot make a return of such notes to the United States Treasury, nor could they do it under any other system of banking that was ever established in this country.
Mr. SCHURZ. Will the Senator permit me to make a suggestion? Will not the operation, as far as the paying of taxes is concerned, be this: that the tax-gatherer will take the national-bank notes, will at once turn them into the redemption agency, which redemption agency will assort them out and return them to the banks?
Mr. FENTON. Unquestionably.
Mr. MORTON. If he takes them, he takes them in violation of law.
Mr. FENTON. He does not take them in violation of law. The depository of the United States would not return them to the Treasury, but the collector of taxes may receive payment in any currency he may choose, as the collector of taxes may do under State laws.
The other portions of the amendment are only calculated to carry out this system of redemption, which is so important if we are to extend national banking as proposed by the Senator from Georgia.
Mr. PRATT. If I get the full import of the amendment proposed by the Senator from New York, I beg to ask him what function the national-bank notes will perform after they have been emasculated according to the mode proposed by his amendment?
Mr. FENTON. They perform the entire function of currency, and if the security upon which they are based, namely, United States bonds, is a perfect security, then they have all the requisites of a perfect currency under a redemption system.
Mr. SCHURZ. The Senator from Indiana, in his remarks recommending the striking out of that section of the bill providing for the retirement of a certain amount of greenbacks proportionate to the increase of national-bank notes, said that he wanted the greenbacks to remain in circulation for the purpose of redemption. He did not think it good policy while we were extending the national bank circulation at the same time to contract the volume of United States notes for that very reason.
The Senator showed great anxiety about the redemption of national-bank notes with greenbacks. Now I would ask him in the name of common sense what under the present system does he want greenbacks for in order to redeem national-bank notes? Is there under the national-bank law anything like redemption at all? It is a mere fancy; a mere sham; nothing else. In a panic a sudden and somewhat unreasoning distrust may seize upon the public mind; people may then imagine that national-bank notes are not as valuable as greenbacks; but looking calmly over the whole field they find that for the purposes for which they can use a greenback they can use a national-bank note as well. Although the bank-notes are not made a legal tender in the discharge of private debts, yet being made a legal tender by law in the payment of taxes and in all things concerning the Government, they virtually are a legal tender in the discharge of private debts just as well as greenbacks.
What, then, does redemption mean under the present system? It means the redeeming of one note by another note which is just as good and no better. That is it virtually. That relation may sometimes be disturbed a little in seasons of panic, but seasons of panic cannot furnish a general rule. Now, the proposition of the Senator from New York suggests one mode of making redemption effectual. I will not say that it is the best mode. I intended once to introduce such an amendment myself, but I gave it up. Possibly some better mode may be proposed, and I hope it will come from those who have been protesting against the reduction of the volume of greenbacks on the ground that that would make redemption difficult.
What will be the effect of the repeal of that part of the national-bank act which makes national-bank notes a legal tender in the payment of taxes and Government dues? It will establish between the national-bank note and the legal-tender exactly the same relation which in specie-payment times exists between a bank-note and specie, nothing else. Specie, then, is legal tender and a bank-note is not, but the bank-note being convertible into specie goes for all the uses in which specie is employed. Is not that so? Upon what, then, does the value of the bank-note depend? Not upon a law making the bank-note a legal tender, for it is no legal tender; but it depends upon the circumstance that it is convertible into specie, and upon nothing else. When, therefore, the Senator from Indiana says by striking out that provision of our law which makes the national-bank note a legal tender in the payment of taxes you depreciate it, it is a misconception of the case. The value of the national-bank note will be exactly the same as the value of that kind of money into which the national-bank note is convertible; that is to say, as long as the national-bank note can be redeemed in greenbacks, it will be worth as much as the greenbacks, and no less. Therefore the purchasing power, the current value of the national-bank note, does not depend upon this provision of the law making it a legal tender in the payment of taxes at all. That provision may be repealed without depreciating the national-bank note in the least. It will not disturb its value as long as the national-bank note is convertible into a greenback, as long as we have an effectual system which regulates the redemption of national-bank notes with greenbacks. Therefore I think that notion that it will depreciate the national-bank currency is not based upon fact.
But it will have another consequence which I consider a very important one. National-bank notes under certain circumstances may depreciate; that is, as soon as their volume becomes too large for the requirements of the business of the country. When that limit is exceeded, the excess of national-bank notes will be turned in for redemption and will be withdrawn. When the business of the country requires more national-bank notes, then they can be set afloat again. Therefore I think that a provision like the one proposed by the Senator from New York would give to the currency that which is called flexibility, or elasticity in the best sense, for it would adapt the volume of the currency to the actual requirements of the business of the
country in so far as it would oblige the national banks to withdraw a certain quantity of their notes as soon as the volume which is required for the business of the country is exceeded; while the banks would be able to keep such a quantity of notes afloat as would be just sufficient to satisfy the actual needs of the business of the country.
Mr. FERRY, of Michigan. I could very well understand the policy of the bill, especially the section which provides for the contraction of the greenbacks to $300,000,000, as calculated to work an appreciation of the currency. That is a fair, open, and direct method looking to the appreciation of the currency of the country. I could as well understand, too, the policy of conversion into bonds by which by the addition of the gold interest accruing from year to year there might be an appreciation of the currency by such conversion. That is direct, and a little more effectual than the other, involving, as has been stated, the burden of interest. Those two propositions we could understand. They emanated from the same source, and have been advocated by the honorable Senator on my left [Mr. Schurz] with all his energy and pertinacity.
Now that theory is changed and we have a sort of boomerang policy. Instead of measures seeking to appreciate the currency directly, it is proposed now to depreciate the national currency in order to multiply the obstacles in the way of conversion. I can characterize it by no fitter term than “boomerang.” It is striking at the value of the national currency for the avowed purpose of affecting an appreciation of the whole volume of circulation.
I say upon principles of good faith, fair and open legislation, when Senators have attempted to convert the currency into bonds and are voted down, and next attempt to contract the greenbacks and are again voted down, they should rest satisfied. But no, the proposition is submitted to prohibit the national-bank currency from being received for taxes and for other purposes, as now provided by law, in order to create an essential difference and thus separate the values of the two currencies. The effect of this would be to depreciate the one, and to create a greater demand for the other, and causing greater pressure upon the banks for the conversion of bank-notes into greenbacks.
I have no disposition to take up time in debate any more than to call attention to this sudden change of policy and to the pertinacious determination of those who are now in the minority to defeat the measures of the majority. They have volunteered the statement that they are trying to perfect the bill, and as resolutely state that they intend rolling the responsibility of results upon the majority. I say, in calmness and fairness and good faith, if we are charged with the duty of framing measures of relief and stability and are to sustain the responsibility of what is done, let it then be managed by its friends. We do not especially invite this kind of proffered aid in the way of perfecting a bill. Let us maintain the value of national-bank currency just where the law holds it to-day. You have failed to cut down the greenbacks and have failed further to induce the Senate to increase the bonded debt, so let us come squarely to the vote whether or not we shall have substantially free banking, or whether we shall have a definite increase of currency; and do not make this attempt to lessen the value of the people's money. The chairman of the Committee on Finance, in the running debate, said twice during the discussion of this subject that if it was an original proposition he would favor making the greenbacks a full legal tender. That I can see is in the line of an appreciation of the currency of the country. But when it is attempted now to break down the national-bank currency to a lower standard of value, I cannot understand the gentleman, and I must say it seems more like an intention to thwart the majority in their efforts to perfect what is charged they must necessarily assume. I am prepared, so far as my vote and action are concerned, to take my part of the responsibility of this question.
Mr. FRELINGHUYSEN. What was the majority?
Mr. FERRY, of Michigan. The majority on the lightest vote was more than one-half.
Mr. FRELINGHUYSEN. The majority was two votes. If my friend had voted the other way, the motion would have been lost. Now, I think we have heard enough of this brag about majorities when we are legislating.
Mr. FERRY, of Michigan. Mr. President, I am not here to raise a question with the Senator from New Jersey. A majority of one is as good as one hundred, practically, upon this question. I am not bragging, only replying to the taunt, if it was meant to be such, addressed repeatedly to the majority, but not before from the Senator from New Jersey. I am not disposed to use epithets that are offensive; but it has been said that we of the majority are assuming a grave responsibility, as though we did not comprehend the gravity of public duty, and at the same time it is suggested that those who are in the minority shall help perfect what we have assumed. In what way? By objectionable amendments. I say, as a question of etiquette at least, we should have the right of perfecting the measure, the responsibility of which we are to assume and answer for to the people. Therefore I say the remark of the Senator from New Jersey is not well-timed. There is nothing of threat in anything I have said or implied. I have merely replied to the remark made by the chairman of the Committee on Finance, that the responsibility rolling upon the majority was a grave one. We carried the amendment, which in the judgment of the minority was our weakest one, by a majority of two. As the majority, we assume the responsibility, and will go before the
country, until Congress convenes again, to test whether that responsibility is wisely taken, and shall then learn whether the measure has the support of the people. I am satisfied to appeal to them and bide their judgment. My belief is that three-fourths (and that is putting it low) of the people of the country are throbbing in sympathy with the majority here for the success of the measure, the responsibility of which we now take.
Mr. MORRILL, of Vermont. The Senator from Michigan said he was not disposed to use any terms here which were not warranted by good taste, or to say anything by way of taunt. I should like to know what the Senator meant by “bullirag?” [Laughter.]
Mr. FERRY, of Michigan. The trouble is that the Senator from Vermont, although near me, did not understand the words that were conveyed to his hears as I uttered them. I did not use the word “bullirag;” I used the word “boomerang;” and if the Senator will consult the lexicographer, perhaps there will be a little more light thrown upon his understanding.
Mr. SCHURZ. I think I have a few minutes more, have I not?
The PRESIDING OFFICER. Four minutes.
Mr. SCHURZ. I think the word “boomerang” is as parliamentary as anything that has been said in this debate.
Now, sir, I begin to feel that it is a somewhat unwarrantable assumption on our part to offer amendments to this bill. IN fact we are given to understand that there is a degree of moral turpitude in it. I did not feel that at first, but we are told it so frequently that gradually the consciousness of guilt is creeping all over me. But, sir, we are all weak, and presumptuous in our weakness, and so we still suspect that a minority, voted down only by two, still have some rights on this floor which white men are bound to respect.
I should not have risen to speak in favor of this amendment at all had not the gentlemen of the majority, a majority of two, told us repeatedly and emphatically that they did not want to have the volume of greenbacks decreased, because it would make the redemption of national-bank notes so difficult. We show them that the redemption of the national-bank notes under the present law, as they contemplate it, is a mere farce, in fact no redemption at all. Now, the Senator from New York, [Mr. Fenton,] in due modesty, for nobody will find any assumption in his manner, came forward and did a thing which he did not suppose to have any moral turpitude in it, and which in former times it was supposed any United States Senator under his sense of responsibility had a right to do, that is to say, he offered an amendment to this bill. He offered an amendment suggesting one method by which possibly the promise given to us by the majority, that redemption should be taken care of, could be fulfilled. Now, I admit, as I said before, that may not be the best one; but if this is voted down, we may then look up to the majority with that respect, even amounting to a certain degree of admiration, and with that confidence which only the imposing display of majestic condescension can inspire, to bring forward a measure which will secure the redemption of national-bank notes into United States notes with certainty better than this. So far I have heard no such suggestion.
[Here the hammer fell.]
Mr. MORTON. Just one word. The substance of the argument on the part of the Senator from Missouri and of the Senator from New York in favor of this amendment is that the national-bank notes are so good a currency, so perfectly secure, in which there is such entire confidence, that nobody wants to convert them into greenbacks, or anything else; and therefore you must take from the national-bank notes certain functions, reduce their value, impair their usefulness, so that people will have some object in converting them into greenbacks. That is the sum and substance of it. It is the most remarkable objection against the increase of the national-bank currency that ever I have heard.
Mr. FENTON. I do not wish to protract this debate; indeed I do not care to say more than a word. The amendment explains itself. My only purpose now is to repel the assertion that the amendment operates to depreciate the value of the national-bank notes. It does no such thing. It does not depreciate the value of the national-bank note. It narrows its uses; it prevents it making the circuit that it now makes, and it compels it to return to the counter for redemption. That is all. It does not depreciate the value of the bank-note, and my friend from Michigan and my friend from Indiana, with all their knowledge on this question, ought not to make any such assertion.
Mr. MORTON. I ask my friend this question: when you diminish the usefulness of the national-bank note, diminish the purposes for which it can be used, I ask if you do not diminish its value, if you do not depreciate it?
Mr. FENTON. Not at all. You localize it and you make redemption possible, and in no other way can it be done successfully.
Mr. FERRY, of Michigan. I rise for no other purpose than to acquit myself in the understanding of my friend from Vermont, that I have used no words here that are unparliamentary or offensive. So I will read from the dictionary the explanation of the word “boomerang” which I used:
Boomerang: a missile weapon, of a peculiar form used by the aborigines of Australia, which if unsuccessfully hurled is liable to return and kill him who hurls it.
Mr. MORTON. The Senator does not mean to say that it was used by aborigines here. [Laughter.]
Mr. FERRY, of Michigan. Nor from Australia. Nor did I wish to
point to the object of my use of the term, to localize (as gentlemen propose to localize this currency) the mover of the amendment, because I hold the mover of the amendment in high esteem. I do not suppose it will react and kill him, but in view of the source from which it emanates, irrespective of personality — from those who are attempting to obstruct and defeat the majority here — I say that its object is not only to strike personally, but to strike down the whole ground upon which they stand; and that is to help to perfect this bill. In attempting to perfect it, with their personality they kill the whole measure, and therefore it is unskillfully used, and will carry death with it.
Mr. FENTON. If the Senator from Michigan will allow me, I think I can help him out of this complication.
Mr. FERRY, of Michigan. I need no help from that quarter.
Mr. FENTON. The only application of the word “boomerang” in this case, as I think, is that my amendment would strike at a perpetually irredeemable and inconvertible paper currency.
Mr. FERRY, of Michigan. That is the judgment of the Senator from New York, who happens unfortunately at this time to be in the minority, and I who happen fortunately to be in the majority am willing to go with the Senator from New York to the people and let them judge and let time judge whether the measure we have is a boomerang that kills the public interest and the industrial interest and values of the country. I leave it there.
Mr. MORRILL, of Vermont. The Senator from Michigan will allow me to say that the allusion I made was a sportive allusion entirely, but it would hardly be safe for him to appeal to the ears of the Senate or of the reporter to correct the word which he actually used.
Mr. FRELINGHUYSEN. I ask if the proposition of the Senator from New York cannot be divided? I am in favor of that part of the proposition which provides for redemption, as I understand it. I am opposed to that part of his proposition which limits the use of the national banking currency. I would like to vote for the part relating to redemption; but must vote against it if it is connected with this, as I think, depreciation of the national currency.
Mr. FENTON. We have nearly the same system of redemption under the present national banking law; but the details are better perfected in this amendment, perhaps.
Mr. BUCKINGHAM. I think we have now the best currency that we have ever had, in one respect: it is of uniform value in every part of the country. Now, any bill that will change the value of the currency, so as to diminish it, even by an attraction in one locality making it worth a fraction more than in some other locality, will be a bill to the injury of this system of banking, in my judgment; and it is for that reason that I cannot vote for the amendment proposed by the Senator from New York.
Mr. SCHURZ. The Senator from Connecticut is an experienced business man. Now, if he can propose a method how to establish a system of redemption that will be efficient, that will have the effect of putting a safe limit to the issue of national bank note currency, which without such limit might run into wild inflation — if he has any such proposition to make, I should be very happy to accept it, and to vote for it. While we cannot redeem in coin, the difficulty is that we have two kinds of paper currency, equally valuable and occupying the same field of action, so that converting one into the other means redeeming it with itself. If the Senator can obviate that difficulty, I shall be happy to accept his proposition.
Mr. BUCKINGHAM. I think when an opportunity shall present itself I can propose a plan of redemption which will meet the suggestion of the Senator from Missouri, a system which will be in perfect harmony with free banking with an equal value of circulation in all sections of the country. I think one may be perfectly consistent with the other; and the plan which I shall propose is one which I have suggested before, which, although not redemption in specie, yet comes virtually to that, and will give the coin to any man who has either kind of currency at par within a fraction.
The PRESIDENT pro tempore. The question is on the amendment of the Senator from New York [Mr. Fenton] to the amendment, upon which the yeas and nays have been ordered.
Mr. RAMSEY. I am paired on this vote.
The question being taken by yeas and nays, resulted — yeas 14, nays 37; as follows:
YEAS — Messrs. Anthony, Bayard, Chandler, Fenton, Hamilton of Maryland, Hamilton of Texas, Jones, Morrill of Vermont, Sargent, Saulsbury, Schurz, Stewart, Wadleigh, and Windom — 14.
NAYS — Messrs. Allison, Bogy, Boreman, Buckingham, Carpenter, Conover, Cooper, Davis, Dennis, Ferry of Michigan, Frelinghuysen, Goldthwaite, Gordon, Harvey, Hitchcock, Howe, Ingalls, Johnston, Lewis, Logan, McCreery, Merrimon, Mitchell, Morton, Norwood, Oglesby, Patterson, Pease, Pratt, Ransom, Robertson, Scott, Sherman, Spencer, Sprague, Thurman, and Tipton — 37.
ABSENT — Messrs. Alcorn, Boutwell, Brownlow, Cameron, Clayton, Conkling, Cragin, Dorsey, Edmunds, Ferry of Connecticut, Flanagan, Gilbert, Hager, Hamlin, Kelly, Morrill of Maine, Ramsey, Stevenson, Stockton, West, and Wright — 21.
So the amendment to the amendment was rejected.