The Kenosha telegraph. [volume] (Kenosha, Wis.) 1860-1888, 1881-03-11
fHE FUNDING BILL;
President Hayes Reasons for Veto
ing III.

THE FUNDING Bill;
President Hayes Reasons for Veto
ing HI.
The following is the message of President
Hayes vetoing the Funding bill
To the House of Representatives
Having considered the bill entitled An act
to facilitate the ftsfidittg OF the national debt, "
l am constrained to return it to the Hotise 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 me to refrain from any attempt to make
any ftilly satisfactory presentation Of my OBJ.
jecti5ns t8 tbs bill: The iifipoftafics of tbs
passags at the pfeseiit sessi6n of Coli
gress of suitable measure for FeftindiHg
the national debt which is about to nnattlrs &
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 it will secure q
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 adj0Hrns. While, In nv
opinion, it would be wise to authorize the
Secretary Of the Treasury, In his discretion, TO
per cent. interest iii aid OF refunding.
| should not deem it my dtity to III
terpose my constitutional objections to the
passage of the present bill if it did
not contain in its fifth section provisions which,
inmy judgment, seriously impair the value and
tend to the destruction of the present national
banking system of the country This system
has How been Id operation almost twenty years.
No safer nor more beneficial banking sSsieIfi was
ever established. Its advantages as business
are free to all who have the necessary capital.
1t furnishes currency to the public which. for
convenience and security of the bill-holder has
probably never been equaled by that
Of any other banking system. Its notes
are secured by deposit with the Gov
ernmont of interestAbearing bonds of the
United States. The section of the bill before me
which relates. to the notwithstanding system,
and to which objection is made, is not an es-
sential part Of refunding measure. 1t is as
follows:
SECTION 5. From and after the fret day Of
July, 1881, the 3-per-cent. botds authorized BY
the first section of this act shall be the OILY
bonds receivable as 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 err continued on deposit as
security for circulation or for the safe keeping
of the public money, and in case tie bonds SO
deposited shall not be withdrawn, as provided
by law, within thirty days after interest has
ceased thereon, the banking association depos-
ting the same shall be subject to liabilities and
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 20,
1874, entitled San act fixing the amount Of
United States notes and providing for the re-
distribution of national-bank currencv. and for
other purposes" be and the same is hereby
repealed, and sections s, 1859 and 5, 100 of the
Revised Statutes be and the same are hereby
re-enacted,
Under this section it 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 81
000000,000 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 tine bill-holder,
cannot, after July next be received as &C.
curty for bank circulation. This is q radical
change in the Banking law. 1t takes from the
banks the right they have heretofore had un-
der the law to purchase and deposit as 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 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 SO as to deprive the banks of the adj
vantage of securing their notes by the most val
liable bonds issued by the Government will, it
is believed in large part of the country be prae-
teal prohibition of the organizing Of new banks,
and prevent existing banks from enlarging theft
capital. The MISUNDERSTANDING system, if con-
tinued at all, will be a monopoly in tho hands of
those already engaged in it, who may purchase
Government bonds bearing moro favorable in
terest 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 makes it as
it now is, banking system free, upon the
same TERMS to all who wish to engage In 1t.
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, cannot but regard the fifth sec
ton of the bill step in the direction of the
destruction of the national banking system of
our country, which, after a 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. If the pres
ent efficient and admirable system of banking
is broken down, 1t will inevitably be followed by
a recurrence to other and inferior methods Of
banking. Any measure looking to such re-
suit will be a disturbing element in our finan-
cial system. 1t 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 if it irnper-
lied the misunderstanding system or seriously
impaired its usefulness, and convinced that
section of the bill before me would, if it
should become a law, work great harm, |
herewith return the bill to the House of Repre-
sentatives for that further consideration which
is provided for in the constitution.
(Signed) RUTHERFORD B. HAYES
EXECUTIVE MANSION, March B. 1881