Emily Eaton Hepburn Alonzo Barton Hepburn.

A history of currency in the United States online

. (page 32 of 49)
Online LibraryEmily Eaton Hepburn Alonzo Barton HepburnA history of currency in the United States → online text (page 32 of 49)
Font size
QR-code for this ebook


ministration and by the public generaUy. Carlisle was forced to
issue bonds under existing authority to replenish the gold reserve.
The gold thus received was paid out in redemption of legsl tender
notes, which had immediately to be used, together with some of
the gold, to meet current expenses. Had he possessed other
money for current use, and thus been able to impound the re-
deemed notes, the gold reserve would have been more easily
maintained. He was forced to proclaim the weakness of the
Treasury and assail the credit of the government with each bond
issue, made ostensibly for the purpose of maintaining the gold
reserve, but in part as well for the purpose of meeting the ordinary
expense of government. Had Congress granted the authwity
asked to borrow for temporary puii>oses upon exchequer notes,
smaller bond issues would have been required and less trouble
and distrust would have been experienced.

The national banks were constantly growing in importance
and usefulness as banks of deposit and discount. Their safe
and conservative management had won for them a place in public
confidence and favor tmsurpassed by the best institutions in any
country. The silver controversy had for several years com-
manded the attention of Congress to the exclusion of legislation
affecting bank circulation. The condition and changes suffi-
ciently appear in the statistics following.



Digitized by



Google



SILVER CONTEST OP 1896



367



STATISTICAL RESUME
(Amounts in millions)
NxnoNAL Finances



Rxvmus



Fdcal
Ykae



ExvBMDxroEn



11



l>



1 +



PUCB OV 4*8
OVX907



Low



I89Z
Z892

1893
1894
189s
1896



220

177

203

132
152

z6o



173

178
183

z66
z6z
167



393
355
386
298
313
327



318
332

356
340
325
317



38
23
«7
28

31
35



356
345
383
368
356
352



+ 37

+ ZO

+ 3
-70

-43
-25



Z006
968
96Z
Z0Z7
Z097
Z223



- 6z

- 38

- 7
+ 56
+ 80
+ Z26



Z22

zz8i

"5
zz6

ii3l

ZZ2i



ZI6

"4
Z08

ZZ2i

zzo

Z06



Cxscdxahon



July :



Is



£



Z89Z
Z892
1893
1894
1895
Z896



647
664
598
627
636
599



388
389
391
395
40Z
422



78
77

77
76

77
76



347
347
347
347
347
347



50
Z02

147
153
Z46

130



z68

173
Z79
207

2Z2

226



Z678
1752
1739
I80S

z8z9
z8oo



z8o

151
Z42

144

2Z7

294



1498
z6oz

1597
z66z
z6o2
Z506



64

66
67
68
70
71



t^S-Ai



2385
24.28
22.93

2Z.ZO



^Incbides certificates*



Digitized by



Google



368 A HISTORY OF CURRENCY IN THE UNITED STATES



EXPOKIS AND ImPOKTS AND GOID MOVXMKNT



Focal
Ybak



1891
1892
1893
1894
189s
1896



884
1030
848
892
808
883



845
827
866
655
732
780



II



- 39

- 203
+ 18
-237

- 76
-103



24
34
42
51
48
6x



26
29

34
20
20
27



1 +



+ 2

- 5

- 8

-31
-28

-34



Goio



86
50

109
77
67

X12



19
50
21
72
36
34



^1



-67



• 5

31

•78



6

9
102

85
"7
159



I



118
"4
95
65
X08
xoa



PitoDnciioN or Gouo and Szlvki



Ybak



1891
1892

X893
1894

1895
1896



WoixD



Gold



13X
147
157
i8x
199
202



177
198

214
213
217
203



136

133
129
X04
no
106



UmnD SxAxn



OOLP



33
33
36
40

47
53



SSLVWk



75
82

78
64
72
76



58
56
47
31
36
40



$.98800

.87145
.78030

.63479
.65406

.67565



20.92
23.72
26.49
32.56
31.60
30.59



.764
.674
.604
^9X

.505
.522



Digitized by



Google



SILVER CONTEST OF 1896



369



Tbb Silver AcQUisinoN



FACAL

Ybax



BmuoM PmoiikSSD



Ouiicis



Con



AVBAOB



Nkt SiLvsi nr

I^XABDST



DOLIARS BmUDH



1891^

I89X
Z893

1893
1894
189s
1896



3

54
54

13



3
SI
SI
45

9



$1.0901

1.0451

.9403

.8430

.7313



24

6

I

3

1
30



391
397
398
401
403
433



59
57
57
53
52
52



307
327
327
327
320

331



33
5
7

16
30
36



32

77

118

137

124
XI9



Nationai; Banks
(at dates nkasxst Janua&y z)



Tbak


Ndmbb


Cavral


S11B11.UB


Dnosm


CncuiA-


SncB






1891


3573


658


215


151S


123


190


88


1933


1893


3692


677


238


1630


135


308


los


30OI


1893


3784


690


340


1778


146


310


109


3167


1894


3787


683


247


1553


180


251


163


1873


1895


3737


666


245


1719


169


318


157


1992


1896


3706


657


346


1734


185


307


131


3041



State Banks, etc.







SxAix BAim






TvtM, RiSOOBCBS


Ybak


NUMSBt


Cartal


Sumkus


Db-


Caib


LOAMB


Trust

COM-
PAMIBS


PUVATK

Bamxi


SAvmot
Bamkb


1891


2572


209


60


557


108


633


537


152


1855


1893


319I


234


67


649


130


700


600


147


1964


1893


3579


251


74


707


137


758


727


108


3014


1894


3586


244


74


658


145


666


705


105


1981


1895


3774


250


74


712


143


693


807


130


20S4


1896


3708


240


71


696


138


697


85s


94


2143



^ Under law of 1878 to August 14, 189a



3B



Digitized by



Qoo^<;:



370 A HISTORY OF CURRENCY IN THE UNITED STATES



MlSCELLAMSOUB FINANCIAL





CtBAUIO-BOUn


Savings Bamo


Fahods


Ykak


NkwYoek

(lilLUOIIS)


U.S.
(MnuoMB)


Dbvos-
1XOB8
(ooo'g)


Fosns

1DH8)


AVBAGB


NUM-


RDB


189Z . , .

1892 . . .

1893 .. .
1894. . .
1895 .. .
1896. . .


34,054
36,280
34,421
24,230

28,264
29,351


57,299
60,884
58,881
45,028
50,975
51,936


4533

4782

4«3i
4778
4«76
5065


1623
1713
1785
1748

x8ix
1907


358
358
370
366
371
377




190
114
347
173
173
226



Digitized by



Qoo^<;:



CHAPTER XXI

Gold Standard Act of 1900
1897-1902

The gold standard advocates, who hoped that McEinley's
election would be accepted as a final declaration in favor of the
gold standard and that legislation would be speedily enacted,
under the influence of his administration, insuring such result,
were doomed to disappointment. McKinley was a safe exponent
but not a moulder of public sentiment. His characteristics in
this respect earned him the criticism of always '' keeping his ear
to the ground." The leaders of the Republican party were still
influenced by the habit of deference to silver advocates and silver
interests and the very large vote cast for Bryan, under stress of
a presidential campaign, was a tangible evidence of strength
and distinct source of inspiration far outweighing any sense of
discouragement involved in his defeat. McKinley's congres-
sional record upon the question of the standard justified the silver
advocates in expecting no drastic measures at his hands, and the
record of other Republican leaders fortified the hope of sufficient
Republican assistance to defeat such measures should they ap-
pear. The gold standard had distinctly triumphed, but the lines
of battle were still drawn, astute generals were deploying for
position on either side, and the struggle was to be fiinally deter-
mined in the presidential contest of 1900.

McKinley was easily persuaded that one more effort to secure
international agreement in favor of the enlarged use of silver as
money should be made. The troubles of Great Britain in pre-

371



Digitized by



Google



372 A HISTORY OF CURRENCY IN THE UNITED STATES

serving even approximate stability in ratio between the rupee
and the pound, among other causes, had preafHtated a general
discussion of the subject in Europe and perhaps justified this
attempt on the part of our government. Senator Wolcott
(Colo.), ex- Vice-President Adlai Stevenson, and General Charles
J. Paine were s^at abroad as commissioners. They visited the
different capitals of Europe, were pleasantly received, but elicited
no responsive interest. The complete failure of the mission was
so generally anticipated in advance that it produced no appre-
ciable effect upon public sentiment at home.

A deficit in revenue of $18,000,000 estimated for 1897 was not
disturbing, because the cash balance, including the gold reserve,
was nearly $213,000,000, resulting from the proceeds of the bond
sales in 1894-1896. The fact that Cleveland's struggle to main-
tain the gold standard was largely caused and greatly intensified
by insufficient revenues was fully understood and appredated.
In fact the most serious criticism upon Cleveland's administrar-
tion is his failure to influence legislation which would pres-
ently produce revenue sufficient for his needs.

McEinley convened Congress in extra session and an act in-
creasing the tariff generally, including a reimposition of part of
the duty on sugar, which had been abolished by the McEinley act
of 1890, soon produced sufficient revenue.

Lyman J. Gage, for more than a generation a successful banker
in Chicago, had been appointed Secretary of the Treasury. He
brought his long experience and study to the work of solving
the currency problem and before the regular session of Congress
opened had elaborated a complete plan well worthy of adoption
which was submitted to that body in December, 1897. ffis
purpose was, as he expressed it, to put the country squarely
upon a gold basis.

The business interests of the country were keenly alive to the
necessity for action and imder the leadership of H. H. Hanna
delegates from all sections assembled in convention at Indian-



Digitized by



Google



GOLD STANDARD ACT OF jgoo 373

apolis. The meeting was thoroughly representative in character^
including some of the ablest men in the country. A very able
commission was created, including Senator George F. Edmunds
as chairman, and ez-Secretary Charles S. Fairchild and J. '
Laurence Laughlin, among its members, to prepare a compre-
hensive measure or proposed law for currency and coinage re-
form, together with an academic discussion of the whole subject,
for submission to Congress, and to the public generally. Their
report, an octavo volume of 600 pages, showed great research,
was forceful, ludd, convincing, and had great influence upon the
public mind ; this octavo volume was distributed gratuitously,
all important libraries receiving a copy. During the early period
of our history, stenogrq)hy was unknown and printing but little
developed, hence records were meagre, libraries almost negligible
and important documents were preserved in a very few places.
Many important historical documents were published in full
in this volume and thus made accessible to the general public ;
for this reason reference is frequently made to this volume because
the original data are out of reach of the general public. This con-
vention was, perhaps, the most influential single influence in favor
of the gold standard and currency based upon commercial assets.

Hie friends of the gold standard became aggressive, and
piiesented to Congress a pr(^)06ition to redeem silver dollars in
gold. This roused the silver leaders who rq)elled it as an attack
upon the legal tender quality of the '' dollar of our daddies,"
and the Senate passed a resolution against the proposition;
the House, however, refused to concur. The whole trend of the
administration toward the establishment of the single gold
standard, slow though it was, gave to Bryan and his lieutenants
great h<q)e of political success in the ensuing campaign.

Hie declared issue had theretofore been between the single
silver standard, toward which the country had been so rapidly
tending prior to the repeal of the silver purchase law, and the
bimetaJlic standard with a strong tendency to the single gold



Digitized by



Google



374 ^ HISTORY OF CURRENCY IN THE UNITED STATES

standard. Aggressive action in favor of the latter was likely to
concentrate all other elements in opposition, and the silver advo-
cates scented future victory in the situation. They were doomed
to disappointment The Spanish War, which occurred at this
time (1898), united the patriotic sentiment of the country in
support of the administration. Republicans no longer enter-
tained any doubt of McEinley's reelection and assumed a bolder
attitude in favor of the gold standard.

An almost continuous rebellion against Spanish rule had existed
in Cuba for more than a quarter of a century. The military
occupation of the island necessarily interfered with commercial
relations with the United States. Exorbitant and unusual tariff
exactions were imposed, coupled with unexplained and prolonged
delay in passing goods, both for export and import, through
the custom-houses, producing conditions inimical to successful
business; and these conditions were modified only by the im-
proper use of money with customs officials. Self-respecting
merchants found it difficult to engage in trade with Cuba. Utter
neglect of sanitation in the Cuban ports bred yellow fever without
interruption.

Cuban ports were in close proximity to the Gulf ports of the
United States, easily reached by the smaller sailing craft, and
hence a periodic scourge of the yellow pest was more or less prev-
alent in our own coimtry. The only means of protecting our
own people from this disease seemed to be to compel proper
sanitation in Cuba. These conditions were aggravating and
long continuance had exasperated people almost to the explosive
point. According to the laws of nations no provocation of war
existed and yet the happening of any untoward event was bound
to precipitate a conffict. The blowing up of the battleship
Maine in Havana harbor, February 15, 1898, and the death of a
large number of American sailors, produced a crisis and the
conffict became inevitable.

The recounting of the above events seems justifiable here for



Digitized by



Google



QOLD STANDARD ACT OP igoo 37$

the reason that the Spanish War, resulting as it did, greatly
strengthened McKinley's administration in the popular mind and
nerved the Republican leaders to firm action in behalf of the gold
standard, relieved as they were from fear of popular defeat. The
war brought other topics to the front and sUver lost its com-
manding interest.

To meet the expenses of the war taxes were increased and a
loan of $200,000,000 in 3 per cent, bonds was placed at par. The
act authorizing the latter contained a provision which directed a
more rapid coinage of silver dollars. It was, in fact, with diffi-
culty that the sQver majority in the Senate was restrained from
forcing a free silver amendment to this measure, so imperatively
demanded by the exigencies of the war. In the House, Bland
had proposed the further issue of legal tender notes to cover the
cost of the war instead of issuing bonds.

After the tariff revision of 1897 was completed, thus rendering
any further change in the near future improbable, the industrial
interests rapidly recovered from the depression, and an era of
prosperity set in which was materially stimulated by the great
demands of the government for war supplies. The world's
production of gold steadily increased and the United States,
with favorable trade balances and a heavy home output, aug-
mented its gold stock at a rate greater than that shown by any
other country. Ability to maintain the gold standard was
beyond question.

The number of national banks continued to diminish until
July, 1898, when there were but 3582 (compared with 3830 in
1893 and 3634 in May, 1897). Their circulation in July, 1898,
stood at $190,000,000. The issue of the 3 per cent war loan
at par enabled the banks to increase circulation at a profit and
by December, 1899, it had increased to $205,000,000. The
number of banks had in the same period increased 20, but their
aggregate capital had diminished over $16,000,000. The circu-
lation of the country was now $25.50 per capita. Silver dedined



Digitized by



Qoo^<;:



376 A HISTORY OF CURRENCY IN THE UNITED STATES

to about 60 cents per ounce, making the market ratio to gold 34 to
I and the bullion value of the silver dollar about 47 cents.

The Republican leaders in Congress detennined in December,
1899, that the time for action on the currency question had
arrived. In the House a Republican caucus adopted a bill upon
the general lines proposed by the Indianapolis conference but
varying in certain particulars. This bill passed in January by
a majority of fifty. The Senate passed a sq)arate measure difiFer-
ing in many respects. The two bills went to conference, an agree-
ment was reached early in March, and on the 14th of that month
the conference bill passed and was signed by the President.

Hie act declared the gold dollar to be the standard unit of
value and all forms of money issued or coined by the United
States were to be maintained at a parity therewith by the Secre-
tary of the Treasury. Both classes of legal tender notes were to
be redeemed in such gold coin, the reserve for the purpose to be
increased at once to $150,000,000, and maintained, if necessary,
by sales of 3 per cent, gold bonds. Notes when redeemed were
to be reissued only for gold, but if the gold were obtained out of
the general Treasury fund, they might be used for any purpose
except to meet deficiencies in revenues. The l^gal tender quality
of the silver dollar remained undisturbed by the law. Hie
monetary functions of the Treasury were separated from those of
a merely fiscal character by the establishment of a separate divi-
sion. Treasury notes of 1890 were to be cancelled as received, and
silver certificates substituted therefor ; the issue of gold certif-
icates to be resumed and continued imless the gold reserve should
fall below $100,000,000, or the greenbacks and silver certificates
in the general fund exceed $60,000,000, and the issue of currency
certificates to be discontinued. Denominations of paper were jugu-
lated as follows: no gold certificates under $20, but one-fourth
at least of the issue to be $50 and under ; silver certificates, 90
per cent, to be $10 and under, 10 per cent. $20, $50, and $100 ;
greenbacks under $10 to be retired as smaller silver certificates



Digitized by



Google



QOLD STANDARD ACT OF igoo 377

are issued, larger greenbacks to be substituted ; $5 national bank
notes to be issued only to one-third of the amount taken by each
bank ; the limit of subsidiary coinage was increased to $ioO|Ooo,-
000, the silver on hand to be used for this purpose. The new
3 per cent, government bonds, the 4 per cents of 1907, and 5 per
cents of 1904 outstanding were to be refunded in the discretion
of the Secretary into 2 per cent, thirty-year gold bonds, upon a
2\ per cent, income basb, the premium to be paid in cash ; na-
tional banks were authorized in smaller towns with $25,000
ci^ital ; circulation allowed to the par of bonds, and to the full
amount of unimpaired capital, and banks depositing the new
2 per cent. United States bonds to be taxed only \ per cent,
annually on circulation, whereas the tax on circulation secured
by any other issue ronained at one per cent.

By selling to the banks a 2 per cent, bond (at least i per cent,
under the interest rate which the government would have to pay
had the bonds sold on their investment value) and allowing them
circulation to the par of the bonds, with a 50 per cent, reduction
in the rate of annual taxation, the government became morally
obligated to maintain these bonds at par and to protect the
currency monopoly which the law gave to the banks ; the con-
sideration to the government was a market for its bonds at a very
low rate of interest.

The provision of the act of 1882 prohibiting banks retiring cir-
culation from again increasing the same for a period of six months
was repealed, but the limit of the amount which might be
retired in any one month remained at $3,000,000. The final
secticm disclaims any intention of precluding bimetallism if con-
ditions should prove favorable.

Thus after a struggle covering many years a number of reforms
in the monetary system were carried through in a single legislative
measure. The opposition at once made itself manifest. The
platform of the Democratic-Populist party in Nebraska, which
met in convention under the leadership of Bryan five days after



Digitized by



Qoo^<;:



378 A HISTORY OP CURRENCY IN THE UNITED STATES

the passage of the '^gold standard law/' declared for free and
unlimited coinage of silver and the substitution of greenbacks
for national bank-notes. In many of the other states similar
declarations were adc^ted, and although the new issue of ''Im-
perialism/' growing out of the war, was for a time prominent
in the presidential campaign the actual contest was upon the
question of the standard of values and opposition to bank-note
currency. All the former arguments for an increased money
supply to come from the remonetization of silver, the expressive
effects of the single gold standard, and the inadequacy of the
gold supply were rehearsed with little effect as the country was
prospering as never before in its history. Prices of agricultural
products had risen. The excess of exports over imports had
averaged $560,000,000 a year for the preceding three years.
The revenues produced a substantial surplus. The world's
production of gold was now over $300,000,000 a year, the United
States contributing nearly one-fourth, aU of which was retained.
The money in circulation in the United States had risen to
nearly $27 per capita.

Bryan's renomination was a foregone conclusion, and he
fatuously insisted upon making the silver question the main
issue. The Republicans renominated McEinley, declared for
the gold standard and against free coinage of silver and in favor
of legislation looking to an equalization of interest rates by
enabling the varying currency needs of the seasons and aU
sections to be promptly met.

McKinley was reelected by a largely increased majority, and
the country accepted the result as indorsing and confirming the
action of Congress in adopting the gold standard by the act of
March 14, 1900. Good results flowing from this act were speedily
manifest. The refunding of the bonds provided for aggregated
$352,000,000 and a large amount of the surplus revenue was paid
out for premiums in making the exchange. National banks
increased 340 in number, the capital was increased $26,500,000



Digitized by



Google



QOLD STANDARD ACT OP igoo 379

and circulation nearly $86,ocx),ooo compared with September a
year before. Of the new banks 123 were converted state banks
and 208 were capitalized at the minimum of $25,000. The
bond security for circulation included $270,000,000 of the new
2 per cents.

The issue of gold certificates increased materially, and the
changes in the denominations of paper money provided for by
the law progressed rapidly, the silver certificates taking the place
of the smaller denominations of other issues. With large crops
to be moved, the country did not suffer from the usual money
stringency, owing to the large increase in the gold stock, in bank
circulation, and the distribution of the surplus revenue in the
process of refunding.

The law of 1900 provided "that the dollar consisting of twenty-
five and eight-tenths grains of gold nine-tenths fine, as estabfished
by section thirty-five hundred and eleven of the Revised Statutes
of the United States, shall be the standard unit of value, and aU
forms of money issued or coined by the United States shall be
maintained at a parity of value with this standard and it shall
be the duty of the Secretary of the Treasury to maintain such
parity." It did not, however, provide any method by which this
parity should be maintained. Secretary Gage in his report for
December, 1900, called attention to this omission, and urged
that specific power be given. He also renewed his arguments in
favor of providing an elastic bank currency. While favoring
branch banking, he recognized that public sentiment was averse
to such a S3^tem, and suggested a federated system or federated
bank somewhat analogous to the general government and the
states, one of whose principal functions should be the issue of
currency. He also recommended that bank-notes be secured,
30 per cent, by a deposit of government bonds, 20 per cent, by a
deposit of legal tenders, the remaining 50 per cent, of the issues
to be based upon assets and secured by a guaranty fund.

Thus he hoped to accomplish a double reform, the elimination



Digitized by



Google



38o A HISTORY OF CURRENCY IN THE UNITED STATES

of the greenbacks and an ample paper currency whidi would not



Online LibraryEmily Eaton Hepburn Alonzo Barton HepburnA history of currency in the United States → online text (page 32 of 49)