Banks now employed to be continued until, &c.

Secretary to lay a statement before Congress.

Bank to pay interest under certain circumstances.

and withdraw from it the public moneys which it may hold on deposite at the time of such discontinuance. And in case of the discontinuance of any of said banks, it shall be the duty of the Secretary of the Treasury to report to Congress immediately if in session, and if not in session, then at the commencement of its next session, the facts and reasons which have induced such discontinuance. And in case of the discontinuance of any of said banks as a place of deposite of the public money for any of the causes herein before provided, it shall be lawful for the Secretary of the Treasury to deposite the money thus withdrawn in some other banks of deposite already selected, or to select some other bank as a place of deposite, upon the terms and conditions prescribed by this act. And in default of any bank to receive such deposite, the money thus withdrawn shall be kept by the Treasurer of the United States, according to the laws now in force; and shall be subject to be disbursed according to law.

SEC. 9. And be it further enacted, That until the Secretary of the Treasury shall have selected and employed the said banks as places of deposite of the public money, in conformity to the provisions of this act, the several State and District banks at present employed as depositories of the money of the United States, shall continue to be the depositories aforesaid upon the terms and conditions upon which they have been so employed.

SEC. 10. And be it further enacted, That it shall be the duty of the Secretary of the Treasury to lay before Congress, at the commencement of each annual session, a statement of the number and names of the banks employed as depositories of the public money, and of their condition, and the amount of public money deposited in each, as shown by their returns at the Treasury; and if the selection of any bank as a depository of the public money be made by the Secretary of the Treasury, while Congress is in session, he shall immediately report the name and condition of such bank to Congress; and if any such selection shall be made during the recess of Congress, he shall report the same to Congress during the first week of its next session

SEC. 11. And be it further enacted, That whenever the amount of public deposites to the credit of the Treasurer of the United States, in any bank shall, for a whole quarter of a year, exceed the one-fourth part of the amount of the capital stock of such bank actually paid in, the banks shall allow and pay to the United States, for the use of the excess of the deposites over the onefourth part of its capital, an interest at the rate of two per centum per annum, to be calculated for each quarter, upon the average excesses of the quarter; and it shall be the duty of the Secretary of the Treasury, at the close of each quarter, to cause the amounts on deposite

in each deposite bank for the quarter, to be examined and ascertained, and to see that all sums of interest accruing under the provisions of this section, are, by the banks respectively passed to the credit of the Treasurer of the United States in his accounts with the respective banks. SEC. 12. And be it further enacted, That all warrants or orders for the purpose of transferring the public funds from the banks in which they now are, or may hereafter be deposited, to other banks, whether of deposite or not, for the purpose of accommodating the banks to which the transfer may be made, or to sustain their credit, or for any other purpose whatever, except it be to facilitate the public disbursements, and to comply with the provisions of this act, be, and the same are hereby, prohibited and declared to be illegal; and in cases where transfers shall be required for purposes of equalization under the provisions of this act, in consequence of too great an accumulation of deposites in any bank, such transfers shall be made to the nearest deposite banks which are considered safe and secure, and which can receive the moneys to be transferred under the limitations in this act imposed: Provided, That it may be lawful for the President of the United States to direct transfers of public money to be made from time to time to the mint and branch mints of the United States, for supplying metal for coining.

SEC. 13. And be it further enacted, That the money which shall be in the Treasury of the United States, on the first day of January, eighteen hundred and thirtyseven, reserving the sum of five millions of dollars, shall be deposited with such of the several States, in proportion to their respective representation in the Senate and House of Representatives of the United States, as shall, by law, authorize their Treasurers, or other competent authorities to receive the same on the terms hereinafter specified; and the Secretary of the Treasury shall deliver the same to such Treasurers, or other competent authorities, on receiving certificates of deposite therefor, signed by such competent authorities, in such form as may be prescribed by the Secretary aforesaid; which certificates shall express the usual and legal obligations, and pledge the faith of the State, for the safe keeping and repayment thereof, and shall pledge the faith of the States receiving the same, to pay the said moneys, and every part thereof, from time to time, whenever the same shall be required, by the Secretary of the Treasury, for the purpose of defraying any wants of the public treasury, beyond the amount of the five millions aforesaid: Provided, That if any State declines to receive its proportion of the surplus aforesaid, on the terms before named, the same shall be deposited with the other States, agreeing to accept the same on deposite in the proportion aforesaid: And provided further, That when said money, or any part thereof, shall be wanted by the said Secretary, to meet appropriations by

Proportions in
which the de-
posits shall
be made.

Secretary of the Treasury to appoint three additional clerks.

law, the same shall be called for, in rateable proportions, within one year, as nearly as conveniently may be, from the different States, with which the same is deposited, and shall not be called for, in sums exceeding ten thousand dollars, from any one State, in any one month, without previous notice of thirty days, for every additional sum of twenty thousand dollars, which may at any time be required.

SEC. 14. And be it further enacted, That the said deposites shall be made with the said States in the following proportions, and at the following times, to wit: one quarter part on the first day of January, eighteen hundred and thirty-seven, or as soon thereafter as may be; one quarter part on the first day of April, one quarter part on the first day of July, and one quarter part on the first day of October, all in the same year.

SEC. 15. And be it further enacted, That to enable the Secretary of the Treasury to carry into effect the provisions of this act, he be authorized to appoint three additional clerks for his Department, the one at a salary of one thousand six hundred dollars per annum, and the remaining two at a salary of one thousand dollars each per annum, and to pay the said clerks, quarter-yearly, out of any money in the Treasury not otherwise appropriated. APPROVED, June 23, 1836.

Annual Report, Secretary of Treasury (Salmon P. Chase)

[Thirty-Seventh Congress, 2d Session, December 9, 1861, Pages 11-14]

To enable the government to obtain the necessary means for prosecuting the war to a successful issue, without unnecessary cost, is a problem which must engage the most careful attention of the legislature.

The Secretary has given to this problem the best consideration in his power, and now begs leave to submit to Congress the result of his reflections.

The circulation of the banks of the United States, on the 1st day of January, 1861, was computed to be $202,000,767. Of this circulation $150,000,000, in round numbers, was in States now loyal, including West Virginia, and $50,000,000 in the rebellious States. The whole of this circulation constitutes a loan without interest from the people to the banks, costing them nothing except the expense of issue and redemption and the interest on the specie kept on hand for the latter purpose; and it deserves consideration whether sound policy does not require that the advantages of this loan be transferred, in part at least, from the banks, representing only the interests of the stockholders, to the government, representing the aggregate interests of the whole people.

It has been well questioned by the most eminent statesmen whether a currency of bank notes, issued by local institutions under State laws, is not, in fact, prohibited by the national Constitution. Such emissions certainly fall within the spirit, if not within the letter, of the constitutional prohibition of the emission of bills of credit by the States, and of the making by them of anything except gold and silver coin a legal tender in payment of debts.

However this may be, it is too clear to be reasonably disputed that Congress, under its constitutional powers to lay taxes, to regulate commerce, and to regulate the value of coin, possesses ample authority to control the credit circulation which enters so largely into the transactions of commerce and affects in so many ways the value of coin.

In the judgment of the Secretary the time has arrived when Congress should exercise this authority. The value of the existing bank note circulation depends on the laws of thirty-four States and the character of some sixteen hundred private corporations. It is usually furnished in greatest proportions by institutions of least actual capital. Circulation, commonly, is in the inverse ratio of solvency. Wellfounded institutions, of large and solid capital, have, in general, comparatively little circulation; while weak corporations almost invariably seek to sustain themselves by obtaining from the people the largest possible credit in this form. Under such a system, or rather_lack of system, great fluctuations, and heavy losses in discounts and ex

changes, are inevitable; and not unfrequently, through failures of the issuing institutions, considerable portions of the circulation become suddenly worthless in the hands of the people. The recent experience of several States in the valley of the Mississippi painfully illustrates the justice of these observations; and enforces by the most cogent practical arguments the duty of protecting commerce and industry against the recurrence of such disorders.

The Secretary thinks it possible to combine with this protection a provision for circulation, safe to the community and convenient for the Government.

Two plans for effecting this object are suggested. The first contemplates the gradual withdrawal from circulation of the notes of private corporations and for the issue, in their stead, of United States notes, payable in coin on demand, in amounts sufficient for the useful ends of a representative currency. The second contemplates the preparation and delivery, to institutions and associations, of notes prepared for circulation under national direction, and to be secured as to prompt convertibility into coin by the pledge of United States bonds and other needful regulations.

The first of these plans was partially adopted at the last session of Congress in the provision authorizing the Secretary to issue United States notes, payable in coin, to an amount not exceeding fifty millions of dollars. That provision may be so extended as to reach the average circulation of the country, while a moderate tax, gradually augmented, on bank notes, will relieve the national from the competition of local circulation. It has been already suggested that the substitution of a national for a state currency, upon this plan, would be equivalent to a loan to the government without interest, except on the fund to be kept in coin, and without expense, except the cost of preparation, issue, and redemption; while the people would gain the additional advantage of a uniform currency, and relief from a considerable burden in the form of interest on debt. These advantages are, doubtless, considerable; and if a scheme can be devised by which such a circulation will be certainly and strictly confined to the real needs of the people, and kept constantly equivalent to specie by prompt and certain redemption in coin, it will hardly fail of legislative sanction. The plan, however, is not without serious inconveniences and hazards. The temptation, especially great in times of pressure and danger, to issue notes without adequate provision for redemption; the ever-present liability to be called on for redemption beyond means, however carefully provided and managed; the hazard of panics, precipitating demands for coin, concentrated on a few points and a single fund; the risk of a depreciated, depreciating, and finally worthless paper money; the immeasurable evils of dishonored public faith and national bankruptcy; all these are possible consequences of the adoption of a system of government circulation. It may be said, and perhaps truly, that they are less deplorable than those of an irredeemable bank circulation. Without entering into that comparison, the Secretary contents himself with observing that, in his judgment, these possible disasters so far outweigh the probable benefits of the plan that he feels himself constrained to forbear recommending its adoption.