BANK MONOPOLISTS--THEIR CONTROL OF THE CURRENCY. A BANKRUPT FINANCIAL
POLICY.
Gold and silver are and must remain the standard of values. This being
true, any attempt to substitute any other standard unsettles values, and
opens avenues for reckless speculation. Bank bills, or other promises to
pay, are and always will remain unsafe as a money standard; especially
when they cannot be exchanged for specie, save at large discounts. The
policy of the government, of substituting treasury notes for coin, as
legal tender, and then issuing national currency for general circulation
by the banks of the country, has been effectual in preventing the
circulation of coin, as well as the resumption of specie payment. No
good reason can be given for issuing two kinds of currency, or for
providing that one kind (treasury notes) shall be legal tender, and the
other (national currency) shall be of less value, good in ordinary
circumstances, but which no one is obliged to accept in payment of
debts.
The present banking law provides that any five or more persons may form
a private corporation or banking association, and upon compliance with
the provisions of the law, transact all business usually transacted by
banking associations. As a condition to the issuing of bank notes, the
company, after it has organized according to law, must deposit with the
proper officer in Washington, in government bonds, an amount greater by
ten per cent than the amount of bank notes it receives for circulation.
If it deposit $100,000 in bonds, it receives from the comptroller of the
currency, $90,000 in national currency, which it can issue, and as
occasion requires, must redeem in treasury notes. The government bonds
are held by the department as security for the redemption of the bank
notes received for circulation, and the government pays to the different
banking companies semi-annual interest at the rate specified in the
bonds deposited by the companies respectively. The amount of tax
annually collected from the people to pay this interest to bankers is
between $18,000,000 and $20,000,000. All that the people receive in
return for this sum is the privilege of borrowing national currency from
banks at legal rates of interest. The banking companies receive from
government their six per cent annually in gold on their bonds deposited
with the department at Washington, and the lawful rates fixed by the
states respectfully upon loans and discounts with such other profits
usual among bankers.
We cannot discover the wisdom of the law which provides that a banking
company shall buy an amount of government bonds equal to its capital
stock, paying government therefor, and after depositing it with the
proper government officials, receive interest on it. If a man pay his
note or bond, and gets it in his own possession, he would lack wisdom if
he were to continue the payment of semi-annual interest on it after that
time. Government is doing this with only this difference: It says to the
banking company: "Buy my bonds, pay for them, and then I will hold them
in trust, and pay you the interest on them." We can see no good reason
for this provision of the law. If the object were to borrow money, it
could have been accomplished by receiving it directly from the banking
company, and then issuing to such company legal tender notes in payment
therefor, and by so doing government would have saved the large amount
of interest now being collected from the people. If the object were to
furnish a circulating medium, the legal tender treasury notes would have
been a preferable currency. The government would have hazarded nothing,
because it would have had possession of the full value of the notes or
bank bills furnished the company. But if the object were to foster and
fatten corporations, then the law, as passed, has fully accomplished its
purpose. The law provides for a general system of banking, without
requiring the bankers to keep one dollar of coin for the redemption of
their issues. It provides for the redemption of _currency_ with
_currency_, thus making the resumption of specie payment impossible, so
long as legal tender notes are in circulation. It locks up from
one-tenth to four-tenths of all the capital invested in banking, and
compels the people to pay interest on this amount without receiving any
equivalent. It fixes arbitrarily the amount of circulating medium for
the whole country; the amount being $356,000,000 in legal tender notes,
and about the same amount in national currency; and of this last amount
the banks are compelled to keep on hand a reserve of from fifteen to
twenty-five per cent on all their bills and deposits, thus leaving for
circulation, throughout the entire country, not more than $550,000,000,
the whole of which is irredeemable in coin. It places the finance of the
whole country under the control of one man--the secretary of the
treasury. The amount of currency being fixed by law, and apportioned
throughout the country, with no means for its increase, it is not
difficult for speculators to withdraw sufficient from circulation to
affect injuriously the commerce of the country. The combined corporate
interest of the country can, at pleasure, corner such amounts as to
create a stringency, and if desired, a panic. We have shown in a former
chapter the combination existing between railroad corporations and Wall
street brokers, and their control of the finances of the country. We
have also shown the effect of the legal tender decision upon the
financial interests of the country, and the large benefits the railroad
corporations are deriving from it; and that they controlled to a great
and dangerous extent all departments of the government. Under the
present financial and banking system they hold the whole country at
their mercy. They fix prices upon all the farm products of the country.
Having full knowledge of the amount of currency in the banks of the
great commercial centers, as well as the amounts in the different parts
of the country, with the means in their own hands of controlling and
expanding these amounts at pleasure, by withdrawing, or as it is termed
"cornering" the necessary sum, they fix the price of all articles of
commerce, and stocks, and gold. The government, under the present
financial policy, cannot prevent this state of things. It has no reserve
with which to aid the people. Nor can the banks, if they had the
inclination, remedy this evil. The business interests of the country
require more money. The government, as well as the banks, are
prohibited from issuing more. Because of the lack of quantity required
by commerce, the banks are, as a general thing, without any considerable
surplus on hand. When these corporations and brokers desire a stringency
in the market, they withdraw from the banks a few millions of dollars
and lock it up. It is withdrawn from the already insufficient amount in
circulation, and legitimate business languishes. Having their vast
corporate stock and bond interest to protect, being engaged in
constructing railroads, having created large debts upon their roads by
reckless and dishonest watering of stock and loose issuing of bonds,
they seek to compel all commercial and industrial pursuits to pay
tribute to them, and they accomplish this object by controlling the
currency of the country. A financial system that can be controlled by
one interest, or in the interest of one class of men, is bad. When, as
is now the case, that interest is a combination and consolidation of the
greatest monopolies that ever cursed a country, the system should be
changed.
Under our present system, no matter how evenly the currency was
originally distributed over the country, the larger portion of it finds
its way to the great commercial centers. The merchant must carry his
money to his place of purchase, or what is the same thing, buy an
eastern draft from his local bank, which bank, in order to command
eastern exchange, must have deposits in eastern banks. The farmer who
ships his produce to the east, must pay the charges for transportation,
which are usually collected at its place of destination; and these
charges being much more than one-half the entire value of the shipment,
are retained in the east, or if charges are paid to local agents, they
are forwarded to the principal office in the east. Nearly all the great
railroad companies having their principal offices in the large eastern
cities, their earnings are forwarded to those offices. By these means,
the currency of the country is concentrated in the larger commercial
cities of the country, mainly in New York, where it is in the absolute
custody of these great railroad corporations and brokers; and the
financial and banking system of the country, designed to meet the wants
of the people, has become, in the hands of these giant monopolies, a
principal agency in their oppression. The produce of the farm, and of
the entire industrial pursuits of the country, are being swallowed by
this huge monopoly, and those others created by our tariff. For this
state of things there is no relief without a change of policy on the
part of the government. An increase of irredeemable paper will not
afford relief. Already there is a wide margin between coin and currency.
An increase of the latter would increase that margin, and lessen values.
With a fixed amount of increase, the same interest that now controls the
finances would, in a short time after its issue, obtain the same
control, and this would demand another issue; the same process to be
repeated until our currency would be of little or no value, the
unlimited increase of irredeemable currency would in the end inflict
upon the country absolute ruin. We are now traveling in that direction.
Currency is only of value as the representative of money. Now (April,
1873) a dollar in paper represents but eighty-two cents in money. Our
government has adopted the Utopian idea of making _small strips of
paper_, with certain printed promises thereon, legal tender. This kind
of paper has been decided by the supreme court to be _money_, the
"measure of values." Notwithstanding the laws of congress and the
decisions of the supreme court, this measure of values will not become
or remain stable; it is gradually shrinking, while gold, the money of
the country, is disappearing. Unfortunately for us, our strips of paper
will not pass for money, or legal tender, with other nations. For this
reason, the coin of the country has to be used in our commerce with
foreign nations. Within the last year, the amount of coin in this
country has decreased over $38,000,000. The balance against us in our
dealings with other countries is the above named amount. Unless some
course is adopted that will prevent this large export of gold, it is
only a question of time when we shall have no gold in the country, and
the only representative of values left us will be paper money without
any intrinsic value. Under the present financial policy of the
government, and the unlimited control that corporations and rings, with
their power all centered in Wall street, have over the finances, we need
not hope that the agricultural products of the country can be
transported to the seaboard at rates that will enable us to export the
same to foreign countries in any considerable amount. We cannot pay
inland and ocean transportation, and compete with other grain-producing
countries. The markets of the outside world are practically closed
against us. With our high protective tariffs, extortionate charges for
inland transportation, lack of ocean commerce, and immense foreign
debts, public and private, absolute financial ruin must overtake us,
unless a different policy is adopted. The amount of currency being fixed
by law, the government has in effect declared that the people of this
country shall have but this fixed amount for all the purposes for which
money is used. The effect of this arbitrary law, followed and supported
by the legal tender decision of the supreme court, is to prevent any
increase of the currency or money. The control of the currency being
placed in the hands of one man, the whole financial interests of the
country are dependent upon his will. No matter how great the wants of
the country may be, or how inadequate the supply, no departure is
allowed from the inflexible rule as to reserves that the banks are
required to hold. If the secretary of the treasury conclude to sell gold
to ease the market, he does so; if he decide to issue a half million
treasury notes, they are allowed to go into the hands of the people, and
withdrawn, when in his judgment, he deems it advisable. His acts create
a feverish excitement in the money market and derange business, carrying
loss to everybody, except Wall street brokers. That power, so necessary
to a despotism, and so destructive to republican institutions--the
control of the purse of the people, and of the government, has fully
obtained in this country. The whole people of the land are as completely
under the control of the secretary of the treasury (and he in turn ruled
by these powerful combinations) as a ward is ruled by his guardian. The
system is bad, and should be changed at once. The government should
control its own finances, and the people should be permitted to provide
for themselves without asking the permission of the government. We
subjoin the following expression of views of one of the ablest and most
experienced of the bank officers in this country:
"The incompetency of special legislation, when applied to the adjustment
and regulation of the paper currency of the country, I presume few
sensible men, at all acquainted with the subject, will question; nor is
it possible for any man of business, or any possessor of property, in
whatever shape, to feel safe while the power to inflate or contract the
currency is arrogated by any one man, whether he happens to be some
narrow-minded, bigoted, obstinate official, acting on his own volition,
or some subordinate clerk, acted upon by others.
"No one should be entrusted or tempted with such a power; for no man,
however able and honest, could by any possibility justly or accurately
exercise it. Foolish as was the experiment, however, we have tried it:
and with the ill success that was inevitable.
"The sway to and fro of our currency, controlled by the ebb and flow of
our business transactions, consequent upon seed time and harvest, is
subject to law as imperious and immutable as any that governs either the
physical or moral world; and in just the degree that we understand and
conform to its action can we hope for a successful solution of the
problem that now so vexes the minds and disturbs the interests of all
classes of the community.
"The nearest approximation we have yet made to such an understanding and
conformity has been in the New York free banking law, from which the
national currency act has borrowed all of any merit it possesses.
"This New York law, free from the vice of monopoly which the national
currency act inherits from the necessities of its birth, and open to all
men, as any honorable pursuit should be in this republic of ours, is
also distinguished by three salient points: perfect security to
bill-holders, freedom from arbitrary reserves, and systematic redemption
of bills. In this last feature of the law, disagreeable as it is at
times to speculation or unwary bankers, lies the key to its success,
checking and governing as it does by its conservative action all
over-issues, while still leaving the open freedom of the system
untouched by any useless restriction; so that, no matter how great the
number of those who choose to embark in the business, no more currency
can be kept afloat than the wants of the country demand. The national
currency act fails because it is a monopoly; because it has only a
nominal redemption; and because of its arbitrary reserve clause, which
serves only to hamper the means and obstruct the usefulness of our
metropolitan banks at the very time when the trade of the country most
requires their services, to say nothing of the power for evil which a
knowledge of this fixed limit gives to the gamblers and speculators who
hang around and within our stock-exchanges; and, lastly, because it has
no power of expansion and contraction in response to the varying calls
of trade and commerce.
"The substitution of a free banking law for the national currency
act--in the mere fact of the release it would give us from constant
petitions to Washington officials, leaving the government to attend to
its own monetary affairs and strictly mind its own business--would go a
great way toward restoring and maintaining the manhood and self-respect
we are fast losing, from our constant looking up to and attendance upon
the central power, asking to have done for us things which should be
self-regulating or which we should do for ourselves. Democrats as we
profess to be, we are rapidly aping the follies and acquiring the habits
of dependence upon authority characteristic of the older civilizations
of monarchial Europe. It is hardly time, I think, for us to take the
backward swing of the pendulum of political progress, that is sure
eventually to land us where we began."
A careful examination of the financial policy of the government ought to
convince us that a change is necessary to prevent ultimate ruin and
bankruptcy. With gold driven from circulation--an insufficient amount of
depreciated currency for the transaction of the business of the country,
and the facilities afforded the monopolies for controlling our whole
commerce, the agricultural and industrial interests of the country
languish--the farmer receives no reward for his toil--the laborer is
poorly paid--and general prostration extends over the land. A return to
specie payment, or an increase of sound currency, would relieve all
cause of complaint, and enable the industry of the country to receive a
fair remuneration for its labor.