The History of Banking Fraud:
Chapter 7
NATIONAL BANKS SECURE A CONTINUATION OF THEIR EXISTENCE.
The Coming Battle
By M. W. WALBERT, 1899
236
"The abandonment of silver will result in the enhancement of the burden of
all debts and fixed charges, acting as a drag upon production, and
suffocation, strangulation, are words hardly too strong to express the
agony of the industrial body when embraced in the fatal coils of a
contracting money." - Francis A. Walker.
"Many of our rich men have not been content with equal protection and
equal benefits, but have besought as to make them richer by act of
Congress. By attempting to gratify their desires we have, in the results
of our legislation, arrayed section against section, interest against
interest, and man against man in a fearful commotion which threatens to
shake the very foundation of our union.
"It is time to pause in our career; to review our principles, and, if
possible, to revive that devoted patriotism and spirit of compromise that
distinguished the sages of the Revolution and the fathers of our union. If
we cannot at once, in justice to interests invested under improvident
legislation, make our Government what it ought to be, we can at least take
a stand against all new grants of monopolies and exclusive privileges;
against any prostitution of our Government to the advancement of a few at
the expense of the many, and in favor of compromise and gradual reform in
our code of laws and system of political economy." - Andrew Jackson.
In the presidential campaign of 1880, the two great political parties
arrayed themselves against each other in this contest with the utmost
zeal.
The National Republican Convention met in Chicago
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The battle cry of the Republican party in this notable contest was "A
solid South against a solid North."
The money power joined in the senseless hue and cry, and by playing upon
the smouldering prejudices of the people growing out of the late war, and
by seeking to reopen the festering wounds of sectional hate, aimed to
control the election and consequently the financial policy of the
Government.
Owing to the dissensions of the New York State democracy, which grew out
of the gubernatorial election of 1879, and which were not healed, and the
lavish use of money, the Republican candidates were successful.
After the 4th of March, 1881 the Republicans had full control of the
Government, and there was no obstacle in their way to hinder or obstruct
the execution of their policy.
William Windom, of Minnesota, was selected by President Garfield for the
post of Secretary of the Treasury.
After the adjournment of Congress in the early part of 1881, Secretary
Windom and the bond-holders mutually agreed that the bonds bearing five
and six per cent interest then maturing, should be refunded at three and
one-half per cent, payable at the option of the Government.
This action of Secretary Windom had no authority in any law then existing,
and was an unwarranted assumption of the constitutional power of Congress
by an executive officer.
The usurpation of legislative power by the Secretary of the Treasury was
tolerated for the reason that it saved the Government a large amount of
interest;
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nevertheless, Congress, at its next session, sharply criticized Mr. Windom
for this exercise of arbitrary power.
The action of the bond-holders in voluntarily accepting a lower rate of
interest than their contracts called for excited a great deal of comment
at the time.
The supporters of the national banking money power never wearied of
pointing at this sacrifice by the national creditors as a remarkable
example of patriotism, and asserted that the bond-holders and national
banks were not as dangerous to the liberties of the people as their
opponents declared them to be.
This apparent sacrifice of millions of interest annually was a rare stroke
of policy on the money power. The shrewd men at the head of the national
banking system were thoroughly acquainted with those traits of character
which distinguished who American people from all others of modern times.
They knew that we, as a people, loot to the events of today and do not
worry with apprehensions for the future. Moreover, the country had entered
upon a career of prosperity, the tendency of which was to make the people
forgetful of the wrongs heaped upon them in the past by the present
banking system.
According to the provisions of the national banking law of 1863,the
charters of the national banks would expire in 1884, and the time seemed
propitious for this money poorer to carry into execution the next step of
its policy - which was to obtain the passage of a law through Congress
extending the franchises of the national banks.
Therefore, during the time that the fears of the people were temporarily
allayed by the voluntary
240
acts of the bond-holders and banking interests in accepting a lower rate
of interest on their bonds, the national banking money power seized this
golden opportunity to secure an extension of their system.
Hence, at the next session of Congress, in 1882, Mr. Crapo, of
Massachusetts, introduced a joint resolution authorizing national banking
associations to extend their corporate existence for the period of twenty
years. The speeches made against its passage were very able, notably those
of Representatives Carlisle and Culberson.
So powerful was the opposition against an extension of the national
banking system that the Democratic minority succeeded in engrafting a
section upon the resolution, by which the circulating notes of national
banks could not be surrendered to an amount exceeding $3,000,000 per
month.
This curtailed the power of the banks to suddenly contract the volume of
currency, by surrendering up for cancellation large amounts of their
circulating notes, a practice to which they had resorted many times in the
past twenty years.
During the debate upon this resolution it was shown by the opponents of
the national banking system that the New York Clearing House Association
had conspired against the constitutional power of Congress, by refusing to
accept silver dollars and silver certificates; that this association of
national banks held themselves superior to the law, and arrayed themselves
in solid phalanx against the financial interests of the people.
It was further shown that the poorer of the national banks was so great
that they had the means to unsettle business throughout the country, and
that every panic,
241
from which the country suffered since the close of the war, was originated
by these banks.
By an additional amendment to the resolution it was made compulsory on the
part of the clearing house associations to accept silver certificates in
settlement of balances.
Again, the privilege of the national banks to institute suits at law in
the Federal courts, as courts of original jurisdiction, was taken array,
and this means of dragging litigants hundreds of miles from their homes at
immense sacrifice of time and money, was denied to these corporations,
which heretofore was one of their most tyrannical means of harassing
individuals.
Therefore it will be seen that the sturdy opposition of the Democratic
minority in the House had succeeded in extracting a few of the sharpest
fangs of the greedy national banking money poorer.
As amended, the resolution passed the House and was transmitted to the
Senate.
Daring the Senate debate on the joint resolution to renew the charters of
the national banks, Senator Voorhees eloquently and truthfully depicted
the vast bounties that had been bestowed upon these creatures of the
Government.
Ho pointed out the overshadowing influence of the national banking power.
On June 19th, 1882, he said: -
"A brief glance at the conduct of the banks during the last year and a
half is all that I can indulge in at this time, but it is sufficient to
prove the truth of what I say.
"In the closing days of the last Congress and of the last Administration
the banks precipitated an issue upon the people which ought not to be
forgotten on an
242
occasion like this; an issue so full of danger to constitutional liberty
that it ought to be faithfully remembered now that they are asking a new
and indefinite lease of power.
"It is now twenty years ago that this Government first engaged in building
up, fostering, and encouraging the present vast and overshadowing system
of national banking.
"No favor ever demanded by the banks has ever been withheld, no privilege
denied, until now they constitute the most powerful moneyed corporations
on the face of the globe. Congress has heretofore on nearly all occasions
abdicated its powers under the Constitution over the finances of the
banks, except when called upon to legislate in their favor. They have
demand the violation of legislative contracts with the people, and the
demand has been granted, whereby their own gains and the people's burdens
have been increased a thousand fold beyond right and justice. They have
demanded the remission of all taxation on their bonds, and it has been
conceded, thus leaving the poor to pay the taxes of the rich. They have
been fortified in their strongholds of moneyed caste and privilege by
double lines of unjust laws, supplemented with here a redoubt and there a
ditch, to guard them from the correcting hand of popular indignation,
until now, deeming themselves impregnable, they bully and defy the
Government."
He continued as follows: -
"Sir, with full and unrestricted power over the volume of the currency
and, consequently, over all values conceded to the banks, together with
ample machinery by which in an emergency they can defy the passage of any
act of Con what is left to the Government except an abject so on? This
Government could not, to-morrow, go to war in defense of its flag, its
honor, or its existence without first asking permission to do so of the
great financial corporations of the country. If there was an invading on
our soil
243
this hour, Congress could not with safety or show of success declare war
to repel it without first supplicating cowardly and unpatriotic capital,
engaged in banking, not to contract the currency, withhold financial aid,
and leave the country to starve. In fact, there is no measure of this
Government, either in peace or in mar, which is not wholly depending on
the pleasure of the banks.
"This Government is at the mercy of its own creatures. It has begotten and
pampered a system which is now its master. The people have been betrayed
into the clutches of a financial despotism which scorns responsibility and
defies lawful restraint."
At the present time the government is a submissive instrument in the hands
of this money power.
After a full discussion in the Senate, during which many amendments were
added to the resolution, it was returned to the House. The House agreed to
the amended bill with the exceptions of a few of the Senate amendments, in
which it refused to concur.
The bill then went back to the Senate, which refused to recede from its
amendments.
Upon this disagreement, both Houses appointed Committees of Conference,
who were to reconcile the differences existing between the two Houses with
reference to the resolution as amended.
After these committees had held several meetings an agreement was reached,
the resolution was reported back to the Senate and House and the measure
was adopted.
This act was approved by the President on the 12th of July, 1882.
Hence, this gigantic moneyed monopoly received a new lease of life for the
period of twenty years longer.
From this time on, it was the constant purpose of the
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national banks to build up a colossal system of bank credit that would
make the entire business interests of the country tributary to its power.
In the congressional election of 1882 the Republicans were overwhelmingly
defeated, and the House became Democratic by a large majority.
On February 12, 1884 Senator McPherson, of New Jersey, a millionaire and
national banker, introduced a bill to it national banks to increase their
circulating notes op to the par value of the bonds deposited by them to
secure their circulation.
The Senate the bill, but it was defeated in the House.
In this same month the sub-treasury at New York City, through the
Assistant Treasurer, addressed an inquiry to the President of the New York
Clearing House as to the effect of the government paying its balances in
silver money.
This action of the Sub-Treasurer was clearly for the purple of rendering
the agitation against silver, and it had the further intention of giving
an excuse to the national bankers to precipitate a panic, and thus lay the
foundation for a new demand for more legislation in favor of the banks.
This cowardly act of the sub-treasurer was an implied admission that the
Clearing House Association was mote powerful than Congress, and that it
was above all law.
On February 18, 1884,a bill for the retirement and re-coinage of the trade
dollar was taken up by the House.
At this time the number of trade dollars afloat in the country
approximated $36,000,000,and they had no
245
legal tender debt-paying power whatever. They were mere bullion.
On April 1, 1884, the Committee on Banking and Currency, to whom the bill
had been referred, reported it back to the House.
This bill authorized the government to receive these trade dollars for all
dues to the United States; they were to be received in exchange for
standard silver dollars coined under the Bland-Allison law; after such
exchange the trade dollars were to be coined into standard dollars.
Section 4 of the act provided that the trade dollars so exchanged should
be coined under the act of February 28, 1878.
On motion of Mr. Bland, section 4 was stridden out, and the bill as thus
amended, should it become a law, would add nearly forty million legal
tender silver dollars to the volume of money.
In its amended form it passed the House by a vote of 198 yeas to 45 nays,
and it was transmitted to the Senate.
In the meantime, after its passage by the House, the New York national
banks had taken their cue from the letter addressed to them by the
Sub-Treasurer, and at once began a vigorous contraction of the currency by
refusing to loan money to the West and South, and calling in outstanding
loans.
This action of the New York banks, with the tacit permission of the
Treasury Department, brought on the great panic of 1884, in which year
alone there were 10,968 business failures, with liabilities aggregating
$226,343,427.
At the same time money commanded three per cent
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interest and commission per day on call. This was usury at the annual rate
of eleven hundred per centum!
It is asserted that while the banks refused to loan money, and mere
surrendering their circulating notes by depositing United States legal
tenders with the Comptroller of the Currency, that the chief stock-holders
in these banks were using the deposits of these institutions in making
loans at those exhorbitant rates of usury.
It may be inquired by some, why did not the Comptroller of the Currency
exerise his lawful powers, and proceed against these banks for these
notorious violations of law?
The facts were that every Comptroller of the Currency, since the creation
of that office, has been a willing instrument in the hands of the national
banks, and the Comptrollers, time and again, authorized these banks to
violate the national banking law whenever it was to the financial
interests of these corporations.
The open and notorious infractions of law practiced by these banks found
ready apologists in Congress, who audaciously asserted that the banks mere
the best judges of the policy to be carried out by them, anti that to
enforce the law would close these institutions, and deprive the people of
the benefits flowing from this beneficient system.
The history of the past thirty years exhibits this remarkable fact, that
each and every Comptroller of the Currency, for his slavish subserviency
to the national banks, has been rewarded by an election to the presidency
of some one of these great financial institutions.
Upon the appearance, in the Senate, of the House
247
bill, providing for the recoinage of the trade dollars, it was referred to
the Finance Committee, who reported a substitute of five sections.
Section z authorized the exchange of trade dollars for standard dollars,
the time of exchange to be limited to July 1, 1885.
Section 2 provided that these trade dollars were to be coined as part of
the bullion under the Bland-Allison law.
Section 4 provided for a renewal of that farce, an International Monetary
Commission.
Section 5 provided that if no treaties could be ratified with foreign
nations for free coinage of silver before August 1, 1886, then a
suspension of the further coinage of silver dollars by the United States
should take place by a repeal of the Bland-Allison law.
No action was seen upon this bill by the Senate, and the efforts of the
House to legitimize the trade dollar by making it legal tender, and to
increase the volume of silver coin were again thwarted.
In his annual message to Congress, in December, 1884, President Arthur
recommended the cessation of the coinage of the silver dollar, and gave as
his reasons for such recommendation that nearly 185,000,-000 had been
coined, of which only a little over 40,000,000 were in circulation.
We quote his language in full. He says: -
"It appears that annually for the past six years there have been coined in
compliance with the requirements of the act of February 28, 1878, more
than $27,000,000. The number now outstanding is reported to be nearly
$185,000,000, whereof but little more than $40,000,000, or less than
twenty-two per cent, are in actual circulation. The mere existence of this
fact seems to me to
248
furnish of itself a cogent argument for the of the statute which has made
such a fact possible."
President Arthur sought to convey the impression to Congress that only
40,000,000 silver dollars were in circulation.
At the time he penned this message the records in the Treasury Department
shamed that 133,940,121 silver dollars were in active circulation through
their paper representative, the silver certificate, and that there were
actually but 12,000,000 silver dollars lying idle in the Treasury.
One striking fact which attracts attention is the fo1-lowing: That the
leading opponents to the coinage of silver dollars have never yet agreed
upon the facts, and the arguments which they advance against the use of
silver as money.
In his message of December 1, 1884,President Arthur urged as a weighty
reason for the discontinuance of the coinage of silver dollars, that less
than twenty-two per cent. of them mere in actual circulation.
In hie report of 1880, in which he advised the cessation of the coinage of
the silver dollars, Secretary Sherman gave his reason why silver should
not be coined, in which he says that it was not held, or hoarded, or
exported, but it was pushed into active circulation.
In this same message President Arthur made the following reference to the
trade dollar: -
"While the trade dollars have ceased, for the present at least, to be an
element of active disturbance in our currency system, some provision
should be made for their surrender to the Government. In view of the
circumstances under which they were coined and of the fact that they never
had a legal tender quality,
249
there should be offered for them only a slight advance over their bullion
value."
This statement of the President with reference to the legal tender power
of the trade dollar is evidence of those inaccuracies that occur many
times in the state papers of high officials. The President averred that
trade dollars mere never legal tender, while the fact is that by the law
of February 12, 1873 they were made legal tender for any one payment not
exceeding five dollars.
The 1am which conferred upon them this legal power continued in force
until July 22, 1876, when the legal tender quality was taken away.
A further inaccurate statement of the President appears, when he speaks of
the amount of standard dollars in circulation, which he places at a little
over 40,000,000. While the actual facts were that the volume of silver
dollars in circulation was 174,000,000.
Secretary Sherman had urged as an insuperable objection against the
further coinage of silver dollars that they were not held, or hoarded, but
were kept in active circulation. President Arthur asked the suspension of
the Bland-Allison law of 1878 on the ground that they did not circulate
actively enough.
This is not the first time that these two distinguished gentlemen
disagreed during their public careers, for while Sherman was Secretary of
the Treasury, and President Arthur was collector of the Port of New York,
they had a notable controversy, with which the public were doubtless
familiar.
While President Arthur was requesting Congress to suspend the coinage of
the silver dollar, the banks of New York City combined to make a raid on
the Treas-
250
ury by presenting greenbacks for gold. That this was done with the
connivance of Secretary of the Treasury, McCulloch, is evident from the
acts of that official. He had dispatched a telegram to the Sub-Treasurer,
in New York City, stating that the country would be on a silver basis in
thirty days.
It was nothing less than a plot formed by the bankers and the Secretary to
frighten Congress into repealing the Bland-Allison law of 1878.
In the meantime, the presidential campaign of 1884 had resulted in the
election of Grover Cleveland, of New York, over the Republican candidate,
James G. Blaine.
Prior to his election to the Presidency, Mr. Cleveland had held the office
of Mayor of Buffalo, and was Governor of the State of New York, in which
positions he had won much distinction as an honest and capable executive.
Some time previous to his inauguration, the report became current that the
President-elect was opposed to the further coinage of silver.
In order to ascertain the views of Mr. Cleveland upon this phase of the
financial issue, Congressman A. J. Warner and ninety-four members of the
House, on the llth day of February, 1885, joined in a letter to the
in-coming President, requesting that he outline his future policy on the
silver question, then agitating the country.
On February 24th, eight days before Mr. Cleveland was inaugurated, he gave
out an open letter to the press in reply to that of Hon. A. J. Warner.
In the course of that remarkable document occurs the following statement:
-
"I hope that you concur with me, and with a great
251
majority of our fellow citizens, in deeming it most desirable at the
present juncture to maintain and continue in use the mass of our gold coin
as well as the mass of silver already coined. This is possible by a
present suspension of the purchase and coinage of silver. I am not aware
that by any other method is it possible. It is of momentous importance to
prevent the two metals from parting company; to prevent the increasing
displacement of gold by the increasing coinage of silver; to prevent the
disuse of gold in the custom houses of the United States in the daily
business of the people; to prevent the ultimate expulsion of gold by
silver."
To state that the expectations of the Democratic party were rudely
shattered by the position assumed by Mr. Cleveland, in his reply to the
letter of Mr. Warner, would be putting it very mildly.
The mass of the party expressed great astonishment, not to say
indignation, at the bold stand taken by the President-elect, in which he
aligned himself with the single gold standard.
In his zeal for the suspension of the coinage of the silver dollar, Mr.
Cleveland was led into erroneous statements of facts as to the alleged
disuse of gold in the custom houses and in the business of the people.
It is a matter of public record that, in 1880, the imports of gold
exceeded the exports thereof by $77,ll9,371; in 1881, the excess of
imports of gold over exports were $1,789,174; in 1883, $6,133,261; in 1884
the exports of gold over imports were $18,250,640, 1eaving a great balance
of imported gold over exports during those five years of more than
$150,000,000.
This great gain of gold took place during the time the Bland-Allison law
was in operation.
Upon the appearance of this reply of Mr. Cleveland
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to the communication of Hon. A. J. Warner and others, the Wall street
clique and their allies seized their opportunity.
They swooped down on Congress and endeavored to force a repeal of the
silver law.
The members of the House were besieged by these hordes of coin venders and
bullion brokers; the national banking money power threatened to visit
another panic upon the people, and predictions mere 'freely made that gold
would go to a premium if the silver lair was not repealed.
The Democratic members of Congress were informed by the thousand per cent
men of New York City that it was the wish of President-elect Cleveland
that the law authorizing the coinage of silver dollars be repealed.
The New York Herald, one of the greatest journals of the East, constantly
kept in a prominent place in its columns, the legend, "We are still
coining the go and 75 per cent dollars."
Every means and all possible influences were brought to bear upon Congress
to force it to repeal the Bland-Allison law, but without avail.
A single attempt was made to carry into effect the wish of the
President-elect, but it failed so ignominiously by such a decisive vote
that no further effort was made in that Congress. It was as follows: On
February 26, 1885, House bill 8256, being the sundry civil appropriation
bill, was pending before the House. A clause was tacked to this bill,
providing for the suspension of the operations of the law of February 28,
1878,- the Bland-Allison law.
Mr. Randall, an Eastern Democratic member of the
253
House, moved to suspend the rules and consider said clause.
This motion was disagreed to by a vote of ll8 yeas to 152 nays, and this
clause was abandoned and stricken from the bill.
The letter of Mr. Cleveland was regarded by the House as an open and
manifest attempt to influence Congas against the continued coinage of
silver, and, if such was the intention of the President-elect, he promptly
received a well-deserved rebuke for his attempted interference with the
legislation of Congress.
One feature of the conduct of Mr. Randall, in his effort to engraft upon
an appropriation bill a clause to repeal the Bland-Allison lair, exhibits
the avidity of the money power to seize every opportunity, however slight,
to gain its ends by legislative sanction, and that is - immediately upon
the appearance of the Warner letter, it presumed that the mere ipse dixit
of Grover Cleveland would coerce Congress into submission to his views.
The infamous nature of the financial legislation from 1862 to 1875, in so
enormously enhancing the value of the public debt, and in enriching the
bond-holders at the expense of the productive energy of the country, will
be shown by the following figures, taken from a work entitled, "The
Philosophy of Price," quoted in the Daily News Almanac and Political
Register for 1891.
The time covered by "Philosophy of Price" is July 1, 1866, up to and
including 1885. "Philosophy of Price" says: -
"Here is a table showing the debt of the United
254
States on the 1st of July, 1866 and 1885, including non-interest bearing
greenbacks, expressed in dollars, and also in the things working folks
have to produce in order to get the dollars with which to pay debts and
interest: -
National Debt 1866. National Debt 1885.
Debt in dollars......$2,773,000,000 $800,000,000
Beef, barrels......... 129,000,000 135,000,000
Corn, bushels....... 2,000,000,000 3,000,000,000
Wheat, bushels.... 800,000,000 1,740,000,000
Oats, bushels....... 3,262,000,000 4,357,000,000
Pork, barrels........ 82,000,000 96,000,000
Coal, tons............ 213,000,000 400,000,000
Cotton, bales....... 12,000,000 34,000,000
Bar iron, tons...... 24,000,000 40,000,000
"Almost every product of labor shows the same result. We paid from 1866 to
1884 the public debt: Interest, $1,870,000,000 and principal about
$1,200,000,000; yet we fin that what there is left of it when measured
labor, or the product of labor, is fifty per cent greater than the
original debt."
This colossal robbery of the nation, and consequently of the people, was
planned and matured by the national banking money power. It is true that
the idea of this system of banking had its origin in England, and it is
also a fact that the scheme of legislating increased value into the bonded
debt was suggested by the influential bankers of London.
Each one of the series of enactments which legally confiscated billions of
property of the tax-payers, and which handed it over to a few individuals,
was placed upon the statute-boots under the false and misleading plea of
maintaining the "Credit of the nation untarnished."
That distinguished historian, Prof. J. C. Ridpath, eloquently described
the legislative process by which
255
the value of the public debt was vastly increased. He said: -
"It is the hardship of war that brings debt upon the country which engages
in it. In our own case we piled up a debt mountainwise. The prodigious
pile reached the clouds. In any old nation there would have remained no
hope at all of paying it. It would simply have been laid upon posterity as
an everlasting tax. The principal question, however, with Congress and
with the people of the United States, was how they should measure and
manage this debt. Gold and
silver had disappeared. Paper money prevailed and abounded. The premium on
coin arose to almost two hundred per cent. The dollar of the law and the
contract became a paper dollar, which, as measured by the standard of
gold, was, for a considerable period, worth less than fifty cents.
"But what was the equity of this situation? One class of statesmen, backed
up and instigated by the creditor classes, held that the dollar was always
the gold and silver dollar. Practically this was not so. Theoretically and
even constitutionally it was probably so. For many years together the
dollar of the law and the contract was, to all intents and purposes, a
dollar of paper. During the same period the modicum of gold and silver
remaining in the country - though it was stamped and branded with the
names of coins -was really merchandise. At length the bottom was reached -
or the top, as the case may be - and the readjustment became necessary.
"Then came on the warfare between the advocates of the so-called 'honest
dollar' and the paper dollar with which, and on the basis of which, the
business of the country had been so long transacted. The advocates of high
payment took the 'honest dollar' as their catch-word, and, to make a long
narrative brief, they won with it, and by a series of legislative
enactments, entailing the greatest hardships on the producing interests of
the country, succeeded in twisting up,
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turn by turn, the standard unit in the financial mill, until the so-called
resumption of specie payment was anally, after fourteen years from
Appomattox, effected.
"Thus the value of the national debt was augmented from year to year as
rapidly as it was paid away.. As fast as payment was made the value of the
dollar in which it was expressed was increased. To the debtor class all
this was the labor of Sysiphus. The toiler laboriously rolled the stone to
the top of the hill; but ever, when near the crest, it got away with him
and returned with thundering and the roar of bankruptcy to the bottom. To
the present day the process has been kept up, and, notwithstanding the
multiplied billions upon billions which the American people have paid in
principal and interest upon that patriotic we debt, which expressed their
devotion and sacrifice, it is the truth of history, that the debt itself,
is at the present time, worth virtually as much to the holders as it was
when it reached its nominal maximum - in August, 1865."
In his effort to convey an adequate idea of the nature of that
legislation, which had plundered the American people of billions of
dollars, this renowned scholar and writer had recourse to the sublime
imagery of Homer.
Prof. Ridpath demonstrates that the public debt was not decreased at all,
although billions had been applied to its payment.
Not only is this true of the public debt, but the same process of
depreciating the value of property has likewise enhanced the value of
private debts.
The amount of property that has been transferred from debtors to
creditors, as a necessary result of the enormous appreciation of money
brought about by contraction of its volume, is beyond computation.
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In a great speech, Wendell Phillips, illustrates the means by which the
money power absorbed the wealth of the country, by juggling with the
currency. He said: -
"In other words, it was the currency, which, rightly arranged, opened a
nation's well springs, found work for willing hands to do, and filled them
with a just return, while honest capital, daily larger and more secure,
ministered to a glad prosperity. Or it was currency, wickedly and
selfishly juggled, that made merchants bankrupt and starved labor into
discontent and slavery, while capital added house to house and field to
field, and gathered into its miserly hands all the wealth left in a reined
land.
"The first question, therefore, in an industrial nation is, %here ought
control of the currency to rest? In whose hands can this almost omnipotent
power be trusted? Every writer of political economy, from Aristotle to
Adam Smith, allows that a change in the currency alters the price of every
ounce and yard of merchandise and every foot of land. Whom can we trust
with this despotism? At present the banks and the money kings wield this
power. They own the yard-stick, and can make it longer or shorter, as they
please.. They own every pound weight, and can mate it heavier or lighter
as they choose. This explains the riddle, so mysterious to common people,
that those who trade in money always grow rich, even while those who trade
in other things go into bankruptcy."
On the 3d of February, 1886, Hon. R. Q. Mills, of Texas, in the heat of
righteous indignation eloquently arraigned that unlimited avarice that was
continually besieging Congress to enhance the value of bonds and
securities at the expense of the producers. He said: -
"But in all the wild, reckless, and remorseless brutalities that have
marked the footprints of resistless power there is some extenuating
circumstance that
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mitigates the severity of the punishment due the crime. Some have been the
product of the fierce
passions of war, some have some from the antipathy that separate alien
races, some from the superstitions of opposing religions.
"But the crime that is now sought to be perpetrated on more than fifty
millions of people comes neither from the camp of a conqueror, the hand of
a foreigner, nor the altar of an idolator. But it comes from those in
whose veins runs the blood of the common ancestry, who were born under the
same skies, speak the same language, reared in the same institutions, and
nurtured in the principles of the same religions faith. It comes from the
cold, phlegmatic marble heart of avarice,-
avarice that seeks to paralyze labor the burden of debt, and fill the land
with destitution and suffering to gratify the lust for gold,- avarice
surrounded by every comfort that wealth can command, and rich enough to
satisfy every want save that which refuses to be satisfied without the
suffocation and strangulation of all the labor of the land. With a
forehead that refuses to be ashamed, it demands of Congress an act that
will paralyze all the forces of action, shut out labor from all
employment, increase the burden of debts and taxation, and send desolation
and suffering to all the homes of the poor."
In his first annual message to Congress, December 8, 1885, the President
took a decided stand against the continued coinage of silver. In this
document he says:
"The necessity of an addition of the silver currency of the nation as is
compelled by the silver coinage act is negatived by the fact that up to
the present time only about fifty millions of the silver dollars so coined
have found their may into circulation, leaving more than one hundred and
sixty-five millions in the possession of the Government, the custody of
which has entailed considerable expense for the construction of
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new vaults for its deposits. Against this latter amount there are
outstanding silver certificates amounting to about ninety-three millions
of dollars."
Further on in this same message he said: -
"At times during the past six months fifty-eight per cent. of the receipts
for duties have been in silver or silver certificates, while the average
within that period has been twenty per cent."
A comparison of the statements in his message with the predictions
ventured in the Warner letter will be instructive. In the latter he
desired "To prevent the disuse of gold in the custom houses of the United
States;" in his message of December 8, 1885, he shows that instead of
silver displacing gold in the payment of duties, only about twenty per
cent of the latter were paid in silver or silver certificates.
Just why the payment of twenty per cent of the duties in silver should
arouse the apprehensions of the President is not very apparent.
Furthermore, the very purpose of coining these silver dollars was to
enable people to transact business, to pay their debts to each other, and
to the Government.
Mr. Cleveland further says: -
"The condition in which our Treasury may be placed by a persistence in our
present course, is a matter of concern to every patriotic citizen who does
not desire his Government to pay in silver such of its obligations as
should be paid in gold."
Again he says: -
"We have now on hand all the silver dollars necessary to supply the
present needs of the people and to satisfy those who from sentiment wish
to see them in circulation, and if their coinage is suspended, they can
readily be obtained by all who desire them. If the
260
need of more is at any time apparent their coinage can be renewed."
The President then recommends the suspension of the coinage of silver
dollars coined under the law of 1878.
According to the President's theory and reasoning, the most effective
means of supplying the volume of money needed by the people would be a
suspension of its coinage.
In this message President Cleveland came out squarely in favor of
perpetuating the national banking system. In this course he allied himself
with the money power, and earned the unenviable distinction of being the
first Democratic President that advocated the policy of delegating the
power of issuing money to private corporations.
In this course he was sustained by a few Eastern Democratic members of
Congress, but he could not lead the great body of the Western and Southern
Democracy to accept that Tory-Republican system of finance that had been
imported from London in 1863.
During the following year, the use of silver and silver certificates
increased from $143,000,000 to $167,000,000, which indicated the great
popularity of this form of money with the people.
Notwithstanding these facts, the President in his next annual message,
December 6, 1886, said:
"I see no reason to change the views expressed in my last annual message
on the subject of compulsory coinage. "
On December 17, 1886, Senate bill No. 199, providing for the redemption of
the trade dollars for standard silver dollars, the trade dollars so
redeemed to be sent
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to the mints for coinage as part of the bullion to bc purchased under the
Bland-Allison law of February 28, 1878, passed the Senate.
On February 12, 1887, Senate bill 199 was pending before the House, and it
was amended to authorize the receipt of trade dollars for government dues,
and in exchange for standard dollars, and for coining the said trade
dollars into standard dollars, not as part of the bullion and coinage
under the Bland-Allison law.
The bill, as amended, passed by a vote of 174 yeas to 36 nays; both Houses
appointed a Committee of Conference, which reported a substitute that axed
the period of six months from date of the act for the exchange of trade
dollars for standard dollars, or for fractional silver coin. The trade
dollars so exchanged were to be recoined and not counted as part of the
silver to be purchased under the Bland-Allison law of 1878.
This act became a law without the approval of the President.
Be it said to the eternal honor of the House of Representatives, which was
Democratic, the advice and recommendations of the President fell on deaf
ears, and this co-ordinate branch of the Government would not be coerced
into repealing the Bland-Allison silver law.
In spite of the fears of President Cleveland that gold mould be displaced
by the increased coinage of silver, the net gain of gold during his
administration was increased many millions.
In the meanwhile the monetary stringency of 1884 continued in all its
severity, and even the banks of New York City felt the effects of the
panic, which was the direct result of their concerted action.
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These great financial institutions of New York City called upon the
Government for assistance; whereupon Secretary of the Treasurer Manning, a
national banker, came to their relief by depositing with these banks
government money to the amount of $63,000,000 without interest for the use
of that enormous sum, which had been wrung from the people by a burdensome
system of taxation.
Had the farmers of Kansas, or Nebraska, requested the Federal Government
to loan them the public funds to assist them in agricultural pursuits, the
millionaire beggars and paupers of Wall street would have emitted a loud
and prolonged howl that would have been heard to the nethermost parts of
the earth.
The people of Kansas and Nebraska would have been assailed by every
epithet that could have been coined from the English language.
The national bank monopoly, the gold gamblers, stock speculators, railroad
wreckers, the Shylocks, who gladly exacted a thousand per cent usury, with
the subsidized press and its satellites, would have denounced the hard
working farmer of Kansas or Nebraska as a "long whiskered hay-seed," a
"socialist," a "dangerous anarchist," or a "crank."
The Nasts and the Gillams, famed in caricature, would have expended all
their genius in holding him up to ridicule.
While it would be dangerous socialism for the Government to assist the
farmer during his calamities, it me the highest essence of patriotism to
save the panic-breeders of New York City from the consequences of their
own traitorous conduct by donating them the use of $63,000,000 in
government funds.
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In the meantime, notwithstanding the aid received from the Federal
Government, the banks of New York City organized a clique with the
intention of making a raid upon the gold in the Treasury.
The base ingratitude of the New York banks aroused the ire of Secretary
Manning, and he called upon those banks who had organized a corner against
the Treasury gold, and informed them of what would follow if they
persevered in that course. He said:
"You may precipitate a panic. The Government is strong; the Government can
stand a panic, but you will have the panic if you continue to embarrass
the Government as you have done."
He continued: -
"Here are twenty million dollars in round silver dollars, not
certificates. Give me your gold for it and stop this raid upon the
Treasury, or else you shall have the panic."
The heroic treatment of Secretary Manning was a warning to these
scoundrels, who would willingly sink the Government if money could be made
by the operation.
The stern threats of the Secretary frustrated this attempt to loot the
Treasury of its gold, and to coerce Congress into repealing the
Bland-Allison silver law.
In his annual message of December, 1887, President Cleveland relegated the
financial question to the rear, and pushed the tariff issue to the front.
This document is justly regarded as one of the strongest state papers that
ever eminated from the pen of the President.
In this message the President urged the necessity of a complete
reformation of the then existing tariff, and he took strong grounds in
favor of suppressing the trusts.
264
Upon the appearance of this message, the leaders of the Republican party
charged the President with having committed the Democracy to the policy of
British free trade.
Mr. Blaine, who was in Paris at the time when the contents of the message
were made public, availed himself of the opportunity to answer the
President by a counter blast, in the form of an extended interview held
with a representative of the New York Tribune.
Meanwhile, since 1883, the national banks steadily continued their policy
of contracting the currency, by substituting government legal tender notes
for the United States bonds deposited with the Comptroller of the Currency
to secure their circulating notes.
This policy, to a large extent, neutralized the benefits derived from the
increased use of silver.
The object of the banks, in thus withdrawing their bonds deposited to
secure their circulating notes, me for the avowed purpose of obtaining the
great premium which they brought in the market - a premium which ranged as
high as twenty-nine per cent on the dollar.
Beside the contraction brought about by the process of depositing legal
tender notes to redeem the circulating notes of national banks, the latter
form of currency was surrendered by the banks, and the bonds deposited to
secure these bank notes were taken up by the depositors and sold for the
premium. This worked a double contraction of the currency.
During this time the Government was redeeming its bonds, and this process
of redemption was carried on by the payment of a large premium to the
bond-holders and national bankers.
In his report for the year 1892, the Comptroller of
265
the Currency showed the extent to which this system of contraction was
carried on from 1883 to 1888 by these fiscal agencies of the Government.
From October 31, 1883, to October 31, 1884, the national banks surrendered
their circulating notes to the amount of $24,170,676; from October 31,
1884, to October 31, 1885, the banks surrendered $15,545,461; from October
31, 1885, to October 31, 1886, national bank notes were contracted
$56,590,533; from October 31, 1886, to October 31, 1887, the banks
surrendered up their notes to the amount of $50,495,589; from October 31,
1887, to October 31, 1888, a further decrease was made by cancelling
national bank notes to the amount of $16,84,739.
It will be ascertained that the total voluntary contraction of national
bank currency, from 1883 to 1888, reached the great sum of $163,000,000.
Although the Bland-Allison law was in operation, and the Government was
throwing vast sums of money into circulation by the redemption of bonds,
yet the volume of money in circulation was not increased.
For nearly every dollar emitted by the Treasury Department for the
redemption of bonds, the national banks surrendered up almost an equal
amount of their circulating notes.
On February 29, 1888, House bill No. 5034 was pending in the House of
Representatives
This measure authorized the Secretary of the Treasury to apply the surplus
in the Treasury to the purchase or redemption of United States bonds. The
bill passed.
The object of this measure aimed at relieving the money market of its
stringency by the purchase of
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bonds, and the consequent increase of the volume of currency.
On March 26, 1888, House bill 5034 came up in the Senate, and Senator
Spooner offered a substitute, declaring section 2 of the sundry civil
appropriation law of June 30, 1882, a permanent provision. The substitute
was agreed to by the Senate.
Senator Beck offered an amendment, directing the Secretary of the
Treasury, on the retirement of national bank circulation, and on failure
of other banks to take out an equal amount, then to purchase an equivalent
amount of silver bullion in excess of the minimum, required under the law
of February 28, 1878, to be coined and used as provided in said act.
The amendment was agreed to by a vote of 32 yeas to 13 nays.
During the debate on the amendment offered by Senator Beck, Senator Plumb
made the following remarks: -
"It is estimated that there are in circulation, including that which is
locked up in the Treasury and held in the banks as a reserve fund, about
$1,600,000,000, of all kinds of currency of the United States, gold and
silver, the surplus of gold and silver certificates, greenback notes and
national bank notes, all told, and there are more than $60,000,000,000 of
property which mast finally be measured by this volume of currency. It has
been contracted during the last year morc than live per cent in addition
to all that has occurred by reason of abrasion and loss. No man can tell
the volume of greenbacks outstanding. Nominally it is $346,000,000 and a
fraction, but that volume has been subject to all the accidents which have
occurred during the past twenty-five years, whereby money has been
consumed, worn out, lost, and it is doubtful if the amount is really over
$300,000,000 today.
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"But say nothing about that, the retirement of the national banking
circulation during the twelve months has been five per cent. of the to
amount of the currency outstanding. There has been during that period a
phenomenal depreciation of the prices of property. There has been the
greatest depreciation of the price of agricultural products the country
has ever known."
In speaking of the effects of contraction of the currency in depreciating
the value of property, he said: -
"The contraction of the currency by five per cent. of its volume means the
depreciation of the property of the country $3,000,000,000. Debts have not
only increased, but the means to pay them have diminished in proportion as
the currency has been contracted. Events based upon nonlegislation have
proved of advantage to 1enders, but disastrous to borrowers."
The bill then went to the House, but as it was near the close of the
session, it did not receive any consideration.
Meanwhile the panic of 1884, as it was called - but which really began in
1882- raged throughout the entire administration of President Cleveland.
The aggregate number of failures for the years 1885, 1886, 1887 and 1888
were 51,748, and the liabilities were $756,597,883.
It was during this period of business failures and general depression
everywhere, with the consequent sacrifice of property at ruinous prices,
that the holders of United States bonds were obtaining a premium for their
bonds ranging as high as twenty-seven per cent.
In his annual message of December, 1888, President Cleveland again urged
the repeal of the Bland-Allison law. He said: -
"The Secretary recommends the suspension of the
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further coinage of silver, and in such recommendation I earnestly concur."
Up to November 30, 1888, 312,570,990 silver dollars had been coined, of
which 60,970,990 were in active use, not including silver certificates to
the amount of $237,418,346- making a total of $298,389,336 in silver
dollars and certificates that were in active circulation.
It will be observed that the many predictions of President Cleveland, as
to the capacity of the country to use silver as money, were utterly
discredited by these facts.
The determined opposition of the President to the coinage of silver was
one of the strange features of an otherwise highly successful
administration.
With the exception of his hostile attitude to silver as money, and his
advocacy of the perpetuation of the national banking system, Mr. Cleveland
gave the people an administration of public affairs that shed honor upon
himself, and its efficiency was not surpassed by any in the annals of
American history.
During the four years that he directed the public affairs of the nation,
the public debt was reduced in the magnificent sum of $341,448,449.
It is true that this vast decrease of the public debt in the short period
of four years resulted in an immense profit to the bond-holders and
national bankers who surrendered their bonds for payment.
The amount of premium on the bonds so surrendered was $59,000,000, and
this measured the profit obtained by the banks and bond-holders in the
process of redeeming the debt.
In addition to this vast decrease of the public debt,
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a surplus of $83,269,220 was accumulated in the Treasury over and above
the gold reserve of $100,000,000.
In addition to this vast sum of money, the result of a frugal and honest
administration, a bank security fund of $82,597,250 in legal tenders was
accumulated as a trust fund for the redemption of national bank notes.
The total amount of cash in the Treasury on the 4th of March, 1889, when
his successor was inaugurated, was $265,846,441.
His administration of other departments of the Government was notably
successful.
Tens of millions of acres of the public lands, fenced in by great
corporations, were restored to the public domain; and the usurpers driven
off by the vigorous policy of the President.
Land grants embracing many millions of acres were forfeited and throw open
for settlement.
For the first time since 1861, the Indian Department was honestly manage,
and the red man received just and humane treatment at the hands of the
United States.
Nevertheless the ultimate baleful results of his influence in favor of the
national banks, and a single standard of gold, eventually more than
counteracted an honest, economical management of the public affairs of the
country.
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Chapter 8
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