money beyond four hundred millions would be a clear and palpable violation of the public faith. In the darkest hours of the war, when every patriot trembled, when our fate hung in the balance, when our armies were before Richmond and on the march through Georgia to the sea, when everybody felt that the danger of inconvertible paper money was likely to strike us from the list of nations, when our paper money then outstanding had fallen so that it took $2.80 to buy one dollar in gold, then it was that we entered into a stipulation with the public creditor, which is a part of the act of 1864, under which we borrowed money and pledged the public faith. It was a solemn promise that under no circumstances would we issue more than four hundred millions of paper money, and an additional reserve of fifty million dollars, pledged to pay a debt then existing, and which has since been paid.

It is suggested that this pledge was made under duress. No, Mr. President; the United States was never under duress except from the rebellion in the Southern States. Then we gave our sacred pledge to the men who helped us, to the men who loaned us money, to the capitalists, to the laborers, to the servants, to the women, to the children; yea, Senators, in every part of this broad land, in every county and every town, in every village and every hamlet, men, women, and children poured their little earnings into the stream that flowed into the National Treasury in the summer of 1864; and every dollar of the loan then made was made upon the faith of the sacred obligation of the United States that our paper money should never exceed $400,000,000.

Sir, I trust in God the day never will come when we shall violate that pledge, until we make those promises equal to par in gold. I will not acknowledge, with my friend from Rhode Island, that we were under duress. Certainly we were not under duress from the men, women, and children who lent us money. They gave us the means by which we put down the people who were in arms against our Govern ment, and, so help me God, I never will violate the faith pledged to them. The act of 1864 is known to every Senator. I will not read it. It is as plain and strong and clear as language could make it.

But, sir, we are told that to issue these three sixty-five bonds convertible into paper money will lower the rate of interest; and my friend from Indiana, with that happy faculty which he has of avoiding difficulties, asks when you have a great deal of money, and issue more, does not that cheapen it? Is not the right way to cheapen money to issue more of it? If you had a great abundance of any commodity to sell, would it not be cheaper? That is the argument. Well, sir, it will cheapen money to issue more. It will cheapen money as tested by the gold standard, and brokers will tell you every day how much it cheapens it. But whom will it benefit to cheapen money? It will aid a man to pay more cheaply a debt contracted upon a different basis, and to that extent will cheat the creditor; but it will not cheapen supplies, provisions, clothing, food. It may cheat the laboring man; for the laboring man may think it is the same money. He may take his two dollars a day just as he did before; but when he goes to spend those two dollars for the food that supplies his life, or for the clothing that

comforts his children, he will find that somebody else than the capitalist is cheated, and he is the one. Every device to relieve needy men in distress or in debt, that will depreciate the currency, adds to the daily toil of the laboring men, and to the cost of food and clothing. Why, sir, Mr. Webster never uttered a grander truth in his life than that famous passage, which I have almost forgotten, but the substance of which is that the best way to enrich the rich man's field by the sweat of the poor man's brow is by the use of inconvertible paper money. No truth was ever more forcibly uttered.

But they tell us that it will lessen the rate of interest. Let us see. This is a matter of experience. We have had a slight experience in this country, and we have had the experience of other countries, and the fact is just the reverse-the more money is depreciated the higher is the rate of interest. I have some knowledge of this by my own experience. I remember the panics that have occurred in this country since 1837. I recall to the recollection of my friend from Iowa what took place in his own State in 1857. I was in that beautiful State in the spring of that year. The people were rich, abounding in riches, fanciful riches; money was plenty. One man had made a profit of 100 per cent. on a piece of land that he had never seen and had owned but three months. Another had laid out a town and was selling lots at fabulous prices. Everybody was rich; paper money was abundant— wild-cat paper money; all kinds of money. Good money was there, too, gold as well as paper. Interest was 40 per cent., and many told me that they could make money by borrowing at 40 per cent. They offered to give me 40 per cent. for money to buy land with within five miles of a settlement. Everybody was rich; interest was high; times were glorious. In August the failure of the Ohio Life Insurance and Trust Company burst the bubble. The money that was loaned at that rate of interest was not paid, and the men who were engaged in these visionary speculations "went up the spout," to use a common phrase. So it was in the panic of 1837. Upon this point I could read you what is said by Mr. Mill; but that is mere "platitude"; it is only the experience of the past, of men of a different day and generation. I could read you from many books. I could read you the story of the South Sea bubble, when securities went up and interest was 100 per cent. So in all times which precede a financial panic, when people think they are prosperous, and that they are making money by marking up their goods, interest is enormously high. Sir, the experience of mankind proves that interest is higher under a depreciated paper money than it is under a gold standard. Is it worth while to waste more time to show the utter fallacy of the allegation that more money would cheapen interest?

But it is said that the recent panic was caused by the want of money, by the want of more paper money. Paper money for what? To build remote railroads, to carry out schemes for the future, to engage in speculative enterprises. The money of the country and the capital of the country were absorbed in unproductive industry. Therefore it was that the blow fell and destroyed a great many good men. But how is it now? Why, sir, at this moment money is easier to be had in the city of New York than it has been for years, by persons who

are engaged in ordinary commercial business, where the circumstances that surround them inspire confidence and credit. The same money that was in circulation before the panic is in circulation now, and more. Sir, this is not a currency panic. It has no connection with our currency. Such panics have occurred in Great Britain and the United States in specie-paying times. It was simply caused by unproductive investments. The currency is good, only lacking one quality to make it better. If it were as good as gold, it would then be the best. It is well secured. Nor was it a bank panic, I will say, for the relief of my friend from Indiana; for I am glad to agree with him in one or two things. The banks have stood the panic very well. With the exception of four or five, the national banks have not failed; and not one has failed unless by a clear violation of the law of its organization. Not one that has been brought to my attention has failed except by the use of the bank by the owners in loans and investments prohibited by the national-currency act.

The suspension of payment of deposits was the result, not the cause of the panic. It was justified by the same circumstances that would authorize the increase of the amount of notes of the Bank of England in violation of law. The banks did suspend payments; and that only proved the truth of what I said a while ago, that no plan of redemption would be wise and good unless it has some provision for such panics. There must be times when banks are compelled to use their reserves and all their resources, and themselves borrow instead of lending, and provision should be made for such times. The banks did commit an act of justifiable bankruptcy when they refused to pay their depositors; but that was temporary-a bending before the storm. They rapidly gathered in their resources, as the Bank of England would under like circumstances, calling in their loans and denying loans to their customers, and are now in a stronger condition than ever. They now have a greater reserve than they had before the panic. Mr. President, the condition of our currency has no relation whatever to the panic that passed over the country.

At this time, when nearly all debts have been settled; when the panic has swept away many fortunes; when we now have all the money that was ever afloat; when confidence is restored; when the price of every commodity is advanced to the price it bore before the panicnow is the golden moment when we should take a step in the right direction to make our money equal to gold. I never have charged the panic upon the currency. Indeed I was the first in the midst of the panic to declare that the currency had no connection with the panic. The money was well secured; it was good, only that it was not so good as gold. That was the only fault to be found with it. Men hoarded it. That added fuel to the fire and fed the panic. Its origin, like that of the panic of 1866 in Great Britain, was in the absorption of capital in unproductive enterprises. The want of confidence created by the failure of great houses gave the first alarm; then came the withdrawal. of deposits, the depletion and the suspension of the banks. Then laborers began to be discharged and productive industry stopped; but in a short time the ordinary business of the country was resumed, and

people found that they were not all ruined. It was the old, old story repeated periodically, arising from different causes, but having the same history and results. These panics are but the ebb and flow of great enterprises. They start with reviving prosperity; they grow with expanding hope and energy; they culminate with enterprises too great for the time, and the blind, unreasoning fear that springs from the failure of these enterprises during the panic does more harm and . causes more destruction of values than the injury done by failures themselves. No action of ours can prevent these panics. All we can do is to improve the opportunity offered us to place the public faith of our country on an enduring foundation.

I again appeal to the Senate to now firmly take its stand against any inflation of paper money under any circumstances, under any provocation, or on any plea. This alone will do a great good to the country. But if it will go further-if the Senate will lead the way to some wise and practical measure, looking to a redemption of the pledged faith of the United States, the people we represent will have cause to be proud of the political body which they have so long honored. I believe, sir, that no act of the Senate would so much inspire confidence, strengthen our business men and revive our industry, as by a decided vote on these propositions to show that our firm purpose is to take the road that leads to specie payments and a restored currency.

Sir, I have been many years here and in the other House, through long and troublesome controversies, during peace and war, and I for one desire to see the work of our generation crowned by the greatest of civic triumphs, the fulfillment of every promise, and to behold the nation free from all dishonor, its promises good, its credit untarnished, its wealth and power increasing and expanding.

FREE BANKING-THE CURRENCY.

IN THE SENATE, MAY 13, 1874.

THE bill to amend the several acts providing a national currency and to establish free banking, and for other purposes, being before the Senate, Mr. Sherman said:

Ir is not my purpose, Mr. President, to open any general financial debate on this bill. Every topic embraced in the bill was very fully discussed during the early part of the session, and I should deem it a violation of my public duty to detain the Senate long on this bill. I shall confine myself to a simple, brief statement of its terms, without any attempt to discuss the various propositions contained in it.

The central idea of this bill, or rather of the substitute reported by the Committee on Finance, is to make the business of banking free to all on the terms and conditions and with the limitations and restrictions embraced in the general popular phrase "free banking." If the business of banking were confined simply to contracts of loan and exchange, there could be no objection to free banking. The busi

ness would involve simply the relation of debtor and creditor, resting entirely upon contract and confidence, and needing no franchise, partnership, or corporation except such as is authorized by law or would be freely granted by any State to promote any business or any enterprise. But the term "banking" in common parlance includes the power to issue circulating notes to be used as money. This power is in no proper sense essential to the business of banking. If I had my way I would grant it to no State corporation and to no individual, but confine it solely to the United States and use it merely to facilitate domestic exchanges, and only to an amount that at any time could be converted into gold coin at the will of the holder. Such, I believe, was the design of the framers of the Constitution, who, fresh from the disasters caused by paper money, desired to cut up and supposed they had cut up this evil by the roots. The prohibition upon the issue of bills of credit by the States, fairly construed, prohibits the issue of paper money by a State or by any corporation authorized by a State, while the power of the United States to borrow money implies that this power must be executed by a contract freely entered into by two consenting parties, and payable alone in gold and silver coin.

If we were now in a condition to deal with this question solely upon principle, I would gladly join in prohibiting all paper money except such as might be issued by the United States for coin values. and redeemable in coin only. But, sir, we must deal with this question as practical men. We know that during our whole history paper money has been issued by corporations, that the business of our people has been founded on it, that it has proved a convenient agency in developing our resources; and that, whatever theory may prevail, in practice some form of paper money has been and will be used in the United States under the authority either of the United States or of the States. We now have nearly two thousand banks authorized to issue $354,000,000 of paper money. Shall the restriction upon the amount be now repealed and banking be made free to all? Section 4 of the substitute contains a repeal by name and description of every clause in the banking law which limits the amount of circulating notes. The first act of 1863 and that of 1864 limited the amount to $300,000,000. In 1870 the limit was extended to $354,000,000. This bill proposes to repeal the restriction upon the amount of bank circulation that may be issued, provided the banks will comply with the terms of the banking law.

The first objection to free banking without coin redemption is that it is a novelty, an experiment, which, though plausible, will endanger the whole system. Other systems of free banking are based entirely upon coin redemption. There is no system of free banking in the world that I know of under which the currency is not redeemable in gold and silver coin. Consequently, we meet the objection at the outset, that, if we now authorize free banking upon a currency basis without coin redemption, we shall be the only nation in the world that has done so to this time. Other systems of free banking are based upon coin redemption. For instance, in New York, which furnished the first example of free banking, every note was redeemable at the counter