me shows that I rather understated it. Here, then, is a liability of $200,000 liable to be called upon at any moment. I stated that it was absolutely necessary for the safety of that bank, no matter where located, in any country town throughout the whole length and breadth of this land, to keep an average deposit of not less than $50,000 in some one of the large cities to draw upon; and whether you pay interest or do not pay interest will neither increase nor diminish it a single half dollar. The bank must be ready to meet its liabilities, and it must meet them in that way; and if it has not exchange on New York it must still draw and instantly express the bills to meet the draft when it arrives.

The city banks are willing and anxious to obtain these deposits at four per cent. Why? Because whatever the fund may be which they have over on any given day, they can loan it, not at four per cent., which they pay, but at six or seven per cent., and sometimes even at a higher rate of interest. Whether they pay four per cent. or nothing they will loan it to the very last dollar they have on hand, daily as they do now. The intent and meaning of this section is that they shall be enabled to pocket, not the residuum over four per cent., but the whole six or seven or eight per cent., whatever the amount may be that they obtain from day to day for their excess.

It is a mistake to suppose that this will change the amount of these deposits. There is not a bank throughout the West that does not receive more than double the amount of interest it receives on its deposits in the great cities. In Cincinnati the average rate of bank interest is not less than ten per cent., as I am informed; in Detroit about that; in Chicago twelve per cent.-three times the amount they receive. Do you suppose a bank in Chicago would deposit its funds in New York at four per cent. when it could get twelve per cent. at home? Certainly not. As I said before, it will not make the difference of a single half dollar in the amount they deposit, whether they receive four per cent. interest or no interest at all. There is not a bank in a single State, even including the New England States, which will not be seriously injured by the passage of this first section. Neither will it affect the amount of circulating medium at home. This is the argument that has been used in both Houses: "Withdraw your interest and the banks will keep their money at home and use it there." Why, sir, what use have they for it? As I said yesterday, I asked the cashier of the largest bank in the city in which I live what amount of redemption he had been called upon for in the three years the bank had been in existence, and he told me a single ten dollar bill. A man stepped in and told him he would like a greenback for a ten dollar bill, and he gave it to him; and that was all the redemption he was called upon for in three long years.

But, sir, day after day they are called upon for vast sums in redemption by drafts from the large cities. The city banks can well afford to pay these drafts, for they know almost to a certainty the amount which they will have on deposit at a given day. One section draws largely to-day, and another section largely tomorrow. One section draws in the spring and another in the fall. Drafts are made largely for the wool crop or the wheat crop. As I showed yesterday, and I have the figures before me, the average amount which they are compelled to keep in New York, and will keep in these large cities and will be compelled to keep, whether you pay interest or not, is something over seventy-three million dollars. Now, sir, I can well understand, and so can you, why the banks and bankers in the cities of New York, Boston, and Philadelphia should desire to have these vast deposits without paying any interest at all in order to swell their own dividends; but it would be an injustice, not only to every bank and banker, but to individuals. In the eity in which I live the banks pay to their depositors for trust funds and court funds and

funds that are to remain a long time on deposit, the precise sum which they receive for their balances in New York. It is their custom. Cut off this interest on the balances, and you cut off the interest that is paid to widows and orphans and trust funds and all other funds throughout the United States.

I intended no disrespect to the Senator from New Jersey yesterday when I said that this bill ought to be designated "A bill to enable a few bankers in the large cities to swindle the people of the United States in order to swell their own profits;" for that is exactly what this bill will do if you pass it. But, sir, if this section is not stricken out, I shall then offer my amendment prohibiting these banks that now desire to be relieved from paying any interest from loaning a single dollar on their deposits, and I hope the Senate will adopt that amendment, and then these men will be more anxious to defeat this section than I am now.

Mr. SPRAGUE. I do not intend to make a speech on this question, but I do wish that Senators would understand the exact condition in which the business of the country will be placed by the section under discussion if it is permitted to stand as law. I may be in error as to my judgment of the effect of this section, but it strikes me that the moment the banks are called upon to have a reserve in the event of this section passing it will be to that extent a curtailment of the currency. You will not certainly compel any of these country banks to make their deposits in a city bank unless there is security of some kind or compensation for it. Why will you ask a country bank to deposit in a New York bank any amount for the redemption of its circulation? Why not permit those banks to hold the amount in their own vaults for the redemption of their own currency? That, I understand, is the measure which the Senator from Michigan proposes.

Mr. CHANDLER. If the Senator will pardon me for one moment, the present law compels the banks to redeem in the large cities as well as at home. That is the law now.

Mr. SPRAGUE. Of course there is manifest injustice in compelling a reserve to be kept in a bank in New York by a bank in Michigan without compensation, because for this currency the bank in Michigan has made payment. The result, then, will be that this reserve fund will in effect be withdrawn from the business of the country into the country banks, and to that extent the bank capital upon which the business of the country is now being carried on will be restricted. That is my judgment in the matter, that the effect will be that if there is $60,000,000 now as a reserve you will permit the country banks to hold that amount in lawful money of the United States for the purpose of making their redemptions or redeeming their bills, and to that amount there will be a contraction of the banking facilities of the United States. If I am not correct in this I wish to be made so.

Mr. President, if I could make my views as plain as the Senator from Vermont [Mr. MORRILL] did his the other day, it would be exceedingly gratifying to me; or if I could make myself as well understood as the Senator from Indiana, [Mr. MORTON,] who disclaims all knowledge of finance and of banking, it would be exceedingly gratifying to me. I wish there were more such men in this body who knew nothing of banking, but who would bring to the consideration of these questions the ordinary common judgment necessary to all practical questions. It has been my judgment from the beginning of the discussion of this question that the bankers of this country have "run the machine." The bankers of this country have had the manipulation of everything connected with the finances of the country, both in the Finance Committees in the Senate and House, at the Treasury, and with the President of the United States. In my judgment, all and each of these positions is susceptible of the clearest proof.

I will state for the information of the Senate, and it is undoubtedly within the knowledge of

every one who hears me, that from the foundation of the banking principle of Great Britain, by which she has been able to carry a great debt two hundred years and more, she has repudiated the counsels of bankers from that time to this, and there is not one to day who gives her counsel and advice in the management of her finances. It is a matter of history that the Bank of England in its yearly organization has ever refused admittance to its board to those engaged simply in the manipulation of money and making money upon money. It is a significant fact, and history has shown it to be true, that where men are engaged in any pursuit as a business they are unfit to take a wide view of all the conditions of the people and of the people's interests.

The PRESIDENT pro tempore. Will the Senator suspend his remarks?

RECEPTION OF THE CHINESE EMBASSY.

The Sergeant-at-Arms appeared at the main entrance of the Senate Chamber at one o'clock, and announced the presence of the committee of the Senate and the Chinese embassy.

The members of the embassy, escorted by the committee of the Senate, Messrs. SUMNER, SHERMAN, and HENDRICKS, advanced within the bar, the Senators rising and standing till the members of the embassy were seated. The committee and the embassy having reached the area in front of the Secretary's desk,

Mr. SUMNER, on behalf of the committee, said: Mr. President, I present Mr. Burlingame and his associates of the Chinese embassy to the Senate of the United States.

The PRESIDENT pro tempore. I welcome Mr. Burlingame and his associates of the Chinese embassy to the Senate of the United States. The committee will conduct them to the seats prepared for them.

Mr. Burlingame and his associates of the Chinese embassy were conducted to seats provided for them in the area in front of the Secretary's desk.

The distinguished visitors having been seated,

Mr. ANTHONY. Mr. President, I move that business be suspended for twenty minutes, in order that Senators may have an opportunity to pay their respects individually to our distinguished guests.

The motion was agreed to unanimously.

The President pro tempore vacated the chair, and he and the other members of the Senate were severally introduced to the dignitaries of the embassy by the committee.

The recess having expired, the embassy left the Senate Chamber, escorted by the committee, and the Senate resumed its business.

MESSAGE FROM THE HOUSE.

A message from the House of Representatives, by Mr. MCPHERSON, its Clerk, announced that the House had passed a bill (H. R. No. 1275) relating to the Alexandria canal, in which the concurrence of the Senate was requested.

AFFAIRS IN TEXAS.

The PRESIDENT pro tempore. The Chair will lay before the Senate a telegraphic dispatch which has just been received from the constitutional convention of Texas, with an earnest request that it be immediately laid before the Senate. If there be no objection it will be

read.

The Chief Clerk read as follows:

AUSTIN, TEXAS, June 16, 1868.

I am directed by the Texas convention to forward you the following resolutions adopted this day, duly attested copies of which will be sent you by mail. The immediate action of Congress is earnestly requested by the loyal people of this State:

Whereas lawlessness and crime exist to such an alarining extent in portions of this State, it is deemed proper to do all in the power of this convention to protect life and property, and for the suppression of crime: Therefore,

1. Be it resolved, That this convention respectfully urge upon the Congress of the United States the necessity of authorizing the organization by the body of a military force in the several counties in this State, to act in conjunction with and under the direction of the military commander therein, for the protection of the lives and property of the citizens now every day being preyed upon by assassins and rob

currency when you issue any paper not based upon a settled, known, understood value; and that value must be a standard value, and gold | is the only standard value. Whenever, therefore, you issue an additional amount of currency, if currency is not based upon the gold standard, you in effect debase your coin in another form. One is paper, the other is gold; each is valuable only as it represents value. A dollar in paper is equally as good as a dollar in gold if it has a value equal to it, and not otherwise. The policy of the Senator from Ohio asks you to issue and the country to receive more of this debased, this changeable currency and value.

I did not mean when I rose to make any extended remarks on this question; but believing that all these financial schemes are simply advocated in the interests of men engaged in manipulating money affairs, and believing that they are in no wise called for by any interest of the country, I could not hesitate to express, though feebly, my disapprobation of everything tending to legislation in the direction indicated by the measures that are before the Senate and before Congress. There can be no safe course except that which tends toward specie payments, as all admit. An increase of this currency puts that off. Restricting the amount of this currency bankrupts your business. Both of these policies, therefore, are wrong. The only sure course to pursue is to increase the value of your securities. They are now depreciated; they are not worth what they purport to be; and until you can create for them a value equal to that which they purport to bear upon their face you can never arrive at specie payments; you can never arrive at a settled condition of business operations in the country; you can never furnish a safe road out of your dilemma. I shall vote for the proposition of the Senator from Michigan, and I trust I shall have an opportunity after that to vote to lay the whole subject on the table.

Mr. HENDRICKS. Mr. President, I shall vote for the proposition to strike out the first section of this bill. In doing so, it is proper for me to say that I was very much impressed by the able argument of the Senator from New Jersey, [Mr. CATTELL.] Some portions of his argument I agree with. I doubt very much whether it is a safe system of banking that one bank shall pay to another interest on deposits;|| but I think that is a matter that ought to be regulated by the interest of business and commerce itself. I understand there are just two cases to be provided for by this section. In the first place, the banks of the interior are compelled by the banking law to keep on deposit in certain cities a portion of their capital.

Mr. SHERMAN. They are not compelled; they are authorized.

Mr. HENDRICKS. Well, they are required by the nature of the business. They are required to be prepared to redeem their bills at certain points; and to comply with that requisition as a matter of course they must have funds at some one of the specified points to meet any demand for redemption.

Mr. SHERMAN. I will say to the Senator from Indiana that, practically, now the redemption of the national banking currency is merely nominal. One hundred dollars in any bank in New York will redeem all the circulation of any country bank that may be presented.

Mr. CAMERON. I hope the Senator from Indiana will let me say just one word. There is no practical difficulty now; but when we come to pay specie then the redemption becomes imperative. The necessity for all interior banks is to redeem their notes at the commercial centers, Philadelphia and New York. Now, they settle by checks and transferring accounts; but when we come to specie payments they must redeem their notes. We must look to that, because this law will act in the future as well as the present.

Mr. HENDRICKS. Mr. President, I am speaking of the necessity that the law, in my judgment, places upon the banks,

Take a

40TH CONG. 2D SESS.-No. 202.

bank in the central portion of the State of Indiana, for instance. It is required to be prepared to redeem its bills at some one of the points mentioned in the law. Just to-day perhaps redemptions are not required, not called for; but there may come a time, and not far distant, when the redemptions will be required. The bank must be prepared to meet them. Now, as the law stands, whenever redemptions do arise, the bank must be ready to meet them whenever they are called for. Therefore, the law contemplates that the banks shall be prepared to meet any demand of this sort. To do so, they ought to have means on deposit at some one of these points. Why not allow them interest upon those deposits, if the interest of the bank in which the deposit is made will allow it? That bank must judge for itself whether it can safely pay interest upon these deposits.

But, sir, the most important question is that which the course of trade and business presents. The demands upon the West from the East constantly accruing make it necessary that the banks of the West shall be prepared to draw upon the East. Our shipments of produce and cattle make this necessary constantly. Practically it is about thus: a man wishing to buy produce or stock in the West borrows the money for a short period from one of our banks; that bank takes his check or draft payable in the city of New York; and when he has purchased his stock on his credit, and shipped it, and sold it in New York, out of the proceeds he meets his paper; and this money is then on deposit in the city of New York to meet exchange from the West to the East.

Now, it is not strange that the deposits in the cities mentioned by the Senator from New Jersey should be $70,000,000 when the reserve fund of these banks is only $40,000,000. The large business between the East and the West requires perhaps that amount of western funds in eastern banks. No bank in the city of Indianapolis, where I reside, could transact business for a day unless it was prepared to draw upon the East. Our business requires it. A merchant finds his indebtedness becoming due to-day in the city of New York. How is he to pay it? He does not want to send the money; but he buys exchange and pays it thus, and the bank makes a small profit, a very small profit, indeed, out of it. But to be prepared to meet that class of business, very important to our trade and commerce, the bank must have deposits in some eastern bank or it cannot carry on the business.

If the bank keeps constantly on hand a fund in an eastern bank, if it is the interest of the eastern bank to have that fund, and if that eastern bank can pay interest upon that fund, why not allow it? It seems to me that the business itself, the interests of the two institutions, will regulate that matter. If the bank in the East is transacting its business upon an unsafe system the western bank will not long credit it. Of course the western bank will seek to deposit in a safe institution in the East; and if that institution can afford to pay interest upon this large fund it is well that it should be done; and this is one of the sources of profit to the western stockholders. I do not know very much about banking; but it seems to me that this is a plain proposition. While the Senator from New Jersey may be right, and I think he is right, that paying interest upon deposits is not a safe system for the bank paying that interest, yet that bank must judge of that for itself. Its stockholders must look to their own interests. If it is a source of profit to have money on deposit at four per cent. they can judge of that.

I am not afraid of the evil complained of by the Senator from Ohio. If the banks in the East are allowed to pay upon deposits made by western banks, he fears that that will withdraw the banking capital and currency from the West to the East. I think, practically, that cannot be so, for it is known to the Senator from Ohio, as it is to myself, that the banks of the West, in the regular course of their

business, make from eight to twelve per cent. It would be a remarkable fact if they should deposit their funds beyond the necessities of business at four per cent. when they can make from eight to twelve per cent. by the use of their money in the West. That cannot be. I know that the abuse which the Senator wishes to avoid does not exist. I shall vote to strike out this section. I do not expect to vote for the bill itself; but yet on this single motion I shall vote to strike out.

Mr. WILLIAMS. Mr. President, I voted for this section in the Committee on Finance, but not because I had any particular interest in the prosperity of any class of banks. So far as this discussion has progressed, it has settled down into a controversy between the interior and the city banks; and the only question that seems to be considered of any moment here is as to which class of banks shall make the most money out of the present condition of affairs. I have no interest whatever in that contest.

I have heard complaints from various sources that the people of the western States were without the necessary amount of circulation; and Congress is besieged from time to time with applications to extend the circulation in the western States, so as to accommodate the people there with monetary facilities. It appeared to me, from such evidence as I was able to obtain, that the present system had a tendency to deprive the people of the West of a circulation or of sufficient circulation, or of that amount of circulation, which they would have if this section became the law of the land.

It has been argued that it was improbable that the banks in the western States would put their circulation in the banks of the eastern cities and receive four per cent. upon it when they could loan that circulation in the neighborhoods where they do business for eight, ten, or twelve per cent. That argument would be good if the fact did not contradict it. No matter what the reasoning may be on the subject, the fact is admitted on all hands that seventy odd millions of circulation that belongs to the interior banks is deposited in the banks of the three great cities; so that in point of fact that amount of circulation is withdrawn from the people of the western States. That is a fact. What the inducements are I of course am not able to say; but it may be that this is a continuous loan to the city banks. It is not subject to those contingencies that loans to individuals are. It may be that the security is more perfect, and it is possible that this difference in the interest may be made up by the rate of exchange to some extent. Various considerations may influence the interior banks to adopt this policy; but whatever those considerations may be, whether sufficient or insufficient to our minds, the fact is that they produce this result, that this money that ought to be in the banks of the western States, there to accommodate the local necessities, is found in the banks of these great cities, to be used there for the purpose of stimulating speculation of all sorts and descriptions, which is the bane of the present day.

What is the reason, I will ask, for extending the banks of this country, multiplying these western banks according to the wishes of the American people, if, when a bank is located in any western State, it immediately commences the transaction of business in the city of New York or of Philadelphia? Multiply these banks, and you increase the circulation in the large cities, and the only effect is to stimulate speculation there, while the necessities of the people of the West are not relieved by the multiplication of your banks.

I am quite surprised, Mr. President, I must confess, to find such a stubborn opposition to this section, which was put into this bill, as I understood, for the express benefit of the western people. I am surprised to find them so unanimously opposed to it. If they manage to strike this section out of the bill I hope they will not come any more to Congress beg

ging for additional banks; I hope we shall hear no more on that subject.

I have no inflexible theory upon this financial question. I judge from circumstances. I am willing to do what I can, consistent with the business interests of the country, to accommodate the western people. I supposed that this measure was intended for that purpose and would have that effect. But it seems that there is some danger that some banks located in the western States, no matter what the interests of the people may be, will not receive as much interest if this bill passes as they now receive. It appears to be a matter of no consequence as to whether they accommodate the people of that section or not in the estimation of Senators. I, knowing nothing about these banks, and caring nothing about them, had supposed that the object and effect of this section would be to prevent the flow of circulation from the western States to the eastern cities.

It is pretended here as a reason for this that the law requires these western banks to keep in the eastern cities a certain amount for the purpose of redeeming their circulation. What commentary does the Senator from Michigan make upon that assumption, when he said that he was told by a banker in the city of Detroit that during three years he was only called upon to redeem one ten-dollar bill. If that be true, then the seventy odd millions of money in the eastern cities is not necessary to redeem the circulation.

Mr. CHANDLER. Will the Senator allow me one moment right there?

Mr. WILLIAMS. Certainly.

Mr. CHANDLER. While they were called upon to exchange greenbacks for only one tendollar bill, they had to daily redeem their deposits by exchange on New York.

Mr. WILLIAMS. I understand that. Mr. CHANDLER. I tried to beat the idea into the Senator's head; but it is hopeless, and I will not try it again. [ [Laughter. It is the simplest business proposition that ever was presented to a man's common sense; but it is utterly hopeless to beat it into the Senator's head, and I resign the task.

Mr. WILLIAMS. The Senator need not put himself to any unnecessary trouble to beat ideas into my head, because it is necessary, in the first place, that he should have some correct ideas in his own, [laughter;] and it is possible, in his zeal on this subject, that he is not so much governed by what the people of the West need and desire as by what the banks of Detroit or some other city need in reference to this matter.

Now, sir, I acknowledge-I have not pretended to deny that there was a necessity for some deposits in the cities to meet the drafts of these local banks. Nobody has controverted that position; but the idea upon which this bill proceeds-and I am indifferent as to its passage, but I want now to have it understood that we are to have no more clamor from the West about additional banking facilities, when the whole effect of it is to increase the circulation in New York, Philadelphia, and Boston-I say the idea is, that when these city banks pay interest upon this circulation there is an inducement for withdrawing from the circulation in the West that which they need and putting it into the already exorbitant circulation of the cities.

This morning I received a circular. I do not know that any consequence is to be attached to it, but I find this statement in it-I suppose it is sent to all Senators; it appears to be a printed circular:'

"Throughout the country trade is unusually quiet, and with the consequently limited demand for loans the banks of the interior are allowing large balances to accumulate with their correspondents here, which it is found difficult to employ except at exceedingly low rates, three and four per cent. being the current interest upon demand loans."

It seems that immense deposits of money are accumulating in these eastern banks, and at this particular time it is said that we must extend the circulation $20,000,000 and provide

for the establishment of new banks in the West so as to accommodate the people. And now, when we undertake to provide by law to prevent this flow of circulation from the West to these cities we are met with the objection that it will not do to legislate in this way because it will injure somebody's bank in the western States.

I do not care particularly about the fate of this section, for the bill, as it is now amended, seems to me to be, with my little knowledge of financial matters, very nearly an absurdity. I do not pretend to know as much about finance as the Senator from Michigan, or many other Senators; but it seems to me to be an absurdity in finance to take, by an arbitrary law of Congress, $20,000,000 of circulation from one section of this Union and undertake to locate it in another section of the Union, disturbing, deranging, and breaking up business everywhere by your legislation. I undertake to say that Congress cannot control and regulate the currents of trade and commerce by any arbitrary legislation, and the less of it we have the better for the country; for the laws of commerce are surer and wiser and safer than any law that Congress can make upon the subject. So far as I am concerned I would rather now that Congress would drop this whole subject at once than undertake to invade the eastern States, where their capital no doubt is altogether employed in business, and withdraw from their business and their circulation $20,000,000, and undertake to send it to Texas or Oregon or California, or some other part of the country.

I only rose to give my reasons for support. ing this section; but if the bill remains as amended, I do not care one straw what becomes of any of the sections.

Mr. MORRILL, of Vermont. Mr. President, I gave my consent in the Committee on Finance to this section purely on the principles enunciated by the Senator from New Jersey, as a question of banking. I do not believe that banks are created to borrow money; they are created to lend. I did it for this other reason, that the banking law of this country required

That may be.

Mr. MORRILL, of Vermont. That will not be affected by this law. Mr. WILLIAMS. Mr. MORRILL, of Vermont. This only relates to the reserve.

Mr. HOWE. You are mistaken about that. Mr. CATTELL. It covers the whole.

Mr. MORRILL, of Vermont. Well, it will not be affected by it, because they can make their deposits with bankers, private individuals, and evade it; so that it will make no difference as to that. It is a necessity on the part of the western banks, and of all country banks, to keep their deposits in the city for the purpose of drawing upon them; and they do it from motives of self-interest, because they desire to obtain a larger rate of interest, and any person applying to them for a discount will not receive bills, but will receive checks upon which a greater amount of exchange will be charged than would be required to transport the bills from the city to the bank.

Mr. President, there is no question but what this section will tend to the benefit of the city banks and against the country banks. There is no doubt about that. The city banks will obtain the same amount of deposits, or nearly the same, for which they will pay no interest, and the country banks will be deprived of that amount of profits. It is not to be concealed that that will be the effect of the bill so far as that is concerned. The only question about it is whether we shall continue to foster and to strengthen these city banks or not. That is for every Senator to judge for himself.

Mr. HOWE. Mr. President, I have not said a word in the course of this debate, and I did not think I should; but having listened to it considerably, I have come to the conclusion that I shall be obliged to vote for this amendment, notwithstanding the arguments urged against it by the Senator from New Jersey [Mr. CATTELL] yesterday, which have been repeated substantially by the Senator from Vermont [Mr. MORRILL] to-day. I never like to vote against a measure supported by the Senator from New Jersey particularly; and whenever I do, I feel called upon to apolo

cluded to submit briefly my apology for the vote I am about to give on this question publicly. I should not have felt the courage to do that even but for the kind words thrown out by the honorable Senator from Rhode Island [Mr. SPRAGUE] just now in support of those who speak upon this subject without knowing anything about it. [Laughter.] Happening to fall within that category, I felt authorized to say a word myself upon it.

Before the inauguration of this system, when we had specie payments, the banks in the cities, although authorized to keep out as large a circulation as the banks in the country, never availed themselves of that privilege, for it was not possible that they could keep it out. The country banks then had to redeem their circulation once in every six or twelve weeks, but the city banks would be compelled to redeem their circulation almost daily or weekly; and therefore these banks of large capital, capital of millions, kept out but a very insignificant amount of circulation. One of the largest banks of this character, holding $10,000,000, as I am informed, kept out no circulation.

But the Senator from Oregon is very much mistaken if he supposes the West do not understand their interest about this matter. They || will not be able if this bill should pass or not pass to discount one single dollar more than they otherwise would. If this reserve is kept at home, they cannot bank upon it. It will not increase their circulation in the least. They must keep it as a reserve.

Mr. WILLIAMS. It has been admitted here throughout this discussion that there were $30,000,000 of money on deposit in the city banks in excess of the reserve. I referred particularly to that.

One reason I have for voting against the adoption of this new restriction was stated very emphatically and forcibly by the Senator from Oregon, [Mr. WILLIAMS,] who has just resumed his seat. He gave utterance to a truth that has dimly suggested itself to my mind several times since this debate commenced, the idea whether, after all, this Congress, (and it is a very able Congress; I take it no man will doubt that,) in spite of its supreme ability, is able to manage the banking of the country better than the banks can do it themselves. The Senator from Oregon denies it, and I am inclined to think he is right. Up to this time the banks have managed this very subject, and, so far as I know, have done it with considerable success. Why not leave them to do it hereafter? He has confidence in their ability, and I have confidence in their ability, and why not let them play their hands? I am inclined to think we had better let them. That is one reason I have for voting against putting this restriction upon the banks.

But what are the reasons urged for the restriction? The Senator from New Jersey says it is a violation of a fundamental principle, not only in the national banking law, but in all banking systems whatever, which is that the banks should be required to keep a certain amount of funds in reserve; and he says that the national banking law recognizes that necessity, and requires of the central banks that

they should keep twenty-five per cent. of their circulation and deposits as a reserve, and discriminates against them and in favor of the country banks by releasing the latter from the obligation of keeping any more than fifteen per cent. of their circulation and deposits, and he says that this is absolutely necessary to the safety and well-being of any banking system; and he says that this practice of depositing the reserve and of taking interest upon it is in violation of this fundamental principle and destructive of it.

I am not familiar with this subject, but I am inclined to think the Senator is wrong in assuming that the national banking law requires any such reserve as he states. It does say, believe, in about so many words, that there shall be that reserve; but suppose there is not that reserve, what then? You cannot safely declare that a law requires a certain thing to be done or not to be done, until you examine the penalties or the means for enforcing the command. What, then, if the reserve falls below twenty-five per cent. in the central banks, or fifteen per cent. in the country banks? So far as I understand, the only penalty which is imposed upon the bank is that it is required to stop loaning. When its reserve falls below the twenty-five or fifteen per cent. it cannot discount time paper any longer; but it may go on still discounting sight bills. If I am right about this, then instead of the law requiring a reserve of twenty-five or fifteen per cent. it simply requires that the bank shall not loan on time more than seventy-five or eighty-five per cent. of its circulation and of its deposits; but the balance of the fifteen or twenty-five per cent. it may employ in purchasing sight bills.

If this is the true construction of the act, then this discrimination in favor of the country banks and against the city banks which the Senator from New Jersey complains of is not so apparent to me as it seemed to be to himself. But if he is right and I am wrong as to the interpretation of the act, is there not a hardship imposed upon the country bank from which the city bank is relieved, in this: the city bank is required only to redeem its circulation at its own counter; the country bank is required to redeem its circulation, and to be prepared to do so at all times, both at its own counter and in some one of the central cities? There is a double redemption for which the country bank must provide, and a single redemption for which the city bank must provide.

Mr. CATTELL. Allow me to say to the Senator that I have explained that several times. In order to provide for that double obligation the law allows two fifths of this fifteen per cent. to be kept there for that purand counted as reserve. There is no pose hardship in redeeming at another place when you provide that your reserve shall be kept there and counted.

Mr. HOWE. I understand that. There would not be any hardship at all in it if the law only required the redemption to be for the amount of three fifths of the reserve which they are allowed to keep on deposit at the central banks; but that is not the requirement of the law. The requirement of the law is that the whole circulation must be redeemed on demand at the central banks.

Mr. CATTELL. The whole circulation is not anything like three fifths of the reserve. The reserve is a percentage on the whole amount of deposits and circulation, so that the amount of reserve is infinitely larger than the whole circulation.

Mr. HOWE. It may be, or it may not be. I cannot say how that is. But the home lia. bility must be provided for at the same time. I cannot regulate discount myself. I am only speaking of the obligations which the law imposes upon the two classes of banks. The Senator says, and says truly, that three fifths of this reserve may be deposited in the vaults of these redeeming banks, and when deposited there it shall count to the country bank just as if it was in its own vault. That is neither a privilege nor advantage, nor, perhaps, a hard

ship. It is a permission to the country bank to reckon three fifths of its reserve, which is not in its own vaults, but is in the vaults of one of the redeeming banks, as if it were in its own vaults; but then it is no more nor less, taken with the two fifths, than the fifteen per cent. after all.

But, after all, that does not provide for redemption. When your law has said to the country bank, "You must redeem your circulation and your deposits at home on demand, and your circulation in the city bank on demand,' what obligation has it imposed upon the country bank? Simply this: it is a victim in the hands of the city bank, and it must make its own terms with the city bank. The city bank will not undertake to redeem the circulation of the country bank without compensation. That compensation, I take it, is in deposits, and what those deposits shall be is a matter regulated not by law, but by arrangement between the two banks. That is the obligation the law puts upon the country bank, and you have left them to mutual arrangements, mutual contract and understanding in order to effectuate, to execute this law; and so far the city and country banks have done it to their mutual satisfaction.

That the possession of these deposits is an advantage to the city bank all admit. The Senator from Vermont admits that. The Senator from New Jersey does not dispute that. But the Senator from New Jersey, and I think the Senator from Vermont, also, rather urged the idea that for the sake of getting this four per cent., which is said to be the amount paid on these deposits, the country banks were crowding their means into the city banks. I do not think that treats the country banks fairly. I do not think it is just, or that it pays due tribute to their judgment and discrimination; and they are smart. I do not believe that of the meager circulation and consequent capital, for after all our banking capital is to a great extent limited by our circulation in the West. I do not think it is fair to suggest that out of that small amount of capital they crowd a large portion of it into the cities to get four per cent., when they could loan it at from seven to ten in their own neighborhood. To meet this requirement of the city banks, to meet the necessities of trade, a large portion of their means are kept, I suppose, in the city banks to the advantage of those banks, and the four per cent. which the city banks pay for it helps to make up the account of profits to the country banks. This seems to me to be a perfectly fair and perfectly safe arrangement.

The Senator from Oregon says that if our country banks do these things we must not complain about having too little bank capital allowed to us. Sir, they do it because your law obliges them to do it; and if our banking capital was only half what it is they would still have to make the same proportionate use of it, in all probability, that they do now; and if it were double the sum that it is now they would still make the same disposition of it.

What is the grievance, what is the injury, that springs from this usage? The Senator from New Jersey has pointed us to the only one I have heard mentioned; and that is, that it stimulates to speculation; money piles up in the city banks and it stimulates speculation in the cities. That is a grievance; that is a hardship; that is an abuse, I suppose. I should be glad to put an end to it; and if I could see any way of putting an end to it now without imposing a hardship upon the country institutions I think I should be willing to do it. But I do not see that way; and until my friend, the Senator from New Jersey, shall show us that some one of these speculators cheated him, who lives there and is exposed them, I am not so very anxious to put an end to these speculations, especially when we have to pay the cost of ending them. If I should hear in some unhappy day that they had proved more than a match for him, and got the advantage of him, then I should seek more earnestly than I do to-day for some means of arresting that sort

of speculation. That is the only abuse that I have heard of yet as growing out of this practice of paying interest on deposits; and I am inclined to think that, until I hear some other, I shall vote to allow the banks to pay it as long as they want to.

The PRESIDENT pro tempore. The question is on striking out the first section of the bill, on which the yeas and nays have been ordered.

The Chief Clerk proceeded to call the roll.

Mr. WILLIAMS (when his name was called) said: I am paired on this question with the Senator from Nebraska, [Mr. THAYER.] If he were here he would vote to strike out this section, and I should vote to retain it.

Mr. CATTELL. I feel it my duty to state that my colleague [Mr. FRELINGHUYSEN] was paired on this question with the Senator from Missouri, [Mr. DRAKE.] He took some interest in it on the opposite side to the one I take. If he were present he would vote in favor of striking out this section. I thought it due to him to make this statement, as the Senator from Missouri happens to be absent and unable to explain it.

The result was announced-yeas 26, nays 11; as follows:

YEAS-Messrs. Anthony, Buckalew, Cameron, Chandler, Cole, Conkling, Cragin, Davis, Doolittle, Edmunds, Ferry, Harlan, Hendricks, Howard, Howe, McCreery, Morrill of Maine, Patterson of New Hampshire, Patterson of Tennessee, Pomeroy, Sprague, Stewart, Trumbull, Vickers, Wade, and Yates-26. NAYS-Messrs. Cattell, Fessenden, Henderson, Morgan, Morrill of Vermont, Sherman, Sumner, Tipton, Van Winkle, Willey, and Wilson-11.

ABSENT-Messrs. Bayard, Conness, Corbett, Dixon, Drake, Fowler, Frelinghuysen, Grimes, Johnson, Morton, Norton, Nye, Ramsey, Ross, Saulsbury, Thayer, and Williams-17.

So the amendment was agreed to.

Mr. DAVIS. I will now offer an amendment

Mr. SHERMAN. The question should now be taken on the amendment that I offered to your amendment.

Very well.

Mr. DAVIS. Mr. SHERMAN. I now offer the amendment that I read last night.

PENSION BILLS.

Mr. VAN WINKLE. While the Clerk is looking for that amendment, with the consent of the Senate I should like to remark that this day has so far gone by that it would be of no use to the Pension Committee, and I ask the Senate if they will not in their kindness give me Saturday, and make the business of the Pension Committee the special order for that day. This is the fourth time that I have been disappointed.

Mr. POMEROY. I suggest that we have an evening session for that purpose.

Several SENATORS. No, no; it is too hot. Mr. VAN WINKLE. I cannot consent to that. I want a whole day. I have seventyfive bills on the Calendar.

The PRESIDENT pro tempore. The motion can only be put by unanimous consent. Is there any objection? No objection; the Chair will put the question on the motion that pension bills be made the special order for Saturday next.

The motion was agreed to.

NATIONAL BANKS.