n, asking for a
subscription to the five per cent bonds.

Subsequently I advised Congress to issue four per cent fifty year bonds
as a basis of the banking system, coupled with an offer to the existing
banks of a preference, but in case any bank should refuse to exchange
the bonds then held by such bank, its charter after one year should be
annulled and its banking privileges should be open to any other
association that would purchase the four per cent bonds. This
proposition aroused the hostility of the national banks and forthwith
the city was invaded by bank officers and agents who succeeded in
defeating the bill.

I had early foreseen that the Public Debt could be paid without much
delay, and without a system of oppressive taxation. In July, 1863, in
the introduction to my volume on the tax system of the country, I had
predicted that the revenues would be equal to the payment of interest
on a debt twice as large as the Public Debt then was, together with
large annual payments of principal. I predicted also that these
payments would menace the national banking system. My scheme looked
for the perpetuation of that system for fifty years at least. The
banks looked upon the scheme as a hostile project and they were
therefore led to defeat a measure which in fact was liberal in the
extreme. At that time the capital of all the national banks was
limited to three hundred million dollars. Thus did the banks defeat a
measure which was designed to secure their perpetuity and calculated
to promote their financial interests. They acted upon the idea that
the credit of the country could never be so far advanced that a four
per cent bond would be worth par.

The success of the five per cent loan of 1871, of which I give a full
account elsewhere, should have ended the contest in regard to the
credit of the United States. A five per cent bond had been sold at par
in the London market. The principal of the Public Debt was undergoing
a monthly reduction and the gain in the interest account was sufficient
to guarantee the payment of the principal in half a century. From that
time forward, the leading bankers of Europe and American were ready to
co-operate in placing the remaining five per cents, and then the four
and a half and four per cents.

From that time forward the credit of the Government has been improving
constantly. It was no longer difficult to borrow money at the rate of
five per cent, and with the adjustm