The representative. [volume] (St. Paul, Minn.) 1893-1901, 1896-06-10
LIGHT TURNED ON.
FACTS CONCERNING NATIONAL
BANKS.
Their Origin, Growth. Uses, Abuses
and Power.
Their True Place in Our Political
Economy.
By A. f. BALL. of Minnesota
Written for The Represe tative.l
CHAPTER "

By A. f. BALL. of Minnesota
Written for The Representatives.
CHAPTER V.
EXTENSION OF CORPORATE Elk
ISTENCE.
The Act of February 25, 1863, did not
provide for an EXTENSION of banks ex-
istence beyond twenty years. 1t was ex-
pected that the amount of government
bonds would be so reduced as to be in
sufficient to furnish a basis for the cur
reDcy demands of the country.
But the bankers had taken a different
view of the matter. They, with a una
nimity which challenged admiration if
not suspicion, blocked the way to a
speedy payment Of the debt whenever
and wherever they could. The national
debt touched the highest point Aug. l.,
1865, when it reached 1854 $40 .626. a.
Just how much of this debt circulated as
money can never be known, as the re-
ports Of treasury officials given out as
correct, vary all the way in fixing the
amount from 81, 4S9, 002 ,480 to 81, 588. 452, :
213, for the year 1869,-only the slight
sum of S99, 449,737 Strange to say, the
interest for that year from the financial
reports of 1869 and 1871 agree exactly.
This shows how hard it is to get at the
exact amount in circulation in 1865 when
the war ended. From September L. 1865,
to September l, 1867, Secretary McCul
Tough reports the reduction as follows:
Compound interest notes. .$144, 149 .120
Seven $40 notes ..... 492, 021 200
Greenbacks and fractional
notes .............. 1865, S39 IL
Total circulation $797 ,804 1874 ~
John ]. Knox, comptroller Of the cur
rency at that time said at the American
Bankers Association which met at Pitts
burg Oct. II, 1877. as follows:
about four years after the war had
commenced, in August, 1865, the public
debt amounted to $2.S45, 907 ,626; and in
cluded in this huge mountain of indebt-
edness there were 81 $40 900 of treas
ury notes either payable on demand, or
bearing interest, of which more than 81,
500, 100000 was legal tender If tempo
rary loans payable in thirty days. and GER
t:ficates of Indebtedness, payable in one
year after date, should be included with
treasury notes, the whole would amount
to considerably more than three-flfths of
the $2,S46, 900 900 of the debt Of the coun-
try.
Now as three-ffths of this vast debt
equals $3.50. 600. 0OO and Knox says it
was considerably more, the question is how
much more. AS authority had been issued
at two different times to issue $50,000,000
each time of fractional notes, is is pre-
sumed that these are now legal tender $4O,-
1000 alluded to above. The registered
coupon bonds at that date could not have
exceeded $S50,000,000. So it is fair to
presume that nearly $2,0O0,000,00O Was
was then in circulation.
McCulloch was a banker, and bent all
his energies to contract the currency. OF
this period he says:
During the month of September, 1868,
the army having been reduced to peace
footing. It became apparent that the in
ternal revenues would be sufficient to pay
all the expenses of the government and
the interest on the public debt, so that
thence forward the efforts of the secretary
were to be turned from borrowing to fund
ing" and for the last two years this policy
has been carefully pursued, and the re-
suit is satisfactory to the secretary"
This policy also satisfied the banks, but
it did not satisfy the people.
Congress passed an act, approved April
u, 1885, which contained the following:
provided, That of United States notes,
not more than ten millions of dollars may
be retired and cancelled within six months
from the passage of this act and there
after not more than four millions of do!-
lars in any month; and provided further,
that the act to which this IS an amend
ment shall continue in full force in all its
provisions except as modified by this act.
The act amended was that of March 3.
1865, authorizing the issue of $500, 100000
seven-thrty bonds or treasury notes. How
Il nnntr n n
affect bank circulation? AS follows:
Oct. 81 1864, outstanding bank
notes poo,O1o,OOO
Oct. 81, 1865, outstanding bank
notes .......... lO4,Ooo,lUo
Oct. 81, 1867, outstanding bank
notes .......... GSS.VI4,o14
Increase in three years. $40 PSI ,S24
Thus it will be seen that the whole force
of the treasury was directed to funding the
circulating notes to make room for banks.
When this policy had continued for two
years, Congress by act passed January %,
1868. which the president, Johnson, failed
to sign, which went into effect February
4, 1868, took away the power to make fur
Their reduction by retiring and cancelling
United States notes"
pended, the credit strengthening act, ap-
proved March 1S, 1869, pledged the United
States Ito redeem United States notes in
COIN
July IA. 1870, the "refunding national
debt" act came, authorizing $200,000,000
OF five per cents, $500 100000 of four and
ore-half per cents, and 100000, 5000 four
per cents This IS the act under which
John G. Carlisle has issued $265, 000, 900 of
bonds. under authority Of an act approved
January IA, 1875.
In the act. July IA, 1870, occurs this re-
markable provision now in force:
"But nothing IN this act, or N any other
law now in force. shall be construed to
authorize any increase whatever, of the
bonded debt of the United States" Uast
clause See ~
If this is not an estoppel of Carlisle what
does it mean?
This provision Of the law prevents the
issue of any of the designated bonds, eX-
cent in lieu of other interest bearing bonds
of the United States. New bonds might
replace other interest bearing bonds, and
nothing else. The magnitude of the crime
of Cleveland and Carlisle in issuing bonds
and thus increasing the bonded debt Of the
United States, is clearly apparent.
It will also be noticed that the amount
of these bonds are limited, and 1t IS quite
certain that this limit is nearly reached.
An act was passed increasing the amount
Of five percentum bonds to $500 900, 900,
but prohibited any increase of the total