The subject of taxation was, in fact, the principal matter of debate. Mr. Brooks, of New York, explained with sufficient frankness the wishes of the minority. "What we desire," he said, "is to do away with the $300,000,000 of bank currency, and that if the government desires more currency, it be legal tender currency."Mr. Stevens, of Pennsylvania, responded, "I myself would prefer legal tender to the circulation of these banks, either State or national." In the same spirit Senator Henderson, of Missouri, inquired. "Why not permit the secretary of the treasury to go on and issue legal tender notes?" One reason was, because all the channels of circulation were full of suspended bank paper. The ordinary limit to bank issues, convertibility into coin on demand, had been taken away, and no other had been established, except the limit proposed by the national bank act and by taxation of the circulation of the State banks.

On the 18th of April two test votes were taken in the House. A resolution offered by Mr. Holman, of Indiana, instructing the committee on ways and means to report a bill to repeal the bank act of 1863, was defeated, 40 to 60; and a resolution affirming that the expansion of bank currency should be repressed, by taxing the issues of the State banks, was adopted, 62 to 46. This was a logical consequence of the bank act, as Senator Fessenden had shown a year before, in his reply to Senator Harris, of New York, who voted for the act of 1863 but argued against the taxation of the State banks. "He is willing to establish the new system," said Mr. Fessenden, "because it is necessary to support the government; but he is not willing to put it in operation, for fear it will injuriously affect private interests."

Another question arose concerning the taxation of the national banks by the States.

Secretary Chase thought the hanks should be exempted from State taxation, not in order to relieve them from their share of the public burdens, but in order to secure to the general government all the revenue from this source, for the benefit of the national credit. Mr. Kernan, of New York, Mr. Eldridge, of Wisconsin, and Mr. Hol-man, of Indiana, rather unfairly denounced this feature of the bill as a monstrous proposition to exempt the banks from any taxation. Mr. Stevens, of Pennsylvania, went quite as far the other way, declaring that the faith of the country was pledged to the immunity of the bonds from local taxation, and that as the bank capital was to be invested in bonds, the real estate of the banks and the investments of the share-holders should be protected by the government. Mr. Sumner made an elaborate argument in the Senate, to show that the decision of the Supreme Court, denying to the State of Maryland the right to tax the bank of the United States without authority from Congress, would go to the length of prohibiting Congress itself from granting such authority. Senator Chandler gave his opinion, as a practical banker and practical business man, that every national bank in Michigan would wind up its affairs in thirty days if they were required to pay local taxes. In spite of these arguments, and in opposition to the weighty opinion of Secretary Chase, the better judgment of Congress decreed that the national banks should be, as the State banks had been, subject to taxation at home.

Other features of the bill were criticised. Mr. Brooks declared that the scheme contemplated a return to the pet bank system of 1836-'37. Mr. Pruyn regarded the act as a great stride toward despotic power. Mr. Boutwell offered an amendment to prevent the secretary of the treasury from making the banks depositories of public money. Mr. Steele, of New York, thought the law contemplated a dangerous association of capital. Senator Davis avowed the deepest hostility to this Briarean paper monster. Senator Henderson declared that John Law's plan was infinitely better, since that had at least a basis of 20 per cent.in coin; and that in less than ten years this system would be less tolerable in the eyes of Americans than the Mississippi bubble in the eyes of the French.

It was no longer contended that the banks would not organize under the national law. They had so organized, and were organizing in every Northern State, and there was one even in New Orleans. This fact was a new source of alarm to some gentlemen. Mr. Mallory, of Kentucky, reckoned up a double profit of 6 per cent. on bonds, and 12 per cent. on loans, with other pickings, giving the banks an annual return of 20 or 22 per cent. on their capital stock. Mr. Ward, of New York, was afraid that these advantages would attract capital into banking, and that a superabundance of bank funds would stimulate speculation. Mr. Law, of Indiana, offered an amendment requiring the banks, after accumulating a surplus of 20 per cent., to turn all their profits over 8 per cent. per annum into the treasury for the benefit of the pension fund. Senator Cowan, of Pennsylvania, rehearsed the calculation of Senator Carlile, a year before, showing how a so-called bank might invest its capital in bonds, draw out 90 per cent. in bills, reinvest the bills in bonds, increasing its circulation pro rata, and so continue, obtaining an income of 30 per cent. without performing any service to the community as a bank. Mr. Cowan himself, however, replied to this suggestion, admitting that the operation could not go on without the knowledge and guilty consent of the comptroller of the currency.

The bill passed the House on the 18th of April, 78 to 63, and the Senate on the 10th of May, 30 to 9. There was a disagreement on some of the amendments, and a committee of conference was appointed, who finally secured an agreement on the 31st of May. The act was approved on the 3d of June.

Congress, at this session, also imposed a tax of 1/2 per cent. per annum on the deposits, 1/2 per cent. on the capital, and 1 per cent. on the circulation of all State banks, and 2 per cent. additional on the excess of their circulation above 90 per cent. of their capital. It was provided in the loan bill that the interest-bearing notes of the government should not be legal tender for the redemption of bank-notes. Finally it was solemnly declared, in the same act, that the total amount of United States notes, issued or to be issued, should never exceed $400,000,000, and such additional sum, not exceeding $50,000,000, as might be transiently required for the redemption of the temporary loan.

It was fourteen years before any serious attempt was made to repeal this wise restriction and unsettle the system thus established.