Benjamnin F. Butler, Butler's Book: Autobiography and Personal Reminiscences of Major-General Benjamin Butler

[945] of the same kind of money. Now, let us balance the books, and how does the account stand? Why, the United States Government receives $30,000 in national bank bills more from the banks than it gave them in bills; in other words, it borrowed of the bank $30,000 in currency, for which, in fact, it paid $18,000 a year in gold interest, equal to $36,000 in currency, for the use of this $30,000. Let me repeat. The difference between what the United States received and paid out was only $30,000, and for the use of that the government pay on the bonds deposited by the company, bought with the same kind of money, $18,000 a year interest in gold, equal to $36,000 in currency.

But the thing did not stop there. The gentlemen were shrewd financiers; their bank was a good one; they went to the Secretary of the Treasury and said: “Let our bank be made a public depository.” Very well; it was a good bank; the managers were good men; there was no objection to the bank. It was made a public depository, and thereupon the commissaries, the quartermasters, the medical director and purveyor, and the paymasters were all directed to deposit their public funds in this bank. Very soon the bank found that they had a line of steady deposits belonging to the government of about a million dollars, and that the $270,000 they had received from the Comptroller of the Currency would substantially carry on their daily business, and as the government gives three days on all its drafts, if the bank was pressed it was easy enough to go on the street if they had good security. They took the million of government money so deposited with them and loaned it to the government for the government's own bonds, and received therefor $60,000 more interest in gold for the loan to the government of its own money, which in currency was equal to $120,000. So that when we come finally to balance the books the government is paying $156,000 a year for the loan of $30,000. And this is the system which is to be fastened forever on the country as a means of furnishing a circulating medium!

This, only using round numbers for the purpose of illustration, is an actual and not a feigned occurrence. You will see it was a perfectly safe operation for the banks, though not a very profitable one for the government, because they held ample security for the government deposits in its own bonds. But the difficulty is the government was paying interest all the while on its own deposits; and this state of facts is only rendered possible by this system of supplying the banks with circulation by the government without interest.

The next reason advanced why we should not interfere with these banks, if I understand it, is that we are told by very high authority this system will become the banking system of the world; having inaugurated