The true northerner. [volume] (Paw Paw, Mich.) 1855-1920, 1881-03-11
THE FUNDING BILL.
President Hayes Reasons for Veto
Ing He


To the House OF Representatives:
Having considered the bill entitled Gan act
to facilitate the funding OF the national debt, I"
/ am constrained to return il to the House Of
Representatives, in which it originated, with
the following statement OF my objections TO its
passage: The imperative necessity for prompt
action. and the pressure of public duties in
this the closing week OF my term OF Office COM
pei mo to retain from any attempt to make
any fully satisfactory presentation of my OBJ
jections TO the bill. The Importance of the
passage at the present session Of Con-
the national debt which is about to mature is
generally recognized. 1t has been urged upon
the attention of Congress by the Secretary of
the Treasury, and in my last annual message.
II successfully accomplished, il will secure a
large decrease in the annual interest payments
of the nation, and / earnestly recommend
if the bill before mo shall fail that another
measure for the purpose be adopted before the
present Congress adjourns. While, in nv
opinion, it would be wise TO authorize the
Secretary of the Treasury, in his discretion, to
offer 10 the public bonds bearing 81
per cent. interest in aid Of refunding,
l should not deem it my duty to in-
terpose my constitutional objections to the
passage Of the present bill IL il did
not contain in its fifth section provisions which,
inmy judgment, seriously impair the value and
tend to the destruction Of the present national
has now been in operation almost twenty years.
No safer nor more beneficial banking system was
ever established. It's advantages az business
are free to all who have the necessary capital.
1t furnishes currency to the public which, for
convenience and security of the bil-holder, has
Of any other banking system. It's notes
are secured by deposit with the Gov
eminent of Understanding bonds Of the
United States. The section Of the bill before mo
which relates. to the notwithstanding system,
and to which objection is made, is not an es-
sental part OF refunding measure. 1t is as
follows:
SECTION 8. From and after the first day of
July, 1881, the 3-per-cent. bonds authorized by
the first section Of this act shall be- the only
bonds receivable IA security for the safe keep
ing and prompt payment Of the public money
deposited with such banks, but when any such
bonds, deposited for the purposes aforesaid,
shall be- designated for purchase or redemption
by the Secretary OF the Treasury, the banking
association depositing the same shall have the
right to substitute other issues of the bonds Of
the United States in lieu thereof provided
that no bond upon which interest has ceased
shall be accepted or continued on deposit as
security for circulation or for the safe keeping
of the public money, and in case the bonds so
deposited shall not be withdrawn, as provided
by law, within thirty days after interest has
ceased thereon, the banking association dcpos-
proceedings on the part OF the Comptroller
provided for In section 5, 234 of the Revised
Statutes OF the United States; and provided
further, that section Of the act of June 30,
1874, entitled AN act fixing the amount OF
United States notes and providing for the ro-
distribution of national-bank currency and for
other purposes, be and the same is hereby
repealed, and sections 5, 159 and $3.50 OF the
Revised Statutes be and the same are hereby
re-enacted.
Under this section II is Obvious that no addi-
tional banks will hereafter be organized except,
possibly, in few cities or localities where the
prevailing rates OF interest in ordinary bust
ness 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 that purpose. The S1,-
000, 600, 900 Of other bonds recently is-
sued by the United States, and bearing
a higher rate Of interest than per cent, and,
therefore, better security for the bil-holder,
cannot, after July next be received az Sc
curity for bank circulation. This Is radical
change in the Banking law. 1t takes from the
banks the right they have heretofore had un-
der tho law to purchase and deposit AK security
for their circulation any of the bonds issued
by the United States, and deprives the bond
holder of the best security which the banks are
alb e 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 bank
ing law 30 as to deprive the banks of the ad-
vantage of securing their notes by the most val
liable bonds issued by the Government will, il
Is believed in large part of the country be prac-
teal prohibition OF the organizing Of new banks,
and prevent existing banks from charging their
capital. The notwithstanding system, if con-
tinued at all, will be a monopoly in tho hands OF
those already engaged in 1t, who may purchase
Government bonds bearing more favorable in
terest than the 3-per-cent. bonds prior to next
July. 40 prevent the further organization Of
banks is to put i'll jeopardy the whole system
by taking from it that feature that makes il as
1t now is, 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 the additional
disadvantages to which they will be subjected
by this bill.
In short, 1 cannot but regard the fifth sec
ton Of the bill az u step in the direction OF the
destruction Of the national banking system of
our country which, after long period OF bust
ness depression, has just entered upon career OF
unexampled prosperity. The withdrawal Of cur
rency from circulation by the national banks
and the enforced winding up of the banks in
consequence would inevitably bring serious
emharrassments and disaster to the business Of
the country. Banks OF issue are essential in
struments Of modern commerce. Ii the pres
ent efficient and admirable system OF banking
is broken down, IT will inevitably be followed by
a recurrence to other and inferior methods OF
banking. Any measure looking to such re-
suit will be q disturbing element in our finan-
cial system. II will destroy confidence and
surely check the growing prosperity Of the
country
Believing that the measure for refunding the
national debt is not necessarily connected with
the National Banking law, and that any refund
ing act will defeat its own object IL it imper-
lied the notwithstanding isystem or seriously
impaired its usefulness. and convinced that
section Of the bull before me would, if il
should become law, work n great harm,
herewith return the bill to the House of Repre-
sentatlyes for that further consideration which
is provided for in the constitution.
(figned) RUTHERFORD Il. HAYES
EXECUTIVE MANSION, March 8. 1881.