Conservative *
Secretary Carlisle would take steps to
replenish his reserve or not. They could
not know whether any steps ho might
take would be effectual or not. Being
not exactly fools , they took care of their
own interests by keeping their own gold
and compelling the exporters to supply
themselves from the Treasury. I should
not want to own stock in a bank that
would do otherwise under like circum
stances. When the situation became
clear , when it was known exactly what
the government would do , the banks
were not slow in turning their gold over
to the government.
PANIC OF 18913.
When Secretaiy Carlisle came into
office ho was faced with an appalling
condition of the Treasury. There was
a constant demand for gold and no gold
receipts to meet it. He followed his
predecessor's example by soliciting gold
from the banks in forma pauperis. The
banks responded by turning $8,000,000
into the Treasury in exchange for legal
tenders. Tlu's was quickly licked up by
the gold exporters , and on April 15 the
Secretary was obliged to acknowledge
that the $100,000,000 fund had been
encroached upon. It was the first time
that this had happened since the fund
was created. The announcement went
like an electric shock through all the
fibres of commerce. There was no town
which had a bank that was not affected
by it. A run on the banks began at
once. I do not mean that everybody
who had any money on deposit went to
the bank and drew it out , but that a
great many did so who would other
wise have left their deposits intact. The
shrinkage of deposits in national banks
from May 4 to July 12 , 1898 , exceeded
$285,000,000. This drain on the banks
compelled them to curtail their loans
and discounts , and the curtailment of
loans and discounts compelled merchants
and manufacturers to draw down their
balances still further. The alarm , ex
tended to savings bank depositors , who
either called for their deposits or stopped
depositing their wages , and kept their
earnings in their stockings and their
chimney corners , thus producing further
contraction. There was a sudden tight
ness of money in all parts of the United
States. The country banks usually
keep their surplus funds on deposit in
New York , because they can earn a
small rate of interest in that way. They
began to call for these balances , and the
cash went away from the city banks at
the rate of $10,000,000 per week. On
the 24th of June the rate of interest for
call money in New York was 74 per
cent , and time money was not obtain
able at all. Both private individuals
and corporations were failing right and
loft.
loft.New
New York banks began to issue clearinghouse
ing-house loan certificates. These are
a device by which the stronger banks
unitedly and systematically help the
weaker ones , securing themselves by the
bills receivable and other assets of the
weaker ones. The operation is well
adapted to the purpose of soothing public -
lic alarm , and it had that effect in this
instance. Nevertheless there were very
few banlcs in New York that did not
make difficulties about paying checks in
cash. The course they pursued was
highly commendable and , indeed , indis
pensable , but the truth is that they were
for a while in a state of virtual suspen
sion , although fortunately they did not
close their doors.
The evidence that they were in this
state is proven by the fact that their cer
tified checks sold for some weeks in
Wall street at a discount ranging from
1 to 4 per cent. Of course nobody would
sell a certified check at a discount if he
could go to the bank and draw the
money for it.
Other parts of the country did not
fare so well. One hundred and fifty-
eight national banks suspended , with a
capital stock of $80,350,000. All but five
of these bank suspensions were in the
Southern , "Western and Pacific states
and territories. During the same per
iod there were 415 failures of state and
private banks , with liabilities of $97-
193,000 , a mortality unprecedented in
our financial history , except , perhaps , at
the beginning of the Civil War. It
should be added by way of comparison
that the number of national bank fail
ures in the previous year was only
seventeen , and of state and private
banks sixty-nine.
The number of mercantile failures
during the year was 14,212 , with liabil
ities of upwards of $190,000,000 , Dur
ing the previous year the failures had
been 10,844 , and the liabilities $114,000- ,
000.
CONGRESS REFUSES TO REPLENISH THE
TREASUUY.
The commercial crisis became so se
vere that congress was compelled by the
force of public opinion to repeal the sil
ver-purchase act of 1890. Tin's was
done in the special session of August-
October , 1898 , but it did not put an end
to the crisis. The foundations of credit
had been too profoundly shaken. The
government income fell off heavily ( both
duties on imports and internal revenue ) ,
so that the Secretary was obliged to take
money from his gold reserve to pay cur
rent expenses. This created fresh alarm.
Congress reassembled in December , and ,
although appealed to in moving terms
by the Secretary to pass some measure
to replenish the Treasury , it did nothing.
This is a picture of greenbackism that
should bo dwelt on for a moment. Hero
was the nation rushing upon bank
ruptcy. The gold reserve was down to
$74,000,000 and was falling at the rate
of $7,000,000 per mouth by virtue of a
deficiency in revenue alone. A re
newed demand for the redemption of le
gal-tender notes might reduce it to zero
within a very short time. In that case
the government's promise inscribed on
the face of the greenback could not be
fulfilled. Congress was in session. The
Secretary of the Treasury asked it to
give him authority to issue bonds or
temporary certificates bearing 8 per
cent interest to avert national bank-
ruptcjr , and all the answer ho got was
hard words. A senator from Nebraska
denied that there was any such thing as
a greenback redemption fund. "The
so-called fund " ho said "is
- reserve , , one
of the instruments used in a gigantic
system of buncoing the people. It is
used as the occasion and pretext for the
unnecessary issuance and sale from time
to time of government bonds , with
which to stop the clamoring of Lombard
and Wall street sharks , as the dismal
bark of Cerberus , the triple-mouthed
dog that stood guard at the gate of
Hades , was stopped by being fed with
victims destined for the weird and
waste laud of Pluto. " Senator Allen ,
January 25 , 1894.
FIRST $50,000,000 BOND ISSUE.
There was an old law on the statute
book which afforded a roundabout and
expensive means of replenishing the
treasury by selling bonds , but as soon as
the secretary gave signs of his intention
to resort to it a number of congressmen
declared in public debate that the secre
tary had misconstrued the law , and that
any bonds issued under it would be il
legal. Some congressmen introduced
bills to forbid the payment of interest on
any bonds so issued. The point of all
this is that in a time of a crisis when it
is necessary for the government to VLSG
its ample powers to provide means for
redeeming its demand notes , it depends
upon politics whether those powers shall
be used or not. Here was a case direct
ly in point. If there had been no law
on the statute book of the kind which
Secretary Carlisle finally resorted to ,
would the congress to whom he appealed
have passed one ? Assuredly not. The
congress which then occupied the na
tional capitol did not believe in gold re
demption of the greenbacks. It did not
believe in gold at all. It had been
coerced to repeal the silver-purchase
act , but it would not take another step
towards the gold standard. Yet I have
heard congressmen say that the govern
ment is better security for a paper cur
rency than the banks , utterly ignoring
the fact that the only time in recent
years when congress has been called
upon to make good the guarantee it re
fused to do so.
On the 17th of January the Secretary ,
being convinced that congress would do
nothing to avert bankruptcy , advertised
the sale of $50,000,000 of 5 per cent
bonds to run ton years. Ho fixed the
price at 117.228 , which made them equal
to a 8 per cent bond at par. He had no
authority under the law to sell 8 per
cent bonds only 4s and 5s. No bids
