Finan. them consists of the bank notes issued by banks' which re- Dewey, ceive their charters from the national government. (1) Hist., These banks are allowed to issue regular notes equal in value §§ 139, 200. to United States bonds which they have bought and left with the Treasurer of the United States. (2) The government Seligman, Prin. of permits national banks to issue notes temporarily by paying Economics, a tax of 5 per cent, increasing 1 per cent a month to 10 per § 221. cent, in order to insure the retirement of these notes after the special need is past. The total amount of this emergency circulation is $500,000,000, distributed among different sections of the country. The notes may be issued to 90 per cent of the value of approved state, city, or county bonds, or to 75 per cent of the value of commercial paper accepted by an association of ten local banks. This emergency circulation, permitted until 1914, gives some elasticity to a very inelastic form of bank notes. As the government agrees to accept all these notes except in the payment of duties, for which gold alone is taken, and as the banks must redeem them in lawful money upon demand, they circulate readily, although they are not legal tender, and people are not obliged to accept them in the payment of individual debts. Finan. Hist., §§ 138, 163, 164. Our present national banking system was established in History and 1863 for the purpose of creating a new market for bonds criticism. which the government was obliged to sell. The national bank notes soon replaced the notes of state banks which Dewey, were then in circulation, for Congress placed an annual tax of 10 per cent upon the issues of the state banks. During each industrial panic there has arisen demand for a reform of our national banking system. The only relief given by Congress has been through the emergency circulation act just described. Reform of the system has been postponed indefinitely. Many people oppose the issuance of any form of currency by a private corporation, holding that the gov 1 The national bank notes are printed by the government at the bureau of engraving and printing, the notes being distributed to the banks for the signature of bank officials. 2 Aldrich-Vreeland Act of 1908. Seligman, Economics $224. Substitutes for coin. Gordon, Congressional Currency, 173-183. Real value of paper money. Bullock, ernment should issue large quantities of treasury notes which would furnish us a cheap and adequate circulating medium. 258. Gold and Silver Certificates. As it is much easier to handle a five-dollar bill than five silver dollars, it has become customary for the government to deposit the silver dollars in government vaults and issue in place of them silver certificates of one, two, five, and ten dollars. These are not legal tender, but the government is willing to exchange the silver for them at any time, and to give gold in exchange for the silver, so that a silver certificate for five dollars is worth as much as a five-dollar gold piece. Gold certificates are likewise issued in denominations from $20 to $10,000; but, as we should naturally expect, the amount of gold in circulation is three times as great as that of the gold certificates, whereas five sixths of all the silver in the United States is piled away in sacks in Washington or at the subtreasuries. The three kinds of paper money- the treasury notes (§ 252), the bank notes, and the certificates are alike in size and general appearance. The certificates are really Economics, substitutes for the coin they replace, although they possess no intrinsic value, but the others depend for their value entirely on the credit of the government or the banks. 264-269. Seligman, Economics, § 207. Commerce by water. Hart, Actual INTERSTATE COMMERCE 259. National Aid to Interstate Commerce. Interstate commerce1 is much more important than our foreign commerce, because it involves a vastly greater volume of trade. Until about a third of a century ago, our governments believed it their sole duty to aid this inland commerce by opening territories hitherto inaccessible, and by improving roads and waterways over which interstate trade might be 1 For an explanation of what is included under interstate commerce, consult Hart, Actual Government, p. 507, or Prentice, Federal Power over Carriers and Corporations, pp. 168-172. in Putnam's Mo., 4 carried on. Appropriations have been made for the deepen- Quick, J. H., ing of river channels and the construction of interstate canals. The importance of this aid may be shown by citing (1908), 3-15. a single instance that of the Sault Ste. Marie Canal connecting Lakes Superior and Huron. This canal which contains a lock 800 feet long was completed in 1896 at a cost of $5,000,000. Since that time the annual tonnage passing through the canal has risen to more than $40,000,000 (1907), more than twice the tonnage entering New York harbor in any year. munication. As the country has been settled more fully, government Means of aid to railways has been discontinued. In the two decades land comfollowing 1850, however, the national government granted to railways, most of which were in the West, an area equal Johnson, to that of the two Dakotas and Nebraska. Immense sums were also loaned by Congress during this period to the portation, promoters of transcontinental railways. Am. Rail way Trans 311-319. Gulf" ship canal. "Lake-to An undertaking greater than any yet attempted by our Proposed national government, except the Panama Canal, is the proposed deep waterway from the Great Lakes to the Gulf of Mexico. By deepening the Mississippi and the present drainage canal from Chicago, with deeper channels for the King, H., tributary streams, freight rates would be lowered and an immense impetus given to commerce throughout the Middle West. The project, like the proposed ship canal from Lake Erie to the Hudson River, is one that will be completed probably by the coming generation.1 in World To-day, 13 (1907), 897–901. 260. Creation of an Interstate Commerce Commission. Need of control. For nearly one hundred years Congress did not attempt to railway exercise its right to control interstate commerce except by the passage of a few minor laws. But with the development Johnson, of trunk railways which did business in several States, regu- Am. Raillation at length became unavoidable. During the period portation, 1 On inland waterways, consult Annals of American Academy of Political Science, T. Roosevelt et al., 31 (1908), 1-11, 48-66, 139-163. On Atlantic coast canals, see same, 31 (1908), 73–116. way Trans 217-227. Haines, Seligman, Limitations of state control. Powers and methods. following the Civil War many unnecessary railways had been constructed. Each of these sought to pay expenses by charging extortionate rates between points that were dependent on their railway alone, since competition had lowered the rates between cities which were connected by more than one railway. As a consequence, the railways often charged more for a short distance than for a longer haul which included the short haul. Not only was there discrimination according to distance, but the railways frequently discrimi nated between persons, by giving some shippers rates much lower than the advertised schedule of charges. Usually this reduction was in the form of a rebate or amount returned to the shipper after the goods had been delivered by the railway. In order to maintain high rates by protecting themselves from competition on the one side and from the demands of the shippers for rebates on the other, the railways formed combinations called pools, in which the amount of business and profit of each railway in the "pool" was determined in advance. This removed any temptation to secure extra business by cutting rates. Several of the States created railway commissions (§ 140) to take charge of railway affairs within their own States. One of these commissions, that of Illinois, applied its laws to certain trade that was carried on between Illinois and the neighboring States, but the Supreme Court of the United States declared in 1886 that the Illinois Commission had no right to regulate interstate commerce, as Congress alone had that power. The next year Congress passed the Interstate Commerce Act to protect the public from the unjust actions of the railways. 261 The First Interstate Commerce Commission, created by the law of 1887, consisted of five members. The avowed purposes of the act were to abolish pools affecting interstate commerce and to prevent the railways from charging extortionate or discriminating rates. The commission could hold sessions, call witnesses, and examine railway accounts when |