4. Indianapolis Monetary Commission.—The tri umph of the Republican party did not stifle the de mands for reform. Three things were advocated strongly: (1) positive adoption and security of the gold standard; (2) retirement of the government legal tenders—greenbacks and treasury notes of 1890; (3) provision for an elastic bank note circulation.
In January, 1897, a large convention was held at Indianapolis to discuss the banking and currency problems. An executive committee was appointed, with authority to organize a commission to investi gate and make recommendations on the subject if Congress did not take satisfactory steps. President McKinley recommended that Congress appoint a commission but no action was taken. Accordingly the commission, known as the Indianapolis Monetary Commission, was appointed.
Its report may be summarized as follows : (1) Make gold the standard of value, in which all obliga tions of the United States shall be redeemable. To carry out this object, establish in the Treasury Department a separate Division of Issue and Redemption charged with custody of the gold reserve. Maintain a gold reserve equal to at least 25 per cent of outstanding legal tenders and 5 per cent of the outstanding silver dollars. Gradually re tire the government paper as national bank circulation in creases.
It may be noted here that the country had already legally adopted the gold standard in the Act of 1873, which was called the "Crime of 1873" during the political campaign of 1896. We should actually have gone on a gold basis when specie payment was re sumed in 1879 had it not been for the silver legisla tion of 1878, which made the silver dollar legal tender without making it redeemable in gold, and gave us what is called the "limping" standard. We actually went on the gold standard in 1890, when the silver dollar was made redeemable in gold thru the govern ment's declaration that it intended to maintain the parity of all circulation with gold. The idea of the Commission was that the gold standard should be re affirmed as a rebuke to the advocates of free silver, and that some tangible provision should be made to guarantee the maintenance of gold payment. The plan was to make this provision in the form of a gold reserve.
(2) Gradually reduce the amount of bonds required as deposit to secure bank notes, permitting notes to be issued more and more against general assets. As the bond require
ment is being reduced, gradually build up a guarantee fund which shall be maintained at five per cent of outstanding circulation by a tax on note issue.
When the recommendation reached Congress, the time of adjournment was so near that it was held over for the next session. During the recess, committees of the Senate and the House worked out some plans which resulted in the Gold Standard Act of 1900.
5. Gold Standard Act of 1900.—The Act of 1900 is improperly called the Gold Standard Act. It did not establish the gold standard, which was adopted long before 1900, nor did it undertake to reform the banking system. Its aim was to provide a reserve for the maintenance of the gold standard, and its pro visions were closely in line with the recommendations of the Indianapolis Monetary Commission.
A Division of Issue and Redemption was estab lished. The Act provided that all legal tender notes should be redeemed in gold coin on demand and that a gold reserve of not less than $100,000,000 should be maintained for the purpose. It authorized the sale of bonds to replenish the fund and to build it up to not over $150,000,000 if it should ever fall below the minimum, and it provided that notes redeemed out of the fund should not be issued again except in exchange for gold. While the Act did not specify gold redemption of silver dollars, it did repeat the pledge to maintain all coins at par with gold. The only way to secure parity with gold is to redeem in gold on demand, so this has always been considered as a pledge of gold redemption of all circulation.
Instead of attempting to reform, the banking sys tem, the Act included two or three provisions which were intended to encourage the extension and per petuation of bond-secured circulation. It lowered the tax on issue. It raised the amount which might be issued from 90 to 100 per cent of the market value of bonds deposited up to par, and it in creased the available supply of low-priced bonds by converting a large issue of four per cents into two per cents, and permitted the establishment of banks with a capital of $25,000 in smaller communities.