By the substitution of national currency we substantially could lose nothing by counterfeiting.
John Sherman
The Public Record
John Sherman was an American politician from Ohio who served in federal office throughout the Civil War and into the late nineteenth century. A member of the Republican Party, he served in both houses of the U.S. Congress. He also served as Secretary of the Treasury and Secretary of State. Sherman sought the Republican presidential nomination three times, coming closest in 1888, but was never chosen by the party. Between 1861 and 1897, John Sherman served in the U.S. Senate for nearly 32 years and holds the record for longest serving senator from the state of Ohio.
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I called attention to the loss to the people by counterfeiting, which could not be avoided when we had such a multitude of banks.
Whenever a failure occurred, such as that of the Ohio Life Insurance and Trust Company, it operated like a panic in a disorganized army; all of the banks closed their doors at once and suspended specie payments.
With this multiplicity of banks, depending upon different organizations, it was impossible to have a uniform national currency, for its value was constantly affected by their issues.
No state has the power to interfere with this exclusive authority in Congress to regulate the national currency, or, in other words, to provide a substitute for the national coin.
When, by the force of circumstances beyond our control, the national coin disappears, either because of war or of other circumstances, Congress alone must furnish the substitute.
Congress has the power to regulate commerce; Congress has the power to borrow money, which involves the power to emit bills of credit; Congress has the power to regulate the value of coin.
It was only by the use of paper money that England maintained her wars with Napoleon.
All nations in the midst of great wars have been compelled to resort to paper money.
I also stated that if peace were restored to our country, we ought, as soon as possible, to go back to the basis of gold and silver coin, but, in the meantime, we must meet the exigencies of the hour.
Therefore, I thought wisely, the sub-treasury system was adopted, by which gold and silver coin was the only money received or paid out by the government.
In 1837 their notes were in the hands of the people, depreciated and dishonored, if not entirely worthless.
Nearly all the statesmen of that time believed it was necessary to have a national currency in some form, but there was a part in the country that believed the only true national currency was gold and silver coin.
Most of the state banks shortly afterward exploded, and almost their entire issue outstanding at the time fell as a loss to the people of the United States.
I said that when coin, the best of currency, was driven out of circulation, by the existence of war or extraneous circumstances, it was the duty of Congress to provide a substitute.
The absence of the precious metals will, it is believed, be a temporary evil; but, until they can again be rendered the general medium of exchange, it devolves on the wisdom of Congress to provide a substitute which shall equally engage…
It is, however, essential to every modification of the finances that the benefits of a uniform national currency should be restored to the community.
I stated distinctly that the purpose of the bill was not merely to levy a reasonable tax on the banks, but also to induce them to withdraw their paper, in order to substitute for it a national currency.
The rate proposed--two per cent.--I insisted was not too high, because it was only one-third of the profit derived from the issue of paper money without interest, the principal of which was not paid in coin.
The discrimination in favor of banks of circulation ran through all the tax laws, while other corporations, such as railroad companies, insurance companies and the like, were subject to heavy taxes.
All commercial paper--checks, drafts, orders, bills of exchange, protests, bonds --every instrument that was used in the ordinary process of banking --was heavily taxed, while bank bills were not taxed at all.
The strongest banks in the United States, such as the Bank of Commerce of New York, had but little or no circulation, while the weakest banks supported themselves and made profit by issuing the largest quantity of bills authorized.
I said that the business of banking proper consisted in loaning money, discounting bills, facilitating exchanges of productions by the agency of commercial paper, and in receiving and disbursing the deposits of individuals.
As the reversal of this policy is threatened I feel justified in briefly restating the argument that induced Congress to deprive all state banks of the power to issue their bills as money.
When I entered Congress I was entirely prepared, not only to tax the circulation of state banks, but to tax such banks out of existence.
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