Bank Monopolists
—Their Control of the Currency.—
A Bankrupt Financial Policy.

GOLD and silver are and must remain the standard of values.  This being true, any attempt to substitute any other standard unsettles values, and opens avenues for reckless speculation.  Bank bills, or other promises to pay, are and always will remain unsafe as a money standard;  especially when they cannot be exchanged for specie, save at large discounts.  The policy of the government of substituting treasury notes for coin, as legal tender, and then issuing national currency for general circulation by the banks of the country, has been effectual in preventing the circulation of coin, as well as the resumption of specie payment.  No good reason can be given for issuing two kinds of currency, or for providing that one kind (treasury notes) shall be legal tender, and the other (national currency) shall be of less value, good in ordinary circumstances, but which no one is obliged to accept in payment of debts.

The present banking law provides that any five or more persons may form a private corporation or banking association, and upon compliance with the provisions of the law, transact all business usually transacted by banking associations.  As a condition to the issuing of bank notes, the company, after it has organized according to law, must deposit with the proper officer in Washington, in government bonds, an amount greater by ten per cent. than the amount of bank notes it receives for circulation.  If it deposit $100,000 in bonds, it receives from the comptroller of the currency $90,000 in national currency, which it can issue, and, as occasion requires, must redeem in treasury notes.  The government bonds are held by the department as security for the redemption of the bank notes received for circulation, and the government pays to the different banking companies semi-annual interest at the rate specified in the bonds deposited by the companies respectively.  The amount of tax annually collected from the people to pay this interest to bankers is between $18,000,00 and $20,000,000.  All that the people receive in return for this sum is the privilege of borrowing national currency from banks at legal rates of interest.  The banking companies receive from government their six per cent. annually in gold on their bonds deposited with the department at Washington, and the lawful rates fixed by the states respectfully upon loans and discounts with such other profits usual among bankers.

The laws of congress creating the national banking system are anti-republican, and at war with the principles of our government.  They restrict the currency of the country to a certain fixed amount, and exclude coin from circulation.  They clothe the secretary of the treasury with absolute control of the finances — not only of the government, but of the whole people — a power that is unprecedented in republican government, and dangerous to republican institutions.  No financial system could be devised that would so completely deprive the people of any control of their finances, or deny to them any knowledge of the solvency of the banking institutions of their own immediate localities.  The system is derived from the old world — from monarchical governments where the population is dense, the policy of the ruling powers settled, and where the aristocratic idea prevails that the few should rule, and the many serve;  that those who produce the wealth of the country should be subject to the idle classes who rule over them.  We have in this country a moneyed aristocracy, composed mainly of men who speculated in their country’s misfortunes during the late civil war, who, under the pretence of aiding the government, made their twenty, fifty, and one hundred per cent., and amassed large fortunes by taking advantage of the tide of war as it submerged a nation’s hopes.  At the time the patriotic men of the nation were in active service — when such were laying down their lives for their country, these men were refusing to aid the government with money unless they had large margins for profit.  Clothed with this great moneyed power, they fixed the price of government bonds, as well as the value of all property in the land.  As a relief measure, the banking law of 1863 was enacted.  At the date of the passage of the act, more than one-half of the wealth of the country was owned and controlled by about four per cent. of the population, who have proceeded to dictate all the financial, revenue, and monetary measures of the government since the breaking out of the rebellion, excepting the measure sustaining the credit of the government — the issue of treasury notes — a measure which alone saved the nation from financial ruin.  The banking act, while it was passed as a relief measure, was in fact but a surrender of the finances of the country to an irresponsible class of banking associations.  The amount of treasury notes was limited by act of congress, and not being sufficient to supply the wants of the people, about $350,000,000 of currency were issued to these private banking corporations, which they now control in their own interest.  One-half of the circulating medium is issued directly in government and treasury notes, and the other half—currency—by these private bankers.  These two amounts are all the people can have as a circulating medium.  By the creation of these private corporations, congress has placed over the people a moneyed aristocracy who are responsible to the secretary of the treasury, and to whom alone they must account.  This banking law deprives the people of coin circulation, and by the assumption of a power at war with Republican institutions, creates a privileged class with the sovereign power of controlling the whole moneyed interest of the country.

Was there any necessity for this creation of national banks with currency differing in character and value from treasury notes ?  The banks were chartered as a war measure.  Did government or people gain by this banking system ?  If banks were desirable as fiscal agents throughout the country, treasury notes were certainly as good a currency as the paper issued to banks, and could have been supplied at less cost to the government and the people.  As a circulating medium the whole people have regarded them as the best possible paper money.  There was no necessity of this banking system for supplying a market for government bonds, inasmuch as the largest amount of bonds was sold after the banking act was passed — not to persons wishing to do a banking business, but to outside parties.  Besides, the amount of bonds purchased by bankers, and deposited with the comptroller of the currency, was comparatively small, being less than one-eighth of the national debt.  If, instead of selling bonds to bankers, and agreeing to pay them coin interest thereon, treasury notes had been sold to them, the public would have been just as secure, for the faith of the government is pledged to redeem these notes, and, having received value for them, neither the people nor the government would be the losers.  On the contrary, a great saving — the interest on the amount of the bonds deposited would have been saved.  In fact all the security for the redemption of bank currency is furnished by government.  The system is based upon the credit of the United States.  If this credit is good as expressed in the bond, it is also good as expressed in the treasury notes.  The bankers themselves impart no money value to the bank notes;  all this is imparted by government.  These bank notes being secured by the credit of the government, and issued by it.  They constitute the money of the government, and are a loan to the banks just as much as though government had loaned to them treasury notes;  and so far as the bankers are concerned it is a free loan.  The banks do not pay interest on the currency loaned to them;  on the contrary, government pays them interest on the amount they receive.  To illustrate :  Let us suppose that government has sold $1,500,000,000 in bonds.  These bonds all bear interest at six per cent. payable in coin.  That is all the consideration paid by government for the loan.  Under the banking act, $350,000,000 of these bonds are purchased and owned by corporations formed for the purpose of doing a banking business.  They deposit the amount with the comptroller of the currency, and receive the full amount, less ten per cent., in currency.  This currency is issued by the government, and must eventually be redeemed by it.  The government, in fact, pays back to the depositors the amount of their bonds, less ten per cent., and at the same time pays interest upon the whole amount.  The bankers have received back ninety per cent. of their deposits, and use the amount received as money;  and at the same time government pays six per cent. interest to the bankers on the ninety per cent. delivered to them in currency.  Take a single case for a further illustration.  A corporation is organized in New York for banking purposes — capital, $1,000,000.  It purchases bonds to the full amount of its capital, and deposits them with the comptroller.  Upon the whole of this $1,000,000, the corporation receives six per cent. interest in coin, payable semi-annually, while it continues the banking business, and simultaneously with the deposit of its bonds it receives from government $900,000 in currency.  On this amount it pays no interest, and no taxes, excepting the one per cent. exacted from all money lenders, brokers, insurance companies, etc.  It receives its six per cent. from government on its banking capital, and receives back from government all but ten per cent. of its capital, and loans it to the people at six per cent. or more, thus getting twelve per cent. on the amount it has invested in the banking business.  This twelve per cent. has all to be paid by the people in national taxes, besides the interest paid to the banks for loans.  If treasury notes had been issued in payment for bonds, or for money paid for them, one-half of this per cent. would have been saved to the people;  and the best kind of circulating medium provided by the government would have been furnished to them.  Banking, without this government bounty paid to bankers, has always proved to be profitable.  Large dividends have been the rule.  According to reports made by some of the present banking corporations in favored localities, they are declaring dividends of ten, twenty, forty, and some of them as high as one hundred per cent. per annum.  This shows that neither the necessities of the government, nor of the people, required that a bounty should be paid to bankers in order to induce them to take the control of the currency of the country.

It has been said that the banking act was a necessity as a war measure.  Is this true ?  No additional bonds were sold because of the passage of the banking act.  The amount of currency issued and distributed over the country did not add to the wealth of the people or the government.  The sale of bonds and issue of greenbacks answered all the ends of the government, unless it was supposed that by affording a privileged few among the purchasers of its bonds the opportunity of making a larger per cent. than was allowed to all other government creditors, would advance its interests.  That the object in the passage of the act was not to aid the government, or relieve the people from the burdens then resting upon them is evident by its peculiar provisions.  It limits the amount of the circulating medium of the country, and compels the people to pay $20,000,000 annually for a currency inferior to treasury notes, which they could have had without cost.  It confers special privileges upon, and pays a bounty to a limited number of the government creditors.  The amount of currency is too limited to benefit the government or the people.  It gives to the secretary of the treasury, and the banking corporations of the country the control of the purse, not only of the government but of the people.  It gives to a few capitalists of the country a complete monopoly of the entire business of the nation.  It has substituted currency for money and made the resumption of specie payment dependent upon the pleasure of the few men who now control the finances of the country.  It is the powerful ally of the brokers and stock-jobbers who are enriching themselves by oppressing the producers of the country.  It has fixed an arbitrary limit to the currency of the country, and deprived the people of the power of increasing that amount, or of using coin as a circulating medium.  It is anti-republican, and at war with the best interests of the people.  It has already cost the people in taxes, to pay interest to banking corporations on their banking capital, the sum of $200,000,000, (which sum is increased $20,000,000 each year) for which they have received no consideration save the privilege of borrowing currency from banks.  It establishes a moneyed aristocracy who rule over and despoil the wealth-producing classes, reducing labor to a state of vassalage to capital.

We cannot discover the wisdom of the law which provides that a banking company shall buy an amount of government bonds equal to its capital stock, paying government therefore and after depositing it with the proper government officials;  receive interest on it.  If a man pay his note or bond, and gets it in his own possession, he would lack wisdom if he were to continue the payment of semi-annual interest on it after that time.  Government is doing this with only this difference :  It says to the banking company :  “Buy my bonds, pay for them, and then I will hold them in trust, and pay you the interest on them.”  We can see no good reason for this provision of the law.  If the object were to borrow money, it could have been accomplished by receiving it directly from the banking company, and then issuing to such company legal tender notes in payment therefor, and by so doing government would have saved the large amount of interest now being collected from the people.  If the object were to furnish a circulating medium, the legal tender treasury notes would have been a preferable currency.  The government would have hazarded nothing, because it would have had possession of the full value of the notes or bank bills furnished the company.  But if the object were to foster and fatten corporations, then the law, as passed, has fully accomplished its purpose.  The law provides for a general system of banking, without requiring the bankers to keep one dollar of coin for the redemption of their issues.  It provides for the redemption of currency with currency, thus making the resumption of specie payment impossible, so long as legal tender notes are in circulation.  It locks up from one-tenth to four-tenths of all the capital invested in banking, and compels the people to pay interest on this amount without receiving any equivalent.  It fixes arbitrarily the amount of circulating medium for the whole country;  the amount being $356,000,000 in legal tender notes, and about the same amount in national currency;  and of this last amount the banks are compelled to keep on hand a reserve of from fifteen to twenty-five per cent. on all their bills and deposits, thus leaving for circulation, throughout the entire country, not more than $550,000,000, the whole of which is irredeemable in coin.  It places the finances of the whole country under the control of one man — the secretary of the treasury.  The amount of currency being fixed by law, and apportioned throughout the country, with no means for its increase, it is not difficult for speculators to withdraw sufficient from circulation to affect injuriously the commerce of the country.  The combined corporate interest of the country can, at pleasure, corner such amounts as to create a stringency, and if desired, a panic.  We have shown in a former chapter the combination existing between railroad corporations and Wall street brokers, and their control of the finances of the country.  We have also shown the effect of the legal tender decision upon the financial interests of the country, and the large benefits the railroad corporations are deriving from it;  and that they controlled to a great and dangerous extent all departments of the government.  Under the present financial and banking system they hold the whole country at their mercy.  They fix prices upon all the farm products of the country.  Having full knowledge of the amount of currency in the banks of the great commercial centers, as well as the amounts in the different parts of the country, with the means in their own hands of controlling and expanding these amounts at pleasure, by withdrawing, or as it is termed “cornering” the necessary sum, they fix the price of all articles of commerce, and stocks, and gold.  The government, under the present financial policy, cannot prevent this state of things.  It has no reserve with which to aid the people.  Nor can the banks, if they had the inclination, remedy this evil.  The business interests of the country require more money.  The government, as well as the banks, are prohibited from issuing more.  Because of the lack of quantity required by commerce, the banks are, as a general thing, without any considerable surplus on hand.  When these corporations and brokers desire a stringency in the market, they withdraw from the banks a few millions of dollars and lock it up.  It is withdrawn from the already insufficient amount in circulation, and legitimate business languishes.  Having their vast corporate stock and bond interest to protect, being engaged in constructing railroads, having created large debts upon their roads by reckless and dishonest watering of stock and loose issuing of bonds, they seek to compel all commercial and industrial pursuits to pay tribute to them, and they accomplish this object by controlling the currency of the country.  A financial system that can be controlled by one interest, or in the interest of one class of men, is bad.  When, as is now the case, that interest is a combination and consolidation of the greatest monopolies that ever cursed a country, the system should be changed.

Under our present system, no matter how evenly the currency was originally distributed over the country, the larger portion of it finds its way to the great commercial centers.  The merchant must carry his money to his place of purchase, or what is the same thing, buy an eastern draft from his local bank, which bank, in order to command eastern exchange, must have deposits in eastern banks.  The farmer who ships his produce to the east, must pay the charges for transportation, which are usually collected at its place of destination;  and these charges being much more than one-half the entire value of the shipment, are retained in the east, or if charges are paid to local agents, they are forwarded to the principal office in the east.  Nearly all the great railroad companies having their principal offices in the large eastern cities, their earnings are forwarded to those offices.  By these means, the currency of the country is concentrated in the larger commercial cities of the country, mainly in New York, where it is in the absolute custody of these great railroad corporations and brokers;  and the financial and banking system of the country, designed to meet the wants of the people, has become, in the hands of these giant monopolies, a principal agency in their oppression.  The produce of the farm, and of the entire industrial pursuits of the country, are being swallowed by this huge monopoly, and those others created by our tariff.  For this state of things there is no relief without a change of policy on the part of the government.  Already there is a wide margin between coin and currency.  An increase of the latter would increase that margin, and lessen values.  With a fixed amount of increase, the same interest that now controls the finances would, in a short time after its issue, obtain the same control, and this would demand another issue;  the same process to be repeated until our currency would be of little or no value, the unlimited increase of irredeemable currency would in the end inflict upon the country absolute ruin.  We are now traveling in that direction.  Currency is only of value as the representative of money.  Now (April, 1873) a dollar in paper represents but eighty-two cents in money.  Our government has adopted the Utopian idea of making small strips of paper, with certain printed promises thereon, legal tender.  This kind of paper has been decided by the supreme court to be money, the “measure of values.”  Notwithstanding the laws of congress and the decision of the supreme court, this measure of values will not become or remain stable;  it is gradually shrinking, while gold, the money of the country, is disappearing.  Unfortunately for us, our strips of paper will not pass for money, or legal tender, with other nations.  For this reason, the coin of the country has to be used in our commerce with foreign nations.  Within the last year, the amount of coin in this country has decreased over $38,000,000.  The balance against us in our dealings with other countries is the above named amount.  Unless some course is adopted that will prevent this large export of gold, it is only a question of time when we shall have no gold in the country, and the only representative of values left us will be paper money without any intrinsic value.  Under the present financial policy of the government, and the unlimited control that corporations and rings, with their power all centered in Wall street, have over the finances, we need not hope that the agricultural products of the country can be transported to the seaboard at rates that will enable us to export the same to foreign countries in any considerable amount.  We cannot pay inland and ocean transportation, and compete with other grain-producing countries.  The markets of the outside world are practically closed against us.  With our high protective tariffs, extortionate charges for inland transportation, lack of ocean commerce, and immense foreign debts, public and private, absolute financial ruin must overtake us, unless a different policy is adopted.  The amount of currency being fixed by law, the government has in effect declared that the people of this country shall have but this fixed amount for all the purposes for which money is used.  The effect of this arbitrary law, followed and supported by the legal tender decision of the supreme court, is to prevent any increase of the currency or money.  The control of the currency being placed in the hands of one man, the whole financial interests of the country are dependent upon his will.  No matter how great the wants of the country may be, or how inadequate the supply, no departure is allowed from the inflexible rule as to reserves that the banks are required to hold.  If the secretary of the treasury conclude to sell gold to ease the market, he does so;  if he decide to issue a half million treasury notes, they are allowed to go into the hands of people, and withdrawn, when in his judgment, he deems it advisable.  His acts create a feverish excitement in the money market and derange business, carrying loss to everybody, except Wall street brokers.  That power, so necessary to a despotism, and so destructive to republican institutions — the control of the purse of the people, and of the government, has fully obtained in this country.  The whole people of the land are as completely under the control of the secretary of the treasury (and he in turn ruled by these powerful combinations) as a ward is ruled by his guardian.  The system is bad, and should be changed at once.  The government should control its own finances, and the people should be permitted to provide for themselves without asking the permission of the government.  We subjoin the following expression of views of one of the ablest and most experienced of the bank officers in this country :—

“ The incompetency of special legislation, when applied to the adjustment and regulation of the paper currency of the country, I presume few sensible men, at all acquainted with the subject, will question;  nor is it possible for any man of business, or any possessor of property, in whatever shape, to feel safe while the power to inflate or contract the currency is arrogated by any one man, whether he happens to be some narrow-minded, bigoted, obstinate official, acting on his own volition, or some subordinate clerk, acted upon by others.

“ No one should be entrusted or tempted with such a power;  for no man, however able and honest, could, by any possibility, justly or accurately exercise it.  Foolish as was the experiment, however, we have tried it :  and with the ill success that was inevitable.

“ The sway to and fro of our currency, controlled by the ebb and flow of our business transactions, consequent upon seed time and harvest, is subject to law as imperious and immutable as any that governs either the physical or moral world;  and in just the degree that we understand and conform to its action can we hope for a successful solution of the problem that now so vexes the minds and disturbs the interests of all classes of the community.

“ The nearest approximation we have yet made to such an understanding and conformity has been in the New York free banking law, from which the national currency act has borrowed all of any merit it possesses.

“ This New York law, free from the vice of monopoly which the national currency act inherits from the necessities of its birth, and open to all men, as any honorable pursuit should be in this republic of ours, is also distinguished by three salient points :  perfect security to bill-holders, freedom from arbitrary reserves, and systematic redemption of bills.  In this last feature of the law, disagreeable as it is at times to speculation or unwary bankers, lies the key to its success, checking and governing as it does by its conservative action all over-issues, while still leaving the open freedom of the system untouched by any useless restriction;  so that, no matter how great the number of those who choose to embark in the business, no more currency can be kept afloat than the wants of the country demand.  The national currency act fails because it is a monopoly;  because it has only a nominal redemption;  and because of its arbitrary reserve clause, which serves only to hamper the means and obstruct the usefulness of our metropolitan banks at the very time when the trade of the country most requires their services, to say nothing of the power for evil which a knowledge of this fixed limit gives to the gamblers and speculators who hang around and within our stock-exchanges;  and, lastly, because it has no power of expansion and contraction in response to the varying calls of trade and commerce.

“ The substitution of a free banking law for the national currency act — in the mere fact of the release it would give us from constant petitions to Washington officials, leaving the government to attend to its own monetary affairs and strictly mind its own business — would go a great way towards restoring and maintaining the manhood and self-respect we are fast losing, from our constant looking up to and attendance upon the central power, asking to have done for us things which should be self-regulating or which we should do for ourselves.  Democrats as we profess to be, we are rapidly aping the follies and acquiring the habits of dependence upon authority characteristic of the older civilizations of monarchial Europe.  It is hardly time, I think, for us to take the backward swing of the pendulum of political progress, that is sure eventually to land us where we began.”

A careful examination of the financial policy of the government ought to convince us that a change is necessary to prevent ultimate ruin and bankruptcy.  With gold driven from circulation — an insufficient amount of depreciated currency for the transaction of the business of the country, and the facilities afforded the monopolies for controlling our whole commerce, the agricultural and industrial interests of the country languish — the farmer receives no reward for his toil — the laborer is poorly paid — and general prostration extends over the land.  A return to specie payment, or an increase of sound currency, would relieve all cause of complaint, and enable the industry of the country to receive a fair remuneration for its labor.