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III.

THE REFUNDING BILL OF THE FORTY-SIXTH CONGRESS, AND THE COINAGE BILL OF THE FORTY-SIXTH HOUSE.

The Refunding Bill.

The following is a copy of the bill (H. R. 4592) as finally passed, and vetoed by the PRESIDENT:

AN ACT to facilitate the refunding of the national debt.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That all existing provisions of law authorizing the refunding of the national debt shall apply to any bonds of the United States bearing a higher rate of interest than 42 per cent. per annum which may hereafter become redeemable: Provided, That in lieu of the bonds authorized to be issued by the act of July 14, 1870, entitled "An act to autborize the refunding of the national debt," and the acts amendatory thereto, and the certificates authorized by the act of February 26, 1879, entitled "An act to authorize the issue of certificates of deposit in aid of the refunding of the public debt," the Secretary of the Treasury is hereby authorized to issue bonds to an amount not exceeding $400,000,000, of denominations of $50, or some multiple of that sum, which shall bear interest at the rate of 3 per cent. per annum, payable semi-annually, redeemable at the pleasure of the United States, after five years, and payable twenty years from the date of issue; and also Treasury notes to an amount not exceeding $300,000,000, in denominations of $10, or some multiple of that sum, not exceeding $1,000, either registered or coupon, bearing interest at a rate not exceeding 3 per cent. per annum, payable semi-annually, redeemable at the pleasure of the United States after one year, and payable in ten years from the date of issue; and no Treasury note of a less denomination than $100 shall be registered. The bonds and Treasury notes shall be, in all other respects, of like character and subject to the same provisions as the bonds authorized to be issued by the act of July 14, 1870, entitled "An act to authorize the refunding of the national debt," and acts amendatory thereto Provided, That nothing in this act shall be so construed as to authorize an increase of the public debt: Provided further, That interest upon the 6 per cent. bonds hereby authorized to be refunded shall cease at the expiration of thirty days after publication of notice that the same have been designated by the Secretary of the Treasury for redemption. It shall be the duty of the Secretary of the Treasury, under such rules and regulations as he may prescribe, to authorize public subscriptions, at not less than par, to be received at all depositories of the United States, and at all national banks, and such other banks as he may designate, for the bonds and for the Treasury notes herein provided for, for thirty days, before he shall contract for or award any portion of said bonds or Treas

ury notes to any syndicate of individuals or bankers, or otherwise than under such public subscriptions; and if it shall happen that more than the entire amount of said bonds and Treasury notes, or of either of them, has been subscribed within said thirty days, he shall award the full amount subscribed to all persons who shall have made bona fide subscriptions for the sum of $2,000 or less, at rates most advantageous to the United States, and the residue ratably among the subscribers in proportion to the amount by them respectively subscribed, at rates most advantageous to the United States.

SEC. 2. The Secretary of the Treasury is hereby authorized, in the process of refunding the national debt, to exchange, at not less than par, any of the bonds or Treasury notes herein authorized for any of the bonds of the United States outstanding and uncalled bearing a higher rate of interest than 42 per cent. per annum; and on the bonds so redeemed the Secretary of the Treasury may allow to the holders the difference between the interest on such bonds from the date of exchange to the time of their maturity, and the interest for a like period on the bonds or Treasury notes issued; and the bonds so received and exchanged in pursuance of the provisions of this act shall be canceled and destroyed; but none of the provisions of this act shall apply to the redemption or exchange of any of the bonds issued to the Pacific Railway Companies.

SEC. 3. The Secretary of the Treasury is hereby authorized and directed to make suitable rules and regulations to carry this act into effect; and the expense of preparing, issuing, advertising, and disposing of the bonds and Treasury notes authorized to be issued shall not exceed one-half of I per cent.

SEC. 4. That the Secretary of the Treasury is hereby authorized, if in his opinion it shall become necessary, to use temporarily not exceeding $50,000,000 of the standard gold and silver coin in the Treasury in the redemption of the 5 and 6 per cent. bonds of the United States authorized to be refunded by the provisions of this act, which shall from to time be repaid and replaced out of the proceeds of the sale of the bonds or Treasury notes authorized by this act; and he may at any time apply the surplus money in the Treasury not otherwise appropriated, or so much thereof as he may consider proper, to the purchase or redemption of the United States bonds or Treasury notes authorized by this act: Provided, That the bonds and Treasury notes so purchased or redeemed shall constitute no part of the sinking fund, but shall be canceled.

SEC. 5. From and after the 1st day of July, 1881, the 3 per cent. bonds authorized by the first section of this act shall be the only bonds receivable as security for national bank circula

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tion, or as security for the safe keeping and prompt payment of the public money deposited with such banks; but when any such bonds deposited for the purposes aforesaid shall be designated for purchase or redemption by the Secretary of the Treasury, the banking association depositing the same shall have the right to substitute other issues of the bonds of the United States in lieu thereof: Provided, That no bond upon which interest has ceased shall be accepted or shall be continued on deposit as security for circulation or for the safe keeping of the public money; and in case bonds so deposited shall not be withdrawn, as provided by law, within thirty days after interest has ceased thereon, the banking association depositing the same shall be subject to the liabilities and proceedings on the part of the Comptroller provided for in section 5234 of the Revised Statutes of the United States: And provided further, That section 4 of the act of June 20, 1874, entitled "An act fixing the amount of United States notes, providing for a redistribution of the national bank currency, and for other purposes," be, and the same is hereby, repealed; and sections 5159 and 5160 of the Revised Statutes of the United States be, and the same are hereby, re-enacted.

SEC. 6. That the payment of any of the bonds hereby authorized, after the expiration of five years, shall be made in amounts to be determined from time to time by the Secretary of the Treasury at his discretion, the bonds so to be paid to be distinguished and described by the dates and numbers, beginning for each successive payment with the bonds of each class last dated and numbered; of the time of which intended payment or redemption the Secretary of the Treasury shall give public notice, and the interest on the particular bonds so selected at any time to be paid shall cease at the expiration of thirty days from publication of such notice.

SEC. 7. That this act shall be known as "The funding act of 1881;" and all acts and parts of acts inconsistent with this act are hereby repealed.

The Objections of the President, March 3, 1881. To the House of Representatives:

Having considered the bill entitled "An act to facilitate the refunding of the national debt," I am constrained to return it to the House of Representatives, in which it originated, with the following statement of my objections to its passage:

The imperative necessity for prompt action, and the pressure of public duties in this closing week of my term of office, compel me to refrain from any attempt to make a full and satisfactory presentation of the objections to the bill.

The importance of the passage at the present session of Congress of a suitable measure for the refunding of the national debt, which is about to mature, is generally recognized. It has been urged upon the attention of Congress by the Secretary of the Treasury and in my last annual message. If successfully accomplished, it will secure a large decrease in the annual interest payment of the nation; and I earnestly recommend, if the bill before me shall fail, that another

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measure for this purpose be adopted before the present Congress adjourns.

While in my opinion it would be wise to authorize the Secretary of the Treasury, in his discretion, to offer to the public bonds bearing 3% per cent. interest in aid of refunding, I should not deem it my duty to interpose my constitutional objection to the passage of the present bill if it did not contain, in its fifth section, provisions which in my judgment seriously impair the value and tend to the destruction of the present national banking system of the country. This system has now been in operation almost twenty years. No safer or more beneficial banking system was ever established. Its advantages as a business are free to all who have the necessary capital. It furnishes a currency to the public which for convenience and the security of the security of the bill-holder has probably never been equaled by that of any other banking system. Its notes are secured by the deposit with the Government of the interest-bearing bonds of the United States.

The section of the bill before me which relates to the national banking system, and to which objection is made, is not an essential part of a refunding measure. It is as follows:

"SEC. 5. From and after the 1st day of July, 1881, the 3 per cent. bonds authorized by the first section of this act shall be the only bonds receivable as security for national bank circulation, or as security for the safe-keeping and prompt payment of the public money deposited with such banks; but when any such bonds deposited for the purposes aforesaid shall be designated for purchase or redemption by the Secretary of the Treasury, the banking association depositing the same shall have the right to substitute other issues of the bonds of the United States in lieu thereof: Provided, That no bond upon which interest has ceased shall be accepted or shall be continued on deposit as security for circulation or for the safe-keeping of the public money; and in case bonds so deposited shall not be withdrawn, as provided by law, within thirty days after interest has ceased thereon, the banking association depositing the same shall be subject to the liabilities and proceedings on the part of the Comptroller provided for in section 5234 of the Revised Statutes of the United States: And provided further, That section 4 of the act of June 20, 1874, entitled 'An act fixing the amount of United States notes, providing for a redistribution of the national-bank currency, and for other purposes,' be, and the same is hereby, repealed; and sections 5159 and 5160 of the Revised Statutes of the United States, be, and the same are hereby, re-enacted."

Under this section it is obvious that no addiditional banks will hereafter be organized, except possibly in a few cities or localities where the prevailing rates of interest in ordinary business are extremely low. No new banks can be organized, and no increase of the capital of existing banks can be obtained, except by the purchase and deposit of 3 per cent. bonds. No other bonds of the United States can be used for the purpose. The one thousand millions of other

bonds recently issued by the United States, and bearing a higher rate of interest than 3 per cent., and therefore a better security for the bill-holder, cannot, after the 1st of July next, be received as security for bank circulation. This is a radical change in the banking law. It takes from the banks the right they have heretofore had under the law to purchase and deposit, as security for their circulation, any of the bonds issued by the United States, and deprives the bill-holder of the best security which the banks are able to give, by requiring them to deposit bonds having the least value of any bonds issued by the Government.

The average rate of taxation of capital employed in banking is more than double the rate of taxation upon capital employed in other legitimate business. Under these circumstances, to amend the banking law so as to deprive the banks of the privilege of securing their notes by | the most valuable bonds issued by the Government will, it is believed, in a large part of the country, be a practical prohibition of the organization of new banks, and prevent the existing banks from enlarging their capital. The national banking system, if continued at all, will be a monopoly in the hands of those already engaged in it, who may purchase Government bonds bearing a more favorable rate of interest than the 3 per cent. bonds prior to next July.

To prevent the further organization of banks is to put in jeopardy the whole system, by taking from it that feature which makes it as it now is, a banking system free upon the same terms to all who wish to engage in it. Even the existing banks will be in danger of being driven from business by the additional disadvantages to which they will be subjected by this bill. In short, I cannot but regard the fifth section of the bill as a step in the direction of the destruction of the national banking system.

Our country, after a long period of business depression, has just entered upon a career of unexampled prosperity.

The withdrawal of the currency from circulation of the national banks, and the enforced winding up of the banks in consequence, would inevitably bring serious embarrassment and disaster to the business of the country. Banks of

issue are essential instruments of modern commerce. If the present efficient and admirable system of banking is broken down, it will inevitably be followed by a recurrence to other and inferior methods of banking. Any measure looking to such a result will be a disturbing element in our financial system. It will destroy confidence and surely check the growing prosperity of the country.

Believing that a measure for refunding the national debt is not necessarily connected with the national banking law, and that any refunding act would defeat its own object if it imperiled the national banking system or seriously impaired its usefulness; and convinced that section 5 of the bill before me would, if it should become a law, work great harm, I herewith return the bill to the House of Representatives for that further consideration which is provided for in the Constitution. R. B. HAYES.

March 3-Mr. ROBESON moved to proceed to the re-consideration of the bill.

Mr. TUCKER moved to postpone its consideration for the present; which was agreed toyeas 138, nays 116:

YEAS-Messrs. Acklen, Aiken, Armfield, Atherton, Atkins, Bachman, Beale, Beltzhoover, Berry, Bicknell, Blackburn, Bland, Blount, Bouck, Bragg, Bright, Buckner, Cabell, Caldwell, Carlisle, Chalmers, Clardy, A. A. Clark, 7. B. Clark, N. N. Clements, Clymer, Cobb, Coffroth, Colerick, Converse, Cook, Covert, S. S. Cox, Cravens, Culberson, Davidson, L. H. Davis, DE LA MATYR, Deuster, Dibrell, Dickey, Dunn, Elam, Evins, Finley, FORD, Forney, Geddes, Gibson, GILLETTE, Gunter, N. J. Hammond, J.T. Harris, Hatch, Henkle, Herbert, Herndon, W. D. Hill, Hooker, Hostetler, House, Hunton, Hurd, G. W. JONES, Kenna, Kimmel, King, Kitchin, Klotz, Knott, LADD, Le Fevre, Lounsbery, LOWE, Manning, B. F. Martin, E. L. Martin, McKenzie, McLane, McMahon, McMillin, Mills, Money, Morrison, Muldrow, Muller, Myers, New, Nicholls, O'Reilly, Persons, Philips, Phister, Poehler, Reagan, J. S. Richardson, Richmond, E. W. Robertson, Ross, Rothwell, J.W. Ryon, Samford, Sawyer, Scales, Scoville, Shelley, Simonton, J. W. Singleton, O. R. Singleton, Slemons, H. B. Smith, W. E. Smith, Sparks, Speer, Springer, W. L. Steele, • Stevenson, Talbott, P. B. Thompson, jr., Tillman, Tucker, O. Turner, T. Turner, Upson, Vance, Warner, WEAVER, Wellborn, Whiteaker, Whitthorne, T. Williams, Willis, Wilson, Wise, WRIGHT, Yeates, YOCUM, C. Young— 138.

NAYS-Messrs. N. W. Aldrich, W. Aldrich, Anderson, Bailey, Baker, Ballou, Barber, Barlow, Bayne, Belford, Bingham, Bisbee, Blake, Bowman, Boyd, M. S. Brewer, Briggs, Brigham, Browne, J. C. Burrows, Butterworth, Calkins, Camp, Cannon, Carpenter, Caswell, Chittenden, Claflin, Conger, Cowgill, Crapo, Crowley, Daggett, G. R. Davis, H. Davis, Deering, Dick, Dunnell, Dwight, Einstein, Errett, Felton, Ferdon, Fisher, FORSYTHE, Fort, Frye, Hall, Harmer, B. W. Harris, Haskell, Hawk, Hawley, Heilman, Horr, Hubbell, Jorgensen, Joyce, Keifer, Kelley, Ketcham, Killinger, Lapham, Lindsey, Mason, McCoid, McGowan, McKinley, Miles, Monroe, Morse, Neal, Newberry, Norcross, O'Neill, Orth, Osmer, Overton, Pacheco, Page, Phelps, Prescott, Price, Ray, Reed, W. W. Rice, D. P. Richardson, G. M. Robeson, G. D. Robinson, D. L. RUSSELL, T. Ryan, Sapp, Shallenberger, Sherwin, A. H. Smith, Starin, J. W. Stone, E. B. Taylor, Thomas, W. G. Thompson, A. Townsend, Tyler, J. T. Updegraff, T. Updegraff, Urner, Valentine, Van Aernam, Voorhis, Van Voorhis, Ward, Washburn, H. White, Wilber, Willits, W. A. Wood, T. L. Young-116.

No other vote was taken upon it.

Supplementary Refunding Bill.

1881, March 1-Mr. CARLISLE, immediately after the House had acted upon the amendments of the Senate to H. R. 4592, and before that bill had been presented to the President, moved

to suspend the rules and pass this bill (H. R. 7254), and it was passed:

Be it enacted, etc., That the last sentence in section I of the act entitled "An act to facilitate the refunding of the national debt," passed at the present session of Congress, and known as the funding act of 1881, be, and the same is hereby, so amended as to read as follows:

“It shall be the duty of the Secretary of the Treasury, under such rules and regulations as he may prescribe, to authorize public subscriptions, at not less than par, to be received at all depositories of the United States, and at all national banks and such other banks as he may designate, for the bonds and for the Treasury notes herein provided for, for thirty days before he shall ask for or award any portion of such bonds or Treasury notes to any syndicate of individuals or bankers or otherwise than under such public subscriptions. And if it shall happen that more than the entire amount of said bonds and Treasury notes, or of either of them, has been subscribed within said thirty days, he shall award the full amount subscribed to all persons who shall have made bona fide subscriptions in order of time of said subscriptions and at the rates most advantageous to the United States."

SEC. 2. That section 4 of the said act be, and the same is hereby, so amended as to authorize the Secretary of the Treasury to use, from time to time, not exceeding $50,000,000 at any one time, of the standard gold and silver coin in the Treasury for the purposes mentioned in said section, and the surplus remaining in the Treasury not otherwise appropriated, or so much thereof as the Secretary of the Treasury may consider proper, may be applied to the purchase or redemption of any United States bonds or of the Treasury notes authorized by the said act.

SEC. 3. That section 5 of said act be, and the same is hereby, amended by adding thereto the following words: "And provided further, That nothing in this act contained shall be so construed as to repeal, modify, or in any manner affect sections 5220, 5221, 5222, 5223, or 5224 of the Revised Statutes of the United States of America."

IN SENATE.

March 3-It was referred to the Committee on Finance, and was not reported.

The legislative history of the vetoed bill is as follows:

Forty-Sixth Congress, 2d Session. 1880, February 18-It was reported from the Committee of Ways and Means in the second session, by Mr. FERNANDO WOOD, as a substitute for H. R. 3306, and was debated, but not voted upon. It was printed in MCPHERSON'S HAND-BOOK OF POLITICS FOR 1880, on pages 148-9, and is as follows:

Be it enacted, etc., That all existing provisions of law authorizing the refunding of the national debt shall apply to any bonds of the United States bearing a higher rate of interest than four and one-half per centum per annum which may hereafter become redeemable: Provided, That in lieu of the bonds authorized to be issued by

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the act of July fourteenth, eighteen hundred and seventy, entitled "An act to authorize the refunding of the national debt," and the acts amendatory thereto, and the certificates authorized by the act of February twenty-sixth, eighteen hundred and seventy-nine, entitled "An act to authorize the issue of certificates of deposit in aid of the refunding of the public debt," the Secretary of the Treasury is hereby authorized to issue bonds in the amount of not exceeding five hundred million dollars, which shall bear interest at the rate of three and one-half per centum per annum, redeemable, at the pleasure of the United States, after twenty years, and payable forty years from the date of issue, and also notes in the amount of two hundred million dollars bearing interest at the rate of three and one-half per centum per annum, redeemable, at the pleasure of the United States, after two years, and payable in ten years from the date of issue; but not more than forty million dollars of said notes shall be redeemed in any one fiscal year, and the particular notes to be redeemed from time to time shall be determined by lot under such rules as the Secretary of the Treasury shall prescribe. The bonds and notes shall be, in all other respects, of like character and subject to the same provisions as the bonds authorized to be issued by the act of July fourteenth, eighteen hundred and seventy, entitled "An act to authorize the refunding of the national debt," and acts amendatory thereto : Provided, That nothing in this act shall be so construed as to authorize an increase of the public debt.

SEC. 2. The Secretary of the Treasury is hereby authorized, in the process of refunding the national debt, to exchange at not less than par any of the bonds or notes herein authorized for any of the bonds of the United States outstanding and uncalled, bearing a higher rate of interest than four and one-half per centum per annum, and on the bonds so redeemed the Secretary of the Treasury may allow to the holders the difference between the interest on such bonds from the date of exchange to the time of their maturity, and the interest for a like period on the bonds or notes issued; but none of the provisions of this act shall apply to the redemption or exchange of any of the bonds issued to Pacific Railway Companies, and the bonds so received and exchanged in pursuance of the provisions of this act shall be canceled and destroyed.

SEC. 3. Authority to issue bonds and notes to the amount necessary to carry out the provisions of this act is hereby granted.

SEC. 4. The act approved February twentysixth, eighteen hundred and seventy-nine, authorizing the issue of certificates of deposit, is hereby amended so as to continue and limit the amount of certificates to be issued to fifty millions of dollars to be outstanding at any one time, and fixing the rate of interest to be allowed thereon at three and one-half of one per centum per annum for one year, after which interest shall cease; and the said certificates shall be convertible, at the option of the holders, when presented in sums of fifty dollars or multiples

thereof, into the coupon or registered bonds authorized by this act; and whenever any of the said certificates shall be converted into bonds, the same shall be canceled and destroyed; but the Secretary of the Treasury may, in his discretion, issued new certificates in place of those so converted up to the limit of fifty million dollars, until the aggregate amount of the bonds authorized by this act and of the said certificates combined then outstanding shall equal the amount of bonds hereby authorized. It shall be unlawful for any person or persons to form combinations by which to procure said certificates of deposit authorized under this act, for purposes of sale to others, or for acting as agents of others, and any person so offending shall be liable, on conviction, to be fined one thousand dollars or imprisoned not to exceed one year. The Secretary of the Treasury is authorized and directed to make suitable regulations in compliance with this act, providing that the expense for the disposing of the certificates and bonds authorized to be issued shall not exceed one-quarter of one per centum: Provided, That said certificates shall not be sold or converted at less than par.

SEC. 5. From and after the first day of July, eighteen hundred and eighty, the three and onehalf per centum bonds authorized by the first section of this act shall be the only bonds receivable as security for national bank circulation.

SEC. 6. This act shall be known as "The funding act of eighteen hundred and eighty," and all acts and parts of acts inconsistent with this act are hereby repealed.

Forty-Sixth Congress, Third Session. 1881, January 18-The bill having been amended in Committee of the Whole, was reported back to the House, amended as follows: A bill to facilitate the refunding of the national debt.

Be it enacted, etc., That all existing provisions of law authorizing the refunding of the national debt shall apply to any bonds of the United States bearing a higher rate of interest than 42 per cent. per annum which may here after become redeemable: Provided, That in lieu of the bonds authorized to be issued by the act of July 14, 1870, entitled " An act to authorize the refunding of the national debt," and the acts amendatory thereto, and the certificates authorized by the act of February 26, 1879, entitled "An act to authorize the issue of certificates of deposit in aid of the refunding of the public debt," the Secretary of the Treasury is hereby authorized to issue bonds in the amount of not exceeding $400,000,000, which shall bear interest at the rate of three per cent. per annum, redeemable, at the pleasure of the United States, after five years and payable ten years from the date of issue, and also certificates in the amount of $300,000,000 in denominations of $10, $20, and $50, either registered or coupon, bearing interest at the rate of three per cent. per annum, redeemable, at the pleasure of the United States, after one year, and payable in ten years from the date of issue. The bonds and certificates shall be, in all other respects, of like character and subject to the same provisions

as the bonds authorized to be issued by the act of July 14, 1870, entitled "An act to authorize the refunding of the national debt," and acts amendatory thereto : Provided, That nothing in this act shall be so construed as to authorize an increase of the public debt: Provided further, That before any of the bonds or certificates authorized by this act are issued, it shall be the duty of the Secretary of the Treasury to pay on the bonds accruing during the year 1881 all the silver dollars of 4121⁄2 grains, and all the gold over and above $50,000,000 now held in the Treasury for redemption purposes: And provided further, That interest upon the six per cent. bonds hereby authorized to be refunded. shall cease at the expiration of thirty days after notice that the same have been designated by the Secretary of the Treasury for redemption.

SEC. 2. The Secretary of the Treasury is hereby authorized, in the process of refunding the national debt, to exchange, at not less than par, any of the bonds or certificates herein authorized for any of the bonds of the United States outstanding and uncalled bearing a higher rate of interest than four and a-half per cent. per annum; and on the bonds so redeemed the Secretary of the Treasury may allow to the holders the difference between the interest on such bonds from the date of exchange to the time of their maturity, and the interest for a like period on the bonds or certificates issued; but none of the provisions of this act shall apply to the redemption or exchange of any of the bonds issued to the Pacific railway companies; and the bonds so received and exchanged in pursuance of the provisions of this act shall be canceled and destroyed.

SEC. 3. Authority to issue bonds and certificates to the amount necessary to carry out the provisions of this act is hereby granted, and the Secretary of the Treasury is hereby authorized and directed to make suitable rules and regulations to carry this act into effect; provided that the expenses of preparing, issuing, advertising, and disposing of the bonds and certificates authorized to be issued shall not exceed onequarter of I per cent.

SEC. 4. That the Secretary of the Treasury is hereby authorized, if in his opinion it shall become necessary, to use not exceeding $50,000,000 of the standard gold and silver coin in the Treasury in the redemption of the five and six per cent. bonds of the United States, authorized to be refunded by the provisions of this act; and he may at any time apply the surplus money in the Treasury, not otherwise appropriated, or so much thereof as he may consider proper, to the purchase or redemption of United States bonds or certificates: Provided, That the bonds and certificates so purchased or redeemed shall constitute no part of the sinking fund, but shall be canceled.

SEC. 5. From and after the 1st day of May, 1881, the three per cent. bonds authorized by the first section of this act shall be the only bonds receivable as security for national-bank circulation or as security for the safe-keeping and prompt payment of the public money deposited with such banks; but when any such

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