Part 89 (1/2)

”The imperative necessity for prompt action, and the pressure of public duties in this closing week of my term of office, compel me to refrain from any attempt to make a full and satisfactory presentation of the objections to the bill.

”The importance of the pa.s.sage, at the present session of Congress, of a suitable measure for the refunding of the national debt, which is about to mature, is generally recognized. It has been urged upon the attention of Congress by the Secretary of the Treasury and in my last annual message. If successfully accomplished, it will secure a large decrease in the annual interest payment of the nation; and I earnestly recommend, if the bill before me shall fail, that another measure for this purpose be adopted before the present Congress adjourns.

”While in my opinion it would be wise to authorize the Secretary of the Treasury, in his discretion, to offer, to the public, bonds bearing three and a half per cent. interest in aid of refunding, I should not deem it my duty to interpose my const.i.tutional objection to the pa.s.sage of the present bill if it did not contain, in its fifth section, provisions which, in my judgment, seriously impair the value and tend to the destruction of the present national banking system of the country. This system has now been in operation almost twenty years. No safer or more beneficial banking system was ever established. Its advantages as a business are free to all who have the necessary capital. It furnishes a currency to the public which, for convenience and the security of the bill- holder, has probably never been equaled by that of any other banking system. Its notes are secured by the deposit with the government of the interest-bearing bonds of the United States.

”The section of the bill before me which relates to the national banking system, and to which objection is made, is not an essential part of a refunding measure. It is as follows:

'Sec. 5. From and after the 1st day of July, 1881, the three per cent. bonds authorized by the first section of this act shall be the only bonds receivable as security for national bank circulation, or as security for the safekeeping and prompt payment of the public money deposited with such banks; but when any such bonds deposited for the purposes aforesaid shall be designated for purchase or redemption by the Secretary of the Treasury, the banking a.s.sociation depositing the same shall have the right to subst.i.tute other issues of the bonds of the United States in lieu thereof: _Provided_, That no bond upon which interest has ceased shall be accepted or shall be continued on deposit as security for circulation or for the safe-keeping of the public money; and in case bonds so deposited should not be withdrawn, as provided by law, within thirty days after interest has ceased thereon, the banking a.s.sociation depositing the same shall be subject to the liabilities and proceedings on the part of the comptroller provided for in section 5234 of the Revised Statutes of the United States: _And provided further_, That section 4 of the act of June 20, 1874, ent.i.tled: ”An act fixing the amount of United States notes, providing for a redistribution of the national bank currency, and for other purposes,” be, and the same is hereby, repealed; and sections 5159 and 5160 of the Revised Statutes of the United States be, and the same are hereby, re-enacted.'

”Under this section it is obvious that no additional banks will hereafter be organized, except possibly in a few cities or localities where the prevailing rates of interest in ordinary business are extremely low. No new banks can be organized, and no increase of the capital of existing banks can be obtained, except by the purchase and deposit of three per cent. bonds. No other bonds of the United States can be used for the purpose. The one thousand millions of other bonds recently issued by the United States, and bearing a higher rate of interest than three per cent., and therefore a better security for the bill-holder, cannot, after the 1st of July next, be received as security for bank circulation. This is a radical change in the banking law. It takes from the banks the right they have heretofore had under the law to purchase and deposit, as security for their circulation, any of the bonds issued by the United States, and deprives the bill-holder of the best security which the banks are able to give, by requiring them to deposit bonds having the least value of any bonds issued by the government.

”The average rate of taxation of capital employed in banking is more than double the rate of taxation upon capital employed in other legitimate business. Under these circ.u.mstances, to amend the banking law so as to deprive the banks of the privilege of securing their notes by the most valuable bonds issued by the government will, it is believed, in a large part of the country, be a practical prohibition of the organization of new banks, and prevent the existing banks from enlarging their capital. The national banking system, if continued at all, will be a monopoly in the hands of those already engaged in it, who may purchase government bonds bearing a more favorable rate of interest than the three per cent. bonds prior to next July.

”To prevent the further organization of banks is to put in jeopardy the whole system, by taking from it that feature which makes it, as it now is, a banking system free upon the same terms to all who wish to engage in it. Even the existing banks will be in danger of being driven from business by the additional disadvantages to which they will be subjected by this bill. In short, I cannot but regard the fifth section of the bill as a step in the direction of the destruction of the national banking system.

”Our country, after a long period of business depression, has just entered upon a career of unexampled prosperity.

”The withdrawal of the currency from circulation of the national banks, and then enforced winding up of the banks in consequence, would inevitably bring a serious embarra.s.sment and disaster to the business of the country. Banks of issue are essential instruments of modern commerce. If the present efficient and admirable system of banking is broken down, it will inevitably be followed by a recurrence to other and inferior methods of banking. Any measure looking to such a result will be a disturbing element in our financial system. It will destroy confidence and surely check the growing prosperity of the country.

”Believing that a measure for refunding the national debt is not necessarily connected with the national banking law, and that any refunding act would defeat its own object, if it imperiled the national banking system, or seriously impaired its usefulness; and convinced that section 5 of the bill before me would, if it should become a law, work great harm, I herewith return the bill to the House of Representatives for that further consideration which is provided for in the const.i.tution.

”Rutherford B. Hayes.

”Executive mansion, March 3, 1881.”

Preceding this message, during the last week in February, there was a serious disturbance in the money market, especially in connection with the national banks, caused by a fear that the bill would become a law. Appeals were made to me to furnish relief.

All I could do was to purchase $10,000,000 of bonds to be paid from an overflowing treasury, but the veto of the President settled the fate of the bill.

CHAPTER XLII.

ELECTED TO THE SENATE FOR THE FOURTH TIME.

Blaine Appointed Secretary of State--Withdrawal of Governor Foster as a Senatorial Candidate--I Am Again Elected to My Old Position to Succeed Allen G. Thurman--My Visit to Columbus to Return Thanks to the Legislature--Address to Boston Merchants on Finances--Windom Recommended to Succeed Me as Secretary of the Treasury--Personal Characteristics of Garfield--How He Differed from President Hayes --The Latter's Successful Administration--My One Day out of Office in Over Forty Years--Long Animosity of Don Piatt and His Change of Opinion in 1881--Mahone's Power in the Senate--Windom's Success in the Treasury--The Conkling-Platt Controversy with the President Over New York Appointments.

In the latter part of November, 1880, General Garfield came to Was.h.i.+ngton and called upon Mr. Blaine, who, it was understood, was to be Secretary of State. Garfield came to my house directly from Blaine's and informed me that he had tendered that office to Blaine and that it was accepted. He said that Blaine thought it would not be politic to continue me as Secretary of the Treasury, as it would be regarded as an unfriendly discrimination by other members of Hayes' cabinet. I promptly replied that I agreed with the opinion of Blaine, and was a candidate for the Senate. It was then understood that Garfield was committed to Foster for the vacancy in the Senate, but this he denied, and, whatever might have been his preference, I am convinced he took no part in the subsequent contest.

On the 16th of December, Thomas A. Cowgill, speaker of the House of Representatives, of Ohio, wrote a note to Governor Foster advising his withdrawal ”for harmony in our counsels and unity in our action.”

On the next day, after advising with leading Republicans, Foster, in a manly letter, declined further to be a candidate for Senator.

Prior to the withdrawal of Foster I received a note from General Garfield from Mentor, Ohio, under date of December 15, 1880, in which he said: ”I am glad to see that the unpleasant matters between yourself and Governor Foster have been so happily adjusted, and I am quite sure that a little further understanding will remove all dangers of a personal contest, which might disturb the harmony of the party in Ohio.”

I subsequently received the following note from Garfield:

”Mentor, O., December 22, 1880.

”My Dear Sir:--Yours of the 20th inst. came duly to hand. I appreciate what you say in reference to personal and Ohio appointments.

The case of Swaim is so exceptional that I hope it will not be taken as a precedent for what is to come. I am greatly gratified at the happy turn which the relations between Foster and yourself have taken.

”I will forward my declination of the senators.h.i.+p in time to reach the general a.s.sembly on the first day of its session.

”I hope you will not fail to visit me on your trip to Ohio. Mrs.

Garfield joins me in the hope that Mrs. Sherman will accompany you.