That Money Difficulty

Nobody ever saw a foreclosed farmer hanging by the seat of his breeches on a hook in front of a bank.  Nor did anybody ever see a bank that set out in front of its premises, in grocer-fashion, many boxes of starved children, a few boxes of sleek children, a few crates of happy men and women, and many crates of men and women who look as if the world were no place in which human beings should live.  Banks do not display their products as many other business houses do.  Therefore, most persons believe that of all subjects banking is the dryest.  When a banker begins to talk about banking, all sensible persons reach for their hats and edge toward the door.

That is the fault of the banker.  He could make banking interesting to you if he would tell the truth about it.  He could make your hair stand.  He could make your blood boil.  But he would have to tell you the human side of banking, instead of the technical side.  He would have to tell you less about what banking and financial systems are and more about what banking and financial systems do.  But he would not be a banker very long after he told those things.

Please read here the brief story of a single colossal tragedy that was purposely precipitated by the great bankers of this country.  Read it for several reasons--- first, if you like, because few novelists could conceive a plot so astounding;  second, because it makes the individual crimes of the greatest criminals seem almost inconsequential in comparison;  third, because, within a year or two, even a greater tragedy may be brought about to bludgeon Congress into passing the so-called Aldrich Currency Plan;  fourth, because you will then better understand why the Aldrich plan is brought forward, and what it is intended to do.  The story will be simply told.  Authority will be given for every statement.

The story is of the real causes that lay back of the panic of 1893.  Who does not remember that dreadful year ?  It was the year of the Chicago World's Fair.  The nation was preparing for a long summer holiday.  Crops were good.  Everybody had a right to expect good times.  But summer had not half passed when black ruin over-spread the country.  Three hundred and fifty-nine banks failed in eight months ---twice as many as had failed in the preceding thirty years.  Stores closed.  Factories closed.  Ruin piled upon ruin until it seemed as if there would be no end.  The greatest went down with the smallest and the oldest with the youngest.  Millions of men were thrown out of work.  Some froze to death the next winter.  Some turned to porch-climbing, some to tramping and some committed suicide.  Others joined Coxey's army and marched to Washington.  Others stayed at home, only to be evicted from their homes because they could not pay their rent.  Children went hungry.  Women wept.  Some became prostitutes.  Some became thieves.  Some committed suicide.  And, though crops were good, these awful conditions continued until 1897.

Let me now proceed to prove by the testimony of reliable witnesses that this panic was deliberately caused by the great bankers of the country.  Their purpose was to secure the repeal of a law framed by John Sherman, which required the United States government to buy, each month, 4,500,000 ounces of silver.  The act was passed as a sop to the silver element.  Bankers opposed it.  They were for gold and nothing but gold.  Most persons believe the great fight over silver was fought in 1896, but in this they are in error.  The great political fight was made in 1896, but the real fight took place three years earlier, and the panic of 1893 was the battle.  But to prove these statements, it is necessary to go back to the campaign of 1892, when Benjamin Harrison made his losing fight against Grover Cleveland for re-election to the presidency.

What the Bankers Wanted Then

So far as the people knew, the great issue in 1892 was the tariff.  Mr. Cleveland had gone out of office in 1889 while talking about the tariff.  His last annual message to Congress, after his defeat in 1888, was against the tariff.  Many attributed his defeat to the uncompromising tone of this message.  And, the triumphant Republicans having enacted the McKinley Law, Mr. Cleveland continued to challenge it.  Everybody thought the tariff was the issue ---everybody but the bankers.  They knew the tariff was but the mask to cover the real purpose of the campaign, which was to secure the repeal of the Silver-purchase Law which President Harrison, on July 14, 1890, had signed.

I shall offer the proof of these statements in a moment.  But in order that you may understand the proof, please recall the part that David B. Hill played in the campaign, prior to the meeting of the Democratic National Convention.  Mr. Hill wanted the Democratic nomination for the Presidency.  Being in full control of the Democratic machine in New York, Mr. Hill called the convention much earlier than usual, and elected a full set of Hill delegates to the National Convention.

This action displeased the bankers, who called Mr. Hill's gathering a "snap" convention.  The bankers preferred Mr. Cleveland to Mr. Hill, because Mr. Cleveland had come out unequivocally for a single gold standard, while Mr. Hill would not tell where he stood.  And, as everybody knows, Mr. Cleveland was nominated, notwithstanding the refusal of the delegation from his own state to support him.

In the light of these known facts, please read some extracts from an article that was written three years afterward by William Solomon, a member of the great international banking house of Speyer & Company, of New York.  The article, which was printed in the July, 1895, number of the Forum, was entitled, "Sound Currency the Dominant Political Issue."  Mr. Solomon was unquestionably in a position to know the facts.  See what he wrote, three years after the people thought they had elected Mr. Cleveland upon the tariff issue.

"It was well understood that a reform of the tariff was to be the nominal issue of the campaign of 1892, and that all the changes were to be rung upon that theme, but enthusiasm for a reform of the tariff would not have produced for the anti-snapper movement the sinews of war.  What did produce them was the conviction that the triumph of the Democratic party, with Mr. Cleveland at its head, would mean a repeal of the purchasing clause of the Sherman Act.  A large number of the men who joined actively in the work of organization, though also tariff reformers, could not have afforded to make the numerous self-sacrifices necessary to taking an active part in a canvass on any but such a vital issue as that of the maintenance of the integrity of the currency."

Mr. Solomon wrote that.  It either is or isn't true.  If it is true, the people were fooled in 1892.  They became excited over the "nominal" issue, and never heard of the real issue.  But was Mr. Cleveland also fooled ?  Did he talk tariff when he knew the real issue was money ?  The facts seem to show that he did.  He carried out the program that the bankers made for him, as I shall show.

Let us now see what happened immediately after Mr. Cleveland's inauguration.  Times were good.  Crops were good.  Trade journals, for three months, had reported business "very satisfactory" and "unusually strong."  But on March 12 ---eight days after Mr. Cleveland took the oath of office--- the banks made a general attack upon the business interests of the country.  The attack came in the form of a panic circular from the officers of the American Bankers' Association to the members of the association.  The onslaught was made for the purpose of terrifying Congress and the country.  A poll of the new Congress had shown in both houses an overwhelming majority against the repeal of the Silver-purchase Act.  The bankers therefore decided to give the country an "object lesson."  The people were to be thrust into misery and told that the silver law put them there.  Here is the circular:

"Dear Sir:  The interests of national bankers require immediate financial legislation by congress.  Silver, silver certificates and treasury notes must be retired and the national bank notes, upon a gold basis, made the only money.  This requires the authorization of $500,000,000 to $1,000,000,000 of new bonds as a basis of circulation.  You will, at once, retire one third of your circulation and call in one half of your loans.  Be careful to make a money stringency felt among your patrons, especially among influencial business men. Advocate an extra session of congress for the repeal of the purchase clause of the Sherman law;  and act with other banks of your city in securing a large petition to congress for its unconditional repeal, as per accompanying form.  Use personal influence with congressmen;  and particularly, let your wishes be known to your senators.  The future life of national banks as fixed and safe investments depends upon immediate action, as there is an increasing sentiment in favor of governmental legal tender notes and silver coinage."

What they Did to get It

That circular brought the panic.  It was like a bombshell in a glass factory.  Read the italicized words and you will understand why.  A third of the bank notes were to be retired from circulation, and half of the outstanding loans were to be called.  A terrific money stringency was to be created.  And, it was created.  A little time was required to bring it about, but it came.  Business was so nearly bled to death that it fainted.

Mr. Cleveland next carried out his part of the program by calling congress in extra session in August to repeal the Sherman Act.  I say he carried out his part of the program, because Mr. Solomon says there was a program.  I quote again from his article in the Forum.

"The nomination of Mr. Cleveland might be called a mere tempest in a tea-pot, compared with the battle to repeal the purchasing-clause of the Sherman act.  This required the calling of an extra session of congress in the summer ---and, after the people had had an object-lesson in the threatened danger.  The severity of this object-lesson in every part of the country is too well known to need much comment.  Surely the men who had lived to see the financial crises of 1873, 1884, and 1890 were convinced that the crisis of 1893 surpassed all of the others combined in its duration and in the extent of its damage."

Please observe not only that Mr. Salomon says there was a program for Mr. Cleveland to follow ---that he was to call an extra session of Congress--- but that prior to the session, the people were to be given an "object lesson" in the form of a panic.  Mr. Cleveland either did or did not know of the existence of this program.  If he did not know of its existence, he carried it out, precisely as it was made, without knowing of it.  If you believe he knew nothing of it, you must at least stand amazed at the good luck of the bankers in furnishing the "sinews of war" to a man who happened to do the thing of all things on Earth that they wanted done.  If you believe he did know about the program, you may be further interested in the message that Mr. Cleveland sent to congress the day it assembled in extra-ordinary session, a paragraph of which follows:

"Our unfortunate financial plight is not the result of untoward events, or of conditions related to our national resources;  nor is it traceable to any of the afflictions which frequently check national growth and prosperity.  With plenteous crops, with abundant promise of remunerative production and manufacture, with unusual invitation to safe investment, and with satisfactory assurance of business enterprise, suddenly financial distrust and fear have sprung up on every side."

Please observe that Mr. Cleveland also certified that crops, times and prospects were all good when the panic suddenly came. But, even if Mr. Cleveland knew nothing of the program that Banker Solomon said existed, the President could not have been much mystified as to the cause of the "financial distrust and fear" that suddenly "sprung up on every side."  A man in his position could hardly have escaped seeing a copy of the American Bankers' panic circular of March 12th.

Congress, however, was not speedily moved to action by the object lesson. Banker Solomon had not then written his article for the Forum and all of the features of the plot were not known.  But enough was known to make Congress suspicious and slow.  Senator Hill, in a speech in the Senate, on August 25, 1893, said:

"Some portion of the present panic may be traced to a concerted effort on the part of numerous monometallists to produce it, in order to further discredit silver as a part of the standard money of the country.  That fact is apparent everywhere we turn.  We observe it in their senseless arguments constantly used against free bimetallic coinage and their ceaseless endeavors to confuse the present issue by characterizing it as a contest between monometallism and bimetallism.  They seemed to be delighted when the first ray of financial trouble appeared.  They hailed the recent action of India with ill-concealed satisfaction.  They talked against silver, morning, noon, and night.

"They denounced not simply the Sherman silver-purchase bill, but the future use of silver as money.  With ghoulish glee they welcomed every bank failure, especially in the silver States, little dreaming that such failures would soon occur at their own doors.  They encouraged the hoarding of money, they inaugurated the policy of refusing loans to the people even upon the best of security;  they circulated false petitions, passed absurd and alarming resolutions, predicted the direst disaster, attacked the credit of the Government, sought to exact a premium upon currency, and attempted in every way to spread distrust broadcast throughout the land.

"The best financial system in the world could not stand such an organized and vicious attack upon it.  These disturbers ---these promoters of the public peril--- represent largely the creditor class, the men who desire to appreciate the gold dollar in order to subserve their own selfish interests, men who revel in hard times, men who drive harsh bargains with their fellow men in periods of financial distress, and men wholly unfamiliar with the true principles of monetary science.

"It is not strange that the present panic has been induced, intensified, and protracted by reason of these malign influences.  Having contributed much to bring about the present exigency, these men are now utterly unable to control it.  They have sown to the wind, and we are all now reaping the whirlwind together."

But Mr. Cleveland, if he was not a party to the bankers' program, stood as firmly as if he had been, and, late in September, the purchase-clause of the Sherman Law was repealed.

Briefly, such is the story of the real causes and purposes of the panic of 1893.  I could pile up the evidence that bankers created the panic ---I have a stack of it beside me as I write--- but what is the use ?  If the evidence I have given is not convincing, I could give nothing that would be convincing.  I cannot undertake to convince anyone who believes Banker Solomon did not know what he was writing about, or that the American Bankers' Association, for a high and holy purpose, sent out the panic circular of March 12, 1893.

But if it be conceded that the panic of 1893 was intentionally brought about, it next becomes important to inquire just how it was brought about.  That is a very interesting story.  It is also exceedingly important.  It throws light upon the Aldrich currency plan, and it shows how the great bankers, if they should be so disposed, can hurl us into another panic, within the next year or two, to stampede the people, through Congress, into passing the Aldrich currency plan. The "object lesson" plan of campaign worked well in 1893 ---why should we doubt that it will sometime be used again ?

The bankers were enabled to bring on the panic of 1893 because then, as now, they controlled the money and the credit of the country.  You will remember that in the panic circular, the bankers were ordered, not only to call in half of their loans, but to "retire one third of your circulation."  Let me explain what is meant by retiring a bank's "circulation."

The Power of the Banks Now

One of the numerous grafts of the national banking business is the graft of issuing bank notes that the law declares shall pass as money.  The notes issued by a bank are called its "circulation."  The legal procedure for the creation of such notes is this:

A national bank buys government bonds bearing, say, 2 per cent interest.  These bonds are sent to the Secretary of the Treasury with the statement that the bank wishes to deposit them as security for its own bank notes, of the same aggregate value, which it desires to issue.  The secretary prints bank notes bearing the name of the bank, with blanks for the signature of the president and the cashier.  The local bank supplies the signatures and places the notes in its vault as money.  The notes are lent out at prevailing rates of interest, or perhaps sent to Wall Street to be lent on call at enormous rates.  And, all the while the notes are drawing interest, the government bonds upon which the notes are based are also drawing interest.  In other words, if a bank deposit $1,000,000 in government bonds as a basis for national bank notes, the bank not only draws interest upon the bonds, even though the bonds are in Washington, but draws interest upon the $1,000,000 in bank notes.

Therefore, when the national banks, in 1893, were ordered to call in half of their loans and retire a third of their circulation, the retiring from circulation meant the withdrawal from public use of a third of the national bank notes.

Let us see what it would mean to-day to retire a third of the national bank notes.  Never, as you know, is there much money in this country.  The wealth of the nation is estimated at $130,000,000,000, but the entire stock of money, on October 2, 1911, was only $3,598,315,046, and of this amount, only $3,242,182,715 was in circulation. The rest was in the United States Treasury.

Putting it another way, there is about $33 worth of property in the country to every dollar in actual cash.  With so small a stock of money, we absolutely could not do business a day if the banks did not supplement the money-stock by resorting to numerous little tricks and devices that enable them to keep every actual dollar employed and drawing interest in several places at once.  These devices really amount to lending the bank's credit.  The transactions that involve the handling of cash are relatively small.  A farmer may give a mortgage for $1,000 and pay interest upon it, without ever seeing any kind of a dollar.  He simply receives authority to draw upon the bank's credit to the extent of $1,000, which he may do with checks in payment for farm implements or groceries.  The bank usually pays these checks by making a few figures in its books ---deducting from the farmer's credit and adding to the credits of the ones who present the checks.  But the farmer's mortgage having become a bank-asset, the bank may proceed to lend another farmer $1,000 upon the basis of the first farmer's mortgage.  A small amount of actual cash may thus be pyramided into a colossal pile of mortgages, each drawing interest upon the same small amount of cash.

In the same manner, $1,000,000 invested in government bonds that are used as a basis for bank circulation may be made to draw interest, from the government and from a good many borrowers at the same time.  For interest-drawing purposes, the million is no longer a million ---it may be five millions, or twenty millions.

When the banks extend the pyramiding too far and a storm comes, a panic ensues, which we are told is due to "over-speculation," or "over-extension of credits."  Some of the smaller banks fail, many business men are ruined, millions of workingmen are made idle, but the big banks are not hurt.  At such times, they buy back for a song securities that they had sold at top-notch prices and hold them until top-notch prices come again.  In short, the business of the big banker is a continuous harvest.  When times are good, he lends his money in many places at once, drawing interest at each place.  When times are bad, he gathers up, at panic prices, the commercial wrecks he has made and, in a few years, sells them back at high prices.

That is what happened in 1893, when the banks called in half of their loans and retired a third of their circulation.  The same acts would bring the same results to-day.  The great banks can bring a panic any time they choose.  We have foolishly permitted them to keep the supply of money so small that we cannot do business unless they supplement the money-supply by lending us their credit.  At any time, they may begin to call in loans as rapidly as they are due.  A loan may have no real money behind it ---it may be only the bank's credit--- but it stands for money, and every loan called amounts to the withdrawal from circulation of so much money.  The calling of half the loans is enough, in itself, to make times desperately hard.  The retirement, at the same time, of a third of the bank notes, could not fail to bring a panic.  On October 2, 1911, the stock of bank notes amounted to $737,788,358, or more than a fifth of the total supply of money.  Every dollar of these notes is at the beck of the banks.  They can be called in any time.

So closely do the bankers hold our lives, our happiness, and, if we have any, our property, in the hollow of their hands.  We talk about the great powers of government ---what government ever had such powers as the bankers ?  Their control of money makes even autocratic governments their slaves.  The Czar of Russia could not go to war to-morrow if the great bankers of the world told him they would not advance him a rouble.

The Aldrich currency plan has no other purpose than to strengthen the strangle-hold that the banks already have upon the country.  It seeks to do this both by placing the nation's supply of money absolutely in the hands of the banks and by giving the banks practically unlimited power to increase or decrease the nation's supply of money.  Mr. Aldrich and his associates may protest otherwise, but their protestations will be in vain.  Their protestations do not bear analysis.

The Aldrich Plan

First of all, the Aldrich plan provides that the United States government shall turn over all of the money that is now in the United States Treasury and all that shall be paid to the government during the next fifty years to a great bank that, for the purpose of lulling the people to sleep, is to be called the "National Reserve Association."  The money is to be placed at the disposal of the association without the payment of interest.  We now have in the treasury about $356,000,000.  Billions more will be paid in during the next fifty years.  Almost anybody would be glad to have the use of so much money for half a century without the payment of interest.  Nobody but the Aldrich crowd of bankers, however, has had the nerve to ask for it.

But keep your seats.  The worst is yet to come.  The plan provides that the banks that compose the association shall deposit with the central bank, 20 per cent of their capital.  Every bank in the country would soon be compelled to become a member of the association.  The banks are now capitalized at $2,000,000,000.  Twenty per cent of this sum is $400,000,000.  This huge sum would be collected from the various localities that compose the United States and added to the government's $356,000,000.

See, now, how readily this $756,000,000 might be multiplied by three and converted by the association into $2,268,000,000.  The plan provides that the association shall be authorized to issue notes (money) secured "at least one-third by gold or other lawful money, and the remaining portion by bonds of the United States or bankable commercial papers."

In other words, by putting up one dollar of real money, and adding $2 in anything that may be considered "bankable" paper, the association may issue $3 in its own notes.  The association may even issue $4 upon the same security, provided an annual tax of 1½ per cent be paid upon the fourth dollar.

There is a lot more to the plan, but it is mostly directions for running the machinery of the association.  Nowhere is the government of the United States recognized as an important factor, except for milking purposes.  There are some pleasant words about giving the government a percentage of the profits after everyone else has had his, but the government is not even given the right to name the governor of the association.  The President of the United States may only choose the governor from a list of names submitted by the association's board of directors.  Of course, the Aldrich crowd claim that Wall Street would never be able to control the association, but nobody who does not want to is compelled to believe the Aldrich crowd.

The Power of the Bank after that

The feeling in Washington this winter is that no attempt will be made at the present session to drive the Aldrich plan through congress.  Too many members are opposed to it.  The Aldrich crowd know this.  They also know better than to try to take what they cannot get.  But the great bankers of the country know that what cannot be gotten one year often comes rushing to them on a platter the next.  They know the power of an "object lesson" to weaken the will of the people.  Maybe they will try again the plan of 1893 and force a panic upon the country.  They can do it.  If a radical should seem likely to be elected President of the United States this year, two birds might be killed with one stone by springing a panic upon the country during the last weeks of the campaign.

This is not made as a prediction, but is set forth as a possibility.  These bankers are determined men.  They have a great graft.  Their great graft gives them great power.  They know how to use it.  They are not afraid of consequences.  The consequences do not hurt them.  They will use their power to create a panic whenever they believe the end justifies the means.

In the face of such a situation, what are the people to do ?  I should like someone to tell me what they can do.  If they "stand pat," nothing is more likely than that they will bring a panic upon themselves.  If they weaken, they will enslave themselves for fifty years ---the life of the association's charter--- and probably for a good deal longer.  But if the people ever occupy a safe position, they will have to take over the money-making power, even if the bankers force another panic upon them for proposing to do so.  The people, through congress, should control their own money supply.  No banker should have the power to add or subtract a dollar.

The Aldrich currency plan was never made to make men free.  It was made to make men slaves.  If enacted into law, it will make men slaves.  Money, credit, loans, debts ---everything will be absolutely in the control of the great bankers.  If they say your credit is good, your credit will be good.  If they say your credit is not good, your credit will not be good.  Business men who are the business friends of the great bankers will be able to borrow at least the money to which their resources justly entitle them.  Not everybody else will.  That means that the trusts will get the money and the little fellows will get bankruptcy.  No other result is possible.  The Aldrich plan seeks to give the great bankers complete control of money and credit.  The trusts and the great bankers are pretty much one and the same.  The trusts are against the little fellows.  Therefore, the Aldrich bank would be against the little fellows.  Why should we expect that bankers who are heavily interested in trusts should furnish capital to the competitors of trusts ?  We may expect that they would, but they wouldn't.

But that is not all.  The Aldrich plan would give the great bankers absolute power to say how much or how little money should be in the country.  Think of that !  We can not live without money.  Business cannot exist.  Panics come, millions are made idle, small businesses are ruined, and the resultant human suffering passes any man's computation.  The banks already have the power to bring these great evils, and they have selfishly used it;  but they want more power.  They not only want to retain the power to whip the country into submission by diminishing the money-supply, but they want equal power to increase the money supply.  Whenever there is a chance to get interest upon another dollar, they want power to make the dollar.  They want the power to put down a real dollar beside any bits of paper that they may choose to call worth $2 and, upon this basis, issue $3 of their own money.

If a farmer who had $1,000 worth of land should ask the government to hold the title to his land as security for $500 worth of money that he intended to issue, the Aldrich gentlemen, if they paid any attention to him at all, would denounce him as a "financial fanatic."  But they urge us not to lose the opportunity to authorize them to issue $1,000 upon the basis of one third real money and two-thirds mortgages and notes which may or may not be good, but which in no event can be any better than the farmer's land.

"We are in a Bad Fix"

The Aldrich plan was made for bankers only.  Business men and workingmen should be against it.  Workingmen in particular should be against it.  They stand to lose the most.  They stand to lose their homes and their lives.  Many of them lost their homes and their lives in the panic of 1893.  Every other panic has taken its toll of human lives.  But if enough persons are against the Aldrich plan to prevent its enactment, it will be pretty safe to figure upon a panic.

If the people of the United States have any aspirations beyond slavery, they had better stand against the Aldrich plan and take the panic.  We have permitted ourselves to be roped and thrown with many a bad law.  We are in a bad fix.  But we shall never be in a better fix by lying down while more bad laws are tied around us.  If a panic comes, we should take the panic.  But we should not then authorize Congress to set up the Aldrich bank !

Serve notice upon these gentlemen at the first opportunity that if they create another panic, not only will they fail to get what they want, but they will most assuredly get what they don't want.

Make it impossible for another banker ever to write again, as William Solomon wrote in the Forum article, heretofore mentioned:

"It may be said that it was only these indisputable proofs (the panic proofs) of the almost irrevocable ruin threatening the commercial and industrial institutions of the country which ultimately drove an unconditional repeal of the purchasing-clause of the Sherman act through the senate."

Let them know, if they bring another panic, that instead of getting the laws they want, they will get some laws that they don't want.  And, it is high time they were getting some of them.  Just as an illustration, do you recall the statement in the bankers' panic circular of March 12, 1893, that the retirement of silver, silver certificates, etc., which the bankers demanded, "requires the authorization of $500,000,000 to $1,000,000,000 of new bonds as a basis of circulation ?"

What did that mean ?  It meant that the bankers wanted to get rid of the money they could not control and substitute half a billion or a billion of money that they could control. And they wanted the government to issue half a billion or a billion of new bonds so the bankers could buy the bonds, deposit them with the treasury department, and then proceed to issue an equivalent in their own bank notes.

See what has happened.  See how the public debt has increased since 1893. public debt, as you know, is represented by government bonds.

The bankers have done precisely what, in 1893 they said they were going to do ---only they have done it more.  They have overshot their own mark.  They said they wanted the government to issue half a billion or a billion more bonds.  The government has issued almost $1,300,000,000 more bonds.  You are to-day paying interest upon those bonds, as well as several rates of interest upon the banks' notes issued upon the basis of the bonds.

What were the bonds issued for ?  For nothing that will ever do you much good.  Some of them went to dredge out the rivers connecting the great lakes, so that the steel trust could run larger ships and make more money.  Since 1883, we have spent more than $500,000,000 in "improving" rivers and harbors.  Some of the bonds went to build ornate public buildings in which political henchmen may sit to draw their fine salaries, and almost half a billion is going to pay for the Panama Canal.  Hundreds of millions more went for battleships, some of which are now obsolete, and to replace which, more bonds will have to be issued.  But the bankers, as they said, wanted the bonds, and some reasons had to be given for issuing them.

Yet the fact stands that the public debt to-day is higher than ever it was before.  It is $58,094,132 higher than the highest point that was reached as a result of the Civil War.  And what for ?  For bonds.  To give bankers something upon which to base their "circulation."

Are we jackasses ?  I believe we are.  And the worst of it is, the bankers seem to know it.

"Is it not possible, sir, that a conspiracy may have existed in the city of New York and in London to force this Government to issue bonds, to the end that they might be taken up for good financial investments, and that a run upon the national Treasury has been inaugurated and the gold drawn therefrom with this object in view, and that this has contributed to our distressed condition ?  Is it without the range of possibilities that in an effort to give the country an object lesson, in order to force the repeal of the Sherman law, the persons in the scheme have gone too far and have precipitated a panic which has passed beyond their control and reacted upon themselves ?"

Sound Currency the Dominant Political Issue.

Mr. William Salomon, born in Mobile, Ala., in 1852, is a member of the firm of Speyer & Company, one of the leading international banking houses in New York City.  He was a staunch supporter of Mr. Cleveland in 1892 and a member of the Committee on Currency of the Reform Club.

It was in 1891, the year before the last national conventions, that Mr. Cleveland wrote his famous letter on the importance of maintaining the stability of the currency, and the dangers menacing it through existing and threatened legislation.  His unpopularity with the Democratic organization in New York was well known.  It was well understood that the choice of the State Convention would fall upon Mr. Hill.  In contrast to Mr. Cleveland, the views of Mr. Hill on the subject of silver, and how far the United States might safely go in "protecting" it, were not surely known, and Mr. Hill was not at pains to make any clear statement on the subject.  Consequently a large number of influential men in the city of New York and in the State felt obliged to exert all their energies for the nomination of Mr. Cleveland and the defeat of Mr. Hill at the National Democratic Convention in 1892.  It is safe to say that most of the men who took part in the "anti-Snapper" movement knew very little about the wickedness charged against the existing State organization, and bore little or no personal animosity toward the leaders.  They did know, however, that the managers of the Democratic organization had shut their eyes and ears to the sentiment of the State upon a question which they deemed vital to the interests of the State and country.  With a right regard for the views of a vast majority of the Democratic party in New York, the regular State Convention was under obligation to choose a man whose utterances were clear and unmistakably on the side of a maintenance of the stability of the currency. [gold standard]

The dangers threatening the country from an overthrow of the existing basis of values, which, it was recognized, would result from the triumph of any but a "sound-money" [gold] candidate, inspired vast numbers of men to go into a party organization which was to claim the field against the so-called Hill-Murphy-Sheehan machine.  It was well understood that a reform of the tariff was to be the nominal issue of the campaign, and that all the changes were to be rung upon that theme, but enthusiasm for a reform of the tariff would not have produced for the "anti-Snapper" movement "the sinews of war."  What did produce them was the conviction that the triumph of the Democratic party, with Mr. Cleveland at its head, would mean a repeal of the purchasing-clause of the Sherman Act.  A large number of the men who joined actively in the work of organization, though also tariff reformers, could not have afforded to make the numerous self-sacrifices necessary in taking an active part in a canvass on any but such a vital issue as that of the maintenance of the integrity of the currency.  The work of these men, happily, was well rewarded, first in the National Convention in Chicago, and subsequently in Congress, by a repeal of the purchasing-clause of the Sherman Act.

The nomination of Mr. Cleveland might be called a mere tempest in a tea-pot, compared with the battle to repeal the purchasing-clause of the Sherman Act.  This required the calling of an extra session of Congress in the summer ---and after the whole people had had an object-lesson in the threatened dangers.  The severity of this object lesson in every part of the country is too well known to need much comment.  Surely men who had lived to see the financial crises of 1873, 1884 and 1890 were convinced that the crisis of 1893 surpassed all the others combined in its duration and in the extent of its damage.

The expedient of issuing clearing-house certificates adopted by the banks, which it is well understood is fraught with great danger, and possibly cannot be defended from the standpoint of strict right, reached its maximum use, which is some evidence of the extreme proportions that the panic of 1893 assumed.  It may be said that it was only these indisputable proofs of the almost irrevocable ruin threatening the commercial and industrial institutions of the country which ultimately drove an unconditional repeal of the purchasing-clause of the Sherman Act through the Senate, where "silver" Senators, guided only by their personal advantage, for weeks kept legislation at a deadlock.

The clouds which hung over the country's finances were scattered none too soon.  The United States had already pledged its credit to keep more than half a milliard dollars of silver money, besides its "legal-tender" issue, on a parity with gold.  Its means to do this rested only upon its high credit and the conviction of the people that it would be used to prevent a parting of gold from silver.  The relatively small amount of gold in the Treasury would vanish quickly if a breath of suspicion rested upon the Government's willingness to replenish the store, if need be, and even with this confidence, already two sales of interest-bearing obligations have been necessary to renew the legal minimum gold-reserve of one hundred million dollars.

Mr. Thomas from Colorado.  [On December 19, 1913, Mr. Thomas voted YES to the federal reserve bill]

Mr. President, I think I can say with perfect impunity that no panic in the past history of this country was ever caused by any attempted reform of the tariff or by a downward revision of tariff schedules;  that no such disturbance has ever occurred in the past which can be logically or properly traced to changes or attempted changes in the protective tariff laws of the United States.  The Senator [Mr. Smith from Michigan] is too well acquainted with the history of his country, he is too able a statesman to be ignorant of the fact that the panic to which he alluded the other day was born, reached maturity, and had practically passed its crisis before the Wilson bill became a law.

It was a panic, Mr. President, which had its origin in entirely different causes;  it was a panic deliberately produced in this country for the purpose of doing away with a statute of the United States, the operation of which was objectionable to the great financial powers of the country ---I refer to what was popularly known as the Sherman silver law, whose repeal was accomplished through the perpetration of the most colossal tragedy of the nineteenth century, regardless of its consequences upon the business interests of the Nation, upon the welfare of the people, upon the general prosperity then everywhere prevalent.

The campaign of 1892 was ostensibly a campaign between two great political parties, with our old familiar friend, the tariff, as the issue between them.  Each party nominated its ticket, adopted its platform, organized for the campaign, and made the issue of protection or tariff reform the principal subject of contention.  The people supposed that to be the issue;  but it was merely the decoy placed before the public for the purpose of arousing and deceiving them, as it did deceive them, while the real purpose of the campaign to be made effective through the election of Mr. Cleveland and the defeat of his opponent involved a tremendous revolution in the financial policy of the country.

Mr. President, I am not going into the history to any very great extent of that frightful period;  but I believe that it is necessary at the outset of the consideration and determination by the Senate of this great measure to let the country know what were the real causes of the great industrial disturbances of the past, to the end that this apprehension, this prophecy of disaster, this campaign of prophecies of bad times, may not have the effect upon the public mind which it is designed to have, and which, when entertained, necessarily deters many from a consideration and performance of what the duties and demands of the time require.

I have said that the panic of 1893, ascribed to the change in our tariff policy as contemplated and pledged by the Democratic administration and upon which issue it was supposed to have been elected, was wholly due to other causes.  There was a great silver sentiment in those days.  It was based upon the best of reasons.  Those who believed in bimetalism stood with their feet firmly planted on the Constitution of the United States, and the great heart of the common people everywhere sustained them.  They knew, as we knew, that both metals were essential in the performance of their monetary functions to the financial well-being of the country;  but the great financial interests of that day, Mr. President, were, and had been for years, absolutely opposed to anything but gold in this country as the ultimate money of redemption, the Constitution to the contrary notwithstanding.  Not only that, but they were absolutely opposed to a continuance in circulation of the greenbacks and demanded their retirement.  They also coveted the great power of note issue, which belongs to the Government and must belong to every government calling itself such the world over, and which, surrendered to the hands of private interests, would invest them with the most potent engine of sovereignty known to modern civilization.

President Cleveland was elected, and on the 4th day of March, 1893, took his seat.  Eight days afterwards, on the 12th day of March, this circular was sent to national banks in the United States:

Dear Sir:  The interests of national bankers require immediate financial legislation by Congress.  Silver, silver certificates, and Treasury notes must be retired.

I will read that again:

Silver, silver certificates, and Treasury notes must be retired and the national-bank notes, upon a gold basis, made the only money.  This requires the authorization of $500,000,000 to $1,000,000,000 of new bonds as a basis of circulation.  You will at once retire one-third of your circulation and call in one-half of your loans.  Be careful to make a money stringency felt among your patrons, especially among influential business men.  Advocate an extra session of Congress for the repeal of the purchase clause of the Sherman law, and act with other banks of your city in securing a large petition to Congress for its unconditional repeal, as per accompanying form.  Use personal influence with Congressmen, and, particularly, let your wishes be known to your Senators.

Then, as now, the votes of Senators seemed to be of supreme importance, perhaps of controlling importance, the House of Representatives being then, as now, too unwieldy and with a majority too great, coming fresh then, as now, from the people, to be influenced in the right direction.

The future life of national banks as fixed and safe investments depends upon immediate action, as there is an increasing sentiment in favor of governmental legal-tender notes and silver coinage.

That circular acted, as a writer upon the subject has well said, "like a bombshell in a glass factory."  A third of the bank notes were to be retired from circulation;  in other words, millions of circulating money were for all practical purposes to be destroyed and money made as dear as possible.  On the other hand, one-half of all the outstanding loans were to be called in.  No enginery which the mind of man can conceive, Mr. President, is so powerful as those two agencies combined for the production of widespread and universal national disaster, and it came.  And the interests which to-day are declaring their belief that disaster may result from the enactment of legislation designed to reduce the burdens of taxation may, if it becomes necessary from their point of view, precipitate panic through their control of credits and exchanges.  I said that that was a conspiracy.  There can be no question about it.

Mr. Norris.  I want to ask the Senator if he has the name of the person or the firm sending out that circular letter ?

Mr. Thomas.  The Senator will find an account of this subject in the July, 1895, number of The Forum, under an article entitled "Sound currency the dominant Political issue."

Mr. Norris.  Can the Senator not give the name of the author ?

Mr. Thomas.  I can not give it at this moment.  It emanated from New York City.

Mr. Norris.  Does the Senator know the bank from which it emanated ?

Mr. Thomas.  I do not.

Mr. Norris.  Does the Senator know how universally the instructions were obeyed which were contained in the circular ?

Mr. Thomas.  History answers that.

Mr. Norris.  I would ask the Senator particularly if the banks did immediately, and for the reason that they were commanded to do so by the circular, call in one-half of all their loans ?

Mr. Thomas.  The bankers retired a good part of their circulation and called in their loans, or a great many of them did.

Mr. Norris.  Those things have occurred, at least to some extent;  but I wanted to know, if I could, just how much effect that circular had upon the situation and how well it was obeyed.  It seems to me that the ordinary banker would refuse to be dictated to by a letter which absolutely commanded him to call in one-half of his loans.

Mr. Thomas.  Oh, I suppose that there were many bankers who paid no attention to it.  I do not mean to say that every person or every institution who received a copy of this circular acted in accordance with it.  I know that was not the case in my section of the country.

Mr. Norris.  I should like to ask the Senator if he can give us any information as to how much publicity was given to the circular at the time or about the time it was sent out ?

Mr. Thomas.  I can only answer that---

Mr. Norris.  I should think such a circular would have attracted a good deal of attention everywhere.

Mr. Thomas.  We heard a good deal during the special session of 1893 of an object lesson which had been given to the country.  We heard a great deal at that time about the object lesson that had been given the country, and this was the object lesson.

Mr. Norris.  Did the Senator at the time that it occurred have any knowledge of the circulation of that letter ?

Mr. Thomas.  I knew while the debates at the special session of 1893, to which I listened from the gallery, that such a circular had been issued.

Mr. Norris.  Was evidence given at that time as to who sent it ?

Mr. Thomas.  My recollection is that if the Senator will turn to the debates of that memorable special session he will find information upon the subject.

Mr. Norris.  I have no doubt of that;  and I am interrogating the Senator for the purpose of information only.  Personally I never heard of that circular, or if I did I have forgotten it.  It struck me as being a remarkable thing, and it seemed to me that perhaps the Senator might be able to give me much more definite information in regard to it.  Can the Senator inform us as to how general its circulation was ?  Was it sent to all of the banks ?

Mr. Thomas.  My recollection is that it was addressed to the national banks.

Mr. Norris.  I understand that.

Mr. Thomas.  The pamphlet which I have in my possession is an article upon the subject by Allan L. Benson, which appeared in Pearson's Magazine for March, 1912.  I shall be very glad to give it to the Senator.

Mr. Norris.  Has the Senator any other information as to its actual circulation than what is contained in that article ?

Mr. Thomas.  I have referred to the article in The Forum and also to the debates at the special session.  That is as much information as I can give the Senator at the present time.

Mr. Norris.  Now, I should like to ask the Senator, if he will yield further, whether he does not know, as a matter of fact, that this letter could not have been widely circulated, or that, as a matter of fact, it was not something that was generally known all over the country ?

Mr. Thomas.  Oh, Mr. President, it was not published in the daily papers.  It was not sent to everybody.

Mr. Norris.  Would it not have been published in the daily papers if it had been sent broadcast ?

Mr. Thomas.  Oh, undoubtedly; and if it had been published in the daily papers it would have defeated its purpose.

Mr. Norris.  The Senator does not mean to say that if every banker did receive one, he would have been willing to conceal the fact that he had received it ?

Mr. Thomas.  I do not think I said that.

Mr. Norris.  No;  I say, the Senator does not want to give that impression ?

Mr. Thomas. No.

Mr. Norris.  Then, as a matter of fact, if it was sent to all of the bankers in the country, it would naturally have followed that a great many copies would have gotten into other hands and would have been given publicity immediately ?

Mr. Thomas.  That depends entirely upon the circumstances under which it was sent.  I have no doubt circulars have been sent since then by the same interests.

Mr. Norris.  Oh, I have no doubt of that, either.

Mr. Thomas.  Which desire now to take the power of note issue from the Government of the United States and to retire the outstanding greenbacks.

Mr. Norris.  I have no doubt but that that has often occurred, but in this particular instance it seems to me a remarkable statement is made.  A command emanates from some source telling the bankers how they shall conduct their business, and it seems to me remarkable that it should not have received great publicity at the time.

Mr. Thomas.  The men who control the finances of the United States are very apt to command, and do command, and their commands are generally obeyed.

Mr. Root [voted against the federal reserve bill].  I did not observe who signed this circular.  I did not hear the Senator read the name of the signer.

Mr. Thomas.  I did not give the name of the signer, because there is no signer in the copy I have.

Mr. Root.  Was this an anonymous circular ?

Mr. Thomas.  I do not know, but I do not think it was.  I think perhaps the Senator knows better than I do where it came from.

Mr. Root.  I never heard of it.  The idea that any considerable effect would be produced upon the action of the bankers of this country by a circular without any signature seems to me to be rather absurd.

Mr. Thomas.  I am not responsible for the manner in which it strikes the mind of the Senator from New York.

I think the Senator from New York is personally acquainted with Mr. William Solomon of the great international banking house of Speyer & Co., who perhaps can give him a great deal of information, if he is still living.

Mr. Root.  Mr. President, I have not the honor of the acquaintance of that gentleman, and if I had I certainly should not expect him to give me more or better information than the Senator from Colorado thinks would justify him as the basis of a speech to the Senate.  It is the Senator from Colorado who has produced this circular and has stated that this was the basis of the panic which followed the repeal of the Sherman silver act and the agitation of the Wilson tariff bill.  It is his responsibility to tell us what it is;  and if he does not know who signed it, or whether it was signed by anyone, then he is taking up the time of the Senate on a very slender foundation of conjecture and suspicion.

Mr. Thomas.  Mr. President, the Senator from Colorado does not have to take instructions from the Senator from New York, either as to this circular or as to anything else.  He is responsible to his own people and to the country for what he says, and he proposes to continue this discussion along those lines, however much the Senator from New York may disapprove it.

Mr. Page [voted against the federal reserve bill].  I have great respect for the Senator from Colorado, but I think I was in a position to have known if any such circular as he has described had been sent to all the national banks of this country.  I understand the Senator to go farther, and to say that a goodly portion of the banks of the country responded to this letter and reduced their loans as suggested by it.

I am morally certain that, so far as my own State is concerned, there was not a single bank in Vermont that responded to that circular if it came;  and I think I am in position to have known the fact if it had existed.  I want to say further to the Senator, that if he will investigate the matter and finds that a single bank in Vermont proceeded along the lines suggested in that circular, and will name some benevolent institution in his State that is in need, I will give it a check for $250.  I will do that for a single instance of any bank in Vermont that complied with that suggestion, if it was received;  and I do not believe any one of them did receive it.  Indeed, Mr. President, it seems to me the statement is so preposterous as hardly to require an answer.  Still, I have no doubt that the Senator from Colorado makes it in good faith.

Mr. Thomas.  This "preposterous" statement seems to be calling forth a good many answers.

Mr. Lane [voted for the federal reserve bill].  I will say for the information of the various Senators, while I am not taking any part in this discussion, that I heard rumors that there was such a circular in existence, and inquired of a friend of mine who is and was a national banker and did see the circular.  He had received such a circular;  it did exist;  I read it myself, but I regret to say I have forgotten who signed it.  It came from New York.  I saw that identical circular, and I was assured by this banker that he acted upon it.  You may have that for just what it is worth.  You are entirely welcome to the information.

Mr. Smoot [voted against the federal reserve bill].  Mr. President, if the Senator from Colorado does not know the name, and the Senator from Oregon will give us the name of the banker to whom he refers, we can telegraph and find out;  perhaps he can remember the name of the gentleman who signed the circular.

Mr. Lane.  I must decline to give the name of the banker.  He is a friend of mine and is still in the banking business, and I fear that it would be disastrous to him.

Mr. Thomas.  The Senator from Oregon is very wise.

Mr. Smoot.  Mr. President, I want to say that this is the first time I ever heard of this circular.

Mr. Lane.  I have known of it for, lo, these many years.

Mr. Smoot.  I, of course, am not going to question it until I make further examination into the matter, but I know that I was in such a position at that time that if any such circular had been sent to the banks in general I would have known it.  I want to say to the Senator from Colorado that if a circular of that kind should come to a bank of which I was president, or of which I was a director, I should consider it an insult.  There is no bank and no man in this country that has a right to demand of any banking institution what it shall do with its loans or its circulation.  If the statement made by the Senator is correct, we can find out in about 10 minutes whether or not the circulation of the banks was withdrawn.

Mr. Thomas.  Oh, yes;  I think if the Senator will consult the reports of the Comptroller of the Currency about the time a panic was inaugurated, he will find that it came about very largely through withdrawal of circulation and the calling in of loans.

Mr. Smoot.  I think the Senator is mistaken as to the circulation question.  Of course it is not my desire at this time to discuss the question as to what was the cause of the panic of 1893-94-95.  I have listened with a great deal of pleasure to what the Senator has said.

Mr. Burton [voted against the federal reserve bill].  The circulation of national banks reached its minimum in the year 1891.  There was a very sharp decline in circulation from 1888 to 1891, due principally to a perfectly plain cause, namely, the very considerable amount of silver which was circulating as currency.  That decrease continued to the year 1891, when it reached its minimum ---that is, the circulation of national-bank notes.  It increased in 1892 over 1891.  It increased in 1893 over 1892, and again in 1894 over 1893.  So it seems that the inference of the Senator from Colorado is incorrect.

Mr. Thomas.  Perhaps it is, Mr. President;  but the historic fact is that in the early summer of 1893, 15 months before the Wilson bill became a law, this country was visited with the most tremendous panic in its history.  Times were good, crops were abundant, industry was thriving.  There was no occasion for it unless it was produced by artificial means.  I have the right to call attention to these matters in answer to the assertion that the Wilson bill of 1894, which became a law in August of that year, carried in its train a fearful freight of miseries to the people of the United States and to its various industries.

Mr. Solomon, in the issue of the Forum to which I refer, said, upon this subject ---and I believe I stated that he was, or used to be, a member of the great banking house of Speyer & Co.:

It was well understood that a reform of the tariff was to be the nominal issue of the campaign, and that all the changes were to be rung upon that theme, but enthusiasm for a reform of the tariff would not have produced for the "anti-Snapper" movement "the sinews of war."

That reminds me of the "antisnapper movement," as it was called, which was the name given by the Cleveland Democrats to the early convention of Senator Hill, which was called for the purpose of electing Hill delegates to the Chicago convention of that year.

What did produce them was the conviction that the triumph of the Democratic party, with Mr. Cleveland at its head, would mean a repeal of the purchasing-clause of the Sherman Act.  A large number of the men who joined actively in the work of organization, though also tariff reformers, could not have afforded to make the numerous self-sacrifices necessary in taking an active part in a canvass on any but such a vital issue as that of the maintenance of the integrity of the currency.

The nomination of Mr. Cleveland might be called a mere tempest in a tea-pot, compared with the battle to repeal the purchasing-clause of the Sherman Act.  This required the calling of an extra session of Congress in the summer ---and after the whole people had had an object-lesson in the threatened dangers.

Of what did that object lesson consist, unless it was something of this sort ?  I do not think the political literature of the day will show any other than this particular object lesson, deliberately inaugurated for the purpose of securing the repeal of the purchasing clause of that statute.  He continues:

The severity of this object lesson in every part of the country is too well known to need much comment.  Surely men who had lived to see the financial crises of 1873, 1884 and 1890 were convinced that the crisis of 1893 surpassed all the others combined in its duration and in the extent of its damage.

What did Senator Hill say in discussing the subject of the repeal on the floor of this Chamber on August 25, 1893 ?  I read:

they inaugurated the policy of refusing loans to the people even upon the best of security;  they circulated false petitions, passed absurd and alarming resolutions, predicted the direst disaster, attacked the credit of the Government, sought to exact a premium upon currency, and attempted in every way to spread distrust broadcast throughout the land.  The best financial system in the world could not stand such an organized and vicious attack upon it.  These disturbers ---these promoters of the public peril--- represent largely the creditor class, the men who desire to appreciate the gold dollar in order to subserve their own selfish interests, men who revel in hard times, men who drive harsh bargains with their fellow men in periods of financial distress, and men wholly unfamiliar with the true principles of monetary science.

Mr. President, without reference to how much money was retired or whether any was retired, without reference to the calling in of loans or whether any loans were called in, the colossal fact is that some method was resorted to for the purpose of producing an object lesson, the effect of which was to be the repeal of an obnoxious financial statute.  If Senators who say or think this circular is mythical, who deride its existence, will give any other basis, any other object lesson than the one to which I have called attention, which was then administered to the people of a nation, I am perfectly willing to accept it to the extent to which it goes.  But until that is done I maintain that the panic of 1893 was a manufactured panic ---manufactured by the means I have asserted, manufactured for a deliberate purpose, which was finally accomplished without regard to the misery, the bankruptcy, and the ruin that followed for two or three years in its trail, a condition which I trust in God this country may never again encounter, but which can not whatever may be said of it, be laid to the passage and subsequent operation of a Democratic tariff law, as it was called.  We have the result;  we have this assigned as the cause, and that is either the cause or some other than the tariff situation must be assigned for it.

One further reflection, Mr. President, and I am done.  I do not think even the Senator from Michigan will contend that the panic of 1907 was due to any threat of tariff revision, or that it was due to any impending disturbance of existing industrial conditions.  Every man is entitled to his own opinion concerning these matters.

My opinion is, Mr. President, that that, too, had for its subject the suppression of what big business considered the incendiary utterances of the President of the United States against the acquisition of the Tennessee Coal & Iron Co. by the Steel Trust, the suppression of an irritating rival of the Standard Oil Co., or some of its constituent elements, to be followed by financial legislation that would go one step further and give to a great central reserve association, as it was called, but a great central national bank, as it would be, the absolute power to determine how much money the people of the United States should have and when and under what circumstances;  to take from the Government of the United States its power of note issue and lodge it in the hands of this tremendous power which today is the real menace to the welfare, to the liberties, and the institutions of the people of the United States.

I deny that anywhere throughout the history of this country can any statement find justification which places upon an attempted reduction of taxation through legislation the responsibility for any financial or industrial disaster.  I am satisfied, Mr. President, that the country will go through the present great reform and the country will adapt and adjust itself to the great changes that the Underwood bill is designed to carry out, with no disturbance except those which arise from an aroused apprehension that is being largely manufactured for the purpose of producing just such conditions, to the end that the hands of the Democratic Party may be stayed, its promises defeated, and its purposes paralyzed.

Mr. Smoot.  Mr. President, if morning business is closed, I should like to address the Senate for just a few minutes.  On the 15th of this month the Senator from Colorado [Mr. Thomas] delivered what I considered a rather sensational address in this Chamber.  In it he referred particularly to a circular claimed to have been issued on the 12th day of March, 1893.  The Senator read the circular and stated that it was from the March, 1912, issue of Pearson's Magazine.  In order that the facts in relation to this circular may be known to all, I wish to say that I have taken up this question with the American Bankers' Association, for that article stated that the circular emanated from that association.

The following day I directed a letter to the secretary of the American Bankers' Association, inclosing the statement made by the Senator from Colorado, and asking whether there was any truth in the statement that this circular was issued by the American Bankers' Association, or if the circular was issued and signed by anyone else, so far as he knew.  This morning I received a letter from Fred. E. Farnsworth, the general secretary of the American Bankers' Association, which I will read:

The American Bankers' Association,
New York, May 21, 1913.

Hon. Reed Smoot,
United States Senate, Washington, D.C.

My Dear Senator:  Acknowledging your letter of May 19, 1913, and the information contained therein regarding a part of a speech delivered by Senator Thomas, of Colorado, found in the Congressional Record of May 16, 1913, I am glad, indeed, to be given this opportunity to stamp the circular referred to as a fraud and a dastardly attack reflecting upon the American Bankers' Association and the bankers and financiers of the country.  I am familiar with the article referred to, which appeared in Pearson's Magazine of March, 1912, headed "That money difficulty."

We have had several inquiries since March, 1912, concerning the circular mentioned, but have not considered that it was worthy of notice or publicity on the part of the American Bankers' Association.  However, now that the matter has been brought ap in Congress, I am pleased to furnish you with documentary evidence as to the fraud perpetrated at the time named--- 1893.

Under separate cover I am sending to you by express, charges prepaid, the proceedings of the American Bankers' Association for the years 1894 and 1896, so that you will have at first hand the original denial of this circular and the action taken in regard thereto.

The controversy starts on page 17 of the proceedings of 1894.  A copy of the circular is printed in these proceedings, and you will note that it was unsigned and dated on the Sabbath.  You will also note that under the signature of E.H. Pullen, chairman of the executive council of the American Bankers' Association, the circular was declared a fraud and an authoritative statement made that it was not issued or countenanced by the American Bankers' Association.

This entire matter was brought to the attention of the executive council of the American Bankers' Association, and the chairman of the executive council, Mr. E.H. Pullen, was afterwards, in 1895, president of this association, as well as vice president of the National Bank of the Republic, of New York City, well known and respected in this community and now deceased.

In the proceedings of 1896, page 21, you will also find a copy of a communication from W.J. Bryan. which, at that time, was answered by Joseph C. Hendrix, chairman of our executive council and a prominent banker of New York City, as well as a Member of Congress representing this section.

As these two copies of the proceedings are taken from the library of the association and are the only copies we have, you will appreciate their value to us and kindly return them when they shall have answered your purpose.

I trust now that this matter can be placed in its proper light and repudiation given to the attacks made on the banks and bankers of the country and the American Bankers' Association, and I notice with great satisfaction and pleasure your statement proving the assertion of Senator Thomas untrue regarding the decrease of circulation during the Democratic administration of 1893-1897.

Very truly, yours, Fred. E. Farnsworth,
General Secretary.

Mr. President, I have here the proceedings of the American Bankers' Association for 1894, and also the proceedings of the same association for 1896.  On page 17 of the proceedings of 1894 Mr. E.H. Pullen, then chairman of the executive council, in his annual report, referring to this circular, makes this statement:

On the 29th day of March, 1894, we received the following letter addressed to the chairman:

German National Bank,
Little Rock, Ark., March 26, 1894.

Dear Sir:  Herewith I inclose you clipping from the Little Rock Daily Press in their issue of the 24th instant which explains itself.  It seems that Mr Sovreign, grand master of the Knights of Labor, read what purported to be a circular issued by the American Bankers' Association last March upon which the officials of the two national banks of this city were interviewed with the result as printed.

If our statements are incorrect, will you kindly so indicate in your letter ?  If it is not objectionable to you it might be to the advantage of the banks that your reply be published.  However, if you would prefer that this should not be done, you can so indicate in your answer.

Very truly, yours,
Oscar Davis, Cashier.

In answer to which letter the chairman sent the following telegram:

New York, March 29, 1894.

German National Bank,
Little Rock, Ark.

Your letter 26th with slip received.  The American Bankers' Association never issued such circular.  It is a fabrication and forgery.  March 12, 1893, was Sunday.  The association repudiates the circular as a lie out of whole cloth.  I write to-day.

He also wrote a letter to said bank under same date, as follows:

"The circular in question was never issued by the American Bankers' Association.  It bears no signature and is dated on the Sabbath.  It carries in its mandatory language extraordinary suggestions and idiotic theories, the evidence of its falsehood, and no sane man could possibly accept it as genuine.  I am very anxious to fasten upon the proper person the responsibility of this false circular.  I shall write to Grand Master Sovreign on the subject and demand from him the proof of the genuineness of the circular (which I am sure he can not furnish), or an acknowledgment that he has no proof to offer.  It is questionable, however, whether I can trace the lie to the party who originally uttered and published it.  I should be glad if the Little Rock Daily Press would publish this letter."

This letter was signed by the chairman, who addressed the following letter under date of March 29, 1894, to---

J.R. Sovreign, Esq.,
General Master Workman, Knights of Labor,
Des Moines, Iowa.

Sir:  At a meeting held at Little Rock, Ark., on Thursday, March 22, 1894 you spoke to a large audience and embodied in your address what you are pleased to call The Panic Circular, which you stated was issued March 12, 1893, by The American Bankers' Association.  No such circular was or could be issued by the American Bankers' Association.  It carries on its face the evidence of its falsehood.  It is unsigned, and dated on the Sabbath.  Will you be good enough to inform me what proof you can furnish of your statement and send me one of said circulars, bearing the signature of one or more of the officers of said association.  I take it for granted that you satisfied yourself, by careful investigation, as to the authenticity of the said circular before you declared it to have been issued by The American Bankers' Association.  Please give me the data you obtained.  I also take it for granted that you will cheerfully give as wide publicity to our denial of the genuineness of this circular as you have in the statement that it was issued by this association.  Awaiting your reply, I am,

"Very truly, yours. etc."

In reply to this letter from the American Bankers' Association, J.R. Sovreign, grand master workman wrote to Mr. Pullen on April 4, 1894:

Des Moines, Iowa, April 4, 1894.

Dear Sir:  Replying to your kind favor of 29th ultimo, I beg to inform you that the circular letter issued in my address at Little Rock, Ark., to which you referred, I cut out of a newspaper or magazine, I do not now remember which;  I carried it in my pocket for two or three months and never referred to it in any public way except at Little Rock, and by mere incident I happened to think of it and took it from my pocket and read it to the audience, and after the meeting I turned it over to the city press of Little Rock to copy, at their request.  I saw the circular in several newspapers about the time it first appeared to the public, and I did not know until I received your letter that its authenticity was questioned.  The circular does not bear the signature of anyone.  I assure you that I have no desire to misquote any person or association, and your statement that that circular is false will be accepted by me, and I will notify the press of Little Rock that the authenticity of the circular is denied by your association, and at the earliest possible time I will return to Little Rock and in a public address will correct the statement.  I am of the opinion that the place to correct an error is where the error is made;  therefore, in justice to your association, I will return to Little Rock and make the correction from that place and in my criticisms of our national banking system I will confine myself to the law and the Congressional Records, and concerning the cause of the recent panic I will use some private letters from leading lights in financial circles, the originals of which I have in my possession.

Thanking you very heartily for calling my attention to the error made at Little Rock and pledging you all possible reparation at my hands, I am,

Respectfully, yours, J.R. Sovreign, G.M.W.

Mr. President, the authenticity of the circular has been denied by the American Bankers' Association every time it has been brought to their attention, and denied in the strongest possible terms.  I think if our Democratic brethren had believed the American Bankers' Association was the author of the circular or responsible for its circulation they would have referred to it in every campaign in the United States since 1896.  But the thing was dead until Mr. Allen resurrected the forgery and published it in Pearson's Magazine.  Then from that magazine article it was brought into this Chamber and referred to as evidence in support of a certain contention.

It is true the Senator from Colorado stated that he did not know whether the circular was signed by anyone or not, but he believed that it was.  I am not going to say one word against his action in bringing it into the Chamber, for it has given me a chance, at least, to record in the Senate of the United States the facts showing exactly what happened respecting this circular and the false and the fraudulent attempt to impress the people of this country with the belief that the American Bankers' Association, an association not only composed of representatives of the national banks of the country but the State banks as well, was the author of this fraudulent circular.

Mr. Thomas.  Mr. President, the occasion of my remarks the other day, which, among other things, resulted in the production of the circular to which the Senator from Utah has just referred, was the assertion a few days before then by the Senator from Michigan [Mr. Smith], in substance, that all attempts to enact the Democratic financial policy ---I think that was the expression used--- into legislation had resulted in industrial disaster;  and he made specific reference to the Wilson bill of 1894 and the panic conditions which that bill was held responsible for.

My purpose in replying was to emphasize the fact that long before that bill had been formulated, long before it had become a law, the panic of 1893, as it was called, had occurred and had practically run its course, and that it was a bankers' panic produced for the purpose of relieving the statutes of the United States of an obnoxious law known as the Sherman silver-purchasing act.

In support of that contention I referred to an article which appeared in Pearson's Magazine of date March, 1912, which contained this circular and which discussed some of the consequences of the panic which was then inaugurated. That magazine has one of the largest circulations in the country.  It is an old magazine.  It is financially a  responsible magazine.  It is one which justly commands the attention and the interest of the readers of public and current topics throughout the land.

March, 1912, preceded by 15 months the occasion of my reference to that letter.  During that time I saw no denial of its authenticity, notwithstanding the fact it had circulated broadcast over the country under the sanction of the proprietors of that magazine.

I referred to it in connection with a number of other circumstances that I intended to speak about but I did not do so at that time because of the desire of my associates on this side of the Chamber to reach a vote upon the pending question as soon as convenient, but to which I shall refer more at length hereafter.

When I was asked what signature the circular bore, as stated by the Senator from Utah, I could not answer that any signature was attached to it.  I gave it as it appeared in the magazine, and I am not conscious of having charged it upon the American Bankers' Association.  I did say in substance that it was a part of the conspiracy, because I called it so, to produce such a condition of business distress and disaster as would lead to the repeal of the purchasing clause of the Sherman law.

During the discussion the Senator from Oregon [Mr. Lane], who I believe to be absolutely worthy of credence, a Member of this honorable body, made the statement that he had seen that identical circular in the year 1893.  I referred to the fact that it had reached my knowledge during the course of the debates at the special session of Congress in 1893, called by the President for the purpose of securing and which resulted in the repeal of the purchasing clause of the Sherman law.

Now, Mr. President, one thing is certain ---at least I think it is certain--- that this circular, from some source, did make its appearance in the year 1893.  The fact that the date falls upon Sunday is, to my mind, immaterial.  It may be that nobody was responsible for it;  it may be that it was designed to carry out and effectuate a fraudulent purpose;  but it did in fact appear in that year.

I have a letter from a man by the name of A.E. Beebe who lives at Niles, Mich., and who writes me that it was called to his attention in 1893.  This letter bears date the 18th of March, 1913.

In 1900 a small volume was published in the city of Chicago entitled "Business without money," by William Henry Van Ornum, Ph.D., and on page 30 of that work appears this identical circular.  To what extent this book has had circulation I do not know, but I do know that it was then current in book form, and was not denied, or if its authenticity was challenged after thus appearing, the fact has not been brought to my attention.

I have yet to be convinced ---although perhaps that is a matter of no concern to anyone but myself--- that this circular did not in some way form a part and parcel of the general purpose to force public opinion and the hands of the Congress of the United States in the repeal of the silver-purchasing clause of the so-called Sherman law.

I do not care to say anything more about this at present, Mr. President, except to renew the statement that before Congress adjourns I shall attempt to prove or to establish step by step the great truth that the panic of 1893 was as completely dissociated from the Wilson bill of 1894 as anything could be, and also that the panic was brought about by concerted action between the great financial powers of this country and the then so-called Democratic administration.

Mr. Smoot.  Mr. President, I do not know how it was with other Senators, but the impression which was made upon me by the speech of the Senator from Colorado [Mr. Thomas] was that there were two reasons for the panic of 1893.  One was this circular letter;  the other, that through this letter the national-bank note circulation was reduced and that the bankers of this country had followed out the instructions of the circular.

I say, Mr. President, without hesitation, that the circular is a fraud and was never issued by the American Bankers' Association.  I also say without hesitation that the national-bank note circulation of this country increased from the year 1891 up to and including the year 1897.  There was not a single year during that time when it did not increase.  As I called attention to it the other day, I want to call attention to it now.

The circulation in 1891 was $162,220,646;  in 1892 it was $167,271,517;  in 1893 it was $174,600,786;  in 1894 it was $200,718,200;  in 1895 it was $206,903,601;  and in 1896 it was $215,168,122.