the financial institutions of the country. It was deemed wise to
give the people time to consider so important a measure, and with
that end in view all further action was postponed to the next
session.

Meanwhile the bill was published in the leading papers of the loyal
States and elicited the most diverse opinion. It was however
received with favor by the public. Those interested in the State
banks were at first exceedingly hostile to it. The proposition to
tax their circulation two per cent. in addition to the three per
cent. imposed upon incomes by the new law was considered harsh and
unjust. The object was to compel the retirement of the State bank
circulation. In no other way could a national system be at once
generally instituted. The courts had repeatedly held the authority
of the States to charter banks with power to issue and circulate
notes as money, to be constitutional. Congress could not abridge
this right in any way by direct legislation. Its power to tax was
however undoubted. The friends of the State bank system claimed
that the indirect method of destroying the institution by taxing
its notes out of existence was an arbitrary exercise of questionable
power.

The advocates of a uniform and stable system of banking to cure
the manifold evils then prevailing, admitted that the prerogative
of the States could not be questioned, but urged that the exercise
of it had invariably increased and often produced the financial
troubles which had afflicted the country in the past. If the States
would not surrender their prerogative, the National Government
would be compelled to exercise its larger prerogative embodied in
the power to tax. The right of the nation to do this had been
asserted by the head of the Treasury under a Democratic administration
some years before. Recognizing as he did the necessity of a reform
in the system of banking, Secretary Guthrie in his report to Congress
in 1855 declared that "if the States shall continue the charter
and multiplication of banks with authority to issue and circulate
notes as money, and fail to apply any adequate remedy to the
increasing evil, and also fail to invest Congress with the necessary
power to prohibit the same, Congress may be justified in the exercise
of the power to levy an excise upon them, and thus render the
authority to issue and circulate them valueless."

THE SYSTEM OF NATIONAL BANKS.

D