rculation
of state banks, but to tax such banks out of existence. But, while
this feeling prevailed in the west, the opposite feeling prevailed
in the New England and Middle States, where their banking system
had been so improved that bank failures were rare, and bank bills
were protected by mutual guaranties.

The Secretary of the Treasury had, in two annual messages, proposed
a tax on the circulation of bank bills. He believed that the
existing bank circulation prevented or embarrassed the process of
funding, by which alone the bonds of the United States could be
absorbed. He was forbidden by law to receive bank bills in exchange
for bonds or for any purpose, so that the current money of the
people was not available for the purchase of bonds. This was an
additional argument for taxing the state banks out of existence.
I introduced a measure for this purpose as an amendment to the
revenue bill, but it was postponed to save it from defeat.

I introduced a bill in January, 1863, containing two sections, the
first to levy a tax of two per cent. per annum on the circulation
of all bank bills, and the second to provide for a tax of ten per
cent. on all fractional currency under one dollar issued by
corporations or individuals. Upon this bill I made a carefully
prepared speech, not only defending the proposed tax, but declaring
my purpose to urge a gradual increase of the tax until all state
bank bills were excluded from circulation. 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.

I drew the distinction between the ordinary powers of banking and
the issue of bank bills. 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. The issue of bank
bills was an exclusive privilege conferred only on a few corporations.
It was a privilege that an individual could not enjoy. No person
could issue his bills in the form of paper money without a corporate
franchise granted him and his associates, either by a general
banking law, or by an act of incorporation. All the business of
banking might be exercised by private individuals except this
franchise. There was no reason why any one individual or a
partnership might n