The Washington times., 1901-10-17
ADDRESSED BY MR.. GAGE
The Secretary of the Treasury Talks
TO American UanI,ers

was the address OF Hon. Lyman ]. Gage,
Secretary of the Treasury.
After reviewing the beginnings of the
Bankers Association and its service to
the country, Mr.. Gage said:
1T has been the effort of your associa-
ton from the beginning to assist in es-
tablishing the Government finances on
secure foundations, and at the same time
the dependency of commercial affairs
upon Treasury operations. While under
our system the Government, in broad
sense, is the people, and the people con-
i stitute the Government, yet in its organi-
zation it is a legal entity. separate, dis
| tinct, impersonaL II is a corporation
with rights duties, obligations, all clear
ly set forth and defined in the Constitu-
tion or in statute law. Within It's proper
sphere of action it is supreme, but its
proper sphere of action is limited, and
il cannot transcend these limits without
harm TO itself and injury to the people.
In other words. there are laws superior
to the Government-laws which 1t can
not defy and escape penalty. They are
varied in form: but ] refer now only to
the higher economic laws. which have
way of self-operation. blessing the obedi-
ent and banning the violator or these
all men and all governments should be
afraid. and to their mandates respect
should be shown"
Mr.. Gage then related an interview with
the financial minister of a South Ameri-
can Republic in which 1t was disclosed
lures in that country are not locked up
as in the United States. but are depos-
tied in banks. where they serve as an i'm
portant aid to Industrial activities. while
they are always subject to the call of the
Government. Mr.. Gage continued;
Has our Governments course been
wise one? Taking the last thirty years,
what sum on the average, in excess of an
ample working balance. has the Treasury
all current use in the fields of industry
and exchange? The amount is found to
average S50,000,000.
''If these surplus millions had been de-
posted with national banks in the clear
ing house cities, in the proportion the rel
ative capital of each bank bears to the
whole capital; and If. secondly, the only
security to the Government had been, in
case of bank failures, prior lien on such
banks assets, not a dollar of loss would
the Treasury have suffered.
Next, If under these conditions the
banks had paid interest to the Govern
ment at the rate of per cent upol. the
funds so deposited, how much woulo the
Treasury have been benefited? Answer:
Thirty-two million dollars.
Lastly, with this fund aid to
their general operations in the field of
trade and commerce, to what extent, on
the average would the banks have been
able to increase credit accommodations
to the people? Answer: Two hundred
millions of dollars.
Have we not been guilty of an enor-
nous economic waste by reason OF our
peculiar Treasury system?
Il could pursue into detail the faults
with which our financial system may be
justly charged. But the matter has been
presented over and over until the theme
is badly worn. Permit me, however, to
summarize into several brief propositions
an expression of my own financial coi'vic-
tions.
.'Tirst-I believe 1t to be most desirable
that the demand liabilities of the Gov
ernment known as legal tender notes
should be put in the way of retirement
and cancellation.
"Second-I believe that this can be ac-
complished without any burden Of inter
est cost to the public treasury.
Third believe that our system or
bank note circulation can be and ought
to be so modified as to make it more re-
sponsive to commercial and industrial re-
quiTementS without any increase OF risk
to the bill holder.
''Fourth-I believe that beyond acting
as a guardian and a trustee for the people
in relation to naN1ual banks, the Govern
ments guaranty to bank note issues
should cease.
"Fifth--I believe that the public moneys
in excess of a reasonable working balance
for daily use should be deposited n ma
tionaI banks. That a simple and safe sys-
TEN OF distribution of funds can be oe-
yised l have no doubt.
SIXTH believe that in periods Of ma
tional peace and prosperity the public
revenue should be somewhat in excess
of public expenditure, and that the sur
plus revenue should be applied to the re-
duction OF the public debt.
Time will not permit me to support
these statements of belief by argument
now, and l will leave them to be the sub
ject of your own reflection.
In the beginning of my remarks ex-
pressed the opinion that there Is too close
an intimacy between the Government s
finance and our commercial affairs, and
appealed to your memory of our history
in support of that proposition 1t IS
comfort and satisfaction to note that at
the present moment the injurious effect
Of such intimacy appears to be at mini
mum. The public treasury is strong, the
public credit is high. and at the same
time the situation of general finance. as
represented by banking and commercial
interests. Is most satisfactory
Il want to close my talk by presenting
some facts in comparison which VIII at
least illustrate the strong and satisfac-
tory condition of tn national finances
While British consos drawing 2& per
cent per annum are quoted at ", German
imperial 3 per cent bonds at SSI2, Russian
IS at 102, and French IS at 102, United
States per cent bonds are quoted at 10l
and United States per cent bonds of
1928 at l5S.
u may throw some light upon this
comparison so favorable to us if L par
ticularize d little ON April l, 1898. the
Understanding public debt stood at
ssh, ,566 $50. Deducting from this the cash
then on hand in the Treasury, amounting
to S226. .lG6 81. leaves S62l l99, IS0 Incidental
to the war with Spain bonds We're issued
to nearly s2G0,yOJO 90. so that on November
l. 1899. the interest-bearing debt had risen
to 81. .Oc6, 0i9 .O20. or, deducting cash in the
Treasury, amounting to 1891 $40. the
debt, less cash, stood at $556,657. .4s0. an
increase of $I2J,45LTH between April l,
1895. and November /. 1899.
''On August l. 1901, the interest bearing
debt stood at $3.50 4i6'0 $50; cash in the I
Treasury. 1927 ,36S,S17: making debt, less /
cash. $6jS 107, 1S3, reduction of s9S, $50 297;
or having now no regard for the increased |
cash In the Treasury, we find that the face |
amount Of the interest bearing debt, !
which stood on November J. 1899 at !
A.Oi6 .0i9p2e, now stands august u at /
$9S5. 49, $50, reduction Of SG0.5 $50.
But this IS only a partial statement. /
Coucurrently with this reduction of the !
face of the debt there has been reduc- |
tion almost equally great in the amount |
of interest which then burdened the fu- /
ture. OF the moneys coming into the |
Treasury during the short period under
review, Si3 So o05 has been used to settle |
and discharge interest which would other
wise have been charge upon the Treas |
ury during the next four to eight years. |
BY the use Of something more than forty |
three millions, interest to the amount of |
$ji. SIS. .424 was settled-the difference ct |
nearly eleven millions being a nominal |
profit to the Treasury.
This operation was, as you all under /
stand. incidental to the refunding of a |
portion of the public debt into the new |
per cent bonds. Briefly to summarize: |
Within two years the principal of the |
pubic debt has been reduced by the sum |
of $50 572 $50; the interest has been autici- |
pated and settled to the amount of S54,-
54S4 42l a total reduction of Sll5 l2i, ,3S4, |
while the annual cost for carrying the
debt in the future has been reduced from
$40. .3f7. .SSi annually. where 1t stood on No
vember l. 1899 to S29.7 ,0l9-a net saving
annually of $1062i. 500 The cash in the
Treasury has been increased from S2S9;o