The Valley Virginian. [volume] (Staunton, Va.) 1865-1895, 1881-03-10
The Funding Bill Vetoed.


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 origi-
mated with the following statement of my OBJ
jections TO its passage The imperative neces-
sity for prompt action and the pressure of pub
lie duties in this the closing week of my term
OF office compel me to refrain from any at
tempt to make full and satisfactory presenta-
ton of objections to the bill The Importance
OF the passage at the present session of Con
gress of such a measure for the Refunding OF
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 it will secure a
large decrease in the annual interest payment
Of the Nation, and | earnestly recommend that
if the bill before me should fail, that another
measure for this purpose be adopted before the
present Congress adjourns. While in my
opinion it would be wise to authorize the Sec
rotary of the Treasury in his discretion to Of
fer 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 fifth section provisions which, in
my judgment, seriously impair the value and
tend to the destruction of the present Nation
al banking system ofthe country. This system
has now been in operation almost twenty
years. No safer Lor more beneficial banking
system was ever established Its advantages as
to business, are free to all who have the neces-
sary capital. 1t furnishes currency to the pub
lie which, for the convenience and security Of
the bill-holder has never been equaled by that
or any other banking system. Its notes are
secured by deposit with the Government OF
nterest-bearing bonds of the United States
The section Of the bill before me which relates
to the National banking system and to which
objection is made, is not an essential part OF
the refunding measure 1t is as follows:
Sec 8 From and after the 1st day of July
1881, the per centum bonds authorized by the
first section of this act shall be the only bonds
receivable as security for national bank circu-
lation, or as security for the safe-keeping and
prompt payment of the public money deposited
with such banks; but when any such bonds
deposited for the purpose aforesaid shall be
designated for purchase or redemption by the
Secretary of the Treasury, the banking associa-
ton depositing the same shall have the right
to substitute other issues of the bonds of the
United States in lieu thereof; provided that
no bonds upon which interest has ceased shall
be accepted or shall be continued on deposit
as security for circulation, or for the safe
keeping of the public money; and in case
bonds so deposited shall hot be withdrawn, as
provided by law, within 80 days after interest
has ceased thereon, the banking association de-
posting the same shall be subject to the
liabilities and proceedings on the part of
the controller provided for in section 1924 of
the Revised Statutes of the United States
and provided further, that section of the act
Of June 20, 1874, entitled can act fixing the
amount of United States notes, providing for
redistribution of the national bank currency,
and for other purposes, "be and the same is
hereby repealed, and sections 5159 and 5160 of
the Revised Statutes of the United States 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 and localities where the
prevailing rates of interest or ordinary bust
ness are extremely low. No new banks can
be organized, and no increase of capital of ex-
isting banks can be obtained except by the
purchase and deposit of three-per cent bonds.
No other bonds Of the United States can be
used for the purpose. The one thousand mil
lions ofother bonds recently issued by the Uni
ted States are bearing higher rate of interest
than three per cent, and therefore better Sc
curity for the bll-holder cannot after the LIST of
July next be received as security for bank Cir
culation. This is a radical change in the
banking law 1t takes from banks the right
they heretofore had under the law to purchase
or deposit as security for their circulation any
of the bonds issued by the United States, and
depriYes the bill-holders of the best security
which the bankers are able to give by requir-
ing them to deposit bonds having the best val
ue of any bonds issued by the Government.
The average of taxation of the capital employ
ed in banking is more than double the rate of
taxation, and is double that employed in other
Legitimate business. Under these circumstan-
ces, to pass banking law so as to deprive the
bank of the advantage of securing their notes
by the most valuable bonds issued by the Gov
ernment, will, it is believed, in large portion
Of the country, be practical prohibition of the
organization of new banks and prevent eX-
change banks from charging their capital. The
National banking system, if continued, will be
monopoly in the hands of those already en-
gagged in it, and who may purchase Gov
ernment bonds bearing a more favorable
rate ofinterest than ofthe present bonds prior
to next July. To prevent further organization
of the banks is to put in jeopardy the whole
system by taking from it that feature that
makes it known as the banking system free,
upon the same terms to all who wish to en-
gage 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. In short, cannot but
regard the fifth section of the bill as step in
the direction of the destruction of the Nation
al Banking system. Our country, after a long
period of business depression, has just entered
upona career ofunexampled prosperity With
drawal of currency from circulation by the
National banks, and the enforced winding
up of banks in consequence, would in
evitably bring pecuniary embarrassment
and disaster to the business of the coun-
try. Banks of issue are essential instru-
ments of modern commerce. If the present
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 a
result will be 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 re-
funding the National debt Is not necessarily
with the National banking law and
that any refundmg act will defeat it's own object
# it imperiled the National banking system or
impaired its usefulness, and con-
vinced that section of the bill before me
would, if it should become law, work great
harm, herewith return the bill to the House
IF Representatives for that further considera-
ion which is provided for in the Constitution.
R. B. HAYES.
Eeecattj0e Mansion, March Sd, 1881.
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