History of Buchanan County, Iowa, with illustrations and biographical sketches, Part 127

Author: Williams bros., Cleveland, pub. [from old catalog]; Riddle, A. G. (Albert Gallatin), 1816-1902
Publication date: 1881
Publisher: Cleveland, Williams brothers
Number of Pages: 574

USA > Iowa > Buchanan County > History of Buchanan County, Iowa, with illustrations and biographical sketches > Part 127

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It was not without difficulty that the conspirators escaped from the fury of their victims and took refuge in their up-town stronghold-the office of the Erie Railroad company.

During Thursday and Friday they had sold out, at high rates, a large part of the gold they had previous'y purchased, and had made many private settlements at rates ruinous to their victims. They at once repudiated all the purchases they had made through Delden, amounting to seventy millions, and it is evident that, either before or after the fact, they bought Belden's consent to this villainy.

The gold clearing-house, with its almost unlimited facilities for set- tling the accounts of gold gamblers, v .s suffocated under the crushing weight of its transactions, and its doors were closed.

This admirable report carries the matter forward with amplitude of detail to conclusion. The blowing up and bursting of the bubble are here shown. It also appears that a congressional investigation in Garfield's hands was a very real thing.

Toward the close of the Forty-first congress there arose between the two houses a grave controversy over the right of the senate to originate revenue bills. The house claimed the exclusive power over the subject.

BANKING AND CURRENCY.

Able speeches were made on both sides. The question was not free from doubt, and never was directly settled. The bill out of which it arose went to a committee of conference, which disagreed. On the house report, on the last day of the session, Mr. Garfield made a speech covering the whole ground, prepared in his thorough way, which was accepted as the authoritative exposition of the claims of the house.

During the spring session Mr. Garfield raised a special committee to prepare and report a plan for taking the approaching census, a work requiring a vast amount of unrequited labor, which could find no compensation in money or applause. His sub-committee spent forty days of the vacation, between the sessions, in elaborating his plan. At the request of the American Social Science association, he delivered an elaborate address before it on this subject, on the twenty-seventh of October, and he afterward produced his plan in a complete report, in the house, accompanied by a well-considered bill. With almost infinite care and pains he conducted this through the house, explaining, answering objections, and carrying it successfully through. He could not follow it to the senate, where it was lost, and the ninth census was taken as happened. Not wholly lost was this bill and labor. Ten years later the bill was reached and reintroduced. The Forty-fifth congress passed it into law, and under its en- lightened provisions the agents of the government are now taking the enumeration and statistics of the Republic.

THE CURRENCY.

It is time our attention was given more largely to Mr. Garfield's labors in his appointed field of the currency. He had, on the fourteenth of March, 1870, amply discussed public expenditures and the civil service, a kindred sub- ject, and, on the seventh of June, on his bill "to increase banking facilities, and for other purposes," he discussed "Currency and the Banks," where he may sparingly speak for himself to my readers. See the clearness with which he sets forth the elementray truths on which his doc- trines rest, deepening the lines of his former speech already spoken of :

Before entering upon the consideration of the bill itself, I ask the indulgence of the house while I state a few general propositions touch- ing the subject of trade and its instruments. A few simple principles form the foundation on which rests the whole superstructure of money, currency, and trade. They may be thus briefly stated :

First. Money, which is a universal measure of value and a medium of exchange, must not be confounded with credit currency in any of its forms. Nothing is really money which does not of itself possess the full amount of the value which it professes on its face to possess. Length can only be measured by a standard which in itself possesses length. Weight can only be measured by a standard, defined and recognized, which in itself possesses weight. So, also, value can only be measured by that which in itself possesses a definite and known

value. The precious metals, coined and stamped, form the money of the world, because when thrown into the melting-pot and cast into bars they will sell in the market as metal for the same amount that they will pass for in the market as coined money. The coining and stamp- ing are but a certification by the government of the quantity and fine- ness of the metal stamped. The coining certifies to the value, but neither creates it nor adds lo it.

Second. Paper currency, when convertible at the will of the holder into coin, though not in itself money, a title to the amount of money promised on its face ; and so long as there is perfect confidence that it is a good title for its full amount, it can be used as money in the pay- ment of debts. Being lighter and more easily carried, it is for many purposes more convenient than money, and has become an indispen- sable substitute for money throughout all civilized countries. One qual- ity which it must possess, and without which it loses its title to be called money, is that the promise written on its face must be good and be kept good. The declaration on its face must be the truth, the whole truth, and nothing but the truth. If the promise has no value, the note itself is worthless. If the promise affords any opportunity for doubt, uncertainty, or delay, the note represents a vague uncer- tainty, and is measured only by remaining faith in the final redemption of the promise.

Third. Certificates of credit under whatever form, are among the most efficient instruments of trade. The most common form of these certificates is that of a check or draft. The bank is the institution through which the check becomes so powerful an instrument of ex- change. The check is comparatively a modern invention, whose func- tions and importance are not yet fully recognized. It may represent a deposit of coin or of paper currency, convertible or inconvertible ; or may, as is more frequently the case, represent merely a credit, secured by property in some form, but not by money. The check is not money; yet. for the time being, it performs all the functions of money in the payment of debts. No greater mistake can be made than to suppose that the effective value of currency is not directly increased by the whole amount of checks in circulation.

I would not for a moment lose sight of the great first necessity of all exchanges, that they be measured by real money, the recognized money of the world; nor of that other necessity next in importance, that bank notes or treasury notes should represent real money ; should be of uni- form value throughout the country, and should be sufficient in amount to effect all those exchanges in which paper money is actually used. I would keep constantly in view both these important factors. But that is a superficial and incomplete plan of legislation which does not in- clude, in its provisions for the safe and prompt transaction of business, those facilities, which modern civilization has devised, and which have so largely superseded the use of both coin and paper money.

The bank has become the indispensable agent and instrument of trade throughout the civilized world, and not less in specie paying coun- tries than in countries cursed by an inconvertible paper currency. Be- sides its function of issuing circulating notes, it serves as a clearing- house for the transactions of its customers. It brings the buyer and seller together, and enables them to complete their exchanges. It brings debtors and creditors together, and enables them to adjust their accounts. * * * * * *

I find there are still those who deny the doctrine that bank deposits form an effective addition to the circulation. But let us see. A bank is established at a point thirty or forty miles distant from any other bank. Every man within that circle has been accustomed to keep in his pocket or safe a considerable sum of money during the year. That average amount is virtually withdrawn from circulation, and for the time being is cancelled, is dead. After a new bank is established a large portion of that average amount is deposited with the bank, and a smaller amount is carried in their safes and pockets. These accumu- lated deposits placed in the bank, at once constitute a fund which can

LIFE OF JAMES A. GARFIELD.

be loaned to those who need eredit. At least four-fifths of the average amount of deposits can be loaned out, thus converting dead capital into active circulation.

But the word deposits covers far more than the sums of actual money placed in the bank by depositors. McLeod, in his great work on banking, says: "Credits standing in bankers' books, from whatever source, are called deposits. Hence a deposit, in banking language, al- ways means a credit in a banker's books in exchange for money or se- curities for money."-Vol. 2, p. 267.

Much the largest proportion of all bank deposits are of this class- mere credits on the books of the bank. Outside the bank, these de- posits are represented by checks and drafts. Inside the bank, they effect settlements, and make thousands of payments by mere transfer from one man's account to that of another. This checking and coun- ter-checking and transferring of credit, amounts to a sum vastly greater than all the deposits. No stronger illustration of practical use of de- posits can be found than in the curious fact, that all the heavy pay- ments made by the merchants and dealess in the city of Amsterdam for half a century, were made through a supposed deposit which had en- tirely disappeared some fifty years before its removal was detected. Who does not know that the six hundred millions of dollars of deposits reported every quarter as a part of the liabilities of the national banks are mainly credits which the banks have given to business men? *

If the analysis 1 have attempted to make of the principles which govern trade and business be correct, it will aid in ascertaining the wants of the country, and in determining what legislation is necessary to meet the demands of business.

Mr. Speaker. I shall venture to hope that those who have honored me with their attention thus far, will agree that a mere supply of cur- rency, however abundant, will not meet the case; coin and currency form only the change-the pocket-money of trade. For the great transactions which the marvelous energies of our people are carrying on they need and will demand that greater instrument of modern invention-that credit, currency, properly secured and guarded, which takes the forms of . checks, drafts, and commercial bills. And this brings me to the question, how is the country now supplied with currency and with these other facilities for the transaction of business?

It ought to be understood everywhere that the great injustice done to the western and southern portions of the country by the present dis- tribution of currency and banking facilities is so flagrant that it will not much longer be endured; and if the wrong be not soon righted the overthrow of the National banking system is imminent.

In entering upon this question I am met by our philosophical eastern friends, who say, "Put the currency wherever you please, and, like water on the top of a mountain, it will find its level; the distribution, therefore, makes no difference, for the currency will necessarily find its natural place."

Mr. Speaker, I recognize the truth asserted, but insist that it is not applicable to the case in hand. 1 offer, in answer, the fact that the dis- tribution of banking facilities under the State system before the war, is a better test of the wants of business than the present distribution. What are the facts? In 1860-61, in eleven of the southern and south- western States there were two hundred and ninety banks of issue, hav- ing a capital of one hundred and nineteen million, two hundred and twenty-three thousand, six hundred and thirty-three dollars, and a cir- culation of seventy-four million, one hundred and fifty-three thousand, five hundred and forty-five dollars, besides specie to the amount of twenty-six million, sixty-four thousand, five hundred and three dollars. Contrast that with the present situation. Trace a line from this capital westward, by the south line of Maryland, l'ennsylvania, West Virginia, Ohio, Indiana, Illinois, and Missouri, and we find in the twelve States south of that line, whose population in 1860 was nine millions, there are but seventy-one National banks, with a capital of only thirteen

million, one hundred and seventy-seven thousand, five hundred dollars, and a circulation of but eight million, nine hundred and thirty-six thousand, one hundred and seventy dollars. Besides the increase of population, the four million slaves have now become users of currency. The people of those States have not more than seventy-five cents each of bank circulation. It is monstrous to pretend that such a distribution is either equitable or just.

Thus he states the existing state of things:

Ninety-four millions of currency reserves in the vaults, thirty millions more than the law requires, money a drug at four and five per cent., and all this because speculation in the gold room was dull, while mil- ions of our industrious citizens find it difficult to loan money at ten and fifteen per cent!

It is marvelous with what patience the American people permit them- selves to be robbed and defrauded.

These speculators are now waiting to see what financial laws we pass, as my friend before me (Mr. Judd) suggests, and what influence they will have on the operations of the gold room. During this suspense, the gamblers of Wall street are letting their money lie idle, to see which way the tide will turn. Let Congress neglect to pass the legislation which is necessary to overcome the difficulties of the situation and we shall see the scenes of July and August, and September last, with its black Friday, re-enacted. I hasten to say that 1 by no means indorse the notion that congress can determine, by any artificial mathematical rule, just how the currency ought to be distributed through the country, or how much is needed. But it cannot be denied that our past experi- ence and present situation demonstrate the outrageous injustice done in the West and South in regard to the currency.

And now I inquire for a remedy. What shall it be? By what means shall we supply the West and South with currency and banking facilities to meet the demands of their rapidly increasing population and wealth? Shall it be by an immediate increase of the volume of our paper money, to be followed by a greater depreciation of the whole mass, an increase of prices, and a great and disastrous disturbance of values and of all business transactions? For myself, I do not hesitate to declare that such legislation would be in every way ruinous to the interests and destructive of the credit of the country. I believe that the volume of our paper currency is already too large, and that a resumption of specie payments would reduce it. But, Mr. Speaker, whatever may be our individual opinions, it is clear that no measure of inflation can by any possibility become a law during the present session of Congress.

The following resolution passed.by the Senate, without a dissenting vote, on the twenty-fourth of February last, indicates that no measure of inflation can meet the assent of that body. I quote the proceedings of the senate on this subject as recorded in the Globe of February 25th: " Resolved, That to add to the present irredeemable paper currency of the country would be to render more difficult and remote the resump- tion of specie payments, to encourage and foster the spirit of specula- tion, to aggravate the evils produced by frequent and sudden fluctua- tions of values; to depreciate the credit of the Nation, and to check the healthful tendency of legitimate business to settle down upon a safe and permanent basis; and therefore, in the opinion of the senate, the existing volume of such currency ought not to be increased.

The Vice-President. Is there objection to the present consideration of the resolution ?

"Mr. Sherman. I hope not. Let it pass.

"Mr. Sumner. Let it p.iss.

"The Vice-President. The chair hears no objection to the present consideration of the resolution, and it is before the senate.

"The resolution was agreed to."

It is equally clear that no measure for the resumption of specie pay- ment that includes contraction of the currency as one of its provisions

BANKING AND THE CURRENCY.

can pass this house during the present congress. Shut up within these limitations, practically forbidden either to increase or diminish the volume of the currency, the committee on banking and currency were instructed by the house of representatives February 21, 1870, to per- form the duty described in the following resolution :

Resolved, That in the opinion of the nouse the business interests of the country require an increase in the volume of the circulating cur- rency, and the committee on banking and currency are instructed to report to the house at as early a day as practicable a bill increasing the currency to the amount of at least fifty million dollars.

Under these circumstances the duty of the committee was very diffi- cult to perform. Shut up between Scylla on the one side and Charyb- dis on the other, and propelled by this peremptory resolution, what could the committee do? It must give more banking facilities. It must give more circulating currency. But it must neither increase nor decrease the volume of the currency. * * * *

Thus he unfolds his bill and remedy:

This bill is the result of a compromise of many differences of opin- ion, and perhaps suits no member of the committee in all its features'; yet, on the whole, they believe it will give the needed relief, with the least disturbance to the business of the country, and without injury to the public credit.

I now invite the attention of the house to its provisions. It aims at two leading objects: To provide for a more equitable distribution of the currency without contraction or inflation, and without increased expense to the government ; and to provide for free banking on a spe- cie basis.

The first of these objects the bill proposes to reach by the provisions of the first six and the last three sections of the bill. The second object is provided for in the remaining sections, being sections seven, eight, and nine.

The provisions for the more equitable distribution of the currency and the increase of banking facilities are the following :

First. The issue of ninety-five million dollars of national bank notes in States having less than their proper portion.

Second. The cancellation and retirement of the three per cent. cer- tificates, which now amount in round numbers to forty-five million five hundred thousand dollars, and the cancellation and retirement of thirty-nine million five hundred thousand dollars of United States notes.

Third. When the whole amount of the ninety-five million dollars of additional notes shall have been issued, circulation shall then be withdrawn from States having an excess, and distributed to States being deficient, in such sums as may be required, not exceeding in the aggregate twenty-five million dollars.

After developing the scope of the measure, he is con- strained to say pensively :

I wish 1 were able to demonstrate also that there is no inflation in this bill; and here is the feature most unsatisfactory to me. For four years past I have pleaded for some practical legislation, looking toward a gradual and safe return to specie payments. It has been clear to my mind that resumption was impossible so long as the present volume of inconvertible currency is maintained. I have therefore strenuously op- posed all attempts to increase its volume. But deeply impressed with the necessity of giving more equal facilities to the West and South, and relieving the National bank system from the odium which the present unequal distribution brings upon it, I have consented, with reluctance, to this feature of the pending bill, believing that the benefits conferred by it will be greater than the evils that will result from the measure of inflation it contains.

The actual increase of circulating notes which it authorizes is about thirteen million dollars; but the great increase of credit currency in the

form of checks and drafts will, in my judgment, result in a very consid- erable expansion of paper credits. I cannot, in justice to myself, let this feature of the bill pass without expressing regret that the state of opinion in the house and country requires its enactment.

And thus he deals with inflation and congressional meddling with the currency.

But some gentlemen say, "Increase the greenback currency ; issue more; it is popular; it is safe; it is cheap; give it liberally and satisfy the wants of the country." This brings us to the question whether we will have the National bank currency or a currency issued directly by the government. All those who believe that the national banks should he overthrown, and that the government should itself become the man- ufacturer of the currency of the country, will doubtless oppose this bill in all its provisions. There are a few gentlemen, whose opinions I very greatly respect, who believe such a substitution ought to take place. ] disagree with them for the following reasons:

In the first place it is the experience of all nations, and it is the almost unanimous opinion of eminent statesmen and financial writers, that no nation can safely undertake to supply its people with a paper currency issued directly by the government. And, to apply that prin- ciple to our own country, let me ask if gentlemen think it safe to sub- ject any political party who may be in power in this government to the great temptation of over-issues of paper money in licu of taxation? In times of high political excitement, and on the eve of a general election, when there might be a deficiency in the revenues of the country, and congress should find it necessary to levy additional taxes, the tempta-' tion would be overwhelming to supply the deficit by an increased issue of paper money. Thus the whole business of the country, the value of all contracts, the prices of all commodities, the wages of labor, would depend upon a vote of congress. For one, I dare not trust the great industrial interests of this country to such uncertain and hazardous chances.

But even if congress and the Administration should be always supe- rior to such political temptations, still I affirm, in the second place, that no human legislature is wise enough to determine how much cur- rency the wants of this country require. Test it in this house to-day. Let every member mark down the amount which he believes the busi- ness of the country requires, and who does not know that the amounts will vary by hundreds of millions?

But a third objection, stronger even than the last, is this: that such a currency possesses no power of adapting itself to the business of the country. Suppose the total issues should be five hundred millions, or seven hundred millions, or any amount you please; it might be abund- ant for spring and summer, and yet when the great body of agricultural products were moving off to market in the fall, that amount might be totally insufficient. Fix any value you please, and if it be just sufficient at one period, it may be redundant at another, or insufficient at another. No currency can meet the wants of this country unless it is founded directly upon the demands of business, and not upon the caprice, the ignorance, the political selfishness, of any party in power.

What regulates now the loans and discounts and credits of our National banks? The business of the country. The amount increases or decreases, or remains stationary, as business is fluctuating or steady. This is a natural form of exchange, based upon the business of the country and regarded by its changes. And when that happy day arrives when the whole volume of our currency is redeemable in gold at the will of the holder, and recognized by all nations as equal to money, then the whole business of banking, the whole volume of cur- rency, the whole amount of credits, whether in the form of checks, drafts, or bills, will be regulated by the same general law -- the business of the country. The business of the country is like the level of the ocean, from which all measurements are made of heights and depths. Though tides and currents may for a time disturb, and tempests vex

LIFE OF JAMES A. GARFIELD.

and toss its surface, still, through calm and storm the grand level rules all its waves and lays its measuring-lines on every shore. So the busi- ness of the country, which, in the aggregated demands of the people for exchange of values, marks the ebb and flow, the rise and fall of the currents of trade, and forms the base-line from which to measure all our financial legislation, and is the only safe rule by which the volume of our currency can be determined.

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History of Buchanan County, Iowa, with illustrations and biographical sketches, Part 127

Author: Williams bros., Cleveland, pub. [from old catalog]; Riddle, A. G. (Albert Gallatin), 1816-1902 Publication date: 1881 Publisher: Cleveland, Williams brothers Number of Pages: 574

Author: Williams bros., Cleveland, pub. [from old catalog]; Riddle, A. G. (Albert Gallatin), 1816-1902
Publication date: 1881
Publisher: Cleveland, Williams brothers
Number of Pages: 574