The Portland daily press., 1881-03-04
VETOED.
The President Returns the Fund
ing Bill Unsigned.
HIS REASONS FOR DISAPPROVING
THE MEASURE.

WASHINGTON, March 3.-The President has
vetoed the refunding bill.
The following is the message of the Presi-
dent:
To the House of Representatives:
Having considered the bill entitled can act
to facilitate the refunding of the national
debt" am constrained to return it to the
House of Representatives, in which it orig
mated, with the following statement of my
objections to its passage. The imperative ne
cessity for prompt action and the pressure of
public duties in this closing week of my term
of office compel me TO refrain from any at
tempt to make full and satisfactory preSenta-
ton of the objections to the bill The import
ance of the passage at the present session of
Congress of suitable measure for the refund
ing of the national debt which is about to ma
ture is generally recognized. 1t has been
urged upon the attention of Congress by the
Secretary of the Treasury, and in my last an
nual message If successfully accomplished
it will secure large decrease in the annual
interest payment of the nation, and earnest
ly recommend that if the bill before me shall
fail that another measure for this purpose be
adopted before the present Congress adjourns.
While in my opinion it would be wise to au-
thoriZe the Secretary of the Treasury in his
discretion to offer to the public bonds bearing
81 per cent interest, in aid of refunding /
should not deem it my duty to interpose my
constitutional objection to the passage of the
present bill if it did not contain IN its 9TH Sec
ton provisions which in my Judgment seriously
impair the value and tend to the destruction
of the pre- sent national banking system of the
country. 1 1Df 4sH
This system has now been in operation al
most 20 years. No safer nor more beneficial
banking system was ever established Its adj
vantages a business are free to all who have
the necessary capital. 1t furnishes currency
to the the public which for convenience and
the security of the billholder has probably
nev er been equalled by that of any other
banking system. Its notes are secured by de-
posits with the government of the interest bear
ing bonds of the United States. The section
of the bill before me which relates to the ma
tional banking system and to which objection
is made, is not an essential part of refund
ing measure. The President here quotes the
fifth section and saysl: Under this section it
is obvious that no additional banks will here
after be organized, except possibly in few
cities or localities where the prevailing rates of
interest in ordinary business are extremely
low. 9df ~ ll II -
No new banks can be organized and no in
crease of the capital of the existing banks can
be obtained except by the purchase and depos-
it of per cent. bonds. lbs 3919d
No other bonds of the United States can be
used for this purpose. The one thousand mil
lions of other bonds recently issued by tho
United States and bearing higher rate of in
terest than per cent, and therefore a better
security for the bill-holder, cannot, after the
first of July next, be received as security for
bank circulation.
This is radical change in the banking law,
1t takes from the banks 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 United States, and
deprives the billholders 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 emploged In other legiti-
mate business. Under these circumstances, to
amend the banking law SO as to deprive banks
of the advantage of securing their notes by
the most valuable bonds issued by the govern
ment will, it is believed in large part of the
country be practical prohibition of the
organizing of new banks and prevent the ex-
listing banks from charging their capital. The
national banking system if continued at all
will be monopoly in the hands of those al
ready engaged in it who may purchase govern
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 that it makes it, as
it now is, a banking system free upon the same
terms to all who wish to engage in it. Even
the existing banks will be in danger of being
driven from business by additional disad
vantages to which they will be subjected by
this bill. f,
In short, cannot but regard the fifth section
as step in the direction Of the destruction of
the national banking system. Our country,
after long period of business depression, has
just entered upon career of unexampled
prosperity. Withdrawal of the currency from
circulation by the national banks and the en-
forced winding up of the banks in consequence
would inevitably bring serious embarrassment is
and disaster to the business of the country;
banks of issue are essential instruments of
modern commerce. If the present efficient
and admirable system of banking is broken
down 1t will inevitably be followed by recur-
renee to other and inferior methods of bank
ing. Any measure looking to such result
will be disturbing element in our financial
system. 1t will destroy confidence and surely
check the growing prosperity of the country.
Believing measure for refunding the national
debt is not necessarily connected with the ma
tional banking law, that any refunu ing act will
defear its own object if it imperilled the ma
tional banking system, or seriously impaired
its usefulness, and convinced that section five
of the bill before me would, if it should be-
come law, work great harm, / herewith
return the bill to the House of Representatives
for that further consideration which is provid-
ed for in the constitution.
(Signed) RUTHERFORD B. HAYES.
Executive Mansion, March 8, 1881.