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country as related to contagious diseases ; and consideration of regulations to be enforced in foreign ports to prevent the introduction of contagion into our cities and the measures which should be adopted to secure their enforcement.

There seems to be at this time a decided inclination to discuss measures of protection against contagious diseascs in international conference with a view of adopting means of mutual assistance. The creation of such a national health establishment would greatly aid our standing in such conferences and improve our opportunities to avail ourselves of their benefits.

I earnestly recommend the inauguration of a national board of health or similar national instrumentality, believing the same to be a needed precaution against contagious disease and in the interest of the safety and health of our people.

By virtue of a statute of the United States passed in 1888, I appointed in July last, Hon. John D. Kernan, of the State of New York, and Hon. Nicholas E. Worthington, of the State of Illinois, to form with Hon. Carroll D. Wright, Commissioner of Labor, who was designated by said statute, a commission for the purpose of making careful inquiry into the causes of the controversies between certain railroads and their employees which had resulted in an extensive and destructive strike, accompanied by much violence and dangerous disturbance with considerable loss of life and great destruction of property.

The report of the Commissioners has been submitted to me and will be transmitted to the Congress with the evidence taken upon their investigation.

Their work has been well done and their standing and intelligence give assurance that the report and suggestions they make are worthy of careful consideration.

The tariff act passed at the last session of the Congress needs important amendments if it is to be executed effectively and with certainty.

In addition to such necessary amendments as will not change rates of duty, I am still very decidedly in favor of putting coal and iron upon the free list.

So far as the sugar schedule is concerned, I would be glad, under existing aggravations to see every particle of differential duty in favor of refined sugar stricken out of our tariff law. If with all the favor now accorded the sugar-refining interest in our tariff laws it still languishes to the extent of closed refineries and thousands of discharged workmen, it would seem to present a hopeless case for reasonable legislative aid. Whatever else is done or omitted, I earnestly repeat here the recommendation I have made in another portion of this communication that the additional duty of one-tenth of a cent per pound, laid upon sugar imported from countries paying a bounty on its export, be abrogated. It seems to me that exceedingly important considerations point to the propriety of this amendment.

With the advent of a new tariff policy not only calculated to relieve the consumers of our land in the cost of their daily life, but to invite a better development of American thrift and create for us closer and more profitable commercial relations with the rest of the world, it follows as a logical and imperative necessity that we should at once remove the chief if not the only obstacle which has so long prevented our participation in the foreign carrying trade of the sea. A tariff built upon the theory that it is well to check imports and that a home market should bound the industry and effort of American producers, was fitly supplemented by a refusal to allow American registry to vessels built abroad though owned and navigated by our people, thus exhibiting a willingness to abandon all contest for the advantages of American transoceanic carriage. Our new tariff policy, built upon the theory that it is well to encourage such importations as our people need, and that our products and manufactures should find markets in every part of the habitable globe, is consistently supplemented by the greatest possible liberty to our citizens in the ownership and navigation of ships in which our products and manufactures may be transported. The millions now paid to foreigners for carrying American passengers and products across the sea should be turned into American hands. Shipbuilding, which has been protected to strangulation, should be revived by the prospect of profitable employment for ships when built, and the American sailor should be resurrected and again take his place—a sturdy and industrious citizen in time of peace and a patriotic and safe defender of American interests in the day of conflict.

The ancient provision of our law denying American registry to ships built abroad and owned by Americans appears in the light of present conditions not only to be a failure for good at every point, but to be nearer a relic of barbarism than anything that exists under the permission of a statute of the United States. I earnestly recommend its prompt repeal.

During the last month the gold reserved in the Treasury for the purpose of redeeming the notes of the Government circulating as money in the hands of the people became so reduced, and its further depletion in the near future seemed so certain that in the exercise


of proper care for the public welfare it became necessary to replenish this reserve and thus maintain popular faith in the ability and determination of the Government to meet, as agreed, its pecuniary obligations.

It would have been well if in this emergency authority had existed to issue the bonds of the Government bearing a low rate of interest and maturing within a short period; but the Congress having failed to confer such authority, resort was necessarily had to the resumption act of 1875, and pursuant to its provisions bonds were issued drawing interest at the rate of five per cent per annum and maturing ten years after their issue, that being the shortest time authorized by the act. I am glad to say, however, that on the sale of these bonds the premium received operated to reduce the rate of interest to be paid by the Government to less than three per cent.

Nothing could be worse or further removed from sensible finance than the relations existing between the currency the Government has issued, the gold held for its redemption, and the means which must be resorted to for the purpose of replenishing such redemption fund when impaired. Even if the claims upon this fund were confined to the obligations originally intended and if the redemption of these obligations meant their cancellation, the fund would be very small. But these obligations when received and redeemed in gold are not canceled but are reissued and may do duty many times by way of drawing gold from the Treasury. Thus we have an endless chain in operation constantly depleting the Treasury's gold and never near a final rest. As if this was not bad enough, we have, by a statutory declaration that it is the policy of the Government to maintain the parity between gold and silver, aided the force and momentum of this exhausting process and added largely to the currency obligations claiming this peculiar gold redemption. Our small gold reserve is thus subject to drain from every side. The demands that increase our danger also increase the necessity of protecting this reserve against depletion and it is most unsatisfactory to know that the protection afforded is only a temporary palliation.

It is perfectly and palpably plain that the only way under present conditions by which this reserve when dangerously depleted can be replenished is through the issue and sale of the bonds of the Government for gold; and yet Congress has not only thus far declined to authorize the issue of bonds best suited to such a purpose, but there seems a disposition in some quarters to deny both the necessity and power for the issue of bonds at all.

I can not for a moment believe that any of our citizens are deliberately willing that their Government should default in its

pecuniary obligations or that its financial operations should be reduced to a silver basis. At any rate I should not feel that my duty was done if I omitted any effort I could make to avert such a calamity. As long therefore as no provision is made for the final redemption or the putting aside of the currency obligation now used to repeatedly and constantly draw from the Government its gold, and as long as no better authority for bond issues is allowed than at present exists such authority will be utilized whenever and as often as it becomes necessary to maintain a sufficient gold reserve, and in abundant time to save the credit of our country and make good the financial declarations of our Government.

Questions relating to our banks and currency are closely connected with the subject just referred to and they also present some unsatisfactory features. Prominent among them are the lack of elasticity in our currency circulation and its frequent concentration in financial centers when it is most needed in other parts of the country.

The absolute divorcement of the Government from the business of banking is the ideal relationship of the Government to the circulation of the currency of the country.

This condition can not be immediately reached; but as a step in that direction and as a means of securing a more elastic currency and obviating other objections to the present arrangement of bank circulation, the Secretary of the Treasury presents in his report a scheme modifying present banking laws and providing for the issue of circulating notes by State banks free from taxation under certain limitations.

The Secretary explains his plan so plainly and its advantages are developed by him with such remarkable clearness, that any effort on my part to present argument in its support would be superfluous. I shall, therefore, content myself with an unqualified indorsement of the Secretary's proposed changes in the law and a brief and imperfect statement of their prominent features.

It is proposed to repeal all laws providing for the deposit of United States bonds as security for circulation; to permit national banks to issue circulating notes not exceeding in amount seventy-five per cent of their paid-up and unimpaired capital, provided they deposit with the Government, as a guarantee fund, in United States legal-tender notes, including Treasury notes of 1890, a sum equal in amount to thirty per cent of the notes they desire to issue, this deposit to be maintained at all times, but whenever any bank retires any part of its circulation a proportional part of its guarantee fund shall be returned to it; to permit the Secretary of the Treasury to prepare and keep on hand ready for issue in case an increase in circulation is desired blank national-bank notes for each bank having circulation and to repeal the provisions of the present law imposing limitations and restrictions upon banks desiring to reduce or increase their circulation—thus permitting such increase or reduction within the limit of seventy-five per cent of capital to be quickly made as emergencies arise.

In addition to the guarantee fund required, it is proposed to provide a safety fund for the immediate redemption of the circulating notes of failed banks, by imposing a small annual tax, say one-half of one per cent, upon the average circulation of each bank until the fund amounts to five per cent of the total circulation outstanding. When a bank fails its guarantee fund is to be paid into this safety fund and its notes are to be redeemed in the first instance from such safety fund thus augmented—any impairment of such fund caused thereby to be made good from the immediately available cash assets of said bank and if these should be insufficient such impairment to be made good by pro rata assessment among the other banks, their contributions constituting a first lien upon the assets of the failed bank in favor of the contributing banks. As a further security it is contemplated that the existing provision fixing the individual liability of stockholders is to be retained and the bank's indebtedness on account of its circulating notes is to be made a first lien on all its assets.

For the purpose of meeting the expense of printing notes, official supervision, cancellation, and other like charges there shall be imposed a tax of say one-half of one per cent per annum upon the average amount of notes in circulation.

It is further provided that there shall be no national-bank notes issued of a less denomination than ten dollars; that each national bank, except in case of a failed bank, shall redeem or retire its notes in the first instance at its own office or at agencies to be designated by it, and that no fixed reserve need be maintained on account of deposits.

Another very important feature of this plan is the exemption of State banks from taxation by the United States in cases where it is shown to the satisfaction of the Secretary of the Treasury and Comptroller of the Currency by banks claiming such exemption that they have not had outstanding their circulating notes exceeding seventy-five per cent of their paid-up and unimpaired capital; that their stockholders are individually liable for the redemption of their circulating notes to the full extent of their ownership of stock; that the liability of said banks upon their circulating notes

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