" ppaptont pt Hind psa rete: shear ae ois ‘ wi ene is cs a eaetetrteer a Seer set lia Ena * oes eee aes oe ty ba reer i os ws Ye) Roti oe petri ope Lt HG. YT! 1898 CORNELL | UNIVERSITY LIBRARY GIFT OF The Executive Committee of the Indianapolis Monetary Convention Report of the Monetary commission of the H. H. HANNA, Chairman, Indianapolis, Ind. WILLIAM C. CORNWELL, New York. M. L. CRAWFORD, Texas. J.M. FALKNER, Alabama, N. A. FLETCHER, Michigan. J. F. HANSON, Georgia. C. C. HARRISON, Pennsylvania. ROWLAND HAZARD, Rhode Island. ve Ma 4 i) District of Columbia. California. Illinois. Illinois. SAMUEL HILL, Cc. C. JACKSON, EUGENE LEVERING, ALEXANDER E. ORR, Minnesota. Massachusetts. Maryland. New York. OF THE INDIANAPOLIS MONETARY CONVENTION OF THE BOARDS OF TRADE, CHAMBERS OF COMMERCE, COMMERCIAL CLUBS, AND OTHER SIMILAR COMMERCIAL BODIES OF THE UNITED STATES. RUSSEL M. SEEDS, Secretary Indianapolis, oo ETO AA MEONEUTMALSS. isconsin. GEO. FOSTER PEABODY, ew York. T.C. POWER, Montana. Ik, L. REMMEL, Arkansas. E.O. STANARD, Missouri. &. B. STAHLMAN, Tennessee, AUGUSTUS E. WILLSON, Kentucky. W.R. TRIGG, Virginia. REPORT OF THE MONETARY COMMISSION OF THE INDIANAPOLIS CONVENTION OF BOARDS OF TRADE, CHAMBERS OF COMMERCE, COMMERCIAL CLUBS, AND OTHER SIMILAR BODIES OF THE UNITED STATES CHICAGO The University of Chicago Press 1898 ® A. Oko NG 49] 1S fee Copyright, 1898 By H. H. HANNA ct \ 4 & wv 4\- 6 (es ae “he. S xe eukvve eS tes WMowne | OCW) a ed ok the To iets mene es ge Congens Low For copies of this Report, address H. H. HANNA, INDIANAPOLIS, INDIANA PREFATORY NOTE To THE ExEcuTIVE COMMITTEE OF THE INDIANAPOLIS MONETARY CONVENTION: The Commission, after completing its plan of monetary reform, entrusted to me the preparation of a Final Report, which, while furnishing the necessary history of our existing system, should more fully than the brief Preliminary Report give the grounds upon which the plan of the Commission was based. It goes without saying that no two persons would do this work in quite the same way; and in justice to other mem- bers of the Commission, it seems right that the public should know by whom the Report was prepared. It has been my aim, however,—so far as possible in the too brief time allotted me and with the help of the Assistants to the Commission—not to prepare an exposition which represented merely my own point of view, but to marshal those facts and arguments which truly supported the conclusions of the Com- mission. No one, it should be added, can be more aware than I of the inevitable shortcomings of this attempt to do what would have been so much better done if it could have had the joint attention of all the members of the Commission. J. Laurence LAvuGHLin, APRIL 1898. ili CONTENTS INTRODUCTION HISTORY OF THE MOVEMENT 3-18 Origin of Indianapolis Monetary Convention, 3-8. First Meeting of Convention, 8-10. Appointment of Executive Committee, 10-11. Appointment and Organi- zation of Monetary Commission, 11. “Interrogatories” Sent Out, 11-13. His- tory of the Commission, 13-14. Second Meeting of Indianapolis Monetary Convention, 14-18. PRELIMINARY REPORT PRELIMINARY REPORT 20-59 Personnel of the Commission, 20. Object and Methods of the Commission, 21-23. The Facts as to the Currency, 23-28. Defects of the System, 28-29. The Stand- ard, 30-34. The Silver Currency, 34-37. The Demand Obligations of the Gov- ernment, 37-45. The Banking System, 45-49. Plan of Currency Reform, 49-58. Metallic Currency and Demand Obligations, 49-53. Banking System, 53-58. BILL EMBODYING COMMISSION’S PROPOSALS - 60-74 FINAL REPORT PART I.—METALLIC MONEY THE FUNCTIONS OF MONEY - 77-91 1. Three Functions of Money. 2. Necessity of a Standard. 3. What is Price? 4. Standard Must Have Value. 5. No Unvarying Standard of Value. 6. Distinction between a Standard and a Medium of Exchange. 7. Expedients to Save the Use of Coin. 8. Origin of Bank Notes and Deposit Currency. 9. Government Paper. 10. Quality of the Money Material. 11. Property a Con- dition of Obtaining Money. 12. Why Money is Needed in Small Transactions. 13. Per Capita Circulation. 14. Doubt as to the Standard Contracts Medium of Exchange. 15. Existing Media of Exchange in the United States. 16. Kinds of Money Received by Banks. 17. Kinds of Money Used in Retail Trade. 18. Kinds of Money Used in International Trade. THE STANDARD 92-112 19. The Time Element and a Standard for Deferred Payments. 20. What is a Just Standard? 21. Change of Standard May be Due to Either Side of the Price “ vi CONTENTS Ratio. 22. Industrial Movement Toward Cheaper Cost of Producing Commod- ities. 23. Owing to Durability, the Value of the Precious Metals Only Slowly Affected by Changes in their Demand and Supply. 24. Impossibility of Coun- teracting Economic Changes in Production by Manipulation of Money Side of Price Ratio. 25. Gold and Silver, Tied Together, Would Not Bear Constant Relation to Commodities. 26. Gresham’s Law. 27. Stability in Value of Silver. 28. Stability in Value of Gold. 29. Increased Demand for Gold has Practically Absorbed Increased Supply. 30. Standards, the Result of Concurring Habits of Mankind; the Duty of Governments to Follow, Not Interfere with, Natural Selections of Standards. 31. Necessity for Adoption of Some Standard by Gov- ernment. 32. Risk of Changes in Value Inherent in All Time Contracts. 33. Relative Economic Position of Debtors and Creditors. 34. Silver and Gold as Standards without a Ratio. 35. The Multiple Standard. 36. Rates of Interest as Affected by Standards of Deferred Payments. 37. The Silver Standard in the United States, 1792-1834. 38. The Gold Standard in the United States, 1834-1861. 39. A Fluctuating Paper Standard, 1862-1878. 40. Legal Recognition of Gold Standard in 1873. 41. Commission Recommends the Pay- ment of United States Obligations in Gold. LAWS OF TOKEN MONEY 113-130 42. The Principles of Token Money. 43. Reduction in Intrinsic Values; Coinage on Government Account Only; Limited Legal Tender Quality. 44. Redemption in Standard Money. 45. Denomination of Token Coins. 46. Seigniorage. 47. French Five-Franc Pieces. 48. United States Silver Dollars. 49. Gold Redemption of Silver Doilars. 50. Field of Circulation Less than $10 Reserved for Silver Certificates. 51. The Treasury Bound to Redeem Silver. 52. Limitation of Quantity. 53. The “Endless Chain.” 54. Disposition of Silver Bullion. LEGAL TENDER 131-137 55. Legal Tender Defined. 56. Legal Tender Quality Should be Conferred Only on the Standard. 57. Legal Tender Does Not Confer Value. 58. How Far Demand Can be Created by Legal Tender Laws. 59. Demand for Money to Pay Past Debts. 60. Origin of Legal Tender Laws. THE UNITED STATES SILVER EXPERIMENT - 138-145 61. The Movement for Silver Coinage, 1876-1878. 62. The Operation of the Bland-Allison Act of 1878. 63. Difficulty in Forcing Silver into Circulation. 64. The Sherman Silver Purchase Act of 1890. 65. The Maintenance of the Parity of the Two Metals. 66. Seigniorage Operations Under the Acts of 1878 and of 1890. 67. Silver Experiment Balance Sheet. THE MOVEMENT OF GOLD 146-158 68. The Fear of a Scarcity of Gold. 69. Domestic Sources of Supply of Gold. 70. Foreign Sources of Supply of Gold. 71. The Flow of Gold Controlled by Changes in Rate of Interest. 72. How the Foreign Banks Get Gold. 73. How the American Banks Have Obtained Gold in the Past. 74. How Country Banks Could Get Gold. 75. Maintenance of Gold Reserve Falls on Financial Centers. 76. Domestic Distribution of Currency. 77. The Gold Movement and Prices, CONTENTS vii PART JIJ.—BANKING THE NATURE OF A BANK 159-171 78. The Safe-keeping of Funds. The Transfer of Funds. 79. Savings-banks and Loan Companies. 80. Commercial Banks Create Demand Liabilities. 81. The Bank as a User of Idle Capital. 82. Inability of Banks to Loan “Credit.” 83. Discount the Source of Banking Profits. 84, The Public, not the Bank, Determines Choice between Deposits and Notes. 85. The Justification of Gov- ernment Supervision. 86. How the Bank Currency Benefits the Community. 87. Deposits Generally Representative of Loans. 88. Currency Function of Deposits. 89. Notes and Deposits really Identical. DEPOSIT CURRENCY 172-179 go. Currency Function of Deposits Recognized by Experts. 91. Why Cur- rency Function has been Overlooked. 92. Rapid Growth of Deposits. 93. Elasticity of Deposit Currency. 94. Importance of Note Circulation Diminished by Growth of Deposits. 95. An Adequate Note Currency Nevertheless Desirable 96. Proportion between Notes and Deposits Settled Naturally. EXPANSION OF NOTE-ISSUES 180-185 97. Current Notions Concerning Expansion. 98. The Volume of Notes Dependent on the Needs of the Community. 99. Comparative Degree of Danger of Expan- sion of Notes and Deposits. 100. The Remedy for Expansion is Presentation of the Notes. 101. The Real Danger Mistaken Judgment. 102. Origin of Fear of Over-issue. PROFIT ON BANK-NOTE ISSUES 186-196 103. Alleged Double Profit of National Bank Note-issues. 104. Effect of Com- pulsory Bond Deposit on Banking Profits. 105. Comparative Profits on the Loan of Notes and of Deposits. 106. Unequal Influence of Bond-Deposit Requirement upon Different Sections. 107. Results of Such Inequalities to the Community. 108. Comparative Use of Bonds under National and State Systems. 109. Influences Affecting Price of Bonds and Issue of Notes. 110. Premium on Bonds Decreases the Profit on Notes. HISTORY OF THE NATIONAL BANKING SYSTEM 197-223 111. Origin of the National Banking System. 112. Mr. Chase’s Support of the Plan. 113. Failure of the Act of 1863. 114. Provisions of the Act of 1864. 115. The Tax on State Bank Issues. 116. The “Apportionment” of Notes. 117. The Act of 1874 and the New Method of Withdrawing Currency. 118. The Resumption Act and Free Banking. 119. Contraction under the Resumption Act. 120. Difficulties Arising from the Bond-Deposit Requirement. 121. The Act of 1882 and the Bond Deposit. 122. Defects of the Early Redemption System. 123. Introduction of the Present Redemption System. 124. Provisions Regarding Reserve. 125. Defects of the Reserve Provisions. 126. The Crisis of 1873 and the Issue of Clearing-House Certificates. 127. Change in the Reserve Requirements. 128. The Banks and Resumption. 129. Issue of Clear- ing-House Certificates in 1884. 130. Stringency in 1890. 131. Operation of the Silver Acts. 132. The Banks and the Crisis of 1893. vili CONTENTS CIRCULATION SECURED BY BONDS 224-230 133. National Bonds Unsuitable as a Basis for Circulation. 134. Increase in Rate of Interest Due to Bond Deposit. 135. Rigidity of Bond-Deposit System. 136. Delays of the System. CIRCULATION SECURED BY COMMERCIAL ASSETS 231-236 137. Asset-Secured Currency Elastic and Quickly Obtained. 138. Character of Bank Assets as Security. 139. Value of Assets as Compared with Probable Note Issue. 140. Relative Unimportance of the Note-Currency. 141. Bond- Secured Systems not always Safe. GUARANTY FUND 237-246 142. Possibility of Failures under Free Banking. 143. Reason for Securing the Note-Holder. 144. Principle of Insurance Underlies Plan for Guaranty Fund. 145. Origin of the New York Guaranty Fund. 146. Change in its Scope. 147. Losses to the Fund from Notes of Failed Banks. 148. Canadian Safety Fund. 149. Inference from History of Banking Failures in the United States. 150. Guaranty Fund proposed by the Commission. INSOLVENCY OF NATIONAL BANKS 247-259 151. General Provisions of National Bank Act Against Mismanagement. 152. Protection to Note-Holders and Depositors. 153. Statistics of Failures. 154. Capital and Net Collections from Assets of failed National Banks. 155. Com- parison of Deficiencies with 80 Per Cent. of the Capital. 156. Estimate of Pos- sible Additional Collections Under Commission’s Plan. 157. Actual Collections from Shareholders. 158. Estimate of Additional Collections from Shareholders under the Commission’s Plan. 159. Capital and Net Collections of all Closed Insolvent Banks. 160. Deficiency to Fall on Other Banks. 161. Probable Defi- ciency in the Case of Eighty-one Banks not yet Closed. 162. Total Probable Loss would not Exceed One-Seventieth of : Per Cent. Per Annum. WORKING OF COMMISSION’S PLAN 260-276 163. Security to Note-Holder. 164. The Guaranty Fund. 165. The Emergency Tax. 166. The Redemption Fund. 167. No Exceptional Danger from Fraud. 168. The Security of Banking Assets. 169. Losses to be Borne by Solvent Banks Small. 170. Importance of Good Management. 171. Position of Depos- itor Different from that of Note-Holder. 172. Situation of Depositor under Present and Proposed Systems Compared. 173. Situation of Depositors in _-National and State Banks Compared. 174. Principle upon which Depositors “Select their Banks. 175. Differences in Methods of City and Rural Banks. 176. Effect of Proposed Plan on City and Rural Banks. ee ~ INSTANCES OF BANK NOTES BASED ON COMMERCIAL ASSETS 277-308 177. European Systems not Exactly Parallel to our Own. 178. Conditions of Note-Issue in France. 179. Conditions of Note-Issue in Belgium and the Netherlands. 180. Conditions of Note-Issue in Scandinavian Countries, 181. Conditions of Note-Issue in Germany and Austria. 182. Conditions of Note- Issue in Scotland and Ireland. 183. Conditions of Note-Issue in Canada. 184. General Characteristics of Early Banking in the United States. 185. Defects in CONTENTS ix Methods of Ownership and Direction. 186. Insufficiency of Capital. 187. Specu- lative Character of Banking. 188. Lack of Protection to Note-Holders. 189. Lack of Uniform Regulations. 190. Unfavorable Character of Business Con- ditions. 191. Faulty Redemption. 192. Transition to Better Banking. 193. State Bank of Indiana. 194. Banking in Louisiana and other States. 195. Suc- cess of the Institutions Dependent on Sound Management. 196. Early Banking in New York. 197. New York Safety Fund Banks. 198. New York Free Bank- ing Act. 199. Bond Security in Ohio. 200. Unfortunate Experience of other States. 201. Reasons for the Failure of the Bond-Security Plan. 202. New England Banking System. 203. No Uniform System regarding Limit of Issues and Stockholders’ Liability. 204. Elasticity of Note-Issue the Point of Similarity: 205. Redemption Provisions. 206. Merits of New England Bank Currency. ELASTICITY 309-323 207. Variations in Demand for Currency. 208. Elasticity of Deposit-Currency. 209. Cases where Deposit-Currency is Inadequate. 210. Need of Note-Currency in Marketing the Crops. 211. Elasticity in England. 212. Elasticity in Scot- land and Ireland. 213. Elasticity in Germany. 214. Elasticity in Canada. 215. Need of Elastic Note-Currency in United States. 216. Failure of National- Bank System to Supply Seasonal Demand for Notes. REDEMPTION OF NOTES 324-340 217. The Relation of Redemption to Elasticity. 218. Why Redemption will be Enforced by Banks. 219. Redemption and the Character of the Currency. 220. Redemption in Canada. 221. Redemption in Scotland. 222. The “Suffolk Bank System” of Redemption. 223. The National Bank Redemption Agency. 224. Redemption under the National Banking Law. 225. Reason for Inactivity of National Bank Note Redemptions. UNIFORMITY OF NOTE ISSUES 341-345 226. Comparative Uniformity Secured by National and Early State Systems. 227. Hindrances to Uniformity. 228. Requisites to Uniformity. 229. Uniform- ity under the Commission’s Plan. BANK RESERVES - = 346-351 230. Why Reserves are Needed. 231. Origin of Reserve Requirements. 232. Tendency Away from a Fixed Reserve. 233. Present Reserve Requirements for National Banks. 234. Recommendations of the Commission Regarding Reserves. INSPECTION AND EXAMINATION 352-360 235. Necessity of Publicity in Banking. 236. Frequency of Bank Reports. 237. How to Make Reports Truly Representative. 238. Inadequate Character of Present Bank Examinations. 239. How Examinations May Be Made More Effective. “TAXATION OF BANKS ; 361-368 240. Taxation of Bank “Franchises.” 241. Methods of Taxing Banks. 242. The Incidence of Taxes on Banks. 243. The Present Tax on Circulation. 244. Current Proposals for a Tax on Emergency Circulation. 245. Working of Tax x CONTENTS on Emergency Circulation. 246. Examples of Tax on Emergency Circulation in Foreign Countries. LOANING AND BANKING FACILITIES IN THE SOUTH AND WEST 369-375 247. Characteristics of the Various Kinds of Financial Institutions in the United States. 248. Distribution of Banking Capital. 249. Need of the South and West for Long-Time Loans. 250. Summary. i BRANCH AND SMALL BANKS 376-386. 251. The Banking System of the United States a System of Small Independent Banks. 252. Reason for the Lack of Branch Banks is the Inability to Issue Notes. 253. Lower Capitalization of National Banks Would Have Been Useless. ; 254. Advantages of the Branch Bank System. 255. Difficulties Connected with \ It. 256. Experience Shows that Branches Will Be Established When Permitted. ‘ 257. Applicability of Branch Bank System to the United States. 258. Effect of Competition of Branch Banks on Small Banks. > PART III.—DEMAND OBLIGATIONS OF THE GOVERN- MENT GOVERNMENT VERSUS BANK ISSUES 389-397 259. Saving Arising from the Use of Government Paper. 260. Relative Fitness of Government and Bank as Issuers. 261. Superior Elasticity of Bank Issues. 262. Lack of Property Behind Government Paper. 263. Weakness of Govern- ment Reserves. 264. Liability of Government Paper to Depreciation When Not Redeemable. 265. Nonresponsibility of Government Before the Law. 266. Secretary Chase’s Comparison of Government- and Bank-Paper. HISTORY OF THE UNITED STATES NOTES 398-444 267. Origin of Government Paper Money in the United States. 268. Issue of Demand Notes. 269. The $150,000,000 Loan (1861) and the Suspension of Specie Payments. 270. The Legal-Tender Act Proposed. 271. Alternative Offered by the Banks. 272. Plan Accepted by Mr. Chase. 273. Introduction and Pas- sage of the Legal-Tender Act. 274. Content of the Act. 275. Its Operation and the Passage of the Second Legal-Tender Act. 276. The Third Legal- Tender Act. 277. Pledge that No More Notes Should Be Issued. 278. Effect of the Notes and Favorable Attitude of Congress Toward Their Retirement. 279. Limit Set to Retirement of Notes. 280. Changes in the Standard. 281. Retirement of the Notes Suspended. 282. The Nation Decides to Pay Its Bonds in Coin. 283. Inelasticity of the Currency. 284. Speculative Operations on the Currency and the Crisis of 1873. 285. Relief Furnished by the Government. 286. Change in Public Opinion. 287. Origin of the Resumption Act. 288. Its Provisions. 289. Opposition to Resumption. 290. Concession of Congress in Act of 1878. 291. Steps Toward Resumption. 292. Resumption Accomplished. S293: The Silver Policy and Its Effect. 294. Popular Explanation of Gold Exportations Subsequent to 1890. 295. Trade of the United States. 296. Withdrawal of Investments by Foreigners. 297. Interest Payments. 298. Situa- tion of the Treasury. 299. Decrease of the Gold Reserve and First Issues of La CONTENTS xi Bonds, in 1894. 300. Third Issue of Bonds, 1895. 301. Popular Loan, 1896. 302. Present Currency Situation. 303. Influence of Legal Tenders in Draining Gold From Treasury. EFFECT OF PAPER ISSUES ON THE COST OF THE CIVIL WAR 445-461 304. Statement of the Problem To be Discussed. 305. Method of Discussion. 306. Increase of Expenditures. 307. Basis for Estimate of Increase. 308. Estimate of Increase of Expenditures. 309. Estimate of Increase of Receipts. 310. Net Loss to Government. 311. Greenbacks and the Payment of the Public Debt. EFFECT OF PAPER ISSUES ON PRICES - 462-469 312. Variations in Prices Not Closely Correspondent to Variations in Value of Greenbacks. 313. Absolute Change in Prices. 314. Effect on Those with Fixed Incomes. 315. Change inthe Standard. 316. Difficulties Subsequent to the War Not Due to “ Contraction.” EFFECT OF PAPER ISSUES ON WAGES 470-478 317. Inequality of Variations in Wages and Prices. 318. Actual Variations in Prices of 223 Articles, and Wages in Twenty-One Industries. 319. Wages in Other Occupations. 320. Pay of the Soldiers. 321. Improvement in Condition of Wages-Earners as Paper Dollar Rose in Value. RETIREMENT OF THE UNITED STATES NOTES 480-490 322. The Notes Should be Early Paid Off. 323. Saving of Interest. 324. Demand Obligations Perilous. 325. Government Paper Inelastic. 326. Saving of Interest Taken from Public. 327. Separation of Monetary and Fiscal Opera- tions of Treasury. APPENDIN I. SELECTED LAWS OF THE UNITED STATES RELATING TO COINAGE, CURRENCY, AND BANKING. 1789, Provisions of the Constitution as to Coinage and Currency 491 1792, April 2, Act Establishing a Mint and Regulating Coinage 491-495 1793, February 9, Act Regulating Foreign Coins 495-497 1834, June 28, Act Concerning the Gold Coins of the United States 497-498 1837, January 18, Act Supplementary to Act Establishing a Mint 498-499 1849, March 3, Act for Coining Gold Dollars and Double Eagles 499 1851, March 3, Act as to Postage, Authorizing Three-Cent Piece 499 1853, February 21, Act Relating to Subsidiary Silver Coins 499-500 1857, February 21, Act (relating to foreign coins and cents) 500 1861, July 17, Act Authorizing a National Loan 501 1861, August 5, Act Supplementary to Act of July 17, 1861 501 1862, February 12, Act Authorizing Issue of United States Notes 501 1862, February 25, Act (for issue of legal-tender notes and of bonds) 502-503 xii CONTENTS 1862, March 17, Act (as to purchase of coin, use of demand notes, and tempo- rary deposits) @ 593 1862, July 11, Act (for second issue of legal tender notes) 503-505 1862, July 17, Act Authorizing Payments in Stamps 505 1863, January 17, Joint Resolution (for issue of legal tender notes) 505 1863, February 25, Act to Provide a National Bank Currency 505-506 1863, March 3, Act (authorizing a loan and third issue of legal tender notes) 506-508 1864, June 3, Act to Provide a National Bank Currency 508-509 1864, June 30, Act Providing Ways and Means through a Loan 509-510 1865, March 3, Act Authorizing the coinage of Three-Cent Pieces 511 1865, March 3, Act as to Interest on Bonds and Treasury Notes Sir 1865, March 3, Act Amending National Bank Currency Act 5II 1865, March 3, Act (as to taxation of banks, etc.) 511-512 1866, April 12, Act (allowing Secretary of Treasury to use his discretion as to funds) 512 1866, May 16, Act Authorizing Coinage of Five-Cent Pieces - 512 1866, July 13, Act (as to taxation of banks) 512-513 1867, March 2, Act for Payment of Compound Interest Notes 513 1867, March 26, Act (as to taxation of banks) 513 1868, February 4, Act Suspending Reduction of the Currency 513 1868, July 25, Act for Payment of Compound-Interest Notes 514 1869, March 3, Act Regulating Reports of National Banks 514 1869, March 18, Act to Strengthen the Public Credit 514 1870, July 12, Act for Increase of National Bank Notes 515 1871, March 3, Act to Provide for Redemption of Token Coins 515-516 1873, February 12, Act Revising Laws Relating to Mints and Coinage 516 1874, June 22, (provisions of the Revised Statutes relating to coinage, currency, and banking) 517-528 1874, June 20, Act (for redemption and redistribution of national bank cur- rency, etc.) 529-531 1875, January 14, Act for Resumption of Specie Payments 531-532 1875, January 19, Act Concerning Notes of Gold Banks 532 1875, February 8, Act (as to taxation of state banks) 532-533 1875, March 3, Act Providing for Coinage of Twenty-Cent Piece 533 1876, April 17, Act Providing for Silver Coin in Place of Fractional Currency 533 1876, July 22, Joint Resolution for Issue of Silver Coin 533-534 1878, February 28, Act for Coinage of Standard Silver Dollar - 534-535 1878, May 31, Act Forbidding Retirement of Legal Tender Notes 535-536 1879, June 9, Act Concerning Subsidiary Coins 536 1880, February 14, Act Authorizing Conversion of Gold Banks 536 1882, July 12, Act to Extend Existence of National Banks 536-538 1882, August 7, Act (for transportation of silver coins) 538-539 1886, August 4, Act (authorizing silver certificates and transportation of coin) 539 1887, March 3, Act (relating to reserves, etc., of national banks) 539-540 1887, March 3, Act for Retirement and Recoinage of the Trade Dollar 540 1889, March 2, Act (as to expense of transporting silver coin) 540 1890, July 14, Act (for purchase of silver bullion and issue of notes thereon) 540-542 1890, August 30, Act (limiting denomination of United States notes) 542 CONTENTS xiii 1890, September 26, Act Discontinuing Three-Dollar and One-Dollar Gold Pieces and Three-Cent Pieces 542 1891, March 3, Act (for recoinage of silver coins) 542 1893, November 1, Act to Repeal Act for Purchase of Silver Bullion 543 APPENDIX II. STATISTICS OF MONEY AND BANKING. Table 1—Money in Circulation, January 1, 1898 547 Table 2—Paper Currency of Each Denomination Outstanding, December 31, 1897 547 Table 3—Money in Circulation Each Year, 1860-1897 548-549 Table 4—Paper Currency in the United States at the Close of Each Fiscal Year 550 Table 5—Aggregate and Per Capita Stock of Money in Principal Countries - 551 Table 6—Situation of the Treasury, January 1, 1898, Under the Commis- / sion’s Plan oe (Table 7—Production of Gold and Silver in the United States, 1792-1896 553 ’ Table 8—World’s Production of Gold and Silver Since 1492 554 Z Table 9—World’s Production of Gold and Silver, 1493-1896 555 Table 10o—Silver Purchases Under Acts of 1878-1890 555 Table 11—Price of Silver, Ratio, Bullion Value of Si:ver Dollar, etc. 556-557 Table 12—Annual Commercial Ratio of Silver to Gold Since 1687 - 557 Table 13—Monthly Ratio of Silver to Gold Since 1844 558 Table 14—Ratio of Silver to Gold and Value of Pure Silver in a Silver Dollar at Various Prices 559 Table 15—Value of an Ounce of Fine Silver at Various Ratios 559 Table 16—Imports and Exports of Gold and Silver Coin and Bullion, Into and Out of the United States 560 Table 17—Coinage of Gold and Silver in the United States, by Periods 560 Table 18—Coinage of United States Mints Since 1792 561 Table 19—Gold Value of $100 in Currency, 1862-1878 562 Table 20—Gold Redemptions of United States Notes and Treasury Notes and Exports of Gold, 1879-1897 563 Table 21—Monthly Gold Redemptions of United States Notes and Treasury Notes, 1892-1897 563 Table 22—-Gold Reserve and Cash Balance in the Treasury Since January 1893 564 Table 23—Principal Items of National Bank Statements, 1863-1897 565-567 Table 24—Abstracts of National Bank Reports October 5, 1897 568 Table 25—Classification of State Banks by Capital Stock 569 Table 26—Classification of National Banks by Capital Stock - 570-571 Table 27—Abstract of National Bank Reports October 5, 1897, by States 572-575 Table 28—Distribution of Coin Reserves of National Banks October 5, 1897 576-577 Table 29—National Bank Notes Kedeemed at the Redemption Bureau Since a : . 578 XIV CONTENTS Table 30—Expense Incurred in the Redemption of National Bank Notes and Assessments on National Banks - 579 Tabie 31—National Bank Notes Redeemable Out of the Five Per Cent. Redemption Fund, and Amounts Redeemed Since 1875 579 Table 32—National Bank Notes Received for Redemption from Principal Cities 580 Table 33—Deposits and Surplus Reserves of New York Clearing-House Banks 580 Table 34—Valuation of Outstanding Government Bonds Upon a Three Per Cent. Basis 580 Table 35—Transactions of New York Clearing-House Since 1854 581 Table 36—Clearing-House Exchanges Since 1882 581 Table 37—Distribution of Silver Dollars at End of Each Fiscal Year 582 INDEXES. General Index 583-604 605-608 Index to Appendix I DIAGRAMS. Chart §I—Kinds of Money Received in Monthly Payments for Customs in New York, by’ Percentages Chart JII—Principal Items of National Bank Reports, 1864-1897 Chart II]—London Clearing House Exchanges Chart IV—Note Issues of English Private and Joint Stock Banks Chart V—Note Issues of Banks of Scotland Chart VI—Note Issues of Bank of Ireland and Irish Joint Stock Banks Chart VII—Note Issues of Imperial Bank of Germany Chart VIII—Note Issues of Canadian Banks Chart IX—Note Issues of National Banks of the United States Chart X—United States Notes and Treasury Notes Redeemed in Gold, and Exports of Gold Chart XI—Gold Value of $100 in Legal-Tender Notes Chart XII—Prices, Wages, and Purchasing Power of Wages Chart XI11J—Specie Value of a Soldier’s Pay xv 144 206 314 315 316 317 318 319 320 434 468 472 478 INTRODUCTION HISTORY OF THE MOVEMENT On November 18, 1896, at the request of a number of busi- ness men, a member of the Indianapolis Board of Trade pre- sented to its Board of Governors the following memorial, viz.: Having been requested by a nuniber of business men of the city to present the subject of reform of the currency to the Board of Trade, I feel that I stand as a representative of the business men of this city, whose experience is, in a general way, the experience of the business men of the entire country. The business man of the country is aroused ‘to the necessity of different methods of demand for right things in legis- lation. I stand to present to you the urgency and importance of an action on your part for which many thinking men of the country are now looking to you. The sentiment is abroad in the land, the business men are discuss- ing and the press is urging currency reform. As yet the ideas are only crude; there are as many plans as there are writers; but the agita- tion is continuous, and opinions are being framed that will soon take stubborn form and divide the people, and the politician will push them as important issues, and the business men will suffer by the disturb- ance and depression that are sure to follow. To avoid the drifting of these sentiments into wrong channels, it is of vital importance that, by conservative measures, they be led by safe, strong hands very early into the right path. The West will not take up this cause; the East should not do so, and the central West, by reason of its importance as a factor in the commerce of the country and its geographical relation to the other sections in which financial views are considered more or less extreme, should act. For such a movement to emanate from Indiana would probably be more acceptable to all parts of the country than for it to emanate from any other state. No movement could or should succeed that is not based upon the broadest possible justice and intel- ligence, and in the entire interest of the whole people. Such investigation and framing should only be entrusted to those who are great enough to rise above all party relation and prejudice, to discard all former ideas when confronted with better methods, and fairly and honestly deal with the great question for the general good and for defense against the instability of values, which has caused such immeasurable losses to the people of this country within the few years just past. The business man is the victim of all such agitation, and I stand in his name to protest with all possible emphasis against further 3 4 REPORT OF THE MONETARY COMMISSION risk by delay, lest the opportunity slip. President Cleveland very ably urges some action in his letter, read at the annual dinner of the New York Chamber of Commerce last night. Again, I say something will be done very soon, and it is just as likely to be wrong as right in the early or superficial discussion ; and I present to you for action tonight a plan that cannot do harm and should lead up to stable things in commerce, and relief from the racking strains that the business man is periodically subjected to by reason of the agitator’s continuous desire to change our financial system. JI am thoroughly aroused to the cor- rectness of the position and the vital importance of prompt or imme- diate action, and if you can agree with me, then the duty is plain, and I beg of you to forestall the menace of early superficial action by direct- ing the minds of the people to a broader view of a great subject, by suggesting steps that will surely put into good, if not perfect, form, the financial methods of the country. To this end I ask that you, as the representatives of the active busi- ness men of the whole country, act at once in the following manner: I ask you to appoint a committee with instructions to prepare a letter of address to the more important boards of trade in the states known as the central West, to wit.: the boards of trade in Louisville, Cincin- nati, Columbus, Cleveland, Toledo, Detroit, Chicago, Milwaukee, St. Paul, Minneapolis, Des Moines, Kansas City, St. Louis, Omaha, Peoria, and Grand Rapids, requesting that the controlling boards of each of such boards of trade send delegations of not exceeding three members, the same being non-partisan in politics, to a conference to be held in Indianapolis, say Tuesday, December 1, at 11 o’clock a. M., for the pur- pose of considering the propriety of uniting in a call for a general or national convention of representatives of boards of trade and other commercial bodies, which shall in turn consider the propriety of organ- izing a representative commission of able, conservative, trustworthy men to thoroughly study, canvass, and consider, without limit or instructions, all conditions and all currency systems, the strength and weakness of our own, as well as the valuable features of all others, for the purpose of presenting to Congress for action these valuable features, united with such as may be of special importance for our special requirements, with the general approval of the boards of trade and commercial bodies of the country. To continue the argument, it is fair to believe that such a carefully chosen commission will produce acceptable results to the general pub- lic. It is reasonable to believe that the call for a general convention being made in the name of the seventeen boards of trade mentioned, will command the respect necessary for recognition, attendance, and participation in the general convention, and a commission that has behind it the united approval of the commercial bodies and boards of trade of the country will be recognized and listened to by Congress. In other words, the manner of call and action is made for the purpose of not only offering the well-digested plan of men able to deal with HISTORY OF THE MOVEMENT 5 such matters, but to reinforce the demand by the support and influence of men who are not asking legislation for political purposes but for the general good of the whole people. If all this is favorably received by you, then preliminary steps cannot be too speedily taken in order to forestall the confusion incident to crudely conceived opinions that cannot be otherwise than harmful. Perfect results of commissions are perhaps not possible, but when the motive behind them is lofty, and above personal or selfish aims of the few, they commonly result better than other ways. When the Venezuelan Commission was established upon high principles of right in search for the truth upon which to base the final demand for justice, the fair and honorable method com- manded the respect of our own people first, and the public excitement was relieved by confidence in a wise step, and it is evident that Great Britain was alive to the exalted spirit and dignified determination on the part of our government for the right, and there is but little doubt that the concession to arbitration in which the Monroe Doctrine was fully respected was brought about to some extent by the idea and work of this commission. So, too, our own people will be influenced more or less to patience and confidence in the outcome of such an effort as is proposed. The procedure will require much time at best, and should be begun at once. In response to this appeal the Board of Governors adopted the following resolutions: Resolved, By the Board of Trade of the City of Indianapolis, that the boards of trade of the cities of Chicago, St. Louis, Cincinnati, Louisville, Cleveland, Columbus, Toledo, Kansas City, Detroit, Muil- waukee, St. Paul, Des Moines, Minneapolis, Grand Rapids, Peoria and Omaha be, and they are, invited to send three delegates each to a pre- liminary conference, to be held in the city of Indianapolis, on the first day of December, 1896, for the purpose of considering the advisability of calling a larger conference or convention, composed of delegates from the boards of trade and commercial organizations of the cities of the United States, to consider the propriety of creating a non-partisan commission, to which shall be assigned the duty of formulating a plan for the reform of our currency system, to be reported to a subsequent meeting of the conference or convention. Resolved, That the president be authorized to appoint three dele- gates to the said conference. Resolved, That the Commercial Club of the City of Indianapolis be also invited to send three delegates to the conference to be held December 1, 1896. Resolved, That the Committee on Arrangements, with a similar committee to be appointed by the Commercial Club, shall have charge of the arrangements for the conference to be held December 1, and the proper entertainment of the attending delegates. 6 REPORT OF THE MONETARY COMMISSION Copies of the same were sent to the boards of trade and other commercial organizations of the cities named, accom- panied by a letter in which the Board said: In behalf of the policy and purpose outlined by these resolutions, permit us to say that it is believed very earnestly that a non-partisan committee or commission composed of experts judiciously selected by a representative conference of business men should be chosen at an early day; and that to this commission should be assigned the duty of preparing a plan which can be embodied in such legislation as will place our monetary system on a permanently sound basis. The present grave juncture presents an opportune occasion to the business men of the country to intervene in a business matter, and it is their duty as well as they can to aid in the solution of a matter which so intimately concerns the stability of business. The commission to be ultimately selected must be of such attain- ments and character as not only to allay all suspicion of any influence from class or sectional interest, but it must be of such fitness as to inspire the confidence in the mind of the fair-minded citizen of the republic that its work will be done for the permanent welfare of the whole nation. We have great confidence in the patriotism of the masses of the American people, and believe that they will recognize the wisdom of looking to a commission of the character above described for the best solution of the questions involved, and that the people will await the results of the committee’s labor before committing themselves to any particular plan or scheme hastily or immaturely devised. In view of the grave character of the situation which confronts us, and the great importance of the work to be achieved by the committee to be appointed, it is obvious that each commercial body, in choosing its representatives to the proposed conference, should nominate men whose attainments, experience, and character will satisfy the demands of the occasion. To this conference delegates were in attendance from the following cities, viz., Cincinnati, Chicago, Cleveland, Columbus, Grand Rapids, Indianapolis, Louisville, Milwaukee, Minneapo- lis, St. Louis, St. Paul, and Toledo, who, after protracted discus- sion, issued the following ‘call for a Monetary Convention of business men:” The representatives of the Board of Trade, of the Chamber of Commerce and similar commercial bodies of the cities of Chicago, St. Louis, Cincinnati, Milwaukee, Minneapolis, St. Paul, Louisville, Columbus, Cleveland, Toledo, Grand Rapids and ‘Indianapolis, in conference assembled at the City of Indianapolis on the rst day HISTORY OF THE MOVEMENT 7 of December, 1896, after due deliberation, do hereby call a non- partisan convention to meet at the city of Indianapolis, on the rath day of January, 1897, to be composed of representative business men, chosen from boards of trade, chambers of commerce, commercial clubs or other similar commercial bodies, in cities of eight thousand or more inhabitants, according to the census of 1890, the basis of representa- tion to be tabulated and in accordance with the population of said cities, for the purpose of considering and suggesting such legislation as may, in their judgment, be necessary to place the currency system of the country upon a sound and permanent basis. In behalf of this call, the conference submits that the fact that necessity for such legis- lation exists is generally conceded by business men. It is the right and the duty of the business men of the nation, in a matter of such vital business concern, to render to this cause all the aid which their experience and knowledge can afford. These owe it to themselves, as citizens of the republic, and as a matter of business self-preservation, to participate actively, and, we believe, efficiently in this movement. The business men have been accused of neglect of political duties. In ordinary times there may be some foundation for this charge, but at every critical juncture in the history of our country, when the nation’s prosperity, honor or general welfare was seriously in danger, they have, in the spirit of enlightened patriotism, risen to the full measure of their duty; and we believe that the painful experience of the country under the existing laws on the subject of the currency admonishes the business men that we have reached a point where it is their duty to take an active part in helping to solve the great questions involved. And we have a right to believe that a convention composed of broadminded and enlightened business men, so earnest in the pursuit of truth that party considerations will be forgotten, convening in the spirit of enlightened patriotism, can and will do much in helping for- ward a wise and sound solution of the currency question. We are also justified, in the light of the recent presidential election, in saying that the voters of the nation are opposed to any plan of cur- rency reform involving the use of any money which will place in jeop- ardy the honor or the credit of our country. Accepting these as conclusions from the recent manifestations of public opinion, we cordially and earnestly invite your organization to choose and send with proper credentials . . . . of your representative business men to the proposed convention. Please appoint only those who will attend, and report the names of your delegates as soon as practicable, to H. H. Hanna, Chairman of Executive Committee, Indianapolis, Indiana. Respectfully: Cincinnati Chamber of Commerce, represented by M. E. Ingalls, Herman Goepper, W. Cooper Procter. Chicago Board of Trade, represented by H. F. Dousman, B. A, Eckhart, P. B. Weare. 8 REPORT OF THE MONETARY COMMISSION Cleveland Chamber of Commerce, represented by J. G. W. Cowles, E. A. Angell. : Columbus Board of Trade, represented by Joseph H. Outhwaite, William Burdell, Charles H. Linderberg. Grand Rapids Board of Trade, represented by N. A. Fletcher, William H. Anderson. Indianapolis Board of Trade, represented by H. H. Hanna, E. B. Martindale, George G. Tanner. Indianapolis Commercial Club, represented by John T. Brush, Louis Hollweg, Herman Lieber. So tee Louisville Board of Trade, represented by Augustus E. Willson. Milwaukee Chamber of Commerce, represented by F. H. Madge- burg, H. L. Palmer. | Minneapolis Board of Trade, represented by T. B. Walker, Joseph ‘U. Barnes, Henry Hill. ~ $§t. Louis Merchants’ Exchange, represented by E. O. Stanard, Clark H. Sampson, James Campbell. St. Paul Chamber of Commerce, represented by E. V. Smalley. Toledo Produce Exchange, represented by Denison B. Smith. On January 12, 1897, the Convention assembled. Twenty- six states and the District of Columbia sent delegates. More than one hundred cities were represented by their leading and representative business men. In all there were about three hun- dred registered members of the Convention. The session lasted two days, during which free and full dis- cussion was had, and, as an expression of the will of the Conven- tion, the following resolutions were, with the exception of three votes, unanimously agreed upon, viz.: This convention declares that it has become absolutely necessary that a consistent, straightforward, and deliberately planned monetary system shall be inaugurated, the fundamental basis of which should be: First, that the present gold standard should be maintained; second, that steps should be taken to insure the ultimate retirement of all classes of United States notes by a gradual and steady process, and so as to avoid injurious contraction of the currency, or disturbance of the busi- ness interests of the country, and that until such retirement provision should be made for a separation of the revenue and note-issue depart- ments of the Treasury; third, that a banking system be provided which should furnish credit facilities to every portion of the country and a safe and elastic circulation, and especially with a view of securing such a distribution of the loanable capital of the country as will tend to equalize the rates of interest in all parts thereof. For the purpose of effectively promoting the above objects; HISTORY OF THE MOVEMENT 9 Resolved, That fifteen members of this convention be appointed by the chairman to act as an Executive Committee while this conven- tion is not in session, with full powers of this convention. The Exec- utive Committee shall have the power to increase its membership to any number not exceeding forty-five, and five members thereof shall at all times constitute a quorum of said committee. The Executive Committee shall have special charge of the solicita- tion, receipt, and disbursement of contributions voluntarily made for all purposes; shall have power to call this convention together again when and where it may seem best to said committee to do so, and said committee shall continue in office, with power to fill vacancies, until discharged at a future meeting of this convention. fesolved, That it shall be the duty of this Executive Committee to endeavor to procure at the special session of Congress, which it is understood will be called in March next, legislation calling for the appointment of a Monetary Commission by the president to consider the entire question, and to report to Congress at the earliest day possible. Or, failing to secure the above legislation, they are hereby author- ized and empowered to select a commission of eleven members, accord- ing to the rules and plans set forth in the suggestions submitted to the convention by Mr. Hanna, of Indianapolis, as follows: ARTICLE 1. The Commission shall consist of eleven members to be named by the Executive Committee appointed by this convention. The Executive Committee shall have power to fill vacancies in the Commission as they may occur. Art. 2. The first meeting of the Commission shall be held at a time and place to be designated by the Executive Committee of this convention in a call to be issued therefor, and at such meeting the Commission shall organize by the election of such officers and the adoption of such rules and by-laws for its own government as may be agreed by a majority of its members, and thereafter it shall be gov- erned by such rules and by-laws subjects to these articles. Art. 3. All rules and by-laws of the Commission, and all its pro- ceedings, shall be directed towards the accomplishment of the objects of its creation, which is to make a thorough investigation of the monetary affairs and needs of this country, in all relations and aspects, and to make appropriate suggestions as to any evils found to exist and the remedies therefor, and no limit is placed upon the scope of such inquiry, or the manner of conducting the same, excepting only that the expenses thereof shall not exceed the sum set apart for such pur- pose by the Executive Committee. ArT. 4. The Executive Committee of this convention shall use so much of the voluntary contributions made to it as may be available for that purpose, to defray all necessary expenses of the Commission, and shall notify the Commission from time to time of the amount so avail- able, in order that it may regulate its expenditures accordingly, and no 10 REPORT OF THE MONETARY COMMISSION liability shall attach to said committee or to this convention beyond the amount so notified. Art. 5. When the labors of this Commission have been completed as far as practicable, the Executive Committee, if it deem it advisable, shall issue a call to bring this convention together again at a time and place designated in such call, and at the meeting so convened the Com- mission shall make report of its doings and suggestions in such man- ner and form as it shall deem best adapted to present the same to this convention and its members for action, and, if legislation is deemed advisable, shall accompany such report with a draft of such bill or bills providing for such legislation. Resolved, That all resolutions and communications as to methods of currency reform which have been presented to this convention be referred to such Commission when formed. Pursuant to this expressed will of the Convention, the Hon, C. Stuart Patterson of Philadelphia, President of the Conven- tion, appointed for an Executive Committee, the following, viz.: H. H. Hanna, Indianapolis, Ind., Chairman. M. L. Crawford, Dallas, Texas. W. B. Dean, St. Paul, Minn. J. W. Fries, Salem, N. C. J. F. Hanson, Macon, Ga. C. C. Harrison, Philadelphia, Pa. Rowland Hazard, Peace Dale, R. I. J. P. Irish, San Francisco, Cal. H. H. Kohlsaat, Chicago, II. J. J. Mitchell, Chicago, II. A. E. Orr, New York, N. Y. G. F. Peabody, New York, N. Y. T. C. Power, Helena, Mont. E. O. Stanard, St. Louis, Mo. A. E. Willson, Louisville, Ky. Subsequently, in accordance with the authority conferred by the resolution under which it was appointed, the Executive Committee added to its numbers the following : Henry C. Payne, Milwaukee, Wis. W. R. Trigg, Richmond, Va. E. B. Stahlman, Nashville, Tenn. Eugene Levering, Baltimore, Md. Chas. C. Jackson, Boston, Mass. HISTORY OF THE MOVEMENT II i, Saal Hill, Minneapolis, Minn. John B. Henderson, Washington, D. C. N. A. Fletcher, Grand Rapids, Mich. W. C. Cornwell, Buffalo, N. Y. Following the instructions of the Convention, the Executive Committee selected a Commission composed of George F. Edmunds of Vermont, Charles S, Fairchild of New York, C. Stuart Patterson of Pennsylvania, John W. Fries of North Carolina, Thomas G. Bush of Alabama, George E. Leighton of Missouri, Stuyvesant Fish of New York, William B. Dean of Minnesota, Robert S. Taylor of Indiana, J. Laurence Laughlin of Illinois, and Louis A. Garnett of California. The Commission thus appointed held its first meeting Sep- tember 22, 1897, at 3 p.m., in Washington, D. C., and organized by electing George F. Edmunds chairman and George E. Leigh- ton vice chairman. At the same time L. Carroll Root and H. Parker Willis were selected as Assistants to the Commission. Committees were appointed as follows: Metallic Banking Demand obligations currency system of the government Mr. Patterson Mr. Fairchild Mr. Taylor Mr. Garnett Mr. Bush Mr. Fish Mr. Laughlin Mr. Dean Mr. Fries Mr. Laughlin Mr. Edmunds Mr. Leighton Sessions were subsequently held daily until September 29, when an adjournment until October 11 was taken. At the meeting of Wednesday, September 29, the following set of interrogatories was adopted and ordered printed, together with a circular letter signed by the Chairman, and supplied to the members of the Commission, to be sent to such experts as they might think fit. METALLIC CURRENCY. 1. Should or should not the silver dollars and silver certificates be redeemed on demand in gold? If redeemed, what reserve should be provided, and how? 12 REPORT OF THE MONETARY COMMISSION z. What in your judgment would be the probable amount of silver dollars and silver certificates presented, if direct redemption were enacted ? 3. To insure the permanent inviolability of the gold standard, what legislative measures would you recommend ? 4. For the purpose of facilitating the use of existing silver cur- rency, what do you recommend as the smallest denomination of United States notes and bank notes which should be put into circula- tion? DEMAND OBLIGATIONS. 1. Do youconsider that there are any dangers arising from allowing the United States notes to remain as a permanent part of our circula- tion? 2. On what grounds, if any, would you favor the gradual but entire withdrawal of the Treasury notes of 1890 and of the United States notes ? 3. If it shall be decided to retire the United States notes, how can it be done without adding to our bonded debt ? 4. How, in that case, can provision be made for maintaining an adequate amount of currency available for purposes of business? 5. If it be thought inexpedient to fund the United States notes, how can they be redeemed with an assurance that bank currency will take their place? 6. Meanwhile, what security or gold reserves would you recom- mend? 7. In case provision should be made for the retirement of United States notes, how could their presentation for redemption be best secured P 8. Should Government issues be withdrawn only as bank notes are put out? That is, if an elastic system of bank issues should be adopted, would it be desirable to define and maintain any given quantity of circulation ? g. Would the banks in fact furnish the currency which the coun- try needs, if the Government notes were withdrawn ? BANKING. 1. Is it possible to rely upon national bonds as security for bank note issues ? 2. Can any safe and practicable plan be devised for using any other security as a basis for bank note issues ? BH bonds should be used exclusively as a basis for issues, would it be possible thereby to secure an elastic note circulation ? 4: If bank note issues be based exclusively on assets of the bank, is the nature and extent of the security such as effectually to protect the note holder? What limit should be set to such note issues ? HISTORY OF THE MOVEMENT 13 5. Since bank assets (including stockholders’ liabilities, etc.), must be the means of ultimate redemption of such issues, what funds would you deem necessary to be held as a cash reserve for the imme- diate redemption of the notes; and in what form; and in whose hands ? 6. In case of notes based on bank assets, what means can you sug- gest to obtain and preserve a high character of discounts ? 7. Can any watchfulness of other banks connected by locality or business connections be brought to bear on a bank to prevent bad banking? Can such a scheme be devised as in cities where Clearing House Associations detect and punish weakness, by which country banks can be guarded ? 8. What plan of examination and inspection would you recom- mend ? 9. What methods would you suggest by which uniformity of note issues based on assets could be secured throughout the country? If by redemption, state where and how? to. What, if anything, beyond provision for immediate redemp- tion is needed for securing the elasticity of note issues in periods of normal business ? 11. In times of panic or sudden stringency, how would you pro- vide for additional issues by the banks to enable them to continue dis- counts and prevent commercial distress ? 12. Of what should the bank reserves consist P 13. Should any National bank be permitted to pay interest on the current deposits of other banks? 14. Should deposits of country banks in reserve cities be author- ized to be counted as a part of the required reserve ? 15. What should be the minimum limit of capital for National banks? 16. Should the existing ten per cent. tax on State bank notes be repealed ? 17. Should any National bank be permitted to establish branches / under its single management ?_ If so, under what limitations, if any? 18. Should branch banks be obliged to redeem the notes of the parent bank and of other branches ? 19. Should branch banks be required to maintain any specified proportion of reserves to liabilities, independent of regulations for the general accounts of the parent bank ? On October 11, the Commission reconvened and sessions were held daily until October 22, when an adjournment was taken to Wednesday, November 3. Sessions were held daily from November 3 to November 13, an adjournment being then taken to November 17. Upon reconvening on November 17, the Commission continued in session during the 18th and toth, and 14 REPORT OF THE MONETARY COMMISSION took an adjournment to December 15, reconvening on that date and continuing in session during December 16 and 17, adjourning upon the latter date sie die. At the session of Friday, December 17, a preliminary report, stating the results of its labors, was adopted by the Commis- sion. This was given to the public on January 3, 1898.7 A few days later, a bill embodying the recommendations of the report? was introduced in the House of Representatives by Representa- tive Overstreet of Indiana. On January 12, the Committee on Banking and Currency listened to arguments in defense of the measure from Senator Edmunds and Messrs. Fairchild, Taylor, Fries, and Bush. ~The Indianapolis Monetary Convention was reconvened January 25, 1898. At this session, the Executive Committee made the following report : In accordance with the general resolutions adopted in the last convention, President Patterson appointed an Executive Committee of fifteen members, charging it to act for the convention when not in session and to execute the will of the convention as expressed in the general resolutions. Faithful to its trust, the Committee assembled in Washington and presented its plan to the Administration. An appeal was made to the Congress seeking authority for the President to appoint a Con- gressional Commission to consider the entire subject of our financial organization and make recommendation for improvement therein. President McKinley sent a special message to Congress in support of your Committee’s appeal, and the members of the Committee are pleased, in justice to the President, to report that the President’s sup- port was full, earnest, and steadfast, of the Committee’s effort to secure legislation for the establishment of a Congressional Commission. Representative C. W. Stone, of Pennsylvania, introduced a bill into the House in response to the President’s message, which was passed, but the measure was not successful in the Senate. Congress adjourn- ing without action, the Executive Committee proceeded further in its prescribed duty and chose a Commission of eleven members to make a thorough investigation of the monetary affairs and needs of the country in all relations and aspects, and to make appropriate sugges- tions as to any evils found to exist and the remedies therefor. The members of the Commission, at great sacrifice of their time and at serious loss to their private business affairs, patriotically and faithfully labored to accomplish the task imposed upon them. x See pp. 20-59. 2 See pp. 50-74. HISTORY OF THE MOVEMENT 15 The Executive Committee is pleased to report to the Convention that the Commission has concluded its labor and submitted a report and plan, together with a memorandum bill, which embodies the recommendations suggested in its plan. Congressman Overstreet, of Indiana, has introduced into Congress in substance the bill recommended by the Commission, and it has been referred to the Committee on Banking and Currency for investi- gation and report. _ Copies of the report of the Commission, its memorandum bill, the bill introduced by Congressman Overstreet, and the report of the first meeting, can be found in the chairs. The members of the Executive Committee desire to express their deep sense of gratitude for the unlimited encouragement and support they have received at the hands of their fellow delegates in the con- vention and at the hands of the general public, and now that the duties delegated to them have been performed, pray that they be further instructed or discharged from service. The Committee on Resolutions presented, and the delegates in convention, without dissent, adopted, the following resolu- tions, endorsing the report and plan of the Commission: Resolved, That this Convention recognizes its obligations to the Executive Committee selected under the resolutions of January 15, 1897, for the thorough and able manner in which they have discharged the duties devolved upon them by those resolutions. They deserve the highest commendation for their determined effort to obtain an Act of Congress providing for the selection of a Monetary Commission, to which the duty should be entrusted of devis- ing the best means of securing a wise and stable currency system through legislative enactment. As the Congress did not adopt a law for the appointment of such a Commission, the Executive Committee, in pursuance of the authority conferred by the Convention, proceeded to make such a selection, consisting of men from different sections of the country, and from dif- ferent walks in life, who were well fitted by their ability, their experi- ence, and their high character, to deal with this most important subject. The Convention recognizes with gratification the wise and able manner in which the Monetary Commission have dealt with the sub- ject, and find in their work the elements of a system calculated to be of inestimable benefit to the country. We most cordially approve of the plan of currency reform sub- mitted by the Monetary Commission, in the belief that if enacted into law it would accomplish, as far as possible, the results contemplated by the Commission, as set out in the following propositions : 1. To remove, at once and forever, all doubt as to what the stan- dard of value in the United States is, and is to be. 16 REPORT OF THE MONETARY COMMISSION 2. To establish the credit of the United States at the highest point among the nations of the world. ; 3. To eliminate from our currency system those features which rea- son and experience show to be elements of weakness and danger. 4. To provide a paper currency convertible into gold and equal to it in value at all times and places, in which, with a volume adequate to the general and usual needs of business, there shall be combined a quality of growth and elasticity, through which it will adjust itself automatically and promptly to all variations of demand, whether sud- den or gradual; and which shall distribute itself throughout the coun- try as the wants of different sections may require. 5. To so utilize the existing silver dollars as to maintain their parity with gold without imposing undue burdens on the Treasury. ¥ 6. To avoid any injurious contraction of the currency. 7. To avoid the issue of interest-bearing bonds, except in case of an unlooked-for emergency; but to confer the power to issue bonds when necessary for the preservation of the credit of the government. 8. To accomplish these ends by a plan which would lead from our present confused and uncertain situation by gradual and pro- gressive steps, without shock or violent change, to a monetary system which will be thoroughly safe and good, and capable of growth to any extent that the country may require. These declarations, and the plan which follows, are honest in pur- pose; they are sound in business principle; they are adapted to the needs and wants of the whole people; they are wisely safeguarded against undue contraction of the currency on the one hand, or its perilous expansion on the other. We believe their enactment into law would stimulate hopefulness, inspire confidence, and conduce to a sense of safety that would be the forerunner of unexampled national growth and prosperity. Approving of the expressed purposes of the Commission, and of its plan, we do most earnestly and cordially commend it to our fellow- citizens as worthy of their approval and adoption, and we urge upon the Congress of the United States that the principles embodied by the Commission in their report should be enacted into law, with the belief and expectation that the effect would be to secure a solid, sub- stantial, and stable financial system that would redound to the credit of the country and insure a state of prosperity that cannot be achieved unless there is a system of finance the integrity and adaptability of which cannot be questioned or gainsaid. That in the opinion of this Convention it is the duty of every citi- zen to urge upon his representative in Congress the adoption of such legal enactments as will carry into effect the recommendations of the Monetary Commission. Existing conditions are propitious for effort in the direction of currency reform. General and able discussion has induced earnest and sober thought and turned the minds of men from fallacies and HISTORY OF THE MOVEMENT 7 delusions to that which was sound and wholesome. The high prices of many of our agricultural and manufacturing products, the inflowing of gold, and the improvement in business have gone far toward allaying that feeling of discontent and unrest which was so disturbing and so full of menace but a short time ago. Never before has public senti- ment been in so healthy a state upon this subject as is now becoming generally prevalent. The time has now come when the prospects for the establishment of the gold standard upon a firm and enduring basis are brightening and encouraging. The people want a note currency which shall be as good as gold. This movement proposes to bring about that result. The people want “a volume of currency adequate to the general and usual needs of business” “with a quality of growth and elasticity through which it will adjust itself automatically and promptly to’ ail variations of demand, whether sudden or gradual.” These ends are not only within the scope of what is contemplated, but are the direct objects intended to be gained by the plan of the Monetary Commission. The people of the Western and Southern states wish the note issues so distributed that the scarcity of currency will no longer ’ hamper and distress them in their business operations. A method is proposed whereby their wants can be supplied, and their just demands can be complied with. We appeal to them—we appeal to all patriotic citizens to unite with us in an earnest and determined effort to secure from Congress such legislation as will wisely but surely eventuate in bringing about sound financial methods, and in building up and establishing confi- dence, security, and safety in business transactions and in the owner- ship and value of property. That the Executive Committee be continued, with power and authority to add to their number and to fill any vacancies which may occur, and also with power and authority to adopt such measures for procuring the needed legislation from Congress as they, in their judg- ment, may deem advisable and expedient. _* The Executive Committee offered, and the delegates unani- mously adopted, the following expression appreciative of the services of the Commissioners : This resolution of the Indianapolis Monetary Convention, of Janu- ary 1898, of representatives of the business men and business interests of the United States, chosen by the Boards of Trade and other repre- sentative commercial organizations, makes this public testimony and record of the very earnest appreciation and gratitude, which all the business men whom we represent, and this Convention and each of its members feel, and by this resolution witness, to Hon. George F. Edmunds, George E. Leighton, ‘T. G. Bush, W. B. Dean, Charles S. 18 REPORT OF THE MONETARY COMMISSION Fairchild, Stuyvesant Fish, J. W. Fries, Louis A. Garnett, J. Laurence Laughlin, C. Stuart Patterson, and Robert S. Taylor, members of the Monetary Commission chosen under the resolution of the Indianapolis Convention of 1897, for the splendid usefulness to our country and to mankind of their report upon the conditions, faults, and dangers, of our present laws, regulations and customs governing the currency, banking, and standard of value of the United States of America, and their plan for the changes recommended. They have given to their country, without any compensation or reward, except the consciousness of duty well and faithfully done, many months of arduous and priceless work, investigation, thought and study, at great sacrifice by each of them, in absence from home and invaluable time needed for their own serious and important duties, and we declare our earnest conviction that there has never been in the history of our country a body of men more truly representative of all that is best in American life, manhood, patriotism, and intelligence, nor one that undertook, and fulfilled a great task for the general welfare in a spirit of more unselfish devotion to our country. Their report and plan which so fully cover the wide and compli- cated field of the duties entrust2d to them is such a model of brevity, clearness, wisdom, and practical common sense, and is so rich in great, wise and just recommendation, rising so far above all personal prefer- ences, limitations and theories in the wide scope of its beneficent plans and purposes, that we feel it due to all whom we represent and to our- selves, even as it is to them, to make this public acknowledgment of our profound appreciation and never ceasing gratitude. Resolved, That a copy of this resolution, suitably engrossed and bound, be sent to each member of the Commission, as a token of this Convention’s sense of their country’s great debt to them and to each of them. The Commission wish to record here their high appreciation of the intelligent services of the Assistants to the Commission, Messrs. L. Carroll Root and H. Parker Willis, in the preparation of this Report. PRELIMINARY REPORT 19 THE MONETARY COMMISSION OF THE INDIANAPOLIS CONVENTION OF THE BOARDS OF TRADE, CHAMBERS OF COMMERCE, COMMERCIAL CLUBS, AND OTHER SIMILAR COMMERCIAL BODIES OF THE UNITED STATES.°* GEORGE F. EDMUNDS, VERMoNnNT, Chairman. GEORGE E,. LEIGHTON, Missourt, Vice-Chairman. T. G. BUSH, ALABAMA. W. B. DEAN, MINNESOTA. CHARLES S. FAIRCHILD, New York. STUYVESANT FISH, NEw York. J. W. FRIES, NortTH CAROLINA. LOUIS A. GARNETT, CALIFoRNIA. J. LAURENCE LAUGHLIN, Ixtinois. C. STUART PATTERSON, PENNSYLVANIA. ROBERT S. TAYLOR, Inprana. L. Carrotit Root, i Assistants to the Commission, H, Parker WILLIs, 20 PRELIMINARY REPORT To THE EXECUTIVE COMMITTEE OF THE INDIANAPOLIS MONETARY CONVENTION: The Commission appointed by you under the resolutions adopted by the Indianapolis Monetary Convention on 15th Jan- uary, 1897, with a request ‘to make a thorough investigation of the monetary affairs and needs of the country in all relations and aspects, and to make proper suggestions as to the evils found to exist and the remedies therefor,” respectfully reports that the members thereof met at Washington on the 22d day of September, 1897, and organized by the election of George F. Edmunds, as chairman, and George E. Leighton, as vice chair- man. The resolutions adopted by the Indianapolis Monetary Con- vention declare ‘‘ that it has become absolutely necessary that a consistent, straightforward, and deliberately-planned monetary system shall be inaugurated, the fundamental basis of which should be: first, that the present gold standard should be maintained; second, that steps should be taken to insure the ultimate retirement of all classes of United States notes by a gradual and steady process, and so as to avoid injurious con- traction of the currency or disturbance of the business interests of the country, and that until such retirement provision should be made for a separation of the revenue and note-issue depart- ments of the treasury; third, that a banking system be provided which should furnish credit facilities to every portion of the country and a safe and elastic circulation, and especially with a view of securing such a distribution of the loanable capital of the country as will tend to equalize the rates of interest in all parts thereof.” We have accepted those principles as the basis of our action, not only because they are the instructions of the body of citizens at 22 REPORT OF THE MONETARY COMMISSION by whom we have been appointed, but also because they meet the approval of our judgment. We have also sought and received the counsel of many of our fellow citizens in all parts of the country. Their com- munications, while differing in some respects, have, upon the more important points, presented a concurrence of opinion which has been an invaluable aid in the formation of our con- clusions. We submit, for the reasons hereinafter stated, a plan of cur- rency reform, in the hope that it will, if enacted into law, accom- plish, so far as possible, these results: 1. To remove, at once and forever, all doubt as to what the standard of value in the United States is, and is to be. 2. To establish the credit of the United States at the highest point among the nations of the world. 3. To eliminate from our currency system those features which reason and experience show to be elements of weakness and danger. 4. To provide a paper currency convertible into gold and equal to it in value at all times and places, in which, with a volume adequate to the general and usual needs of business, there shall be combined a quality of growth and elasticity, through which it will adjust itself automatically and promptly to all variations of demand, whether sudden or gradual; and which shall distribute itself throughout the country as the wants of different sections may require. 5. To so utilize the existing silver dollars as to maintain their parity with gold without imposing undue burdens on the Treasury. 6. To avoid any injurious contraction of the currency. 7. To avoid the issue of interest-bearing bonds, except in case of unlooked-for emergency; but to confer the power to issue bonds when necessary for the preservation of the credit of the government. 8. To accomplish these ends by a plan which would lead from our present confused and uncertain situation by gradual and progressive steps, without shock or violent change, to a PRELIMINARY REPORT 23 monetary system which will be thoroughly safe and good, and capable of growth to any extent that the country may require. We cannot, within the limits of this preliminary report, go at length into the reasons which have led us to all the conclu- sions here expressed. A statement of those which relate to the more important points must suffice.- Later a fuller and final report will be presented. THE FACTS AS TO THE CURRENCY. The people of the United States have ten different forms of currency: gold coins, silver dollars, subsidiary silver coins, minor coins, gold certificates, silver certificates, United States notes, currency certificates, Treasury notes of 1890, and national bank notes. The respective qualities of each, the amounts out- standing, the amounts in the Treasury, the amounts in circulation, and the respective denominations of the paper currency, were, on Ist November, 1897, as follows: 1. GoLpD coins of the denominations of $20, $10, $5, and $2.50, weighing 25.8 grains to the dollar and .goo fine. They are a “ legal tender in all payments at their nominal value when not below the standard weight and limit of tolerance provided by law for the single piece, and when reduced in weight below such standard and tolerance, a legal tender at valuation in pro- portion to their actual weight ;” receivable for all public dues, and formerly exchangeable for gold certificates. Gold bullion is admitted to free coinage. The Treasury estimates that the stock of gold in the country is $729,661,110, of which $153,573,148 (in addition to $36,814,109 held against outstanding gold cer- tificates) are held by the Treasurer, and $195,895,107 are held by the national banks. 2. STANDARD SILVER DOLLars, each containing 412.5 grains of standard silver .goo fine, coined for government account, a ‘legal tender at their nominal value for all debts and dues, public and private, except where otherwise expressly stipulated in the contract;” receivable for all governmental dues, and exchangeable for silver certificates. From 1793 to 1873, the Mint coined silver dollars to the 24 REPORT OF THE MONETARY COMMISSION amount of $8,031,238. From 1874 to 1878, none were coined. The act of 28th February, 1878, required not less than two million nor more than four million dollars worth of bullion to be purchased monthly and coined into standard silver dollars. The act of 7th August, 1882, directs the Secretary of the Treasury ‘‘to transport, -free of charge, silver coins when requested to do so, provided that an equal amount in coin or cur- rency shall have been deposited in the Treasury by the appli- cant.” The act passed on I1gth February, 1887, which became a law without President Cleveland’s approval, on 3d March, 1887, directed that ‘‘trade dollars” received at the Treasury should be coined into standard dollars. Theact of 14th July, 1890, required four million five hundred thousand ounces of fine silver bullion to be purchased monthly and Treasury notes to be issued in pay- ment therefor. The act of 1st November, 1893, repealed the purchasing clause of the act of 14th July, 1890. Under the act of 28th February, 1878, the government pur- chased 291,272,018 ounces of silver at a cost of $308,279,260. Under the act of 14th July, 1890, the government purchased 168,674,682 ounces at an average price per fine ounce of $0.9244, costing $155,931,002. The government coined to the 1st of November, 1897, $452,713,792, of which $392,715,014 are in the Treasury, and $60,196,778 are in circulation. The free transportation of the silver dollar has cost $1,064,106. The government now holds 115,361,079.54 ounces of silver bullion, which cost $104,853,851.55, and which, at the price of silver on 3d November, 1897, are worth $65,900,016.67. As against the 392,517,014 silver dollars now in the Treasury there are out- standing silver certificates to the amount of $372,838,919, leaving $19,678,095 in the Treasury uncovered by certificates. As the silver bullion now in the Treasury and purchased under the act of 1890 cost $103,957,026.25, and there are out- standing Treasury notes of 1890 to the amount of $109,313,280, silver dollars to the amount of $5,356,254 must be held as against these Treasury notes of 1890, and this amount deducted from the amount of silver dollars uncovered by silver certificates PRELIMINARY REPORKT 25 ($19,678,095) leaves as the amount of silver dollars uncovered by either silver certificates or Treasury notes of 1890, and subject to disposal by the Treasury, $14,321,841. The act of 14th July, 1890, declared it to be ‘‘the established policy of the United States to maintain the two metals ona parity with each other upon the present legal ratio, or such ratio as may be provided by law.” The act of 1st November, 1893, declared it “to be the policy of the United States to continue the use of both gold and silver as standard money and to coin both gold and silver into money of equal intrinsic and exchangeable value, such equality to be secured through international agreement, or by such safeguards of legislation as will insure the maintenance of the parity in value of the coins of the two metals, and the equal power of every dollar at all times in the markets and in the payment of debts.” 3. SUBSIDIARY SILVER, coined for government account in denominations of 50, 25, and Io cents, .goo fine, containing 385.8 grains’ to the dollar; ‘‘a legal tender in all sums not exceeding $10 in full payment of all dues, public and private ;” receivable for governmental dues to $10; and exchangeable for lawful money at the office of the Treasurer or any Assistant Treasurer of the United States in sums of $20 or any multiple thereof. The general stock of subsidiary silver amounts to $75,414,007, of which $11,981,078 are in the Treasury, and $63,432,929 are in circulation. 4. Minor Corns, coined on government account in denomina- tions of 5 cents and I cent; a “legal tender at their nominal value for any amount not exceeding 25 cents in any one pay- ment;” receivable to the amount of 25 cents for all govern- mental dues; and redeemable in lawful money at the office of the Treasurer and the several Assistant Treasurers and deposi- tories of the United States when presented in sums of not less than $20. 5. Gotp CERTIFICATES, issued under the acts of March 3, 1863, and July 12, 1882, for gold coin deposited in the Treasury, in denominations of $10,000, $5000, $1000, $500, $100, $50, 725 grams, 26 REPORT OF THE MONETARY COMMISSION and $20; nota legal tender; ‘“‘receivable for customs, taxes, and all public dues,” and redeemable in gold at the Treasury or any sub-treasury. Certificates to the amount of $38,348,169 are outstanding, of which $1,534,060 are in the Treasury, and $36,814,109 are in circulation. 6. SILVER CERTIFICATES, issued against standard silver dollars deposited, in denominations of $1000, $500, $100, $50, $20, $5, $2 and $1; not a legal tender; receivable for customs, taxes, and all public dues; exchangeable for standard silver dollars (or smaller coin); andredeemable in standard silver dollars. There are outstanding silver certificates to the amount of $384,170,504, of which $11,331,585 are in the Treasury and $372,838,g19 are in circulation. 7. TREASURY NotTEs, issued under the act of July 14, 1890, in payment for silver bullion; a “legal tender for all debts pub- lic and private, except where otherwise expressly stipulated in the contract ;”’ dues and ‘redeemable on demand in coin” at the office of the Treasurer or any Assistant Treasurer of the United States. There have been issued $155,931,002, of which $46,617,722 have been redeemed in silver and canceled; $7,553,325 are in the Treasury and $101,759,955 are in circulation. 8. UnitEp States Notes, issued under the acts of February 25, 1862, July 11, 1862, and March 3, 1863, in denominations of $1, $2, $5, $10, $20, 50, #100, £500, $1000, #5000, and $10,000; a “legal tender in payment of all debts, public and private, within the United States, except for duties on imports and interest on the public debt ;” redeemed when presented since Ist January, 1879, in gold coin at the subtreasuries in New York and San Francisco, and reissued. The highest amount of these notes outstanding at any time was on January 3, 1864, when it reached $449,338,902. By the Public Credit Act of March 18, 1869, ‘‘the United States solemnly pledges its faith to make provision at the earliest practicable period for the redemption of the Urited States notes in coin.” The Resump- tion Act of January 14, 1875, authorized the use of surplus receivable for customs, taxes, and all public PRELIMINARY REPORT 25 revenues and the issue of bonds for their redemption. The act of May 31, 1878, prohibited their further cancellation or retire- ment, and directed the reissue of such as might be received or redeemed by the Treasury. The amount outstanding has there- fore since remained at $346,681,016, of which $87,684,018 are in the Treasury, $48,625,000 of these being held against out- standing currency certificates, and $258,996,998 are in circula- tion. The aggregate amount outstanding of United States notes, Treasury notes of 1890, and silver dollars is $908,708,088, of which $61,274,184 are now inthe Treasury, but liable to reissue,’ and $842,077,650 are in circulation. As against this large amount of that which is a credit cur- rency, aside from the value of the silver bullion and dollars in the Treasury, the Treasury now holds $153,573,148 in gold coin and bullion, after deducting the amount of the gold certificates. g. CuRRENCY CERTIFICATES, issued under the act of June 8, 1872, in denominations of $10,000, upon deposit of United States notes, payable to order, and not a legal tender, nor receivable in exchange for anything other than legal-tender notes. $48,625,000 are outstanding, of which $340,000 are in the Treasury, and $48,285,000 are in circulation. 10. NATIONAL Bank Notes, issued by the national banks of the United States in accordance with the act of June 3, 1864, to the extent of go per cent. of the par of government bonds deposited by such banks with the Treasury ; not a legal tender ; receivable at par ‘‘in all parts of the United States in paymentcf taxes, excises, public lands and all other dues to the United States except duties on imports; and also for all salaries and other debts and demands owing by the United States to individuals, corporations, and associations within the United States, except interest on the public debt and in redemption of the national currency ;” receivable also by every national banking association for any debt or liability to it, and redeemable at the Treasury. The national bank notes outstanding are $230,132,275, of * Silver dollars to the amount of $5,356,254 are also in the Treasury, to be issued only upon the redemption and cancellation of an equal amount of Treasury notes, 28 REPORT OF THE MONETARY COMMISSION which $4,998,012 are in the Treasury, and $225,134,263 are in circulation. The national banks were organized under the act of 25th February, 1863, and its supplements. They were authorized to issue a circulation based upon bonds, in order that there might thereby be created a demand for the bonds of the United States, On 2d July, 1866, there were 1634 banks; on 26th December, 1873, 1976; on 2d October, 1890, 3540; on 9th December, 1892, 3773, and on sth October, 1897, 3610. The maximum capital was $689,698,017 on gth December, 1892. The maximum circulation was on 26th December, 1873, $341,320,256, and the minimum cir- culation on 2d October, 1890, $122,928,084. Up to 1892, the tendency was towards increase of capital. Since then the ten- dency has been in the direction of a decreasing capitalization. From 1873 to 1890, there was a marked decrease in circulation, with occasional fluctuations; but since 1890 there has been some increase of circulation, with no prospect of any material increase under the existing system. On 5th October, 1897, there were 3610 banks, with an out- standing note issue of $230,132,275 (of which $4,998,012 were held in the Treasury), with a capital stock of $631,488,095, with an aggregate capital, surplus, and undivided profits of $966,- 240,095, with deposits of £1,869,491,310, and with investments in discounted paper (rediscounts deducted) of $2,043,803,392, in United States bonds of $277,235,920, in other stocks and securities of $208,831,563, and in lawful money of $388,882,631, of which $195,895,107 are in gold coin. The 5 per cent. redemption fund held by the Treasury now amounts to $10,021,- 689. From the organization of the system, in 1863, to 30th June, 1897, the national banks have paid in taxes to the United States $150,207,339.44; and the United States has also made a profit of $2,826,466 from that amount paid by the banks to redeem circulation which has not been presented. THE DEFECTS OF THE SYSTEM. The defects of the existing system are: First, The vast amount of government credit currency with- PRELIMINARY REPORT 29 out a certain and adequate provision for its redemption, and the consequent diminution of public confidence in the continued maintenance of the gold standard. is Second. The continuance in circulation of government prom- ises to pay, which, when made a legal tender, constitute a forced loan, which are secured only by such resources as the exercise of the taxing power can render available, and which are payable only at the will of the debtor. Third. The failure to provide the means for a gradual and sufficient increase of the volume of the currency to meet the needs of an increasing population and an enlarging commerce. Fourth. The want of a natural outflow and inflow of the cur- rency when and as, and only when and as, the agricultural, manu- facturing, and commercial interests of the country require, at a given time, either a greater or a less quantity of currency in cir- culation. Fifth. The failure to secure such a distribution of the loan- able capital of the country as will tend to equalize the rates of interest in all its parts. Sixth. The confusion of the fiscal functions of the Treasury as the receiver of the public revenue and the disburser thereof under congressional appropriations with its issue and redemption functions in exchanging and redeeming the currrency. Seventh. The circulation of different forms of government currency having different qualities as to legal tender and receiv- ability for government dues. Eighth. The circulation of silver dollars of full legal-tender quality whose nominal value as coins so largely exceeds their value as bullion, that they offer tempting inducements to success- ful counterfeiting. Ninth. The circulation of a national bank currency based upon government bonds, presupposing a continuing issue of those bonds, diminishing the loanable funds of the banks, and, by reason of their bond basis, incapable of increasing in volume with a temporary demand for more currency, and of decreasing with the cessation of that demand. Lb 30 REPORT OF THE MONETARY COMMISSION THE STANDARD. The most serious evil affecting our present monetary system is the threatened degradation of its standard. The story is familiar, but it will be useful to recall it briefly in this connection. The close of the Civil War found the people of the United States in the possession of a depreciated lega]-tender paper currency, with its inevitable accompaniment of inflated prices. To return from such a condition to one of sound money and normal prices is always a painful process, and when the government began that process, under Secretary McCulloch, in 1866, there was an outcry against it, and it was suspended. From a remonstrance against the payment of the demand obligations of the Treasury at that time the movement grew to an opposition to the payment of them at amy time, and finally to a demand for the issue of more of them, and that, not in the form of promises to pay, but of fiat paper dollars. The number of persons who were carried away by these delusions was very great. The political struggle which ensued was prolonged and intense, and the victory which the defenders of sound money achieved in the passage of the resumption law of 1875 was a close one. That victory ought to have settled all disturbing questions in relation to the monetary policy of the United States, and would have done so, so far as can now be seen, if it had not been for the fall in the value of silver, which began while the contest was going on. From 1792 to 1873 the legal standard of value in the United States was the double one of gold and silver at pre. scribed ratios. By the coinage act of 1873 the silver dollar, which was then worth more than the gold dollar, and which no one could foresee would ever be worth less, and of which very few were in existence, was dropped from the coinage, leaving gold as the only full legal-tender coined money. Soon after the passage of this law, the value of silver began to decline. The friends of cheap money saw their opportunity and lost no time in improving it. The clamor for the restoration of the sixteen-to-one silver dollar to free coinage began. This was a far more plausible, and therefore more dangerous, move- bb ey PRELIMINARY REPORT 31 ment than the fiat paper money scheme. Silver had a real value. At the beginning of the agitation that’ value was not greatly less than sixteen of silver to one of gold in weight. It was claimed that its admission to free coinage would increase its value to the full measure of that ratio. Patriotic sentiment was invoked in its favor. It was said to be the money of the fathers and the Constitution. To this was added the appeal to class prejudice. Gold was said to be the money of the rich; silver of the poor. Gold was said to be increasing in value, and so depressing all prices, and increasing the burden of all debts to the unjust advantage of all creditors. The advocates of free silver professed to be the champions of the farmer, the mechanic and the laborer against the aggressions of the capitalist, the banker, and the corporation. Such appeals come to men in debt, out of employment, and downcast in spirits with great seductive force. Evidence enough of that fact is on record in the election returns of 1896. The pertinence of this retrospect is the proof which it affords of the fact that so large a portion of the people of the United States have no conception of the nature or importance of a money standard. In such a country as ours the legal monetary standard is whatever a majority, or a plurality, it may be, of the voters say it shall be. It is therefore of the utmost importance that the standard shall not only be distinctly declared in the law but clearly fixed in the minds of the people as the first and indispensable element of a sound monetary system. All history is evidence that the people who suffer most from a degradation of the standard are not the rich and powerful, but the poor and helpless. Compared with this danger, all existing evils of mere kind or quantity of our present money are relatively only inconveniences. The first need of the situation it to fortify the standard. There are some considerations as to the standard which ought to commend themselves to the judgment of the country. There must be some standard of value. The standard must have a market value as a commodity independently of any govern- mental fiat and of all legal-tender laws; it must be durable; it 32 REPORT OF THE MONETARY COMMISSION must be homogenous; it must have a maximum of value pro- portioned to its bulk; it must have, as a commodity, as stable a market value as possible, and in order to secure the stability of that market value, the relation between its supply and demand must be as constant as possible. Gold alone fulfills these conditions. The civilized world has, therefore, determined that the standard shall be gold. No government, however powerful, can in fact reverse that determination, or, without injury to the interests of all its people, attempt to establish any other standard of value. There isa clear distinction between the functions of money as a standard of value and as a medium of exchange. While that money which is the standard of value will always serve also as a medium of exchange, yet other forms of currency of inferior market value can in no sense be a satisfactory standard, and can be a suitable medium of exchange only when the convertibility at par into the standard money is assured. Any possible cur- rency is, therefore, of one of two kinds. The first kind is that which has been adopted as the standard of value. The second kind is that which is, without reference to its market value as a commodity, receivable at par, because convertible at par into the standard money. Today gold is the only currency of the first kind. United States notes, national bank notes, silver dollars, subsidiary silver, and minor coins, are currency of the second kind. The face value of the silver dollars, the subsidiary silver, and the minor coins more or less largely exceeds their bullion value, and they differ from the note-issues only in the fact that the material of which they are made has some market value as bullion. Under modern conditions of business, purchases, sales, loans, the discharge of debts, and even payments of wages are effected in great part by drafts, checks, or transfers of credits. While the work which the money, which is the standard, actually performs in the exchanges of the country is relatively small, yet every one of those exchanges is based on that standard. Ii all the money of the country is convertible at par into gold, there may then be whatever, and as much, of the representative forms of currency as the convenience of the people may require. PRELIMINARY REPORT 33 ‘On the other hand, if the standard of value be lowered, there necessarily follows aloss of public confidence, a lessened use of credit and of credit forms of currency, and a consequent diminu- tion of the effectiveness of the currency. The gold standard, therefore, does not mean gold monometal- ism, and it necessarily results, not in contraction, but in the greatest possible expansion of the currency within the bounds of safety. As gold derives no value from any legal-tender law, nor any value from coinage at the mint beyond “the ascertainment that its weight and purity are what the law requires,” and the certi- fying by the government’s stamp that it possesses those qualities, it is, and it ought to continue to be, admitted to free coinage. On the other hand, silver, nickel, and copper should be coined only upon government account, into coins of limited legal tender quality; should be issued from the mint only in exchange for gold at par; and should be re-exchangeable at the Treasury in convenient multiples for gold coin at par. Under this system there could be no arbitrary contraction or expansion of the coin currency, nor any tampering with the standard of value, and the people would then carry to their credit in the ledger of the Treasury Department the profits upon the coinage of silver, nickel, and copper. Many of our fellow citizens have hoped in all sincerity that the problem of the standard would be solved by international bimetallism. An earnest effort has been made to realize that hope, but it must now be abandoned. The only alternatives, therefore, are the continued maintenance of the existing gold standard, or the adoption of the silver standard. If the latter alternative be taken, the obligations of the United States, of the states, of all municipalities, of all private corporations, and all of individuals, the receipts of income from every source, the proceeds of policies of insurance, the deposits in banks and saving funds, and the wages of labor, will then be payable in a debased and depreciated currency ; and individual and corporate bankruptcy, and, worst of all, national dishonor, will follow. If the former alternative be taken, and the necessary means be adopted to 34 REPORT OF THE MONETARY COMMISSION secure the stability of the gold standard, the credit of the country will be established; the national debt can be refunded at lower interest rates; the surplus capital of the world will come here to find profitable investment ; and our country will enjoy the prosperity that follows a currency system based upon a stable standard of value. The means necessary to establish and preserve popular con- fidence in the continued maintenance of the gold standard are: 1. An explicit legislative definition of the gold standard, and a pledge that it will be maintained. 2. A requirement that all obligations, public and private, unless otherwise stipulated in the contract, shall be payable in conformity with that standard. 3. The adoption of a plan for the gradual retirement of the outstanding note-issues of the government. As the gold deposited for certificates cannot be used by the government, and as the issue of gold certificates is of no advan- tage to the government or to the people, there does not seem to be any reason for their continued issue. THE SILVER CURRENCY. The silver certificates, being the expressed representatives, dollar for dollar, of silver dollars deposited, ought to continue to be exchangeable only for silver dollars. The face value of the subsidiary silver coins more largely exceeds their bullion value than is wise even in the case of token coins, They might be called in and recoined; but the expense and inconvenience of that operation are such as to render its postponement advisable. As the owners ofa large stock of silver bullion, silver dollars, and subsidiary silver, the people of the United States are directly interested in the continued use of silver as currency, provided that the silver can continue to be maintained at par with gold. The silver dollar is by reason of its size and weight an incon- venient coin to carry about the person, or to use in change. Most people, therefore, do not desire to use silver dollars as currency, if they can have, as representatives of the coin dollars, notes in PRELIMINARY REPORT 35 denominations of $1, $2 and $5. Even with the inducement of free transportation from the Treasury, it has never been possible to force into circulation at any one time an amount of silver dollars exceeding $67,000,000, and there are now outstanding only $60,196,778, of which at least $10,000,000 are held by the national and state banks. On the other hand, there are in cir- culation $354,355,031 of notes of the denominations of $1, $2 and $5, of which $154,965,473 are silver certificates and $199,— 389,558 are United States notes, Treasury notes of 1890, and national bank notes. Of the total amount of silver certificates outstanding, $154,965,473 are, as before stated, in denominations of $1, $2 and $5, and $229,205,031 are in larger denominations. If, therefore, the United States notes, Treasury notes of 18g0, and national bank notes of the denominations of $1, $2 and £5 be retired, their places can be taken by a further issue of silver certificates to the amount of $199,389,558 in denominations of $1, $2 and $5, and an equivalent amount of silver certificates of larger denomination be retired, leaving of the $229,205,031 now outstanding in larger denominations $29,815,473 to be redeemed in silver dollars when presented for redemption. If, also, the silver dollars now in circulation and amounting to $60,196,778 should be deposited in the Treasury, the balance of $29,815,473 of silver certificates in denominations exceeding $5 could be replaced by an issue of silver certificates in denominations of $1, $2 and $5, and there might, without any expansion of the present outstanding circulation, be a further issue of silver certificates in denominations of $1, $2 and $5, amounting to $30,381,305 based upon the silver dollars so deposited. The place of the retired United States notes, Treasury notes of 1890 and national bank notes of small denominations would be taken by an issue of notes of large denominations of the same kinds, so long as the United States notes and Treasury notes of 1890 are unredeemed. The effect of this plan will be that the currency of the country of all denominations below $10 will be silver coin, and silver certificates based upon silver dollars held in the Treasury, sup- plemented by gold coins of the denominations of $2.50 and $5. The government has received the full face value for all the 36 REPORT OF THE MONETARY COMMISSION silver dollars which have been put in circulation either in kind or by means of representative certificates. The silver coins differ from the note issues only in the fact that the material of which they are made has some market value as bullion. They are, nevertheless, as justly obligations of the government and as properly exchangeable at par for gold as the United States notes. A gold reserve must, therefore, be provided for such exchange, but as the retirement of the United States notes, Treasury notes of 1890, and national bank notes of denominations less than $10 will leave the silver dollar, the silver certificates in denomina- tions of $1, $2 and $5, the subsidiary silver, the minor coins, and the gold coins of the denominations of $2.50 and $5 as the only currency for small transactions, it is probable that the trade of the country will keep the silver and its representatives in circula- tion, and prevent the coming in of any considerable quantity of that currency. It is also to be observed that when popular confidence shall have been restored as to the maintenance of the gold standard and the security of our currency system, there will be no general desire to exchange silver dollars or silver certifi- cates for gold, for the silver currency will then be, beyond ques- tion, as good as gold. The Treasury has an asset in its silver bullion not held against outstanding certificates, which may be utilized by selling it from time to time, as the German government has done with its sur- plus silver. Of course, such sales should be carefully made in such quantities as not to unduly depress the market. for silver bullion. It is, therefore, suggested that authority be given to the Secretary of the Treasury to make such sales in his dis- cretion. It may be well to consider whether the sum of £45 2,713,792 of silver dollar pieces, with seigniorage of over 50 per cent., which remain as the evidence of a serious danger to the existing standard, is not too large to be permanently retained in our cur- rency; and if this should prove to be the case, whether a suf- ficient number of these silver dollars should not be ultimately, although not immediately, withdrawn and sold as bullion. It is an essential part of a sound system of finance, that the PRELIMINARY REPORT 37 government should raise by taxation a revenue adequate to its necessary expenditures. But as the revenues are sometimes defi- cient, it is advisable that power be given to the Treasury to sell short-term bonds to supply such deficiency. Under existing legislation only long-term bonds can be sold; and, if the govern- ment comes into possession of a surplus, such bonds cannot be retired save by purchasing them at a premium. On the other hand, short-term bonds can, under a securely-established cur- rency system, be negotiated at low interest rates; can be, if necessary, extended at maturity, and can be retired by purchase in advance of maturity without a heavy loss in payment of pre- mium. For similar reasons it is suggested that long-term bonds should contain a reserved option to the government of retire- ment. It is to the interest of the government and of the people that all the people should have an equal opportunity of investing their savings in the obligations of the government when issued. As the mass of the people have not the necessary facilities for the safe custody of bonds, it is suggested that a system be adopted of inscription on the books of the Treasury, instead of bonds, similar to that which has long prevailed in the case of the English consols and the French rentes. Under this system it will be possible to place government loans by a really popular subscription. THE DEMAND OBLIGATIONS OF THE GOVERNMENT. It is a part of the plan submitted that the demand obligations of the government shall be put in course of retirement by a proc- ess which shall be gradual in its operation as respects the cur- rent money and business of the country, but which will lead ultimately to the substitution of other forms of money in their place. The demand obligations, properly so called, consist of the United States notes or “ greenbacks,”’ amounting to $346,- 681,016, and the Treasury notes of 1890, amounting to $109,- 313,280. While the former are not in terms payable in gold, and the latter are by law payable in gold or silver, at the discre- tion of the Secretary of the Treasury, it is obviously necessary, 38 REPORT OF THE MONETARY COMMISSION in order to keep good the pledge of the government to main- tain the parity of the two metals as coined, to pay all its notes in gold when gold is demanded by the holder. So that, ina practical sense, the note obligations of the government payable in gold on demand must be reckoned at the sum of the green- backs and the coin notes, that is, $455,994,296. The measures recommended in relation to these obligations may be briefly summarized as follows: 1. The separation of the note issuing and redeeming opera- tions of the Treasury from its ordinary fiscal operations by the creation of a Division of Issue and Redemption, and the transfer to it of the gold reserve and other resources held against obli- gations; the government notes to be paid in gold coin on demand through that division. 2. The reserve to be maintained from revenue when ade- quate, and by sale of bonds when necessary; the proceeds of such sales to be used for that specific purpose, and no other. 3. Notes paid to be canceled as paid, up to the amount of $50,000,000; the cancellation thereafter for five years not to exceed the increase of bank notes. After five years the notes paid to be retired at a rate not exceeding 20 per cent. per annum of the amount then outstanding; at the end of ten years the legal-tender quality of the notes then outstanding to cease 4. No note, once paid, to be reissued otherwise than in exchange for gold, except that, in case of an excessive accu mulation of redeemed and uncanceled notes in the Division of Issue and Redemption, the Secretary of the Treasury may use them in the purchase of United States bonds for the benefit of the Division of Issue and Redemption; such bonds to be held in that division and sold for the benefit of the redemption fund when directed by the Secretary of the Treasury. At the present time the government has no fund for the payment of its demand obligations except the general balance in the treasury applicable alike to the payment of all dues. Our revenues are more or less uncertain in amount; our expenditures are large and growing, and liable to vary with changes in the spirit of the times and the disposition of Congress and the PRELIMINARY REPORT 39 people. It is, therefore, uncertain whether we shall have at any particular time an adequate fund for the redemption of the demand obligations without recourse to borrowing. Borrowing is an ineffectual resource, because, under the law as it stands, the notes which have been paid must be returned to circulation, and, so, may be used over and over to draw out the borrowed gold. The uncertainty of this situation is increased by the fact that the issue of bonds rests with the executive department, and whether it will be resorted to or not will depend upon the personal views and discretion of the officials at the head of that department. More serious still is the fact that it is in the power of the execu- tive department, as the law now stands, to decide absolutely whether the government notes shall be paid in gold or in silver. An end ought to be put to this anomalous and hazardous situa- tion by making specific and adequate provision for the payment of the demand obligations, and directing in the law that such payment shall be in gold at the demand of the holder. It is regarded as certain that if this were done there would be comparatively little presentation of notes at the Treasury for redemption, in the absence of serious public alarm, and that the best possible security against the recurrence of such alarm would be attained. The provision authorizing the purchase of bonds during the period mentioned is recommended, with the belief that it would enable the Secretary of the Treasury to prevent any injurious contraction. The bonds purchased with the notes returned to circulation would furnish the means with which to redeem them when presented again. A proposal to retire the government notes may be received at first with disfavor by some persons, but it must be supposed that, upon due reflection, preferences which are to a large extent merely sentimental will yield to arguments resting on solid grounds of safety and advantage to the government and the people. All good citizens must desire that the credit of the government shall rest on a basis so secure that no wind that can blow will ever shake it; that the standard by which all obligations and values are measured shall be the most perfect expression of truth and honesty and unchangeableness * 40 REPORT OF THE MONETARY COMMISSION which is possible of attainment; and that all the money in cir- culation shall be up to that standard in its value, and shall, in respect to its form and quantity and distribution, serve every requisite of commercial and personal use as equally and com- pletely as is in the nature of things possible. If it is necessary in order to accomplish these results to relieve the government from the function of supplying money in the form of its own notes, it is only necessary to make that fact clear to the people to secure their approval of the measure. Not to believe this would be to despair of the capacity of the people for wise and successful government. A government paper currency educates the people who use it in false notions concerning money. Such a currency, circu- lating year after year without redemption, appears to those who do not look at it critically to derive its value from the “ govern- ment stamp.” It ceases to be regarded as a promise to pay money, and is thought to possess the virtue of money in and of itself. It is so easy to create it that in any emergency the call for more is perfectly natural. There can be no doubt that the aberration of judgment on the money question by so many of our people in recent years has been largely due to the misedu- cating influences of the greenback currency. The young and middle-aged men of today have grown up in a vitiated financial atmosphere. Such a currency also lacks the important quality of auto- matic adaptability to the varying demands of business. A paper dollar is a useful form of currency so long as there is legitimate use for it. When there is no legitimate use for it, it becomes a superfluous and injurious thing —a temptation to speculation, extravagance and unwise business ventures. A paper currency created by legislation is fixed in volume by the law of its creation, and can neither contract nor expand in response to those varying conditions which are bound to occur in the affairs of men. More important than this is the fact that such a currency puts upon the government the burden of maintaining the credit of all the financial institutions of the country. The government > PRELIMINARY REPORT 41 notes are as good as gold only so long as the government redeems them in gold. If it should fail in that, all bank notes, bank deposits, insurance losses, and debts and dues of every kind not specifically payable in gold would be payable in the depreciated paper or in silver. Every passing incident, there- fore, which raises an apprehension, however slight, of a possi- bility, however remote, that the government may be unable or unwilling to maintain gold payment of its obligations sends a nervous tremor through the whole business system of the coun- try. A sovereign government cannot be compelled to pay its debts ; it pays them only when it wills so to do; and there is in the public mind more or less doubt as to the continuance of the will of our government to pay its demand obligations in money satisfactory to the holders thereof. In these days of large invested capital and small profits such a condition is a The existence of a large outstanding debt payable on demand is also a source of weakness to the government in its interna- tional relations. Modern warfare is so expensive that it is almost as much a matter of money as of men. A nation sud- denly confronted by the alternative of war or dishonor would be greatly handicapped by a large demand debt which it must pro- vide for at once. Great additional force is given to this consid- eration by the fact that it would be scarcely possible for this nation to engage in war in its present situation—counting as part of the situation the imperfect development of clear concep- tions on the subject of money in the minds of the people— without a suspension of specie payments and a resort to further issues of government notes. There is no occasion to criticise those patriotic men who believed that the issue of greenbacks was necessary to save the Union. But the world has advanced in financial knowledge and skill since then. There is no doubt that if our government were relieved of its existing demand obligations, and our currency system put in working order upon a gold basis, it would be entirely possible for us to go through a war without suspension of specie payment, or any derangement of our monetary system. If war should come, the value to the serious drag on business enterprise. ae 42 REPORT OF THE MONETARY COMMISSION country of the ability thus to avoid the indirect losses following from depreciated currency, inflated prices and financial demoral- ization would be so great that the burden of paying off now our demand obligations would be as nothing in comparison. While the silver dollars are not, by the terms of the law, exchangeable for gold coin, their current value is sustained by the promise of the government to maintain their parity with goid. So that we have a total volume of paper and silver in circulation amounting to $908,708,088, all resting for its value on the credit of the government, except in so far as the bullion in the silver dollars has value. That credit is maintainable only asa whole. The paper of the United States could not be dis- honored and its silver upheld. It is necessary, therefore, that the government shall keep a large fund in gold, and continue to do so so long as the credit currency is outstanding. Sucha fund in the hands of the government is defenseless against attack. In countries where the government has no demand debt out- standing, and the gold reserve is held by banks, the nation’s stock of gold is capable of some degree of protection through the rate of interest charged for loans. But our government has no such resource. Its great gold reserve is an open mine free to all who bring its notes. The exigencies of war or commerce are liable to create sudden and great demands for gold. And as the entire monetary system of the country hangs upon that one reserve, the situation is one of uncertainty and hazard against which no insurance is possible, and which is bound to continue while the government demand obligations are extant in large volume. It would go far to relieve the perennial strain of this situation and strengthen our financial position at home and among nations to transfer this burden to the banks and other moneyed institutions. As against these serious disadvantages there is no advantage which can possibly be claimed for paper money in the form of government notes over any other form of paper money equally good—that is, equally current in all parts of the country and equally certain of redemption in specie on demand—except the saving of interest on so much of the public debt as is represented PRELIMINARY REPORT 43 by the notes. Our national bank notes have served the uses of the people as well as greenbacks. In all ordinary business trans- actions no one cares which he receives or pays out. The sup- posed economy of the greenbacks is more apparent than real ; indeed, when we consider all the facts they are an extremely costly form of money. To keep them good requires the main- tenance of a large gold reserve in the Treasury, which offsets the saving of interest to the extent of one-fourth or more. When conditions arise which threaten to deplete that reserve and compel a resort to extrordinary measures to protect it, no limitation of cost can be observed, and it is impossible to know what sacrifice may become necessary. In order to create the gold reserve required for the resump- tion of specie payments in 1879, United States bonds to the amount of $95,500,000 were sold, and most of which are still outstanding in a refunded form. During the years 1894, 1895, and 1896 bonds to the amount of $262,315,400 were sold. Throughout those years there was a constant drain of gold to redeem United States notes. By the law of 1878 it was pro- vided that United States notes ‘‘shall not be retired, canceled or destroyed, but they shall be reissued and paid out again and kept in circulation.” There being a deficit in the ordinary rev- enue, these notes continued to go out again and again in pay- ment of ordinary expenses. Whether the deficit would have required the sale of bonds if there had been no want of public confidence in the payment of the notes, and they had not con- tinued to be presented for redemption, is a point upon which there may be a difference of opinion. Not to enter upon that question closely, it is clear that with irterest to pay on $357,- 815,400 of indebtedness incurred chiefly, if not wholly, in con- sequence of the existence of the government notes, and $100,- 000,000 of reserve lying idle in the Treasury, the saving in interest by the United States notes is a small gain compared with the unending burden of providing for their redemption. In considering the cost of these operations, it is necessary to take into account, also, the expense of engraving, printing, bookkeeping, and other incidents. From all of which it appears 44 REPORT OF THE MONETARY COMMISSION that instead of saving money to the people, the United States notes have been and are now costing them a large sum annually. This cost is liable to be increased by the further issue of bonds for the protection of these notes in emergencies—not now present, nor immediately threatening, but always possible. Between Ist January, 1879, and Ist November, 1897, the Treasury paid United States notes in gold to the amount of $507,470,149, being $160,789,133 in excess of $346,681,016, the entire amount outstanding at the resumption of specie pay- ments; which paid and repaid and yet undiminished amount still remains outstanding to be paid again, and, unless some change be made in the existing law, again and again. Between 14th July, 1890, and 1st November, 1897, Treasury notes of 1890, issued for the purchase of silver bullion, have been redeemed in gold coin and reissued to the amount of $90,680,879. Morever, we are carrying a burden put upon us by the doubt and uncertainty which the presence of this large demand debt of the government in the form of current money produces, which no man can estimate. Any one of a number of circumstances might cause a suspension of gold payment of its notes by the government. A war, a failure of revenue, a commercial revul- sion, an election, a weak president—any one of these unfavor- able conditions, exciting alarm and then panic, might cause the Treasury to be depleted of its gold and its notes to be dishonored. The injury which all business suffers from this condition of the currency is none the less real because it is not distinctly per- ceived. The evil may go long unnoticed, like friction in machinery or malaria in the air; but it has its effect neverthe- less. When it comes to an acute manifestation of the evil, such as we have experienced within the last five years, the loss.occa- sioned is beyond computation. Many concurring causes con- tributed to the business depression which the people of the United States have suffered within that period; but it cannot be doubted that the fact that the entire paper currency of the country consisted of or rested upon notes of the government, and that there was an uncertainty as to the redemption of those PRELIMINARY REPORT 45 notes, was the chief cause of that great disaster. All the _ government notes outstanding, and all the interest they have saved since they were issued, would pay only a small fraction of the loss which the American people have suffered within that time. THE BANKING SYSTEM. Under the present system, a bank may issue circulation not exceeding 90 per cent. of its paid-up capital, and also not exceeding 90 per cent. of the par value of the bonds deposited. Each bank is required to deposit with the Treasury a redemption fund of 5 per cent. of its outstanding circulation; and the notes are secured by a first lien on all the assets of the bank, including the liability of the shareholders. While in some cases share- holders of and depositors in national banks have lost by unskill- ful or unfaithful management, yet the bank circulation has been so well secured that no holder of a national-bank note has ever had occasion to inquire what bank issued the note, or has ever lost any part of the amount of the note. But the relative increase in the number of the banks and decrease in the amount of the issue of the circulation shows that the system should be so amended that, while the notes issued thereunder shall be as adequately secured as under the present system, there will yet be an increased issue of bank notes, and an out- flow and inflow of those notes as the business of the country may require. A note circulation, issued under the present system, unques- tionably satisfies the condition of security, but is open to grave objections. 1. It presupposes a continuing issue of government bonds, when it ought to be the national policy to steadily reduce and ultimately extinguish the debt of the United States. 2. The investment in bonds diminishes the funds of the bank available for loans to its customers. 3. Such a currency does not increase in volume with a tem- porary demand for more currency, nor decrease with the cessa- tion of the demand, 46 REPORT OF THE MONETARY COMMISSI ON All the conditions can be met by: 1. A national system with improved regulations as to exam. ination, supervision, etc. 2. The issues to be based upon those readily convertible assets which represent the exchangeable wealth of the country in its natural products and manufactured goods. 3. A limitation of the amount of the issues to the unim- paired capital of the issuing bank. 4. A further security in a common guaranty fund. 5. The continuance of the present redemption fund and method of redemption, with extension of the places of redemp- tion under the approval of the Secretary of the Treasury. 6. A further security in the liability of the shareholders to the full amount of the par of their shares. The chief difference of the proposed, from the existing, sys- tem of bank notes is that it gradually does away with the requirement that there shall be a deposit of bonds with the government as a condition for the issuance thereof. As now, the notes are to be a first lien upon all the resources of the banks, including the stockholders’ liability. This change is necessary because of the scarcity of United States bonds; and the attempt to substitute other bonds would lead to many evils, The change is wise because it permits the issuance of notes in the way and at the time when, and for the purpose for which, they would be issued under natural conditions, if no law prevented. Such a system would more perfectly than any other give the country a circulating medium; it would readily and quickly adjust itself from season to season to meet the wants of the business of the country requiring bank notes for its convenient transaction. Under the present system, the problem presented to a bank, when its customers call for currency, is not the amount of its own assets, but its ability and desire to make an investment in something quite apart from its usual business as a bank, in order that it may be in a position to provide a man who wishes to move property or employ labor with the tools most convenient at the time for his purpose. Notes secured as herein provided cannot fail to be safe, because, PRELIMINARY REPORT 47 being based upon all the resources of all the banks issuing them, they are based upon the whole business of the country, and that business is the thing which gives life and value to all securities, government, municipal, railway, and individual obli- gations. Should all the resources of the banks ever so shrink in value as not to be ample security for the amount of notes that could be issued under this plan, then all other securities, even government bonds, would become valueless. The banks are bound together for the security of these notes to accom- plish the same purpose that the deposit of bonds is intended to accomplish, namely, to guard against loss through the mis- fortune or bad management of single banks, and thus save the holder of a bank note the need of ascertaining the standing of any bank. The objection that is sometimes made that the larger banks in the great cities would not issue notes because of an apprehended liability for other banks, is shown by statistics to be groundless. 1893 was the year of largest bank failures; but had all the banks of the country then issued notes up to 80 per cent. of their capital, the amount of their assessment to make good the ascertained deficiencies of that year up to the time of the Comptroller’s report of 1896 would have been only a fraction of 1 percent. Had 80 per cent. of the capital of all national banks been issued in notes, upon the proposed plan, since the beginning of the national banking system in 1863, the assess- ment upon the banks annually would have been an amount so insignificant that it need not be taken into account. Taking the country banks as a whole, it is found that on 5th October last, they had $401,000,000 of the $631,000,000 of national bank capital. Should they issue notes up to 80 per cent. of that capital, they would have $321,000,000 of notes, and there would be $1,956,000,000 of resources against these notes, not counting stockholders’ liability. If these resources of the country banks are insufficient security for this amount of notes, they will be insufficient only because there would then be such a condition of business paralysis that government, municipal, and railway bonds would be valueless, and also few, if any, banks in the reserve cities 48 REPORT OF THE MONETARY COMMISSION would remain solvent. The occurrence of this disaster is so improbable that its consideration may be dismissed. In some quarters fear is expressed that there would be undue expansion under this plan. There is no danger of this. The system of redemption, not only at the banks but at the Treasury in Washington and at the subtreasuries, would strongly guard against that. The expansion over that which could be effected, were no notes issued at all, will be found, upon investigation, to be small. Dangerous expansion does not take the form of the issue of bank notes, but of the extension of credits. Very few borrowers take their loans in the form of bank notes. The bank note is only one form in which he to whom credit is given will use that credit; he can use it equally well for most purposes if the loan is placed to the credit of his account by the bank making the loan to him, or by some other bank, or by a private person. The plan increases stockholders’ liability, so that each stock- holder is absolutely liable to assessment up to the par of his stock, and not ratably and equally with every other stockholder as now. The existing tax of 1 per cent. per annum on circulation is repealed. Inits place taxation of capital, surplus, and undivided profits is provided. The issue of circulating notes is only one form in which a bank expresses its demand liability. The other form, deposits, is, under the development of modern banking operations, of vastly greater importance, and the one which, in cities and highly organized commercial communities, is most used. In October, 1897, the country banks issued more than 72 per cent. of all notes issued. The reserve banks, except those of the central reserve cities, New York, Chicago, and St. Louis, issued more than 18 per cent., New York less than 8 per cent., and Chicago and St. Louis together about 1% per cent. Sur- plus and undivided profits and capital show the profits and prop- erty of banks, and these are certainly more legitimate objects of taxation than the mere instruments which banks may be called upon by their customers to issue to serve chiefly the convenience of those customers. This tax makes as equitable an apportion- ment of the expenses of the system as can be devised, PRELIMINARY REPORT 49 The plan provides that these notes shall be received by banks and by government in payment of debts and dues under the same conditions as now. This provision is made, not because it materially adds to the security of the notes, but that they may be more convenient to the people and in aid of their speedy redemption. This method of passing from the present to the new system is proposed in order that the change may be gradual and that the country may become accustomed to it in this way, and also to guard against the possibility of undue sale of United States bonds. Doubtless, portions of the country lack adequate bank- ing facilities; and to meet this a diminution of the minimum capital required for banks in places of small population, and authority for the establishment of branch banks, are advised. PLAN OF CURRENCY REFORM. I. METALLIC CURRENCY AND DEMAND OBLIGATIONS. 1. The existing gold standard shall be maintained ; and to this end the standard unit of value shall continue, as now, to consist of 25.8 grains of gold, nine-tenths fine, or 23.22 grains of pure gold, as now represented by the one-tenth part of the eagle. All obligations for the payment of money shall be performed in conformity to the standard aforesaid ; but this provision shall not be deemed to affect the present legal tender quality of the silver coinage of the United States or of their paper currency having the quality of legal tender. All obliga- tions of the United States for the payment of money now existing, or hereafter entered into, shall, unless otherwise expressly provided, be deemed, and held, to be payable in gold coin of the United States, as defined in the standard aforesaid. 2. There shall continue to be free coinage of gold into coins of the denominations, weight, fineness, and legal tender quality, prescribed by existing laws. 3. No silver dollars shall be hereafter coined. 4. Silver coins of denominations less than $1 shall be coined upon government account, of the denominations, weight, fineness, and legal tender quality prescribed by existing laws. 50° REPORT OF THE MONETARY COMMISSION 5. Minor coins shall continue to be coined upon government account, of the denominations, weight, fineness, and legal tender quality prescribed by existing laws. 6. Subsidiary and minor coins shall be issued and exchanged as prescribed by existing laws, except as hereinafter otherwise provided. 7. There shall be created a separate division in the Treasury Department, to be known as the Division of Issue and Redemption, under the charge of an Assistant Treasurer of the United States, who shall be appointed by the President by and with the advice and con- sent of the Senate. ‘ 8. To this division shall be committed all functions of the Treasury Department pertaining to the issue and redemption of notes or certifi- cates, and to the exchange of coins; and this division shall have the custody of the guaranty and redemption funds of the national banks, and shall conduct all the operations of redeeming national bank notes, as prescribed by law; and to this division shall be transferred all gold coin held against outstanding gold certificates, all United States notes held against outstanding currency certificates, all silver dollars held against outstanding silver certificates, and all silver dollars and silver bullion held against outstanding Treasury notes of 1890, and all sub- sidiary and minor coins needed for the issue and exchange of such coins, and the funds deposited with the Treasury for the liquidation of national bank notes. All accounts relating to the business of this division shall be kept entirely apart and distinct from those of the fiscal department of the Treasury; and the accounts relating to the national banks shall be kept separate and apart from all other accounts. g. A reserve shall be established in this division by the transfer to itby the Treasurer of the United States from the general funds of the Treasury of an amount of gold in coin, and bullion, equal to 25 per cent. of the aggregate amount of both the United States notes and Treasury notes issued under the act of July 14, 1890, outstanding, and a further sum in gold equal to 5 per cent. of the aggregate amount of the coinage of silver dollars. This reserve shall be held as a common fund, and used solely for the redemption of such notes and in exchange for such notes, and for silver and subsidiary and minor coins. 10. It shall be the duty of the Secretary of the Treasury to maintain the gold reserve in the Division of Issue and Redemption at such sum as shall secure the certain and immediate redemption of all notes and silver dollars presented, and the preservation of public confidence ; and PRELIMINARY REPORT 51 for this purpose he shall from time to time, as needed, transfer from the general fund of the Treasury to the Division of Issue any Redemp- tion any surplus revenue not otherwise appropriated ; and in addition thereto he shall be authorized to issue and sell, whenever it is in his judgment necessary for that purpose, bonds of the United States bear- ing interest not exceeding 3 per cent., running twenty years, but redeem- able in gold coin, at the option of the United States, after one year ; and the proceeds of all such sales shall be paid in to the Division of Issue and Redemption for the purposes aforesaid. 11. To provide for any temporary deficiency which may at any time exist in the fiscal department of the Treasury of the United States the Secretary of the Treasury shall be authorized at his discretion, to issue certificates of indebtedness of the United States, payable in from one to five years after their date, to the bearer, of the denominations of $50 or multiples thereof, with interest at a rate not to exceed 3 per centum per annum, and to sell and dispose of the same for lawful money at the Treasury Department, and at the subtreasuries and designated depositories of the United States, and at such post-offices as he may select. And such certificates shall have the like privileges and exemp- tions provided in the act to authorize the refunding of the national debt, approved July 14, 1870. 12, Whenever money is to be borrowed on the credit of the United States, the Secretary of the Treasury shall be authorized, instead of issu- ing the usual forms of engraved bonds, upon receiving lawful money of the United States, in sums of not less than fifty dollars ($50) in any single payment, to cause a record of all such payments to be made in books to be kept for that purpose in Washington, and thereafter, from time to time, to pay to those so registered on such books interest not exceeding 3 per cent. per annum in gold coin on the amount with which they shall severally stand credited on such books in the same manner and at the same dates as if they were the holders and owners of registered bonds of the United States ; and he shall also pay to those so registered the principal sum originally deposited, in gold coin, at the date of maturity of such inscribed loans. Suitable arrangements shall be made at each and every money order post-office in the United States for receiving such payments into the Treasury on like terms, as well as for the transfer, on proper identification, of any inscription on the books in Washington, or of any part thereof not less than fifty dollars ($50). No interest shall accrue or be paid on inscriptions which shall have been reduced below fifty dollars ($50). No charge of any kind 52 REPORT OF THE MONETARY COMMISSION shall be made by any department or officer of the government for any service in connection with the receipt or transmission of the lawful money, nor in the transfer of inscriptions on the books at Washington. 13. The Division of Issue and Redemption shall on demand at Washington, and at such subtreasuries of the United States as the Secretary of the Treasury may from time to time designate : (a) Pay out gold coin for gold certificates. (6) Pay out gold coin in redemption of United States notes or Treas- ury notes of 1890. (c) Pay out silver dollars for silver certificates of any denomination. (2) Issue silver certificates of denominations of $1, $2 and $5, in exchange for silver dollars and for silver certificates in denominations above $5. (e) Pay out gold coin in exchange for silver dollars. (f) Pay out silver dollars in exchange for gold coin, United States notes or Treasury notes. (g) Pay out United States notes or Treasury notes, not subject to immediate cancellation, in exchange for gold coin. (2) Pay out and redeem subsidiary and minor coins as provided by existing laws. (‘) Pay out United States notes in exchange for currency certificates. 14. United States notes or Treasury notes once redeemed shall not be paid out again except for gold coin unless there shall be an accumula- tion of such notes in the Division of Issue and Redemption which can- not then be canceled under the provisions of the act, in which case the Secretary of the Treasury shall have authority, if in his judgment that course is necessary for the public welfare, to invest the same or any portion thereof in bonds of the United States forthe benefit of the redemption fund, such bonds to be held in the Division of Issue and Redemption, subject to sale at the discretion of the Secretary of the Treasury for the benefit of the Division of Issue and Redemption, and not for any other purpose. 15. The Secretary of the Treasury shall be authorized to sell from time to time, in his discretion, any silver bullion in the Division of Issue and Redemption ; and the proceeds in gold of such sales shall be placed to the account of the gold reserve in the Division of Issue and Redemp- tion. 16. The gold certificates and the currency certificates shall, whenever presented and paid or received in the Treasury, be retired and not reissued. PRELIMINARY REPORT 53 17. No United States note or Treasury note of 1890 of a denomina- tion less than $10 shall hereafter be issued ; and silver certificates shall hereafter be issued or paid out only in denominations of $1, $2 and $5 against silver dollars held by or deposited in the Treasury. 18. The Assistant Treasurer in charge of the Division of Issue and Redemption shall, on demand, pay in gold coin all United States notes and Treasury notes presented for payment, and as paid cancel the same up to the amount of $50,000,000. After that amount shall have been paid and canceled, he shall then from time to time cancel such further amounts of notes so paid as shall equal, but not exceed, the increase of national bank notes issued subsequent to the taking effect of the pro- posed act. 1g. If at the end of five years next after the taking effect of the proposed act any United States notes or Treasury notes shall be out- standing, a sum not exceeding one-fifth of such outstanding amount shall be retired and canceled each year thereafter ; and at the end of ten years after the passage of the proposed act the United States notes and Treasury notes then outstanding shall cease to be legal tender for all debts public and private, except for dues to the United States. 20. The Secretary of the Treasury may, in his discretion, transfer from surplus revenue in the general Treasury to the Division of Issue and Redemption any United States notes or Treasury notes which on such transfer could then lawfully be canceled under the provisions of the proposed act if they had been redeemed on presentation; and when so transferred the same shall be canceled. The Secretary of the Treasury, in his discretion, whenever there may be United States notes or Treasury notes in the general Treasury which are not available as surplus revenue, and.which upon transfer to the Division of Issue and Redemption could.then lawfully be canceled under the provisions of the act, may exchange such notes with the Division of Issue and Redemption for gold coin, and such notes shall thereupon be canceled. 21. All vested rights of property or contract, and all penalties incurred before the taking effect of the proposed act or any part of it, shall not be affected by the passage thereof ; and all provisions of law inconsistent with any of the provisions of the proposed act should be repealed. II. BankiInG SYSTEM. 22. The total issues of any national bank shall not exceed the amount of its paid-up and unimpaired capital, exclusive of so much 54 REPORT OF THE MONETARY COMMISSION thereof as is invested in real estate. All such notes shall be of uniform design and quality, and shall be made a first lien upon all the assets of the issuing bank, including the personal liability of its stockholders. No such notes shall be of less denomination than $10. 23. Up to an amount equal to 25 per cent. of the capital stock of the bank (the whole of its capital being unimpaired), the notes issued by it shall not exceed the value of United States bonds, to be fixed as hereinafter provided, deposited with the Treasurer of the United States. The additional notes authorized may be issued without further deposit of bonds. Beginning five years after the passage of the proposed act, the amount of bonds required to be deposited before issuing notes in excess thereof shall be reduced each year by one-fifth of the 25 per cent. of capital herein provided for ; and thereafter any bank may at any time withdraw any bonds deposited in excess of the requirements hereof. 24. Every national bank shall pay a tax at the rate of 2 per cent. per annum, payable monthly, upon the amount of its notes outstanding in excess of 60 per cent. and not in excess of 80 per cent. of its capital, and a tax at the rate of 6 per cent. per annum, payable monthly, upon the amount of its notes outstanding in excess of 80 per cent. of its capital. 25. Any bank may deposit any lawful money with the Treasurer of the United States for the retirement of any of its notes; and every such deposit shall be treated as a reduction of its outstanding notes to that extent ; and the tax above provided for shall cease as of the first of the following month on an equal amount of its notes. 26. The Secretary of the Treasury shall annually fix the value of each series of bonds of the United States bearing a rate of interest exceeding 3 per cent. as equalized upon the rate of interest of 3 per cent. per annum, and such valuation as fixed by the Secretary on this basis shall be the valuation at which the bonds will be receivable upon deposit. Bonds payable at the option of the government shall be receivable at 95 per cent. of their then market value as determined by the Secretary of the Treasury. If any bonds shall be issued hereafter payable at a date named and bearing interest at 3 per cent., or less, they shall be receivable at par. 27. The Comptroller of the Currency shall from time to time, as called for, issue to any bank, the capital of which is full paid and unim- paired, any of the notes herein elsewhere provided for, on the payment PRELIMINARY REPORT 55 to the Treasurer of the United States, in gold coin, of 5 per cent. of the amount of notes thus called for, which payments shall go into the common guaranty fund, for the prompt payment of the notes of any defaulted national bank. Upon the failure of any bank to redeem its notes, they shall be paid from the said guaranty fund, and forthwith proceedings shall be taken to collect from the assets of the bank and from the stockholders thereof, if necessary, a sum sufficient to repay to said guaranty fund the amount thereof that shall have been used to redeem said notes; and also such further sum as shall be adequate to the redemption of all the unpaid notes of said bank outstanding. 28. Persons who, having been stockholders of the bank, have trans- ferred their shares, or any of them, to others, or registered the transfer thereof within sixty days before the commencement of the suspension of payment by the bank, shall be liable to all calls on the shares held or subscribed for by them, as if they held such shares at the.time of suspension of payment, saving their recourse against those by whom such shares were then actually held. So long as any obligation of the bank shall remain unsatisfied, the liability of each stockholder shall extend to, but not exceed in the whole, an amount equal to the par of his stock. 29. If the said guaranty fund of 5 per cent. of all the notes out- standing shall become impaired, by reason of payments made to redeem said notes as herein provided, the Comptroller of the Currency shall make an assessment upon all the banks in proportion to their notes then outstanding sufficient to make said fund equal to 5 per cent. of said outstanding notes. Any bank may deposit any lawful money with the Treasurer of the United States for the retirement of any of its notes; or return its own notes for cancellation; whereupon the Comptroller shall direct the repayment to such bank of whatever sum may be the unimpaired por- tion of said bank’s contribution to the guaranty fund on account of said notes. Any portion of the guaranty fund may be invested in United States bonds in the discretion of the Secretary of the Treasury. The taxes on circulation, provided for in paragraph 24, as well as the interest accruing from investment of any part of the guaranty fund, shall be held in the Division of Issue and Redemption in gold coin or in United States bonds in the discretion of the Secretary of the Treas- ury, and shall be a fund supplementary and in addition to the guaranty fund, to be used only in case said guaranty fund shall ever become 56 REPORT OF THE MONETARY COMMISSION insufficient to redeem any bank notes issued hereunder, and it shall not be taken into account in estimating the amount of assessments necessary to replenish said guaranty fund or in repayments to banks of their contributions to the guaranty fund. 30. The present system of national bank note redemption should be continued, with a constantly maintained redemption fund of 5 per cent. in gold coin, and with power conferred on the Comptroller of the Currency, with the approval of the Secretary of the Treasury, to establish additional redemption agencies at any or all of the sub- treasuries of the United States, as he may determine. : 31. So much of the provisions of existing law as require each national bank to receive at par, in payment of debts to it, the notes of other national banks, and making such notes receivable at par in payment of all dues to the United States except duties on imports, shall be extended to cover notes issued under the pro- posed plan. 32. National banks shall hold reserves in lawful money against their deposits of not less than 25 per cent. and 15 per cent. for the respec- tive classes as now provided by law, at least one-fourth of which reserve shall be in coin, and held in the vaults of the bank. Neither the 5 per cent. redemption fund, nor the 5 per cent. guaranty fund, shall be counted as part of the reserve required. No bank shall count or report any of its own notes as a part of its cash or cash assets on hand. 33. Permit the organization of national banks with a capital stock of $25,000, in places of four thousand population or less. 34. Provision should be made whereby branch banks may be established with the consent of the Comptroller of the Currency and approval of the Secretary of the Treasury. 35. For the purpose of meeting the expenses of the Treasury in connection with the national bank system, a tax of one-eighth of 1 per cent. per annum upon its franchise as measured by the amount of its capital, surplus and undivided profits, shall be imposed upon each bank. 36. So amend existing laws as to provide — (2) For more frequent and thorough examinations of banks. (4) For fixed salaries for bank examiners. (c) To provide for rotation of examiners. (¢) For public reports, regular or special, at the call of the Comp- troller of the Currency. PRELIMINARY REPORT 57 (¢) To make it penal for any bank to loan money, or grant any gratuity, to an examiner of that bank, and penal for such examiner to receive it. 37. Any national banking association heretofore organized may at any time within one year from the passage of the proposed act, and with the approval of the Comptroller of the Currency, be granted, as herein provided, all the rights, and be subject to all the liabilities, of national banking associations organized hereunder: provided, that such action on the part of such associations shall be authorized by the consent in writing of shareholders owning not less than two-thirds of the capital stock of the association. 38. Any national banking association now organized which shall not, within one year after the passage of the proposed act, become a national banking association under the provisions hereinbefore stated, and which shall not place in the hands of the Treasurer of the United States the sums hereinbefore provided, for the redemption and guar- anty of its circulating notes, or which shall fail to comply with any other provision of the proposed act, shall be dissolved ; but such dis- solution shall not take away or impair any remedy against such corporation, its stockholders or officers, for any liability or penalty which shall have been previously incurred. 39. Any bank or banking association incorporated by special law of any state, or organized under the general laws of any state, and having a paid-up and unimpaired capital sufficient to entitle it to become a national banking association under the provisions of the proposed act, may, by the consent in writing of the shareholders owning not less than two-thirds of the capital stock of such bank or banking association, and with the approval of the Comptroller of the Currency, become a national bank under this system, under its former name or by any name approved by the Comptroller. The directors thereof may continue to be the directors of the association so organ- ized until others are elected or appointed in accordance with the provisions of the law. When the Comptroller of the Currency has given to such bank or banking association a certificate that the provis- ions of this act have been complied with, such bank or banking association, and all its stockholders, officers, and employés, shall have the same powers and privileges, and shall be subject to the same duties, liabilities and regulations, in all respects, as shall have been prescribed for associations originally organized as national banking associations under the proposed act. 58 REPORT OF THE MONETARY COMMISSION This plan is based in its main features upon principles, which are conceived to be fundamental and unchangeable, and which never have been, and never can be, departed from without dis- aster. Its methods and details are of course capable of consid- erable variation consistently with these principles. The methods suggested have been reached after very careful inquiry and study, and it is thought that they will prove to be practical, and adequate to the realization of a safe and steady system of finance and currency, in which all the people of our country, of what- ever calling or political opinion, are equally and most deeply interested. All of which is respectfully submitted. WASHINGTON, December 17, 1897. GEorGE F. Epmunps, Chairman. GrEorGE E. LEIGHTON, Vice-Chairman. T. G. Busu. W. B. Dean. CHARLES S. FAIRCHILD. STUYVESANT Fisu. J. W. FRrigs. C. Sruart PaTTerson. Ropert S. Tay.or. I sign except as to provisions relating to metallic currency and certificates issued thereon. Louis A. GARNETT. The undersigned, while heartily agreeing in general to the above plan, dissents from the principle involved in section 14, by which the Secretary of the Treasury is empowered to reissue United States notes in purchase of bonds,—believing that the increase of the circulation should not be left to the decision of PRELIMINARY REPORT 59 government officials; that no official should be exposed to the pressure which would thereby be created ; that the issue of gold in redemption of the notes would prevent contraction ; and that it is inconsistent with the principles on which an elastic bank currency has been recommended, because notes should not be issued by the government in an emergency, when bank issues have been above provided for exactly such an occasion. J. Laurence LAvGHLIN. BILL EMBODYING COMMISSION’S PRO- POSALS. FIFTY-FIFTH CONGRESS, SECOND SESSION. H. R. 5855. IN THE HOUSE OF REPRESENTATIVES, JANUARY 6, 188. Mr. Overstreet introduced the following bill, which was referred to the Committee on Banking and Currency and ordered to be printed: A BILL To PROVIDE FOR STRENGTHENING THE PUBLIC CREDIT, FOR THE RETIREMENT OF THE DEMAND OBLIGATIONS OF THE UNITED STATES, AND THE AMENDMENT OF THE Laws RELATING TO NATIONAL BANKING ASSOCIATIONS. Be it enacted, &c., That the standard unit of value shall as now be the dollar, and shall consist of twenty-five and eighth-tenths grains of gold, nine-tenths fine, or twenty-three and twenty-two one hun- dredths grains of pure gold, as represented by the one-tenth part of the eagle. Sec. 2. That all obligations for the payment of money shall be performed in conformity with the standard provided for in section 1: frovided, That nothing herein contained shall be construed or held to affect the present legal tender quality of the silver dollar or the sub- sidiary or minor coins or the paper currency of the United States. That all obligations of the United States for the payment of money now existing or hereafter to be entered into, shall, unless hereafter otherwise expressly stipulated, be deemed and held to be payable in gold coin of the United States, as defined in the standard aforesaid. Sec. 3. That there shall continue to be free coinage of gold into coins of the denominations, weight, fineness, and legal tender quality, prescribed by existing laws. No silver dollars shall be hereafter coined. 60 THE COMMISSION’S BILL 61 Silver coins of denominations less than one dollar shall be coined upon government account, of the denominations, weight, fineness, and legal tender quality prescribed by existing laws. Minor coins shall continue to be coined upon government account, of the denominations, weight, fineness, and legal tender quality pre- scribed by existing laws. Subsidiary and minor coins shall be issued and exchanged as pre- scribed by existing laws, except as hereinafter otherwise provided. Sec. 4. That there is hereby created a division in the Treasury Department, to be known as the Division of Issue and Redemption, under the charge of an Assistant Treasurer of the United States, who shall be appointed by the President, by and with the advice and con- sent of the Senate. Sec. 5. That to the Division of Issue and Redemption shall be committed all functions of the Treasury Department pertaining to the issue and redemption of notes and certificates, and to the exchange of coins, and the said Division of Issue and Redemption shall have the custody of the Bank Note Guaranty Fund and of the Redemption Funds of the national banking associations, and shall conduct the operations of redeeming the circulating notes of national banking associations, as prescribed by law; and to this division shall be trans- ferred all gold coin held against outstanding gold certificates, all silver dollars held against outstanding silver certificates, all United States notes held against outstanding currency certificates, and all silver dollars and silver bullion held against outstanding Treasury notes issued under the Act of July 14, 1890, and such amount of subsidiary and minor coins as the Secretary of the Treasury shall consider necessary for the issue and exchange of such coins, and the funds deposited with the Treasury for the redemption or retirement of the circulating notes of national banking associations. All accounts relating to the business of this division shall be kept entirely apart and distinct from those of the other departments of the Treasury; and the accounts relating to the national banking associations deposited with the Division of Issue and Redemption shall be kept separate and apart from all other accounts. Src. 6, That a reserve shall be established in the Division of Issue and Redemption aforesaid, by the transfer to it by the Treasurer of the United States from the general funds of the Treasury of an amount of gold, in coin and bullion, equal to 25 per centum of the amount both of United States notes and Treasury notes issued under 62 REPORT OF THE MONETARY COMMISSION the Act of July 14, 1890, outstanding, and a further sum in gold equal to 5 per centum of the aggregate amount of the coinage of silver dol- lars. This reserve shall be held as a common fund and used solely for the redemption of said notes and in exchange for said notes and for silver dollars and subsidiary and minor coins, as hereinafter pro- vided. Sec. 7. That it shall be the duty of the Secretary of the Treasury to maintain the gold reserve in the Division of Issue and Redemption aforesaid at such sum as shall secure the certain and immediate redemption of all notes and exchange of all silver dollars presented, as hereinafter provided for, and the preservation of public confidence; and for this purpose he shall from time to time transfer to the Division of Issue and Redemption any funds in the Treasury not otherwise appropriated, and in addition thereto he is hereby authorized to issue and sell, whenever it is in his judgment necessary to the ends afore- said, bonds of the United States, bearing interest at a rate not exceeding 3 per cent. per annum payable in gold coin at the end of twenty years, but redeemable in gold coin at the option of the United States after one year; and the proceeds of all such sales shall be paid into the Division of Issue and Redemption for the purposes aforesaid. Sec. 8. That the Division of Issue and Redemption shall, at Wash- ington, and at such sub-treasuries of the United States as the Secre- tary of the Treasury may from time to time designate, on demand — (1) Pay out gold coin for gold certificates. (2) Pay out United States notes for currency certificates. (3) Pay out gold coin in redemption of United States notes and Treasury notes of 1890. (4) Pay out silver dollars for silver certificates of any denomina- tion. (5) Issue silver certificates of denominations of one dollar, two dollars, and five dollars, in exchange for silver dollars and for silver certificates of denominations above five dollars. (6) Pay out gold coin in exchange for silver dollars. (7) Pay out silver dollars held in the Division of Issue and Redemp- tion aforesaid and not covered by outstanding silver certificates, in exchange for gold coin, United States notes or Treasury notes. (8) Pay out United States notes or Treasury notes, not subject to immediate cancellation, in exchange for gold coin. (9) Pay out gold coin in exchange for subsidiary and minor coins presented in sums of twenty dollars or multiples thereof, and pay out THE COMMISSION'S BILL 63 subsidiary and minor coin in sums of twenty dollars or multiples thereof, in exchange for any lawful money. (10) Pay out in redemption of national bank notes the moneys in the division available for that purpose. Sec. 9. That the Division of Issue and Redemption shall, on demand, pay in gold coin all United States notes and Treasury notes presented for payment, and as paid cancel the same up to the amount of $50,000,000. After that amount shall have been paid and canceled, it shall then from time to time cancel such further amounts of notes so paid as shall equal, but not exceed, the increase of national bank notes issued subsequent to the taking effect of this Act. Sec. 10. That if at the end of five years next after the taking effect of this act any United States notes or Treasury notes shall be outstanding, a sum not exceeding one-fifth of such outstanding amount shall, as received, be retired and canceled each year thereafter; and at the end of ten years after the passage of this Act United States notes and Treasury notes then outstanding shall cease to be a legal tender for all debts, public and private, except for dues to the United States. Sec. 11. That United States notes or Treasury notes once redeemed shall not be paid out again except for gold coin, unless there shall be an accumulation of such notes in the Division of Issue and Redemption which cannot then be canceled under the provision of this Act ; in which case the Secretary of the Treasury shall have authority, if, in his judg- ment, that course is necessary for the public welfare, to invest the same, or any portion thereof, in bonds of the United States for the benefit of the gold reserve in the Division of Issue and Redemption, such bonds to be held in the aforesaid Division, subject to sale at the discretion of the Secretary of the Treasury, for the benefit of the said reserve in the said Division of Issue and Redemption, and not for any other purpose. Sec. 12. That the Secretary of the Treasury shall be authorized to o sell for gold, from time to time, in his discretion, any silver bullion in the Division of Issue and Redemption, and the proceeds of such sales shall be placed to the account of the gold reserve in the Division of Issue and Redemption aforesaid. That so much of section 2 of the Act approved July 14, 1890, entitled “ An act directing the purchase of silver bullion and the issue of Treasury notes thereon, and for other purposes,” as provides there shall be outstanding at any time no greater amount of the Treasury notes issued under the provisions of that act than the cost of the silver bullion and the standard silver dol- 64 REPORT OF THE MONETARY COMMISSION lars coined therefrom, then held in the Treasury, purchased by such notes, be and the same is hereby repealed. Sec. 13. That gold certificates and currency certificates shall, whenever presented and paid or received in the Treasury, be retired and canceled. All provisions of law authorizing the issue or reissue of gold certificates or currency certificates are hereby repealed. Sec. 14. That no United States note or Treasury note issued ‘under the act of July 14, 1890, of a denomination less than ten dollars shall hereafter be issued, and silver certificates shall hereafter be issued or paid out only in denominations of one dollar, two dollars, and five dollars, against silver dollars deposited in the Division of Issue and Redemption, or in exchange for silver certificates of denominations exceeding five dollars. Sec. 15. That the Secretary of the Treasury may, in his discre- tion, transfer from any funds in the general Treasury not otherwise appropriated to the Division of Issue and Redemption any United States notes or Treasury notes which, on such transfer, could then law- fully be canceled under the provision of this act, if they had been redeemed on presentation; and when so transferred the same shall be canceled. And the Secretary of the Treasury, whenever there may be United States notes or Treasury notes in the yenera] Treasury which are not available as surplus revenue, and which, upon transfer to the Divi- sion of Issue and Redemption could then lawlully be canceled under the provisions of this act, may exchange such notes with the Division of Issue and Redemption for gold coin, and such notes shall. thereupon be canceled. Sec. 16. That, to provide for any temporary deficiency which may at any time exist in the Treasury of the United States, the Secre- tary of the Treasury be and he is hereby authorized, at his‘discretion, to issue certificates of indebtedness of the United States, payable to the bearer in gold coin in five years, and rédeemable in gold coin at the ption of the United States after one year from their date, of the denomination of fifty dollars, or multiples thereof, with interest at a rate not to exceed 3 per centum per annum, and to sell and dispose of the same for lawful money at the Treasury Department and at the sub- treasuries and designated depositories of the United States, and at such post offices as he may select. And such certificates shall have the like privileges and exemption provided in the Act entitled “An Act to authorize the refunding of the national debt,” approved July 14th, 1870. (5 > THE COMMISSION'S BILL 65 Sec. 17.. That whenever money is to be borrowed on the credit of the United States, the Secretary of the Treasury is authorized, instead of issuing the usual forms of engraved bonds, upon receiving lawful money of the United States in sums of not less than fifty dollars in any single payment, to cause a record of such payments to be made in books to be kept for that purpose in Washington, and thereafter, from time to time, to pay to those so registered on such books, interest at a rate not exceeding 3 per cent. per annum, in gold coin, on the amount with which they shall severally stand credited on such books, in the same manner as if they were holders and owners of registered bonds of the United States, and he shall also pay to those so registered the sum due in gold coin, at the date of maturity of such inscribed loans. Suitable arrangements shall be made at each and every money order post office in the United States for receiving such payments into the Treasury on like terms, as well as for the transfer, on proper identifica- tion, of any inscription on the books in Washington, or of any part thereof, not less than fifty dollars. No interest shall accrue or be paid on inscriptions which shall have been reduced below fifty dollars. No charge of any kind shall be made by any department or officer of the government for any service in connection with the receipt or transmis- sion of the lawful money, nor in the transfer of inscriptions on the books at Washington. Sec. 18. That any national banking association organized under the laws of the United States shall, if its capital be wholly paid up and unimpaired, be entitled to receive from the Comptroller of the Cur- rency circulating notes of denominations hereinafter provided, in blank, registered and countersigned as provided by law, to an amount not exceeding the amount of such paid up and unimpaired capital, after deducting therefrom its investment in real estate: Provided, That during the five years first succeeding the passage of this act, any national banking association receiving from the Comptroller of the Currency circulating notes in blank under the provisions of this act, shall maintain on deposit with the Treasurer of the United States, bonds of the United States to an amount, at a valuation computed as hereinafter prescribed, equal to that of the circulating notes so received, whenever such notes shall not exceed 25 per centum of the capital stock. And for each succeeding year after the expiration of five years from the passage of this act, the amount of bonds required to be deposited before issuing notes in excess of such deposit shall be decreased by 20 per centum of the original 25 per centum of capital 66 REPORT OF THE MONETARY COMMISSION stock hereinbefore specified, and from and after the expiration of ten years from the passage of this act no such bond deposit shall be required. And no further deposit of bonds shall be required than is herein prescribed ; and any national banking association having at any time bonds of the United States deposited with the Treasurer in excess of the amount required by law to be at such time deposited, may with- draw the whole or any part of such excess. But nothing herein con- tained shall be construed to authorize or permit the withdrawal of bonds required to be deposited under the provision of section 5153 of the Revised Statutes of the United States, as security for the safe keep- ing and prompt payment of public moneys deposited with any national banking association. Sec. 19. That so much of the provisions of section 5159 of the Revised Statutes of the United States and section 4 of the Act of June 2oth, 1874, and section 8 of the Act of July rath, 1882, as provide that before any national banking association shall be authorized to commence banking business it shall transfer and deliver to the Treas- urer of the United States, United States registered bonds, to an amount, where the capital is $150,000 or less, not less than one-fourth of its capital stock, and $50,000 where the capital 1s in excess of $150,000, be and the same is hereby repealed. Sec. 20. That every national banking association shall at all times keep and have on deposit with the Division of Issue and Redemption for the purpose hereinafter specified a sum in gold coin equal to five per centum of its outstanding circulation. The amounts so kept on deposit shall constitute a fund to be known as “The Bank Note Guar- anty Fund,” which fund shall be held for the following purpose, and for no other, namely :— Whenever the Comptroller of the Currency shall have become sat- isfied by the protest or the waiver and admission specified in section 5226, or by the report provided for in section 5227 of the Revised Statutes of the United States, that any association has refused to pay its circulating notes on demand in lawful money, he shall direct the redemption of such notes from the Bank Note Guaranty Fund afore- said, and such notes shall thereupon be so redeemed. After the failure of any national banking association to redeem its notes shall have been thus ascertained, the bonds deposited with the Treasurer of the United States shall be sold, as provided by law, and the proceeds of such sale shall be paid into the Bank Note Guaranty Fund. The Comptroller of the Currency shall forthwith collect, for the benefit of said fund THE COMMISSION'S BILL 67 from the assets of the bank and from the stockholders thereof, accord- ing to their liability, as declared by this act, such sum as, with the bank’s balance in the Bank Note Guaranty Fund, shall equal the amount of its circulating notes outstanding. And for this purpose the United States shall, on behalf of the Bank Note Guaranty Fund, have a paramount lien upon all-the assets of the association ; and such fund shall be made good out of such assets in preference to any and all other claims whatsoever, except the necessary costs and expenses of administering the same. Sec. 21. That whenever the Comptroller of the Currency shall ascertain what deficiency, if any, exists between the aggregate collec- tions for the benefit of the Bank Note Guaranty Fund in the case of any failed bank and the amount of its outstanding notes redeemed and to be redeemed from the said fund, he shall assess such deficiency upon all the national banks in proportion to their notes outstanding at the time of the failure of such bank. Sec. 22. That every bank going into liquidation, voluntary or invol- untary, shall, prior to the payment of its creditors other than noteholders and the distribution of any of its assets to its shareholders, deposit with the Assistant Treasurer in charge of the Division of Issue and Redemption lawful money to the full amount of its outstanding notes, and shall, in addition, pay to the aforesaid Assistant Treasurer such assess- ment for the benefit of the Bank Note Guaranty Fund as the Comptroller shall judge to be requisite to meet such bank’s liability for the reim- bursement of the guaranty fund for any deficiency resulting from the payment therefrom of the notes of banks which shall have failed prior to the date when such bank shall go into liquidation. Sec. 23. That the Secretary of the Treasury be and is hereby authorized, in his discretion, to cause to be invested in bonds of the United States any portion of the guaranty fund hereinbefore provided for; and such bonds shall be held and disposed of for the benefit of such fund. Sec. 24. That all interest accruing from the investment of any por- tion of the aforesaid guaranty fund, and all funds received in payment of the duties on circulation provided for in this act shall be held in the Division of Issue and Redemption in gold coin or in United States bonds, in the discretion of the Secretary of the Treasury, and shall be a fund supplementary and in addition to the guaranty fund, to be used only in case said guaranty fund shall- ever become insufficient to redeem. any. bank notes issued under the provisions of this act, and it 68 REPORT OF THE MONETARY COMMISSION shall not be taken into account in estimating the amount of assess- ments necessary to replenish said guaranty fund or in repayment to banks of their contributions to the guaranty fund. Sec. 25. That every national banking association shall pay, on or before the last day of every month, to the Division of Issue and Redemption, a duty imposed at the rate of two per centum per annum upon the average daily amount of its circulating notes outstanding in excess of 60 per centum of its capital stock, and not in excess of 80 per centum of such capital stock, and a duty imposed at the rate of six per centum per annum upon the average daily amount of such notes outstanding in excess of 80 per centum of its capital stock. Circulating notes of any national banking association shall be deemed and held to be outstanding whenever they shall have been supplied by the Comptroller of the Currency to such association, in blank, registered and countersigned according to law, and shall have not been returned to the Comptroller for cancellation or covered by an equal amount of lawful money deposited with the Assistant Treasurer in charge of the Division of Issue and Redemption for the retirement of such notes. Sec. 26. That in order to enable the said Assistant Treasurer to assess the duties imposed by the preceding section, the Comptroller of the Currency shall, within five days from the first day of each calen- dar month, make a return to the said Assistant Treasurer of the United States, in such form as he may prescribe, of the average daily amount of circulating notes of each national banking association outstanding during the calendar month next preceding. And every national bank- ing association shall be notified by said Assistant Treasurer of the United States within ten days from the first day of each calendar month of the amount of the duties upon its circulating notes due from it to the United States, under this Act, and every such association shall, before the last day of such calendar month, pay to the Division of Issue and Redemption in lawful money the full amount of such tax; and whenever any association fails to pay the duties imposed by this act, the sums due may be collected in the manner provided for the collection of taxes, or said Assistant Treasurer may reserve the amount so due out of the interest as it may become due on any bonds depos- ited with him by such defaulting association; and while such default continues no further amount of circulating notes shall be issued to such defaulting association. Sec. 27. That every national banking association shall pay into THE COMMISSION'S BILL 69 the Division of Issue and Redemption’ each half year, in the months of January and July, on or before the thirtieth day thereof, a duty of one-eighth of one per centum upon the value of its franchise as meas- ured by the aggregate amount of its capital, surplus, and undivided profits, upon the last day of the calendar month next preceding. Sections 5214, 5215, and 5216 and 5217 of the Revised Statutes of the United States are hereby repealed. But nothing in this section contained shall be so construed as in any manner to release any national banking association from any liability for taxes or penalties incurred prior to the passage of this Act. Sec. 28. That the valuation of the bonds required by this Act to be deposited by national banking associations with the Treasurer of the United States shall be annually fixed, upon a basis of three per centum interest, by the Secretary of the Treasury, for each series of the bonds of the United States then outstanding and bearing a rate of interest exceeding three per centum. And such bonds shall be received upon deposit by the Treasurer of the United States at the valuation thus fixed by the Secretary of the Treasury. Bonds of the United States payable at the option of the Government shall be received upon deposit, under the provision of this Act, at ninety-five per centum of their market value. Bonds of the United States payable at a date named and bearing interest at a rate not exceeding three per centum per annum shall be received on deposit at their par. Sec. 29. That the circulating notes furnished to national banking associations under the provisions of this act shall be of the denom- inations prescribed by existing law, except that no national banking association shall, after the passage of this Act, be entitled to receive or to issue or reissue or place in circulation any circulating notes of a less denomination than ten dollars. So much of section 5172 of the Revised Statutes as reads: “Express upon their face that they are secured by United States bonds, deposited with the Treasurer of the United States, by the written or engraved signatures of the Treasurer and Register, and by the imprint of the seal of the Treasurer ; and shall also,” is hereby repealed. SEc. 30. That no national banking association shall count or report any of its own notes as a part of its cash or cash assets. SEC. 31. That section 9 of the act of July 12th, 1882, entitled “An ‘It was intended by the Commission that this tax should be paid into the fiscal department of the Treasury and not into the Division of Issue and Redemp- tion. 70 REPOR1 -OF THE MONETARY COMMISSION Act to enable national banking associations to extend their corporate existence and for other purposes,” be and the same is hereby repealed. SEc. 32. That from and after the passage of this act the stock- holders of every national banking association shall be held individu- ally responsible for all contracts, debts, and engagements of such association, each to the amount of his stock therein, at the par value thereof in addition to the amount invested in such stock. The stock- holders in any national banking association who shall have transferred their shares, or registered the transfer thereof, within sixty days next before the date of the failure of such association to meet its obliga- tions, shall be liable to the same extent as if they had made no such transfer; but this provision shall not be construed to affect in any way any recourse which such shareholders might otherwise have against those in whose names such shares are registered at the time of such failure. Sec. 33. That the fund of 5 per centum of outstanding circu- lating notes required to be kept on deposit by every national banking association for the redemption of the circulating notes of such asso- ciation shall be in gold coin of the United States, and the Comptrol- ler of the Currency shall, with the approval of the Secretary of the Treasury, have authority to provide for the redemption of national bank notes at any or all of the sub-treasuries of the United States. Sec. 34. That so much of section 3 of the act of June 2oth, 1874, entitled “An Act fixing the amount of United States notes, providing for a redistribution of the national bank currency, and for other pur- poses,” as reads, “And when the circulating notes of any such asso- ciations, assorted or unassorted, shall be presented for redemption in sums of $1000, or any multiple thereof, to the Treasurer of the Uni- ted States, the same shall be redeemed in United States notes,” be amended to read, “And when the circulating notes of any such asso- ciations, assorted or unassorted, shall be presented for redemption in sums of $1000, or any multiple thereof, at the Treasury, or at such subtreasuries as may be designated by the Comptroller of the Cur- rency, the same shall be redeemed in lawful money. But nothing in this Act contained: shall be construed to impose upon the United States any liability for the redemption of the notes of any national banking association beyond the proper application of the redemp- tion and guaranty funds deposited with the Division of Issue and Redemption, and the enforcement of the remedies by this act pro- vided.” THE COMMISSION'S BILL qi Sec. 35. That at least one-fourth of the reserve of twenty-five per centum of the aggregate amount of its deposits.required under the provisions of existing law to be held by every national banking asso- ciation in either of the cities designated as reserve or central reserve cities, and at least one-fourth of the reserve of fifteen per centum of the aggrégate amount of its deposits required to be held by every other association shall consist of coin of the United States actually held in the vaults of such bank: frovided, That nothing in this sec- tion except as expressly provided shall be construed to alter or in any way affect the provisions of existing law governing the mainte- nance of reserves. SEc. 36.. That so much of section 3 of the Act of June zoth, 1874, entitled ‘An act fixing the amount of United States notes, providing for a redistribution of the national bank currency, and for other pur- poses,” as provides that the fund deposited by any national banking association with the Treasurer of the United States for the redemption of its notes shall be counted as a part of its lawful reserve as provided in section 2 of the Act aforesaid be, and the same is hereby, repealed. And from and after the passage of this Act neither such fund of five per cent. nor any contribution to the Bank Note Guaranty Fund, pro- vided for in section 20 of this Act, shall be counted by any national banking association as a part of its lawful reserve. Sec. 37. That section 5138 of the Revised Statutes of the United States be amended to read as follows: “No association shall be organ- ized under this title in a city the population of which exceeds fifty thousand inhabitants with a less capital than $200,000. No associa- tion shall be organized with a less capital than $100,000, except that banks with a capital of not less than $50,000 may, with the approval of the Secretary of the Treasury, be organized in any place the population of which does not exceed six thousand inhabitants, and that banks with a capital of not less than $25,000 may, with the approval of the Secretary of the Treasury, be organized in any place the population of which does not exceed four thousand inhab- itants.” Sec. 38. That it shall be lawful for any national banking association to establish branches under such rules and regulations as may be pre- scribed by the Comptroller of the Currency, with the approval of the Secretary of the Treasury. SEc. 39. That so much of section 5182 of the Revised Statutes of the United States, as provides that the circulating notes of national 72 REPORT OF THE MONETARY COMMISSION banking associations shall be received at par for all salaries and other debts and demands owing by the United States to individuals, corpora- tions, and associations within the United States, except interest on the public debt and in redemption of the national currency, be and the same is hereby, repealed. Sec. 40. That section 324 of the Revised Statutes of the United States be amended so as to read as follows: ‘There shall be in the Department of the Treasury a Bureau charged, except as in this act otherwise provided, with the execution of all laws passed by Congress relating to the issue and regulation of currency issued by national banking associations, the chief officer of which Bureau shall be called the Comptroller of the Currency, and shall perform his duties under the general direction of the Secretary of the Treasury.” SEc. 41. That the examination of the affairs of every national banking association authorized by existing laws, shall take place at least twice in each calendar year, and as much oftener as the Comp- troller of the Currency shall consider necessary in order to furnish a full and complete knowledge of its condition; and the person making such examination shall have power to call together a quorum of the directors of such association, who shall, under oath, state to such examiner the character and circumstances of such of its loans or dis- counts as he may designate; and from and after the passage of this Act all bank examiners shall receive fixed salaries, the amount whereof shall be determined by the Secretary of the Treasury. But the expense of the examinations herein provided for shall be assessed by the Comp- troller of the Currency upon the associations examined. The Comp- troller of the Currency shall so arrange the duties of national bank examiners that no two successive examinations of any association shall be made by the same examiner. Sec. 42. That no association shall hereafter make any loan or grant any gratuity to any examiner of such association. Any association offend- ing against this provision shall be deemed guilty of a misdemeanor, and shall be fined not more than $1,000 and a further sum equal to the money so loaned or gratuity so given; and the officer or officers of such association making such loan or granting such gratuity shall be likewise deemed guilty of a misdemeanor, and shall be fined not to exceed $500. And any examiner accepting a loan or gratuity from any association examined by him shall be deemed guilty of a misde- meanor, and shall be fined not more than $500, and a further sum equal to the money so loaned or gratuity given. THE COMMISSION'S BILL 73 Sec. 43. That the Comptroller of the Currency, in addition to the reports provided for by existing laws, shall have authority to call for such other reports, regular or special, as he may deem advisable ; and such reports shall be rendered in such form as the Comptroller may pre- scribe; and each association making such report shall cause a copy thereof to be conspicuously displayed in a public place in its banking house for the period of thirty days from the date of such report; but nothing herein contained shall be construed to require the publication of such additional reports by each association in the manner prescribed for other reports now rendered. Sec. 44. That any national banking association heretofore organized may at any time within one year from the passage of this Act, and with the approval of the Comptroller of the Currency, be granted, as herein provided, all the rights, and be subject to all] the liabilities, of national banking associations organized hereunder: Provided, That such action on the part of such associations shall be authorized by the consent in writing of shareholders owning not less than two-thirds of the capital stock of the association. Any national banking association now organized which shall not, within one year after the passage of this Act, become a national banking association under the provisions hereinbefore stated, and which shall not place in the hands of the Treasurer of the United States the sums hereinbefore provided, for the redemption and guarantee of its circulating notes, or which shall fail to comply with any other provision of this Act, shall be dissolved ; but such dissolution shall not take away or impair any remedy against such corporation, its stockholders, or officers, for any liability or pen- alty which shall have been previously incurred. Sec. 45. That any bank or banking association incorporated by special law of any state, or organized under the general laws of any state, and having a paid-up and unimpaired capital sufficient to entitle it to become a national banking association under the provisions of this act, may, by the consent in writing of the shareholders owning not less than two-thirds of the capital stock of such bank or banking asso- ciation, and with the approval of the Comptroller of the Currency, become a national bank under this system, under its former name or by any name approved by the Comptroller. The directors thereof may continue to be the directors of the association so organized until others are elected or appointed in accordance with the provisions of the law. When the Comptroller of the Currency has given to such bank or banking association a certificate that the provisions of this 4 REPORT OF THE MONETARY COMMISSION Act have been complied with, such bank or banking association, and all its stockholders, officers, and employés, shall have the same powers and privileges, and shall be subject to the same duties, liabilities, and regulations, in all respects, as shall have been prescribed for associations originally organized as national banking associations under this Act. Sec. 46. That nothing contained in this Act shall be construed to alter or affect any vested rights of property or contract, or any penalties incurred before the taking effect of this Act or any part of it, and all provisions of law inconsistent with or superseded by any of the pro- visions of this Act be and the same are hereby repealed. FINAL REPORT PART I METALLIC MONEY 75 FUNCTIONS OF MONEY. 1. Money is used to serve several different purposes, and by considering these separately clearness will be gained. In brief, these different uses of money may be defined as: 1) A Standard, or Common Denominator of Value. . 2) A Medium of Exchange. 3) A Standard of Deferred Payments. Under this head only the first two functions of money will be described. The third will be reserved for subsequent treat- ment. (Sections 21-44.) 2. The use of money as a standard naturally assumes first importance, and clear ideas as to its meaning are essential. It is necessary to ask, first, Why doesa country need a standard of value? Obviously, every article possessing value can be com- pared with other articles having value only by reference to some given standard which itself possesses value. The value of a commodity, it should be said, is the quantity of another com- modity, or other commodities, for which it will exchange. To be obliged to go through an arduous comparison of one article with every other article created would be an insuperable diffi- culty. ‘If a tailor had only coats, and wanted to buy bread or a horse, it would be very troublesome to ascertain how much bread he ought to obtain for a coat, or how many coats he should give for a horse. The calculation must be re-commenced on different data every time he barters his coat for a different kind of article, and there could be no current price or regular quotations of value. As it is much easier to compare different lengths by expressing them in a common language of feet and inches, so it is much easier to compare values by means of a common language’”’ of dollars and cents. In short, a common denominator is as necessary in comparing the value of com- modities as is a common language among many persons in any one city to enable them readily to compare ideas. Before 77 78 REPORT OF THE MONETARY COMMISSION property can be conveniently traded in, or exchanged, its value must be expressed in terms of the standard money. 3. It is clear by referring one article to another, which has been chosen as a common denominator, that the one article is directly comparable in value with all others similarly so referred. The price of any article is the quantity of the standard for which it may be exchanged. For instance, on comparing a desk with gold, we find that it will exchange for the quantity of gold in twenty dollars; while a book purchases only that quan- tity of gold which is in one dollar. Thus we know the exact relations of the two articles to a third, used as a standard; that is, we know their prices; and we can compare their exchange values by comparing their prices. There can be no such thing, however, as the price of an article without a standard in which the price is expressed. Whenever a price is quoted, we all have a tacit understanding as to the standard with which the article is compared. In the United States, for example, from 1862 to 1879 prices were quoted ina paper-money standard; but since 1879 in gold. 4. Evidently an article having value cannot be compared with another which has no value. The value of anything is the quantity of other articles for which it will exchange. For example, a desk exchanges for twenty books; then a desk is twenty times as valuable as one book, or a book is one-twentieth as valuable as a desk. Each of these articles has value rela- tively to the other. One cannot compare wheat with air (which has no value) ; or, to express it mathematically, quantities com- pared with zero are incommensurate. Hence, whatever is used to measure purchasing power must itself have purchasing power. We measure length only by something having length ; and capac- ity only by something having capacity. Likewise, we can no more estimate the value of things by comparison with a com- modity which has no value than we can measure the distance from Chicago to Denver by bushels. 5. Value is a relation, not an absolute thing like length. That is, value isa ratio. If the value of a desk increases rela- tively to books, then it follows of necessity that books have FUNCTIONS OF MONEY 79 fallen relatively to a desk. It depends merely upon the side looked at, whether there has been a rise or a fall in value. When we state the price of wheat in the standard, say gold, we are comparing the value of wheat with gold; if the price of wheat rises we may correctly say, since wheat commands more grains of gold, either that wheat has risen, or that gold has fallen, in value relatively to the other. Consequently, there is no absolute measure of value as there is of length. A standard of value and a unit of length, likea yardstick, are wholly differ- ent in kind. A yardstick is an unvarying measure of length; but a metal, or any commodity, is not and never can be an unvarying measure of the relations of that metal or commodity to other commodities which are constantly changing relatively to each other. The very commodity chosen as a standard can be changed in value by causes affecting itself; and the other commodities (which are compared with the standard) can be changed by causes affecting them; so that the ratio of exchange with the chosen standard may be modified by causes affecting either or both terms of the ratio. It is inconceivable that any one article should alter exactly and in a compensating direction, with innumerable other commodities. : 6. A wide difference should be made between the function of money as a standard and its function as a medium of exchange. A standard, whether it is a perfect one or not, is used to measure value; a medium of exchange is used to transfer value. The two processes are entirely distinct. The difference will be instantly seen by the analogy with weight: the machinery for weighing coal, the scales, does one duty; while that for transporting coal, the horses and wagon, doesanother duty. If, instead of coal, we think of all goods; and, instead of weight, we think of value (which is a relation), then money is used both as a measure of the value, and also as a means of exchange— although these two functions are quite distinct. In the case of value, an article, after being expressed in terms of the standard, is ready to be exchanged. But the one important idea to be kept firm hold of in all discussions of money, is that when it comes to exchanging goods, the metal chosen as the standard is 80 REPORT OF THE MONETARY COMMISSION not necessarily used as the medium of exchange. If gold, for instance, is chosen as the standard by a country, it does not at all follow that gold is used in all the transactions requiring a medium of exchange. The failure to keep this point clearly in mind has been a stumbling block to many; and it has been wrongly supposed that an increase of transactions always required a proportional increase in the standard coin. But, if it happens that goods are in fact exchanged readily and safely by means of other things than the metallic standard, then such a conclusion is entirely unwarranted. Ifa man has wheat or shoes, how are they actually exchanged for other things, under existing meth- ods? On this point, a few words of explanation may be neces- sary. 7. The first historical fact which confronts us is that ina society which has passed beyond the stage of barter, but which has not yet developed the habits of a modern commercial nation, money is usually passed from hand to hand in buying and selling. The commodity selected as a standard is then, also, practically the sole medium of exchange. But as soon as commerce develops, expedients arise for saving the expense and risk of using actual money. The Romans, although they had a considerable commerce, had but a slight acquaintance with bills of exchange. The early Italian and Jewish merchants brought them into general use and after the fourteenth century the forms, laws, and customs relating to them were much the same as in the present day." Given a standard in which the prices of commodities are expressed, the progress of commercial civilization for many centuries has been in the direction of devising new means of exchanging goods at a diminishing expense. The incentive behind this movement was a strong one. In transferring coin, itself possessing value, between persons in the same town, and above all between persons separated by great distances over sea and land, the cost of carriage and the still greater risk from loss *“A bill is nothing but an order to pay money addressed by the drawer to the drawee, or person on whom it is drawn, specifying the amount to be paid, the time of payment, and the person to whom it is to be paid.’—JEvons, Money and Mechanism of Exchange, p. 300. ‘FUNCTIONS OF MONEY 81 and robbery were obstacles to be removed if possible. There was thus a standing premium in favor of devising expedients by which the actual transfer of money was obviated, and later, expedients by which effective substitutes might permit exchanges to be carried on without the necessity for money. This stimulus to invention has always been present in commercial history, and is the cause of the development of ingenious and safe means of exchanging goods without the actual use of coin, or metallic money. 8. For these reasons banks came into existence, at first, as safe places of deposit. Under the principle of codperation, a bank with its vaults could do for all persons cheaply what each person would otherwise at great cost have been obliged to do for himself. In early days, too, the banks created the means by which their depositors could, without withdrawing it, transfer the ownership of coin held in their names. Such methods as changes by entries on the books of the bank, or by certificates, furnish the fundamental idea in which originated the bank note. The notes of a bank, therefore, arose from a natural: proc- ess, in the interest of the public, by which the risks and expenses of using actual coin were lessened. The bank note originated, not as a means of profit to the bank, but as a convenience and saving to the community. Finally, during the present century, the banks were employed by customers to create what is now the most largely used medium of exchange in existence. Persons gave the banks legal control over property, or collateral, and in return the banks coined this property into means of payment by crediting the persons with a deposit-account on which checks or drafts could be drawn in terms of current money, The banks became responsible that this property should be quickly realizable in cash, and thus were able to pay lawful money on demand foi these instruments whenever presented. In this way, through the form of a dis- count (or loan) at a bank, and a consequent credit in the form of a deposit-account, any man having marketable goods could obtain means of payment, and by checks, or drafts, and bills, meet any of his debts. Today, this medium of exchange is so 82 REPORT OF THE MONETARY COMMISSION largely used that over 90 per cent. of the large transactions in the country are performed by it without the use of actual money. This will be more fully explained at a later point (pp 90-91). 9. Then, by a process of evolution, governments, without being the depositories of money or of property against which notes or certificates were issued, have at times put forth prom- ises to pay, when they had no means of paying. This inferior medium of exchange has always conflicted with correct business methods, and has always given rise to misunderstandings and confusion. When banks create media of exchange the standard of the country remains unchanged; but when governments put forth paper money, almost invariably a depreciated paper money is substituted for the former metallic standard. From the above facts, it is clearly apparent that the com- modity chosen as the standard is not the only medium of exchange. On the contrary, the whole history of money is con- cerned with the development of expedients by which the use of the standard coin can be economized. And to such an extent has this gone on that in Anglo-Saxon countries, where commer- cial honor and intelligence are high, the use of bills of exchange, bank notes, checks, and drafts has reduced the actual handling of coin to very narrow limits, practically to those transactions in which — whether because of distrust, or because the operations are petty — coin is still passed directly from hand to hand. (See Section 12.) 10. In early times the different functions of money were not clearly developed in distinct form. The article chosen as the standard was commonly used as a medium of exchange. But as soon as confidence arose between merchants, the exchange of goods did not necessarily require the use of the standard as money. In deciding upon an article which best serves society as money, it was evident that such an article, in early times, must have (so far as one article possibly could) both the qualities demanded for a standard and those demanded for a medium of exchange. In our day, however, when so many substitutes are ysed as media of exchange to save the use of the standard com- FUNCTIONS OF MONEY 83 modity, it is not so necessary that the article chosen as the standard should possess all the qualities expected of a good medium of exchange. For the standard, as already explained, the chosen article should itself have (1) value, and so far as pos- sible (2) stability of value. For the medium of exchange, it should possess (3) portability. That is, the value must be so related to weight and bulk of the material that the denomina- tions of money in use shall not be inconveniently heavy, or inconveniently minute. To a poor people like that of India, where payments for services are necessarily of small amounts, the silver rupee is well suited; but in France and the United States, the five-franc piece and the dollar, are used; while for larger sums gold is required. Cheap and heavy substances like iron and copper are obviously unfit fora medium of exchange in these days, because of their lack of portability. The material used as money should also have (4) indestructibility. Perishable commodities like eggs and fish—although they have been so used —are not well suited to be passed about from hand to hand without suffering deterioration. Again, the substance of the money should be (5) homogeneous : that is, of the same quality throughout, so that equal weights would have the same value. Consequently such money could be melted up and divided, or put together again, without losing any of its material, or its value. This quality of (6) dvisibility really confines the choice of money to certain metals. And lastly, the money should be made out of such a material that most persons can easily recognize it at sight ; that is, it should have (7) cognizability. 11. Money can be obtained only by those who can get it in exchange for property of some sort or through the ability to render service. When persons who are hard pressed by poverty say that there is not money enough, they mean that they do not have wealth or property enough to satisfy their wants. Those who have marketable property have no difficulty in getting money. Of course, some kinds of property are more readily salable than others. Real estate, for example, is not as quickly changeable into money as cotton, wheat, or wool. Hence, owners of land can in general obtain money only from mortgage companies, or from 84 REPORT OF THE MONETARY COMMISSION institutions especially created to deal in long-time loans. Ord. nary commercial banks will advance means of payment, as a rule, only on property which is, in case of necessity, immediately convertible in the market. Holders of property salable on short notice, such as wheat or cattle, can obtain means of pay- ment. The only limit tothe amount of the medium of exchange they can obtain is the limit of their property. Of course, those who have no property and no services to offer, do not have the means of obtaining money. To remedy any supposed lack of money, they should adopt some means to produce or obtain more property. Those who have skill in producing goods caa always get money. And, as elsewhere shown, the price of the articles they produce is fixed by comparison directly with the value of the standard, and not with the various devices used to exchange goods. 12. Any person, therefore, who had property quickly real- izable, could easily get the means of payment at a bank by which to meet maturing indebtedness. And through the medium of exchange provided by a deposit-account and checks, he could make his payments without the use of actual money. This process might be extended, in principle, to all persons and to all transactions no matter how small. There are, however, some practical limits. If all persons were of high honor and intelli- gence, and if the transactions were large enough to warrant the trouble and expense of borrowing at a bank, there would be almost no use at all for actual money in exchanging goods. The only reason why men having little property have to pass money of value for small transactions is that they must offer in hand the thing of value, either because they are unknown or distrusted, or because the transaction is so small as not to be worth the trouble of borrowing, or of transferring a credit. This is today the reason why money in small denominations is in use in retail transactions ; and it is the reason why some money will probably always be used. 13. For large transactions—and increasingly even for’smaller ones—little actual money is used among men of high commer- cial development. Asgbusiness habits involving the use of the FUNCTIONS OF MONEY 85 check and deposit. system develop, the need of actual cash dimin- ishes . Hence the fallaciousness of the reference to the per capita circulation i in various countries, France, for example, has a larger per capita circulation than the United States; but this is due directly. to the fact that the deposit and eheek system is little used. in. France, while it is highly developed in the United States. The French use instead, more bank notes and forms of actual money than we, because the use of deposits among the French is not so general as it is with us. The use of - ‘per capita figures, so common in the discussion of this subject, springs from the idea that the more money a country has in use the better off it is. It is probable that the contrary is true. A country should not spend more of its resources than it can help on its media of exchange, any more than a farmer should spend more money than is necessary on raising ‘his crop of wheat. A country should have all the media of exchange needed for its transactions; the work of exchange should be well done; but it should not be done in an unneces- sarily expensive way. "14. Inthis connection, we may notice the demand which arises from some quarters for ‘more money.” When this is not really a demand for more wealth, or capital, it shows a confusion of thought between the uses of money asa standard and as a medium of exchange. Very often, when it is said that more money is needed to exchange goods, to buy and sell wheat or cotton, a demand is supposedly made solely for an increase of the article chosen as a standard. But when we understand that exchang- ing can be done by other means than by the standard metal, we see that this demand is wholly unjustifiable. It is, however highly sensible as compared with the proposition to meet the demand for more media of exchange by increasing the number of standards. For as soon as a change in the standard is suggested, or a variety of standards offered, all the media of exchange, drawn in terms of the standard, become of uncer- tain value, are less acceptable, and so shrink in volume. Hence the last thing one who wished an enlarged volume of circulation should urge, would be an increase of the number of standards, 86 REPORT OF THE MONETARY COMMISSION or raising doubt in any possible way as to what the standard shall be—whether it shall be gold, or whether it shall be silver, The only thing to be done is to lay firmly the foundations of that standard which has been chosen by the commercial world, in order that the most effective media of exchange in use by highly commercial countries may be expanded with the greatest ease and safety, and at the least cost to the public. Any uncertainty as to the standard tends to contract the media of exchange in circulation. If there is doubt as to what article is to be the standard—whether it shall be gold or sil- ver —then the one most valued will be hoarded (so long as the doubt continues); and as the standard coin is used as the basis of credits, it will be harder to get coin when so with- drawn from circulation, and thus shrinkage will be caused in all credits; loans will be hard to get; men having property will find it more difficult to obtain means of payment with which to meet coming obligations ; production consequently falls off ; less labor is employed, and trade and industry are curtailed. Whenever the government by its acts in any way creates doubt as to the standard, such doubt is certain to contract the media of exchange. In the United States this was done when inconverti- ble paper was issued, at which time the standard was changed from one of coin to one of fluctuating paper. Again, it produced similar results when our legislation on silver looked to a possible change from a standard of gold to one of silver of about one-half the value of the former. Lowering the quality of money reduces its efficiency. Keep the standard unshaken, and abun- dant media of exchange will arise whenever transactions require them. Look after the quality of the money standard and the quantity of media of exchange will look after itself. 15. Having thus sketched the functions of money, and hav- ing indicated the requisites which the money-material should preferably possess, the reader is given below in as brief form as possible, a statement of the various kinds of money now in use in the United States. From this array of facts, he may under- stand how much of the standard gold coin is employed asa medium of exchange, and what other media of exchange are in FUNCTIONS Ok MONEY use. 87 It will be seen that by no means all of the gold in the country is in circulation as a medium of exchange, and that the gold itself is a very small part of the sum total of the currency. STATEMENT BY THE UNITED STATES TREASURY OF THE CIRCULA- TION JANUARY I, 1898. General Stock, Amount in Circu- Coined or Issued In Treasury eee ee I, Gold: Coins cinacccen equ qacagewns $699,478,536 $151,910,176 $547,568,360 Standard Silver Dollars........ 455,818,122 394,327,049 61,491,073 Subsidiary Silver..... a% Sey oF RS 76,400,207 10,679,899 65,720,308 Gold Certificates...... gidblenteos.e 38,128,149 1,570,460 36,557,089 Silver Certificates............... 387,925,504 11,229,912 376,695,592 Treasury Notes Act July 14, 1890. 106,348,280 2,904,344 103,443,936 United States Notes............. 346,681,016 84,200,089 262,480,927 Currency Certificates ........... 44,555,000 1,240,000 43,315,000 National Bank Notes...... ..... 229,014,641 5,186,886 223,827,755 Totals’. 6 xaaioiie ose y des 2,384,349,455 663,248,815 1,721,100,640 Gold Bullion in the Treasury ........ 050. esse eee 45,559,000 |.... ee sees eee ee Silver Bullion in the Treasury ............-.0005 TO2284,9360- |iswa sexnotae dos To which is to be added the Deposit-Currency. Classifying these forms of money, together with the deposit currency, the relative quantities of our very diverse kinds of money are more clearly shown: GOLD. Coin, Certificates, - - SILVER. $547,568,360 36,557,689 Dollar pieces, - Subsidiary coin, - Certificates, GOVERNMENT DEMAND OBLIGATIONS. United States notes, Currency certificates, Treasury notes of 1890, $61,491,073 65,720,308 376,695,592 $262,480,927 43,315,000 103,443,936 $584,126,049 $503,906,973. $409,239,863 88 REPORT OF THE MONETARY COMMISSION NATIONAL BANK NOTES, 223,827,755 DEPOSIT CURRENCY. National banks October 5,1897, - $1,869,491,310 State banks 1895-6, 695,659,914 Loan and trust companies, 586,468,156 Private banks, 59,116,378 eran $3,210,735,758 In connection with their enumeration above there is given herewith a brief description of each kind : (1) Gold Coins of the denominations of $20, $10, $5, and $2.50, weighing 25.8 grains to the dollar and .goo fine, or 23.22 grains fine gold. They are a “legal tender in all payments at their nominal value when not below the standard weight and limit of tolerance pro- vided by law for the single piece, and, when reduced in weight below such standard and tolerance, a legal tender at valuation in proportion to their actual weight ;”’ receivable for all public dues and formerly exchangeable for gold certificates. Gold bullion is admitted to free coinage. By the act of February 12, 1873, it was enacted that the one-dollar gold piece, “at the standard weight of 25.8 grains, shall be the unit of value.” (2) Gold Certificates, now issued under the act of July 12, 1882, for gold coin deposited in the Treasury, in denominations of $10,000, $5000, $1000, $500, $100, $50, and $20; not a legal tender; “receiv- able for customs, taxes, and all public dues,” and redeemable in gold at the Treasury or any subtreasury. (3) Standard Silver Dollars, each containing 412.5 grains of stand- ard silver .goo fine, or 3714 grains of pure silver, coined for govern- ment account; “a legal tender at their nominal value for all debts and dues, public and private, except where otherwise expressly stipulated in the contract ;”’ receivable for all government dues and exchangeable for silver certificates. (4) Subsidiary Silver, coined for government account in denomi- nations of 50, 25, and ro cents, .goo fine, containing 25 grammes to the dollar (or 385.809-+ grains standard silver, or 347.228-+ grains of pure silver); “(a legal tender in all sums not exceeding $10 in full payment of all dues, public and private;”’ receivable for government dues to $10, and exchangeable for lawful money at the office of the Treasurer or any Assistant Treasurer of the United States in sums of $20 or any multiple thereof. (5) Minor Coins,coined on government account in denominations of 5 cents and 1 cent; a “legal tender at their nominal value for any amount not exceeding 25 cents in any one payment;” receivable to the amount of 25 cents for all governmental dues; and redeemable in FUNCTIONS OF MONEY 89 lawful money at the office of the Treasurer and the several Assistant Treasurers and depositories of the United States when presented in sums of not less than $20. (6) Silver Certificates, issued against standard silver dollars, in denominations of $1,000, $500, $100, $50, $20, $10, $5, $2, and $1; not a legal tender for debts, public and private; receivable for cus- toms, taxes, and all public dues; exchangeable for standard silver dollars or smaller coin, and redeemable in standard silver dollars. (7) United States Notes (greenbacks), issued under the acts of Feb- ruary 25, 1862, July 11, 1862, and March 3, 1863, in denominations of $1, $2, $5, $10, $20, $50, Froo, $500, Frooo, $5000, and $10,000; a “legal tender in payment of all debts, public and private, within the United States, except for duties on imports and interest on the public debt ;”” redeemed when presented since January 1, 1879, in gold coin at the subtreasuries in New York and San Francisco, and reissued. (8) Currency Certificates, issued under the act of June 8, 1872, in denominations of $5000 and $10,000, upon deposit of United States notes, payable to order, and not a legal tender, nor receivable in exchange for anything other than legal-tender notes; but available as lawful reserve by national banks. (9) Treasury Notes, issued under the act of July 14, 1890, in pay- ment for silver bullion; a ‘legal tender for all debts, public and pri- vate, except where otherwise expressly stipulated in the contract ;” receivable for customs, taxes, and all public dues, and ‘‘redeemable on demand in coin’”’ at the office of the Treasurer or any Assistant Treasurer of the United States. There were issued in all $155,931,002, but can- cellations have reduced the amount to $106,348,280, on January 1, 1898. (10) National Bank Notes, issued by the national banks of the United States in accordance with the act of June 3, 1864, to the extent of 90 per cent. of the par of government bonds deposited by such banks with the Treasury; not a full legal tender; receivable at par “in all parts of the United States in payment of taxes, excises, public lands, and all other dues to the United States, except duties on imports; and also for all salaries, and other debts and demands owing by the United States to individuals, corporations and associations within the United States, except interest on the public debt and in redemption of the national currency ;” receivable also by every national banking associ- ation for any debt or liability to it; and redeemable at the Treasury of the United States (in United States notes). (11) The Deposit Currency appears ‘as the credit to depositors in the banks; and on these sums as given above, checks, drafts, and the like, are drawn, creating a medium for exchanging goods, which, as shown by the clearing-house returns of the United States, performs transactions annually to the large sum of more than $50,000,000,000. Not a legal tender for any payments whatever. go REPORT OF THE MONETARY COMMISSION 16. After getting possession of the facts as to the various kinds of money in the United States, and the denominations of each, it will add to a proper understanding of the existing situ- ation to discover the work done by each of these forms of money. There are several tests at our disposal, and these will be treated in the following order: (a) The classified receipts by the banks on given days. (4) The kinds of money used in retail trade. (c) The money used in international payments. In 1871, at the request of James A. Garfield, then Chairman of the Committee on Banking and Currency of the House, the Comptroller obtained returns from fifty-two banks selected from three groups, namely, largest city banks, banks in smaller cities, small country banks. The figures showed that of all the receipts over the counters of those banks ($157,000,000) only 12 per cent. ($19,370,000) was in coin or notes, and 88 per cent. was in checks, drafts, and commercial bills. In 1881, 1890, 1892, and 1896 more careful examinations were made, showing the following results as to the percentages of the different kinds of money actually used by the people of the United States in their dealings with banks: Dates No.of Goldcoin | Silver coin lorie eee Total June 30, 1881........... 1966 0.65% 0.16% 4.06% 95.13% 100% September 17, 1881...... 2132 1.38 0.17 4.36 94.09 100 Jaly ty 18002 syecene axas 3364 0.89 0.32 6.29 92.50 100 September 17, 1890......| 3474 1.13 0.43 7.40 91.04 100 Septembér 15, 1892...... 3473 0.88 0.41 8.10 90.60 100 July 1, 1896............ 5530 0.60 0.50 6.30 92.50 100 17. Also the actual average percentage of checks and credit instruments used in making payments in retail trade, has been shown by the Comptroller of the Currency to be about 55. In short, over one-half of the retail trade is performed by banking expedients. And since of large transactions over go per cent. are likewise done without the usual forms of money, it has been shown that, taking the mercantile business of the country as a FUNCTIONS OF MONEY gt whole, retail and wholesale, over 80 per cent. of all the money work is done by checks, drafts, and other credit instruments." 18. A brief glance at the immense amounts of our inter- national trade also shows that very large transactions are settled by relatively small sums of metallic money. Taking merely the figures for 1896, it is found that the exports and imports of mer- chandise and of gold and silver coin and bullion were as follows: Total exports, merchandise, $882,606,938 Total imports, merchandise, 779,724,074 Total merchandise $1,662,331,612 Total exports gold coin and bullion, 112,409,947 Total imports gold coin and bullion, 33,525,065 Total gold, 145,935,012 Total exports silver coin and bullion, 60,541,670 Total imports silver coin and bullion, 28,777,186 Total silver, 89,318,856 Total gold and silver, $235,253,868 From this table it appears that in settling transactions amount- ing to $1,662,331,612, all told, gold and silver coin and bullion (including ore) were used to only about 14 per cent. Since much of this gold and silver bullion was itself sent as merchan- dise, the real percentage is much less than 14. *See Report of Comptroller of Currency 1896, and KINLEY, Journal of Political Economy, March 1897. THE STANDARD. 19. In the preceding sections, attention has been confined to the two functions of money known (1) as the Standard or Com- mon Denominator of Value, and (2) as the Medium of Exchange, Concerning transactions begun and ended on the spot nothing more need be said; but the fact of contracts over a period of time introduces a new and important element — the time element. Whenever a contract is made covering a period of time, within which serious changes in the economic world may take place, then difficulties may arise as to what is a just standard of pay- ments. Various articles might serve equally well as a standard for exchanges performed on the spot, but it is-not so when any one article is chosen asa standard for deferred payments. With- out much regard to theory, the world has in fact used the same standard for transactions whether settled on the spot, or whether extending over a period of time. 20. In order to work with perfection as a standard for deferred payments, the article chosen as that standard should place both debtors and creditors in exactly the same absolute, and the same relative, position to each other at the end of a con- tract that they occupied at its beginning ; this implies that the chosen article should maintain the same exchange value in rela- tion to goods, rents, and the wages of labor at the end as at the beginning of the contract, and it implies that the borrower and lender should preserve the same relative position as regards their fellow producers and consumers at the later as at the earlier point of time, and that they have not changed this rela- tion, one at the loss of the other. This makes demands which any article that can be suggested as a standard cannot satisfy. And yet it is a practical necessity of society that some one article should in fact be selected as the standard. The busi- ness world has thus been forced to find some commodity which — while admittedly never capable of perfection— provides 92 THE STANDARD 93 more nearly than anything else all the essentials of a desirable standard, 21. The causes which may bring about changes in the rela- tions between goods and labor, on the one side, and the standard, on the other, are various. We may, for instance, compare wheat with the existing gold standard. The quantity of gold for which the wheat will exchange is its price. As wheat falls in value relatively to gold, it exchanges for less gold, that is, its price falls; or, véce versa, gold exchanges for more wheat, and relatively to wheat gold has risen. As one goes up, the other term in the ratio necessarily goes down; just as certainly as a rise in one end of a plank balanced on a log necessitates a fall in the other end of the plank. Therefore, changes in prices can be caused by forces affecting either the gold side or the wheat side of the ratio; by forces affecting either the money standard or the goods compared with that standard. Consequences of importance follow from this explan- ation. First, suppose that commodities and labor remain unchanged in their production and reward, respectively; then, anything affecting the supply of and demand for gold will affect in general the value of gold in comparison with goods and labor. Or, second, if we suppose an equilibrium between the demand for and supply of gold, then, prices and wages can be affected also by anything affecting the cost of obtaining goods or labor. It is one-sided to look for changes in prices solely from causes touching gold, or one term of the price ratio. If, however, it should be desired ‘that prices should remain stationary, then this can be brought about only by finding for the standard an article that would automatically move in extent, and in the proper compensating direction, so as to meet any changes in value arising not only from causes affecting itself, but also from causes affecting labor and the vast number of goods that may be quoted in price. Nocommodity ever existed which could thus move in value. 22. For the moment, let the money side of the price ratio be regarded as unchanged and constant, in order to discuss some changes on the side of goods and labor, First of all, attention 94 REPORT OF THE MONETARY COMMISSION is called to a most remarkable industrial movement, indeed, one so great and striking, that it has never been paralleled in the economic history of the world. Never has there been such a widespread movement of invention and progress in the arts and sciences as in the last three or four decades of the nineteenth century. On every side and in every industry we have witnessed an unequaled progress in invention, in labor-saving devices, in new processes of extracting and manipulating the raw materials of the earth, in opening up vast new areas producing food and other commodities, the marvelous development of ocean and land transportation, the cheapened cost of carriage, the commer- cial rise of telegraph and telephone communication by which quotations in any one market are instantly known in every other market of the world, the concentration of production and les- sened cost of management—all of which have revolutionized the cost of producing every article of daily consumption from the simplest kitchen utensil to the great traveling crane or the modern express train. In the last few decades, then, great mate- rial causes have been at work which in themselves, quite inde- pendently of any forces on the money side of the ratio, would have been able to make very great changes in the prices of goods and in the position of labor. The word labor is used advisedly, because, exactly as the world has been able to increase its efficiency in production and in obtaining satisfactions for man- kind at less effort, the same labor and sacrifice has given forth a larger result. This explains why today labor commands in wages more for a day’s work than at any time in the previous history of the world. In view of the great progress made in the latter part of this century, it is natural to suppose that great changes should have taken place in the cost of obtaining a wide range of articles, even of food and extractive products. The blind struggle of great masses of men against the movement above described, which took its form in a lowered range of prices, is undoubtedly the cause which has given rise to the discussions of the present time about prices and silver. Yet unconsciously, the operation of these industrial changes has been largely overlooked, and THE STANDARD 95 attention has been almost wholly directed to the changes on the money side of the price ratio. 23. In looking about for the most desirable standard, it is at once clear that the ratio between the standard commodity, on the one side, and goods and labor on the other, may be changed during the time of a contract running long enough to allow changes to take place either in the standard or in goods and labor. It has been explained in what way prodigious changes can operate on the side of goods and labor. Now, it is fitting that the possibility of change on the money side of the ratio should be presented, and compared as to rapidity and exten with those of goods and labor. In the first place something must be said as to the possibility of rapid changes in the standard metals, gold and silver. Because of their durability, all the gold and silver ever produced (except losses by abrasion, shipwreck or the like) still remains. This is a matter of great moment. After a long continued period of production the total supply, of gold, for example, assumes very large proportions as compared with the annual output. Hence changes in the annual production have a relatively small effect on the total massin existence. The effect produced is somewhat like that of adding a barrel of water to Lake Michigan; it does not perceptibly raise the level of the lake. From this fact it fol- lows that when the existing supply of gold has become very large, moderate changes in demand for it do not produce any material change in the value of the whole of the large mass in the world. A falling off in the demand would be dissipated over the whole of a large quantity; a considerable increase in the demand (even if not at once balanced by an increased supply) must be dis- tributed over the whole mass already in existence. Conse- quently, owing to the durability of the precious metals, they accumulate to such an extent, that ordinary changes in demand and supply cannot immediately produce any rapid or even per- ceptible change in their world value. If it be desirable to select for a standard a material which is least exposed to changes in its own demand and supply (so that prices would be least affected by changes in the money term of the price ratio), then 96 REPORT OF THE MONETARY COMMISSION we understand why in the past, in obedience to this principle of selection, the precious metals have been invariably adopted as a standard of prices by commercial nations. And it is safe to assume that, when serious changes of price take place in short periods of time, they are assignable to forces operating rather on the side of goods than on that of the precious metals. For instance, the existing supply of wheat is, roughly speaking, the annual supply ; and a change in the demand for or supply of wheat can produce rapid and extreme fluctuations in its value and price. No one should think of their being due to changes in the world mass of gold in which the price of wheat is expressed —at least not the changes going on in short periods of time. Likewise, anyone must know that the fall in the price of steel rails in recent years trom $56 to $18 per ton, has been due to the intro- duction of new and cheaper methods of production, and not to changes on the gold side of the price ratio— especially since labor has received increased gold wages. 24. The world, as above described, has witnessed the sweep of a great economic movement over the field of industrial life in the latter half of this century. The events of this period have been such as to produce great changes in the value of any standard of deferred payments. The force of this current underneath industry has been steadily going on, its drift not well understood, but its disturbing influences on contracts everywhere felt. This is the reason why agitators have been able to create so much stir by the discussion of the standard. It must, however, be clear how impo- tent are the remedies proposed by these persons to counteract these great economic changes. To coin more silver dollars, or for the government to print more demand notes, will not change the disposition and ability of the country to produce commodities at a lowered cost. This disposition and ability arise from the char- acter of the people and our great natural resources. Merely to increase the quantity of money while preserving its value in gold will not change the relations of commodities in general to gold. The price of an article in gold will be maintained at that ratio which expresses its value relatively to the value of gold in the markets of the world, Moreoyer, the total mass of gold in the THE STANDARD 97 world must be changed in value in order that the price of goods shall be changed by influences affecting the gold side of the price ratio. For any single nation, it will be practically a physical impossibility to effect such a change, and even if the gold side’ of the ratio can be successfully manipulated, that will not dispose of the fact that changes in prices may arise from modification of cost on the commodity side of the ratio. Even then the problem of a standard of deferred payments will not have been settled. 25. Having arrived at the conclusion that, owing to their dura- bility, the precious metals are least likely to vary in value on account of changes affecting themselves, the choice of a standard lies between gold and silver. We cannot have two different stand- ards of value at the same time, without having two sets of prices. Also, if both gold and silver, united together in some form of international bimetallism, could be welded into a double stand- ard, it is clear that there would still be changes between this combination standard and the commodities compared with it. That is, even if gold and silver are bound together, changes in prices relatively to them must necessarily take place if changes occur in the costs of production of articles exchanged against this double standard. Granting all that may be asserted by the advocates of international bimetallism, conceding that the values of gold and silver may be maintained at a fixed ratio to each other, it must be evident that the problem of a standard of deferred payments is not thereby solved; because it does not follow, even if gold and silver can be successfully tied together, that they together will always maintain the same exchange rela- tions and the same level of prices with labor and with all other commodities— which we know are constantly changing in cost. 26. Moreover, we are forced to believe that bimetallism, national or international, is impracticable. If we are thus—as seems to be inevitable — forced to set aside the plan of attempting to regulate the values of gold and silver at some ratio, then the choice is between a single gold, or a single silver, standard. There can be no halfway place, if both gold and silver are given free coinage, under our present mint laws. As long as these two metals 98 REPORT OF THE MONETARY COMMISSION vary in value relatively to each other (without here going into the reasons why they so vary), it is impossible to use both gold and silver as a standard of prices. If given weights of each * metal are coined into a legal dollar (for example, 23.22 grains of pure gold, and 371% grains of pure silver), then as soon as the market values of gold and silver differ from the mint rela- tion, we have dollars of different values. Under such circum- stances, Gresham’s Law begins to operate. The operation of this law is really a very simple matter. The owner of the cheaper metal, supposing it to be silver, has two ways to dispose of it, either in the form of bullion, or in the form of coin. If silver has become cheaper, then it is over-valued at the mint. Thus silver in the form of coin, would buy more gold than it would in the form of bullion, consequently, silver will be sent to the mint to be coined. Gold is treated quite the reverse. Gold being the dearer, it is undervalued at the mint. Gold in the form of coin would buy less silver than it would in the form of bullion; hence, gold will be changed from coin to bullion and sold in the general market. The result is, if both are placed on the same basis at the mint, the cheaper metal, silver, will rush to the mint, and the dearer metal, gold, will be driven from coinage. In short Gresham's law operates: the cheaper money, whenever there is free coinage of both, drives out the dearer. 27. So long as it is impracticable to use gold and silver jointly as a double standard, and so long as gold and silver vary in value relatively to each other, it is impossible to use both metals as a standard. Any attempt to do so, as has been shown again and again in our own history, will 1esult in a single standard of the cheaper of the two metals. This brings the controversy about the standard to a clear issue. It was found that, for several reasons, our choice was restricted to either gold or silver. Shall it be gold, or shall it be silver? It must be either one or the other. To some it might appear that silver has shown a disposition to follow the general tendency of goods to fall in value, and that therefore it is a fairer standard on which to settle long con- tracts. Omitting here the discussion as to the justice of a stand- THE STANDARD 99 ard so constituted, it does not appear that silver has kept with goods in such a uniform way as would warrant us in choosing it as a standard because of this characteristic. For many years a tendency had manifested itself to subtract a previously existing demand from silver, until a situation was created such that the great total mass (large in comparison with the annual production) found little to support its value. So enormous a change in the attitude of the world towards silver finally created a condition in the market for silver which made it sensitive to sudden changes of demand. Losing a great part of its monetary demand, this large mass became heavy in value, and in its downward movement it showed the possibility of sud- den rushes as it fell (like an avalanche) from one point of support to another lower down. In 1876, silver within a few months declined and rose relatively to commodities to the extent of fully 25 per cent. Again in 1890, under a gigantic speculative movement silver rose nearly as many per cent., followed by the greatest fall in the whole history of the precious metals. In a | little over three years (from August 1890 to March 1894) silver — fell to one-half its former value. Such fluctuations in a precious metal in short periods of time without corresponding fluctuations in the cost of producing goods totally unfit that metal to act as a standard of deferred payments even for short contracts. 28. No such sudden and erratic changes have taken place in the exchange value of gold relatively to goods. Whether it be ‘due to prejudice or not is immaterial ; the fact remains that the business interests of the world have in recent years preferred gold to silver whenever they could get it. An increase in the world’s supply of gold has thus been followed by its extended use even to the extent of discarding silver. That is, let there be an increase in the quantity of gold and a corresponding increase of demand seems to follow owing to the concurring habits of ‘commercial countries. On the other hand, increase the quantity _of silver and it does not at all follow that there will be an increas- ing demand for it which will cause gold to be discarded. The ‘monetary history of the world since 1850 gives strong evidence of the truth of these statements. This has been the reason why Too REPORT OF THE MONETARY COMMISSION even with a vastly increased production of gold there has been steadiness in its value. The increasing supply has been followed by an increasing demand; and this may go on so long as there are nations to discard silver and take up gold. The conclusion, there- fore, is irresistible that since it is desirable to choose a commodity as astandard which fluctuates least in its exchange value in short periods of time, for reasons affecting itself, gold must be that commodity. It must be chosen by any commercial country which proposes to trade with the great civilized countries. A country must keep in touch with the great commercial movements of the day and furnish to the buyers and sellers a stable standard of prices, just as Venice did of old and England does today; if a country does not it is certain to lose some of its trade to its rivals. 29. The great increase in the production of gold since 1850 has now, so far as supply is concerned, a steadying influence on its value, for reasons previously given. A conservative estimate gives the total available stock of the world in 1850 at about $2,000,000,000. Inthe last forty-seven years (1851-1897) gold has been produced to the amount of over $6,000,000,000; so that, even allowing a deduction of £2,000,000,000 for loss by shipwreck, abrasion, use in the arts, etc., the total supply is now more than three times that in 1850. Tripling the supply of almost any other article would have enormously lowered its value. _ The reason why this fall in the value of gold did not take place is due to the preference of the business world for gold as com- pared with silver. The abundance of new gold enabled many countries to discard silver, thereby opening up a new demand for gold. But there is good reason to believe that any new demand thus created did not equal the new supply ; because we find a fall in the value of gold as compared with a day’s labor. Labor today exchanges for more gold than at any previous time in history. By the side of the abundance of new gold there has developed the phenomenal progress of the arts, previously described, by which the expense of obtaining nearly all goods of common consumption has been greatly cheapened. If gold itself had not come to be obtained more cheaply, prices would have fallen THE STANDARD IOI more than they have. But the interesting point is that, as com- pared with human labor, gold has depreciated. If gold had risen in value relatively to both labor and goods there might be some plausibility in the contention that it was ‘‘scarce.” The great gain to the laborer at the close of this century is the fact that his labor exchanges for more gold, and that in addition gold exchanges for more of the comforts and necessaries of life. To those of the wages-receiving class it is of the first importance that the commodities they buy have fallen in price and doubly so because at the same time gold in which wages are paid has also fallen relatively to labor. The fall in the prices of goods, therefore, is not only an advantage in itself as evidence of the easier acquisition of commodities we need, but it is no evidence of the scarcity of gold. On the contrary, the supply of gold has been tripled within forty-seven years, and, other things remaining the same, gold would have fallen in value; but all kinds of goods have also been obtained more cheaply than ever; so that the resultant of these movements on both sides of the price ratio has been to offset each other somewhat. There has been greater ease of acquisition of both gold and goods (as shown by the wages of labor), but goods have cheap- ened somewhat more than gold; hence, the resulting fall of prices coincident with the rise in the gold price of labor. 30. Standards, moreover, are not discovered or created by gov- ernments: they are adopted by the latter. People of all nations and all conditions, civilized and savage, have more or less exact standards of value by which they measure property and services. An African wishes certain things in exchange for his goods or his labor and has roughly in his mind the amount that he should receive. He has arrived at this standard not by express agreement with his fellow savages, but by the concurrence of the habits of the members of the tribe. And so we go on through various stages of civilization and we find that at various times men in this way have created standards of value. Gov- ernments sometimes have adopted them, but not always; some- times they have attempted to change them, and such attempts have invariably been followed by disastrous results. Therefore 102 REPORT OF THE MONETARY COMMISSION it is manifestly the duty of government to ascertain what the standard of the people whose business it wishes to promote may be, and then by law adopt that standard. If it does not do this it might better leave the whole subject alone and let the stand- ard take care of itself, as it will do under the play of natural forces arising from the habits of the people. * o¥ ' The business interests of the country regard the choice of gold as the standard by the greatest modern commercial nations as a natural evolution of the commodity fittest for that purpose. We are dealing herein with facts and not with theories. In so far as this standard has been evolved by the concurrence of practical men of affairs in the conduct of commerce and indus- try, it is the duty of the state not in any way to interfere with this choice. The mere fact that gold is the standard of most commercial nations is sufficient ground why the government should not attempt to establish another standard, especially since this fact is an evolution of business and not of politics. Any legislation, therefore, which operates to deprive the business com- munity of the standard which has been chosen with reference to business considerations is a blow aimed directly at the prosperity of trade and industry. Such action would be the same in effect as a measure to cut the farmer off from the use of improved implements, or to cut the whole business world off from the use of improved transportation methods. 31. Although there is no commodity that will serve as a per- fect standard of deferred payments where any considerable time elapses between the beginning and maturity of a contract, it is obvious that some standard must be chosen. As things go in a modern commercial nation, contracts are necessarily made running over a considerable period of time. The fulfillment of these contracts often becomes a question of judicial arbitrament, and hence the state, through its courts, must be able to declare what must be accepted as a legal acquittal of debts. There must, therefore, be an accurate legal interpretation of monetary terms. And it follows from what has been said that the stand- ard adopted for this purpose by government should be that selected by commerce. i he THE STANDARD 103 32. During long periods of time—within which gains in mechanical skill and invention, revolutions in political and social habits, changes in taste or fashion, settlement of new countries, opening of new markets, may take place— great alterations in the value of the standard may occur wholly from natural causes affecting the commodity side of the price ratio. And yet, in default of a perfect standard, persons who borrow and lend create debts and obligations expressed in terms of that article which has been adopted as the standard by the concurring habits oi iic commercial community of which they form a part. It should be understood, whenever men enter into obligations reaching over a period of time, that a necessary part of the risks involved in this undertaking is the possibility of an altera- tion in the exchange values of goods, on the one hand, and in the standard metal on the other, due to industrial changes and natural causes. This is one of the risks which belong to indi- vidual enterprise, differing in no way from other possibilities of gain and loss. For instance, prices rose, as indicated by an index number of 100 in 1860 to an index number of 216 in 1865. Therefore, in the United States, in this period of rising prices the creditor lost and the debtor gained. On the other hand, from 1865 to 1878, prices fell from 216 to Iol, and in this period of falling prices the creditor gained and the debtor lost. It is to be observed, however, that these figures refer to actual quotations of prices during the fluctuations of our paper money. But it is evident in such movements as these, that parties to atime-contract must take their own chances of changes ; and indeed it is much more wholesome that they should do so. It should be kept well in mind that it is not a proper — function of government to step in and save men from the ordi- nary risks of trade and industry. It goes without saying that if changes in the value of the standard due to natural causes take place during the continuance of a contract, it is not the business of government to indemnify either party to the con- tract. This is a matter on which every individual who enters — into time obligations must bear his own responsibility. The inefficient or shortsighted person who fails to take the risks of 104 REPORT OF THE MONETARY COMMISSION industry and contracts into account has no ground of appeal to the government for assistance. A government should no more appear in such cases to remedy the inefficiency of business men than to indemnify them for losses occurring in business, due to lack of judgment in other directions. Any attempt, therefore, to change the burden of responsibility from the individual in industry, to the government, in such a case, is an exaggerated form of socialism. It is a plea for government help to make up for individual weakness. Hence the attempt, through govern- mental control over the currency, to regulate prices artificially, and thereby to make a redistribution of property. 33. In this connection some consideration should be given to the economic position of debtors and creditors in society, and some estimate may be given of their relative values to society. It is known, of course, that all merchants are constantly borrow- ing. Nearly every man in business is a borrower and a debtor. It is also true that every bank is also a debtor to the full extent of all its deposits and notes. In our modern complex commer- cial organization, all this is legitimate; but the fundamental dis- tinction between a debtor and a creditor assumes importance in another form, as may be seen by taking a typical example. Most salaried persons lay up something for their families or for old age, by saving out of their moderate incomes. If sucha person has succeeded in saving perhaps one thousand dollars, he would naturally wish to invest it at interest. He has made this saving by foregoing the expenditure of that amount of money for satisfactions to his family or to himself. By going without these comforts and satisfactions he would naturally wish to obtain some future advantage. He loans his money on interest, for example, to the builder of one of our great city office buildings. The borrower, under the agreement, is given the power to con- sume whatever that $1,000 will buy. Is he, after expending that $1,000, exempt from any moral (to say nothing of legal) obligation to return the loan to the lender according to agree- ment? When the borrower entered into the agreement he took the risk connected with it. The act of making the loan was a voluntary one on his part. Now, in case the building does LHE STANDARD 105 not rent so well as he expected it would, and his use of the $1,000 produces nothing in its place, does that free him from his obligation to the lender? Is there any reason why the thrifty lender, on a small salary, should obtain no return for his long and painful sacrifice because a builder has been inefficient? Certainly not. The man who borrows money for investment in any undertak- ing will have the profit thereof; and it is therefore quite proper that he should assume the risk of loss. The lender specifically waives all claim to profits in excess of the designated interest, on the condition that he shall be relieved from all risk of loss. If he is not to be relieved from these risks, then there is no reason why he should not also have the profits. 34. Coinage of silver is sometimes urged as a means of aid- ing debtors. If silver is to be used in unlimited quantities, when at a value different from gold, it is clear that this ought to be done only in such a way as would place each metal on its own foundations. Were the government to manufacture silver coins and merely certify their weight and fineness, and enforce con- tracts made payable in such coins, then people could use silver as a standard of deferred payments if they chose to do so. It would not be necessary to fix upon any ratio to gold. If a particular name were assigned by law, or even by custom, to a definite weight of gold so that when contracts mention that name, there can be no doubt as to what is meant, there would be no necessity for conferring upon gold any further legal tender quality. So, too, if a different name, not easily confused with that assigned to the gold unit, should be assigned to a unit con- sisting of a definite weight of silver, so that contracts expressed in such units would be interpreted and enforced with certainty as to the meaning of the terms, there would be no need of further legal tender laws.’ If it be true, as is so often contended, that : Every contract would then carry with it the precise terms of its fulfillment. An award of damages could be expressed by a jury in either standard without more trouble than is involved in reaching a verdict now; for, there being at any given time an ascertainable ratio between the two standards, any damages found could be easily expressed in either standard indifferently. At a time when 31 ounces of silver was worth one ounce of gold, it would be immaterial whether an award of damages was 106 REPORT OF THE MONETARY COMMISSION silver has kept in value closely to commodities for long periods, and that it would for this reason be a better standard of value, silver could in this way be voluntarily agreed upon by those who borrow and lend, if it were preferred by them to gold. Then all members of the community could have the alternative of using gold or silver, as might be agreed upon. Perfect justice to all portions of the people demands that each should have the privi- lege of performing its transactions in the way most serviceable to itself. If tied together by a legal ratio, the poorer of the two metals will drive out the better; but, if not tied together in any way, whichever furnished the better standard would unquestion- ably come into general use through the concurring habits of busi- ness men; the poorer would be discarded, just as the better tools supplant the poorer. Those who wish to use gold, therefore, should have the same rights as those who wish to use silver. 35. So far it has been assumed that the standard of deferred payments must be a single commodity, and it has been shown that no single commodity can render perfect justice as between debtors and creditors in deferred payments. It has been urged, however, that a much greater approximation to justice would result if long-time obligations should be satisfied by taking as a unit not one commodity, but a large number of commodities. This is the principle of the Multiple Standard. Under this plan the sum of the money prices of a long list of commodities upon a given date, say 1870, is ascertained. Suppose that this amounts to $1,000; and that at another period, say 1890, the prices of the same quality and quantity of the same articles are again added up, and amount, we will suppose to $900. The theory of the Multiple Standard is that the debtor should return to the cred- itor that amount of money which will buy exactly the same quantity and quality of commodities that the debtor received at the beginning of the contract. In the case supposed above, the debtor would return to the creditor that amount of money ($900) which would buy in 1890 the same quality’ and quantity expressed as 100 ounces of gold or 3100 ounces of silver; the real damages awarded would be the same, just as any definite temperature is the same whether expressed in Centigrade or in Fahrenheit. THE STANDARD 107 of commodities that he could purchase with the £1,000 received in 1870. So far as the change in values of commodities relative to gold has been due to the progress of the arts and to invention, the gains of society as a whole are thus transferred to the debtor. The theory of justice in the Multiple Standard is based on the assumption that the creditor should have only the same quantity and quality of goods at the end as at the beginning of the con- tract; but if, during the continuance of the contract, advances in the arts have enabled society to produce these goods at less cost, it cannot be contended that this result has been due to the individual exertions of either the creditor or the debtor. The case is nearly the same as that of the unearned increment from land which is derived from the growth of the community and not from any effort on the part either of the landlord or the tenant. By the Multiple Standard, of-course, the gains of society would be transferred to the debtor. The question naturally arises, then, which of two parties to the contract —to neither of whom the changes of price are due—is the most deserving per- son to whom the gains of society should go. “It is to be observed that the Multiple Standard, as Sidi | narily proposed, does not include the prices of labor, of rent, and the like. So that, even if it might preserve unchanged rela- tions as concerns merely the quantity of goods, it would not bring about the same relations as concerns the purchasers of labor. When it is remembered that a very large part of expend- iture is for labor, the inclusion of this element in a standard might properly work to counterbalance any inference as to the value of the standard drawn solely from the prices of goods. If the price of labor were to be given its relative importance in a Multiple Standard for recent years, it might appear that prices as a whole had not fallen at all. 36. Moreover, if a Multiple Standard and a silver standard were provided for voluntary adoption by the side of a gold stand- ard, and granting that in a régime of falling prices the two former would throw the gain entirely to the debtor and the latter to the creditor, it is evident that these facts would be taken account 108 REPORT OF THE MONETARY COMMISSION of by both parties to a contract in fixing on the rate of interest. The borrower could get his loan at a lower rate under the gold standard, and only at a higher (and compensatory) rate under the Multiple Standard, or the silver standard. So that, if none were obligatory, the result to the borrower would work itself out much the same whether one or the other standard were used. It should be kept clearly in mind that whenever a country wishes to provide its citizens with a multiple standard by which the above operations may be carried on, it is quite within its power todo so. By publishing authoritative quotations of prices and giving the official valuation of a multiple unit each day, each average of the week, month, and year, it would be possible for any person, voluntarily, to enter into contracts based upon this standard. The choice of the multiple standard or the gold standard would then be open to all who were willing to make contracts with one another. It would be a matter of free choice which they would adopt, and the choice of the standard would be a part of the bargain on which the transaction was based. In no wise, however, should the government make it impossible for any citizen to use either standard at his discretion. And that stand- ard which in fact has been evolved by the development of com- mercial habits should not be displaced so long as it is demanded by commercial usage. THE STANDARD IN THE UNITED STATES. 37. Upon the establishment of the Mint of the United States in 1792, provision was made for the coinage of both silver and gold at a ratio of 15 to 1—the silver coins to contain 371% grains of fine silver to the dollar, and the gold coins 2434 grains of fine gold to the dollar. In selecting this ratio, Alexander Hamilton, then Secretary of the Treasury, appears to have been actuated by a desire to secure the concurrent circulation of both gold and silver through the adjustment of the legal ratio so as to approximate the actual market ratio.t Finding it difficult or “There can hardly be a better rule in any country for the legal than the market proportion, if this can be supposed to have been produced by the free and steady course of commercial principles. The presumption in such case is, that each metal THE STANDARD 109 impossible to ascertain, without much delay, the market ratio cur- rent throughout the countries of, the commercial world, he had directed his attention to the relative values of gold and silver in this country alone, and found that the silver dollars in circula- tion were of varying weights, but that ‘24% grains of fine gold have corresponded with the nominal value of the [silver] dollar in the several states, without regard to the successive diminu- tions of its intrinsic worth.” The Spanish silver dollars in cir- culation (which he had ascertained to exchange currently for 2434 grains of fine gold), varied in weights from 368 grains to 374, or a mean ratio of about 15 to 1, which he recommended as the coinage ratio, though he himself said that it was ‘ some- what more than the actual or market proportion, which is not quite 15 tor.” Therefore, starting with the gold dollar as 2434 grains of fine gold, the silver dollar was made to contain fifteen times as much, or 3714 grains of fine silver. Events proved, however, that although the actual market ratio in the commercial world had been in the past—as stated by Hamilton—a little less than 15 to 1, it did not long remain so. After 1793, the price of silver fell very materially, and the result was the establishment of the single silver standard instead of the gold standard, or a double standard. By 1820, the fact that the monetary system of the United States was on a silver basis—that the ‘‘dollar” which was the standard meant 371% grains of fine silver and not 2434 grains of gold— was too patent to escape discussion. The gold coins had been drained off—being too valuable to circulate on a par with silver. The commercial ratio between gold and silver in the years 1810 to 1833 averaged 15.66 to 1—-at which the gold dollar was worth $1.044. The ratio in 1833 was 15.93 to 1—at which valuation the gold dollar was worth $1.062. These prices, of course, are expressed in silver, which had become the standard of value; that is, prices were measured in this metal and it was this which was referred to whenever the word “dollar’’ was used. finds its true level, according to its intrinsic utility, in the general system of money operations.” See HAmiLton’s Report on the Establishment of a Mint (January 1791); Reports of the Secretary of the Treasury; Washington, 1837, Vol. I, p. 141. IIo REPORT OF THE MONETARY COMMISSION 38. In consequence of this loss of gold from the currency and with a view so to adjust the ratio that gold would: once more be brought into circulation, the act of June 28, 1834, reduced the weights of the gold coins. Instead of 24.75 grains they were made to contain 23.2 grains of pure gold to the dollar— a coinage ratio of 16.00215 tol. At the average commercial ratio of the year 1833, the gold dollar of the new coinage was worth 99.55 cents as measured by the existing silver standard. The coinage ratio, however, was now greater than the commercial ratio, which in the year 1834 was but 15.73 and in the subsequent decade varied from 15.62 to 15.93——averaging 15.78. Gold was then overvalued in the coinage, as silver had been before. 1834, and the silver was driven from circulation, being more valuable as bullion than as coin. Thus the gold coins became the standard of value; the word ‘dollar’ which had previously meant 371% grains of fine silver, came to mean 23.2 grains of gold; and the monetary system of the United States passed from the silver to the gold basis. By the act of January 18 1837, providing for uniform fineness of both gold and silver coins the standard was again changed very slightly. In con- formity to that act, the weight of gold coins was increased from 23.2 grains to 23.22 grains of fine gold to the dollar—making the coinage ratio of the two metals 15.9884 to 1. This was the establishment of our present gold standard. After the passage of the act of 1834 prescribing a coinage ratio by which silver was undervalued and driven out of -circula- tion the actual standard of value in the United States down to the year 1862 was gold. The silver dollar was worth as bullion, in these years from $1.01 to $1.05 as measured in the standard gold. Prices of commodities were measured in gold, and it was gold coin which was meant when ‘dollars’? were mentioned, because the business world had learned that the silver coins were worth too much to pass as dollars. 39. With the passage of the legal-tender acts in 1862 and 1863, however, the standard was again altered. The word “dollar” no longer meant 23.22 grains of gold. It had become a govern ment’s promise to pay that amount of gold—a promise the value THE STANDARD I1I of which fluctuated with every change in the credit of the govern- ment and every change in the prospect of a definite fulfillment of the promise. During the succeeding seventeen years all prices were measured in this fluctuating paper standard. As the standard depreciated, prices rose —but after the close of the war, its value increased with every additional indication that the time when the promise would be fulfilled was approaching. The value of the standard in fact appreciated toward the point from which it had departed in 1862, and upon the resumption of specie payments on January 1, 1879, the currency system again rested upon a gold basis and our standard was once more gold. 40. In 1873, however, came the legislative recognition of gold as the sole legal standard, as it had been the actual standard, of value. By the coinage act of February 13, 1873, it was provided “that the gold coins of the United States shall be a one-dollar piece, which at the standard weight of twenty-five and eight-tenths grains, shall be the unit of value; a quarter eagle,” etc. And although subsequent legislation, in 1878 authorizing the coinage of the silver dollar piece, and in 1890 discontinuing the coinage of the gold dollar piece, may have occasioned some confusion as to what is now to be regarded as the legislative definition of our standard, there cannot be the slightest doubt that, quite irrespec- tive of the metals of which our coins have been made, the actual standard of our present monetary system is and has been since January 1, 1879, 23.22 grains of fine gold and that it is this standard in which all prices have been measured and in terms of which contracts have been drawn. 41. The reason why some definite legislative declaration, as recommended by the Commission, should be made in order to remove all possible doubt as to whether ‘‘coin” means gold or silver in the payment of our national bonds, is connected with the refunding act of July 14, 1870. The question as to whether United States bonds could be paid off in greenbacks was settled by the election of General Grant in 1868, followed by the act of March 18, 1869 which solemnly pledged the faith of the United States to pay all its obligations in coin. When the large public debt was refunded at a lower rate of interest by the act of 1870, I12 REPORT OF THE MONETARY COMMISSION it was provided by this statute that all.the bonds issued under its regulations should be ‘‘redeemable in coin of the present standard value” (that is, the standard in 1870). The whole interest-bearing debt of the United States of the present day is governed by this law; since those issued under the terms of the Resumption Act of 1875 also followed the act of 1870. Inasmuch as the silver dol- lar piece was a legal standard coin in 1870, even though not in circulation, it is contended that as between individuals contracts payable ‘‘in coin” might be satisfied by either silver or gold coin. Even in such a case, however, the question would very properly be raised as to what was contemplated by the parties to the contract. But the bonds of the United States represent not contracts between individuals, but contracts between a govern- ment and individuals. Such a government cannot be forced to pay its debts in any kind of money unless by the power of a stronger government; but its credit at home and abroad depends upon its reputation for honesty and fair dealing in such matters, and considerations of public policy, as well as justice, therefore demand that no advantage shall be taken of technicalities as a shield for partial repudiation of indebtedness. Even if there might be a fair question raised by the private debtor as to the interpre- tation of such a contract, there should certainly be none raised by the government. It should not hesitate in announcing its” intentions to fulfill its obligations in their spirit. The only coin in contemplation in 1870 and 1875 was gold coin, and gold coin or its full equivalent has been received by the government for all bonds which have been sold since. THE LAWS OF TOKEN MONEY. 42. The recourse in recent years of several great countries to what has been termed the “limping gold standard” presents several cases where two metals circulate at par interchangeably, the one having a value of pure metallic content much below its nominal face value. The futile attempts to keep two metals with free coinage in concurrent circulation at different market values have resulted in a considerable use of silver, which still possesses an unlimited legal-tender power. The best known instances are the United States with its silver dollar piece, and France with its five-franc piece. The principles by which such coinage of inferior value is maintained at its face value in gold demand full explanation. In almost all points, such money as is referred to above cor- responds to the character and functions usually ascribed to token coins; but where it is clothed with unlimited legal-tender power and where large amounts are outstanding, there are seem- ingly very great discrepancies between such money and token coins. To make the matter quite clear, therefore, it will be well first to outline the nature of token coinage. As now understood and practiced, a correct system of token money would conform to the following principles : / 1. Such a reduction in weight and value below the standard unit as would prevent exportation and yet not place a premium on counterfeiting. 2. Coinage only on government account; that is, no free coinage. | : ' 3, Limited legal-tender power. 4. Protection against excessive quantity by direct redemp- tion on presentation in proper amounts, which also maintains its face value. \ 43. As a matter of course, countries have not always had clear conceptions regarding this kind of money, so that the 113 114 REPORT OF THE MONETARY COMMISSION principles just enumerated have come forth only by a process of evolution out of experience. For example, in the United States the first rule was not observed until 1853; not until it was discovered that the same causes which led to the dis- appearance of the dollar piece (of 371% grains pure silver) soon after 1834 also removed the subsidiary coins (two halves or four quarters, etc., then also containing 3714 grains pure sil- ver). This was the reason why we were driven to such shifts to use foreign coins for small change. In 1853, our subsidiary coins were reduced to 345.6 grains of pure silver for two halves, four quarters, or ten dimes. This reduction in weight by about 6 per cent. kept the bullion value of the token coins below that of both the gold and silver dollars, and they circulated freely. They were worth more as small change than as bullion. As regards the second law it is evident that if coins are issued at a value above the cost of the bullion in them, the issuer gains this profit, or seigniorage. Hence the coinage should not be allowed toa private person but should be restricted to the state, to which the profits should accrue. This is all the more necessary if the duty is laid upon the state to redeem the coins upon demand. The reason for the third law is obvious. The standard coins being ordinarily issued only in multiples of a unit, there must frequently be fractional sums represented in a debt; and the same considerations which demand that the kind of money to satisfy the major part of the debt shall be clearly defined in law, also require that some method of legally satisfying the fractional portions should be indicated. Consequently, the token coins are made legal tender for this purpose. On the other hand, a pay- ment of a debt in large amounts of over-valued coins, these being of small denomination and hence heavy and cumbrous in large sums, would be a serious inconvenience. If, therefore, the legal-tender quality conferred on token coins were unlimited, the power might be abused by a captious debtor, who might insist on making some large payments in these coins for the purpose of annoying the creditor. Minor and subsidiary coins have usually been made a legal tender, therefore, only to lim THE LAWS OF TOKEN MONEY 115 ited amounts. In 1853 subsidiary silver coins, which hitherto had had full legal-tender power, were made payable for debts only in sums not exceeding five dollars. In 1879 this limit was raised to ten dollars. 44. A person obliged to make remittances abroad might have been paid here in over-valued token coins, which, not being worth in foreign countries more than the bullion they contained, would be short payment and could not be used abroad. Unless he could exchange token coins for full-valued standard coins which would be equally good abroad as well as at home, he would find business decidedly venturesome. Consequently the neces- sity for the fourth law becomes at once apparent. Indeed, redemption is a fundamental necessity for a system of token coins. Inasmuch as no government can ever foretell the amount which the community will absorb, it must be ready to freely provide token coins in exchange for standard coins whenever needed; and to prevent an excess from clogging the tills of merchants it must be equally ready to pay out standard coins in exchange for token coins whenever the latter are sent in to the Treasury. Thus free exchange of token coins for gold and of gold for token coins, is the only proper method by which an excess in quantity is automatically prevented. If wanted, they are obtainable; if redundant, they are inevitably withdrawn. Without a method of redemption direct or indirect, token or debased coins would certainly go to a discount if issued to excess, because, not being received equally with standard coins, a discrimination against them would manifest itself. Not hav- ing in themselves a value equal to their face value, they must borrow the deficiency only from the process by which they can be exchanged at par with full-valued coins. By the act of 1879 subsidiary coins may be exchanged for lawful money in sums of twenty dollars and multiples thereof. In addition to the removal of excessive issues from the cir- culation, redemption of token coins performs an important func- tion in the distribution and redistribution of such coins as are needed. Without redemption, nickels, for example, would accu- mulate in large amounts on the hands of the street car com- i 116 REPORT OF THE MONETARY COMMISSION panies; for it would be inconvenient or impossible for these companies to find those who might want small change, and it would be difficult for them to get rid of large accumulations at full value. But the system of redemption offers the means whereby those who have too much can dispose of their surplus, and those who have not enough can get more. The Treasury thus acts as a distributor of the supply of token coins. Lastly, the community will need only a limited amount of token coins for small change. What this sum will be can be determined only by experience. No one can foretell how many dimes or quarters will be needed in the daily transactions in which money is necessarily used. There must, therefore, be free- dom in issuing all that is wanted. Safety is to be found ina prompt redemption of those which the public do not need. In small denominations a very large number of pieces may be required, but the total value may be inconsiderable; for larger denominations of no greater number of pieces the total sum may be quite important. The inconvenience of not having money for large and small change is so great that if the government did not provide it in a form that will circulate (as before 1853 and again in July 1862) some substitutes are necessarily provided by merchants. The demand for token coins is therefore, up to a certain limit, strong and steady, and if the issues are within this limit there will be no net redemption. The coins presented by one individual or class will be withdrawn by others for use in the channels where they are wanted. 45. The limitation of the laws of token coinage to denomina- tions below one dollar is purely artificial, being based on the idea that two half dollars would circulate in a way different from two one dollar pieces. Or, to put it another way, it is untrue to say that “change” is wanted only in denominations below one dollar. In fact, retail transactions—being those in which, if at all, money passes from hand to hand—require the use of one dol- lar and two-dollar, if not five-dollar denominations as much as they do those of quarters and halves and for exactly the same reasons. Then, if it should happen that the coins, or money, of denominations above one dollar in general use for “large THE LAWS OF TOKEN MONEY 117 change” should be over-valued (as in the case of our silver dollar piece to the enormous extent of, perhaps, 55 per cent.) we have in these forms of money qualities exactly similar to those of all token coins, and the same principles govern their issue and circulation. 46. The difference between the value of the bullion in a coin and its face value is called the seigniorage. The name took its origin from the usage of the lord or seignior, who took a profit on the coinage of the metals brought to his mint. Properly speaking it should be no greater in the case of standard coins than the expense of coinage. In the United States since 1875 coinage of gold has been made gratuitous, that is without any charge for manufacturing the coins. Seigniorage has been used as a term to cover more than the mere cost of coinage ; being used to indicate the sum, be it large or small, by which the face value exceeds the market value of the bullion in the coin. In any instance where the seigniorage includes anything beyond the cost of coinage, we have a case of token coins. In short, the existence of a seigniorage is the essential characteristic of token coinage. Hence our silver dol- lar piece with a seigniorage today of over 55 per cent. is even more distinctly a token coin than two half-dollars were in 1853, with a seigniorage of only about 6 per cent. Of course at the present time our fractional coin has a seigniorage of nearly 60 per cent. The reduction in value in 1853 of about 6 per cent. to prevent exportation and melting has now, because of the fall in silver, extended to nearly 60 per cent., thus establishing an enormous premium on counterfeiting. 47. The circulation of silver five-franc pieces in France at par with gold furnishes a most interesting case of token coinage. These coins have a seigniorage of over 50 per cent. To many it seems inexplicable that they should circulate at their face value. On examination, however, it will be found that they owe their value to the ordinary laws of token coins. They are highly necessary for change, and large amounts of them are certain to be needed for this purpose. Bank of France notes, the only paper money, are issued generally in large denomina- 118 REPORT OF THE MONETARY COMMISSION tions; and hence leave the field for currency of smaller denomi- nations wholly to gold and silver. Although gold five-franc pieces are authorized they have not been coined since 1870; indeed since that date almost no gold coins below twenty francs have been minted. A large field in the circulation has thus been given over to be occupied by the five-franc silver pieces, and between $200,000,000 and $400,000,000 of them have been thus kept in circulation outside the Bank of France. The quan- tity has been restricted to a sum no greater than is demanded by the needs of the community for the purposes of large change. ~ Most important of all, however, to their maintenance at par is the system of redemption, which will be found to be much like the redemption of the silver dollars in the United States. In the first place, if there were any redundancy in general cir- culation the excess would promptly be removed by the system of quasi-redemption, which requires all the state treasuries, as tIn 1890 M. de Foville, Director of the French Mint, by a method of his own (see Journal de la Société de Statistigue de Paris, January 1886) estimated the total silver stock of France, including subsidiary coin, at z,500,000,000 francs (approxi- mately $500,000,000). Later he stated the exact distribution of the standard silver coin circulating in France as follows : In circulation In bank Total (000,000 omitted) (c00,000 omitted) (000,000 omitted) French silver five-franc pieces, 606 fr. 794 fr. 1,400 fr. Belgian silver five-franc pieces, 112 233 345 Italian silver five-franc pieces, 155 173 328 Greek silver five-franc pieces, -.- 8 7 15 Swiss silver five-franc pieces, 3 4 7 Total, 884 fr. 1,211 fr. 2,095 fr. These estimates received the support of Dr. Soetbeer. M. Ottomar Haupt, how- ever, has made a much higher estimate. According to his figures, the situation in 1892 (see Haupt: Monetary Situation in 1892, p. 130) is as follows: In circulation In bank Total | (000,000 omitted) (000,000 omitted) — (000,000 omitted) French silver five-franc pieces, 1,800 fr. 924 fr. 2,724 fr. Foreign silver five-franc pieces, 160 340 500 Total, ; 1,960 fr. 1,264 fr. 3,224 fr. Other estimates have been made by competent persons. M. Haupt believes that the figures as stated by him in 1892 have, until recently at least, remained sub- stantially correct. As no striking monetary changes have since taken place, the silver circulation, whatever it may amount to, has probably not materially altered during the past five years, 7 THE LAWS OF TOKEN MONEY 119 well as the Bank of France, to receive the five-franc silver pieces at their face value equally with gold. That is, they are as good as gold for all payments to these institutions, which afford an outlet for any which may be in excess of the needs of circulation. The Bank of France is not obliged to directly redeem silver in gold, but so long as the gold reserves of the Bank are large and increasing in comparison with silver, it is evident that there is no danger of the silver flowing into the bank in quantities suf- ficient to weaken the gold basis on which the bank now firmly stands. While there is no direct redemption in gold, the indi- rect redemption works sufficiently well in normal times. Both gold and silver are received in unlimited amounts on equal terms; and in payments by the bank, while gold is skillfully accumulated, there is practically no discrimination against silver. So long as France retains her present gold standard, the bank will be able to keep silver at par with gold, and her large gold reserves are the immediate proof of this ability." The general security as to the redemption of silver coins is, however, obtained by protection for the future. The only rea- son why the Latin Union at present holds together is because of the existing provisions of the Treaty in regard to the ultimate redemption of its own silver coinage by each member of the Union. In case the Union is dissolved, it has been agreed by all the states that each state shall redeem all the silver five- franc pieces which it has emitted at the nominal or face value of the coins. These measures, known of all men, give assurance that in cases of emergency the ultimate redemption in gold of the silver circulation is assured. The five-franc pieces of France, therefore, although having «While for ordinary sums there is usually no difficulty in obtaining gold from the Bank of France, the policy of the institution to preserve a large gold fund leads it to charge a slight premium on sums of any magnitude wanted in gold for exportation. But this charge has not exceeded one-tenth of 1 per cent., and is often much less. This policy does not operate as a positive prohibition to obtaining gold, but as a slight deterrent, sufficient to turn applicants to other sources if they can obtain gold at lower rates elsewhere. Yet it is to be understood that the gold can be had of the bank, in case of real need, on payment of the slight premium. It is by such methods as these that the gold reserves of the bank have been favored, and yet any real dis- crimination against silver is practically avoided. 120 REPORT OF THE MONETARY COMMISSION unlimited legal tender power, circulate according to the rules of token coins, as described above. They bear a seigniorage (of over 50 per cent.); they are limited in quantity; their further coinage is suspended; and their quantity in circulation is kept at the needed amount by redemption, as above described, and by the promise of absolute and final redemption in gold in case the Latin Union be dissolved. 48. The case of the American silver dollar is very similar to that of the French five-franc piece. The reason why our silver dollar circulates at par is to be found in our observance of the principles of token coinage. It will be seen that the silver dollars conform to all the requisites of token coins; they beara seigniorage (of over 50 per cent.); their coinage is only at the will of the government; their quantity is limited by suspen- sion of further coinage to a sum probably no greater than is needed for large change; and there exists a very effective sys- tem of indirect redemption. The need of silver dollars for purposes of change must ever be limited by the amount which the community, from its own preferences, will use. The silver pieces themselves cannot be used in large quantities, as has been proved by the constant and indefatigable efforts of the Treasury to put them into circula tion. In order to get silver dollar pieces into circulation Con _gress appropriated the means to pay for shipping the coins free of charge to any part of the United States. To cover this cost the Treasury has already expended over $1,000,000; and yet the highest figures for the circulation of silver dollar pieces was $67,547,023 in December, 1890; while for years the sum has remained below $60,000,000. During the fiscal year 1897 the Treasury paid out and shipped to various points about $72,500,000 in silver coin (including subsidiary silver coins as well as dollars), at an expense, for express charges alone, of $81,500; but the channels of circulation were already so filled with silver coin that more could not be absorbed, and the consequence was a return of $73,200,000 to the Treasury, thus resulting in a net decrease of $700,000 in the actual circulation of silver coin. * The details as to this movement are indicated in the following table: THE LAWS OF TOKEN MONEY 121 Since our people would not carry heavy coins, the only way in which their circulation could be assured was to issue silver certificates in small denominations. The public would take silver certificates when they would not use silver dollar pieces. In 1886, silver certificates in denominations below ten dollars were authorized. The competition of other small paper money had already been removed by the withdrawal of one- and two-dollar MOVEMENT OF SILVER COIN DURING THE FISCAL YEAR ENDING JUNE 30, 1897. [In millions of dollars.] “ Ship- Bal; ae Office at ee Received Paid June 3, eee a 1997 in ‘“‘ paid” Washingtoms sissies iscaceaces 152.4 3-7 3.0 153.1 1.7 NOW VOrk’ .ccaceesnce sotew eee 49-7 23.5 19.9 53-3 3.1 BOStON ac s:aelaa mim aeubdace 2.8 3.7 3.8 27, 2.9 Philadelphia...............0. Il. 7.9 6.7 12.3 3.1 Baltimoreisisc caisiscdase enaas ess 6.8 2.5 3.1 6.2 2 Cincinnati...:. 0000002 s205 05 1.3 4.0 3.9 1.4 3.3 Sti Louis: ss.iscaeem deeds as eae 18.9 8.3 73 19.9 5-9 Chicago ic cssde sawn aeeennia: 3-4 9.8 9.4 3.8 8.4 New Orleans............ 000. 5.5 6.0 9.8 1.7 9-3 San Francisco........... 04+. 25.7 3.8 2.3 26.2 255 277.6 73:2 70.2 280.6 40.4 MintS..ccc ass ses se eaeesans 116.7 20:27 2.3 135.6 1.2 Total ioe. cccisiaie sane esis 394.3 94-4 72.5 416.2 41.6 * This amount includes new coinage. RESUME. Balance in Treasury and Mints June 30, 1896, $394.3 Receipts, - 73-2 $73.2 Coinage, 21.2 $488.7 Paid and shipped, 72.5 72-5 Balance of silver coin in Treasury and Mints. $416.2 Net inward movement, $0.7 Expense of movement, express charges only, - $81.500 OUTSTANDING. Silver coin, June 30, 1896, $112.3 Silver coin, June 30, 1897, II1.6 Net decrease of circulation, $0.7 122 REPORT OF THE MONETARY COMMISSION United States notes. In this way an increasing work was pro- vided for the silver currency, so that it was not in supply beyond the demand for purposes of large change, and it ceased coming back to the Treasury to such an extent as formerly. That is, the supply of the silver circulation being determined by the requirements of the acts of 1878 and 1890, new demands were created for it, owing to the withdrawal of other kinds of money. This was also aided by the very large contraction in the cir- culation of the National Banks. In these ways the silver coinage, having a large seigniorage, was kept in quantity equal to the need for large change. And the danger that an increasing quan- tity would transcend even the demand created by withdrawal of other currency was removed by the cessation of further pur- chases of silver, November 1, 1893. 49. But the important fact which maintains the silver dollar pieces at par with gold, and reduces the amount in circulation to the actual needs of the community for change, is the existing system of redemption. This redemption, however, is not direct. There is no law requiring the Treasury in express terms to redeem the silver dollars in gold. But there is a system of indirect redemption which, in practice, proves almost as effective as a specific requirement.’ In all payments to itself, the Treas- ury receives silver on an equality with gold; and in all payments from itself to others it provides gold, if that metal is desired; but in no case does it force silver upon an unwilling person. * How this indirect redemption is accomplished is clearly shown in the following extracts from the Refort of the Secretary of the Treasury in 1887: “Provision should be made against a time when there may be more of that form of money [silver dollars] than is required for the business of the country. The first symptom of this will be increasing ownership of silver by the government; this increase will take place because the government pays to the people that kind of cur- rency which they wish to have and receives from them that kind which they wish to pay; consequently the government will accumulate the form of money which the public least desires. If the government held no funds save those needed for its daily expenses, it would perform no different function toward currency when it had oxce coined or printed it than does an individual who receives and pays out money; but the two great trust-funds—that for the redemption of United States notes (#$100,000,000), and that for the redemption of national-bank notes, at present more than $100,000,000 — and whatever surplus there may be from time to time, form, as it were, a reservoir which takes and holds that kind of currency which the people reject. THE LAWS OF TOKEN MONEY 123 This indirect method of redeeming silver, and thus maintain- ing its value at par with gold, by taking out of circulation and locking up in the Treasury any surplus, has been given a support by legislation so worded that while not ordering direct redemp- tion of silver dollars in gold, it puts an obligation on the Treas- ury so clear and undoubted that if silver were not maintained at par with gold it would be a distinct violation of statute. In the act of July 14, 1890, it was declared to be ‘the established policy of. the United States to maintain the two metals on a parity with each other upon the present legal ratio, or such ratio as may be provided by law.” This policy was reaffirmed by the act of November 1, 1893, discontinuing purchases of silver bullion, which required the equality between gold and silver coins to be ‘“‘secured through international agreement, or by such safeguards of legislation as will insure the maintenance of the parity in value of the coins of the two metals, and the equal power of every dollar at all times in the markets, and in the payment of debts.” The statutes above quoted and the practice of the Treasury, therefore, have effected a process of redemption of silver in gold, which has all the force of a direct system." Were it not for this great government reservoir, a redundancy of any form of currency would be shown either by its exportation to countries where it was needed or by its depreciation here. The silver dollar cannot be exported, because the silver of which if is made is worth less than 75 cents, which would be its value for exportation. “The government has always kept those dollars and their certificates as valuable as they were when it paid them out by receiving them in payment of taxes ; but some- times it has been obliged to receive them in greater amounts than the people were willing to take them. This was notably the case in 1884, 1885, and 1886, when they so accumulated that at the end of July 1886 there were $93,959,880 of them in the Treasury. During those years these funds in the Treasury formed the reservoir which held the silver dollars that the people did not want, and thus prevented those which they did want, and still held, from going to a discount, or, in other words, from becoming worth less to the people than they were when the government originally paid them out of its Treasury.” * How this is regarded by the Treasury may be seen in a letter from Mr. Carlisle, when Secretary, to James P. Helm, Louisville, Ky., in September, 1896: “With a knowledge of these assurances, the people have received these coins and have relied confidently upon the good faith of their government, and the confidence thus inspired has been a most potent factor in the maintenance of the parity. The public has been satisfied that, so long as our present monetary system is preserved, the governmen 124 REPORT OF THE MONETARY COMMISSION 50. The actual needs of the country for money of the vari- ous denominations can be seen in the following table: PAPER CURRENCY OF EACH DENOMINATION OUTSTANDING DECEMBER 31, 1897. Denomi- | United States |Treasury notes} National Gold Silver nation notes of 1890 bank notes certificates certificates Total $1.00...| $2,754,763 |815,346,889 | $350,536] .-...... $31,538,550] $49,990,738 2.00...| 2,447,878 | 10,204,776 169,032 |) sioede nes 19,271,678 32,093,364 5.00...| 62,582,267 | 32,267,755 | 72,827,010] ........ 106,211,195 | 273,888,827 10.00. .| 82,835,501 | 31,650,930| 70,747,130] ........ 119,233,366 | 304,466,927 20.00..) 67,971,032 | 10,255,480 | 52,566,400 | $4,795,494 | 71,162,410] 206,750,816 50.00..] 14,208,375 285,350 | 10,679,450] 2,722,655 | 14,361,435] 42,257,265 100.00.| 24,051,200] 2,382,100] 21,504,100] 3,712,000] 25,821,370 77,470,770 500.00.| 15,690,000] ........ 112,000| 3,448,500 157,500 19,408,000 1000.00[ 75,115,000! 3,955,000 28,000! 5,634,500 168,000 84,900,500 5000.00 15,0004) xccawanre | Qonewads 5,475,000] ........ 5,490,000 10,000. T0000 | aseewawe | sesaeuws 12,340,000} ........ 12,350,000 Fractional parts...) vereeese | sere vate 90,382) -ssea‘sienen |, adareninn 30,382 Total .|347,681,016 |106,348,280 |229,014,640 | 38,128,149 |387,925,504 | 1,109,097,589 Unknown destroyed] 1,000,000 |...... 0.05 Jesse ceeeee | cece cece [eee cence 1,000,000 Net.. ./346,681,016 |106,348,280 |229,014,640| 38,128,149 |387,925,504 | 1,108,097,589 If, then, the plan of the Commission should be adopted, by which the issue of all other forms of paper money of denomina- tions less than ten dollars is forbidden, and the duty of serving as large change be granted to silver dollars and silver certificates will do whatever its moral obligations and express declarations require it to do, and very largely in consequence of this confidence in the good faith of the executive authori- ties, the silver coins have not depreciated in value. It is not doubted that whatever can be lawfully done to maintain equality in the exchangeable value of the two metals will be done whenever it becomes necessary, and although silver dollars and silver certificates have not, up to the present time, been received in exchange for gold, yet, if the time shall ever come when the parity cannot be otherwise maintained, such exchanges willbe made. It is the duty of the Secretary of the Treasury, and of all other public officials, to execute in good faith the policy declared by Congress: and whenever he shall be satisfied that the silver dollar cannot be kept equal in purchasing power with the gold dollar, except by receiving it in exchange for the gold dollar, when such exchange is demanded, it will be his ‘duty to adopt that course. But if our present policy is adhered to, and the coinage is kept within reasonable limits, the means heretofore employed for the maintenance of the parity will doubtless be found sufficient in the future, and our silver dollars and silver certificates will continue to circulate at par with gold. . .” THE LAWS OF TOREN MONEY 125 alone, it is evident that practically all of the silver currency can be kept outstanding without exceeding the needs of the com- munity for denominations below ten dollars. This can be shown by the amounts of the various kinds of money of those denom- inations now used in the country. Silver dollar pieces (January 1, 1898) $61,491,073 One dollar notes other than silver certificates, 18,452,188 Two-dollar notes other than silver certificates, 12,821,686 Five-dollar notes other than silver certificates, 167,677,632 198,951,506 Silver certificates of one, two, and five dollars 157,021,423 Total, $417,464,002 If this be the sum of money required today by the country in denominations below ten dollars, how nearly will the existing coinage of silver dollars fit this need? Total silver dollars coined (January 1, 1898) $455,818,122 In circulation outside the Treasury : Silver dollar pieces $61,491,073 Silver certificates in one, two, and five dollars, 157,021,423 ———-—- $218,512,496 Remaining to be given a use, $237,305 ,626 Held by the Treasury : Silver dollar pieces, $6,401,545 Silver certificates, 11,229,912 ——- $17,631,457 Net to be kept in circulation, $219,674,169 By withdrawing all notes below ten dollars of United States notes, Treasury notes of 1890, and national bank notes, which amounted January 1, 1898, in all to $198,951,506, a place will be provided for at least this amount of silver currency. It will be seen that the silver to be provided with a place exceeds the paper money to be withdrawn by only $20,722,643 ; and this sum would, in all probability, be soon absorbed by an increasing demand as the country grows. Taking existing conditions, there- 126 REPORT OF THE MONETARY COMMISSION fore, as a guide, it is quite unlikely that silver to any extent worth consideration would flow back to the Treasury, should silver be given the monopoly of service within the limits set by the Commission. Carrying out the principles of money governing a coinage having a large seigniorage, the Commission urged that all doubt as to the methods of redemption should be removed, and that there should be direct redemption of silver dollars in gold. This in fact, would be no departure from present practice but would make direct what is now indirect. It would acknowledge in law what is now going on in fact ; and this open acknowledgment would remove all possible doubt or uncertainty at home or abroad as to our intentions regarding the parity of our gold and silver coins. The policy of the government as to its coinage should be above the suspicion of uncertainty. If direct redemption of silver dollars in gold be required, our cur- rency system will be unified and reduced to a common basis. Simplicity will take the place of confusion. s1. By the plan of the Commission, unity and uniformity of our metallic money will be obtained, without increasing the strain upon the Treasury. If there be any fear that the promise of direct redemption of silver in gold will impose any new burden upon the Treasury, the figures given will remove it. The need for money of small denominations is so imperative that it must be met; and under the proposed plan this necessity can only be supplied by silver certificates and silver dollars. This would keep most of them constantly in circulation. Then the explicit declaration that this currency can at any time be redeemed in gold, will remove the only reason why anyone would hesitate to take it. If such a currency is made absolutely equal to gold, there will then be no reason whatever why it should be sent in for redemption except either its imperfect distribution or its redun- dancy. And if it should appear, by experience, that the country did not need so great an amount of money of these denomina- tions, then, of course, it is the bounden duty of the Treasury to take up the surplus. The government received a dollar in gold, or its equivalent for every dollar of the silver it put into circula- THE LAWS OF TOKEN MONEY 127 tion; and justice to its citizens requires that if silver is redun- dant, the Treasury should give back as good as it received In this matter, the Government should consult the wishes and pre- ferences of the people; if the latter, by their voluntary action, send in silver dollars for redemption, thereby announcing that there are more than they need, then this mandate of the public should be obligatory on the Treasury. The plan of the Com- mission, moreover, gives the Secretary power to sell bonds in case an emergency arises where it may be necessary to obtain gold to properly satisfy the wishes of the people whenever they desire to use less silver. Then only would there be any demand upon the gold in the Treasury, and in such cases the Secretary should be given full power to meet such demands without creating the slightest disturbance in any part of the country’s industry. 3 Probably there would be even less redemption under the direct than under the indirect form. At the present time banks which have silver dollars and certificates in their vaults make it a point to use them in furnishing funds for paying customs duties. Under the present indirect system the banks turn them in for customs duties in advance of any actual redundancy, embracing the opportunity to secure their redemption merely because they are not sure that, if they continue to hold them, there will be another opportunity just when they want to dispose of them. 52. The prime requisite of a circulation like our silver dollars, which bear so large a seigniorage, is that its quantity should not exceed the needs of the business community for the respective denominations. The figures given above, show that our exist- ing silver coinage fully equals —and slightly surpasses—that quantity which we now need. It is therefore plain that, after doing everything which can be done to give silver the largest possible circulation, no further coinage should be thought of. Under a redemption system, in just the proportion that an excess over needs is coined, will the silver return upon the Treasury, and embarrass its attempts to keep a strong gold reserve. For these reasons the Commission urged the suspension of all further 128 REPORT OF THE MONETARY COMMISSION coinage of the silver bullion purchased under the Act of 1890, If this bullion, costing about $100,000,000, were coined into dollars, it would add over $150,000,000 to the existing sum of $455,818,122 to be kept at par with gold. This would be clearly in excess of the needs of the country for notes below #10. It is to be noted that the plan of the Commission, while pro- viding a place for the silver dollars where they would circulate at par, does not thereby indicate that in the future no additional measures may wisely be adopted to render our monetary system wholly invulnerable. The retention of 455,000,000 of silver dollars in our circulation at double their real value, will require the constant maintenance of a gold reserve sufficient to create confidence in the ability of the government to redeem all the silver that may be sentin. It is possible that in emergencies and in times of political stress, when the credit of the govern- ment may be assailed, this may prove an element of weakness. It may be justly observed that, while in normal times no diffi- culties may arise from this silver circulation of a token character as proposed by the plan of the Commission, in the very time when the country may not be able to give it full protection this token silver may cause disturbance. If we had no form of money that was not of full value —that is, if the face value of every coin were no more than its bullion value —then, in time of emergency the Treasury would be entirely free from the neces- sity of providing against possible fear on this account and would not be obliged to keep larger gold reserves at just the time when every dollar of gold is needed elsewhere. Consequently, while the Commission postponed to the future the settlement of this particular question, it was believed that adequate provision had been made for preserving the silver dollars at par with gold in normal times. This is made absolutely certain, even in periods of stress, by the authority given to the Secretary to sell bonds for gold. Still, in order to lessen the necessity of such bond sales, if it is found that the burden of redemption is great, and large quantities of silver accumulate in the Division of Issue and Redemption, it is an imperative duty that the accumulated THE LAWS OF TOKEN MONEY 129 dollars which the public refuses to purchase should eventually be reduced to bullion and sold at the discretion of the Secre- tary. After the other reforms provided in the scheme of the Commission have been accomplished, then it may be time to take up this matter and reduce the large amount of our token silver dollars to a sum which will never, even in the hour of stress, give the slightest ground for uneasiness to the Treasury. This, when carried out, it should be carefully noticed, would not imply contraction of the circulation. It would mean that the largest quantity of silver dollars would be out which could be safely used and yet maintained at par with gold. If the with- drawal of silver caused any real vacuum in the circulation, as indicated by business needs, then it would be promptly filled with gold, and token coinage would be replaced by a coinage always equal to its face value. How this vacuum would be filled is shown in the discussion of the Movement of Gold. Ay 53. If it should be thought by objectors to the plan of the Commission that the requirement of redemption in gold of silver dollars, would create a new ‘‘endless chain,” by which silver dollars could be used to deplete the gold reserve, just as has been done by the greenbacks, attention should be called to the accompanying provision advocated by the Commission, which permits the Secretary to reissue redeemed silver dollars only in exchange for gold coin (or United States notes redeemable in gold). This rule would prevent any possibility of silver dollars reappearing from the Treasury to be again presented for redemp- tion, except after having left gold in their place. ae 54. The Treasury notes of 1890, it will be observed, are not treated by the Commission as a part of the silver circulation; they are included with the United States notes (greenbacks) in the measures for withdrawal of legal tender government paper money. For these notes, separate reserves and provisions as to redemption are established. This being the case, the silver bul- lion now behind the Treasury notes of 1890 should be used to strengthen the funds in the Division of Issue and Redemption, for the maintenance of the silver currency at par, and for the retire- ment of the demand obligations all of which draw on a common £30 REPORT OF THE MONETARY COMMISSION fund. In brief, this asset in silver bullion, which it is forbidden to coin into more dollars, would be dead unless it can be gradu- ally sold and turned into gold. Sufficient reasons have been given why it should not be coined into more silver dollars; hence, there is no other disposition of it possible except to sell it, gradually and with discretion, for what it will bring in gold. LEGAL TENDER. 55. The essential idea of “legal tender” is that quality given to money by law which obliges the creditor to receive it in full satisfaction of a past debt when expressed in general terms of the money of a country. A debt is a sum of money due by contract, express or implied. When our laws, for instance, declare that United States notes are legal tender—and this is the only complete designation of a legal-tender money — for “all debts public and private,” it must be understood that this pro- vision does not cover any operations not arising from contract. Current buying and selling do not make a situation calling for legal tender; a purchaser cannot compel the delivery of goods over a counter by offering legal tender money for them, because, as yet, no debt has been created.’ Contracts made in general terms of the money units of the country must necessarily often be interpreted by the courts. The existence of contracts calling for a given sum of dollars and the necessity of adjudicating and enforcing such contracts, require that there should be an accurate legal interpretation of what a dollar'is. As everyone knows, the name, or unit of account, is affixed to a given number of grains of a specified fineness of a certain metal. This being the standard, and this having been chosen by the concurring habits of the business world, it is fit that the law should designate that, when only dollars are men- tioned in a contract, it should be satisfied only by the payment of that which is the standard money of the community. «“A contract payable in money generally is, undoubtedly, payable in any kind of money made by law legal tender, at the option of the debtor at the time of payment. He contracts simply to pay so much money, and creates a debt pure and simple ; and by paying what the law says is money his contract is performed. But, if he agrees to pay in gold coin, it is not an agreement to pay money simply, but to pay or deliver a specific kind of money, and nothing else; and the payment in any other is not a ful- fillment of the contract according to its terms or the intention of the parties.” 25 Calif. 564, Carpenter vs. Atherton. 131 132 REPORT OF THE MONETARY COMMISSION 56. Since prices and contracts are expressed in terms of the standard article, it is clear that the legal-tender quality should not be equally affixed to different articles having different values, but called by the same name. This method would be sure to bring confusion, uncertainty, and injustice into trade and industry. No one who had made a contract would know in what he was to be paid. The legal-tender quality, then, should be confined to that which is the sole standard. And it is also obvious that when a standard is satisfactorily determined upon, and when various effective media of exchange, like bank notes, checks, or bills of exchange, have sprung up, the legal-tender quality should not be given to these instruments of convenience. They are themselves expressed in, and are resolvable into, the standard metal; so the power to satisfy debts should be given not to the shadow, but to the substance, not to the devices drawn in terms of the standard, but only to the standard itself, even though, as a matter of fact, nine tenths of the debts and contracts are actually settled by means of these devices. So long as these instruments are convertible into, and thus made fully equal to, the standard in terms of which they are drawn, they will be used by the business community for the settlement of debts without being made a legal tender. And whenever they are worth less than the standard they certainly should not be made a legal tender, because of the injustice which in such a case they would work. Having shown that the legal-tender quality is only a neces- sary legal complement of the choice of a standard, it will not be difficult to see that the state properly chooses an article fit to have the legal-tender attribute for exactly the reasons that governed the selection of the same article as a standard. The whole history of money shows that the standard article was the one which had utility to the community using it. As the evolu- tion of the money commodity went on from cattle to silver and gold,so the legal-tender provisions naturally followed this course. 57. A state may select a valueless commodity as a standard, but that will not make it of value to those who would already give nothing for it; and so, it may give the legal-tender quality LEGAL TENDER 133 to a thing which has become valueless, but that will not of itself insure the maintenance of its former value. This proposition may, at first, appear to be opposed to a widely-spread belief; but its soundness can be fully supported. It should be learned that a commodity, or a standard, holds its value for reasons quite independent of the fact that it is given legal recognition. It has happened that legal recognition has been given to it because it possessed qualities that gave it value to the commercial world, and not that it came to have these qualities and this value because it was made a legal tender. Sy A good illustration of this truth is to be found in interna tional trade. Money which is not dependent on artificial influ-/ ences for its value, and which is not redeemable in something else, is good the world over at its actual commercial value, not at its value as fixed by any legal-tender laws. It is not the legal-tender stamp that gives a coin its value in international payments. A sovereign, an eagle, a napoleon, is constantly given and received in international trade not because of the | stamp it bears, but because of the number of grains of a given fineness of gold which it contains—the value of which is deter- : mined in the markets of the world. And an enormous trade among the great commercial countries goes on easily and — effectively without regard to the legal-tender laws of the partic- | ular country whose coins are used. — By imposing the attribute of legal tender, however, upon a | given metal or money, it may be believed that thereby a new demand is created for that metal, and that its value is thus con- trolled. And in theory there is some basis for this belief. It is, of course, true that, in so far as giving to money a legal- tender power creates a new demand for it (which without that power would not have existed) an effect upon its value can be produced. But this effect is undoubtedly much less than is usually supposed. It must be remembered that the value of gold, for instance, is affected by world influences ; that its value is determined by the demand of the whole world as compared with the whole existing supply in the world. In order to affect the value of gold in any one country, a demand created by a 134 REPORT OF THE MONETARY COMMISSION legal-tender enactment must be sufficient to affect the world- value of gold. Evidently the effect will be only in the propor- tion that the new demand bears to the whole stock in the world, It is like the addition of a barrel of water to a pond; theoret- ically the surface level is raised, but not to any appreciable extent. 58. It may now be permissible to examine into the extent to which a demand is created by legal-tender laws. If the arti- cle endowed with a legal-tender power is already used as the standard and as a medium of exchange, it is given no value which it did not have before. The customs and business habits of a country alone determine how much of the standard coin will be carried about and used in hand-to-hand purchases, and how much of the business will be performed by other media of exchange, such as checks or drafts. The decision of a country to adopt gold— when it had only paper before, as was the case in Italy— would create a demand for gold to an extent deter- mined by the monetary habits of that country ; and this demand has an effect, as was said, only in the proportion of this amount to the total supply in the world. This operation arises from choosing gold as the standard of prices and as the medium of exchange. To give this standard a legal-tender power in addi- tion does not increase the demand for it, because the stamp on the coin does not in any way alter the existing habits of the community as to the quantity of money it will use. But in case an equal power to pay debts is given to fixed quantities of two metals, while each quantity so fixed has a different metallic value but the same denomination in the coin- ‘age, Gresham’s law is set in operation with the result that the cheaper metal becomes the standard. After this change has been accomplished, the legal tender has no value-giving force. When the cheaper metal has become the standard, its legal tender quality does not raise the value of the coin beyond the value of its content. This cheaper standard, in international trade, would be worth no more in the purchase of goods because ‘t bore the stamp of any one country. Prices must necessarily be adjusted between the relative values of goods and the LEGAL TENDER 135 standard with which they are compared. If the standard is. cheaper, prices will be higher, irrespective of legal-tender acts. Where two metals are concerned, then, the only effect of a legal-tender clause is an injurious one, in that the metal which is overvalued drives out that which is undervalued. The example of an inconvertible paper, such as our United States notes (greenbacks) in 1862-1879, is still more conclusive. Although a full legal tender for all debts public and private, their value steadily sank until they were at one time worth only 35 cents in gold. In California, moreover, these notes, although legal-tender, were even kept out of circulation by public opinion. In short, the value of inconvertible paper can be but slightly affected by legal-tender powers. Its value is more directly gov- erned, as in the case of token coins, by the probabilities of redemption. As bearing on the point that the value of the paper was more influenced by the chances of redemption than by legal-tender laws, we may cite the sudden fluctuations in the value of our United States notes during the Civil War. With no change in the legal-tender quality and no change in the indebted- ness which might be paid with such notes, their value frequently rose or fell many per cent in a single day owing to reports of Federal successes or defeats in battle, which had a tendency to affect one way or the other the public estimate of the probabili- ties of an early resumption of specie payments. The fact that they were legal-tender evidently had no effect whatever in maintaining their value. In view of the evident fact that legal-tender acts do not preserve the value of money, it is clear that the demand created by such legislation must be insignificant. And this must be so in principle as well as in fact. 59. There is but one thing which the legal-tender quality enables money to do which it could not equally well do without being a legal tender; that is, to pay past debts. An examination, however, shows that this use of money is very small compared with its other uses. The amount of past debts coming due and which might be paid in any year, month or day is insignificant when compared with the total transactions of that year, month or day 136 REPORT OF THE MONETARY COMMISSION —so very small as to lose all measurable value-giving power. In other words, the one thing which legal-tender money can surely do in spite of the habits, wishes or prejudices of the busi- ness community in which it exists, namely, cancel past debts, is infinitesimally small when compared with those other things which man wishes money to do for him. It is for this reason that it ceases to give value, and this is why history has shown so many instances where money endowed with legal-tender power has become utterly valueless. The legal-tender money is no longer money if it will not secure for man the things which are most important for his welfare, if it will not buy food, clothes and shelter; for it performs none of the functions of money except the subsidiary one of canceling past debts. Moreover, the obligatory uses of legal-tender money are in fact very inconsiderable. A law requiring a past debt to be satisfied with money of a certain kind has for its essence only the payment of something of a definite value, or its equivalent ; in practice, it does not even bring about the actual use of a ‘legal money, since the monetary habits of the community will not necessarily require the debt to be paid in such money. Take the extreme case of a judgment by a court against a defendant for fulfillment of a contract; in such an example, of all others, it would be supposed that legal money would be exacted. But even here, the judgment would most probably be satisfied by the attorney’s check, or at most by a certified check. If such media of exchange are of common usage in the com- munity they will be resorted to in practice even for legal-tender payments. The necessity of paying that which would be mutually satis- factory to payer and payee also makes clear why the existence of a legal-tender money does not necessarily cause its actual use in payments. The business habits of the community are stronger than legislative powers. Business men will not asa rule take advantage of a legal-tender act to pay debts in a cheaper money, if they look forward to remaining in business. For, if, by taking advantage of legal devices, they defraud the creditor, they cannot expect credit again from the same source; and since loans are LEGAL TENDER 137 anecessity of legitimate modern trade such action would ruin their credit and cut them off from business activity in the future. Gold was not driven out of circulation by paper money during the years 1862-1879 in California, because the sentiment of the business public was against the use of our depreciated green- back currency; and a discrimination was made against mer- chants who resorted to the use of paper. 60. Explanation has been given of the principles according to which legal-tender laws should be applied, if at all. It is not wholly clear that there is any reason for their existence. It may now be well to indicate briefly the origin of legal-tender provisions. It can scarcely be doubted that their use arose from the desire of defaulting monarchs to ease their indebted- ness by forcing upon creditors a debased coinage. Having possession of the mints, the right of coinage vesting in the lord, the rulers of previous centuries have covered the pages of history with the records of successive debasements of the money of account. The legal-tender enactment was the instrument by which the full payment of debts was evaded. There would have been no reason for debasing coins, if they could not be forced upon unwilling creditors. It is, therefore, strange indeed that, in imitation of the monarchical morals of a past day, republican countries should have thought it a wise policy to clothe depre- ciated money with a nominal value for paying debts. Although the people are now sovereign, they should not embrace the vices of medieval sovereignty for their own dishonest gain in scaling debts. THE UNITED STATES’ SILVER EXPERIMENT. 61. By the coinage revision act of February 12, 1873, the silver dollar of 412% grains of standard silver was dropped from the list of coins to be executed at the mints.* Little attention was then given to this fact for two reasons. The first was that, at the time, neither gold nor silver was in use as money in the United States — where for more than a decade depreciation of the paper currency had driven specie out of circulation. The second reason was even more important. For forty years the silver dollar had been at a premium as compared with gold, and xThe coinage act of 1873 provided for the coinage of a “trade dollar” of 420 grains of standard silver. This was never intended for circulation in the United States, but was designed for use in the trade with China and the East. The coin was really intended to be only an ingot of a particular weight and fineness to compete with the Mexican dollar in the Eastern trade. The cost of coinage was borne by the per- son bringing the bullion to the mints for coinage. It appears, however, that uninten- tionally the trade dollar was made a legal tender to the amount of five dollars equally with subsidiary coins. By 1876 silver had fallen in value to such an extent that the 420 grains in the trade dollar were worth less than $1.00 in gold. It thus came about that on the Pacific coast, where coin was in circulation, there was a profit in putting these trade dollars into circulation, and considerable amounts of them were so used. This called attention to their status, and the legal tender quality which they had pos- sessed was taken away by the act of July 22, 1876. In the Eastern states, where the currency was a depreciated paper, it was not until 1877 that the trade dollar became worth less than $1.00 in currency. When this occurred, however, large numbers of trade dollars appeared in circulation throughout the East — whereupon their further coinage was discontinued by order of the Secre- tary of the Treasury. Before this, however, $35,959,360 had been coined, and although most of them had been exported, considerable numbers were scattered over the country. Congress by the act of March 3, 1887, which became a law without President Cleveland’s sig- nature, provided for the redemption at par of all those presented within six months. Speculators had reimported some of them from China in the expectation that this would be done, and with those gathered up throughout this country, $7,689,036 were presented and redeemed. These have since been melted and converted into subsidiary silver coin and into standard silver dollars. In the coinage of standard silver dollars, 4,365,631.12 ounces of trade dollar bullion, costing the United States $5,020,361.61, were used — being coined into $5,078,472. 138 THE UNITED STATES SILVER EXPERIMENT 139 even before the legal-tender paper had displaced both metals, » the silver dollar had long been too valuable to circulate as money. In the entire 81 years since the establishment of the mint, only 8,031,238 silver dollars had been coined—and most of these for use by jewelers or for exportation. People had long since ceased to use in the payment of debts silver dollars worth $1.03 to $1.05 in gold, and much more in currency. A few years later, however, when those who had opposed the resumption of specie payments, and had favored the con- tinuance of the legal-tender paper upon a depreciated basis, found themselves temporarily vanquished, the fall in the price of silver by 1876 appeared to open another way to a cheaper dollar. The forces of paper money inflation joined those of “the friends of silver,” and under the guise of reéstablishing a coinage system which had long existed, renewed the fight for cheap money. In 1876 the current had turned strongly in this direction. Numerous bills for the free coinage of silver were introduced into Congress and discussed. A bill providing for the free coinage of the old silver dollar of 412% grains of standard silver (371% grains of fine silver) was passed by the House of Representatives, December 13, 1876, by a vote of 167 to 53, but was not acted upon by the Senate. A similar measure introduced by Mr. Bland of Mis- souri was again passed by the House on November 5, 1877, by a vote of 163 to 34. In the Senate the bill was reported from the Committee on Finance by Senator Allison with important amendments, the chief of which was the abandonment of the free coinage provision, and the substitution therefor of a section requiring the Secretary of the Treasury to purchase and coin each month not less than $2,000,000 and not more than $4,000,- 000 worth of silver bullion. The standard silver dollars coined therefrom were to be full legal tender for all debts public and private, ‘‘except where otherwise expressly stipulated in the contract.” Certificates of denominations not less than $10 were authorized to be issued against deposits of the coined dol- lars. The act passed the Senate on February 15, 1878, by a vote of 48 to 21, and though unsatisfactory to the silver men in 140 REPORT OF THE MONETARY COMMISSION the House, was accepted by them as the best they could hope to get at that time. The measure was returned by President Hayes on February 28 with a veto message expressing his objections. On the same day the House passed it over his veto by a vote of 196 to 73, and the Senate by a vote of 46 to Ig, 62. Under this act the purchase of silver bullion and the coinage of silver dollars were at once resumed, the amount of silver actually purchased being kept by each Secretary of the Treasury practically at the minimum, $2,000,000, per month, The following table shows the purchases of silver under this act in each fiscal year and the coinage of standard silver dollars therefrom : AMOUNT, COST, AND AVERAGE PRICE OF SILVER PURCHASED UNDER THE ACT OF FEBRUARY 28, 1878, AND COINAGE OF SILVER DOLLARS THEREFROM. Fiscal years Fine ounces Cost ee eo TS 7 Sino ode ase, Sagh ance 10,809,350.58 $13,023,268.96 $1.2048 $ 8,573,500 DS 7Oh ices aieen eonaes 19,248,086.09 21,593,642.99 1.1218 27,227,500 TES 0% 656.8 os Hise ave 22,057,862.64 25,235,081.53 1.1440 27.933,750 MSSM ois asim y aeveess 19,709,227.11 22,327,874.75 1.1328 27,637,055 T8825 645 aula aguas 21,190,200.87 24,054,480.47 I.1351 27,772,075 T8333 vn owe ewe 4 22,889,241.24 25,5775327-58 1.1174 28,111,119 £8845 0u4me yaaa ers 21,922,951.52 24,378,383.91 1.1120 28,099,930 TS85 daa aed eas 21,791,171.61 23,747,460.25 1.0897 28,528,552 PS80F snc sana ss 22,690,652.94 23,448,960.01 1.0334 29,838,905 1887. 26,490,008.04 25,988,620.46 -9810 33,266,831 TS88 iis Gaaieaaaen 25,386,125.32 24,237,553.20 .9547 32,718,673 TS88O:is ine eae 26,468,861.03 24,717,853.81 9338 33,793,860 1800 vissasticecre a cieies 27,820,900.05 26,899,326.33 -9668 35,923,816 1809 igedue ssn ai ee 2,797,379.52 3,049,426.46 1.0901 8,740,327 Totals os sacs 291,272,018.56 | $308,279,260.71 $1.0583 | $378,166,793 In spite of the steady purchases of silver by the United States, which took from the market every year more than 250 “At the date of the passage of the act of February 28, 1878, there was some three million ounces of silver bullion on hand that had been purchased to provide a Bullion Fund, as required by Section 3545 of the Revised Statutes. There was alsoa balance of bullion purchased under the act of January 14, 1875 (The Resumption Act), for the subsidiary silver coinage. A part of this bullion was used in the manu~ facture of silver dollars, which will account for the number coined in excess of wha the quantity of silver bought under the act of February 28, 1878, would produce.”— Letter of Director of the Mint, February 8, 1898. THE UNITED STATES SILVER EXPERIMENT I41 times the average annual coinage of silver by the United States mints in the eighty years before 1873, the price of silver con- tinued to fall. The bullion value of the silver dollar, which was about 90 cents when the act was passed, fell to 88 cents in 1881, to 82.3 cents in 1885, and to 72.3 cents in 18809. 63. It was soon found that there was no demand for more than 30,000,000 or 35,000,000 of silver dollar pieces in circula- tion as coins. But the provision for the issue of certificates made it possible for some time to force this stream of silver into the channels of circulation without serious difficulty, because, owing to the price of bonds, the national bank circula- tion began about this time to contract. The banks, however, were not partial to the new currency, and objected to the use of silver or silver certificates in their clearing-house transactions; and though legislation in 1882 made it impossible for the banks thereafter to formally refuse to accept the silver or certificates for clearing-house balances, as a matter of fact in the larger clearing houses silver has not been used. Nor have the banks cared to carry any large proportion of their reserves in silver or silver certificates. As the first certificates were not issued in denominations below $10, the Treasury soon found it difficult to force into the channels of circulation paper representing the $2,000,000 or - $2,500,000 which were being coined each month. Conse- quently, an embarrassing amount of silver and paper represent- ing it began to accumulate in the Treasury in spite of the most persistent efforts to force it out, involving the payment of express charges on vast sums in the years 1882-1886.* In 1885 the Treasury inaugurated the policy of retiring the $1 and $2 United States notes in order to make a vacuum in the circula- tion to be filled by silver dollars. During the fiscal year 1886, the amount of United States notes of $1 and $2 outstanding was — tIn this effort to force the silver dollar into circulation considerable expense has been incurred. An appropriation act of August 7, 1882, directed that the Secretary of the Treasury should transport, free of cost, silver coin when requested to do so by an applicant depositing an equal amount of coin or currency. Similar provisions have been contained in subsequent appropriation laws. Under this legislation the cost of transportation, down to the end of the fiscal year 1897, was $1,064,106. 142 REPORT OF THE MONETARY COMMISSION reduced by $14,439,000. In the same period the silver dollars in circulation increased $13,998,000. Meanwhile the accumulation of silver in the Treasury had grown from $39,000,000 in 1884 to $64,000,000 in 1885, and to $93,000,000 in 1886,” at which time over half of the large available cash reserve in the Treasury was in silver dollars. In 1886, the Treasury, for its protection against the threat- ening danger that it would itself have to accept and care for the entire further coinage of silver dollars, secured the enactment of legislation? permitting the issue of silver certificates in denom- inations of $1, $2, and $5. By the use of these certificates it has since been possible to keep in actual circulation, irrespective of the bank reserves, the larger part of the silver coinage. There were on November 1, 1897, $372,838,919 of silver certificates outside of the Treasury. Of these only $31,593,302 were held (October 5, 1897) by the national banks, leaving $341,245,617, in circulation in other channels. From this temporary settle- ment in 1886 of the vexatious question of the disposition of the silver coinage, matters moved more smoothly until 1890. As the larger certificates were replaced by others of smaller denominations which were more easily absorbed into circula- tion, less silver dollars and certificates were forced on the gov- ernment through payment for customs, and the troublesome accumulation in the Treasury melted away. 64. In 1890, however, the silver advocates saw an oppor- tunity to go further, and the result was the act of July 14, 1890, commonly known as “the Sherman Act.” This directed the Secretary of the Treasury to purchase monthly 4,500,000 ounces of silver bullion, to be paid for in Treasury notes redeemable in coin. Until July I, 1891, 2,000,000 ounces per month were to be coined into standard silver dollars; after that date, only so much ‘‘as may be necessary to provide for the redemption of the Treasury notes’ was to be coined. Under this act the amount of silver bullion purchased, the cost of the same, and the amount of silver dollars coined therefrom, are shown in the fol- lowing table: tSee Appendix, I. * Act of August 4, 1886; see Appendix, I. THE UNITED STATES SILVER EXPERIMEN1 PURCHASES OF SILVER BULLION UNDER THE ACT OF JULY 143 14, 1890. Fiscal year, July 1 Amount of silver pur- chased—Fine ounces Cost Av. price per fine ounce T8QiE ss conaacwesis saa eaene was 48,393,113.05 # 50,577,498.44 $1.0451 T8020. 3 head cate eaet wafeante oy 54,355,748.10 51,106,607.96 -9402 1893 sca6 sedactvwssaas buyed 54,008, 162.60 45,531,374-53 -8430 1894 a aicyicen ti aweka dea dalnecwnes 11,917,658.78 8,715,521.32 7312 | 168,674.682.53 $155,931,002.25 $0.9244 TREASURY NOTES OF 1890 ISSUED IN PAYMENT FOR SILVER PUR- CHASED, COINAGE OF SILVER DOLLARS FROM BULLION PUR- CHASED UNDER ACT OF 1890, AND AMOUNT OF TREASURY NOTES CANCELED AND RETIRED. Silver dollars Amount of Treas- Amountol Tieas= Fiscal year, July x Treasury notes coined from ury notes re- m ay Cates ei , issued ae deemed insibrer outstanding 1892 sees ccseeeeges $50,577,498 $27:2902,475 | seeauvaaun $ 50,228,417 T8OQ as hse es earns 51,106,608 33450;9005 |i secede es 101,712,071 ESOS ade vavRicmals atone 455530375 Sy BAS 716 |) wae wewe anes 147,190,227 T8Q4 ioe 5.05 cichoicnt 8,715,521 758 $3,346,585 152,584,417 TBQG ce ce aceiwamiee |) sade aibisieey 3,956,011 6,496,017 146,088,400 18066 scahiw dhendtt|| “pegormaiedos4 7,500,822 16,405,120 129,683,280 180702 dyciawcRenwes|| a eseaticingals 21,203,701 14,816,000 114,867,280 1898* cecstvaaaassnw) sass ewe es 3,824,380 8,519,000 106,348,280 Total) ssctceenaii sake $155,931,002 $72,572,857 $49,582,922 | csseksacaes 65. The notes issued under this act were made by law redeemable in coin at the Treasury or at any sub-treasury by the Secretary —‘‘in gold or silver coin, at his discretion.” To this was added the further proviso: ‘It being the established policy of the United States to maintain the two metals on a parity with each other upon the present legal ratio, or such other ratio as may be provided by law.” This imposed upon the Secretary the legal duty of maintain- ing all the silver currency of the United States on a parity with gold. Under it each Secretary of the Treasury has pursued the * First six months only, from July 1, to December 31, 1897. 144 REPORT OF THE MONETARY COMMISSION policy of refusing to discriminate against coins of either metal. When the holder of any coin obligation of the government—- whether United States note, Treasury note, or draft on the Treasury —has preferred silver, he has been given it; and where, on the other hand, he has preferred gold, the Treasury Depart- ment has not refused to furnish it. It has said distinctly, in substance: ‘‘We regard the silver as equal in every way to gold, and hence have no reason for keeping one rather than the other.” These Treasury notes have, therefore, come to occupy practically the same position as the United States notes. In consequence, being regarded as gold obligations, they have not been so objectionable as the silver certificates, and large amounts have been used by the banks. * This increase of the silver purchases, however, did not tend to restore confidence in the integrity of our standard. The addi- tion of some $50,000,000 annually to the government credit cur- rency, with no further security behind it than was provided by a mass of rapidly depreciating silver bullion, had cast a doubt upon the ability of the government permanently to maintain gold payments. Gold payments for customs, which had been very general prior to 1890, now rapidly fell off, and, except for one or two brief periods, have never been resumed. In the place of gold, the Treasury found itself obliged to receive silver certifi- cates, United States notes, or the new Treasury notes. ~ 66. By the act of November 1, 1893, the purchasing clause of the act of July 14, 1890, was repealed. Since that date, the coinage of the silver bullion has been going on more or less steadily and some $50,000,000 of the coin notes have been paid in silver dollars and canceled and retired. Prior to January 1, 1898, 56,194,139.46 ounces of fine silver purchased under the ~ act of 1890 (which had cost $54,225,040.90) had been coined © into 72,572,857 silver dollars. The difference $18,347,816.10, being the seigniorage, has gone into the Treasury as revenue— being accounted for as a ‘‘ miscellaneous receipt.” Down to July 1, 1897, the coinage of the silver dollar had resulted in a seigniorage of $69,887,532.29, on account of the silver purchased under the act of 1878, and $17,216,322.87 on CHART I KINDS OF MONEY RECEIVED IN MONTHLY PAYMENTS FOR CUSTOMS AT NEW YORK, BY PERCENTAGES cenr 28781879) 1880_| 1881 | 1882 | 1883 | 1884 | 1885 | 1886 | 1887 | 1888 | 1889 | 1890 | 1891 | 1892 | 1803 | 1894 | 1895 | 1896 | 1897 | PER | 90 . a 00 20) 2 — 30 70) i oe 60 . 60 o0 AQ A) 30 \ WY 30 . \ 20 20 10 \Y 10 OQ [| SILVER COIN AND SILVER CERTIFICATES \\ TREASURY NOTES AND UNITED STATES NOTES eee GOLD COIN AND GOLD CERTIFICATES THE UNITED STATES SILVER EXPERIMENT 145 account of that purchased under the act of 1890—a total of $87,103,855.16. That is to say, the silver dollars coined to July 1, 1897, from bullion purchased under these two acts exceed by $87,103,855.16 the cost of the silver from which they have been coined. 67. The depreciation of silver which has taken place since the purchase of this bullion by the government has resulted in greatly lessening the value of the reserve behind the Treasury notes and silver certificates. On the understanding that the United States is bound to make good every dollar which it has thus issued, the balance sheet at the end of December 1897, appears as follows: Cost of 291,272,018 oz. By present market value fine silver purchased (at 58 cents per fine under act of 1878 $308,279,260 ounce) of 459,946,700 Cost of 168,674,682 oz. oz. of silver pur- fine silver purchased chased $266,769,086 under the act of 1890 155,931,002 || By net loss on trans- Cost of transportation 1,064,106 action to January 1, 1898 198,505,282 $465,274,368 $465,274,368 —J THE MOVEMENT OF GOLD." 68. One of the most frequent and plausible objections to the retirement of the government legal-tender notes, and their replacement by a national bank currency, arises from the question, how would the banks obtain and hold a metallic reserve? It is admitted that under any system, a substantial cash reserve must be maintained by banks against their deposits. Under the existing system, this reserve, which is merely required to be of “lawful money,” may be made up of gold, of silver, or of legal-tender paper of the United States, or of all three com- bined. In their reports to the Comptroller of the Currency on December 15, 1897, the 3607 national banks of the United States reported aggregate cash reserves of $252,163,553 specie and $158,404,875 legal tenders. Of the specie thus held, $207,093,145 was either gold coin or certificates of ownership of gold coin; the rest was chiefly silver certificates, These figures show that, although the greater part of the national bank reserves is already in the form of gold, neverthe- less about 38 per cent. of that reserve consists of legal tenders. The question has, therefore, very properly been raised, how are the bank reserves to be kept good if the legal tenders are to be gradually extinguished? If the $158,404,875 noted above, or such amount of legal tenders as may at any time exist in the national bank reserves, is to be withdrawn, it must be replaced by other “lawful money,” and that lawful money must apparently be gold. Whence then, it is asked, are the banks to procure this gold? Can they be sure of getting it in the first place, and if they get it, can they be sure of retaining it? What would be the situation of the banks in the event of a heavy and continuous gold export movement? Would not their reserve at once dis- appear because of a withdrawal of gold either through operations t Acknowledgment is due in the preparation of much of this section to Mr. A. D. Noyes, of New York, for a paper on this subject sent in to the Monetary Commission, 146 ‘ { THE MOVEMENT OF GOLD 147 of banking depositors or through redemption of notes? These are fair and proper questions, to which satisfactory answers should be given. 69. The first and most obvious answer which will occur is, that if the Treasury were not issuing notes and, therefore, did not have to maintain a gold reserve on its own account, the gold now idly stored in the government vaults, ranging at different periods from $100,000,000 to $288,000,000 and now amounting to about $180,000,000, would presently be available for banking uses. The Treasury’s gold holdings are thus larger by fully $25,000,000 than the entire amount of legal tender notes reported as held by the national banks of the United States as part of their cash reserves. If this gold were paid out, therefore, in redemption of the notes held by the banks, the banks would merely have the gold in the place of the notes. By that oper- ation alone, without a dollar of gold from any other source, and without even exhausting the Treasury’s stock of gold, the gold reserves of the national banks might be increased from $207,- 003,145 to $365,498,020. But quite apart from the very evident fact that the pay- ment by the government of its notes in gold would leave the banks which now hold those notes in possession of the gold with which they were redeemed, the banks would experience no diffi- culty in getting such amounts of gold as they desired. The national banks by their own showing already hold in their present reserves $207,093,145 gold. If they have obtained and hold as large an amount as this, it is not unreasonable to assume that they could get more if they wished it, from the same sources and in the same way through which they obtained the amount they already hold. Where, then, did, the banks obtain this gold which now makes up more than half of their reserve ? The gold was obtained partly by importation from abroad, but chiefly from new production of the American mines. The United States Mint reports show that since 1878, #704,000,000 in gold has been produced in this country, an average of nearly #36,000,000 annually. Just now the output is much larger than this average; it was $53,100,000 in 1896, by the Mint estimate, 148 REPORT OF THE MONETARY COMMISSION and $61,500,000 in 1897. From this yearly average of $36,- 000,000, $8,000,000 or $9,000,000 annually should be deducted to allow for gold used in manufacture; but making the widest allowance for this industrial consumption, it will be seen that during the past nineteen years, from $500,000,000 to $600,000,- 000 of gold produced from the American mines has been avail- able for use as money. 70. It is possible, of course, that a gold-producing country may send to other nations, every year, all or most of its own product. This has been the rule with Australia; it is the rule now with the Transvaal. But in these two instances the gold product was exported only because it was not needed at home. In the United States, owing to our vastly larger domestic trade, the gold when needed was retained. Therefore, in the develop- ment of the country since 1878, not only has the new annual output of the American gold mines been kept at home, but gold has been imported from foreign nations. Between 1879 and 1889, by the returns of the Bureau of Statistics, the United States imported $219,000,000 more gold than it exported. With an increasing domestic trade if more money was needed for the circulating medium, it came, as it always may come under such circumstances, in the shape of gold imports. After 1890, on the other hand, foreigners sent home our securities, while under the silver-purchase law of 1890, we more than sup- plied the needs of circulation with the new legal-tender notes. The result was that gold was exported and that the United States lost in the next eight years most or all of what it had gained from foreign nations since 1879. But, even with the gold exports for the whole period some- what in excess of the imports, nearly all of the new American gold product was retained for domestic uses, and this new product, as we have seen, amounted to upwards of $500,000,000. There is another way in which it may be seen that this new gold has been kept available since 1878 for banking uses. On the first of every month, the government publishes an estimate of the amount and kinds of money circulating in the United States, The estimate of the Treasury Department on January THE MOVEMENT OF GOLD 149 I, 1879, reckoned the stock of gold then in the United States at $231,625,207. On January I, 1898, the estimate was $699,- 478,536. It is possible that these totals are inexact, because when the government began its reports of the amount of money in circulation, it had to make a guess at the total. But while the two sums may be inaccurate, the difference between the estimate for 1879 and that for 1898 will approximately measure the addition to the country’s stock of gold within the period ; for having once settled on the initial estimate, it was possible to report with greater or less accuracy the monthly and yearly increase or decrease. Taking this difference, it will be seen that since the opening of 1879 the total stock of gold in the United States has increased $467,800,000, which tallies with our previous estimate of new American production, less a comparatively slight net loss on export. The banks, then, will have in the first place a large and constantly increasing supply of domestic gold on which to draw for their reserves. This new gold has always gone freely into the hands of the banks, and it will continue to do so. The reason why it has hitherto gone into the banks is that gold coin is an expensive currency for private owners either to store or to ship. The miner deposits it in the assay-office and takes an assay-office check in payment. This assay-office check he deposits, in nine cases out of ten, with his own bank, where it becomes a part of the institution’s regular deposit fund. The owner of the gold, if he thereafter needs currency, will take from his bank the kind most convenient to him; the bank, on the other hand, presents the assay-office check for gold coin, storing this coin with its own reserves. This simple operation, one of the most familiar in American banking, shows how the new gold product of the United States goes automatically into the reserves of the banks. 71. But, aside from supplies of new gold, the financial insti- tutions of the world have the means of directing the flow of existing stocks of gold to those places where it is needed. To understand this mechanism, it may be necessary to consider briefly the general question of gold exports and imports. An example may assist to a clearer comprehension : 150 REPORT OF THE MONETARY COMMISSION During the year 1897, it appears that there were net gold imports into the United States of about $45,000,000. This gold was sent here, say from England, in payment of balances result- ing from a multitude of exchanges. We had sold to England certain commodities and securities, for which England must make payment to us. Her purchases from us gave us a credit there for an equivalent amount—a credit which we were free to realize in commodities, securities, or gold, as we ourselves might choose. The reason why a certain amount of gold was actually shipped was that, at the prices at which the English commercial interests held their commodities and securities, we cared to purchase no more than we did; and the balance com- ing to us was paid in money. Had England been willing to sell securities cheaper, that is to say, if she had been willing to pay a higher rate of interest, our investors would have been induced to increase their purchases of securities in England, or, what amounts to the same thing, our financial institutions would have been willing to leave on interest in England balances due to them, instead of asking for remittance. And thus the equilibrium of exports and imports (using the terms, in their broader sense, to include securities, loans, etc., as well as commodities) would not have been disturbed. But at the rate of interest then offered there, and the opportunities for the use of the funds here, we preferred to have the debt paid; and as the situation in England was such that English interests would rather pay the debt than offer us a rate of interest high enough to induce us to leave the funds with them, the gold was shipped. The real reason for our imports of gold was thus the fact that we would rather have the money here than invest it in loans or securities at the prices at which they were offered, and the English would rather spare the money than offer a rate of interest sufficiently high to overcome our preferences. To balance our exports we were entitled to a certain credit, and if we preferred to have it in gold rather than in steel rails, pocketknives, or woolen goods, we might do so; and so, after having purchased what commodities we wished, inasmuch as we preferred to have the balance in gold rather than in securities or interest-bearing THE MOVEMENT OF GOLD I51 balances from English institutions at the rates offered, we got it. From this illustration it will be clear how gold moves from one country to another as a consequence of general trade move- ments and especially as a consequence of conditions of the money markets. Further examination of these gold movements will show how it is that they bring into operation forces tending to stop the flow of gold before it reaches a point where it would endanger business. The gold comes, it has been explained, in payment of balances which interest rates in London would not tempt us to leave there in return for securities or other interest- bearing obligations, or, in other words, because we preferred to have the funds for use here. The gold thus shipped, upon reach- ing New York, goes into the bank reserves. The previously existing relation between the reserves and immediate liabilities of the banks is thereby altered. Inorder to utilize the new reserves the banks have to extend their discounts, and to do this they lower the rate of interest. In the meantime interest rates in | London would have been raised for a reason exactly the oppo-— site of that which had lowered them here. The decrease in the bank reserves there would soon result in a desire to curtail loans and thus tend to produce a higher rate of interest there, accompanied, of course, by a lower price for securities bearing a fixed rate of interest. Before long our investors would find that, with reduced rates here and higher rates in London, they could more profitably employ their capital by loaning it in London than in New York. They would, therefore, increase their loans to London (by purchases of securities there), and thus a substantial equilibrium of imports and exports would have been reéstablished. As soon, therefore, as wé had as much gold as we wished — so much that more could not be employed here as profitably as elsewhere —the cause for the gold import movement would disappear, and the flow of gold to this country would cease automatically ; or, if the rate of interest was sufficiently lowered here, and sufficiently raised in England, a movement of gold out of the country might even take place. 152 REPORT OF THE MONETARY COMMISSION 72. Thus, even if the American banks did not possess a remarkable advantage in the domestic gold product, they would have the means, with a properly managed banking system, of obtaining it from abroad. Neither England, France nor Germany, produces gold; the banks in each of these three countries furnish currency to meet the needs of trade, yet none of the banks has any trouble in procuring and maintaining a sufficient gold reserve. The Bank of England, for instance, has an unwritten rule that the minimum of its reserve against liabilities shall be in the neighborhood of 40 per cent. This reserve consists of gold or of notes convertible at the Issue Department into gold. The minimum percentage is much higher than has been required in the past for United States national banks, and higher than is proposed for the future. Yet the Bank of England has no diffi- culty in securing an abundance of gold and its percentage of reserve, during recent years, has averaged nearer 60 than 40 per cent. If by any turn in the commercial movement, a heavy drain of gold occurs from these countries, the recourse employed by banks, is the recall of loans, with a consequent decrease in the deposits or notes, if not an actual increase of reserve. A process of this kind increases the percentage of reserve to liabilities, even if it does not add to the reserve, because it contracts the total of liabilities. But such a conservative reduction of loans usually does more than this. If there exists a real demand for loans in the money market, the void left by the loans recalled by the Bank of England will be filled by foreign capital; the transfer of such foreign capital to London occasions a fall in the foreign exchanges, and such a fall checks the outflow of gold which we have supposed to exist, and in the end replaces it by gold importations. : No operation in contemporary banking is more familiar than this. It was successfully practiced, for instance, by the Bank of England in the autumn of 1896 and in the winter of 1897. In neither case was any real inconvenience caused to borrowers. The London rate for time-money rose only from 2 per cent. to 3% or 4; this was enough, however, to stop the outward move- THE MOVEMENT OF GOLD 153 ment of gold and to check the adverse movement of sterling exchange at every important city. The continental banks pursue under similar circumstances exactly the same plan. 73. The same safeguard will be open to the American banks ; indeed, it has always been open to them. The active demand for money familiar to the autumn season has generally caused an advance in Eastern money rates. Jt has repeatedly hap- pened that, in the busy autumn months, the cash reserves of Eastern banks were called for by the West to sustain its har- vest trade: This decrease in reserves usually occurred simul- taneously with an expansion of deposits through loans in the equally active city markets. In the end, the proportion of reserve to deposits has often fallen suddenly to the 25 per cent. minimum required by the present national banking law. But the necessary result of such a decrease in reserve was the calling in of loans by eastern banks and an advance in money rates; whereupon foreign capital was transferred to the United States through sales of exchange in New York City ; under these sales, the exchange market declined; and, eventually, foreign .gold was imported. This gold invariably went into the bank reserves. During the gold imports between August and December 1896, for instance, the New York banks’ gold holdings increased from $47,000,000 to $77,000,000. During the imports in the corres- ponding months of 1891, they increased from $62,000,000 to $96,000,000. The foreign exchange bankers who imported the gold deposited it with their banks, for exactly the reason which made the miner give up his gold bullion to the assay-office and ‘his assay-office checks to his bank of deposit. 74. Nor is there any reason to suppose that interior banks, away from the centers of foreign exchange, would have trouble in obtaining gold. The facts on this point are quite con- clusive. In December of 1897, as shown by the Comptroller’s statement, the national banks of Ohio, Indiana, Illinois, Iowa, Kansas, Colorado, and in fact of all the middle and western states, held in their reserves more gold than legal tenders. The truth is, that the bank at the seacoast or at the mining 154 REPORT OF THE MONETARY COMMISSION centers is no more anxious to accumulate gold in excess of its real needs for reserve than is the gold importer or the gold miner. Such a bank is as ready to pass its gold on to other banks which need it and which can pay for it, as the banks have hitherto been, in every gold importing movement, to present their gold to the United States Treasury in exchange for legal- tender notes. A country bank, like any individual, can always get gold, if it has marketable assets to offer for it. In short, gold has always been easily obtainable by. our banks. In a properly managed banking system, the question of procuring. and maintaining a gold reserve is the least troublesome of all problems which arise. Nothing is more clearly marked out by precedent and practice, and in nothing are results, under proper management, more certain. 75. It has been thought by some that a system of bank cur- rency which should place the issue of currency largely in the hands of the country banks, and should take it away from the government, would throw the responsibility of furnishing gold for export upon the note-issuing banks, just as at the present time it falls upon the greatest note-issuer, the government. This argument proceeds upon the assumption that the method of obtaining gold under the proposed system of bank-issues would continue to be as now the presentation of notes for redemption. Granting this to be the case, it would be neces- sary for those desirous of obtaining gold to present the notes at some central redemption agency; and the one most naturally suggesting itself would be the New York sub-treasury. Suppos- ing a great mass of notes of different banks to be presented there for payment, the process would be somewhat as follows: the notes would be redeemed and thus the gold would be furn- ished for export. The amounts thus paid would then be charged against the 5 per cent. redemption account of the banks and they would be called upon to make the fund good. This would most cheaply and naturally be done by draft from the country banks on their New York correspondents. To meet such drafts the banks would usually keep money on deposit with their cor- respondents in New York and thus the strain would be trans- THE MOVEMENT OF GOLD 155 ‘ferred to the New York, z.¢., to the stronger, banks of the system. As a matter of fact, however, those in need of gold would not be likely to seek to obtain it by presentation of notes for redemption. True, gold is now most naturally and easily obtained by the presentation of the government demand obliga- tions for payment in gold. This is due to the fact that at the present time the legal-tender notes by their very existence relieve the banks from the necessity of paying gold. The Treas- ury being the only certain source of gold supply, is resorted to when gold is really needed. Checks on deposits may be paid in legal-tender notes, and, if gold is wanted, these notes are accepted chiefly for the purpose of presenting them at the Treasury. Were the legal-tender notes retired, however, banks would have no other course than to meet demands upon them in gold. The banks of England and France, which are constantly under the necessity of furnishing gold for export, do so in response toa check or draft when the metal is wanted. This would be the case with the New York banks were the legal tenders finally retired. And, like the European banks, they would be able, as already seen, to save their resources from becoming unduly depleted, by raising the rate of interest as occasion seemed to demand. 76. Practically everything which has been said as to the movement of gold from one country to another applies equally well to the movement of money from one portion of the same country to another. Indeed, in order to observe the principles of international trade operating in their purest form, it is necessary to look for some place where restrictions of a commercial char- acter are absent. This may be found in the case of two por- tions of the same country. A good example is that of Arkansas and New York, which are dissimilar in climate, manufactures, and natural products and whose trade must be regulated upon principles exactly like those of international trade. Take, for example, the problem of the distribution of cur- rency. Fora long time it has been observed that currency tends to flow from the Southern and Western districts of the 156 REPORT OF THE MONETARY COMMISSION United States into the eastern commercial centers. It has been shown that the reason for the movement of gold ‘between any two countries, is the necessity of paying for any balance which may exist between the amounts of imports and exports— includ- ing in each securities. The same statement would hold true concerning any sort of currency used in all parts of the same country. There would be the same reason for the transfer of quantities of this currency from one remote portion of the country to another portion, in case the purchases of the first of these communities from the second had exceeded its sales to the second, and if the first community was not willing to pay a rate of interest sufficient to induce the second to loan the balance. It has been seen, too, that the movement of gold, or in the case under discussion, of currency of any sort, arises from, and in fact is merely, the transfer of capital from the one to the other and is largely dependent upon the rate of interest. If the citizens of Arkansas have sold to buyers in the East farm products to the amount of $500,000 they have a credit of that amount in the East. This credit they can employ as they choose. If they wish pianos, silks, etc., they can have them; if they wish plows, harvesters, and other farm implements, they can have them; if they wish more money for the transaction of their business, they can secure it; or if they wish to buy gov- ernment or railroad bonds or invest on interest in the East or elsewhere a portion of the sums coming to them in payment for their crops, they are able to do that. If they choose to have the money rather than the other things, there will be a movement of currency from New York to Arkansas; and if later they find they have more currency than they really need for the convenient transaction of their business, it will surely return East simply because they prefer either to have something else in place of it or to save interest by paying off a portion of their indebtedness to the East. In the case of many of the Southern and Western communities of the United States, this is precisely the process which has been going on. For a long time purchases from other. communities have exceeded sales to them. That is to say, actual capital, such as machinery, etc., has been purchased from THE MOVEMENT OF GOLD 157 the East, and to the East have been sold not only various prod- ucts but mortgages as well, and rather than sell the mortgages at the prices offered, they preferred to send money, and all cur- rency except what was really needed has thus been drained off. The scarcity of currency existing in these districts is thus by no means due to a general scarcity of currency in the coun- try as a whole; but has been solely due to the fact that these regions have been deficient in capital and have preferred to. invest the returns from their products otherwise than in a_ medium of exchange. 77- The movements of gold from one country to another, or — of currency from one part of our country to another, have been shown to follow natural laws. This movement is one of conven- ience, and follows the trade operations of the respective coun- tries or regions, chiefly through the fluctuations in the rates of interest. Nor does this tidal ebb and flow touch the funda- mental elements regulating the prices of products. The move- ment of currency to and from New York and Nebraska does not determine the price of wheat in either New York or Nebraska; that is determined by other forces. This movement of the currency is not the cause of the trade movement, but the consequence. And so it is ininternational movements. The price of wheat in London and New York is not determined by the flow of gold back and forth; on the contrary, the movement of gold is a consequence of the trade—not only in wheat, but in other goods and securities. That prices in general have little to do with the gold movement may be easily explained. Price is simply a ratio between commodities and the stand- ard, which is, in general, gold. There are an immense number of circumstances which tend to affect general prices. But the outcome of all these influences is a certain definite adjustment of the ratios in which commodities will exchange for gold. And inasmuch as modern methods of transportation and communica- tion have practically brought all countries into one general market, gold prices must be uniform the world over. The only differences will be those due to cost of transportation. A change in the price of any commodity,.therefore, must imply a change 158 REPORT OF THE MONETARY COMMISSION in the price of that commodity all over the world. Its price is the ratio between it and gold, which has a value issuing from a comparison with commodities throughout the whole world. In any system of gold-using countries, therefore, the level of prices must be the same throughout all. It would be impossible under modern conditions that it should become higher in one and remain lower in another. It appears that prices being thus determined by the ratio between gold and com- modities all over the world, a mere abundance of gold in any one country could not change this ratio in that country as distin- guished from the rest of the world. For, since the value of a unit of gold in terms of commodities has been established and is well known in all the markets of the world, it would be impossible that persons in any country should be willing to give a greater quantity of gold for a definite amount of a certain kind of commodity, merely because gold was abundant in that country at that par- ticular time. That is to say, no more gold would be given ina particular country where there was an abundance of gold than in one where gold was less abundant, any more than wheat would sell for less in Chicago than in Liverpool (cost of transporta- tion excepted) simply because there happened to be a larger supply of wheat on hand in Chicago than in Liverpool. PART II BANKING 159 NATURE OF A BANK. 78. In its simplest function a bank has a codperative quality. It does for many persons cheaply what, without it, each would be obliged to do at considerable expense for himself. A trust- worthy bank, with vaults giving protection against fire and robbery, serves for each one of many persons; while to gain like security a single individual could ill afford so expensive a vault. In short, by the division of labor, a separate profession has been evolved in society which performs certain services whereby all who need them are convenienced and saved expense. If this were all, however, a bank would be no more than a safe place of deposit; but it is much more than this. A natural consequence of the deposit of money with a bank for convenience and safe keeping was the creation of methods by which the ownership of these deposits could be transferred without actually moving the money itself. In early banks, devices for this purpose were already used. In modern times the transfer is promptly and easily made by a check, or draft, which is merely an order upon the bank by the depositor to credit a certain sum to the person named. In this way a deposit becomes as available for payments as if actual money were passed from hand to hand. 79. A savings bank, or a loan company, is not a commercial bank in the proper sense. Depositors furnish the total funds (or capital) loaned by a savings bank on time-securities ; and it is understood that they need not expect to have deposits paid back on demand. Most savings banks, because their resources are invested in time-loans, properly reserve the right to exact a notice of perhaps sixty days in case of intended with- drawal of deposits. A loan company, whose funds are paid in by shareholders, is not very different in kind from a savings bank. The funds are subscribed to be loaned out on mortgages or time- securities. Since savings banks are provided for those who are 161 162 REPORT OF THE MONETARY COMMISSION less able to invest on their own account, legal precautions hedge in the kind of investments they can make; while a loan company takes its own risks without much limitation, its shareholders aking their chances. In neither case do these institutions eceive deposits which take the form of demand liabilities. 80. A commercial bank, however, not only receives deposits, but it is particularly distinguished by the fact that it engages to repay a deposit on demand. The banker finds that it is not necessary for him to retain all of the money in his vaults to enable him to do this; because not all the depositors will want to draw out their funds at the same time. Some will ask for payment today, but others will be making deposits. Asa result, he ascertains by experience that if he keeps on hand in cash a proportion only —say one-fourth or one-third— of the resources which have been entrusted to him, he will still be able to meet on presentation all demands of depositors or noteholders. He is, therefore, enabled to loan the balance of these funds just as he can loan his own capital. Thus another function ofa bank is developed, —that of loaning, or discounting. “Bie Many persons and firms have balances which they are not _ ready to invest permanently, and these are freely deposited in banks. Small sums, each of little effect by itself, are accumu- lated in great numbers, and make very large amounts in the aggregate. So that, bits of capital that would be ineffective for serious productive operations on a great scale, are thus placed where they may be put to important uses. In this way, the sav- ings of the small, or uninformed capitalists are made efficient for the productive use of active members of the community to whom they may be loaned. Although banks do not actually increase the wealth of society, they lead to the productive use of amounts which, without banks, would remain inactive. They place funds: where society gets the most from them, by allowing them to pass into the hands of the most efficient members of the com- munity. This process of uniting scattered sums into large capitals which can be effectively employed, is, of course, not only the function of commercial banks, but equally that .f savings banks NATURE OF A BANK 163 or building and loan associations. The distinguishing function of commercial banks, however, is the creation by them of a demand liability through which the sums left with them may serve as a currency, since by the use of notes or of deposits and checks, they are available purchasing power in the hands of their owners. The investor in a building and loan association or savings bank, on the other hand, loses the opportunity to use his money in other ways because no demand obligation is credited to him. That is to say, the deposit in a commercial bank performs a currency function, while the deposit in a building and loan association or savings bank is no longer currency, but an invest- ment, since in the former case the depositor receives a claim payable on demand and in the latter case he does not. This is the primary distinction between a bank and other financial insti- tutions. 82. Banks cannot make something out of nothing. They cannot coin wealth or money out of any intangible thing. The operations of legitimate banking are always based on property ; whenever these operations are not so based, they cease to be legitimate, and become speculative. The profit of banking arises from the discount operation or lending. Of course, sup- posing the rate of interest to be fixed, the more a bank can lend, the more its profits will be. What, then, can it lend? It has its capital; it can lend that. It has also the resources entrusted to it by the public through the discount operation ; it can loan such part of these resources as it does not need to hold in cash to meet the demands of depositors and noteholders. This, then, is the limit placed upon its power to loan—its own’ capital and the resources of others entrusted to it (except so much thereof as must be held as a reserve). It does not ‘‘coin its credit.” If a bank has won the confidence of the public by the safe and conservative management of its loans and invest- ments, it will receive large deposits. The larger its deposits, the larger the sums it can loan; and hence the larger its profits. The bank becomes responsible, whenever it loans its deposi- tors’ funds, that the titles to these funds may be realizable upon in cash; and quickly in case of suddenly increased demands in 164 REPORT OF THE MONETARY COMMISSION time of emergency. It assumes this responsibility to the full extent of its capital, which must meet any losses due to bad judg- ment. Upon the banker, then, rests the responsibility of deciding that the security for a loan is realizable in a kind of property that is always salable. Hence every business transaction involving a loan from a bank must pass the judgment of the banker who is acting with full knowledge that an error will be followed by financial loss. This is the reason why it is possible to say that the resources of a bank, received as the security for loans reflect quite accurately the character and soundness of the business transactions of the country. 83. The profit of banking arises from the discount operation. The bank buys and sells something, and makes a gain thereby in the same way as other commercial institutions. In making a . loan, the bank buys the right (well secured) to receive a given sum of money at some future date; for this it gives an equal sum less the interest. The borrower gets this amount in cash or more often in the form of a liability of the bank to pay on demand. The profit consists in the fact that the demand-liability given the borrower is always less (by the profit) than the amounts to be received in the future. The borrower needs immediate means of payment; and the bank can give this to him in either of sev- eral forms, whichever the customer prefers. It can give him actual money from its uninvested resources (either a portion of its own capital or money left with it by others); or it can give him its circulating notes; or it can give him a credit on its books —a deposit account. The two forms of payment last mentioned are those which are most used, and most characteristic of bank- ing operations. Then, whether the customer chooses to use checks and transfer his deposit to another person without tak- ing the funds from the bank; or, whether he finds his needs best served by taking notes of the bank away in his pocket— is settled merely by the wishes of the borrower, and not by the will of the bank. The amount of the loan being fixed it then makes no difference whatever to the bank, so far as its profit is concerned, whether this credit to the borrower takes the form of a deposit, or of a withdrawal of its notes. Both are equivalent demand- NATURE OF A BANK 165 liabilities of the bank. A note is a promise to pay on demand; so is a deposit. Either one means that its holder refrains from demanding actual money from the bank, the deposit or note answering all his purposes. Large city banks have customers who scarcely ever use anything but deposits and checks, who never call for notes; and yet, without issuing notes, these banks make a profit quite as well as any note-issuing bank. It must be evident, at once, that the privilege of issuing notes is not in itself the means of profit; but that the profit arises out of the process of discounting, or lending. 84. On the other hand, in some parts of the country checks are little used. To make payment one needs a form of money that will be taken irrespective of any knowledge of the signa- ture on the check, or of whether or not the signer has a deposit in the bank. And if the transactions are for small sums, for retail trade, or payment of wages, checks are not always con- venient, especially if, as in rural districts, a bank is not close by. Under these conditions, a borrower at a bank will usually ask for that means of payment which his situation and the business habits of his community demand. If he cannot get it in that form, his loan is ineffective. Hence the habits of the com- munity determine which form of liability the bank will make use of; it is not determined by the will of the bank. If the latter is not able to conform to the business habits of its customers it cannot loan in that district. In the interest of borrowers, therefore, a proper banking system should be so ordered that it can adjust itself to the needs of its constituency. If banks are given perfect freedom in conducting their business, whether they issue notes or not is a question merely of convenience to their customers; to a large city bank the privilege of issuing notes is of almost no advantage. 85. The government does no more in the matter of supervis- ing the issues of a bank than it does in coining bullion into money. In the latter case, it certifies to the fineness and weight of the metal in a given coin; it does this not for the bullion owner, but to save the public the inconvenience and delay of weighing and testing the metal at each exchange of goods and 166 REPORT OF THE MONETARY COMMISSION money. In the same way it provides a banking system, decides how the notes should be secured, redeemed, and the like, not in the interest of the banks, not even to protect note-holders against loss; but to save the public the inconvenience and delay involved in examining into the security of each note; for it is only when bank notes are issued under such a system that it is unnecessary to examine into the circumstances of each individual bank that they can attain their greatest usefulness. If, also, there is free banking, so that any body of reputable men can form a bank under the general law, banking is not a monopoly; and the bank which is unwilling to issue its notes under']a system that is safe and wise for all, thereby indicates that, if permitted, it might issue its notes under methods little likely to bear inspec- tion and with the evident result of loss or inconvenience to the public. 86. How truly the properly regulated issue of bank notes is really in the interest and for the convenience of the public may be seen by taking a simple illustration of those needs of a com- munity which lead to the organization of a bank. Suppose the case of a farmer who desires to market his crop. His prospective purchaser has not the immediate funds in hand with which to purchase the farmer’s products. He offers to give his note for some amount (say $1,000). The farmer, however, wishes to use the proceeds of the sale of his crop in paying the expenses which he has incurred in raising it. The credit of his purchaser is undoubted, so that the farmer’s creditors would unquestionably accept the note of the purchaser in payment. In order that the claims may all be satisfied, the farmer proposes to accept instead of one note for $1,000, one hundred notes for $10 each, and for the privilege of having them payable on demand, he proposes to forego the interest upon them. In sucha case the purchaser of the produce might take the goods upon these terms, and if his total property, upon which the notes would become a lien, was formerly $10,000, he would then have $11,000 as security for the notes —that is to say, his original $10,000 and the $1,000 in property additional. The illustration may be carried further: Suppose the met- NATURE OF A BANK 167 chant who purchased the farmer’s crop were to extend his oper- ations and to purchase the products offered for sale by nine others, giving on each occasion one hundred notes of $10 each. The merchant has now outstanding one thousand promissory notes of his own of $10 each, making $10,000 in all. These notes are all payable on demand and have been given by the farmers who received them to their creditors in payment of debts. The notes being payable at the wish of the holder, are likely to be presented at any time. To enable him to meet the notes as they are presented, the merchant has the original $10,000 of property with which he started, and in addition ten different lots of produce worth $1,000 each or $10,000 in all. We may assume that on a certain day, a month after the notes were given, fifty of the holders of the notes, finding it desirable to obtain money, for the purpose perhaps of paying taxes, present the notes for payment. The merchant foreseeing the probability of this event has, in the meantime, converted either a part of his capital, or of the goods purchased, into coin (as a reserve to meet demands). He is thus prepared to meet the fifty notes, and when presented he pays for them $500 in cash and destroys them. In sucha way as this, a community otherwise devoid of a medium of exchange, might derive great help from the creation of such a currency, which converts property into means of payment. The farmers have been able to market their crops and obtain the means with which to satisfy their creditors without sacrifice. Had they not been able to obtain from the merchant the titles to immediate means of payment, it might have been necessary to sell their products at a heavy loss. 87. So far it has been assumed that the deposits of a bank come into existence when other persons leave their funds with the bank; and that the banks can lend the portion over and above the sums needed for reserves. But this is by no means the origin of the principal sums which swell the deposits to very consider- able, or even surprising, figures. It seems, at first, paradoxical to say that in the main deposits do not result from the bringing of money to a bank. And yet it is literally true. This is indeed one of the things most necessary to understand about 168 REPORT OF THE MONETARY COMMISSION a bank, because it is thus only that we can comprehend how a bank creates a most effective currency without issuing any notes. No progress can be made in getting correct views of banking and currency until we grasp the fact that banks are not confined to issuing notes when they wish to create a medium for the exchange of goods. Indeed, in no other way, can one clearly see how large city banks, without issuing a single note, can supply their customers with a perfectly satisfactory medium of exchange. Such a currency is readily supplied through eae deposits of a bank, on which checks are drawn. A manufacturer may have a stock of hardware, and yet he needs a means of payment at the present moment. If he has sold goods on ninety days’ time, and needs means to pay a note maturing tomorrow for materials used in his factory, he can present his evidence of sale of this property to a bank and get it changed into means of payment. The value of goods expressed in terms of money (the common denominator) is by the bank converted into means of meeting obligations, so that goods may be exchanged against goods. This is the preéminent service which the banks render to society. The processis simple. The sale of the goods creates a bill drawn on the purchaser for, say, ninety days; the manufacturer takes this claim for a given sum due in the future, and sells it to the bank in return for the right to draw on the bank immediately. That is, the loans of the bank (on the side of resources) are increased by this bill; and a deposit on the liabilities side is credited to the borrower. Now it by no means follows that the borrower (who is now technically a depositor to the amount of his loan) will take his deposit away. All he wishes is that the value of the goods sold may be utilized in the form by which he can pay tomorrow’s maturing note. By drawing a check on the bank in favor of his creditor he transfers to another the right to draw on demand, and his debt is paid. The granting of the loan by the bank depends upon the bor- rower’s possession of or capacity to obtain property; whether, after the loan is granted in the form of a deposit, actual money will be drawn out, or whether this right to draw will be passed about on paper from one to another depends entirely upon the NATURE OF A BANK 169 business habits of the bank’s customers. In our chief cities the right of drawing out cash is seldom exercised, because payments can be more expeditiously and safely performed by transferring the title to the deposit. The real function of a bank is thus to assist the man of busi- ness who has property, and whose credit is good where known, to secure an advance of current funds which he can use in his business. Those selling commodities to him may not be willing to let him owe them, for they may not know what his credit is, or even if they do, may insist on being paid because they need the money, and those to whom they must make payments would not know the merchant’s credit, and hence would not be willing to take his notes. They know the bank, however, and are willing to have it owe them (either as evidenced by bank notes or deposits), because they know that the customs of the com- munity make such bank liabilities a form of money. The mem- bers of the community, therefore, are willing to leave funds with a bank which they can call for; and on the strength of these, and with the aid of the bank’s capital as a guarantee, the bank makes the advance to the merchant who needs means of pay- ment. The bank’s promises are convenient and useful to the community, since they are currency, while an individual’s promises are not usually sufficiently well known or guarded; and third, the one is more acceptable and valuable than the other. For this reason the merchant is willing to pay the bank for giv- ing him immediate means of payment for his note, even though what he receives may be only the bank’s promise instead of his own. So long as the bank’s promises are convertible into money and are accepted by the public as equally as good as money and even more convenient, they are currency and means of payment, which his own promises are not. 88. In this way, then, a man having property, readily salable, can borrow upon the strength of it, get the value of that property converted into means of payment, expressed in terms of the standard, and exchange it for other forms of property which he most needs at the moment in his business; and all this is swiftly and conveniently done by creating a deposit and giving 170 REPORT OF THE MONETARY COMMISSION the right to draw on it. It is a highly efficient medium of exchange —indeed the most efficient, and the most largely used at this time by the business men of the United States. The value of wheat shipped from Chicago to New York appears—expressed in terms of money—in a bill at a New York bank to be traded against a similar title to dry-goods traveling west from New York. And the exchanges take place through deposits and trans- fer of rights to draw on deposits. Anyone may now see how the deposits of a commercial bank are enormously increased by the result of granting loans. It does not at all follow that deposits were originally formed out of money left with the bank. In most cases the balances deposited are simply checks transferring claims on deposits created by loans. In England and the United States, in normal times, the loans and deposits move together, and their sums roughly correspond; because in these countries the habit of using checks on deposits is highly developed, as contrasted with the continent of Europe (or rural districts in our own country), where note-currency is largely used. 89. When we consider the operations of a bank, then, it is evident that the institution can do its work equally well either by notes or deposits. It is for the community, by its own business habits, to determine which shall be used; from the view of profit to the bank it makes no difference which is used. It also follows clearly enough that expansion and speculation are equally possible under either form of currency created by the bank. The essential point lies in the discounts. If a speculative mania seizes the public and loans are made on property which turns out eventually not to be worth what it seems to be, then the liabilities created on the basis of these assets may be unduly expanded whether the liabilities are notes or deposits. This has been illustrated by history. Inthe United States before 1837~1839 careless lending produced an expansion of notes because notes were the kind of currency the public then demanded. In England, before 1844, it was also urged that spec- ulation and expansion were due to the issue of notes. In 1844, the Issue Department of the Bank of England was entirely separated from the Banking Department; and while its notes NATURE OF A BANK 171 can no longer be increased except by deposit of gold, the deposit- currency provided by the Banking Department has been expanded in times of over-trading quite as certainly as under the old form of note-issues. Without going into details, it is sufficient to point out the error of supposing that by controlling the issue of notes alone expansion of the currency canbe prevented. So far, however, as notes are the necessary currency of certain parts of the country, they will, of course, be the form through which any expansion must necessarily take place. DEPOSIT CURRENCY. 90. The process by which a highly efficient medium of exchange is created by means of bank deposits has already been described. But its influence on the problems under discussion is not so generally admitted as it shouldbe. If properly under- stood, those persons who profess to regard with favor a medium of exchange which expands easily in time of need should heartily favor a sound banking system out of which an efficient and expanding currency arises. The characteristics of this cur- rency were clearly understood by Hamilton in 1790: ‘Every loan which a bank makes is, in its first shape, a credit given to the borrower in its books, the amount of which it stands ready to pay, either in its own notes, or in gold or silver, at his option. But, in a great number of cases, no actual payment is made in either. The borrower frequently, by a check or order, transfers his credit to some other person, to whom he has a pay- ment to make; who, in his turn, is as often content witha similar credit, because he is satisfied that he can, whenever he pleases, either convert it into cash or pass it to some other hand,as an equivalent for it. And in this manner the credit keeps circulat- ing, performing in every stage the office of money, till it is extinguished by a discount with some person who has a payment to make to the bank to an equal or greater amount.” The same understanding also appeared in the statement of the Bank Commissioners of Massachussetts :* “By far the most operative of the causes which have dimin- ished the circulation of bank bills has been the increased use of deposits, bills of exchange, and drafts. To keep a bank account was once the badge of a large mercantile business ; it is now the habit of most shopkeepers, mechanics doing a considerable . * Report of Massachusetts Bank Commissioners (J. F. Marsh, Wm. D. Forbes, and George Walker), October 15, 1860, Executive Document No. 77, pp. 47-8, XXXVI Congress, Second Session. ; 172 DEPOSIT CURRENCY 173 business, and professional men. Bank deposits are, properly speaking, a part of the currency; and for that reason our law wisely places them on a footing with bank bills in providing a specie basis for their redemption. This is a truth not always recognized, and sometimes even denied; but a moment’s reflec- tion upon the characteristics and functions of both deposits and bank bills will show that while they differ in the manner in which their value is evidenced, and their transfer accomplished, they do not differ in intrinsic character. Considered as a whole, deposits grow out of the discounting of paper, precisely as does the issue of bills; like them, they are capable of performing every oper- ation of payment, and may effect a countless number of pay- ments without any redemption being made of them by the bank; the only difference being that the transfer of bills is by manual delivery, while that of deposits requires a registration by the bank to perfect it... .. By the use of deposits the bank derives a profit, precisely as by the issue and circulation of bills; like bills, they are payable by the bank on demand in specie, and any unusual withdrawal of them affects the bank precisely as an unusual demand for the redemption of its bills would do. The suspension of specie payments by the banks of the city of New York in October 1857, which led to a similar suspension throughout this State, was not caused by the presentation of bills for redemption, but by the withdrawal of deposits.” g1. And yet during the early part of our history there was little consideration given to the deposit currency, largely because the country as a whole was, speaking generally, then in the state of our present rural districts where note-issues and not deposit currency are chiefly required. As a consequence, legislation directed against bank expansion was concentrated solely upon note-issues. This has been fully explained by Professor Dun- bar,? as follows: “Besides the apparent ease of legislating upon note-issues and the obvious difficulty of legislation upon deposits, the notes were, in the earlier decades of our history, the more important ™ Deposits as Currency,” Quarterly Journal of Economics, vol. i, July 1887. The subsequent extracts are also taken from the same admirable paper. 174 REPORT OF THE MONETARY COMMISSION of the two. The comparative sparseness of population and the imperfect development of the banking habit, in a new and more slowly advancing country and in a less advanced age than the present, created an early preference for the currency which passes from hand to hand, and discouraged the use of that which implies a resort to the bank. Even in the abnormal years 1809 and 1811, when all business was stagnant as the result of the embargo and subsequent non-intercourse, the note-circulation of the Bank of the United States was little below its debt to indi- vidual depositors, as shown by the only statements of that insti- tution ever given to Congress; and, in the accounts even of the best developed state banks of that date, the notes have clearly the first place. The figures collected by Gallatin for 1820 and 1829 show the same preponderance of note circulation. The returns collected by the Treasury for many years, under the resolution of July 1832, show that it was not until 1855 that the deposits of the banks, taken in the aggregate, rose above their circulation. Even under such special circumstances as those of Massachussetts, the notes continued to be the more important element until 1858, with the exception of an irregular period from 1806 to 1823, and two or three scattered years of excep- tional conditions.” “And not only were the notes practically the more impor- tant during these years, but events riveted the attention of the public upon them. The suspension of specie payments at the close of the second war with Great Britain, the history of the second bank of the United States and the struggle for its re-charter, and the hard-money movement which finally led to the independent treasury system, all tended to keep the notes in the foreground, and to give the impression that banking was synonymous with note issue, as the old acts of Parliament treated it. The long-continued suspension of 1861 and the later controversies, turning primarily on the questions raised by the greenbacks, but involving the bank notes, have easily and natur- ally followed the same line.” 92. The rapid growth of the deposit currency, which was out of all proportion to the growth of banking capital, and to the DEPOSIT CURRENCY 175 quantity of national bank notes issued, is to be seen in the reports of the Comptroller of the Currency. These reports show how admirably this species of currency seems to have served the interests of the community, since this expansion, at the expense of notes, could have taken place only by the voluntary choice of the business public, arising out of its own conception as to what was most convenient. The figures’ are given since 1875. Notes Deposits sae | Natceel Bee lomo) Eanes peeraes a ay i Average for six months ending November 30, 1875........ 318 G75). Va seeeasereneee 487 |.c.escea| 1,162 May 31, 1876........... 008 308 GOL7! [eee cccicte 480 1,097 May 31, 1877. ......0eee eee 293 GAO, [teeny seid BVT. [evo marere || AshhE UF -—_— May 31, 18785 ise asanae wees 301 611 230 184 1,025 May 31, 187 Qiise a's: sissies oe 304 614 257 140 I,O1I May 31, 1880.........00 000 321 799 319 183 1,301 May 31) 1880 i icactcnvecan. os 309 989 386 242 1,617 May 31, 1882.........-.005- 921 1,047 452 296 1,795 Novi 30) 1882i.554 4 aavan cares ss 312 1,095 490 289 1,874 For year 1883......... 000005 312 1,043 335 165 300 |* oe For year 1884..... 0... 00000 295 979 325 189 300 ]*} [1,793 For year 1885.........-.000 269 1,106 344 188 300 |* | [1,938 For year 1886............0. 245 1,146 343 214 300]*| [2,003 For year 1887 167 1,285 447 240 300 ]*| [2,272 For year 1888 155 1,292 410 258 300]*| [2,260 For year 1889. . 129 1,442 507 300 300 ]* ee For year 1890. . 126 1,522 553 336 300]*| [2,711 For year 1891 124 | 1,535 557 355 300]*) [2,747 For year 1892 141 1,753 649 412 300]*} [3,114 For year 1893.........e000-5 155 | 1,557 707 486 300 |*| [3,050 For year 1894.....-..0.- 005: 172 | 1,678 658 471 300 ]*| [3,107 For year 1895..... 0... 00000 179 1,736 712 547 300 |*| [3,295 For year 1896........0-0e00+ 199 | 1,668 696 586 ele 3,250 For year 1897......... 00005 197 1,770 723 567 300 |*} [3,360 93. This highly efficient currency is certainly present in very large amounts— much larger than any other medium of exchange. But the one quality which characterizes it in a preéminent degree is its elasticity. And on this point we cannot do better than quote again the words of Professor Dunbar: «The table supplied by Professor Dunbar to 1886, has been continued to the present time. Comptroller's Report, 1897, pp. 571, 572, and Finance Report, 1893, p. 532. * Estimated. 176 REPORT OF THE MONETARY COMMISSION “Tt adapts itself to the demand of the moment without visi- ble effort, and either by expansion or contraction, as the case may be; and it does this quite irrespective of legislative purpose or guidance. From the figures, indeed, the conclusion is irre- sistible that, if for any reason the creation of deposit currency through the agency of the national banks is hindered or limited, it will make its growth by means of state banks; and, if not by these, then by a system of private banking, which no legislation can touch, until the government shall assume the power of declaring whether A may owe B or not. The growth of this kind of credit may be guided and it may be made morte or less sound according to the wisdom of legislation. The stability of the. standard to which its value relates is wholly within legislative control, and the continuity of the test of its solvency by refer- ence to that standard is within the scope of legislative influence. But, whether the legislation be good or bad, here is the adjusta- ble part of our system of credit currency, and the part of it which will continue to adjust itself to the scale of the transac- tions to which current business naturally gives rise.” 94. “And, in view of the extraordinary growth of this kind of credit currency, the mere question of the amount of national bank notes in circulation sinks into insignificance, and with it the question whether their place must be made good by other descriptions of paper, as, for example, by greenbacks. There is a real question as to the convenience of using coin, in place of a part of the paper which the community uses in its small trans- actions; there is a question as to the wisdom of depriving a great system of banks of the ability to supply whichever form of credit may be required by the public; and there is a grave question as to having any larger part of our credit currency, or any part of it, subject to control as regards its amount, by any legislative body whatever. But as regards the mere question of contraction, still sometimes brought forward with respect to the paper currency, the grounds for it have ceased to exist. For, besides the fact that since resumption specie has come in and must continue to come, through an ever open door, to make good any deficiency of circulating medium, the growth of DEPOSIT CURRENCY 177 deposits has covered many times over all loss in the amount of paper circulation. Indeed, we may go farther, and say that if the United States government were to pay off every legal tender note, and if every bank note were to be withdrawn, these changes would produce no real contraction of the currency. With specie thus brought into common use for smaller and everyday trans- actions, we should, it is true, have a currency far less convenient for its minor uses, and we should no doubt see the use of the deposit and check system thus carried prematurely into classes of transactions and into sections of country where the note now meets a popular demand; but, as regards the mass of exchanges from which the business condition of the country at any given time takes its tone, we should find them carried on as now, by a creation of bank credits on whatever scale the needs of the time might require. In fact, so soon as specie payments were firmly established and the value of credit currency was settled, by its assured conversion at pleasure into a solid medium, contraction ceased to be any proper object of dread.” ‘Upon this point sufficient evidence is presented by the oper- ations of the national banks since the resumption of specie pay- ment. Of these operations, the great results are clearly shown in the diagram issued with the Comptroller’s report for 1886." Inspection of this diagram shows an enormous expansion of the general scale of transactions by the banks since 1879. This expansion has come only in a moderate degree from the applica- tion of new banking capital ; it has come in spite of the sinking of the line which describes the changes in circulation, and chiefly from the sharp rise of the line of deposits during the flush period from April 1879, to December 1881, and again from the fall of 1884 to the present time [with the exception of the period of depression beginning with 1893]. The elastic power of the deposit currency, and the certainty with which it fills the void left by the disappearance of paper, could not be illustrated better than by the soaring of [the line for deposits] as the [one for circulation] sinks, upon [the Comptroller’s] chart.” The diagram given by the Comptroller in 1886 is continued in the Report for 1897. For reproduction of this diagram see p. 207 of the present volume. 178 REPORT OF THE MONETARY COMMISSION 95. ‘The legitimate inference from these considerations is not, however, that the disappearance of the bank note, or the substitu- tion of government paper for it, is to be viewed with indifference. The business of a country in which the banking habit is firmly seated, will, it is true, find a medium of exchange, and in the amount needed ; but it is of great consequence that the medium used should be made up of the kinds most convenient for the use of the community, and divided between those kinds in the proportions most convenient. This question of proportion is one which no combination of counselors, public or private, can deter- mine. No legislature and no conclave of bankers can say that the people of the United States require any given amount of notes for the management of their exchanges. The amount which is sufficient this year may, and almost certainly will, be either insufficient or in excess the next ; and it is partly from a sense of the absolute inability of any human foresight to deal with this problem, that we owe the multitude of schemes proposed in years past ‘to adapt the amount of the [paper] currency to the needs of the country.’ ”’ 96. ‘Left to itself, the country settles this problem of propor- tion in a natural way, by the demand which each individual using a credit currency of any kind will make for notes or for a deposit account, as his special conditions may require. But, in order that this natural process should go oneasily and withoutinconven- ience to the community, it is requisite that the banks or bankers with whom individuals deal when obtaining loans or receiving payments should have the ability to respond to demand in either form; in other words, that the creditor of the bank or banker should be able to receive the evidence of his claim in the one form, if he expects to use it in large operations or in a closely settled community, or in the other, if in small operations or where hand-to-hand dealings are the rule, and that the lender should find his profit equally in responding to either demand. It is only by being allowed to take one or the other form, as occasion requires, that a given mass of bank credit can perform its functions with the maximum of public advantage. There may be sound reasons of a different order for not giving the DEPOSIT CURRENCY 179 power of issue in both forms to every company or individual carrying on the business of banking ; in other words, the ideal of a perfectly free system of banking is no doubt beyond reach; —but that, for the greatest advantage of the public, the issue of notes by banks should be widely enough diffused to present in every considerable district which uses banking facilities at all the easy choice between the two methods of using credit, seems to be beyond dispute. This choice is given only when the power of issue is substantially in the same hands which control the loans and the business of banking generally, It is, in fact, one of the great services rendered by the national banking sys- tem that, for a most critical quarter-century, it carried note-issue and deposit banking side by side throughout the greater part of the country, under the management of a class of remarkably sound institutions, giving to the community many of the benefits of free banking, with the minimum of its risks. As a substitute for this system, the issue of notes by the Treasury is as little to the purpose as the striking of coins by the mint ; nor is there any machinery by which the operations of the Treasury can be made tc: perform the desired office. Happily, those operations are quite distinct from the commercial movement of the country, and are unsuited by their nature for any closer connection with it, even if such connection were expedient.” EXPANSION OF NOTE ISSUES. 97. The issue of bank notes is frequently regarded as a means by which banks exercise an injurious influence upon the commercial community. This is one of several ideas which seem to proceed from an incorrect analysis of the nature of the bank- note. These may be divided into two general groups represent- ing (1) the assumption that notes can be issued and maintained in circulation to any amount by banks at will, and (2) the belief that these notes have a direct influence upon business conditions and tend to bring on commercial crises. 98. The idea that notes can be issued by banks to any amount proceeds from an ignorance of the methods of banking. No legitimate bank would distribute its notes without receiving in exchange equivalent values, nor could it get them into circu- lation and keep them out, unless persons desirous of exchanging such values for the notes presented themselves. It might be said that the bank could pay them out in discharge of its debts, its expenses, etc. This, however, could not be done unless by the consent of those whom it owed. And, inasmuch as the bank would not legitimately be in debt, or have such expenses, except for the inconsiderable matter of services or office furniture, etc., such payments would in any case be small in amount. In gen- eral, then, it may be said that, in ordinary business, the notes can be issued only if there are borrowers who are willing to accept them, and they can be kept in circulation only if those *In this discussion, the question of wilful fraud and issue of notes by banks with- out receiving (supposedly) valuable assets in exchange therefor has been omitted Even in such cases the security of the currency would, under the plan of the Commis- sion, be fully assured. This will appear at a later point. Protection to the other banks of the system could, of course, be obtained in such cases only by suitable regulations governing examination, inspection, reports, etc., and above all by giving to the Comp- troller authority to grant bank charters only in instances where he is well satisfied that the incorporators of the bank are honest in their intentions. Such discretion lodged in the hands of the Comptroller would, however, if intelligently exercised by him, be a sufficient protection against fraud or wilful issue of notes without security. 180 EXPANSION OF NOTE ISSUES 181 to whom they are paid have use for them as currency and con- sequently do not deposit them or present them for redemption. Though the amount of bank-notes for which the public thus has use varies from time to time, it is unquestionably true that at any given time, with the business conditions then existing, this amount is something quite definite, and any issue in excess ‘thereof will be returned to the banks for redemption or deposit. Consequently, though the notes are put into circulation through the mechanism of loaning them to borrowers, it is nevertheless true that banks cannot increase their note issues by such loans —no matter how many borrowers may present themselves— unless there is a willingness on the part of the public to absorb and use increased amounts of bank-notes. For otherwise the notes paid out to a borrower today will be returned to the bank for redemption or deposit tomorrow, and the result would not be a loan met by notes, but a loan met by cash from the bank’s reserve or by the creation of a deposit account. In this way the loans of a bank beyond the amount of its capital are limited by whatever it can borrow through its notes or deposits (in excess of such portion thereof as it requires for a cash reserve), and not, as sometimes supposed, its notes and deposits by its loans. 99. The amount of deposits standing to the credit of indi- viduals on the books of the bank must be regulated in a similar way. In a previous section (87) the identity of the note and deposit has been pointed out. Neither note nor deposit will be created save in response to a demand trom the business public and both fulfill the same purpose. Whatever objection applies to the too great increase of the one applies equally to the over- expansion of the other. There is therefore no special or peculiar danger in the over-issue of notes, not existing in the case of deposits. It should also be remembered that at the present time the part played by notes relatively to deposits is unim- portant. Since deposits and notes are alike forms of purchasing power and since the deposit is now so much more extensively used than the note, the absolute danger from the over-expansion of deposit-liabilities is immensely greater than that of the over- 182 REPORT OF THE MONETARY COMMISSION issue of notes. Not only are bank notes at the present time quite unimportant when compared with deposits (in thé United States and Great Britain at least), but, with modern restrictions on the issue of notes, the expansion of this form of liability to anything like equal importance with the deposit-liability is impossible. This may be clearly seen from the following computation; which represents the situation of a bank of $100,000 capital operating under a system where its note-issues are limited to 80 per cent. of the capital as recommended by the Commission. The bank may be supposed to do 1. A deposit business only. 2. A note-issue business only. 3. Both a deposit and a note-issue business. I. Suppose that the bank has a capital of $100,000, paid up in cash; that it issues no notes, and that it receives no deposits of actual cash, but that it utilizes its capital as a 25 per cent. reserve against the deposits which it creates in the process of making loans. Under these conditions this bank could make loans amounting to $400,000, its situation being as follows: Resources Liabilities Specie, $100,000 Capital, - $100,000 Loans and discounts, 400,000 Deposits - 400,000 $500,000 $500,000 II. Suppose that the bank has no deposits at all but issues notes, under the plan proposed in this Report, to the amount of 80 per cent. of its capital, holding a 25 per cent. reserve. It could then loan, in addition to the $80,000 notes, the balance of its capital after deducting the $20,000 necessary to keep as a reserve. Its situation would then be: Resources Liabilities Specie, S$ 20,000 Capital, $100,000 Loans and discounts, 160,000 Notes, 80,000 $180,000 $180,000 III. Should this bank do both a note and deposit business, notes to the amount of $80,000 being issued and 25 per cent. EXPANSION OF NOTE ISSUES 183 reserve being held against both deposits and notes, its accounts would stand thus: Resources Liabilities Specie, $100,000 Capital, $100,000 Loans and discounts, 400,000 Notes, 80,000 Deposits, 320,000 $500,000 $500,000 This is precisely the situation found to exist in supposition I, save that some of the loans are now made by means of a note- issue. It thus appears that the possibility of expansion would not be increased by the note-issue. 100. The responsibility for any injury from over-expansion, moreover, lies with the public. It has just been seen that the creation of note- and deposit-liabilities occurs only in response to a demand from the side of the public. In the same way the cancellation of them is entirely within the power of the public. If either notes or deposits increase to an extent which the public finds greater than it needs, their cancellation will be required of the bank through the mechanism of redemption; and in general cancellation will be so required, since to keep an unnecessarily large volume of them in existence involves a loss of interest to the community." But whatever the dangers of an over-expansion of notes and tIt is true that convenience may dictate the holding of some purchasing power for atime idle. The notes being immediately available as money, and it being pos- sible to use them on many occasions where checks could not be utilized, there is a pos- sibility that they may be kept in the pockets of the people who use them, for a consid- erable time, and thus be assured a long period of circulation before they are returned to the bank for payment. The length of this period, however, is often overestimated and it is seldom recognized that the liability created in the form of a deposit is also likely to remain a long time inactive before it is checked upon or transferred to others. Scarcely more than one-fifth of the aggregate deposits of the country are daily checked upon. At this rate it would therefore require five days to move the whole mass. But this one-fifth is, in very large proportion, the most active part of the deposits, while on the other hand there are many mere transfers in which the bank simply alters a book credit, and is not obliged to redeem a check either by the payment of cash or by off- setting it against checks on other banks which may have been deposited with it. There is thus quite as great a possibility that owners of claims against banks in the form of deposits may for some time refrain from demanding the cancellation of these claims as in the case of owners of claims in the form of notes. 184 REPORT OF THE MONETARY COMMISSION deposits may be, the two considerations just indicated should constantly be borne in mind, (1) the extent to which these lia- bilities will be created cannot be increased except in response to the demand of the community, and (2) the return of its promises to the bank for redemption is dependent wholly upon the desire and judgment of the holders. Both notes and depos- its arise mainly from the loan operations of the bank. The fear of the increase of notes, therefore, amounts merely to a fear of the over-increase of bank loans. tor. A question, however, then arises concerning danger of the over-increase of bank loans. Without inquiring what the influence of an over-increase of bank loans in assisting to bring on acrisis may be, one or two things may be taken as estab- lished. It has been shown that loans leading to the issue of notes would be no different from loans followed by the creation of deposit liabilities, and that the danger, if any, arising from the issue of notes or the making of loans represented by deposit liabilities depends chiefly on the spirit of the community as a whole. It may be argued that the bank should act as a regu- lator and should deter the community from carrying on business upon a defective basis. This is precisely what it attempts to do. As already seen, no bank will make a loan whether in cash, or by the issue of notes, or by the creation of a deposit account unless it receives in exchange property, or what it considers a certainty of obtaining property. The judgment of bank mana- gers may be bad and they may in consequence grant loans upon over-valued property, as a result of which they may be unable to collect the amount due them. That is to say, they may pay, or promise to pay, something without receiving an equivalent, but in general they will not do this. Moreover, if redemption is exacted of the bank at every step as it goes on increasing its liabilities, it will be absolutely unable to enlarge its business to an unwarranted extent. Especially will it be unable to force into circulation more notes than are actually demanded by the community as a medium of exchange, since any surplus will at once come back to the bank for redemption. The real danger is that the bank may mistake the character of the supposed EXPANSION OF NOTE ISSUES 185 purchasing power in the hands of the would-be borrower and may lend to those who are not actually in possession of values to an equivalent amount. =F 102. This furnishes a clue to the origin of the fear of ae issues. As has already been remarked, this fear is anold one. It in fact developed during the earlier years of the present century at a time when the note was the principal means by which banks made loans and when the use of deposits was still in its infancy. In this period the mistakes sometimes made by banks in granting credit became confused with the mechanism by which it was granted. People came to think that the notes themselves and not the fact that they did not represent realizable property was the cause of the difficulties ensuing upon a speculative period. This idea has persisted to the present time. The outcome of the fear of expansion of bank-issues was seen in the English Bank Act of 1844 in which the conditions of the issue of notes were carefully prescribed. Yet the fact that the difficulties of the situation lay deeper than the mere possibility of excessive note- issues may be seen in the regular recurrence of periodic crises following periods of industrial over-excitement in England since the passage of the bank act just as before it. | PROFIT ON BANK NOTE ISSUES. 103. It is frequently asserted that the national banks secure an exorbitant profit upon their note-circulation. Many argue that the prohibitory tax of Io per cent. on state bank issues which confines the privilege of issuing circulating notes to the national banks, grants a monopoly to a limited number of institutions whereby a ‘‘ double profit” is obtained, (1) by receiv- ing the interest upon the bonds deposited as security for the notes, and (2) the interest at current rates on the notes when issued for loans. At the very outset, however, it is impossible to speak of a profit arising from the issue of notes as distinct from the gen- eral operations of banking. The source of profit resides in the discount operation; in the process of buying a right to receive money in the future in return for giving an immediate right to draw means of payment. The extent to which this can go on is limited only by the amount of resources left with the bank by others over and above necessary reserves. The lending, or investing of these amounts, brings a profit. It is sheer igno- rance of banking operations, therefore, to assert that the banks make a profit out of the notes issued. It is true that one form of liability by which loans are consummated is notes; but the profit could be made equally well by a deposit account, without the issue of a single note. The only possible ground for saying that banks make a “double profit” is the fact that a bank loans not only its own capital, but also any funds left with it by the community (uncov- ered by necessary reserves). A bank lending only its own capital would be scarcely more than a loan company; and would earn scarcely more than enough to pay expenses, to say nothing of dividends. To earn ordinary dividends a bank must, by some means, be able to loan funds beyond its capital. If it can issue notes which remain outstanding at a regular 186 PROFIT ON BANK NOTE ISSUES 187 amount, to that extent it thereby gets funds from the community which it can lend. Or, if it by loan operations creates deposits, which are not drawn out, but are used as a currency by means of checks, then it finds itself in possession of funds which it can loan on good, short time paper. 104. Where banking is perfectly free, therefore, and goes on subject to no restriction, the profit arising from a loan is the same whether the funds retained by the bank are balanced by liabilities of notes, or of deposits. When, however, banks are obliged to invest their funds in a specified sort of security in order to obtain notes, the result is a loss of profit equivalent to the difference between the rate of interest paid by these securi- ties and that currently paid by ordinary commercial paper. For the security in which the bank is required to invest as a guaran- tee for its notes will of necessity bear a low rate of interest on the investment, if this is of such unquestioned value as to afford greater safety to the note holder than would ordinary commer- cial paper. This is precisely the case with the national bonds which banks are now compelled to deposit before taking out notes. Inasmuch as the average rate of return on an investment in national bonds is now less than 3 per cent., while in practi- cally all parts of the country the rate on ordinary commercial loans is appreciably higher than that, it results that, because of the requirement to buy bonds, the bank earns less upon its resources than it would if they were invested in ordinary com- mercial paper. The profit to the bank depends wholly upon how its resources over and above its cash reserve can be invested, and the obligation to invest a part of its resources in low inter- est-bearing bonds as a security for its notes is a means of pre- venting it from putting the same resources into better-paying investments, and consequently reduces, rather than ‘‘doubles,” the profit of a bank. Even if this explanation were not conclu- sive, the fact that national bank circulation has been largely reduced, and that where the commercial rate of interest is high, the banks take out no more notes than the minimum amount necessary in order to hold their charters, should entirely destroy the ground for this erroneous belief. 188 REPORT OF THE MONETARY COMMISSION 105. While it is true that the profit arising from the issue of notes cannot be dissociated from that gained through the exer- cise of the functions of discount and deposit, and since it is impossible to speak of a separate profit as arising from the notes, it may be practicable to estimate what, under current conditions, might be the maximum profit derivable from taking out notes on the basis prescribed by the present system, as compared with a banking business where an equal amount of deposits was used or with loaning the funds directly. Supposing a bank to use only notes, and no deposits at all, it may be possible to see the truth of what has been above explained. If the 4 per cent. bonds of 1907, which are mainly used as a security for notes, were to sell on a 3 per cent. valuation, it would require in July, 1898, $107,- 861 to buy $100,000 of bonds, on which only $90,000 of notes can be issued. The account would stand as follows, under the present law:? I. NOTES AND NO DEPOSITS. Bonds at 3 per cent....... $107,861 Capital ec cos cscs ceeacees $100,000 Loans at 6 per cent....... 68,639. NOtéS. icon usn eevee sgeans g0,000 5 percent.redemption fund, 4,500 Io per cent. reserve....... 9,000 $190,000 $190,000 Income: On: bond Sxs.4u5bdeu Gass on aresea see ue es $3,235.83 OM LOANS 1: sos jardosaea Galdiars lala! oobile Sleie Aare lw giv aeaveneae wae aes 4,118.34 ———— $7,354.17 Deduct : Special Expense on Notes: WA KAttOM setescis ase ayo.0i odie aca 4 wig beau aia Saws weee $900.00 Redemption 2.0.0.5 sce seeta aves sdevamaee das 48.15 PI ALES she fae ergs veces asdeaalet asa viewe awieciaeane 7.50 Express Charges! 3.3. cca deus Seca ne ees dds 3.00 — 958.65 NEE IMCOM Ess. eles sete ake ek aoe $6,395.52 *From the available capital and notes amounting to $190,000, there must be subtracted the reserve, the redemption fund, and the cost of the bonds in order to ascertain how much could be loaned ($68,639). PROFIT ON BANK NOTE ISSUES 189 Then contrast the above account with one in which no notes are used, but only deposit accounts: II. DEPOSITS AND NO NOTES. Loans at 6 per cent....... $176,500 Capital.................. $100,000 I5 per cent. reserve....... 13,500 Deposits Sse tena isvieu duos dale sauiehe'She go,000 $190,000 $190,000 Income on loan.......... 10,590 Thus the advantage in favor of the deposit system would be $10,590 minus $6,395.52, or $4,194.48, while the loaning of the original capital of $100,000 at 6 per cent. simple interest (without the necessity of forming a bank) would have brought a return of $6,000— only $395.52 less than that earned by the bank of issue. 106. It has been previously explained that deposits perform essentially the same function as notes, though in a different way and with a different class of people, and that the profit arising to the bank is the same whether its loans are made possible by the use of notes or of deposits, where the use of both is free. It follows that those banks whose customers demand their loans in the form of notes will be placed at a disadvantage (relatively to those using deposit-accounts), and in order to make the same rate of profit as the banks which are not obliged to issue notes they would be forced to charge borrowers a higher rate of dis- count upon loans, That is, the tendency of the present national banking law is to make the issue of notes more expensive, and this in the end falls upon borrowers. And as it isin less thickly settled regions that notes rather than checks are chiefly used, it follows that at the present time country banks are at a relative disadvantage as compared with city banks, and their customers are at a relative disadvantage as compared with those of the city banks. | Kecurring to the illustration given above, it will be seen that a bank of $100,000 capital with $90,000 of deposits, if its expenses were $5,000 could make loans to the community at 6 per cent. interest and yet make a dividend of 5.59 per cent. on 190 REPORT OF THE MONETARY COMMISSION its capital; while a bank with no deposits, but issuing $90,000 of notes under the present system, with the same expenses and $900 additional taxation, in order to make the same dividend upon its capital stock (5.59 per cent.) would have to obtain an average of 12.02 per cent. on the loans which it makes to the community. This state of affairs works injustice in another way by sub- jecting banks in different portions of the country to different conditions. It is a direct inference from the computation con- cerning the profit derivable from a note-issue, given at an earlier point, that the higher the rate of interest current in a specified locality, the less is the inducement under the present system to issue circulation in excess of the minimum required by law, and vice versa. This follows directly from the fact that since the fixed charges, such as tax, redemption fund, etc., remain the same in every case, the higher the rate of interest the greater the inducement to elect the direct investment of the capital in carrying on the ordinary business of the bank in preference to using it for the purchase of bonds and issue of notes. This may readily be shown by a computation similar to that already given, the rate of interest used being Io per cent. instead of 6, as before. With this rate of interest the situation would be as follows: I, NOTES AND NO DEPOSITS. Bonds at 3 per cent., $107,861 Capital, $100,000 Loans at Io per cent., 68,639 Notes, g0,000 5 per cent. redemption fund, 4,500 IO per cent. reserve, 9,000 $190,000 $190,000 Income: On bonds, $3,235.83 On loans, 6,863.90 ——— $10,099.73 Deduct : Special expense on notes, as before, - $958.65 Net income, $9,141.08 PROFIT ON BANK NOTE ISSUES 191 II. DEPOSITS AND NO NOTES. Loans at Io percent., - $176,500 Capital, $100,000 15 per cent. reserve, 13,500 Deposits, - g0,000 $190,000 $190,000 Income on loans, $17,650 The advantage in favor of the deposit system in this instance is thus $8,508.92, a sum nearly twice as large as that represent- ing the advantage of the deposit system where the rate of inter- est was 6 per cent. Not only this, but where the rate of interest is 10 per cent. the net income ($9,141.08) derived by such a bank would actu- ally be $858.92 less than the bank would have obtained by loan- ing out its original capital at simple interest without taking out notes at all, or using any portion of it as a reserve upon which to build up deposits. In other words, after going to the expense and trouble of organizing a bank, the income (before taking out the expenses of the bank) would be found to be less than the return from an investment of the capital in simple loans, with- out forming a bank. 107. The consequences flowing from the state of things just described are sufficiently familiar. Interest is of course highest in those states where capital is least abundant. But it is pre- cisely there that business is least highly developed, and hence that the check and deposit system is less advantageously used. This inability to use checks implies a need for a greater supply of note-currency, which, under the present system, is very unlikely to be issued, inasmuch as the resources of the bank can be employed in some other form to much better advantage. It is due to this that the circulation of Western banks, situated where currency is most wanted, is generally kept close to the amount corresponding to the legally required minimum bond-deposit, while that of Eastern banks, where money and money substitutes are more abundant is, proportionately to capital, much higher. In order to display more clearly the curious way in which the national banking system as at present organized, fails to perform the function of furnishing currency where it is wanted, the follow- by the Comp- iven REPORT OF THE MONETARY COMMISSION oe ood‘ Ler lg Li6‘b6zg LiE‘g9S ‘zg ooh ELz‘zg oor ‘10L‘6¢ oo06LL‘o1g | ZOI 30 000‘grg 063‘9 06g‘gSz o000'zSz 000 g60‘1 o00f0zz‘I 6 fae eR eS Se TES BRET LET ay Szr‘Lds S€o'vz orb‘g1z SLE‘Z61 00S‘694 000'SSg or [rrtrcr tte tts iddississty, rs oSL‘L90'z oz6‘Sor 0L9‘L69 oS 4‘16S 00S‘6S9‘z 000'SS6‘z Sz )**(ewy]ag apisjno) eueqely rs oSz‘gLL ogo‘zb ofg‘oo€ oSZ‘gSz o00‘S€o‘1 oo00‘oS ‘I Gro frrttrtsrttt tts epropy be oo6bie‘1 Sells SzotrSP oof ‘€6E 00z‘goL‘t 000‘g69‘I QI [rcccr tte eUurpores) qNOg ae SLo‘Shg1¢ | Loz‘gS¢ zoP‘ebog Szz‘Ses¢ oo6‘oeh'z¢ | ooofrodizg | Lz jot tect BUTpOIeD YWON ‘HINOS gb £6L‘6zz‘gig¢ | obg‘of gg LEzgiSSg¢ | LOS‘1go‘bg | o6€'116‘zzg | oo1‘LSh‘Szg | Poz Lv SLE‘IIQ’D SoL'S1z o6g‘LLe‘1 Sz‘zgi‘t o0S‘ELL‘S o00'S1b‘g ZS |(storT ‘1S @ptsyno) linosstyl 6°9 £bo610'9 Lor‘ozr pop ries LvE‘169'1 o6f ‘or ‘L oo1‘L9S‘g Cor [tr sesuey gz SLE‘O6S‘LE | gol‘oozg Cbg*gzo'zg | Szi‘gzgiig | ooS‘LzbOg | ooo'SAborg | hor Jt ts’ BYSeIqaN ‘ISTM gz o0g‘gzi‘z1¢ | OQ6'SQE‘O¢ | SBS‘gfo‘o1g | Szg‘oSO‘EF | Szz‘LLL‘Sig | oSz‘oES*41g | cer 6s GLO‘gzze gri‘zbl‘t gogo Liz oSL‘bro'r ScLiebep oSzsid‘b EE forse r cscs cesses (gouapr -AOIg apIs]no) puvysy spoyy z6b SLE‘zOQ6'b Loz‘1bb‘z zzpssoLle Seber 00S ‘9gz‘9 000‘Sg6‘9 or |: petee sess sy TOULIaA, BOSS oSz‘Se6'eg | ShStzoz'zg | S6z‘h1S‘Eg | OSL*IIE‘Ig | oootLbz‘S¢ | ooo‘oEg‘SY | of ++ orrysdwmepy Mon ‘LSV] (6) (3) (4) (9) (5) (+) (€) (2) (2) ansst Ayjenjoe syueq yisodap isodap yorym Gisodap | puog pormbar | puogq pasinbor pansst ysodap ayqisstuniad syueq puoq pasmnbar BO SHES) uo ansst jo Ayjemioe puoq parmnbar ansst jendeg yo sdnorg MO:SNSSE. JO, JO'SSoOXOs NT ss90xa UI pansst} uoTye[NdII-) uo anssy UWINUIXe AL ‘ON ‘ ssaoxa ul ‘ansst | pansst aq yysrur Aqenqoe junowy a[qissimied yor qunowy Ne. yo ade,ua0I0g table has been computed from the data g troller of the Currency in the report for 1897: 192 ing ‘MVI AG GALLINUAd LISOdaG-GNOd@ WOWINIW AHL OL DSNIGNOdSAYNOD LVHL AO SSAOXTA NI AONHUAND ANSSI SNOILOAS LNAYAAKIG NI SHNVH HOIHM OL LNALXAY ONIMOHS ATAVL LROFIT ON BANK NOTE ISSUES 193 As will be seen, returns for three groups of states are given, one a typical Eastern group, one Western, and one Southern. The fourth column gives the maximum circulation which under present laws it would be possible to issue, z. ¢., 90 per cent. of the par value of the capital stock of the banks. Column 5 rep- resents the circulation corresponding to the minimum amount of bonds required to be deposited by the banks according to law. Column (6) shows the circulation actually issued. The difference between the circulation actually outstanding (6) and that cor- responding to the required deposit of bonds (5) represents the amount which, under current conditions the banks are induced to issue over and above actual legal requirements, and is given in column (7). The difference between the possible maximum (4) and the circulation upon the legal minimum of bonds (5) is given in column (8), and represents what the banks might issue if conditions made it sufficiently profitable to induce them to do so. The percentage of column (8) represented by column (7) indicates what proportion of this possible surplus above legal requirements the banks are actually induced to issue, and is given in column (9). It is unnecessary to repeat that the Western and Southern states are those where the need of currency is most pressing. Yet as appears in a most striking fashion from the table just given, it is precisely in the Western and Southern groups of states that national bank note-currency is not issued. The highest per- centage for any Southern state here given, as appears from column g, is 5.4, whereas the lowest for an Eastern state is 49.2, or more than nine times as much. In brief it must be admitted that the notion which ascribes higher earning powers to the issue function of banks under any system and especially under the present one, must be regarded as incorrect. Under a system of bond-secured circulation, it is absolutely without foundation. 108. The charge ofa double profit upon circulation has already been shown to be erroneous, except in so far as it is a complaint against the principle underlying the existence of all banks. As applied in its most extreme form to the present national banking 194 REPORT OF THE MONETARY COMMISSION system as a system enjoying some peculiar privileges in contra- distinction to the old state-bank system, the idea of a double profit is absurd. As has been said by a recent writer,’ ‘there was nothing to forbid any of the old state banks from getting interest in exactly the same manner. They were allowed to buy as many United States bonds as they wished, but bought few, if any, as they got higher interest on other investments. They also had the right to deposit such bonds with a trustee as secur- ity to the note-holder.: The only difference between the old state banks (other than free banks) and the present national banks, is that the former might, if they thought fit, invest in United States bonds, which they rarely did, and pledge them to the note-holders, which they never did; while the national banks are compelled to do these things.” 109. From what has gone before, it must be clear that a high or low rate of interest in the loan market as compared with the fixed returns from high-priced bonds, will affect the willingness of national banks to issue notes. If the commercial rate of interest is high, and the returns from bonds are low, there will be small incentive to use their notes. It now remains to indicate some of the causes affecting the prices of United States bonds, in order to understand how the profit of banks, and thereby the amount of circulation outstanding, is affected. Changes in the price of bonds will take place from causes producing a disparity between the rate of interest paid by the bonds and the prevailing rate of interest for equally safe investments in the community. When our debt was refunded by the act of 1870, 4 or 4% per cent. was regarded as a low rate in view of the credit of the government. Since then, the credit of the country has improved, or the normal rate of interest on such securities has fallen. But those bonds paying, ¢. g., 4 per cent. when the normal rate in the community is only 3 per cent. will sell at a premium (varying from par in the case of bonds which may be paid at any time to about 120 for a bond having 30 years to run, and 133% for a perpetuity). And if the permanent * Louis N. Dembitz of Louisville, Ky., in a communication to the Monetary Com- mission, PROFIT ON BANK NOTE ISSUES 195 rate in the market falls below 3 per cent. the price of the 4 per cent. bonds will rise still higher; in fact these bonds have risen as high as 130 or higher. The price of such a bond is a measure of the normal rate of interest on equally safe securities. For this reason bonds, when issued at a rate above that normally paid for such securities at the time of issue, frequently command a heavy premium at the very outset. Thus, for instance, the bonds issued in 1894 at once sold in open market at a premium of 17 or more. These bonds bore interest at the rate of 5 per cent., the Secretary of the Treasury being limited by the terms of the Resumption Act and the preceding Refunding Act (of 1870) to bonds bearing certain rates of interest. Inasmuch, however, as the credit of the government was better, while market rates were lower than in 1870-5, 5 per cent. was con- siderably above the rate current on such bonds, and they there- fore sold at a premium. The amount of this premium was such that, taking into account the rate paid by the bond and the time it was to run, exactly the market rate would be earned upon the total amount actually invested in the bond. Speaking technically, the value of the bond was thus automatically “equalized” upon the market rate, or reduced to the basis of that rate. The term for which a bond runs, moreover, has an influ- ence on its price. If it is a short-term bond, as the date of maturity approaches when it will be paid off at par the premium will steadily fall until it drops to what will be paid forit. A bond bearing 6 per cent. would not sell above par when near to maturity, while a 4 per cent. long-term bond sold to take its place might command a high premium. A bond paying a slight amount above the market rate of interest is worth a higher price varying somewhat in proportion to the term of years in which it continues to pay this additional gain. When bonds are pay- able at call it is impossible for them to command any appreciable premium. 110. The profit to a bank on issuing notes, however, is affected by the price of the bonds which it is obliged to deposit before obtaining its notes. Inasmuch as only go per cent. can be issued 196 REPORT OF THE MONETARY COMMISSION on the par value, 10 per cent. of the investment is locked up. But if the bonds sell for 124, then there is a margin above go per cent. of about 34 which is locked up. The higher the price of the bonds, the more the dead margin, on which no return can be obtained, becomes; and in proportion as the price paid for the bonds is high the return on the investment is low. That is, even if the bonds to be deposited bore 3 per cent. interest and could be purchased at par, the present system would require a bank wishing to issue $90,000 of notes to invest $100,000 at 3 per cent. interest; while if the bonds were 4 per cent. bonds of 1925 selling on a 3 per cent. basis at 120 it would require that, as a condition of issuing $90,000 of notes, $120,000 must be invested at 3 per cent. The more the profit diminishes, the less are notes taken out. Consequently, in the years since 1870 when the credit of our government was improving, and while the rates on safe investments have been falling—for reasons quite outside the control of the banks—we have witnessed the steady decline in the volume of the national bank notes. Ata time when the business of the country was expanding the notes were declining. For these reasons, the Commission has recommended that so long as bonds are required as security for notes (10 years) they should be reduced to a basis of 3 per cent., thereby lessen- ing the gap between the market value and the amount of notes which can be issued on their deposit. .And in all cases where bonds are authorized to be sold by the Secretary to replenish the reserves of the Treasury, it is urged that they be issued for short periods, and at as low a rate of interest as the market will warrant. HISTORY OF THE NATIONAL BANKING SYSTEM. 111. The origin of the national banking system is to be attributed to two distinct causes: (1) The desire to extend and improve the market for government bonds; (2) to provide a safe national currency of uniform value. In consequence of the banks’ locking up their funds in unsal- able bonds in 1861, and of other circumstances which will be dis- cussed at a later point, the banks and the Treasury had been forced to suspend specie payments at the end of that year. In order to obtain revenue for war purposes, there were three courses open to the government: (a) To resort to increased taxation; (0) to sell bonds or other government obligations; (¢) to issue gov- ernment notes of some sort. Of these three means of raising reve- nue, the first was not much relied upon by. Mr. Chase, while the second had from the beginning been that on which he intended to place most dependence. Nor had he desired to issue legal- tender notes. Thus it was of the first importance that, if bonds were to be the government’s chief resource, the market for them should be improved. There was also, from the very first, the desire for a sound and uniform currency. The existing -bank-notes were issued by 1600 different institutions operating under State laws possessing little similarity. Currency which was perfectly good in certain portions of the country would not pass at all in others, while there was in many sections an immense volume of worthless paper in circulation. Both the need of a better market for bonds and the demand for a suitable note-currency were intensified by the issue of the legal-tender notes. The government had drifted into this means of obtaining funds with- out consideration, The issue of the legal tenders weakened - the credit of the government, drove out of circulation what gold remained, and left the country without any universal currency save the legal tenders themselves. These, however, it was no 197 198 REPORT OF THE MONETARY COMMISSION part of the government’s policy to retain permanently in circula- tion. They had been issued only as a temporary forced loan, without interest, and the danger of increasing them, or even of retaining them in circulation, was constantly in the minds of the legislators of the time. It was desired to replace these issues by a note-circulation which, as hinted in the title of the National Bank Act itself, should furnish a “national currency.” At the same time the shock to the government’s credit resulting from the issue of the legal tenders had unfavorably affected the sale of bonds and, with other events, made it important to devise some means of stimulating the market for them. The National Bank Act was intended, therefore, to meet the want of a cur- rency and to increase the demand for bonds. 112. The plan for a national banking system had been early advanced. All through the first stages of the war it had been Secretary Chase’s favorite measure. He had thought of it at least as early as the summer of 1861; and it had*at that time been strongly opposed by the New York banks. Nevertheless he had recommended it in his report for that year,’ and the bill was in preparation before the first issue of legal-tender notes,’ but, inasmuch as it demanded much time for its completion, it had been delayed. The Secretary’s report for 1861 stated the essential feature of the plan to be “the preparation and delivery to institutions and associations of notes prepared for circulation under national direction,” etc., ‘‘ secured as to prompt convertibility into coin by the pledge of United States bonds and other needful regulations.” 3 Mr. Chase recurred to the subject in his report for 1862. A bill embodying a plan some- what similar to his had already been brought before the House in July, but had received no attention. The Secretary urged that ‘‘no very early day will probably witness the reduction of the public debt to the amount required as a basis for secured circulation.” When that time should arrive the debt might be t Report of Secretary of the Treasury, 1861, p. 18-19. 2BoLLEs’ Financial History of the United States, III, p. 43. 3It had been Mr. Chase’s original plan to force state banks to secure their issues by basing them upon United States bonds. 4 Finance Report, 1862, p. 20. HISTORY OF THE NATIONAL BANKING SYSTEM 199 retained at low interest, or some other security could be pro- vided. For the present, the new plan would furnish a suitable currency and assist in the negotiation of bonds. At first the operations of associations organized under the new act were ‘to be restricted to investing United States notes in bonds, issuing a circulation based on these* bonds and transacting ordinary business.” Thus the price of bonds would be enhanced, and thereby great relief to the government was anticipated from the measure. 113. Several bills embodying in different forms the idea thus recommended by Mr. Chase were introduced into the Senate during January and February 1862, but all failed of passage Finally a bill was introduced by Mr. Sherman January 26, 1863, which was sent to the House February 12, and became a law on the 25th. The characteristic point in the new system was the require- ment that the. banks should buy national bonds, deposit them with the government, and receive back circulating notes for issue. Although the plan had already been tried in New York, and had given tolerable satisfaction, yet it was found to be obnox- ious at the outset. The unfortunate experiences of several West- ern states, which had tried the system with disastrous results, overcame any favorable impression which the experience of New York may have made. Some time, moreover, was lost in elabo- rating the new system and in preparing the circulating notes Opposition had time to mature, and when Mr. McCulloch, the first Comptroller of the Currency, was finally ready to proceed with the organization of the system, he found the state banks almost united in opposing it. It was feared that the working of the new national system would be a repetition of the disastrous experience with earlier bond-deposit systems; that the national banks might be ruined in case of the success of the rebellion; that Congress might interfere with the banks, and that they would suffer by the change of name.” The last point was finally tFor an account of the debate on the National Bank Act of 1863, see Journal Pol. Econ., Chicago, 1894, p. 250 ef seg. 2McCuLiocn’s Men and Measures of Half a Century, p. 168. 200 REPORT OF THE MONETARY COMMISSION conceded by Mr. Chase. He agreed to allow the organization of banks, without a further change of name than the addition of the word ‘‘national’” to their titles. Still the banks were not willing to enter the system. Not until July 20, 1863, was the first charter granted and authorization given to the First National Bank of Philadelphia to begin business. Several Western banks received charters within the succeeding month, but very few charters were asked for by banks in NewYork. In August 1863, twenty-six banks were reported in process of organization.’ During the year 1863-4 the process of organiz- ing new banks and reorganizing old ones proceeded with pain- ful slowness. On December 5, 1863, at a meeting of bank officers in New York, a committee which had been ordered to ‘take into con- sideration the National Bank Currency Act as to its prospective effects upon the currency of the nation and the national credit, and what action, if any, devolves upon the banks in the prem- ises,”’ reported that, as the banks applying for charters were mostly of small capitals and located in the West and South, it was plain that the act would foster a system of “ wild-cat” bank- ing. It was said that the notes, not being a legal tender, would depreciate, and that their use would involve a loss to the govern- ment of the interest on an equal amount of legal-tender notes. This report was accepted by the New York Clearing-House, and had some effect in deterring state banks from entering the sys- tem.? The slowness with which the extension of the system proceeded, however, was, at least in part, due to the defects in‘ the law itself. They were too grave to be overlooked, and to ensure the success of the system immediate action was needed. A bill for the improvement of the act of 1863 was reported in the Committee of Ways and Means on March 1, but did not become a law until June 3, 1864. 114. The new act retained most of the features of the act of 1863, but changed it in several respects and added various new tHuNT’s Merchants’ Magazine, Vol. 49, p. 139. 2 Compare KNox’s History of Banking in the United States; Rhodes’s Journal of Banking, 1892, p. 630. HISTORY OF THE NATIONAL BANKING SYSTEM 201 provisions. As finally amended the main provisions of the act were as follows: There was to be established a separate bureau to be presided over by a ‘‘ Comptroller of the Currency,” to which should be committed the charge of the “issue and regulation of a national currency based on United States bonds.”’* The currency was to be issued by institutions known as “ National Banking Associations,” to be organized by any number of per- sons not less than five. No bank with less than $100,000 capital was to be organized in places of from 6,000 to 50,000 inhabitants, and none with less than $200,000 in places of more than 50,000 population. Only in towns of less than 6000 pop- ulation was the organization of banks of $50,000 capital to be permitted. The incorporators before being authorized to begin business were to transfer to the Treasurer bonds of the United | States to an amount of at least 30 per cent. of the paid-in capi- tal stock of the bank, receiving back circulating notes to an amount equal to 90 per cent. of the market value of the bonds transferred, but never exceeding the par of the capital stock paid in. This act also required 50 per cent. (instead of 30 per cent.) of the capital to be paid in before the bank could com- mence business, and required the balance to be paid in at the rate of one-fifth each month. (The act of 1863 had required this unpaid balance to be paid only at the rate of 10 per cent. of the capital stock every two months.) The total issue of notes was not to exceed $300,000,000 in amount, one-half to be appor- tioned to banks according to the representative population of the states in which they were located, and one-half ‘‘ having due regard to the existing banking capital, resources, and business of such states.”’ The notes were to be redeemable in lawful money on demand, and were receivable in all payments to the United States, except for duties on imports. Shareholders were to be liable for double the amount of their stock. Country banks were to keep on hand in lawful money an amount equal to 15 per cent. of their outstanding notes and deposits (instead of 25 per cent. as provided by the act of 1863), and might redeposit three- fifths of this 15 per cent. with other national banks in certain * Act of February 5, 1863, Statudes at Large, pp. 665 e¢ seg. 202. REPORT OF THE MONETARY COMMISSION specified large cities (increased in number from nine to seven- teen). Banks in these seventeen cities were to have a nominal reserve equal to 25 per cent. of their notes and deposits, but might redeposit one-half of such reserves in New York. The act also compelled every bank in the seventeen cities to pro- vide for the redemption of its notes at par by some bank in New York, all other banks being obliged to redeem in some one of the seventeen cities themselves. State banks might enter the new system by adopting as their title the word “ national ”’ with the proper numeral prefixed and complying with certain regula- tions. The earlier act had permitted the issue of no notes of denominations less than $5. The act of 1864, however, allowed the issue of notes of $1, $2, and $3 until specie payments should be resumed, not exceeding in aggregate amount one-sixth of the capital of the bank. 115. Banks, however, still came into the system less rapidly than had been hoped. At the end of 1864, 282 new banks were reported organized, and 168 state banks converted. The total capital stock of the national system was then $108,964,597.28, the circulation $65,864,650, the bonds securing this circulation $81,461,450. At the outset Secretary Chase had estimated that $250,000,000 of bonds would be absorbed by the new sys- tem of banks. This expectation was not fulfilled until the end of 1865. Inthe report of that year the Comptroller announced the organization of 283 new banks and the conversion of 731 state banks, making the total, on November 1, 1865, 1601, pre- cisely the number of the state banks in existence at the opening of the Civil War. The note circulation of the national institutions was reported at the close of 1865 as $141,321,903, there being still $78,867,579 of state bank-notes outstanding. The pressing need of a market for bonds was now past; but it was clear that if the second object of the national bank act — the provision of a uni- form and secure national currency —was to be attained the function of note-issue must be exercised only by the national banks. If the state banks were to continue upon equal terms with the national banks the result would be merely to add another to the numerous note-issuing systems already existing HISTORY OF THE NATIONAL BANKING SYSTEM 203 before the passage of the national bank act. Some measure which would render the currency more uniform was needed. In order practically to prohibit the use of state bank-notes and thus to stimulate the conversion of state into national banks, Congress, therefore, passed the act of March 3, 186s, by which a tax of 10 per cent. was levied upon all state bank-notes paid out by any bank. This enactment was later made to include the notes of all corporations, individuals, cities, etc., and the tax was further extended to the issuer of the notes as well as to those who should pay them out. This enactment, of course, rendered the use of other than national bank notes impossible, and practically confined the right to issue notes to institutions organized under the national bank act. This and the growth of the national system in popular favor after the close of the War finally gave the new system a free field. — 116. Probably the most important provisions of the system as thus inaugurated were those governing the issue of notes. It has just been seen that the issue of circulation was conditioned upon the deposit of United States bonds with the Treasury. Furthermore, the maximum amount of the circulation had been fixed at $300,000,000, and the rigidity and inelasticity inherent in the system had been enormously intensified by the attempt to *apportion”’ the circulation. Fault had been found, too, with the act of 1864, because it left so much power in the hands of Treasury officials as regarded the apportionment of notes. A more elaborate attempt to regulate the issue of notes was, there- fore, made in the act of March 3, 1865.7 Every bank having not more than $500,000 capital might receive no more than go per cent. of this capital innotes. Banks with capitals less than $1,000,000, but over $500,000 no more than 80 per cent. ; those with from one to three millons 75 per cent. and those with over three millions 60 per cent. This was in addition to the former restrictions upon the issue of notes. It will be remembered that, according to the act of 1864, no bank could issue notes to an amount exceeding its capital stock, but each bank must deposit bonds at least tothe amount of one-third of its capital. ™13, Statutes at Large, p. 498. 204 REPORT OF THE MONETARY COMMISSION Much dissatisfaction was still felt with the apportionment of the circulation. By the end of 1867, the whole of the permitted circulation had been issued and the entire sum was thereafter kept outstanding. The whole of the permitted maximum being thus taken up, no new banks could obtain circulation, and the growth of the system was thereby hampered, since there was no longer any real advantage to be gained by organization under national rather than under state charters. This state of things continued until 1870. At this date, the withdrawal of the 3 per cent. certificates hitherto held by the banks as a part of their reserves, bade fair to increase the demand for legal-tender notes to be held for this purpose. The act of July 12, 1870, therefore, authorized the issue of an additional $54,000,000 of national bank notes, and the re-apportionment of the whole issue by the withdrawal of $25,000,000 from states hav- ing more than their proper share. The redistribution of the issues of the national banks, however, was unsatisfactory.” Nearly the whole of the additional $54,000,000 was taken up by the end of 1873, and the Treasury was thus again unable to assign cir- culation to new banks.?, The Western and Southern states espe- cially found their circulation inadequate. *The withdrawal of $25,000,000 had been wholly insufficient. According to the new apportionment based on the wealth and population shown by the census of 1870, the Eastern states were in excess to the amount of 70.6 millions, the Middle states 9.4 millions. The Southern and Southwestern states had 57.2 millions less than their due proportion, the Western 21.4, and the Pacific 7.9. In compliance with the terms of the act, the Comptroller announced his intention of calling upon banks with a circulation in excess of $1,000,000 to reduce their note issues, and pointed out that owing to the wide distribution of the notes it would probably be impossible for them to callin the notes. They would, therefore, find it to their interest to deposit legal tenders with the Treasurer. It was likely, however, that few if any of the notes would be presented to the Treasury for redemption and it was, therefore, impossible to issue much additional circulation to new banks. The Comptroller consequently recom- mended the repeal of the act and the authorization of $25,000,000 additional circula- tion to be issued to banks in states having less than their due proportion. It was also recommended that banks be permitted to organize without circulation upon depositing United States bonds to the amount of $10,000 instead of one-third of the capi- tal, and that banks already organized without circulation be allowed to withdraw bonds down to $10,000. ? The act of 1870 contained another important provision. For some time a con- siderable volume of business had been done on a gold basis. Gold had been received HISTORY OF THE NATIONAL BANKING SYSTEM 205 117. The first really important change in the national banking system after the passage of the original measure was made by the act of June 20, 1874. Although this law was passed after the veto of the so-called inflation bill, it made no concessions to inflation, but rather the reverse. Thus by one of the most impor- tant provisions of the act, which dealt with the bond-deposit requirement,? banks were authorized to reduce their bond- deposit to $50,000; and if desirous of withdrawing circulation, their bonds might be released upon their leaving with the Comp- troller lawful money in sums of not less than $9,000 to cover outstanding circulation. This permission to withdraw circula- tion by depositing lawful money was an important provision and since the notes could now at least be contracted did something in a negative way toward relieving the inelasticity of the sys- tem. The original act of 1864 had provided in Section 16 that circulation might be reduced and bonds withdrawn from deposit beyond one-third the capital stock of any bank “upon its return- ing to the Comptroller [its] circulating notes.” Owing to the difficulty of obtaining their own notes when in circulation banks by banks as a “special deposit.” One-half of all the banks in New York were said in 1870 to have opened gold accounts with customers. Foreign commerce was neces- sarily carried on upon a gold basis. During the War and thereafter the Pacific states had adhered to a gold basis of payments. This had seriously interfered with the organization of national banks in these states. Resumption of specie payments seemed far in the future. It was thought that the wants of some states might be served, and a certain degree of elasticity for the currency of Western states might be obtained, by authorizing the organization of a new class of banks which should issue notes payable in gold. The act of 1870, in addition to the provisions for redistributing the national bank-notes, consequently provided for the organization of national gold banks which should deposit bonds with the Treasury and receive bank-notes to the amount of 80 per cent. of the value of the bonds. They were obliged to redeem their notes in gold, und for this purpose a coin reserve of 25 per cent. was to be held. They were further to be released from the obligation to receive notes of other national banks. Banks in the Pacific states were not obliged to redeem in the East. t The act of 1874 provided among other things that $55,000,000 (inclusive of the $25,000,000 already mentioned in the act of 1870) were to be withdrawn from states found to have an excess of circulation and redistributed to those whose circulation was deficient. No bank was to be suffered to issue more than $500,000 in notes, but existing banks might be removed to states with less than their proportion of note circulation. In accordance with the provisions of this act, further arrangements for the with- drawal of circulation were made. 206 REPORT OF THE MONETARY COMMISSION had been unable to reduce their note-issues in this way when desired; because there was no reason why the public should send in notes of such uniform value until they were worn by long use. This, however, was now remedied by the grant of authority to withdraw bonds upon the deposit of lawful money in lieu of the notes outstanding, while the reduction of the required amount of bonds to $50,000 materially lightened for the banks of larger capital the burden of locking up funds in bonds. 118. There had so far been no possibility of elasticity in the bank-currency of the country. As will be seen at a later point, the note-currency had been somewhat contracted in amount, and the events of the crisis of 1873 and the subsequent stringency had led to a demand for an increase in the volume of the cur- rency. Pressure had been brought to bear upon the Secretary of the Treasury to compel the reissue of legal tenders. Under these circumstances, Congress in 1874, before the passage of the bank act of June 20 of that year, passed the so-called inflation bill. The permitted maximum of national bank-notes was at this time $354,000,000. The inflation bill proposed to increase the volume of the legal tenders to $400,000,000, and, in order to bring the national bank-issues up to the same level, additional notes to the amount of $46,000,000 were to be authorized. This bill, however, was vetoed by President Grant. Those who desired to see the volume of the currency increased, were unable to secure the passage of any inflation measure, but, during the fol- lowing year, what was supposed to be a concession to inflation tendencies was made. The act of January 14, 1875, which provided for the resump- tion of specie payments after January 1, 1879, removed both the absolute limitation upon the issue of circulation by banks and the regulations for apportionment and distribution of notes. The Resumption Act, therefore, marks an important epoch in the history of national banks by the establishment of free banking. The maximum issues were thus entirely removed from the con- trol of Congress and a free banking system was established sub- ject only to the oversight of the Comptroller and to the require: ments as to bond-deposit. N Ooo DEO ° oO NFEABWO oO O——--—NNYNNPNOW o wee wee ee an RQ eo ow = MILLIONS OF bahibiliny tho Actual and Relative Variations, al alaled periods, Opry Okober 8, 1866, and wor i 1865) 1866] 1867) 1866)1869| 1870; 1871 | 1872) 1873) 1874) 1875) 1876) 1877) 1878; 1879; 1880) 188i | 1882) 1883) 1884) 1885} 1886; 1887) 1888) 1889 CHART II Ba wy’ Okober , 1897, Uae umber of National i Moe Aggregate > Arrowita of the chief ilemve of Mein Reaowrera & Kabititiea. ot THE NORRIS PETERS CO., PHOTO-LITHO awd =< S — io) ~ ein | =F 5S t~ ~ ray 1% bo ~ Coy ® o roy . sles =[a(& on 1890; 1891 | 1892; 1893) 1894 1895 | 1896/1897 DOLLARS. HISTORY OF THE NATIONAL BANKING SYSTEM 207 A consideration of some of the earlier experiences of the various states with their free banking systems* shows why it was thought that such a step would be a concession to the inflation tendencies. In the past the ‘free banking” systems had fre- quently implied an issue of bond-secured notes unrestrained by any redemption requirements or by a maximum limitation with reference to capital. Many of the existing difficulties with the currency, though arising from the circulation of the greenbacks, or other causes, were attributed to the prevailing regulations concerning the issue of national bank-notes. Many no doubt anticipated that the removal of these restrictions would result in a return to the comparatively unrestrained liberty of note- issue which prevailed in certain parts of the country prior to 1860. As many banks could then be established as wished to con- form to the general requirements. The removal of the limita- tion on the note-issues would leave the circulation free to expand, subject only to the general provisions of law requiring the deposit of bonds and limiting these bonds to the amount of the capital stock of the banks. It was further provided that, for every $100 of new national bank-notes issued, $80 of legal tender notes were to be withdrawn and canceled by the Secretary of the Treasury, until the amount of legal tenders outstanding should have been reduced from $382,000,000 to $300,000,000. The Resumption Act evidently anticipated an increase of national bank notes at least to an amount greater than $100,000,000 and, inasmuch as it provided only for the with- drawal of $82,000,000 of legal tenders, was on this ground again a concession to the inflationists. 119. Contrary to these expectations, however, the circulation of the banks did not increase. As may be seen from Chart II and from the tables given in Appendix II the note-issues reached their highest point in 1873. This failure to expand was mainly due to the rise in the price of government bonds which proceeded even more rapidly after the passage of the Resumption Act. In consequence of this rise in price and the consequent impossi- bility of making an adequate profit from the issue of notes, the tSee pp. 297-302. 208 REPORT OF THE MONETARY COMMISSION banks were anxious to withdraw, rather than to increase, circu- lation. In January 1875, the volume of the national bank-notes was $352,000,000, that of the legal tenders being $382,000,000. The rise in the price of bonds proved so unfavorable to an expansion of the bank-notes, however, that by April 1, 1878 there had been withdrawals of these notes amounting to $74,000,- ooo leaving the total existing volume of old notes $278,000,000, During the same period there had been issued in new bank-notes $43,000,000 making a grand total of $321,000,000. In accord- ance with the terms of the Resumption Act an amount of legal tenders equal to 80 per cent. of the $43,000,000 of new national bank-notes or $35,800,000 had been withdrawn. The net result of the operation of the act was thus a contraction of the cur- rency equal to the amount of the $35,800,000 of legal tenders withdrawn plus the difference between the $£321,000,000 of national bank-notes and the $35 2,000,000 originally outstanding— a total contraction of $67,000,000. In this way the provision of the act which authorized a reduction in the volume of the green- backs corresponding to 80 per cent. of the increase in the national bank-notes, resulted in an entirely unexpected con- traction. Consequently, in response to the demands of the infla- tionists, Congress, in 1878, forbade the further retirement of United States notes, and thus the legislative connection between the amount of the legal tenders and that of the national bank- notes was cut off. 120. There was, however, little probability of an increase in the volume of the bank-notes.* So far was this from being the case that there was no expansion of the circulation, while many 1“ There was a slight tendency to increase bank-note circulation for a time after the revival of business in 1880, but the increase was sharply arrested in the winter of 1881 by the passage of a bill requiring the banks to deposit a new issue of 3 per cent. refunding bonds as security for circulating notes. This limitation on the class of bonds was accompanied by a drastic provision repealing the authority to reduce circulation and withdraw bonds. The banks generally preferred to retain the existing bonds, paying higher rates of interest, even with the loss of circulation, than to sub- mit to such a measure, and 141 banks hastened to deposit $18,764,434 in lawful money for the retirement of their notes and the withdrawal of their bonds in anticipa- tion of the enactment of the bill. The measure was vetoed by President Hayes, but the result upon the secured circulation was to reduce it from $322,654,721 on Febru- HISTORY OF THE NATIONAL BANKING SYSTEM 209 small banks felt the necessity of depositing bonds to the amount of one-third of their capital to be a hardship. Nothing was done to relieve the situation of these banks, until the expiration of the bank charters began to draw near. Many of these ran for twenty years, and began, therefore, to expire about 1883-4. There were certain technical difficulties in the way of reorganizing the old banks and transferring their assets to the new associations which were to succeed them. It was just at this time, too, that the bonds issued during the Civil War began to mature in considerable numbers, laying the Treasury under the obligation of redeeming or of refunding them. The current market rate of interest was now much lower than formerly. Government credit was vastly stronger and resumption was an established fact. It was now within the choice of the govern- ment to refund the bonds at a much lower rate of interest. The subject was discussed by the Comptroller in the Report for 1882. He declared that the popular demand for removal of the bond- deposit requirement was dangerous. No nation or state had ever permitted banks to be freely organized without exacting a deposit of securities to maintain the value of circulation. The security of the note-holder was the prime object to be kept in view. The difficulty, nevertheless, was patent. ‘If the public debt is to be paid hereafter as rapidly as during the past three years,” said the Comptroller, ‘‘all of the interest-bearing bonds will be surrendered and canceled.” 121. In order to’ make the bond-deposit requirement less burdensome, the act of July 12, 1882, among other provisions, authorized banks having $150,000 or less capital to withdraw bonds down to an amount equal to one-fourth of such capital. Not more than $3,000,000 of notes were, however, to be retired in any one month by the deposit of lawful money therefor. Three per cent. bonds were to be issued in exchange for those bearing 314 per cent. All of these provisions were favorable to the banks in so far as they were permitted to cease issuing notes ary I, 1881, to $305,5$7,202 on March 1, 1881. Many of the bonds were deposited again after the adjournment of Congress, and the circulation increased to $332,398,- 922 on January 1, 1882."— Conant, History of Modern Banks of Issue, pp. 369-370. 210 REPORT OF THE MONETARY COMMISSION at a loss, or at little or no profit. The reorganization of banks which occurred during this period was generally accompanied by a reduction of the bond-deposit, as permitted by the act of 1882, and consequently by a corresponding reduction of circulation. At the same time a considerable number of banks took the opportunity of leaving the system, either by reorganizing under state laws or by going into liquidation in accordance with the provisions of the act." Notwithstanding this tendency there has been a steady, although slow growth in the capital of the system, the increase being about parallel with that of state banking cap- ital. This growth may be traced by reference to Table 23 in Appendix II. At the present time the capital of the banks of the system is about $631,000,000. 122. Among the first of the causes for complaint against the provisions of the act of 1864 was the system of redemption. It was seen from the first that the problem of redemption was a peculiar one. The difficulty lay in the number and diversity of the institutions and the impossibility of demanding universal redemption from all. The defects of the system were early pointed out. As the act of 1864 stood, it provided for redemption only over the counter of the issuing bank and in some one of seventeen speci- fied cities, while the banks in these cities were required to redeem in New York. During 1864-1865 there were many proposals to require redemption only at some one central point, preferably New York.? Others favored the requirement of redemption at Boston, Philadelphia, and New York. A year later the Comp- t The decline of the note-circulation of the national banks, and the fact that little profit is derivable if the banks are obliged to use the note-issue, has stripped the national banking system of one of its principal advantages over other systems. Bur- dened as the national banks are by the bond-deposit requirement, and by various other restrictions, it has latterly seemed more advantageous to take out charters under state laws which would grant greater freedom in the conduct of business. Thus, the so-called trust companies are able to perform a variety of functions which the national banks do not possess, and have competed keenly in the principal cities with institu- tions organized under the national act. In the less important country places small state banks, though practically denied the privilege of note-issue, seem to have a considerable advantage over the national banks. 2 Cf. Commercial and Financial Chronicle, September 23, 1865, p. 394. HISTORY OF THE NATIONAL BANKING SYSTEM 211 troller reported that action on the redemption question was imperatively demanded. Of the 1647 banks 1320 were already voluntarily redeeming in New York, Boston, or Philadelphia. The argument for requiring redemption in one of these three cities was just as valid for redemption at one central point— New York. In 1867, the Comptroller again urged the necessity of a suitable redemption system. He pointed out that ultimate redemption was secured by the bond-deposit. It was only con- vertibility that was absent, and this could be secured by a com- prehensive system of redemptions. ‘‘At present,” said he, “there is no immediate demand for the redemption of national bank-notes, but it would be one of the healthiest evidences of returning soundness if it shculd be inaugurated. It would be the first step toward specie payments to see a bank-note accepted and treated as a promise to pay, and not the payment itself.’’* It was noteworthy that redemption at New York was no longer advocated. This was probably in deference to the popular fear that such a system would render the country banks tributary to New York. The latter objection was discussed a year later, and the Comptroller suggested the organization of one central bank of redemption in New York by the national banks as stock- holders. He renewed the recommendation in 1869, but noth- ing was done, nor did he again discuss the subject until 1874. Nevertheless, the demand for action on the redemption question continued. It was said that there were networks of banks which, by various maneuvers, managed to avoid redemption.’ Various hostile projects were brought up in Congress. No legislation on the subject, however, was passed until the act of June 20, 1874.3 123. Upto the passage of this act there had been, as already seen, no real redemption. The act of 1874 provided that no cash need be kept in the vaults of the banks as a reserve against circulation. National banks were, however, to be compelled to keep on deposit with the Treasurer of the United States at Wash- ington a fund of 5 per cent. of their outstanding circulation. t Finance Report, 1867, p. 5. 2 Cf. Hunt's Merchants’ Magazine, June 1870, p. 403. 318, Statutes at Large, p. 123; see Appendix I. 212 REPORT OF THE MONETARY COMMISSION This fund was to be kept in lawful money, 2. ¢., greenbacks, and was to be used by the Treasurer for the redemption of all national bank-notes presented. At the present time, notes must still be redeemed on demand in lawful money by the banks issuing them, as well as by the Treasury. Should any bank fail to redeem its notes on demand, the Comptroller is authorized to sell its deposited bonds and redeem the notes with the proceeds. In case the proceeds of the bonds should be deficient, the United States has a paramount lien upon the general assets of the bank. Gains arising from loss or destruction of notes inure to the benefit of the United States. The goodness of the notes is further maintained through their reception by the United States in payment of all dues (except customs) to it. They are not legal tender in payment of ‘all debts, public and private,’ but must be accepted by national banks in payment of dues from other banks, and are payable by the United States in satisfaction of all claims within the United States, except interest on the public debt. The working of the redemption system thus inaugurated, and which has continued in operation down to the present time, may be seen by reference to Table 29 in Appendix II, which exhibits the monthly redemptions of national bank-notes since the establishment of the agency in Washington. From this it appears that the total volume of notes is on the average redeemed about once in two years. This is of course scarcely enough to retire worn and mutilated notes. Much less does it provide any real redemption or elasticity. There has, in fact, been neither motive nor ability on the part of the banks to insist upon actual redemption. The provisions for bond-deposit, which have made the issue of notes unprofitable wherever inter- est is high, and unprofitable in any case except where practically the whole circulation can be kept permanently outstanding, have induced the banks to take out only so much circulation as they can keep outstanding throughout the entire year. There has thus been no chance for the substitution by bankers of their own notes in place of those of others, as in Canada, and hence no real redemption has been possible. AISTORY OF THE NATIONAL BANKING SYSTEM 213 124. According to the terms of the act of 1864 all banks, except those in seventeen specified cities,’ were to keep ‘“‘on hand in lawful money” at least 15 per cent. of the aggregate amount of their notes and deposits. Three-fifths of this ‘lawful money” might, however, consist of balances due from banks located in the seventeen cities before mentioned. Banks in these cities were required to hold, in lawful money, 25 per cent. of the amount of their notes and deposits, but might re-deposit one-half of these reserves in banks in New York. From the outset, the reserve system was a source of many difficulties. The requirement of a fixed reserve, which should be ‘‘at all times on hand,” and the contradictory permission to deposit three-fifths of this reserve with banks in cities other than those where the depositing bank was located, combined with the inelastic and redundant character of the currency and the defective provisions for redemption to stimulate speculative transactions at the expense of ordinary business. The framers of the national bank act had decreed the keep- ing of what was considered a large reserve, and wished only to make the sacrifice involved as little onerous as possible. Actu- ally, the reserve system afforded just the outlet desired for redundant currency at dull seasons. Country banks, however, would feel no inducement to deposit their currency with other banks, unless they received some compensation. Thus the cus- tom of paying interest upon deposits arose. It was necessary for city banks to find employment for sums thus deposited with them by other banks. This could only be done during the dull season when the country deposits were at their height, by stimulating borrowers through the offer of unusually low interest. And, inas- much as the deposits were always subject to demand, they could similarly be loaned only on call. It being seldom that large sums of money can be used in legitimate business operations subject to call, the outcome of the practice was a stimulation of loans to the stock market and of speculative dealings of all sorts. There can be no doubt that the original intention of the law in permitting the depositing of reserves with other banks in Reduced to sixteen by act of March 1, 1872. 214 REPORT OF THE MONETARY COMMISSION principal cities had been merely to make provision for counting in the statement of required reserve the funds deposited as a basis for exchange. This would have been open to no objec- tion. But the offer of interest for deposits made by certain city banks with the object of attracting. to themselves the deposits of country banks stimulated the country banks to keep the legal maximum constantly on deposit with their city agents. 125. This concentration of resources at New York was one of the first subjects to create anxiety. The difficulties arising from the massing of funds in New York were popularly attributed to the requirement of a fixed reserve. An agitation for the repeal of all provisions of law demanding a reserve was begun, but was not strong enough to effect anything. In speaking of this the Comptroller pointed out, in 1872, that it was not the strong and wealthy, but the poor and weak, banks which were making the demand for a change in reserve requirements. The contention that the directors and managers of a bank were the best judges of its needs in respect to reserves, was no argument against reserve requirements, if those requirements were lower than what the judgment of the most skillful men dictated as a proper reserve for permanent keeping. “If private citizens,’ said the Comptroller, ‘wish to transact business in accordance with their own judgment, they can avail themselves of the privilege by conducting a private business.”* That the reserve require- ments were not extreme, was shown by the fact that but 6 per cent. of the liabilities of country banks, and but 12% per cent. of those of reserve-city banks, must be kept at home in cash. As arule, about as large a reserve was held by the best state banks as by those organized under national charters. The defects of the reserve system were strongly called to the attention of the people in connection with the crisis of 1873. During the last two months of 1872 the money market was extremely close, but the’ year 1873 opened with hopes for a relaxation of the stringency. These, however, were not satis- fied. Call loans, which had been at 7 per cent., fell only tem- * Finance Report, 1873, p. 81. HISTORY OF THE NATIONAL BANKING SYSTEM 215 porarily and rose again to a point higher than before. Nearly every branch of business was affected by the stringency. For some time there had been an active demand on the part of country banks for their deposits with New York banks. During the two years preceding 1873, the periodic stringencies due to seasonal demands by country banks, had been more than usually intense and the fear of more than ordinary difficulty in obtain- ing money had become tolerably widespread. Added to this, the organization of new banks in Western and Southern states, and the announcement by the Comptroller in a letter to the national banks that he should soon be obliged to call upon the larger banks to reduce their circulation, aroused fears of a scarcity of currency.* During the few weeks prior to April 1 the demand of the country banks for their deposits with New York banks had been about double what it had been in ordinary years, and during the period subsequent to that date currency was not returned as freely as usual. 126. The crisis of 1873 really began with the failure of the Warehouse Security Co., New York, on September 8, and of two other large institutions followed by the failure of Messrs. Jay Cooke & Co. and Messrs, Fisk & Hatch in quick succession on the 18th and 19th. These failures were closely connected with the depression in railway securities resulting primarily from the over-investment of capital in railway extension, but partly due to the Granger movement and the popular feeling against rail- roads. On the 20th the New York Stock Exchange closed its doors. The demand from country correspondents became more active, and their drafts came in to such an extent that reserves were much reduced. Call loans to city borrowers could not be realized upon, because the means of borrowers, being practically exhausted, were already pledged to the banks, and even if they could have paid they would have done so in checks on the asso- ciated banks, which would not have enlarged the stock of cash on hand. The closing of the Stock Exchange was decisive. Immediately after this event, the banks of New York decided at a meeting to make their legal tender notes a common stock, and See Commercial and Financial Chronicle, 1873, vol. xvi, pp. 373, 374: 216 REPORT OF THE MONETARY COMMISSION to issue clearing-house certificates." This was followed by a suspension of currency payments. Exchange on New York was at a discount and unavailable, instead of being at a premium as it should have been. The other national banks, therefore, being unable to withdraw their deposits from New York, suspended currency payments, and the suspension continued for forty days. 127. Recovery, after the crisis of 1873, was rapid so far as concerned the reéstablisment of the bank reserves. By Decem- ber 31, 1873, the specie stock of the banks had risen to $2,286,734, and their stock of legal tenders to $45,904,389, while circulation and deposits were but $486,180,869, showing a notable falling off in the latter item. The events of the crisis, however, made a strong impression upon the public mind. The report of the committee of the clearing-house had especially advocated the cessation of interest payments for deposits and the keeping of fixed reserves. It was generally felt that reforms should be effected upon these two points. One of the earlier drafts of the act of 1874, establishing the redemption fund at Washington, contained a provision intended to meet both points. Banks were to be required to keep their lawful money reserves in their own vaults at the place where their business was ordinarily carried on. The bill containing this provision passed the Senate, but was lost in the House, and went to a conference committee which reported it back with this provision omitted. Although the bill abolished the redemption agencies in the sixteen spe- cified cities so that the keeping of funds in New York and other places was no longer necessary except for purposes of exchange- * According to the resolution adopted by the New York Clearing House Associa- tion, September 20, 1873, asa measure for the relief of the New York banks, “any bank in the Cleariug House Association [might] at its option, deposit with a committee of five persons to be appointed for that purpose an amount of its bills receivable, or other securities to be approved by said committee who shall be authorized to issue there- for to said depositing bank certificates of deposit, bearing interest at 7 per cent. per annum, in denominations of five and ten thousand dollars, such as may be desired, to an amount not in excess of 75 per cent. of the securities or bills receivable so deposited.” It was also resolved that the legal tender notes then held by the banks were to be treated as a common fund for mutual protection. The committee before referred to was to have power to equalize the notes by assessment or otherwise at discretion, HISTORY OF THE NATIONAL BANKING SYSTEM 217 it still permitted the counting of such funds as reserve. Thus the only important outcome of the demand for changes in the reserve requirements was the provision of the act of June 20, 1874, already noted, by which the requirement of a reserve against notes was abolished and the 5 per cent. redemption fund was ordered to be kept with the Treasurer in Washington. The other provisions regarding reserves were maintained. 128. As already mentioned, the Resumption Act of 1875 provided for the redemption of the legal tenders in gold after January Ist, 1879. Since many of the greenbacks were held in the reserves of the banks, it was highly important that the banks should coéperate with the Treasury in maintaining its gold stock. Inasmuch, however, as the bank notes continued to be redeem- able in greenbacks there was no reason why the banks should throw any additional strain upon the Treasury. It was, in fact, entirely consonant with the interest and desire of the banks to make resumption as easy forthe government as possible. Resump- tion, was effected without difficulty. Few legal tenders were pre- sented for redemption and of these probably none came from the banks. Greenbacks being thereafter at par in gold there was no longer any impediment to a coin circulation and the coin reserves of the banks consequently increased rapidly. Since the decrease in note circulation previously mentioned has become marked and permanent, and the elasticity of the system has consequently decreased, the reserves of the banks have been subject to strains more severe than formerly. The impossibility of issuing notes to meet mere currency needs in time of stringency has again and again led to heavy withdrawals of current funds from the depository banks, necessitating resort to expedients of various sorts for mutual support. Thus, although the banks have in general held reserves much in excess of the legal minimum,’ the prccauticnary large reserve has been rendered of no avail in time of unusual demand for currency. In this way reserves have several times fallen much below the ‘It may be noted that the distrust of the country banks which seems to exist in some minds hardly seems warranted by the figures for reserve actually held. These seem to show that the country banks have ordinarily heid, proportionately to the reserve required, much more cash on hand than have the banks in reserve cities. 218 REPORT OF THE MONETARY COMMISSION legal minimum in the financial centers. The problem of the maintenance of an adequate reserve has thus become somewhat dependent on that of securing an elastic currency. Since the passage of the bank act of 1882, moreover, several causes beside the inelasticity of the note currency have been at work to make conditions more difficult. These now remain to be dis- cussed. 129. Notwithstanding the decrease of national bank circula- tion after 1882 the general stock of currency did not decrease. The issue of silver certificates under the act of 1878 more than compensated for the tendencies to decrease in other directions. The currency was thus kept redundant, and this redundancy had much to do with the strong export movement of gold during 1882. This movement was less intense during 1883, but increased to an alarming degree during the early months of 1884. This export movement tended to deplete the coin reserves of the New York banks. While the banks, during the period prior to the crisis of 1873, had been ina position notably weaker than when the crash actually came, so during 1883 the banks were much less rich in specie than during the early portion of 1884. But it was precisely the generally excited condition of the market, of which weakened bank reserves were a symptom, which finally brought onadisaster. The general over-trading had resulted in many failures during 1883 and the feeling of anxiety thereby induced, aggravated by the dread of legislation which might lead to the introduction of a silver standard, led ultimately to several bank suspensions in New York which, as was to be expected, were followed by a severe drain of country deposits. May 1, 1884, the total coin holdings of the New York banks were but $9,900,000, as against a usual holding of from $15,000,- 000 to $26,000,000. General suspension was imminent. The result, as in 1873, led to combined action on the part of the New York banks. On May 14, ata meeting of the members of the New York Clearing- House Association the issue of clearing-house certificates was again decided upon. This action resulted only in a mitigation of excitement. The city deposits of the coun- try banks continued for some time to be heavily drawn upon HISTORY OF THE NATIONAL BANKING SYSTEM 219 ind for a time the reserves of the banks were reduced consider- ably below the legal level. 130. The reduction of bank circulation went on. The bank- note issues decreased with greater rapidity during the few years immediately succeeding the act of 1882 than at any time before or since. This has already been mentioned and may be seen from the chart given on a preceding page. Various bills intended to remedy the defects of the system of note-issue were intro- duced into Congress, but none was passed. A bill introduced by Senator Sherman in 1887 providing for the repeal of the provisions of law requiring a bond-deposit in excess of $1000, and for the extension of the permitted note-issue to the par value of all bonds deposited, like all others, failed of passage. The whole subject, however, began to attract attention more intensely in 1890. For some time there had been a general tendency to speculate. Heavy investments in railways and other forms of fixed capital had necessitated the placing of large volumes of securities. These had overloaded the market, and the result was a severe stringency, made more intense by the news of serious failures in London and the danger of large withdrawals of capital from America in consequence of the timidity of foreign investors. All of these causes united to bring on conditions much the same as those which preceded the panic of 1884. During the first eight months of 1890, gold exports were exceedingly heavy amounting to more than $75,000,000, net. Assistance from Europe and especially from England, which was itself upon the eve of a serious crisis, was not to be looked for. During the early autumn, demands on New York City banks from coun- try correspondents became unusually pressing. Deposits had already fallen off in the spring months, dropping nearly $45,000,- 000 between February 28 and May 17. This demand continued active during the fall, and, though the banks were able to strengthen their position, the crisis could only be postponed. It was forced on by the news of the failure of Baring Bros. of London, and became very serious early in November. On the 11th of that month the situation was so grave that a meeting of 220 REPORT OF THE MONETARY COMMISSION the clearing-house banks of New York decided upon the issue of clearing-house loan certificates. These were put out to the extent of $16,645,000, and the example of the New York Clear- ing-House was followed by those of Philadelphia and Boston soon afterward. These clearing-houses issued certificates to the amounts of $9,655,000 and $5,065,000 respectively. None of the certificates were outstanding after May 1891; but during the whole period the bank circulation continued practically inelastic. 131. In the meantime, forces had been at work bearing directly only upon other parts of the general monetary system, but ultimately influencing the national banks. The acts of Feb- ruary 28, 1878, and July 14, 1890, had led to the coinage of large quantities of silver dollars and the issue of Treasury notes. These acts, aided by the willingness of the government to furnish free transportation for silver dollars, had to some extent assisted in narrowing the scope of the national bank-note and contrib- uted to reduce the volume of this paper in circulation. This, however, was the least important effect of the two acts. These measures, by destroying confidence and stimulating fears of a silver standard, together with the redundancy of the silver and government paper, created unrest, drove gold out of the country, threw all demands back upon the slender gold stock of the Treasury, brought on the panic of 1890 and its successors in 1893 and 1896,—and weakened the position of the national banks, not merely by a destruction of confidence, but by a direct effect upon their reserves. 132. Recovery from the crisis of 1890 early in 1891 was merely apparent. The causes which had operated to disturb the commercial equilibrium in 1890 were still in operation and, in conjunction with other unfortunate circumstances, intensified what would in any event have been bad into the worst mone- tary and banking crisis the country has ever seen. The gold exports and withdrawals from the Treasury, which continued from the moment the Sherman law was passed, were largely due to the fears of foreign investors. Crops, indeed, were good in 1892, and momentarily turned the course of foreign trade, but this relief was short-lived. The over-investment in fixed HISTORY OF THE NATIONAL BANKING SYSTEM 221 capital which continued during 1892 aggravated the situation, and 1893 opened with every probability of a terrible monetary crisis. Heavy failures began almost with the new year, and by the middle of May the panic was in full swing, proving to be far the most disastrous period in the history of the national banking system. More national banks suspended in June than in any previous year, and three times as many in July as in June. Private and state banks and corporations collapsed in immense numbers. As usual, the issue of clearing-house cer- tificates was resorted to, and that on a scale much greater than in previous years. The device was also much more widely used than previously. Philadelphia began the issue of certificates, the first making its appearance on June 16. New York and Boston resorted to the same expedient on June 21 and 27 respectively, then Baltimore, followed by Pittsburg. For the aggregate of these cities the largest amount outstanding at any one time was $63,200,000. Few were outstanding, however, on October 31. Efficient as were the clearing-house certificates of the associated banks as far as they went, no adequate assist- ance was furnished by the notes of the national banking system. True, the violence of the crisis forced the system to do its utmost for the relief of the business community but, in such a test, it displayed its inefficiency. That nothing except the most strenuous demand for money or currency can bring about an increase in the national bank- note issues, and then only in a very inadequate and halting way may be seen from a study of the crisis of 1893, and the currency scarcity resulting from it. The total increase of national bank-currency during the unprecedented stringency in the fall of 1893 was only about 15 per cent., which was less than half the amount of money supplied through purchase of European gold by individual bankers in the single month of August. On June 1, 1893, the total volume of national bank-notes outstanding, including those in the United States Treasury and subtreasuries amounted in round numbers to $177,000,000. The intense stringency during the succeeding weeks and months threw such a burden upon the existing sup- 222 REPORT OF THE MONETARY COMMISSION ply of money — already strained to its utmost—that the slight expansion in the note-issues of the national banks was utterly inadequate to meet the increased demand. This led to the adoption of various substitutes for currency and money. The clearing-house certificates, already mentioned, were issued to the amount of over $41,000,000 in New York, $22,500,000 in Phila- delphia and Boston, and $5,000,000 in the aggregate in several other cities. These expedients, however, were only employed in financial centers. In the Western and Southern states it was necessary to resort to an immense number of contrivances to supply the wanting circulating medium. Not only did many holders of United States bonds of large denominations have them exchanged for lower denominations and use these small bonds as currency, but considerable sums of certified checks were issued to circulate as money. In many places resort was had to checks payable only through clearing-houses, and many large corporations issued checks of small denominations upon the strength of their individual credit. Many printed checks drawn on New York and used as local currency were issued by certain railways, and even so-called bond certificates, represent- ing securities deposited in trust, as well as bonds of very low denominations issued by certain cities, were used in meeting pay- rolls, and in turn by employés in purchasing ordinary necessities. Besides these, there came into existence an immense number of orders and certificates of various sorts which served as currency in sections where real money or money substitutes were scarce or wholly wanting. During the whole period, as already stated, the increase in national bank circulation was phenomenally slight. True, it did increase from $177,000,000 already said to have been outstanding on June first, to about $199,000,000 on September first, and about $209,000,000 on the first of Novem- ber. Only the very strongest stimulus was able to increase it in the slightest. Even then, it did not arrive until after the need was past, for many packages of currency were returned unopened by banks which had sent for them during the scarcity. The period since the crisis of 1893, has not been a prosper- ous one for the national banks. Failures have been numerous HISTORY OF THE NATIONAL BANKING SYSTEM 223 and business conditions unfavorable. There has been a notice- able diminution of capital since 1890. Circulation has, on the | contrary, increased slightly, owing to the lower prices of United © States bonds. Deposits, which fell off during 1893 with a rapidity and to an extent not before known, recovered rapidly but continued upon a lower level than formerly. CIRCULATION SECURED BY BONDS. 133. Whatever impedes the ability of a bank to furnish its currency, whether this currency take the form of notes or of deposits, must necessarily hinder it in the performance of its legitimate functions. As will be seen later’ the assessment of a tax upon the currency of a bank will increase the cost to the bank of furnishing its loans to the community. That is to say, so far as it results in a rise in the rate of interest, it means that the tax has been shifted by the bank to the borrower. From the side of the borrower it is clear that anything which interferes with the ability of the bank to make him a loan and thus raises the rate of discount is injurious to him. It is clear, then, that in the interest of the whole community the issue of bank currency should be as unrestricted as is consistent with safety. In the United States the choice at present is supposed to lie between a bond-secured issue (bonds or securities of some sort being pledged for the redemption of the circulation) and a sys- tem in which the notes, like the deposits, are secured only by the general assets of the bank. Before considering, however, the bond-secured type of circulation as such, one point having special application to the banking system of the United States must be considered. The bonds at present required as security for circulation are national bonds. The people of the United States have become accustomed to the security of bank notes based upon the deposit with the government of national bonds. For thirty-five years this has furnished an absolutely safe bank circulation. There is good reason why the people should have come to regard this system as highly satisfactory, and why there should be a strong belief that no other kind of security would be acceptable. It is well understood, however, to be the traditional policy of the United States to pay off its bonded indebtedness. Since the 'In Section 242. 224 CIRCULATION SECURED BY BONDS 225 close of the Civil War the reduction of the debt has gone on in away to surprise the debt-burdened countries of Europe. Two- thirds of the debt existing in 1865 has been paid off and the amount of bonds now available for national bank circulation is not large. If we should return to the policy of the past and begin the payment of our national debt again, it is evident that United States bonds could not be used to provide a permanent and increasing bank circulation. Certainly, we may not seriously discuss the possibility that a debt of the United States would be purposely contracted or maintained merely in order that bonds might be provided with which to secure the notes of national banks. Even if sufficient amounts of United States bonds were pro- vided in the future, or if other kinds of bonds were deemed satisfactory, there would still be serious objections to the plan of a circulation secured by bonds. First, any provision which obstructs the easy flow of loans from banks to customers in the particular form in which they wish to take their loans is a burden to the community. It works in much the same way as an increased cost of agricultural implements to farmers, who can accomplish results only at an increased cost, whether their tools cost them more, or whether their loans cost them more. Any means by which the notes are less obstructed, will facilitate loans, and better serve the com- munity which is dependent on notes. 134. To communities where the supply of loanable capital is inadequate to the demands and where the rate of interest is cor- respondingly high, the system of bond-security as a basis for note-issue. is especially disadvantageous for another reason. It deprives that community of a large amount of capital which it would otherwise have, in that it requires the banks in that com- munity to loan elsewhere at a low rate of interest (in the form of investments in bonds) large amounts which would otherwise be loaned to borrowers in the community in question. An illus- tration may make this clearer. The present capital of the national banks of Nebraska, Kansas, Alabama, and Texas is about $45,000,000; the deposits in those states are, roughly, 226 REPORT OF THE MONETARY COMMISSION $75,000,000. If the banks of these states were to issue notes under the present system to the amount of $36,000,000 (80 per cent. of their capital) their accounts would stand somewhat as follows: CIRCULATION BASED ON PRESENT BOND REQUIREMENT. RESOURCES. LIABILITIES. Loans to community ... $81,200,000 Capital .............. $45,000,000 United States bonds?... 46,800,000 Surplus and undivided Reserve (cash and on profits .........60.. 12,000,000 deposit). ........... 40,000,000 Circulating notes...... 36,000,000 Deposits ...... 0.000 75,000,000 $168,000,000 $168,000,000 If, however, the banks were not required to invest in bonds, they could loan to local borrowers not only the $81,200,000 possible under the present law, but also the $46,800,000 now required to be invested in bonds—leaving the account standing as follows: CIRCULATION BASED ON COMMERCIAL ASSETS, RESOURCES, LIABILITIES, Loans to community...$128,000,0007 Capital ...........06. $45,000,000 Reserve (cash and on Surplus and undivided deposit) .........0. 40,000,000 profits ..........4.. 32,000,000 Circulating notes...... 36,000,000 Deposits .........000 75,000,000 $168,000,000 $168,000,000 This of itself would be objection enough to the system from the standpoint of our Western and Southern states; but when to this hardship that capital is taken away from their local bor- rowers and invested elsewhere in bonds is added the further disability which has been mentioned—that this outside invest- ment must be at an exceedingly low rate of interest—it seems inexplicable that the system should have been permitted to 1 $20,000,000 4’s of 1907 at 110, and $20,000,000 4’s of 1925 at 124. ? The sum of the loans and the cost of the bonds under the bond-deposit require- ment, CIRCULATION SECURED BY BONDS 227 exist as long as it has. It needs no argument to show that if one condition precedent to the establishment of a bank of issue in such a locality, is that a greater or less amount of capital shall be loaned elsewhere at a rate of interest much lower than the local rate, the loss thus incurred will necessarily be made up by a higher rate of interest upon the capital which remains to be loaned at home. 135. A system of bond-deposit security will be a rigid sys- tem. It cannot respond to sudden needs. The relation of the price of bonds to the market rate of interest produces great difficulties in regard to the probable issue of bank-note circula- tion when it is needed. It is well understood that changes may take place in the value of bonds due to changes in the credit of the government or to changes in the normal rate of interest, entirely outside of the control of the banks. As elsewhere shown, the profit of a bank on its circulation is diminished as the price of the deposited bonds increases, that is to say, as the rate of interest received on the bonds falls below the commercial rate. For this reason changes in the price of bonds may have a direct bearing upon the profit of circulation, and hence upon the volume of the notes which the banks will thereby keep outstanding. It may, therefore, be laid down as an undisputed fact that a system of bond-secured circulation is practically inconsistent with the automatic adjustment of the quantity of notes to the demands of borrowers and the needs of trade. When the demand for loans is great, there is little profit to be made in putting out notes; that is, when the demand is urgent, the supply is not forthcoming. Also, an increase in the commercial rate of interest will lessen the relative profitableness of issuing notes, secured by bonds paying a lowand fixed rate of interest. At any given time, with bonds at a definite price, the existing system makes the issue of notes profitable in those sections like New England, for example, where there is already an abundance of both currency and capi- tal, accompanied by low rates of interest, and unprofitable in those sections such as the West and South, where rates of inter- 228 REPORT OF THE MONETARY COMMISSION est are high and a real demand for more currency and capital exists.” As already explained, the bonds are high-priced and bear a low rate of interest; and yet, in times of financial stringency, the rate of discount is sure to be high, and borrowers are in great need of loans. As against buying bonds bearing a low rate of interest in order to issue notes, there is the opportunity of loan- ing such funds directly at the high market rate of discount. The situation, therefore, puts a premium upon the direct use of banking capital, as against the method of investment which leads to increasing the bank-note circulation. In those com- munities where bank-notes are essential to making discounts this is a serious obstacle. In short, at the time or place of pressing demand under the existing system, the supply of notes is not forthcoming. On the other hand, if the country is suffering from business depression, if funds are accumulating in the banks, and if the market rate of interest is low because there are few opportuni- ties of profitably employing capital, then it would not be impos- sible to expect the banks to use superabundant funds in buying bonds of a low rate of interest. Therefore, at a time when the demand for loans is slight and the rate of discount low, it would be easy for the banks to invest in bonds and thereby obtain notes. In short, when there is no demand, the supply is easily obtained. It needs no further comment, consequently, to see that such a system of note-issues works at cross purposes ‘with the needs of the public. With a deposit of bonds for security of notes, there is no supply of notes at a time when most needed and an abundant supply of notes when least needed.” «It appears for example, that, in the New England States, where the commercial rate of discount is not over 5 or 6 per cent., the national banks find it profitable to issue in excess of the notes on the required deposit of bonds, more than half the amount which they might so issue; while in the Western and Southern states, the banks issue, in general, but little more than the amount of notes permitted upon their required deposit of bonds. See pp. 190-192. *This has been clearly illustrated by the experience of the last half dozen years. ‘‘ From 1882 until 1889 there was a pretty steady advance in the price of gov- ernment bonds; the 4’s of 1907 having risen from 103 in 1880 to 129 in 1889. In 1880 and 1881, while these bonds were selling between 103 and I12, there was some CIRCULATION SECURED BY BONDS 220 136. It should be noted that when the necessities of business urgently demand additional notes, even if the price of bonds should be such as to make the issue profitable, the delays inci- dent to the purchase of bonds, the taking out of circulation upon them, etc.,would make it impossible to obtain the currency until all need for it was practically past. Under such a system, there- fore, banks must refuse to customers additional supplies of notes upon sudden demand even though the community in such cir- cumstances has enlarged its currency need and an additional supply may, therefore, without additional strain on the bank, be kept in circulation. Under such circumstances, if notes are an essential to the borrower, rates for loans rise abnormally and crisis conditions are vastly intensified. Probably the best illus- increase in the national bank circulation; but their price touched 120 in 1882, and for nine years thereafter, the bonds being high priced, there was a steady decrease in the note circulation of the national banks. The financial panic of 1890 caused a fall in the prices of government bonds, and thereby increased the chances of profit on the circulation of national bank notes, As a result there was a net increase of $13,000,000 in their circulation in 1891, and of $8,000,000 in 1892. Now, in these two years, there was absolutely no demand for an increase in the circulating medium of this country; on the contrary, the Treasury Department in these years was injecting arbi- trarily between $25,000,000 and $50,000,000 of silver paper money into the currency of the country, as a result of the Silver Purchase Act of 1890, and gold, in conse- quence, was being exported at a rate which alarmed business men and finally pre- cipitated the panic of 1893. “During 1893 the 4’s of 1907 sold down to 113, and the banks added to their cir- culation $37,000,000. During the months of June, July, and August of that year there was a most urgent need for an expansion of the currency; but during these months the new national bank notes did not appear. Not until after the panic was over and money was piling up,in all the financial centers—a drug on the market— did the increase in the national bank note circulation take place. Asa result of the panic, business being depressed, the interest rate on prime*commercial paper during 1894, 1895 and 1896 was between 3 per cent. and ‘4 per cent. The money supply of the country was in excess of its needs and gold was exported in large amounts. The Treasury, embarrassed by the withdrawals of gold, was forced to issue bonds in order to maintain the gold reserve. These bond issues forced down the prices of bonds, and thus increased the profit which banks could make upon new circulation. There- fore, considerable idle banking capital, which could be loaned barely at 3 per cent. in business, was exchanged for government bonds and made the basis for bank notes, so that in 1895 and 1896 there was a net addition to the bank note circulation of $32,000,000. Thus, the national bank note helped to embarrass the government by inflating the currency at a time when the government was doing its utmost to hinder inflation and prevent the‘exportation of gold to Europe.” —PROFESSOR JOSEPH FRENCH JOHNSON, ix response to the interrogatories of the Monetary Commission. 230 REPORT OF THE MONETARY COMMISSION tration of this delay in responding to demand was seen in the difficulty of obtaining currency during the summer of 1893, when it was practically impossible to secure a sufficient supply of a circulating medium of any sort. The New York banks held on June I, 1893, a surplus of $21,000,000 in excess of their legal reserve. At that time the volume of national bank notes out- standing was about $177,000,000. By the first of August extraor- dinary demands for currency had drawn down the reserves $14,- 000,000 below the legal minimum and yet the outstanding notes were only about $5,000,000 more than June1. By September 1, however, when the reserves were but $1,500,000 below the mini- mum, and the urgency was past and currency once more com- paratively abundant, the notes had begun to expand and had already reached $199,800,000, subsequently rising to $209,300,- ooo on November 1, notwithstanding the continued decrease in the demand for them. These considerations may be stated in three indictments of the system (1) higher regular rates of interest; (2) inelasticity; (3) inconvenience and delay. The explanations here briefly given sufficiently account also for the extraordinary fact in the history of the national banking system that from December 1873, when the note circulation stood at $341,320,256, it pretty steadily diminished to October 1890, when the amount outstanding was but $122,928,084. That is, in the face of a special stress, the bank-note circulation proved its maladjustment to the needs of the public by shrinking at the time when there was more work to be done. CIRCULATION SECURED BY COMMERCIAL ASSETS. 137. None of the objections previously noted are, of course, applicable to notes issued on the security of general commercial assets. It has been fully shown that a bond-secured circulation cannot furnish an elastic medium, expanding and contracting automatically. But it is quite otherwise with a currency which is based upon the general assets of the issuing banks. The _ volume of notes put forth under such circumstances will, like deposits, automatically expand in volume by being issued upon demand from legitimate borrowers, and automatically contract by being returned to the bank when the need for the currency is past. Under such a system, any increase in the demand for money, and consequent higher rate of interest, adds to the inducement to issue notes, instead of making it less profitable as in the case of bond-secured currency. There is, moreover, no delay or inconvenience such as exists where bonds must be purchased and deposited with the Treas- urer before the notes can be issued. The assets on which the notes are based are the ordinary commercial paper acquired by the bank in the course of its regular business. The bank is thus always ready to increase its circulation if the public will use more notes, and all considerations of profit lead it to do so, as its power to loan will be increased in proportion as it is able to keep more notes in circulation. The same motives acting on all the banks lead to active competition, which, as explained elsewhere, results in the prompt redemption of all notes depos- ited or paid into any bank. The greater comparative elasticity of a system of bank cur- rency based on genera] assets:over one based on deposit of bonds, is shown not merely by a comparison of the national bank system with foreign systems based on general assets, but even more sharply by an examination of the results of the two systems when existing side by side in New York, prior to 1860. 231 232 REPORT OF THE MONETARY COMMISSION In that state the so-called ‘Safety Fund Banks” were free to issue notes upon their general commercial assets; while the “free banks’ were obliged to deposit with state officials either United States or state bonds, or bonds and mortgages. Because the rate of interest which these investments bore was not very much less than the commercial rate, the inelasticity of the bond- secured currency in New York was not as great as that of the national banking system. Yet, as compared with the circulation issued by the safety fund banks upon commercial assets, it was so rigid as to make its inferiority in this regard perfectly mani- fest. Another result of a system of bank currency based on gen- eral assets—indeed a corollary of what has just been stated— is that each community is thereby enabled to furnish for itself most easily and economically just such a currency as it requires for the convenient transaction of its business. The rural dis- tricts are not forced to go to more expense in creating their cur- rency —notes—than are the commercial centers in creating that which they use—deposits. Then, again, where commercial paper is accepted as the basis for the notes, the banks are not obliged to withdraw from the community for investment in bonds a large portion of their funds. The local borrowers thus get the benefit of having offered to them the capital which a bond-secured system requires to be invested in bonds. For sections where notes, as distinguished from deposits, constitute the important part of the currency, this is equivalent to a large increase in the capital offered to borrowers, and results in a consequent lower interest. Considerations of elasticity, the greater facility given for the prompt and automatic adaptation of the supply of currency to varying demands, the larger opportunities afforded to every rural community to furnish for itself easily and economically the currency which it needs for the convenient transaction of its business, and the ability given to banks to loan more freely to local borrowers, thus favor the issue of bank notes upon the gen- *See diagram in Sound Currency, 1896, p. 306. CIRCULATION SECURED BY COMMERCIAL ASSETS 233 eral assets of the bank as distinguished from the system of bond security, 138. The only arguments which have been seriously opposed to this plan have been based on the fear that the security provided by general commercial assets would not be equal to that afforded by bonds. The validity of the objection depends entirely upon the character of the assets. Of what, then, do the ordinary assets of banks consist, and what is their amount and character? In this connection itis neither necessary nor proper to consider any one bank apart from the others; for, under the plan proposed in this Report, the notes of each bank are secured not only by its own assets, but also, if those assets should prove insufficient, by such portion as might be necessary of the assets of all the other banks. It is, therefore, the general question of the character of bank assets as a whole with which we are concerned. These assets are the result of loans made by the banks to those car- rying on the business of the country ; they represent in the main marketable products or commodities in the process of exchange and distribution. They are made by bankers whose interest it is to see that they are sound, inasmuch as the first loss, if any, must fall on the bank and its stockholders. These assets, there- fore are based on and secured by the best business of the coun- try; their character rests on that which is a condition precedent to all solvency, individual, corporate, and governmental. Should the time ever come, in this or any other country, when the best business assets were not worth on the average 35 cents on the dollar, a time will have come when government and munici- pal bonds will likewise be practically valueless. It is con- ceivable that a government may become bankrupt while the great portion of the private business of the country remains solvent; indeed, this has occurred. But it is not conceivable that the bulk of the private business of a country can become worthless and the government of that country remain solvent; this has never occurred. These considerations make it clear that, taken in the aggregate, there can be no safer security for bank notes than that afforded by the combined commercial assets of the issuing banks. No revulsion which has ever taken 234 REPORT OF THE MONETARY COMMISSION place in this or any other country of similar commercial devel opment has been so serious that it would have impaired the value of notes secured by such assets. 139. Under the plan proposed by the Commission the resources behind the notes would be much greater than is usually supposed. The present capital of all national. banks is $631,488,095; and if notes should be issued by all of them to the amount of 80 per cent. of their unimpaired capital, the aggregate would be $505,190,476, for which the security in the form of total assets would be $4,011,403,513,” or a protection of nearly 8 to 1. But, it will be said, not all banks will issue notes to this limit; and this will be done mainly by the banks outside of reserve cities. The present capital of the 3,276 banks out- side of reserve cities (though including some cities of consid- erable size) is $401,302,835; of which 80 per cent. would be $321,042,268; for which the security in the form of total assets would be $1,956,216,503, or £6.10 to every $1 of notes. There can be no question, then, that in the aggregate the security behind the notes would be ample. It is for occasional banks where such would not be the case that the Guaranty Fund is provided. And, finally, the power of the Comptroller to levy assessments as they may be needed to keep the fund good for this purpose insures that these occasional failures wil cause no loss to the note-holders. 140. If it should be thought that the security of a prior lien upon all the resources of a bank (instead of a part specifically invested in bonds) is insufficient for the protection of the note-liability, attention is called to the fact that now over 90 per cent. of the large exchanges of goods are performed by the media of exchange created on the basis of the deposit-liability of banks; and that the protection to this liability has always been the general resources of the bank. An enormous volume of checks, drafts, and bills are daily in circulation, expanding with *With a note liability of 198,920,670, the actual assets now held by all the national banks amount to $3,705,133,707. Should their note issues be increased to $505,190,476, their assets would at the same time be increased by the same amount— making the aggregate assets behind the $505,190,476 of notes, $4,011,403,513, as stated. CIRCULATION SECURED BY COMMERCIAL ASSETS 235 the expansion of business, constantly coming home for redemp tion and payment, always regarded as a safe medium of exchange —and this circulation is protected solely by the general assets of the banks. When it is noted that deposit accounts of about $2,000,000,000 do awork of more than $50,000,000,000 (as ‘shown by the clearings of the United States),’ while the note- circulation of the banks is only about $220,000,000, it must be admitted that there is nothing novel or unsafe in basing the smaller amount upon the same security as that of the greater, a security to which the community has long been accustomed. Not only are the note-issues in the proposed plan secured by assets of the same kind, but they are given a prior lien on all this vast sum of resources. There is no reason, therefore, why the note-issue of a bank should not be as good as, indeed much better than, its cashier’s draft. No greater obstacles, with some obvious limitations, should be put in the way of the increase in the quantity of the one than of the other, and as rigid require- ments should be exacted for the redemption and payment of the one as of the other. In this way, notes will be used if transac- tions warrant their issue, and be presented for redemption, just the same as a cashier's check, immediately their work is done, thereby giving perfect elasticity. 141. The people of the United States have become accustomed to regard government bonds as the only safe security for bank- issues. It should be clearly understood, however, that perfect security to the note-holder has been obtained under the system proposed herein, in certain sections of our own country in earlier times and in practically all the civilized nations on the conti- «The amount of checks and drafts annually passed through the clearing houses of the United States has for some years past ranged between $50,000,000,000 and $60,000,000,000. These clearings, however, represent only a portion of the checks actually used. There are many checks which never go” through a clearing-house at all— being either deposited in the banks upon which they are drawn or, as is usual in the case of out-of-town checks, forwarded by mail for settlement. Information furnished to the Commission by numerous banks indicates that the clearings represent no more than 75 or 80 per cent. of the aggregate credit instru- ments actually used. So that instead of $50,000,000,000 or $60,000,000,000, the transactions annually carried on by means of this deposit currency probably amount to from $65,000,000,000 to $80,000,000,000. 236 REPORT OF THE MONETARY COMMISSION nent of Europe today. It should be kept constantly in mind, also, that many losses, due to the inadequate security of bank- note issues in various parts of the country before the Civil War, came from a system in which the notes were secured by the deposit of bonds. The bonds used, however, were frequently state bonds, which, by repudiation or bad legislation, had depre- ciated or become worthless. It is the unmistakable testimony of our history before the Civil War that the security of bonds did not, by any means, protect the note-holder. Since the notes are protected not only by the general assets but by the combined guaranty of the other issuing banks in the system, there can be no question as to the security to the note- holder. This point may be regarded as entirely disposed of. The only question to be raised may, conceivably, be as to the willingness of the banks to go into a system in which a com- bined guaranty (by the guaranty-fund) is created for the safety of the note-holder. This question will be taken up and fully discussed in connection with the guaranty-fund and the history of bank insolvencies, where it will be found that the possibility of loss to the banks by making such a guaranty is inconsiderable. * Professor J. F. Johnson, Annals. of American Academy March 1898, makes the objection to the Commission's plan that the notes are “too good.” GUARANTY FUND. 142. Where the business of banking is not a monopoly, but is thrown open to any group of persons who may wish to enter it, that is under a régime of so-called free banking, there will prob- ably be a few failures from time to time. Under a system where the business is concentrated in a few hands, risks are less and those which exist are met by larger resources. Above all, the best of experience and business judgment is in charge of affairs There is little more likelihood of the failure of the strong financial institutions of the world, such as the banks of France or England, than there is of the failure of all, or a large proportion of, the banks in the national banking system —an occurrence scarcely more to be anticipated than the breakdown of the whole business community itself. This absolute security, obtainable by com- mitting the business of banking to one or to a few large financial institutions, is sacrificed under a system of free banking like our present one. This is the price paid for freedom of opportunity to engage in the business. 143. It is easy to see why the note-holder should be guaranteed security at the expense of the other creditors of the bank. It is not because of any inherent reason why notes should be preferred to the other liabilities, but chiefly because the notes in order to attain their highest usefulness to society must be made a uni- versal currency. Deposits, although the same in their nature, need not, and indeed, cannot become such a universal currency since each particular check and draft rests upon proof of the depositor’s possession of a credit to his order. Notes of banks of small capital would be subject to much the same limitations, unless made uniform by some mechanism which would secure their redemption under any circumstances. This would neces- sitate delay and expense in making the necessary investigation as to the character of each note, and would thus seriously inter fere with their ability to perform their proper function in 237 238 REPORT OF THE MONETARY COMMISSION exchange. If occasional losses are certain to occur under a system of free banking, some means must be found whereby the notes of all banks, whether failed or not, will be maintained upon an equality. In this way only can bank-notes become a currency of the highest usefulness. 144. A consideration of the nature of the bank-note shows no reason on @ priori grounds why its holder cannot be protected by the usual means of insurance against loss. The principle of insurance has now been applied to an immense variety of under- takings. Risks of all sorts are now provided against by insur- ance. The essential idea of the operation is the contribution by those who are engaged in any occupation of a small sum to defray losses to any of the contributors arising from a specified cause. This is sometimes donethrough the agency of a company which makes a profit upon the transaction, although often directly by those whose interests are involved. In either case the principle would be the same if carried out by those who are insured against loss. And although the cost of insuring the notes might for convenience be paid by the banks themselves, the principle here again would be the same as if it were paid by the note- holders, since it might be shifted to them by the bank, in the shape of higher interest, unless the increase in credit secured to the notes by the operation should result in an additional profit sufficient to compensate the bank for any extra expense involved. The principle of insurance can as a rule be applied only to those losses which are small in amount or recur regularly. It would be inapplicable if losses could not be estimated with some reason able degree of certainty upon the basis of past experience, so that the amount to be contributed by the individuals concerned could be accurately gauged. Banking experience, however, has been comprehensive enough to afford a basis for calculation. The principle of insurance has in several instances been actually applied to banking in the shape of a safety fund used to guarantee the note holder against loss. 145. Probably the earliest example of a safety fund for the security of the note-holder, is found in New York. The act of April 2, 1829, established upon the recommendation of Governor GUARANTY FUND 239 Van Buren, a so-called‘ Bank Fund.” This fund was to be created by an annual payment to the state by each note-issuing bank in the system of a tax of one-half of 1 per cent. of its capital stock, until these payments should have aggregated 3 per cent. of the cap- ital stock. The fund was to be invested by the state and was to be utilized to make good to creditors any failure of the assets of insolvent banks to meet the banks’ obligations. Whenever the fund should become reduced by insolvencies, it was to be restored by annual contributions of one-half of one per cent. of the capital of the banks of the system until it should reach its original size. The fund was thus intended as a guaranty for the deposits as well as for the notes. The act establishing the Safety Fund was subsequently modi- fied in several very important particulars. Provision for the immediate redemption of the notes of failed banks, whenever the liabilities in excess of the assets of such banks should not amount to more than two-thirds of the fund, was adopted in 1837. The fund as thus established was first drawn upon in 1837, after it had been in existence for eight years. Losses aris- ing from several failures of minor importance were successfully met from the fund and reimbursed to it from the banks’ assets. But it was not until the years 1840-1842 that the fund was really put to atest. In the meantime several of the banks which had been chartered in the speculative period 1835-1837, and which, going into business at such a critical time, had become heavily involved in speculative transactions, found themselves unable to place their business upon the sound basis which legitimate bank- ing demanded. The result was eleven serious bank failures in the years 1840-1842, which drew attention to some of the defects of the law and led to its amendment. In 1842 it was provided that thereafter the fund should be used only for the redemption of the notes of failed banks (and no longer as a guaranty for deposits), after the liquidation of losses already incurred.’ ¥In the liquidation of the eleven banks which failed in 1840-1842 and threw so heavy a burden on the Safety Fund, it appeared that only two (the Lafayette Bank and the Oswego Bank) succeeded in paying all their creditors in full without resort to the Safety Fund. The amounts collected by the receivers of the other banks prior to 240 REPORT OF THE MONETARY COMMISSION 146. These losses, however, were so great as to necessitate the payment of about $1,600,000 for notes and $1,100,000 for other debts. As the fund at this time amounted to only about $900,000, it became necessary, in order to meet these obliga- tions, to issue stock payable from future contributions of the banks to the fund. The amount of the fund in any case was altogether too small to provide insurance against losses, on both notes and deposits, which might occur in the course of business; while the failure, up to this time, to make the notes a preferred lien on the assets, and to impose an individual liability on the stockholders, threw upon the fund a burden which it should not have been obliged to assume. In devoting the fund solely to the redemption of the notes, therefore, a step in the right direction was unquestionably taken. But it did not go far enough. More important were the pro- visions of the constitution of 1846 giving the holders of the December 1845, and the amounts paid from the fund for notes and for other debts of such banks, together with amounts subsequently realized, were as follows: Payments from Safety Fund Collections Subseq from assets to collections December 1845|In redemption] Payment of | from assets of notes other debts 1. City Bank of Buffalo.......... $166,576 BIT7,107 | ceev deen $99,996 2. Wayne County Bank.......... 56,744 113,131 $16,078 | .....-. 3. Commercial Bank of New York.| 303,339 139,837 146,129 7,188 4. Bank of Buffalo............... 82,837 435,540 149,241 | ......- 5. Commercial Bank of Buffalo....| 172,864 186,861 424,515 5,000 6. Commercial Bank of Oswego... 80,853 163,162 78,351 2,392 7. Watervliet Bank.............. 19,459 134,107 77,484 13,259 8. Clinton County Bank.......... 76,019 71,896 TSOj25 7 | dcacesstecece g. Bank of Lyons....... BN ao saae Sie 37,445 52,898 40,053 3,960 Not specified. ......cceese cess | ec eeeeee F25\ wescaes 6,482 Motalsig aga gai cieave's oo eueene's $996,136 | $1,615,264 | $1,088,109 | $138,277 From this statement it appears that the collections from the assets of the Com- mercial Bank of New York were much more than enough to meet its notes; while those from the other banks, if applied to the payment of their notes, would have reduced the total net payments of notes out of the Bank Fund to $651,541. Of this sum, however, $252,647 was represented by notes issued by the Bank of Buffalo and the City Bank of Buffalo in excess of the $500,000 which those banks were authorized to issue. GUARANTY FUND 241 notes of an insolvent bank a first lien upon its assets and mak- ing the stockholders individually liable for an amount equal to the stock held by them. The banks had also, in the beginning, been allowed to issue notes subject only to very loose restric- tions as to quantity. The result was that notes were over-issued in several cases, and the Safety Fund was actually called upon to redeem over $250,000 of notes issued in excess of the maximum authorized. The safety fund system was perfected in this par- ticular by the act of 1843, which provided for the printing and registry of notes by the Comptroller—all note-issuing institu- tions being compelled to give up their old plates. 147. As already-noted, however, before these amendments were made, a number of serious failures had not only exhausted the fund, but had made heavy drafts upon future contributions for that purpose. Yet an examination of the facts developed in this experience, makes it clear that if the Bank Fund had from the beginning been applicable only to the notes (as after 1842), and if the notes had been originally given a first lien on the assets of the issuing banks (as they were after 1846), and if it had been made impossible for any bank to put in circula- tion more notes than were authorized by law (as it was after 1843), the total draft upon the Bank Fund on account of these eleven bank failures in 1840-1842—serious as they were — would have been less than $400,000. That is to say, they would not have exhausted one-half of the Bank Fund at that time avail- able. From the renewal in 1841 of the annual payments to the Bank Fund (% per cent. per annum on capital), all subsequent contributions for twenty-five years were mortgaged to secure the payment of the principal and interest of the stock issued in 1845! to cover the losses already referred to, the greater part of which under a proper system would not have fallen on the Safety Fund at all. Consequently, in this period, there was really no *By the act of April 28, 1845, the Comptroller of the state was authorized to issue stock on behalf of the state, redeemable from subsequent contributions to the Bank Fund, with which to secure funds to settle at once with the creditors of the banks which had previously failed. 242 REPORT OF THE MONETARY COMMISSION security for note-holders except that involved in the provisions limiting the circulation, making the stockholders liable, and giving the note-holders a first lien. But even without any further guaranty, the loss to the note-holders was slight. Of five banks which failed in the subsequent history of the system, one paid its notes in full without delay; three others collected enough from their assets to reduce their aggregate note-issues from $508,535 to $37,057; while the fifth paid about $30,000 of its total issue of $125,000. The net loss, therefore, falling on a guaranty fund in this entire period subsequent to 1842, was only $129,499, which, for the whole twenty-four years, would have been considerably less than 1 per cent. of the average capital; that is, less than one twenty-fourth of I per cent. per annum.’ The experience of New York with a system of note-issues based on general commercial resources—-even complicated as it was with the speculative transactions of the years 1835-1839— shows that in the whole history of the system the total loss which would have been thrown upon the Safety Fund, if it had been originally established in its finally perfected form, would have been less than $550,000, an amount which would have been met by an average annual assessment of less than one-tenth of I per cent. upon the capital. Other applications of the safety fund principle to the guaranty of notes in the United States were to be found in the state bank systems of Ohio and Jowa, which appear to have given entire satis- faction. Vermont also, in 1831, adopted a system quite similar * These five bank failures were those of the Canal Bank of Albany, in 1848; the Lewis County Bank, in 1854; and the Bank of Orleans, Reciprocity Bank, and Yates County Bank, in 1857. The first redeemed its notes in full. The outstanding circula- tion of the Lewis County Bank at the time of its failure was $125,283; that of the other banks was: Bank of Orleans, $200,000; Reciprocity Bank, $159,577; Yates County Bank, $148,958. By 1866 the collections from the assets by the receivers had reduced the outstanding amounts to $7,598 for the Bank of Orleans, $10,744 for the Reciprocity Bank, and $18,715 for the Yates County Bank. In his report for 1867, the Comptroller of the State of New York stated the then outstanding circulation of these four banks to be $129,499.. Notice was given that these notes would be redeemed from the surplus of the Bank Fund then remaining, and all which were presented were redeemed in full. Many of them, however, were never presented. , , GUARANTY FUND 243 to that of New York, but a few years later permitted the banks to substitute in place of contributions to the common insurance fund, the personal bonds of the stockholders of any bank to redeem its notes. 148. The only banking system in which a Guaranty Fund pro- vision is actually incorporated at the present time is that of Canada. According to the terms of the banking law of 1890, the notes are made a first charge upon all the assets of the issuing bank, including the double liability of stockholders. In addi- tion to this, banks are required to keep on deposit with the Min- ister of Finance a sum equal to 5 per cent. of the average amount of their notes outstanding during the fiscal year preceding. In case of the suspension of any bank, its notes outstanding draw interest at 6 per cent. from the date of suspension until the date set for their redemption. If such a day is not fixed by the directors of the bank within two months from suspension, the Minister of Finance is authorized to appoint a date upon and after which they will be redeemed from the redemption fund. Until the fund is made good from the assets of the failed banks, all the banks of the system are required to centribute in their due proportion at a rate not exceeding 1 per cent. on their circula- tion each year. Since the establishment of this system in 1890, but two bank failures have occurred. In the case of the second failure, the notes of the bank were redeemed by the bank itself, without recourse to the redemption fund. In the case of the earlier one, the liability at the end of two months fell upon the redemp- tion fund, though even here no notes were really presented for redemption from it. No doubt, however, was felt concerning the goodness of the notes, and inasmuch as they drew interest at 6 per cent. from the date of suspension, they were regarded rather favorably as an investment, and were readily received by banks and others, The successful working of insurance against loss upon bank notes, as embodied in the safety fund idea, has thus been shown to be possible by experience. In the instances just cited, it either succeeded absolutely in securing note-holders against loss, or 244 REPORT OF THE MONETARY COMMISSION demonstrated its ability to do so if properly applied and supple- mented by adequate auxiliary measures, such as limitation of note-issue, stockholders’ liability, and a first lien on assets in favor of notes. 149. We need not, however, depend solely upon actual experi- ence in the case of banking systems which have put the princi- ple specifically into operation. The theory of insurance is suf- ficiently worked out to allow a judgment as to the possibility of its application to any class of risks—provided only that ade- quate statistics upon which to base a judgment can be found. With the safeguards and precautions which are being increas- ingly thrown about the business of banking, it is improbable that in the future failures of national banks would exceed those of the past. Even though, under the plan proposed in this Report, a stimulus might be given to the establish- ment of banks in sections where business conditions were so unsettled as to make the danger of failure greater than the past average, this possibility of an increase of failures will unques- tionably be more than offset by the general improvement due. to the more rigid and thorough investigations provided for. With the discretion lodged with the Comptroller, no bank can be started where it is not clearly shown that the bank is estab- lished in good faith and that the capital has been fully paid up. The names of the directors must be given, and the Comptroller will be in a position to refuse his approval of any application where the directors are not men of good reputation. There will thus be no more opportunity for fraud than under the present system. Our past experience, therefore, offers sufficient data upon which to base a judgment regarding the applicability of the insurance principle in the form of a safety fund to guard against losses to note-holders under the proposed system. The results of an examination of this experience will be given in the section on Insolvency of National Banks (pp. 247-259). 150. The guaranty fund provision recommended by the Com- mission may be briefly described as follows : Each bank. must at all times maintain on deposit with the Division of Issue and Redemption an amount in gold equal to GUARANTY FUND 245 5 per cent. of its outstanding circulation. This will most natur- ally be administered precisely as the 5 per cent. redemption fund is now. At the start each bank will be required to put up an amount equal to 5 per cent. of its outstanding circulation, and thereafter, when it takes out an additional amount of notes, it will be required to pay into the Treasury 5 per cent. of such notes for its redemption fund, and another 5 per cent. for the guaranty fund; and whenever it returns any of its notes for cancellation, or deposits lawful money for their withdrawal, it will receive back from the Treasury 10 percent. of the amount of circulation so retired — 5 per cent. from each fund.* These contributions will aggregate a large sum, which will be available at all times for the redemption of the notes of any individual failed bank without the necessity of waiting until its * The considerations which led to this method of adjusting the fund were these: It seemed very desirable that the fund should, in the early years of the new system, be of sufficient size to inspire confidence in the redemption of the notes of every failed bank. The project to accumulate a fund by imposing an annual tax of % per cent., or I per cent., had, therefore, to be abandoned at the outset, since it would have left the fund small, and, possibly, insufficient in the early years. Another favorite proposition has been to establish a fund by requiring each bank to contribute an amount equal to 3 per cent., or 5 per cent., of the circulation taken out, but making no provision for the return to the bank of any portion of such sum in case of the retirement of the circulation. This proposition likewise had to be aban- doned, for it appeared that such an arrangement would tend to retard the issue of cur- rency when demanded by temporary business needs; for no bank which could not expect the additional circulation thus called for to remain outstanding for more than a few weeks, or at most a few months, would be willing to go to the expense of paying an assessment of 3 per cent. outright in order to get the notes. If the currency were outstanding for onlytwo months, this would be equivalent to 18 percent. per annum, a rate which would make the issue of notes out of the question, and necessitate some makeshift such as resort to borrowing currency wherever it might be secured, as at present. Such a proposition therefore, if carried into effect, would have seriously hindered that proper adjustment of supply of currency to business needs which the Commission endeavored to bring about. The Canadian system, in which the banks maintain throughout each year an amount equal to 5 per cent. of the average outstanding circulation for the previous year, was also decided to be inapplicable, because with so many banks as there are in the national banking system, and the great changes frequently taking place in their circulation, it would frequently happen under such a system, that a bank having in one year only a very small circulation, would be enabled to put out in the next year a very much larger amount of notes without increasing its contribution to the guaranty fund correspondingly. 246 REPORT OF THE MONETARY COMMISSION assets are turned into cash. All notes of such a bank pre- sented for redemption will be promptly paid from this fund, and the notes merely held in the Treasury as a part of the fund until they can be paid by the receiver from the assets of the bank. In the meantime they would be regarded as the investment of a portion of the fund. If, when the affairs of any failed bank were finally wound up it should appear that the total net collec- tions had been insufficient to redeem all its notes, the other banks of the system would be assessed whatever amount would be necessary to meet the deficiency. INSOLVENCY OF NATIONAL BANKS. 151. The provisions of the national banking act intended to afford protection against losses arising from the insolvency of banks in the national system, consist mainly of general restrictions upon the methods and kinds of business done. National banks are prohibited from permitting their capital to become impaired, from becoming indebted to an amount exceeding the unimpaired capital (except for circulating notes, deposits), etc., from hypothe- cating their own notes, from making loans to any one person or firm exceeding 10 per cent. of capital, etc. If the capital has become impaired in any way, the deficiency must be made up within three months. They are not allowed to accept real estate as security for loans, or to purchase real estate, or to engage in any industrial undertaking. Each bank is required to maintain against its deposits a certain fixed reserve of cash or of current funds due from reserve depositories. The Comptroller is further- more authorized to demand reports upon five dates, to be speci- fied by him each year, and he may appoint examiners to inves- tigate the condition of the banks. 152. Under the present national system the protection of note-holders is adequate, and it would seem impossible that they should suffer losses. Even if the bonds deposited should sell for less than the amount of the notes, the latter must be redeemed by the government, which has for the purpose of reimbursing itself a paramount lien upon the general assets of the bank, and in case the assets themselves should not suffice, upon the additional liability of the shareholder. There has, of course, never been an instance in which the value of the bonds deposited did not much exceed that of the notes issued upon them. It follows, therefore, that the note-holder has suffered no loss under the national system, and, whatever the cost at which this result has been obtained, it has given great satisfaction. The depositor naturally has not been so fortunate. It might 247 248 REPORT OF THE MONETARY COMMISSION seem that the provisions of the national banking act for share- holders’ liability should have been adequate to protect depos- itors from loss. Asa matter of fact, however, the difficulty of collecting the amounts assessed has thrown some losses upon depositors, although such losses have been much less than those under most other systems. The general restrictions and regulations imposed upon the business of national banking associations are such that if they were closely followed there should be but few failures, except those brought about by causes outside the control of the man- agers of banks, and impossible to foresee. This conclusion is quite borne out by the causes of failure assigned in the reports of the Comptroller. Among those given in the report for 1896," not less than 117 out of a total of 328 banks declared insolvent during the period from 1863 to 1896, had been wrecked by defalcation or fraudulent management, and the failures of not less than 139 were connected in some way with injudicious banking, or depreciation of securities generally due to bad man- agement. Only forty-three failed as a consequence of general stringency of the money market and consequent hard times. Failures due to injudicious banking and kindred causes cannot be guarded against by law. They wili occur under any system, where, as in the national banking act, there is no real restriction of the business of banking to those persons who are competent to conduct it. Just how far security has been afforded to the general public, notwithstanding the freedom with which banks may be organized, may be seen from a short statistical study of the history of insolvency under the national banking laws. 153. The total number of national banks which have failed since the establishment of the system was, at the end of 1897, 352 or 6.9 per cent. of the 5,095 which had been organized. As against this, 1,234 failures of state banks are knqwn to have occurred in the same period prior to the close of 1896. The total number of state banks in operation during the year 1895-6 was 3,708. Adding the 1,234 failed banks to the number in operation a total of 4,942 banks is obtained, and, though a cer- * Pp. 640-654. INSOLVENCY OF NATIONAL BANKS 249 tain additional number have doubtless gone into liquidation, or for some other reason do not appear in these figures, it seems safe to say that probably about 20 per cent. of the total number of state banks organized during the period in question have failed. This would be a percentage nearly three times as high as that of the national banks which failed during the same period. The total capital stock of all insolvent national banks (exclu- sive of 16 restored to solvency) which failed prior to November 1, 1897 was $58,802,420; their circulation (which was of course met in full) was $20,893,827, and the total claims proved against them $121,768,186. Their total assets were reported as $223,778,713, which, with an assessment on the shareholders of $33,754,070, made a total of $257,532,783. Of these assets, however, $69,478,257 were reported by receivers as doubtful, and $51,- 115,315 as worthless. The total collections from assets to November 1, 1897, had been $89,917,461, and from assessments on shareholders, $13,405,486. From these collections, after paying loans and expenses, dividends amounting to $75,935,925 were paid to creditors, making an average dividend of about 62 per cent. on claims proved. Nearly half of the banks which have been finally closed succeeded in liquidating in full, and to their shareholders were returned $5,156,258 in assets at their nominal value, and $1,138,861 in cash. If we compare this showing with the returns for failed state banks, the results of the comparison are strikingly in favor of the national system. Out of a total of 1,234 state banks that failed between 1863 and 1896, with an aggregate capital of $53,632,- 259, nominal assets of $214,312,190, and liabilities of $220,629,- 988, the dividends paid amounted to but $100,088,726, or about 45 per cent. as against the 62 per cent. paid by the national banks which failed within the same years. Of the insolvent state banks for which information is given, 158 paid dividends of 100 per cent.; 128 paid 75 or over, but less than 100, per cent.; 184 paid between 50 and 75 per cent.; 203 paid between 25 and 50 per cent.; and 192 less than 25 per cent. Many paid no dividends to creditors, and some were reported as having no stated capital stock. 250 REPORT OF THE MONETARY COMMISSION 154. The data accumulated by the Comptroller of the Cur. rency in reference to the national banks which have failed, is valuable for the light it throws upon the probable losses which would, under such a system as that proposed by the Commis- sion, finally fall upon the other banks of the system. From the inauguration of the national banking system to November 1, 1897, 368 banks were placed in the hands of receivers. Sixteen of them, however, were restored to solvency, leaving 352 actual failures. The table which follows, shows the periods within which these 352 failures were distributed, and the number and capital of the banks failing, with the facts as to the collections from the assets of the banks of each group. ‘s Leauns:3 dis- - ; . ¢: ‘ s Periodt No. Capital Total fhommal cellections Teale leeeons assets from assets2 | penses, etc., | from assets paid 1865-1870....| 15 | $2,430,000 | $ 8,731,713] $3,761,470 $ 644,779 | $3,116,691 1871-1875....{ 25 6,881,100 } 20,842,847] 9,899,196 2,924,889 | 6,974,307 1876-1880....| 44 8,851,500 22,019,654] 9,700,678 2,569,765 | 7,130,913 1881-1885....]| 20 3,696,300 | 22,346,282) 11,937,206 | 2,361,317 | 9,575,889 1886-1890....] 35 5,100,000 21,387,470] 9,800,295 2,132,577 7,667,718 1891-1892....| 40 | 5,872,000 | 26,673,415] 12,093,708 | 2,198,374 | 9,895,334 1893....| 54 | 9,210,000 | 30,485,752] 11,731,007 | 4,951,825 | 6,779,182 1894....| 21 2,770,000 8,185,971] 2,083,223 1,502,408 580,815 1895....] 35 | 4,935,020 | 13,925,485] 4,286,234 | 2,083,498 | 2,202,736 1896....| 26 3,305,000 13,238,328] 2,162,235 1,261,493 900,742 1897 aa! 37 5575 1,500 35,891,796 12,462,209 2,046,982 10,415,227 Total....] 352 |$58,802,420 |$223,728,713/$89,917,461 |$24,677,907 |865,239,554 The total note issues of these 352 banks which failed prior to November 1, 1897, would have been only $47,041,936 if each bank had issued notes up to 80 per cent. of its capital. The total net collections from their assets, after paying all loans, dis- « The years referred to are “ report years,” ending with October 31. 7The notes issued under existing law being more than covered by the bonds deposited, the notes have been omitted from the liabilities and an amount equivalent to the notes has been omitted from the assets. 3 Many banks had themselves pledged valuable assets as security for loans. In order to obtain possession of these assets, it was necessary to pay off the loans for which they were pledged. These are the “Loans” included here among disbursements. INSOLVENCY OF NATIONAL BANKS 251 bursements, legal expenses, etc., have already been $65,239,554. And it should be kept in mind that large sums of unliquidated assets of banks which have failed in recent years are yet to be included in the above results. So that, taken in the aggregate, the collections from their assets are already far in excess of the maximum amount of notes which they would have had in cir- culation under the plan proposed in this Report. 155- But, of course, in the case of some of these banks net collections from the assets were largely in excess of any amount of notes which those banks could have put in circulation under the plan proposed by the Commission. Such banks (118 in number) should be excluded from the investigation because they would not only protect the note-holders, but even pay some- thing to other creditors. But it is necessary, for present pur- poses, to know what would be the situation of those 234 insol- vent banks whose net collections to date from assets fall short of 80 per cent. of the bank’s capital. The results of such an examination appear in the following table : Amount by which net Period No, Capital Net collections ee aber of capital 1865-1870 ....... 9 $ 1,320,000 8 753,039 £ 302,961 1871-1875 ....... Il 2,375,000 1,186,738 713,262 1876-1880 ....... 24 6,064,500 3,316,538 1,535,062 1881-1885 ....... 8 700,000 360,636 199,364 1886-1890....... 14 1,850,000 881,506 598,494 1891-1892....... 30 4,472,000 1,377,211 2,200,389 1893 ....... 36 5,335,000 1,487,551 2,780,449 1894 ....... 19 2,660,000 460,535 1,667,465 1895 wien ess 28 4,385,000 1,235,057 2,272,943 1896 ....... 25 3,155,000 577,821 1,946,179 TBO] siccin eee 30 3,976,500 1,288,190 1,893,010 Total..... 234 $36,293,000 $12,924,822 $16,109,578 It is to be observed that the net collections do not include the sums yet to be obtained from assets now unliquidated. Hence the $16,109,578, by which net collections fall short of 80” per cent. of the capital, will be much diminished by further collections. The table above, it will be noticed, is based upon 252 REPORT OF THE MONETARY COMMISSION the actual assets of these banks at the time of their failures, deducting the amount realized from the United States bonds and applied to their notes. 156. If each of these 234 banks, in addition to its actual lia- bilities at the time of its failure, had issued notes up to the limit of 80 per cent. of its capital under the plan proposed in this Report, the nominal value of its assets would have been increased by the same amount. A reasonable basis for estimating what amount would have been realized from these additional assets is the proportion actually collected from its other assets. Had the bank had an additional amount to loan it must be assumed that it would have been loaned on security similar to that upon which its other loans were made. Applying this method of estimating what would have been the net collections had each of these banks actually issued notes to the amount of 80 per cent. of its capital, it is found that in the case of 56 banks out of the 234 above mentioned the net collections from the assets, without resort to stockholder’s liability, would have been more than sufficient to meet all of their notes, even if issued to the amount of 80 per cent. of their capital. The estimate as to the remain- ing 178 banks, in which resort was necessarily had to the stock- holders’ liability, is set forth in the table which follows: Maximum Betinated ni Estimated net Period No. | Capital | rambableissne) Actual met |" Coections | deficiency ‘© of capital) rom assets’ | shareholders 1865-1870..... 4 |$ 520,000|$ 416,000] $ 201,836|$ 291,202|$ 124,798 1871-1875..... 4 800,000 640,000 231,943 330,469 309,531 1876-1880.....] 16 2,622,500] 2,098,000 753,881 | 1,201,017 896,983 1881-1885..... 5 350,000 280,000 89,941 189,841 90,159 1886-1890..... Il 700,000 560,000 175,341 310,207 249,793 1891-1892..... 23 3,647,000} 2,917,600 $73,150| 1,486,512| 1,431,088 1893..... 26 4,510,000} 3,608,000 988,301) 1,756,812] 1,851,188 1894..... 17 2,485,000} 1,988,000 360,925 831,846 | 1,156,154 1895..... 23 3,875,000} 3,100,000 995,981 | 1,767,820] 1,332,180 1896..... 24 3,105,000 | 2,484,000 542,861 942,549] 1,541,451 1897..... 25 3,025,000] 2,420,000 679,696} 1,062,140] 1,357,860 Total..... 178 |$25,639,500 |$20,511,600 | $5,893,856 |$10,170,415 |610,341,185 * Including actual net collections and estimated additional collections from the additional assets in exchange for which notes would have been issued. INSOLVENCY OF NATIONAL BANKS 253 157. In the computation just given, the 178 banks examined have been considered as an aggregate. It is clear that these 178 banks may be divided into two classes, one in which the actual collections from shareholders exceed the net deficiency to fall on shareholders as estimated above, and a second in which these actual collections fall below such estimated net deficiency. Dividing the 178 banks into these two classes, the actual col- ections from the shareholders of these banks were as follows: BANKS WHERE ACTUAL COLLECTIONS FROM SHAREHOLDERS EXCEEDED ESTIMATED NET DEFICIENCY. Period No. Capital Jet ite Geiclency Actual colleetions 1865-1870 ....... I $ 50,000 $ 1,205 $ 4,000 1871-1875 ....... we MW ogigtecuetiger 9) tetewa lO isedeers 1876-1880 ....... 4 430,000 135,675 207,326 1881-1885 ....... 2 150,000 14,183 113,369 1886-1890....... 6 350,000 116,711 181,566 1891-1892 ....... 7 1,525,000 444,440 645,559 1893} 4 ese. 3 1,750,000 464,764 718,081 1894....... 3 485,000 100,216 143,484 1895 2 1,050,000 14,182 159,815 1896....... 5 550,000 161,184 235,393 1897 ....... 3 450,000 107,446 146,293 Total..... 40 $6,790,000 $1,560,006 $2,554,886 In 4o out of the 178 banks, wherein assessments were levied on shareholders, the collections thereby obtained thus amounted to $2,554,886, or more than enough to cover the deficiency of $1,560,006, which represents the sum not provided by collec- tions from assets necessary to meet their notes in full. This was not true, however, of the other group of 138 banks. In 138 out of the 178 banks, requiring assessments on share- holders, it is found that the assets did not provide sufficient funds to meet the notes by $8,781,179; and that the assess- ments on shareholders actually furnished only $2,724,428 towards making up that deficiency. It is solely with banks in this group of 138 that we are concerned, because the notes of only these banks were not covered by assets and stockholders’ liability; and the notes of only these banks would become a charge upon the Guaranty Fund. 254 REPORT OF THE MONETARY COMMISSION ., BANKS WHERE THE ACTUAL COLLECTIONS FROM SHAREHOLDERS WERE LESS THAN ESTIMATED DEFICIENCY. Period No. Capital er eeeroma se | Actual collections 1865-1870....... 3 $ 470,000 $ 123,593 $ 3,370 1871-1875 ....... 4 800,000 309,531 68,785 1876-1880 ....... 12 2,192,500 761,308 250,308 1881-1885 ....... 3 200,000 75,976 42,601 1886-1890 ....... 5 350,000 133,082 68,083 | 1891-1892...... 16 2,122,000 986,648 467,587 TS G3 a ccsicisias 19 2,760,000 1,386,424 437,189 TSQ4 biiisice 14 2,000,000 1,055,938 467,555 1895....... 21 2,825,000 1,317,998 316,414 18968 sissies 19 2,555,000 1,380,267 367,420 WSO7 is npow as 22 2,575,000 1,250,414 235,136 Total. ...} 138 $18,849,500 $8,781,179 $2,724,428 158. A further examination of the 138 banks, in which the actual collections from assessments upon shareholders were less than the estimated deficiency, to fall on shareholders, shows that there are some banks included in which no assessment upon share- holders was made because, though the net collections were less than 80 per cent. of the capital, they were nevertheless greater than the actual liabilities of the bank. There are also very many banks in which the first assessment was for less than 100 percent. But the present law gives the Comptroller no right to make a second assessment for the remainder of the 100 per cent., if the first is not collected in full. This defect, the plan recommended by the Commission proposes to correct. If, there- fore, assessments had been made in accordance with the Com- mission’s plan, the deficiency in the case of 26 of the 138 rep- resented in the last of the foregoing tables would thus have been made good, and the condition of the remaining 112 would have been as set forth in the following table :* ‘In making this calculation, in those cases where an assessment of less than 100 per cent. was made, the collections from that assessment have been taken as the basis of the estimate as to what the collections would have been if the full 100 per cent. had been assessed. In those cases where no assessment was made the basis of the esti- mate is the actual average collections in the same period from such assessments as were made, : INSOLVENCY OF NATIONAL BANKS 255 Period No, Capital red Dees ae Netine On - from assets shareholders guaranty fund 1865-1870. 3 | 8 470,000 $ 123,593 $ 7,026 $ 116,567 1871-1875..... 3 750,000 306,703 116,634 190,069 1875-1880..... 7 730,000 409,228 251,560 157,068 1881-1885..... eet wees Ol “csesea I etree | ele es 1886-1890..... 3 250,000 973755 68,115 29,640 1891-1892..... 14 1,947,000 910,541 570,364 340,177 1893..... 17 2,610,000 1,366,358 907,144 459,214 1894..... 12 1,500,000 828,622 420,709 407,913 1895..... 20 2,625,000 1,228,993 401,322 827,671 1896..... 16 2,395,000 1,353,957 476,626 877,331 1897..... 17 2,125,000 1,160,980 529,799 631,181 Total..... 112 | $15,402,000 $7,786,730 $3,749,299 $4,037,431 159. In all of the preceding discussion the returns for the whole number of banks (352) which have failed since the begin- ning of the system have been used. Of these 352 banks, how- ever, only 181 have had their affairs finally closed. The remainder (171) are as yet unsettled, and have nominal assets of $60,997,117 Still unliquidated, so that nothing definite can really be said concerning many of them. An estimate of the loss likely to fall on the other banks of the system under a ALL INSOLVENT BANKS WHOSE AFFAIRS HAVE BEEN CLOSED. Loans, dis- Total A 9 Net col- Period No. Capital soni fea electoas 1 eae Teco assets from assets etc., paid >| from assets 1865-1870....| 15 | $2,430,000 | $8,731,713 | $3,761,470 | $644,779 | $3,116,691 1871-I1875....] 24 | 6,831,100 | 20,507,741 9,812,273 | 2,840,129 | 6,972,144 1876-1880....| 43 8,101,500 | 19,242,445 8,088,988 | 2,130,592 | 5,957,879 1881-1885....| 18 | 3,246,300 | 15,521,117 | 7,658,778 | 1,576,569 6,082,209 1886-I890....] 31 | 3,600,000 | 11,591,542 | 3,796,834 | 1,751,458 | 2,045,376 18g91-1892....| 20 1,737,000 | 4,872,436 | 2,188,974 600,291 1,588,683 1893....| 18] 1,925,000 | 5,311,157 | 2,486,432 763,496 | 1,722,936 1894....] 4 425,000 905,407 304,943 172,995 131,948 1895.... 7 535,000 919,511 371,726 162,839 208,887 1896... .[ecrcefeces cw eweer [ec ce teen ca [ecee ee eeereleeeneerccns lee reteeaes 1897....| 1 50,000 105,219 10,470 3,396 7:074 Total ....| 181 |$28,880,900 /#87,708,288 |$38,480,888 [$10,646,544 $27,834,344 256 REPORT OF THE MONETARY COMMISSION plan of note-issues like the one proposed by the Commission can, therefore, be more safely and fairly based upon the results arrived at in considering only the failed banks whose career has been fully terminated. The preceding table presents the capital, aggregate collec- tions from assets, loans, disbursements and legal expenses paid, and net collections from assets for the closed, insolvent banks of the system during its whole history, according to the Comp- troller’s figures. 160. It is seen that the table just given is made up on the same basis as that given at the outset for all the failed banks ofthe system. In order to ascertain what loss to the guaranty fund would have resulted from the failure of these banks, it is necessary to carry the figures through the same processes adopted for the returns of all the failed banks of the system. If this be done, it will appear that of the 181 banks whose affairs have been finally closed, the notes of but 317 would have ulti- «The process by which the figures for the thirty-one banks are reached is as fol- lows : 1. The sum by which the actual net collections from assets of the aggregate of these 181 banks fell short of 80 per cent. of their capital was ascertained. z. Those banks whose net collections amounted to 80 per cent. of their capital were excluded. 3. If 80 per cent. of notes were issued it is assumed that an equivalent amount of assets would be held; and the same proportional part of these added assets it is assumed would be collected as was obtained from other assets. These assumed col- lections were added to the net collections, and the total collections were subtracted from 80 per cent. of the capital to obtain the estimated deficiency which would fall upon shareholders. 4. Those banks whose actual collections from shareholders exceeded the defi- ciency estimated to fall on such shareholders were then excluded. 5. The actual collections from shareholders of the remaining banks were then increased by an amount obtained by supposing that the Comptroller should assess (as recommended by the Commission) shareholders to the full amount of capital stock, and supposing that he could collect the same percentage of such assessments as was actually collected. 6. The banks whose collections thus estimated exceeded the estimated deficiency were then excluded. 7. The estimated collections for the remaining banks (numbering thirty-one) were then subtracted from the estimated deficiency in collections from shareholders to obtain the ultimate amount which must be met by the guaranty fund, INSOLVENCY OF NATIONAL BANKS 257 mately become a charge upon the other banks of the system. The results of such an analysis are displayed in the following table : CLOSED INSOLVENT BANKS WHERE A DEFICIENCY MIGHT HAVE FALLEN ON OTHER BANKS. x = Maximum . Ultimate . Estimated f Period No. Capital oe aioe ante. collections raraied cent. of - holders from share- other banks capital) holders of system 1865-1870....| 3 $470,000 $376,000 $123,593 $ 7,026 $116,567 1871-1875....] 3 750,000 600,000 306,703 116,634 190,069 1876-1880....| 7 730,000 584,000 409,228 251,560 157,668 P8STHAT885 5 c24 | ewaailssaes as caine] Seva sso4arcel Chaat sac hamdganaavecetlload ones aha 1886-1890....| I 50,000 40,000 13,750 1,805 11,945 1891-1892....] 9 712,000 569,600 345,067 183,814 161,853 1893....] 5 500,000 400,000 280,085 229,415 51,270 1894....] I 50,000 40,000 25,127 14,240 10,887 sees) 2 100,000 80,000 77,016 51,357 25,659 1806. 00s |\yscos|eeeveesmacs| iveedemaweall Gees vais loess ee eas sl Aye eoawee 1897....| I 50,000 40,000 28,946 15,548 13,398 Total....} 31 $3,412,000 | $2,729,600 | $1,610,715 $871,399 $739,316 It will be recalled from the table given on page 255 that out of the original 352 the number of banks in the case of which a deficiency would have fallen upon other banks was 112. As just seen, thirty-one out of this 112 were banks whose affairs had finally been closed, leaving eighty-one, in the case of which, although a deficiency exists at the present date, something further may be realized from unliquidated assets. 161. These remaining eighty-one banks, not yet closed, in the liquidation of which to date, there would still have been a deficiency to fall on the guaranty fund, are mainly banks which have failed since 1890. Under the system proposed in this Report, according to the method adopted above, it appears that the total net investment of the guaranty fund to date in the notes of these eighty-one insolvent banks would be only $3,298,115, while the remaining unliquidated assets of the same banks as shown in the following table, amount to $23,396,466 : 258 REPORT OF THE MONETARY COMMISSION INSOLVENT BANKS NOT YET CLOSED, WHERE A LOSS WOULD FALL ON GUARANTY FUND TO DATE, AND STATEMENT OF UNLIQUIDATED ASSETS FROM WHICH THE DEFICIENCY MAY STILL BE MET. Deficiency to dat bo Period No. Capital to fall on guaranty Remains TS8O5=1870 vz e's wisvers sins avail eas ellie o's oe Sioeiaee ein | eee es Asie disnydal senierarlans eeeliains TS7TI8 7S oso 055555 as|ceuine al sd coos GuieMsaee| oo eads sagan esl toaee Yate Sake T1S7OH188O. sarees cacns| Vemads | Perea cies wee des 4 455 e4 5 wasmlee|i deeded Mead su ee PSST DSBS ceesesere eonee eas |heoomeaanas | sewage eS A eGhoaansin| PREM ee Aa nnmena | ainmmng aa daw Gans 1886-1890.........256. 2 $ 200,000 $17,695 $ 11,803 1891-1892. ......0000-- 5 1,235,000 178,324 2,727,714 . (SOBs 2 hie nee bees 12 2,110,000 407,044 1,961,300 T8O4s ce. Wises oe ass 12 1,450,000 397,026 1,805,974 1805s scae veces exe 18 2,525,000 802,012 4,623,467 PS96s. sachs va dd ss 16 2,395,000 877,331 7,739,611 TOF signet skeet 16 2,075,000 617,783 4,526,597 VOIR? peiaaee oe SI $11,990,000 $3,298,115 $23,396,466 162. From the liquidation of these remaining assets it is alto- gether probable that enough will be realized before the banks are closed to reduce the entire net loss to fall on the other banks of the system, in the case of the 171 banks (capital $29,921,520), the accounts of which are not yet closed, to an amount at least as small as the ascertained maximum loss for the 181 banks (capital, $28,880,900) which have been finally closed. Should this be the case the net loss to date, to fall on the other banks of the system, would be less than $1,500,000. Even for the period since 1890, when failures have been most disastrous, this would amount to but $1,000,000— less than $150,000 a year—which, on the basis of an aggregate circula- tion of 80 per cent. of the capital for the banks of the country as a whole, would have been met by an annual assessment of less than one-twenty-fifth of one per cent. on the outstanding circulation of the national banks; while during the whole period, 1864-1897, the net losses, as already estimated, would have been met by an annual assessment of less than one-seventieth of one per cent. on an outstanding circulation of $300,000,000. It should be remembered that this percentage, low as it is, includes INSOLVENCY OF NATIONAL BANKS 259 an estimate on the final outcome from the 171 banks not yet closed. The one preéminent fact, however, which appears from the whole examination, based upon the results of banks actually settled —and this is the only set of facts we yet have—is that, throughout the whole history of the national banking system, final losses would have fallen upon the guaranty fund only in the case of thirty-one banks, amounting to but $739,316, or less than one one-hundred-and-fortieth of one per cent. per annum on an outstanding circulation of $300,000,000. So far as experience goes, then, it seems that the losses which would have been incurred under the national banking sys- tem, had no bond deposit been required, and which might, there- fore, be expected, were no such deposit demanded, have been insignificant. Even if the solvent banks were all obliged, as they must be, to make good the notes of failed banks to the note- holder, the losses to be met by them would have been so small that they might almost be neglected. In short, a guaranty fund seems to give a security equal to that of a bond-deposit system, but at an infinitesimal fraction of the cost. WORKING OF THE COMMISSION’S PLAN. 163. It may be well to consider in a practical way the working of a system of note-issues based upon all the resources of the bank without the particular pledge of any specified portion of the assets for the notes. Under the plan proposed by the Commis- sion, the note-issues may be considered from four points of view: I. As affecting the note-holder ; II. As affecting the other banks in the system ; III. As affecting the depositor ; IV. As affecting the relative position of city and country banks. I The only possible basis for consideration in a system of bank-note issues, and one which must be regarded as funda- mental, is an absolute protection to the note-holder. This must be accepted as axiomatic. Not only would a system which did ' not provide absolute security to the note-holder have no chance of adoption, but it would also be a distinct wrong to the business community to propose it. The national bank-note of the pres- ent system has earned a well-deserved confidence, because the basis of its security has been unquestioned. Moreover, the note of one bank should be so protected that it is as good as the note of any other bank, no matter in what part of the country it may be circulated. Perfect uniformity of bank-issues throughout the length and breadth of the land is essential to a good currency. The note of a bank in Maine must be equally good if offered in Texas. That condition exists under the present system, and the same result must be achieved under any system which shall be devised to take its place. It may be taken for granted, then, that the ends to be attained in the proposed plan are not only (1) perfect security to the note-holder, but also (2) entire uniformity of issues by all the 260 WORKING OF THE COMMISSION’S PLAN 261 banks of the system. In order to secure these ends, the Com- mission has recommended a system by which it is confidently hoped that uniformity, as well as absolute security to the note- holder, will be obtained. This plan, in brief, authorizes the issue of notes by any bank to an amount not exceeding its unimpaired capital, less its investment in real estate; a first lien in favor of the note-holder upon all the assets of the bank; and, if the fore- going should be insufficient, a prior lien upon the stockholders liability, which is for an amount equal to the capital of the bank ; and, finally, the creation of a guaranty fund of 5 per cent. on outstanding circulation. A heavy tax of 6 per cent. is laid upon any notes issued in excess of 80 per cent. of unimpaired capital ; so that we may go upon the assumption that notes will not, under the proposed system, exceed, in ordinary times, 80 per cent. of the capital. It is also provided that the notes of every bank shall be receivable at par for debts due to all other national banks and to the government. It is believed that such a system will protect the note-holder beyond peradventure; and that, in practical operation, no holder of the note of a failed national bank could ever lose a cent. 164. It should be kept in mind that the Guaranty Fund is clearly distinct from the Redemption Fund. The Guaranty Fund, contributed by each bank in proportion to its note-issues, is a fund held in trust by the Treasury and reserved solely to provide for the immediate redemption of notes of failed banks.. It is intended that no period of time shall ever exist during which there shall not be on hand a sum sufficient to redeem the notes, even of a failed bank. Without this fund, between the date of the failure of a bank and the time when the receiver could have realized in cash upon the assets of the bank, there would be a time when notes * That portion of a bank’s capital which is invested in real estate (2. ¢., banking house, etc.) is evidently rendered for the time unavailable and cannot be considered a commercial asset. .Were the bank to fail, the amount of the capital, which is the first guarantee against loss to the note-holder, would be decreased (so far as immediate realizability was concerned) by the investment in real estate. The Commission’s plan has therefore restricted the notes to an amount equal to that portion of the bank’s capital which will take the form of live commercial assets, or immediately realizable funds of some sort. 262 REPORT OF THE MONETARY COMMISSION could not be redeemed, even though their ultimate redemption were assured.* Under the plan of the Commission, it is pro- vided that the notes of failed banks in any part of the country shall be redeemed out of this common Guaranty Fund without any delay in waiting for realization upon the assets of the bank bya receiver. This provision perfectly secures uniformity in the value of the notes of every bank in any part of the country. Any note, whether of a failed or solvent bank, will, at any time, be redeemed on demand at the Treasury, or, at the discretion of the Secretary of the Treasury, at any sub-treasury of the United States. On the supposition that the present circulation may be increased from about $200,000,000 to $300,000,000, there would be a Guaranty Fund of $15,000,000 always ready to meet the redemption of notes of insolvent banks. At any one time this would be fully sufficient to cover the notes of a failed bank, or of a group of banks. But it should be understood that this does not necessarily imply an assessment upon other banks. The Guar- anty Fund will be used in the purchase of the notes of failed banks to the full extent of those presented. But these notes, for the time being, keep the fund nominally intact, at least while the assets are in process of liquidation. As fast as cash is real- ized, this will be first used to replace the notes held by the Guaranty Fund ; and so long as there are any assets yet unliqui- dated to meet notes in the Guaranty Fund, no assessment will be made on the other banks. An assessment can take place, then, only for the few notes for which no assets can be realized at the close of the liquidating process by the receiver. 165. In order to act as a brake upon excessive issues, it is pro- vided in the plan of the Commission that all notes beyond 60 per cent., and less than 80 per cent., of the capital of a bank shall be taxed, so long as they are outstanding, at the rate of 2 per cent. per annum; while in lieu of an absolute prohibition of note-issues in excess of 80 per cent. of the capital, each bank is permitted to issue an additional 20 per cent., subject to a tax at In the Canadian banking system the notes of insolvent banks bear interest until redeemed. (See section 148.) WORKING OF THE COMMISSION'S PLAN 263 the rate of 6 per cent. per annum. The interest on any portion of the Guaranty Fund invested by the Secretary of the Treasury and the taxes upon emergency issues, just described, would, in time, furnish permanent additions to the Guaranty Fund, and thereby establish public confidence in the practical sufficiency of this sum for all possible protection to the notes of failed banks. 166. The Guaranty Fund thus described provides for the imme- diate redemption of the notes of any failed bank, while the prior lien on the assets and stockholders’ liability of the bank, together with the operation of the fund in case of deficiency, make up the provisions for the ultimate and final security of the notes. As distinct from this ultimate security (which is believed to be full and more than sufficient), and the provision for the imme- diate redemption of the notes of insolvent banks, the plan of the Commission provides for the daily and immediate redemp- tion of the notes of all solvent banks by the maintenance of a5 per cent. Redemption Fund, as now required by law. Each bank is required to redeem its notes on demand at its own counters, and also at Washington, or at any sub-treasury which may be designated by the Secretary of the Treasury. This Redemption Fund is a part of the assets of the bank. As a matter of course, the banks must keep on hand cash enough to redeem their own notes, and the part of this sum placed in the Treasury is only intended as a matter of convenience to intercept in the commercial centers the stream of notes coming in for redemption which would otherwise be presented at the counter of the bank. The purpose of a Redemption Fund is to make redemptions more easy and rapid for the community. It is no added burden to the bank, which would be obliged to per- form the same service at its own counter, if no Redemption Fund existed. To be required to send notes home to each bank in remote parts of the country, however, is an inconvenience which is obviated by the existence of a Redemption Fund placed in those centers where notes are most likely to be in circulation. The daily and immediate redemption of notes at its own counter and through the Redemption Fund, which must always be kept intact, provides a constant test of the condition of a bank to 264 REPORT OF THE MONETARY COMMISSION meet immediate demands. This system of redemption, moreover, will be much more effective under the new than under the pres- ent system. Notes will constantly be coming in for redemption to every bank, and it will be impossible for any one bank to keep its notes in circulation beyond the amount actually needed by the community. II. 167. We pass now to the effects of the plan of note-issues, as here proposed, upon the other banks in the system. The objec- tion might very naturally arise in the minds of bankers that, under the system of a Guaranty Fund, supplied by all the banks issuing notes, the well-managed banks would be sustaining badly-managed banks, with the result that there would be no. penalty visited upon poor management. Clearly good bankers might not wish to enter a system by which they became responsi- ble for issues of notes over which they could have no control; and they might say that untrained or fraudulent managers might put out excessive issues based on worthless assets. It is therefore well to examine this objection in the light of experi- ence, It is evident that the failure of a bank to provide proper assets to meet its note-liability must depend upon either (1) bad judgment, or (2) fraud. It should be said at once that these two elements of danger can create no greater obstacles to suc- cessful management in banking than in any other business, and that average honesty, as well as occasional dishonesty, must be given its due weight. The possibility of fraudulent mismanage- ment of bank assets may possibly be magnified too greatly. Even in the organization of banks, where the opportunities for fraud would perhaps be greatest, it is inconceivable that the number of cases of fraud could ever be large relatively to the whole field of banking. Before the Comptroller approves the application and grants a bank authority to commence business he has to be satisfied that its capital has actually been paid up as represented, that the directors are men of good and sub- stantial reputation, and that the undertaking is a dona fide one. WORKING OF THE COMMISSION’S PLAN 265 All this guards against fraudulent practices at the outset just as frequent examinations and reports make it difficult to conceal extensive frauds in the later course of the bank’s existence. Nothing is more common and fallacious than to reason that what is true in a particular case is true in general. For instance, if a single bank had been known to fail, and if assets had proven insufficient to cover the note-issues of that bank, it would be fallacious to assume that the same would be the case at once with many or all banks. Failures due to dishonesty and mismanagement will sometimes happen, but it is undoubtedly true that these will be only sporadic cases. Therefore, the objection to the proposed scheme from the fear that bank assets would be often or generally insufficient is based on the errone- ous assumption that fraud will be general and chronic on the part of the issuing banks. An objection based on this general assumption can certainly have little value. It, moreover, proves too much. To assume that fraud in regard to banking assets would be so general as feared by timid persons, presupposes a condition of morals in the community such that fraud would be so prevalent in all forms of business as to make it impos- sible for ordinary trade and exchange to go on as it does now. Business as it exists today would be impossible. On such an assumption it would not be practicable to obtain a proper num- ber even of bookkeepers or officials who could be trusted. But the supposition on which this objection to the scheme is based is every day and hour contradicted by the fact that we do go, in banking as in all other business, on the belief that fraud is the exception and not the rule. The objection to the plan of the Guaranty Fund as thus stated on the ground of any general prevalence of fraud is hypercritical and largely imaginary. Bankers are as honest as the average man in other branches of business. The banks, therefore, entering into this system run no peculiar risks, owing to the requirement of contribu- tions to the Guaranty Fund, since their responsibility extends only to losses determined by the average honesty of business men. That is, the losses they will be obliged to meet from fraud will be exceptional, and the amount of these will be very small in 266 REPORT OF THE MONETARY COMMISSION comparison with the total circulation, and will be no serious bur- den to the Guaranty Fund. This fund is founded on the theory of insurance by which a very small premium from each participant is sufficient to provide a considerable sum to cover individual losses. 168. It is well known that in the whole history of our national banks, bank failures were greatest in the years 1893-1897. In 1893, if all the banks in the system had issued notes to the full amount of 80 per cent. of their capital (as contemplated in the proposed plan), the sum would have been $5 48,000,000. The aggregate circulation actually issued by the banks which failed in 1893, would have been only 1% per cent. of the aforesaid possible circulation under the plan proposed. That is, if upon the failure of these banks all their notes had been presented for redemption before a dollar had been collected from their assets, only about one-third of the Guaranty Fund would have been invested in such notes. During the process of liquidation, however, it appears that the amount which, up to November 1, 1897, would not have been recovered to the fund from the assets of the banks would have been less than $460,000, or less than one-tenth of 1 per cent. of the proposed circulation Only $51,270 of this sum, however, was a final deficiency from the eighteen banks failing in 1893 whose accounts have been closed. The remaining $407,944 belongs to the other thirty-six banks; and to meet it there would still be a resort to their unliquidated assets, amounting to $1,961,300. The facts are more conclusive if, instead of one period of frequent failures we pass under review the whole period of the existence of the national banks. Of the 352 banks which failed in the national banking system from 1863-1897, only 181 have had their affairs finally settled. The net collections to date from 150 of them have been such as to indicate that, if each had issued notes to the amount of 80 per cent. of its capital, every dollar of their circulation would have been met from their assets, and that no deficiency would have fallen on the Guaranty Fund or on the other banks. In the case of the remaining 31 banks, the net deficiency which would have fallen on the other banks, by assessment, would have been less than $750,- WORKING OF THE COMMISSION’S PLAN 267 o00—which would have been met by an average assessment, on a circulation of $300,000,000, of less than tiv Of I per cent. annually during .the thirty-five years’ existence of the national banking system. Of the 171 banks whose affairs have not been closed, 90 have already collected enough to show that under the system proposed all their notes would have been met from their assets; while the remaining 81 banks have unliqui- dated assets of over $23,000,000 from which to meet $3,298,115 of notes which might, at the close of 1897, have been advanced from the Guaranty Fund. If the ultimate net deficiency here should be $750,000, which is a little more than the deficiency in the case of the 181 banks whose accounts have been closed, the total net loss from the 352 failures would have been met by an average annual assessment of one-seventieth of I per cent. ona circulation of $300,000,000. 169. Therefore, on the basis of banking assets, as disclosed in the history of the present system, it is beyond question that all losses upon the note-issues of failed banks, after recourse to the general assets of the bank, and to the stockholders’ liability, will in fact be easily met by a Guaranty Fund of 5 per cent. as pro- posed, without imposing any serious burden on the other banks in making good occasional deficiencies. Having shown that the losses which will fall upon the Guar- anty Fund will not in any case be serious, it should be also borne in mind that, in the plan of the Commission, responsibility for the notes of other banks affects only those that issue notes, and even then only in proportion to their note-issues. It may be possible that great city banks which are now able to doa very large business and earn their profits without the use of any notes what- ever, may continue to do their business without resort to note- issues at all. So far as this takes place these banks would be entirely unaffected by the requirements for the Guaranty Fund. In case need should arise for the temporary issue of notes, when the need for the issue had passed, and measures had been taken to retire their notes, their contributions to the Guaranty Fund would be withdrawn and their responsibility for the issues of other banks would thereupon cease. 268 REPORT OF THE MONETARY COMMISSION If it be taken into account how small the losses to note- holders from the failure of banks might have been, as previously discussed, it will be found that only a very small part of the Guaranty Fund would have been called upon to meet the sporadic cases of bad management. How small-this amount would be, as determined by the character of the assets held by the banks, during the last thirty-five years, must surprise those who may not have investigated the facts. The banks have, moreover, been able under the present law to pay a tax of I per cent. on circula- tion; and yet the average annual assessment on circulation for the Guaranty Fund, as already shown by the experience of thirty-five years, would have amounted to not more than one- seventieth of 1 per cent. Attention in this connection should be called to the recommendation of the Commission that the expenses of the banking system should not be provided by a tax on circulation, but by a tax on capital and surplus. Hence, if there should be no other tax on circulation, the insignificant con- tribution for the Guaranty Fund cannot be said to be heavy. 170. To rest the security of the notes on the general assets of a bank gives direct importance to the fact that good or bad bank- ing depends entirely upon the kind of discounts made. Hence it is proposed under the new plan to obtain as far as possible an improvement in the methods of examinations and reports upon the character of the resources of the banks. The mere fact that banks have a responsibility, no matter how slight, for each others’ notes, will induce a habit of vigilance and watchfulness over the character of other banks that will not only make each more careful as to the discounts it makes, but will con- stantly tend to drive to the wall mismanaged institutions. Banks showing bad judgment or fraudulent intentions under this sys- tem would be so hard pressed by other banks to meet their obligations that they could not long exist. It should also be kept in mind by other banks in the system that the method of rapid and constant redemption which is likely to take place under the proposed system would make it impossible for the mismanagement of banks to go on long unob- served. Hence the system of redemption affords a protection WORKING OF THE COMMISSION’S PLAN 269 of great practical importance to the other banks in the system as a means of detecting the character of their banking resources. The quality of the assets of each bank will be constantly tested by the requirement to pay its notes on demand. The new provisions as to stockholders’ liability will, also, have the effect of creating vigilance among owners of stock as to the responsibility of fellow stockholders, and thereby increase the disposition to watch closely the management of the bank. Ill. 171. It is necessary next to discuss the provisions in the pro- posed plan for the protection of the note-holder so far as they affect the depositor. Attention should again be called to the fundamental assumption upon which any system of bank-note circulation must be based. This assumption is that the note- holder must be given absolute safety. It is useless to discuss note- issues on any other basis. Under the present national banking system the note-holder has absolute security; and it is believed that also under the new system, as already fully described, the note-holder is given absolute and perfect security. This is as it should be. Inasmuch as the note moves to a distance from the issuing bank, and cannot perform its proper function asa convenient currency except where members of the community are in no way obliged to investigate the individual character of each bank whose notes are in circulation, the security for each and every note must be thoroughly established inde- pendently of the management of any particular bank. The position of the depositor is necessarily different from that of the note-holder. The former is usually one close to, and able to inform himself about, the bank in which he deposits. Heisina position, moreover, where he may be expected to choose his depository bank for himself, and very properly to face all risks of his own judgment in this matter. It is instantly to be seen that the state could not possibly undertake by regulations to protect a depositor in the exercise of his own voluntary judgment in regard to good or bad banking-management. It is clear, there- fore, that the depositor stands in a different relation to the 270 REPORT OF THE MONETARY COMMISSION bank than the distant and innocent note-holder. The depos- itor, it is true, may be protected in general by regulations peculiar to his case—by publicity, by frequent examinations, and by vigilance of the Comptroller against loose and fraudulent methods. Beyond this banking regulations cannot advanta- geously go. 172, We now approach the question first raised as to the effect of the proposed plan on the depositor with two clearly defined propositions which all must accept: First, that the depositor holds a different position relatively to the bank from the note- holder; second, that the note-holder under any practicable scheme must be made absolutely safe. With this understanding, it may be well to discuss the effect on the depositor of the prior lien on the assets of the bank in favor of the note-holder. It is well understood that for the notes issued, the bank has received an equivalent amount of resources. Under the pres- ent national banking system, a part of the assets at least equal to that received in return for the issue of notes is, in the begin- ning, taken irrevocably away from the depositor; and, in order that it should not possibly fall into any other hands, it is invested in bonds and deposited with the government. Under the pres- ent system, therefore, the note-holder has a claim upon the assets of the bank prior to all other claims. The new system proceeds upon the same principle. Although the method of affording the protection is different, only the same amount even- tually goes to the note-holder under the proposed as under the present system. Consequently, in either system the assets cov- ering the note-issues are necessarily so placed that they cannot go to the depositor. A national bank which, under the present law holds in its resources, say $500,000 worth of bonds, as a protection to its notes which are out (we will suppose for simplicity) to an equal amount, would, under the new system, hold $500,000 of gen- eral resources (instead of bonds in the Treasury) to cover an equal amount of notes. The resources behind the depositor are thus not affected by the change of the bond resources into the form of other general resources. On this additional amount of WORKING OF THE COMMISSION’S PLAN 271 $500,000 of general resources behind the notes, the depositor should have no more claim than if those resources existed, as now, in the form of bonds. Merely because the additional resources corresponding to the bonds are held in the posses- sion of the bank and not by the government, the depositor has no right to assume that this fact gives him any moral precedence on what lies behind the notes. In the case of mismanagement and fraud, under the present national bank system, the depositor would suffer directly by the effect on the resources lying behind his deposits. In short, the only way in which the depositor can be protected from mismanagement is, that directors should direct, and not by casting eyes upon the means of protecting the note-holder. Good management will inspire confidence and insure large deposits under either system of banking; and under either they will with good management be equally safe. 173. In most cities there now exists keen competition between national banks on the one hand and state banks and trust companies on the other hand. It may be said by state banks to depositors, that it would be desirable for them to deposit with the state banks, because, if they deposited with a national bank under the new system, the note-holder of the national bank would have a prior claim upon the assets of the bank in case of failure, and that consequently the deposits would be safer with the trust companies and state banks. We have already shown that on entering the new system, a national bank would have in its possession more resources by exactly the amount of its present bond-holdings kept for security of its notes. Under the present national bank system, by which the portion of the assets intended to secure the notes is placed with the government, in order that mismanagement may by no possibility reach them, losses from bad banking can still fall upon the resources behind the deposits. Under the new system the depositor would be worse off only on the supposition that the resources behind the notes, being in the hands of the bank, were thereby liable to mismanagement. The risk to the depos- itor resolves itself, as in every case it must, into a question whether the bank is well or badly managed as a whole. 272 REPORT OF THE MONETARY COMMISSION Such statements as the above, however, may be used by the state banks and trust companies to influence depositors at a time of distrust in the money market. Ata critical time depositors might be induced to withdraw large deposits from national banks for fear that in case of failure the note-holders, having a first lien, might exhaust the resources of the bank. Among unthinking depositors this might be used to the disadvantage of the national banks. It should be observed as to this point that the national banks would have a remedy in their own hands. To a timid depositor, they could offer, instead of a deposit, their own notes, which would be a first lien upon the resources of the bank, and the depositor would then be even better off with the national bank than if he held a deposit in a trust company or a state bank; for, as before explained, the notes would be abso- lutely safe. In fact, it is apparent to every one that the unimpaired capital, which necessarily appears in the resources, furnishes an amount of assets which acts as a buffer to receive losses before they reach the depositor. If the note-holder has a prior lien before the depositor, it is equally clear that the depositor has a prior claim before the shareholder, and the capital must be totally impaired before a loss can fall upon the depositor. No other precedence of claims is defensible under any banking law It might be remarked in passing that if a national bank found itself pushed by the competition of trust companies under state laws, it might create a situation under the new system which would give the depositor exactly the same protection as now under the system of a deposit of bonds to secure the note- holder. That is, if a bank wished to guard against any objec- tion to the position of the depositor under the new system as compared with the present, it might take that portion of its resources which was equal to its note-liability and deposit these resources with a trust company as trustee for the note-holder, Then the bank would stand in exactly the same position rela- tively to depositors as a national bank does now. 174. It is, moreover, not believed that depositors would pre- fer a trust company under state laws to a national bank WORKING OF THE COMMISSION’S PLAN 273 under the proposed plan, or vice versa, upon any such analysis of bank accounts as has here been given. It will be found, that depositors, in fact, place their accounts with banks quite irre- spective of such considerations as have been advanced above. If depositors actually did analyze accounts in order to determine where to keep their funds, then in banks which have smaller deposits relatively to capital (which, as before said, must be impaired before losses can fall on the depositor) they would find greater security. But all the business world knows this not to be the case. Depositors, as a rule, deposit where deposits are already large. A well-managed bank, having the confidence of large interests, and already having large deposits, thereby attracts other deposits. Smaller depositors naturally reason that if men in charge of large estates select a certain bank for the deposit of large sums, they must have good grounds for their confidence, and they follow their example without more exam- ination. The banks obtain deposits on the principle of ‘to him that hath shall be given.” The accumulation of deposits by a bank in any place depends so entirely upon its reputation for good management, that it is quite independent of the particular system under which the bank is doing business. . eidaceca:Gusaae ill lus tesenate arabe Nt dunt lenudeacavan Il sdcgdele deere 348,464,145 1874 25,000,000): ||» Svea aatearwes: lh ahecelnnlate dee lh. Seven talteeia: (Il seacs aatnevraea 371,421,452 1875 Bo OOO 0007 | Lars eandae tT wkeeca tan Wl aviaweeke P weeneeaws 349,686,335 1876 SS000,0007 | sige vecane. |) wehad eee |) cues eevee $21,055,128 | 331,447,378 1877 215 000,000 f |) dasardwecis, || twenties || Cee execu 37,884,853 | 337,899,344 1878 25,000,000f | .......... $ 1,209,251 |$ 7,080 | 53,918,322 | 320,905,895 1879 | 110,505,362 | 15,279,820 | 8,036,439 414,480 | 61,346,584 | 301,644,112 1880 | 225,695,779 7,963,900 | 20,110,557 5,789,569 | 48,511,788 | 327,895,457 1881 | 315,312,877 5,759,520 | 29,342,412 | 39,110,729 | 46,839,364 | 328,126,924 1882 | 358,251,325 5,029,020 | 32,403,820 | 54,506,090 | 46,379,949 | 325,255,427 1883 | 344,653,495 59,807,370 | 35,651,450 | 72,620,686 | 46,474,299 | 323,242,177 1884 | 340,624,203 71,146,640 | 40,690,200 96,427,011 | 45,660,808 | 318,687,214 1885 | 341,668,411 | 126,729,730 | 39,086,969 | 101,530,946 | 43,702,921 | 331,218,637 1886 | 358,219,575 76,044,375 | 52,668,623 | 88,116,225 | 46,173,990 | 323,812,699 1887 | 376,540,681 91,225,437 | 55,548,721 | 142,118,017 | 48,583,865 | 326,667,219 1888 | 391,114,033 | 121,094,650 | 55,527,396 | 200,759,657 | 50,362,314 | 308,000,040 1889 | 376,481,568 | 117,130,229 | 54,457,299 | 257,155,565 | 51,477,164 | 316,439,191 1890 | 374,258,923 | 130,830,859 | 56,278,749 | 297,556,238 | 54,032,587 | 334,688,977 1891 | 407,319,163 | 120,063,069 | 58,826,179 | 307,235,966 | 58,219,220 | 343,207,360 1892 | 408,568,824 | 141,093,619 | 56,817,462 | 326,693,465 | 63,293,704 | 339,399,904 1893 | 408,535,663 92,642,189 | 56,929,673 | 326,823,848 | 65,469,866 | 330,774,426 1894 | 495,976,730 66,339,849 | 52,564,662 | 326,990,736 | 58,510,957 | 325,524,602 1895 | 479,637,961 48,381,309 | 51,986,043 | 319,622,941 | 60,350,014 | 319,093,985 1896 | 454,905,064 42,198,119 | 52,116,904 | 330,657,191 | 60,204,451 | 256,139,868 1897 | 517,589,688 37,285,339 | 51,940,281 | 357,849,312 | 59,616,409 | 306,914,622 * Not including money in the treasury. { Includes all specie estimated to be in circulation—silver as well as gold. } Including notes represented in circulation by currency certificates. §“ These tables have been compiled from the records of the department which were made on or about the dates specified. They include everything properly belonging in a statement relative to circulation, except minor coins, which are not stated, because it is difficult to estimate accurately the amount in use. The figures agree with the reports published from year |to year, and an estimate has been added of the amount of specie in circulation on the Pacific coast during the period of suspension of specie payments (1862 to 1878 inclusive). Itwill be observed that no attempt has been made in the table for 1862 to estimate the quantity of the nondescript currency of postage stamps, tickets, due bills, etc., which served as small change during the period subsequent to the disappearance of subsidiary silver and prior to the issue of the postal currency and fractional currency authorized by the acts of July 17, 1862, and March 3, 1863. Also that the one and two-year notes of 1863 and compound-interest notes supposed by many persons to have been in circulation are not included in any of the tables. The small quantities of these classes of interest- bearing obligations which were in circulation as money for a few months when first issued had been absorbed as investment securities and withdrawn from circulation before July 1, 1865, which is the date commonly selected for comparison with the present time as to money in circulation. The seven-thirty notes are also excluded from the table. They were not used as money, nor paid out as such by the treas- 548 No. 3.— ESTIMATED AMOUNT OF MONEY IN ACTUAL CIRCULATION IN THE UNITED STATES AT THE CLOSE OF EACH FISCAL YEAR FROM 1860 TO 1897 INCLUSIVE —Continued. (Finance Report 1897, pp. cxxxi-cxxxviil.) Demand National bank State bank Fractional Total Per July notes notes notes currency circulation capita | st swiewnts |laew ed tees $207,102,477 | veces orga 435,407,252 | 13.85 | 1860 Shi e Kae ear | SSRO REN OER 202,005,707 | cvceesdcra 448,405,767 | 13.98 | 1861 $53,040,000 | .......45. 183,792,079 | .....e--ee 334,697,744 | 10.23 | 1862 3,351,020 | ....-- eee 238,677,218 |$15,884,382 595,394,038 | 17-84 | 1863 sone ee eees $ 31,235,270 | 179,157,717 | 19,132,501 669,641,478 | 19.67 | 1864 sustain eotee 146,137,860 | 142,919,638 | 21,728,755 | 714,702,995 | 20.57 | 1865 Pad vadghasncste 276,012,713 19,996,163 | 24,687,063 673,488,244 | 18.99 | 1866 cede ae 286,763,961 4,484,112 | 26,306,294 661,992,069 | 18.28 | 1867 gage Rises 294,368,873 3,163,771 | 28,999,352 680,103,661 | 18.39 | 1868 hiss ides 291,749,684 2,558,874 | 30,442,239 664,452,891 | 17.60 | 1869 2 ee 288,648,081 2,222,793 | 34,379,282 | 675,212,794 | 17.50 | 1870 rena ereees 311,405,672 1,968,058 | 34,446,305 715,889,005 | 18.10 | 1871 seen eeenes 329,037,005 1,700,935 | 36,402,929 | 738,309,549 | 18.19 | 1872 re shee aera 338,962,475 1,379,184 | 38,076,005 751,881,809 | 18.04 | 1873 Se eekeaas 340,265,544 1,162,453 | 38,233,582 776,083,031 | 18.13 | 1874 dapevaginss 340,546,545 964,497 | 37,904,570 | 754,101,947 | 17.16 | 1875 enter 316,120,702 1,047,335 | 32,938,845 727,609,388 | 16.12 | 1876 PeAaei seas 301,289,025 | ........-- | 20,241,661 722,314,883 | 15.58 | 1877 scales es athe 311,724,301 | -2e.--+e-+ | 16,367,725 729,132,634 | 15.32 | 1878 gassakanseennehes 227404900 | siawaivecas | soma cence 818,631,793 | 16.75 | 1879 Aakeaveitenine 399 ALS178. || cosa sees | eda anes 973,382,228 | 19.41 | 1880 siamo 349,746,203 | we. cere ee | eee eeeeee | 15114,238,119 | 21.71 1881 Fanccuiga wee 352,404,788 | .... 0c cee [eee ee cere | 151745290,419 | 22.37 1882 iitewsres 347,856,219 | cccceceeee | eeeereeens 1,230,305,696 | 22.91 | 1883 aweee etna 330,689,893 | -.cc eee eee [eeer er eeee 1,243,925.969 | 22.05 | 1884 se tteoaract oe 308,631,001 | .... 0.266 | eeeeeeeees | 1,292,568,615 | 23.02 1885 sR be. btte ts 307,605,038 | .... eee ee fee ee ee eee | 1,252,700,525 21.82 | 1886 | 276,855,203 | cece ce cere Jee ee neces 1,317,539,143 | 22.45 | 1887 Treasury Notes| 245,312,780 | ....eeeeee [veer ee eres 1,372,170,870 | 22.88 | 1888 of 1890 207,220,033 | ...-eeeeee fees eeeere 1,380,361,649 | 22.52 | 1889 —————| 181,604,937 | -...-- Sceze | 294 eas weed 1,429,251,270 | 22.82 | 1890 40,348,704 | 162,221,046 | ......--0- [eres eens 1,497,440,707 | 23.41 | 1891 98,258,692 | 167,221,517 | ..ce eee ee [eves erence 1,601,347,187, | 24.44 | 1892 140,855,614 | 174,669,966 | ....-.e0ee [eee e renee 1,596,701,245 ; 23.85 | 1893 134,681,429 | 200,219,743 | eee seers [ects eens 1,660,808,708 | 24.28 | 1894 115,043,169 | 206,953,051 | ...--eeeee freee ceeeee 1,601,968,473 | 22.93 | 1895 95,045,247 | 215,168,122 | .... 60. 6. | weer ee eee 1,506,434,966 | 21.10 | 1896 “83,460,517 | 225,544,351 | cece ee eee force serene £,640,209,519 | 22.49 | 1897 ury, but were negotiated as a loan and issued by the government to investors in exchange for legal tender notes, being sold at par and accrued interest like any other loan, A small amount of these, however—less than ten millions—was issued to soldiers in the field, but the notes were taken only by the soldiers who desired to save, and were, therefore, not placed in circulation. The total amount of seven-thirty notes negotiated in 1864 and 1865 was $829,992,500, of which $44,509,900 were of the denomination of $50, $137,634,600 of $100, and the remainder $647,848,000 were $5008, 1000s, and $s5000s. The receipt of legal tender notes by the department in exchange for seven-thirty notes did not cause a contraction of the currency, because the legal tenders so received were immediately paid out by the government in settlement of demand liabilities then pressing. “The one and two-year notes and compound- interest notes were sufficiently unlike the legal tenders to attract notice and cause an examination of their terms, In this way their interest-bearing quality was speedily discovered, and they were very soon retired. The seven-thirties were unlike the legal tenders, except in color, being much larger and having coupons attached. “There are two facts which prove conclusively that these obligations were not in active circulation : one is that they were all redeemed within three years without creating monetary disturbance ; the other i that nearly allof them came back into the treasury as clean and unworn as on the day of their issue—a condition which they would have not presented had they been in active circulation,’— Secretary of the Treasury, 1891. 549 REPORT OF THE MONETARY COMMISSION 55° L6'066'S6L‘tz1‘t | PEO‘ggg‘oEz | POS'6LP'SLE | Bgr‘zgQZ‘gE Leobg€gz'S1 | ogz*Logthr11 | gro‘rgg‘gbe | oS-APe‘hs pase" £62 L6°Soo'bzr'Eor‘r | LeS‘ooo'gzz | voS61g‘zrS | 6grigigizh | Leezi‘Lgz'S1 | ogz‘Egg‘'6z1 | QIO‘Igo‘QvE | OS*APE'PS srt Q6gi ZE-Lig‘oS1‘Z60'r | S€o'r69‘t1z | boS*r6g'gze | 6S6‘Ggr‘gh | zgSSo‘olze‘Sr | oob‘ggo‘gh1 | Qro‘Igo‘grE | OS Lrg‘PS srett S6QI Se‘gbS*bg6'bzr't | LglbSg‘goz | PoS‘ghI‘ZE€ | 66g‘LgE‘9q | SLSLO‘ELzSr | Lrb‘hgszS1 | gro‘rgg‘gbe | oS-Lrg‘rS S-g6giozd‘111't | zlg€rd'gl1 | PoS*LZS6%0EE | bgr‘grg'z6 | Sé-zbb‘olz'S1 | Lzz‘oor‘Lh1 | Qro‘rgg‘gPE | OS-Lhg‘SS Sbgiz‘Szotber'r | oSg'€ggtedi | bof rig‘ | 626'g6S‘gS1 | S6-0orOLz‘Sr | ILotzIZ‘101 | Q1O‘Igg‘QPE | OS*L9'SS EvogzESeLbotr | pLo‘ ttre + spuepistan | or €x | €£°6 S6€ | rb-1 | L6°€ | CoO‘COg‘LL1 9 | CoO‘0OL‘Eg ooo'oo0'ob 2 =| co0fo0L‘Ez 2 e00'o0S'gZ1 2 | o00fo00'S? en er | gz'F porr | botz | grix | coo‘oob’z 2 ooo'ool‘r ooo'ool'z 9 rrtossssttss | opotooL'e 2 ooo‘ ook 'z aI rr | o€-1z | 61-2 | g6"x | Sx-L | Coofoog*r1 2 | Coo‘o0g‘or ooo'oag‘or 2 ooofo0g'gt 2 ooooobsS IL ox | o£:zx | gZ*6 | gg't | gorx | co0%00g‘6h 2 e00'o0S‘6 000‘00S‘6 2 + | ooofo0S'S a ooofoor'sS or 6 | ¥6r0r | z£:S | Lt | oS-z | co0fcc0'Eor 9 | coofo00'6h 000'000 6% 2 * | coofoao'St a 000000’ gr 6 g | 24x | 1g*1r| 89° fa oc0a00'gz 2 | coo‘ooS‘r oo0%000'I 2 oao'ooS a o00'ooz'z, 8 Z | €€91 | LZ | gS°€ | oorg | cootook hr a 000%00L‘or ooofood‘or * | cootcco'tz f | o00‘oo0'f z 9 | 69°6 ex | Sbx | ox€ | o0af000‘r91 9 | co000b'S+ co0'c0S'gz 2 | c00%006‘gt 2 | c00‘006'g6 2 o00fo0k rE 9 € | o£:Sz | z€-1z] 16°g | Zb°S | coofooS‘zd 9 00000! LS o00f000'L a oo0'oo0'oS 3 ooo'ooo SE a co0'oor'g ‘i ‘sumrdjag | $ + | S6gr | Lez | Lob | iS-zr | coofoog‘ézr 2 o00'o0g'z1z c0o'cag9'Z11 p | c00'o00z"S6 p | co0'o0S*bSg py | cootooE ‘2S : Auewyasy | + € | govE | ort€ | ES*rx] Soroz c00%coz'611 2 | co0'oob‘Erh o00%006'LS 9 o00‘o00'ggt 9 | Gootooo'z£L 2 | ooofooS‘gé : ses gouerg | € zw Ggoz | Cg's | Lov€ | SL-bx ooo'oor'z11 2 | coofool‘1z1 ooofooLizi g | tt eoofoco'rgS g | c0ofo0g'6E . ‘wopsury payuy, | z | o£-€2q| Sh-S¢| od-gg] SS-6g] cooto00t6EG7 | cooto0S'¥Eg g] cootoog‘SL gf] coroodigss § o00'o0£'g69 $| coofoob‘eL votre ssssy sayeag powuy) | z z jopuayr peso, |zedeg |z941'g | PIOD 3 yew, paruiry Japuay [IN eee eeu c Plog jo yI0Ig | uone[ndog | xy. 2900 salzjunoZ eyideo 19g APATIS JO YDOIS “QT3OM AHL dO SATMINNOD IVdAIONIDA FHL NI VLIdVO Yad UNV ALVOAAOOV AHL NI AFNOW JO SHOOLS aLVWIxOwdav—"S -ON 552 REPORT OF THE MONETARY COMMISSION No. 6. APPORTIONMENT OF MONEY IN THE TREASURY ON JANUARY I, 1898, BETWEEN THE FISCAL DEPARTMENT OF THE TREASURY AND THE PROPOSED DIVISION OF ISSUE AND REDEMPTION. TREASURY, FISCAL DEPARTMENT. Gold coin, $20,243,659 Gold certificates, 1,570,460 Silver dollars, 1,456,997 Silver certificates, 11,229,912 Silver bullion, 881,004 Subsidiary silver, 9,679,899 Minor coin, 1,086,589 United States notes, 7,358,943 Currency certificates, 1,240,000 Treasury notesof 1890, 2,904,344 Bonds and_ interest paid, and fractional currency, 29,453 Deposits in National banks, 49,182,717 Total, $106,865,977 Less outstanding checks and drafts, disbursing officers’ balances, etc., 40,723,584 Available cash bal- ance, - . $66,140,393 DIVISION OF ISSUE AND REDEMPTION. Gold coin and bullion: Held against gold certifi- cates, $ 38,128,149 5 per cent. of $455,818.122 (silver dollars), 25 per cent. of $346,681,016 (U. S. notes), and $106,- 348,280 (treasury notes), 22,790,906 113,257,324 Total gold, 8 174,176,379 Silver dollars held against cer- tificates, $ 387,925,504 Silver dollars held against treasury notes, 4,944,548 Silver bullion (cost, $101,403,- 732.25), - 68,000,000 Subsidiary silver and minor coin,! 1,000,000 Total silver and minor coin, $ 461,870,052 United States notes held against currency certificates, $ 44,555,000 Grand Total, $ 680,601,431 NATIONAL BANK NOTE REDEMPTION FUND, National bank notes, $ 5,186,886 Gold coin, 3,049,197 Total,- $ 8,236,083 NATIONAL BANK NOTE RETIREMENT FUND, United States notes,? # 32,286,146 *There being no definite provision in the plan as to the precise amount of sub- sidiary and minor coins which should be transferred to this division, this amount is suggested as typical of the necessary transfer. * United States notes are used here merely as indicative of “lawful money,” though any other forms of lawful money might be used in making the transfer, APPENDIX 553 No, 7.— PRODUCT OF GOLD AND SILVER IN THE UNITED STATES, 1792-1896. [Estimate for 1792-1872 by R. W. Raymond, commissioner; since 1872 by the Bureau of the Mint.] [Report Director Mint 1897, p. 51; Statistical Abstract, 1896, p. 41.] Gold Silver Calendar year 5 + Fine ounces Value Fine ounces Commercial value 1792-July 31, 1834... 677,250 | $ 14,000,000 | Insignificant | Insignificant 1834, July 31-1844... 362,812 7,500,000 193,363 $ 253,000 1845s sean yosces estes 48,778 1,008,327 38,672 50,196 18465. ccwdees os ees 55,116 1,139,357 38,672 50,274 TSAW ics ii oe ee 43,009 889,085 38,672 50,583 T8ABiceewwdies geen 483,750 10,000,000 38,672 50,428 T84 Qi gfe ws cies Aveta 1,935,000 40,000,000 38,672 50,622 L850. cepiarccegetanes 2,418,750 50,000,000 38,072 50,892 (8G Tene e Sabw's tena 2,660,625 55,000,000 38,672 51,704 IB 2iacianisaatenes 2,902,500 60,000,000 38,672 51,279 1859) eae aeeeucee 3,144,375 65,000,000 38,672 52,130 OSA itevaccwnvdvianare ina 2,902,500 60,000,000 38,672 52,130 DOSS iicstass crane wind Sues 2,660,625 55,000,000 38,672 51,975 TSO ister istendtenn heirs 2,660,625 55,000,000 38,672 51,975 DSS 7 caemnemeewa sans 2,660,625 55,000,000 38,672 52,323 TBESmcwun aowees eee 2,418,750 50,000,000 386,725 519,752 TSS Osicce gaapegsamie SHAS 2,418,750 50,000,000 775345 105,188 1860s 6 bits seenetes 2,225,250 46,000,000 116,015 157,000 TBO" wsiosaeieciw ees 2,080,125 43,000,000 1,546,875 2,062,000 1862) sdisatin saaa-weds 1,896,300 39,200,000 3,480,469 4,685,000 1868 canes pew eis 1,935,000 40,000,000 6,574,219 8,842,000 186433 csveeoacnee ess 2,230,088 46,100,000 8,507,812 11,443,000 TOS a iticas caer Rae 2,574,759 53,225,000 8,701,171 11,642,000 TROGies > vaciacsaater’ tne 2,588,063 53,500,000 757345375 10,356,000 TROT ca vadinwes ake $ 2,502,197 51,725,000 10,441,406 13,866,000 T8682 ,00 vee ey. acca 2,322,000 48,000,000 9,281,250 12,307,000 186052 ee eies Kev ay 2,394,563 49,500,000 9,281,250 12,298,000 1870s cvnusees cvage 2,458,750 50,000,000 12,375,000 16,734,000 IBM scenes gee anes 2,104,313 43,500,000 17,789,062 23,578,000 NO 7 OW ia co oa wae 1,741,500 36,000,000 22,236,328 29,396,000 S79 inca cae iek< mae 1,741,500 36,000,000 27,650,000 35,890,000 W894 dcaiaacan canes 1,620,563 33,500,000 28,849,000 36,869,000 BPG ds aceaiaty aulas 1,615,725 33,400,000 24,518,000 30,549,000 BFE stnccllee- jaan 1,930,162 39,900,000 30,009,000 34,690,000 187 Fivev ene s gee Be 2,268,788 46,900,000 30,783,000 36,970,000 TB Siccie isis Sys aieieraccie 2,476,800 51,200,000 34,960,000 40,270,000 TS 7G tui us Seee oeareitaes 1,881,787 38,900,000 31,550,000 35,430,000 WS8 0 eaver ed ik weston 1,741,500 36,000,000 30,320,000 34,720,000 DEBT cea evnchaeing 1,678,612 34,700,000 33,260,000 37,850,000 1882 5 aciaiea's wianensn det 1,572,187 32,500,000 36,200,000 41,120,000 1888 jonny xo.¥ sans 1,451,250 30,000,000 35,730,000 39,660,000 188 Aasciesyava miajscn yaa 1,489,950 30,800,000 37,800,000 42,070,000 WSS Sperceshierecsecncaracecn snares 1,538,325 31,800,000 39,910,000 42,500,000 1886...... Sierauaneanins 1,693,125 35,000,000 39,440,000 39,230,000 NOB Hievasiem cove ahs ater 1,596,375 33,000,000 41,260,000 40,410,000 1888. 1,604,841 33,175,000 45,780,000 43,020,000 T8805 cisccune wincrotasaee 1,587,000 32,800,000 50,000,000 46,750,000 1890...........000- 1,588,880 32,845,000 54,500,000 57,225,000 TSOT voiiccse'e:s euonaseardwes 1,604,840 ~ 33,175,000 58,330,000 57,630,000 1892 cnacmonienieers 1,596,375 33,000,000 63,500,000 55,563,000 1893 ciaivsesidjsieiaentunglasvs, 1,739,323 355955,000 60,000,000 46,800,000 TRG 4 aia deci ccwt + 1,910,813 39,500,000 49,500,000 31,422,000 1895s .wwwdisiasot” 2,254,760 46,610,000 55,727,000 36,445,000 1896........008 eae 2,568,132 53,088,000 58,835,000 39,655,000 Totallsccsccs vs 102,218,361 |$2,113,034,769 | 1,117,636,401 $1,041,648,451 ‘At the average market price for the year. REPORT OF THE MONETARY COMMISSION 554 oo0‘Lib‘zgo'g¢g ROIS L‘EzO‘S wee wees lee two n ee anne oooE LES QOS bSEzbS‘6gz. Beh aba sarge [a eniecese teh oe, Semtaels o00‘061‘Pgr gzo‘Peg‘gz1 000‘S60‘zg bro‘LIEEg |oooPSr'r€z | gzo'zgi‘rr | ooo'L£S‘Srr | Pro‘16S‘S 000‘'SLb*S gz Pr6'LSz'S1z | oo0'S60'LS EQS*1SO'EP 000‘ Lo‘gbg ofPoSe1€ | ooo'v19‘6z1 | gg0‘oLz‘g o00'SLE*LEz z99*600'LL1 o00SLb‘Lb | zlo‘1ob‘S€ | ooo'hbO'big | €16‘LPL‘6z | O00‘6g6‘zz1 | zRS‘OHE'S 000‘0L1‘961 THULLy Shr o00'hEz‘6E gzb‘S60'6z o00S rb‘oL9 ZICIEPZE | ooo'Lgo'vEr | zgz‘ggh‘g 000‘0z0‘161 gg6‘zbrzbr ooo‘boz‘*ge =| L6S‘ggh‘gz | 000‘g9S‘zgg 1zg‘tGo'ze | ooo 1S‘zEr | Pet ‘o1P‘g ooood ‘hee zeb‘eob‘osz o00‘A1L‘ze zre‘obo'Sz 000'gz6‘EgE gtosog‘'Z1 | o00'f6E*g€ | zoS‘ogL‘1 ooo‘oLh‘1Sz SLO‘gS L161 ooo Lb1'Sz Log‘SL1‘61 ooo hg*hE1 £16'zzS‘g ooo'rer‘E1 | 16z‘zSQ 000‘0g 1‘P61 obo‘oLo‘ehi ooo’gI P61 boot Log‘ hi 000'6Lb'r6 brp‘ols*y oo0'ghh‘6 brotlSp 000‘0gg‘1fz SSS*ZSQ°C LI 00098 I'Ez SSL'SQE‘LI oo0'fgo0‘gd 89S ‘6L9°E 000‘909‘L LSO‘LOE o00‘0Sz‘1gt Szz‘6gh‘Lez |ooo'Szi‘gf |zzb6‘gbLigz | ooo'zS1‘griI L£zgSr L's ooo'Srg‘1r | €gStr L$ oo0‘oP lhl ogs'SezSgS |ooocLELige |6LL‘19z‘gz | ooo'rgh‘gfz =| oL6'gf 11 | oootzg‘ir | gh6'rZS oo0‘obg‘06S ozg‘11Z‘61P ooo'zbS‘6z 16S‘SQ6‘oz ooo 17'S lz Sister€€1 | oootrgZ‘€1 | 999‘°S99 000‘obo‘ogh Stz‘zigizbe | ooo'zoo'hz =| z1g‘obI‘L1 ooo'gi‘£ZzE | of z‘bzg’Sr | ooo'gSt‘gr | 11z*16L 000‘oro‘oge o0g‘1gz‘Z4z | o00*z00‘61 Ogo‘Egg‘E1 ooo'r19'€Sz orb ggz‘z1 | oootrgg‘zr | ezb‘€19 o00‘ozo'o1€ 00g‘0Sg‘gzz 000‘10S‘S1 OpS*zer ri oo0'feh‘oL1 ogz‘Ehz'g 000‘0zS"g Egi‘ziP 000‘096‘zof ooL'Ibg61z =| ooo'gh1 ‘ST Sg0‘z66‘or o00‘ggo'erI $69'1z6'9 ooo'bhS 1° S60‘gbE 000‘0z9‘g6z o00'169‘91z =| OOO I L6H 1 oSS*beg‘or o00'Fgo'ez ogibS6's o00'bS 1‘9 60L‘L6z ooo‘oro'See 006‘0£S‘Sez 000‘zS Z‘gi SPS‘gLL 11 ooo LS‘gII O11 6£9'S 000'gzg‘S SS6‘1gz ooo‘ob ELE oog‘*bgo'eSz | o00‘LSo%gt obz‘bSg'zr o00'hzE ‘orl 006‘gfE'S o00'g 1 S‘S Sbg‘ggz ooo‘obe6Sh ooLl'bz6‘1 Lz 000‘L96‘zz SEz*g6S ‘C1 ooo'ghz‘e11 ogt Lbs 000‘z99°S gr6ele 000‘096‘0Lb ooL‘zS€*6gz oo00'ghS ‘tz Seg‘LoPer 000‘S60‘g6 obeSpl'y 000‘S06‘P Lozltz o00ozL‘grhe 00S‘gLS*z61 o000‘ge ELI $z6'gz9'6 000‘L16'06 oz1‘g6e'y oo00‘ghS‘F 906‘61z o000‘gze‘€6z obo‘Lgz‘og1 OooEEE QI ob6‘Z10‘01 000‘z6b‘06 PES LLe'y 000‘9S9'S g6S‘ELz o00zLlg‘Lz1 ozt'g6S ‘69 000'gze‘s 0£6'669‘z ooo‘Soz‘vir gSg'bzS‘S 0006S L‘b por‘otz 000‘L6S‘gl¢ och60f‘zb ooo‘ 1 16‘z¢ oSO‘TIS'T ooo £6‘Lorg | ogi ‘127s oo0'SSg‘fg | oLbgogt on[ea jeloiauiwi07) s90uno 9Uly onjea [eo19 WoT) soouno 9Uly on[eA s99uno duly on[eA s90uno sul porsad 103 [830], poried 10} adesoae jenuuy porsad 10} [eI0 J, poised 10} aderaae [enuuy FOALS PISD ss peqOT, zLgi-1Zgr oLgI—99g1 SQgI-19gI o0ggI-9Sg1 SSgi-1S@1 oSgi-1brgi obgi-1f€gr O€gI-1zgI OzZgI-I11gI OIQI-10gI1 oogI-1g41 ogZ1—-1941 ogL1-1bL1 obL1-1zL1 ozZ1-1041 ooLI-1g91 OggI—I9g1 oggI-IP91 obgI—1zg1 OZQI-I1091 OOgI-1gSI ogS1-19S1 ogS1-SbSt beS1-1zS1 sts ozS1-£6br poneg (‘129qQ390g Ydjopy ‘iq 4q pattduos ‘spotiod ureji99 IOf saseioae jo a[qQe} & WIJ) ‘VOINANV AO AUAAOOSIG AHL AONIS ATYOM AHL NI AUFZATIS GNV GIOO AO NOILINGOUd — *8 “ON No. 9.— PRODUCTION OF GOLD AND SILVER IN THE WORLD, 1493-1896. [The aggregate production of 1493 to 1872 is obtained from estimates by Dr. Adolph S i 1872 the estimates are those of the Bureau of the Mint] aaa Gold i Calendar year - ae Fine ounces Value Fine ounces Commercial : value 1493-1872....| 289,542,354 | $5,985,373,000 | 5,623,751,944 | 8,082,417,000 187.3 wraceis eaters 4,653,675 96,200,000 63,267,187 82,120,800 TB 7G issrds od tiie 4,390,031 90,750,000 55,300,781 70,674,400 1875 visaravediiins 4,716,563 97,500,000 62,261,719 77,578,100 197 Gasicg ctw 5,016,488 103,700,000 67,753,125 78,322,600 TOF ie isin aie 5,512,196 113,947,200 62,679,916 75,278,600 1878 s.s0ce som 5,761,114 119,092,800 73,385,451 84,540,000 1879.. veeee 5,262,174 108,778,800 74,383,495 83,532,700 1880......... 5,148,880 106,436,800 74,795,273 85,640,600 I88I.....00.. 4,983,742 103,023,100 79,020,872 89,925,700 18825 cine ces 4,934,086 101,996,600 86,472,091 98,232,300 1883 ole estan g ays 4,614,588 95,392,000 89,175,023 98,984,300 1884......... 4,921,169 101,729,600 81,567,801 90,785,000 1885 3s-0csen te 55245,572 108,435,600 91,609,959 97,518,800 1886.......4. 5,135,679 106,163,900 93,297,290 92,793,500 1887. .... 0... 5,116,861 105,774,900 96,123,586 94,031,000 POSS cesses 5,330,775 110,196,900 108,827,606 102,185,900 1880.00 555 e ee 5,973,790 123,489,200 120,213,611 112,414,100 T8Q0sssseaaes 5,749,306 118,848,700 126,095,062 131,937,000 I8QI..... eee 6,320,194 _ 130,650,000 137,170,919 135,500,200 T8923 ee scieease 7,094,266 146,651,500 153,151,762 133,404,400 TSO 3 6 54 wives 7,618,811 157,494,800 165,472,621 120,119,900 1894. 066-00 8,764,362 181,175,600 164,610,394 104,493,000 1896 wien cea 9,641,337 199,304,100 167,288,729 109,406,800 1896......... 9,817,991 | 202,956,000 165,100,887 111,278,000 Potal vic. c 141,723,650 $2,929,688,100 | 2,459,025,160 | 2,369,697,700 Grand Total] 431,266,004 $8,915,061,100 | 8,082,777,104 | $10,452,114,700 No. 10.—SILVER PURCHASES UNDER ACTS OF FEB. 28, 1878, AND JULY 14, 1890. [Annual Report Director of the Mint, 1897, pp. 15, 16.] Average Price | Bullion Value Fiscal Year Fine Ounces Cost per ofa Fine Ounce Silver Dollar OPS! acdc cacao 10,809,350.58 $13,023,268.96 $1.2048 $0.9318 1870 sree tacoralatia eres 19,248,086.09 21,593,042.99 1.1218 -8676 1880's anicareiaraisiny 22,057,862.64 25,235,081.53 1.1440 8848 1881 wax Rihclvitnter 19,709,227.1T 22,327,874.75 1.1328 8761 18826 ees caadncndali 21,190,200.87 24,054,480.47 1.1351 .8779 1883 sessmns aa wian 22,889,241.24 253577732758 1.1174 -8642 TOS Are tnsuseansieat 21,922,951.52 24,378,383.91 1.1120 -8600 TSB stessnelcuatitiatns 21,791,171.61 23,747,460.25 1.0897 8428 TBS O.saces: aad ¥ 22,690,652.94 23,448,960.01 1.0334 +7992 1987 sien esdesii 26,490,008.04 25,988,620.46 9810 7587 1883 essaiciais ois-aacace 25,386,125.32 24,237,553-20 9547 7384 TSB O 82 easing sve oie 26,468,861.03 24,717,853-81 -9338 7222 TS OO ich ss sxe cucd ns doe 27,820,900.05 26,899,326.33 -9668 7477 TSO ves Seay cots 2,797,379-52 3,049,426.46 1.0901 -8431 *EE | 291,272,018.56 | $308,279,260.71 $1.0583 $0.8185 EBON ecaaucaacare s 48,393,113.05 $50,577,498.44 $1.0451 $0.8083 TSO 2 vice ieeweasta v's 54,355,748.10 51,106,607.96 +9402 7271 1803 sce ssaiciissietnns 54,008,162.60 45,5315374-53 .8430 -6520 1894............] 11,917,658.78 8,715,521.32 7313 +5656 TtT....| 168,674,682.53 | $155,931,002.25 $0.9244 $0.7150 Grand total....| 459,946,701.09 | $464,210,262.96 #$1.0093 $0.7806 PP Silver purchased under act of Feb. 28, 1878. tit Silver purchased under act of July 14, 18g, 556 REPORT OF THE MONETARY COMMISSION No. 11.—RATIOS AND PRICE OF SILVER, BULLION VALUE OF SILVER DOLLAR, ETC’ 1833-1897. ‘ 7 rs London quotations pee Z ‘sna Totes Calendar year at average | HOOF | value of Lowest Highest Average quotation gold silver dollar I 583d sogd 596 Z| 81.297 15.93 $1.003 592 60 3 sote 1.313 15.73 1.015 504 60 59tt 1,308 15.80 1.012 59% 60 # 60 1.315 15.72 1.017 59 60 3 5976 1.305 15.83 1.010 504 60¢ 504 1.304 15.85 1.009 60 60 & 60% 1.323 15.62 1.023 604 60 60% 1.323 15.62 1.023 593 60 ; 6075 1.316 15.70 1.017 594 60 5916 1,303 15.87 1.008 59 598 5916 1.297 15.93 1.003 594 59 594 1.304 15.85 1.009 585 595 594 1.298 15.92 1.003 59 604 Sore 1.300 15.90 1.005 58% 60 sott 1.308 15.80 1.012 583 60 59% 1.301 15.85 1.009 593 60 594 1.309 15.78 1.013 594 613 61s 1.316 15.70 1.017 60 618 61 1.337 15.46 1.034 594 61% 604 1.326 15.59 1.026 60% 61g 614 1.348 15.33 1.043 604% 61; 61} 1.348 15.33 1.013 60 61g 619, 1.344 15°38 1.039 604 624 615 1.344 15.38 1.039 61 622 619 1.353 15.27 1.047 60% 61g 6175 1.344 15.38 1.039 61% 62 6275 1.360 15.19 1-052 614 62 6144 1.352 15.29 1.046 604 61 6013 1.333 15.50 1.031 61 62} 61s 1.346 15.35 1.042 61 613 61% 1.345 15.37 1.040 608 624 61% 1.345 15.37 1.040 604 61 61,5 1.338 15.44 1.035 60% 624 614 1.339 15.43 1.036 60 3 614 607%; 1.328 15.57 1.027 604 614 603 1.326 15.59 1.026 60 61 6075 1.325 15.60 1.025 604 60 603%; 1.326 15-57 1.027 6075 61 60 $ 1.328 15.59 1.026 so4 614 6075 1.322 15.63 1.023 574 59té 594 1.298 15.92 1.004 574 594 58r5 1.278 16.19 998 55k 578 565 1.246 16.59 -964 462 584 522 1.156 17.88 894 534 584 54te 1.201 17.22 +929 494 554 5225 1.152 17.94 891 484% 532 si} 1.123 18.40 868 512 525 524 1.145 18.05 836 LSB Toes eA Meron wie 50% 524 514% 1.138 18.16 881 * Down to 1880 the figures for silver prices are based on Pixley and Abell’s tables, since that date on daily cablegrams from London to the director of the mint, No. 11.—RATIOS AND PRICE OF SILVER, BULLION VALUE OF SILVER DOLLAR, ETC, 1833-1897 —Continued. Average ec i Value of Average Calendar year eae ve alia! ae Lowest Highest Average quotation ees Fis silver dollar 1882), 6i oda vane 50 ad 528d 5142 d| $1.136 18.19 #878 WS3 0608 asaas wwe 50 Sigs 50% I.110 18.64 858 T3882 6.0 eacas sia 494 513% 50 2 1.113 18.57 861 TSO 5 Fie dae se monae 46% 50 4835 1.0645 19.41 823 F886 ii. isco sesttea erie 42 47 45% -9946 20.78 -769 TBS 76s .c'e dco. 0 scsieiseenouad 434 474 448 .97823| 21.13 756 18880565 6s dssiesrans 41 § 4425 42% 93974] 21.99 727 1889.5 665-3 ceeeus ¢ 42 443% 4i}t -93512] 22.10 3723 1800335 Fis ancien 43 54 47 } 1.04633 19.76 .809 1891..... ceeevay stata 434 48 ¢ 4575 -98782| 20.92 764 1892's. di caee apes 37% 43 ¢ 39% 87106} 23.72 673 1803 cos dbase arden 30} 38 } 3525 -78031 26.49 603 D904 esd s ios ankoaes 27 31 ¢ 2845 -63479] 32.56 -491 1895..... (arsnlanaie e 2735 318 29% -65406 31.60 1505 1800505 4 sccowarscewe es 29 ¢ 3148 30 # -67437| 30.66 522 L807 caaouaew canines 23% 29th 2725 .60449] 34.28 468 No. 12.—COMMERCIAL RATIO OF SILVER TO GOLD EACH YEAR SINCE 1687, (From 1687 to 1832 the ratios are taken from Dr. A. Soetbeer; from 1833 to 1844 from Pixley and Abell’s tables. Year Ratio Year Ratio Year Ratio Year Ratio Year Ratio 1687...., 14.94 || 1719...} 15.09 || 1751...| 14.39 || 1783...| 14.48 || 1815... 15.26 1688..... 14.94 || 1720...] 15.04 |] 1752...| 14.54 || 1784...] 14.70 || 1816...| 15.28 1689..... 15.02 || 1721...] 15.05 || 1753...| 14.54]|| 1785...| 14.92 || 1817...] 15-11 1690..... 15.02 || 1722...] 15.17 || 1754...| 14.48 |} 1786...| 14.96 |] 1818...] 15.35 1091..... 14.98 || 1723...] 15.20] 1755...| 14.68 || 1787...| 14.92 |] 1819...] 15.33 1692..... 14.92 || 1724...] 15.11 !] 1756...] 14.94 |] 1788...] 14.65 || 1820...| 15.62 1693. 14.83 || 1725...] 15.11 || 1757...| 14.87 ]| 1789...] 14-75 || 1821...] 15.95 1694, 14.87 || 1726...| 15.15 || 1758...] 14.85 || 1790...| 15.04 || 1822...] 15.80 1695..... 15.02 || 1727...| 15.24 |] 1759...] 14.15 || 1791...| 15.05 || 1823...] 15-84 1696. 15.00 || 1728...] 15.11 || 1760...) 14.14 |] 1792...| 15.17 || 1824...] 15.82 1697. 15.20 || 1729...) 14.92 |] 1761...| 14.54 |] 1793-.-] 15.00 |] 1825...] 15.70 1698..... 15.07 || 1730...| 14.81 |] 1762...] 15.27 |] 1794..-| 15.37]|| 1826...] 15.76 1699..... 14.94 || 1731...| 14.94 |] 1763...] 14.99 || 1795.--| 15.55 || 1827...| 15-74 1700, 14.81 || 1732...] 15.09 || 1764...) 14.70]| 1796...| 15.65 || 1828...) 15.78 1701 15.07 || 1733...| 15.18 |] 1765...) 14.83 || 1797.:.| 15.41 ]| 1829...| 15.78 1702..... 15.52 || 1734...| 15.39 || 1766...] 14.80 |] 1798..-| 15.59 |] 1830...] 15.82 1703. 15.17 || 1735...| 15.41 |] 1767...] 14.85 || 1799...] 15.74]| 1831...| 15-72 1704..... 15.22 || 1736...| 15.18 || 1768...| 14.80 || 1800...| 15.68]| 1832...) 15-73 1705.. 15.11 || 1737.-.| 15.02 || 1769,..| 14.72 || 1801...| 15.46 ]| 1833...) 15-93 1706..... 15.27 || 1738...{ 14.91 || 1770...| 14.62 /| 1802...] 15.26 |] 1834...] 15-73 1707..... 15.44 || 1739...| 14.91 || 1771...| 14.66] 1803...| 15.41 || 1835...] 15.80 1708..... 15.41 || 1740...} 14.94 || 1772...| 14.52|| 1804...] 15.41 |] 1836...| 15-72 1709..... 15.31 || 17q1...| 14.92|] 1773...| 14-62 |] 1805...] 15.79 || 1837..-] 15-83 1710, 15.22 || 17q2...| 14.85 |! 1774...! 14.62 || 1806...] 15.52 || 1858...] 15-85 1711 15.29 |} 1743..-| 14.85 || 1775...] 14.72 || 1807..-| 15.43 |] 1839...] 15-62 1712 15.31 || 1744...] 14.87 |] 1776...] 14.55 |] 1808...) 16.08}, 1040... 15.62 PIT 3.0. ¢5 15.24 || 1745...| 14.98 |] 1777...] 14.54 || 1809.--| 15.96] 1841...] 15-70 1714. 15.13 || 1746...) 15.13 || 1778... 14.68 ]| 18r0...] 15.77 || 1842...] 15.87 1715..... 15.11 || 1747...| 15.26 || 1779...| 14.80 |] 1811.--] 15.53 || 1843...] 15-93 1716, 15.09 || 1748...] 15.17 || 1780... 14 72 || 1812.--] 16.11 || 1844...] 15.85 1717..... 15.13 || 1749.-.| 14.80 || 1781...] 14.78 || 1813.--| 16.25 1718..... 15.11 || 1750...| 14.55 || 1782...| 14.42]; 1814.-.] 15.04 557 558 REPORT OF THE MONETARY COMMISSION No. 13-—RATIO OF SILVER TO GOLD, MONTHLY, SINCE 1844. Year Jan. Feb. Mch, April May June July Aug. Sept. Oct. Annual Average, 1845 1846 1847 1848 1849 1850 1851 1852 1853 1854 1855 1856 1857 1858 1859 1860 1861 1862 1863 1864 1865 1866 1867 1868 1869 1870 1871 1872 1873 1874 1875 1876 1877 1878 1879 1880 1881 1882 1883 1884 1885 1886 1887 1888 1889 1890 1891 1892 1893 1894 1895 1896 1807 15.85 15.90 15.68 15.95 15.97 15.82 15.30 15.52 15.36 15.27 15.33 15.40 15.19 15.35 15.24 15.18 15.38 15.35 15.29 15.23 15.33 15.32 15.49 15.62 15.53 15.57 15.57 15.50 15.75 16.05 16.38 16.98 16.35 17.53 18.84 17.96 18.36 18.15 18.76 18.54 18.98 20.20 20.17 21.23 22.17 21.19 19.72 22.05 24.59 30.30 34-53 30.7 3 31.72 15.92 15.92 15.62 15.90 15.78 15.82 15.32 15.59 15.38 15.29 15.32 15.38 15.24 15.27 15.27 15.19 15.41 15.32 15.33 15.33 15.35 15.43 15.53 15.59 15.49 15.60 15.58 15.45 15.75 16.05 16.42 17.38 16.54 17.38 18.88 18.05 18.12 18,12 18.60 18.42 19.17 20.22 20.21 21.43 22.12 21.36 20.67 22.71 24.57 32.41 34-33 30.27 31.73 15.95 15.92 15.62 15.93 15.92 15.82 15.33 15.62 15.36 15.26 15.36 15.47 15.27 15.32 15.26 15.18 15.24 15.38 15.33 15.33 15.41 15.47 15.52 15.54 15.57 15.59 15.61 15.51 15.75 16.00 16.51 17.67 17.16 17.30 19.03 18.14 17.99 18.15 18.50 18.51 19.21 20.17 20.78 21.74 22.15 21.40 20.75 23.39 24.84 34-36 32.87 30.09 32.55 16.05 15.95 15.65 15.95 15.75 15.82 15.33 15.68 15.36 15.26 15.52 15.46 15.27 15.36 15.18 15.29 15.44 15.41 15.43 15.54 15.54 15.65 15.46 15.55 15.57 15.61 15.66 15.57 15.78 16.01 16.47 17.55 17.40 17.44 18.97 18.13 18.11 18.07 18.64 18.58 19.10 20.33 21.47 22.09 22.35 20.53 21.22 23.76 24.71 32.24 31.04 30.42 33.28 16.22 15.98 15.98 15.97 15.75 15.82 15.43 15.75 15.41 15.27 15.43 15.43 15.33 15.33 15.12 15.30 15.43 15.40 15.38 15.46 15.54 15.32 15.55 15.59 15.65 15.60 15.66 15.68 15.82 16.06 16.61 17.80 17.42 17.62 18.47 18.09 18.22 18.04 18.78 18.55 19.05 20.75 21,63 22.38 22.40 20.17 21.10 23.56 24.75 32.90 30.88 39.33 33-95 15.98 15.98 15.97 15.85 15.82 15.82 15.43 15.73 15.46 15.36 15.33 15.43 15.26 15.33 15.19 15.40 15.57 15.33 15.35 15.40 15.57 15.19 15.59 15.62 15.68 15.60 15.63 15.70 15.88 16.06 16.74 17.24 17.59 17.76 18.18 17.97 18.37 18.09 18.71 18.57 19.22 20.04 21.44 22.38 22.40 19.75 20.90 23.23 27.23 32.94 30.98 30.06 34.19 15.95 15.97 15.92 15.85 15.82 15.78 15.52 15.64 15.35 15.36 15.33 15.40 15.29 15.44 15.13 15.44 15.67 15.46 15.44 15.41 15.55 15.35 15.59 15.61 15.64 15.45 15.57 15.68 15.90 16.15 16.90 19.59 17.44 17.92 18.18 17.90 18.27 18.20 18.71 18.57 19.17 21.65 21.35 22.37 22.37 19.54 20.50 23.78 28.20 32.62 31.01 30.00 34.47 15.88 15.95 15.73 15.77 15.77 15.73 15.49 15.62 15.30 15.40 15.33 15.35 15.24 15.47 15.21 15.36 15.64 15.41 15.46 15.38 15.54 15.57 15.60 15.64 15.64 15.59 15.54 15.68 15.96 16.26 16.76 18.07 17.42 17.97 18.29 17.90 18,29 18.15 18.66 18.59 19.32 22.29 21.07 22.44 22.24 17.26 20.68 24.51 27.91 31.86 31.01 30.54 37-76 15.88 15.95 15.78 15.78 15.80 15.72 15.57 15.62 15.21 15.36 15.29 15.24 15.32 15.51 15.27 15.30 15.57 15.38 15.43 15.33 15.51 15.51 15.63 15.66 15.60 15.62 15.52 15.61 16.00 16.32 16.63 18.21 17.32 18.33 18.29 18.02 18.23 18.17 18.57 18.58 19.72 21.52 21.08 21.87 22.17 18.03 20.94 24.67 27.58 31.73 30.91 31.08 36.61 15.82 15.92 15.92 15.77 15.88 15.65 15.65 15.49 15.40 15.40 15.36 15.21 15.26 15.40 15.21 15.29 15.52 15.33 15.38 15.46 15.44 15.46 15.61 15.64 15.61 15.59 15.60 15.70 16.05 16.33 16.56 17.96 17.13 18.71 18.11 18.11 18.15 18.23 18.51 18.62 19.88 20.86 21.29 21.87 21.90 18.09 21.18 24.26 28.74 32.24 30.42 31.40 34-74 15.80 15.73 15.95 15.83 15.85 15.52 15.62 15.32 15.14 15.36 15.41 15.15 15.29 15.29 15.21 15.32 15.47 15.21 15.35 15.47 15.10 15.47 15.66 15.59 15.59 15.56 15.50 15.85 16.26 16.26 16.61 17.50 17.30 18.65 17.66 18.22 18.16 18.38 18.59 18.84 19.88 20.30 21.53 21.93 21.93 20.12 21.77 24.18 29.35 32.69 30.61 31.47 35-17 15.92 15.68 15.95 15.85 15.85 15.33 15.52 15.35 15.27 15.32 15.36 15.18 15.26 15.30 15.21 15.35 15.43 15.29 15.35 15.39 15.32 15.49 15.61 15.54 15-59 15.58 15.52 15.79 16.25 16.40 16.74 16.65 17.20 18.87 17.94 18.19 18.18 18.70 18.58 18.98 19.98 20.64 21.20 21.14 21.40 19.50 21.49 24.45 29.44 33.87 31.06 32.07 35.18 15.93 15.91 15.82 15.87 15.81 15.72 15.46 15.58 15.33 15.33 15.36 15.34 15.27 15.36 15.21 15.30 15.48 15.36 15.38 15.39 15.43 15.44 15.57 15.61 15.60 15.60 15.58 15.64 15.93 16.16 16.63 17.80 17.19 17.96 18.39 18.06 18.24 18.27 18.65 18.63 19.39 20.78 2u.11 21.99 22.10 19.77 20.92 23.68 26.70 32.58 31.57 30.67 34.28 Computed to 1880 by Dr. O. J. Broch, From 1881 to September, 1886, Appendix to From 1886 to 1896, computed from quotations givenin furnished by the Director of the Mint. See Report of International Monetary Conference of 1881. Final Repo: ‘ixley & Abell’s tables. rt of Royal Gold and Silver Commission, p. x60. For 1897, from quotations APPENDIX 559 No. 14.—RATIO OF SILVER TO GOLD AND VALUE OF THE PURE SILVER IN A SILVER DOLLAR AT VARIOUS PRICES OF SILVER. Price of . Value of . 7 Value of ; ' silver per Tee pure silver a ot am Hate eS pure Hlver ae ae ete ag eee une gold ae ha fine ounce gold inet yer fine ounce] gold in gonlger $0.50 41.34 | $0.387 $0.77 26.85 | $0.596 || $1.04 19.88 | $0.804 51 40.53 +394 78 26.51 603 1.05 19.69 812 152 39.75 402 ‘79 20.17 -O11 1.06 19.50 -820 53 39.00 +410 80 25.84 -619 1.07 19.32 828 54 38.28 418 81 25.52 -626 1.08 19.14 835 55 37.58 +425 82 25.21 634 1.09 18.96 843 56 36.91 +433 83 24.91 .642 1.10 18.79 851 57 36.27 +441 84 24.61 -650 I.II 18.62 865 .58 35.64 449 85 24.32 657 1.12 18.46 866 59 35.04 +456 86 24.04 665 1313 18.29 874 60 34.45 464 87 23.76 673 1.14 18.13 882 61 33.89 472 88 23.49 -681 1.15 17.97 889 62 33.34 .480 89 23.23 .688 1.16 17.82 .897 63 32.81 487 -90 22.97 .696 1.17 17.67 905 .64 32.30 -495 «OI 22.72 :704 1.18 17.52 913 65 31.80 +503 92 22.47 712 1.19 17.37 .920 66 31.32 .510 93 22.23 719 1.20 17.23 928 .67 30.85 518 94 21.99 1727 1.21 17.08 -936 68 30.40 526 95 21.76 735 1.22 16.94 1944 69 29.96 +534 .96 21.53 742 1.23 16.80 +951 70 29.53 541 07 21.31 +750 1.24 16.67 +959 wi 29.12 +549 98 21,09 758 1.25 16.54 967 72 28.71 +557 -99 20.88 -766 1.26 16.41 975 73 28.32 565 1.00 20.67 773 1.27 16.28 -982 74 27.93 +572 1.01 20.47 781 1.28 16.15 990 75 27.50 580 1.02 20.27 789 1.29 16.02 998 76 27.20 588 1.03 20.07 .797 || *1.2929] 15.988] 1.00 No. 15.— VALUE OF AN OUNCE OF FINE SILVER AT VARIOUS RATIOS, Value of an Value of an Value of an Ratio ounce of fine Ratio ounce of fine Ratio ounce of fine silver silver silver Ito 15 $1.3780 I to 23} $0.8796 I to 32} $0.6360 (to 15h 1.3336 I to 24 8613 I to 33 6264 I to 15.988* 1.2929 I to 24} 8437 I to 334 6171 I to 16 1.2919 I to 25 8268 T to 34 .6080 I to 164 1.2527 1 to 254 8106 1 to 344 5992 1 to 17 1.2159 1 to 26 7950 I to 35 +5906 Ito 17h 1.1811 I to 264 7800 I to 354 5823 I to 18 1.1483 I to 27 7656 tT to 36 5742 I to 184 1.1173 I to 274 -7517 1 to 364 5663 I to I9 1.0879 I to 28 -7382 1 to 37 5587 I to 194 1.0600 I to 28} 7253 1 to 374 +5512 I to 20 1.0335 I to 29 «7109 I to 38 +5439 1 to 204 1.0083 I to 294 .7007 1 to 383 +5369 I to 21 9843 I to 30 -6890 «1 to 39 +5300 1 to 21} .9614 1 to 304 6777 I to 304 +5233 I to 22 -9396 I to 31 .6668 I to 40 5168 I to 224 9187 I to 314 6562 I to 404 +5104 1 to 23 8987 I to 32 6459 I to 41 5042 * Parity at United States coinage ratio. 560 REPORT OF THE MONETARY COMMISSION No. 16.— IMPORTS AXD EXPORTS OF GOLD AND SILVER COIN AND BULLION INTO AND FROM THE UNITED STATES. { Finance and Commerce, Series 1897-8, p. 72.) Gold Coin and Bullion Silver Coin and Bullion ee Excess of Excess of Excess of J Be! Imports Exports ame er Imports Exports Epon Exports Imports Imports 1864 | $11,176,769) $100,661,634]........... $89,484,865] $ 1,938,843] 8 4,734,907] 8 2,796,064 1865 6,498,228 58,381,033|........0.- 51,882,805 3,311,844 9,262,193 5,950,349 1866 8,196,261 71,197,309]..-. +. eee ee 63.001,048 2,503,831] 14,846,762] 12,342,931 1867 17,024,866 39,026,627|........6-- 22,001,761 5,045,609} 21,841,745] 16,796,136 1868 8,737,443] 72,396,344].......00-- 63,658,901|| 5,450,925] 21,387,758] 15,936,833 1869 14,132,568 36,003,498].... 22.00 21,870,930 5,675,308] 21,134,882] 15,459,574 1870 12,056,950 33,635,902]....--.eeee 21,579,012|| 14,362,229] 24,519,704] 10,157,475 1871 6,883,561 66,686,208].........0. 59,802,647!| 14,386,463} 31,755,780] 17,369,317 1872 8,717,458} 49,548,760].........-- 40,831,302|| 5,026,231] 30,328,774] 25,302,543 1873 8,682,447| 44,856,715|....-..--- 36,174,268]| 12,798,490) 39,751,859] 26,953,369 1874 | 19,503,137} 34,042,420].........-- 14,539,283]| 8,951,769] 32,587,985) 23,636,216 1875 | 13,696,793} 66,980,977|.....--.++- 53,284,184|| 7,203,924] 25,151,165) 17,947,241 1876 7:992,709| 31,177,050]....+-0-0e- 23,184,341 7,943,972] 25,329,252] 17,385,280 1877 26,246,234 205005374 | sseiccoverscs sane 344,140|| 14,528,180] 29,571,863} 15,043,683 1878 | 13,330,215 9,204,445] $ 4,125,760].........., 16,491,099] 24,535,670] 8,044,571 1879 5,624,948 4,587,614] —1,037,334]..-- +--+ ees 14,671,052] 20,409,827) 5,738,775 1880 | 80,758,396 3,639,025] 77,119,371|....--- 200s - 12,275,914] 13,503,894 1,227,980 1881 | 100,031,259 2,565,132] 97,406,127].........6- 10,544,238] 16,841,715 6,297,477 1882 | 34,377,054] 32,587,880) 1,789,174)......-.--- 8,095,336) 16,829,599] 8,734,263 1883 17,734,149 11,600,888] 6,133,2601]........... 10,755,242] 20,219,445] 9,464,203 1884 | 22,831,317 G1,08T,957|\seseccn so 18,250,640|| 14,594,945] 26,051,426] 11,456,481 1885 26,691,696 8,477,892| 18,213,804].........6. 16,550,627| 33,753,633} 17,203,006 1886 20,743,349 AZiQS2;1OV dice inx wen as 22,208,842|| 17,850,307| 29,511,219| 11,660,912 1887 42,910,601 9,701,187| 33,209,414].........6. 17,260,191] 26,296,504] 9,036,313 1888 | 43,934,317] 18,376,234] 25,558,083]........... 15,403,669] 28,037,949] 12,634,280 1889 10,284,858 59,952,285]....-...00 49,667,427|| 18,678,215] 36,689,248] 18,011,033 1890 | 12,943,342] 17,274,491|.....-..00- 4,331,149]] 21,032,984] 34,873,929) 13,840,945 1891 18,232,567 86,362,654]........005 68,130,087|| 18,026,880] 22,590,988] 4,564,108 1892 | 49,699,454] 50,195,327|....---+.6- 495,873]| 19,955,086] 32,810,559) 12,855,473 1893 21,174,381| 108,680,844].... ...... 87,506,463|| 23,193,252] 40,737,319] 17,544,067 1894*| 72,449,119] 76,978,061]........... 4,528,942|| 13,286,552! 50,451,265] 37,164,713 1895*| 36,384,760 66,468,481]........... 30,083,721|| 20,211,179] 47,295,286] 27,084,107 1896*| 33,525,065] 112,409,947|..........- 78,884,882|| 28,777,186] 60,541,670] 31,764,484 1897*| 85,013,575] 40,359,780) 44,053,795|.......-.-- 30,533,227| 61,946,638] 31,413,411 * Including gold and silver in ore. Prior to 1864 the figures for domestic exports or imports of gold and silver cannot be given separately. The figures of total imports and exports for the years 1845-1863 will be found in any recent Report on Commerce and Navigation or Sta- tistical Abstract. The Annual Report on Commerce and Navigation gives full details as to countries to and from which gold and silver are exported and imported. No. 17. — COINAGE OF GOLD AND SILVER IN THE UNITED STATES BY PERIODS. Period Silver Coinage Gold Total Gold and aoe ee Total Silver Silver, 1793-1833, 4 yrs.| $11,825,890.00] $1,439,517 §|$34,835,560.90 | $36,275,077-90, $48,100,967.90 1834-1852, 19 yrs. 224,962,920.00| 1,113,483 | 41,853,293.60 | 42,966,776.60 267,929,696.60 1853-1873, 21 yrs.| 615,325,627.50] 5,478,238 | 62,769,805.80"| 68,248,043.80| 683,573,671.30 1874-1897, 24 yrs.| 1,063,135,788.00| 455,818,122 |125,876,805.45t| 581,694,927.45| 1,644,830,715-45 Totahs cexeeeccs $1,915,250,225.50| 463,849,300 265,335,465.75 729,184,825.75)] 2,644,435,051.25 § Total coinage of silver dollars, 1793-1805; from 1806 to 1835 no silver dollars were coined. * Including $1,225,000 trade dollars. + Including $34,740,924 trade dollars. APPENDIX 361 No. 18.— COINAGE OF THE MINTS OF THE UNITED STATES FROM THEIR ORGANIZA- TION, 1792, TO DECEMB ER 31, 1897. Denomination Pieces Value GOLD Double eagles................. iw nine wales 67,843,440 $1,356,868,800.00 Ha glesisesnaaighimks caer s SSRN eee bac 28,105,056 281,050,560.00 Half Gag) €S:3. 5.5.5.6 5.0.3 a sutncnaerai sear dnti2t Goneverneyarcst ince 45,478,617 227,393,085.00 Three-dollar pieces (coinage discontinued under act of September 26, 1890)............ 539,792 1,619,376.00 Quarter eagles. .ccsjais vee ee gatiows rad eae s 11,527,027 28,819,067.50 Dollars (coinage discontinued under act of Sep- tember 26, 1890)ia vcsaceseeves sengiew cree se 19,499,337 19,499,337.00 Lotall GOl dics aisyeverces-eiveie:, Steck Qieowwrnsiente.bee 172,993,867 1,915,250,225.50 SILVER Dollars (coinage discontinued, act of February 12, 1873, and resumed under act of February 28, 1878 lines ewe Giey ipeake cay ewe Bee KES *463,849,360 463,849, 360.00 Trade dollars sctiisicsee so nesieieas as ae ees 35,965,924 35,965,924.00 Pali Oars) scicancscaiaine oss seiasse a 88 271,287,642 135,643,821.00 Half dollars, Columbian souvenir............. 5,002,105 2,501,052.50 Quarter dollars. sccce cede ieee wesc ene ane 217,358,816 54,339,704.00 Quarter dollars, Columbian souvenir .......... 40,023 10,005.75 Twenty-cent pieces (coinage discontinued, act Of May 2, 1878)... ...cccceene eect ener eees 1,355,000 271,000.00 DiMGSi..4 sdaseits Siar es aS oe tes tee eee G 304,417,519 30,441,651.90 Half-dimes (coinage discontinued, act of Feb- TUALY 12,1873) 2 wasaveus ave ee vedeuaernieda Phe w3 97,604,388 4,880,219.40 Three-cent pieces (coinage discontinued, act of February 12,1873) esc nacccnawwenaecanesies 42,736,240 1,282,087.20 Total'Silvére save cls odes otal foie esis ars 1,439,616,017 729,184,825.75 MINOR Five-cent pieces, nickel............++e+seeee 311,326,149 15,516,307.45 Three-cent pieces, nickel (coinage discontinued, act of September 26, 1890.)...........000-5 31,378,316 941,349,48 Two-cent pieces, bronze (coinage discontinued, act of February 12, 1873)....2.-..e eee eee 45,601,000 912,020.00 One-cent pieces, copper (coinage discontinued, act of February 21, 1857).... 0.000 eee eeee 156,288,744 1,562,887.44 One-cent pieces, nickel (coinage discontinued, act of April 22, 1864) 200,772,000 2,007,720.00 One-cent pieces, bronze... 1.1... cece cence eee 874,257,085 8,742,570.85 Half-cent pieces, copper (coinage discontinued, act of February 21, 1857)......0.2eeeeeeeee 7,985,222 39,926.11 Total minor.............05+ isis apis BAe 1,626,608,516 29,722,781.33 Total coinage vice ccc iced cemennec crete s 3,239,218,402 2,674,157,832.58 *Silver-dollar coinage under act of : Alpril 2; 17092:....c0 1a sre ess eoe ed cadens Keni cw eyes eee ce thee $ 8,031,238 February 28, 1878...... 0.0 eee ee ences $378,166,793 July 14, 1890... .. 0. cece ee eee eee neces 72,572,857 March)3,.0801.gasaieectoinne eGo aca eueaes 5,078,472 455,818,122 463,849,360 TSSION ETARY COMM: MON. THE EPORT OF R ‘Suruado ayy : amo jo ‘YIOA MON Ur sooud Surtsold pur ‘ysamorl ‘jsaysIy uvour oy} SI YoIyM jo yova ‘pros jo suorjejonb A[rep jo saseviaae woly padtiap oe soinSy A[TyjyUOW ey] S$°46 | £26 /g°4g | ggg | €-6g | E-4g | v-6g | L-gg | r1g| 424] S-1Z| 6-04 | z12| S-6b| obg | 6zZ| P-g6| -+° +++ +o aun papua seat [eosty Z*66 | 1°96 | g°6g | 0°48 | 6°6g | 6°Lg | 0°68 | $°6g | o'4g | z°S4| gL | bzL] o1L | O'EQ | ZOb] Ogg] Eggle tread repuarea 9°66 | #'96 | 6:06 | 1°48 | L:06 | b-6g | 29g | 26g | £48} S94] S'1L) E14 | 9°99] 1°69| Qzh | gId{org] ste ttt tts read JTey puosag 3°36 o'b6 $38 6°98 z'6g b'98 8°68 3°68 v'98 6EL oe vel SEL 6°gS OLS £99 6°96 ee *eok yey sity 4°66, | £°26 | 9°16 | 6°98 | z°06 | 9°16 | L°gg | 0°06 | 9°68 | b'64 | L°€L] g'1Z| o'04 | #99 | OPH | zL9| g'9L|-° serressss qeak rayrenb yino0g $66 | 9°S6| 1:06 | 24g | 1°16 | €-4g | o°Lg | b'gg | g°Sg| 4°EL| $69 | B04 | z'Lg| 9°69 | gor | god] Tog] othe tt tt tread aayzenb pay y, £°66 | z'b6 | L°gg | €-9g | 0°6g | £°S9 | 9°99 | 4°68 | ogg | EL | £12] z€L| gL LoL] g°€S | pL9| E96 ]-- °° ‘streak ra1enb puosag z°g6 | g°h6| 1g | 9°49 | €°6g | 9°L4g | 016 | 0°06 | 6'bg | AHL) S12] LEL| EEL] b'0S | 6-zg | z-Sg] S°L6 | °° sretetssssrpad raqyrenb ysing 6°66 | €°L6 | 9°26 | 9°4g | 9°68 | 6°06 | 1°6g | S16 | £06 | Ez | obL| zvl| EL) Pgg|obrhl| cog] OSL] cot ttt ‘t+ laquia.aq 3°66 £46 | £16 z'Lg z'06 | 1'z6 9°88 6°63 3°68 z6L| bbl gt $-69 0'g9 gizb g'L9 E94 eee tees thts aquiaAoN $66 | £°46 | z'16 | 6°Sg | 016 | g°16-| E-gg | E-gg | 4-88] g°94| 6-zL| £69] b-L9| A890] Egh | Lido] gsd | irr crt ttt ttre tees ago 9°66 | 9°96 | 6:06 | b'9g | z'16 | 2-gg | 1°gg | E48 | 1°48} 1°EL| 9°69 | 4°69 | £99] S69] OPH |S PL] bg] occ URGES HS sr etess raquiaydas $66 | z°S6 | 6°68 | I'gg | z'16| 4:98 | b°Lg | 0°68 | Brbg| SPL | L-gqg| od | zl | £69] POE | SOL) Lg] ott ttt ee ees gen sry 5°66 6'v6 £68 1°Zg 0°16 bog S'L4g 0°68 9°S8 SEL rol LiL 0°99 pol Lge g'9L 9°98 fee ee ee . oe ee 608 Fee Aqnt z'66 6'v6 6°88 S'Sg 0°06 g'Sg gLg 0°68 9°88 vel bil LZEL 210 pil GLP z'69 6°56 ee eee eee . we ee ee . “ounf £66 S'C6 8°88 £98 6°68 o'Se 0°88 4:63 ale gid gid ocl 6SL Le 4°98 oto 3°96 eee e eee eee ERE ee eee Sew b'66 zr6 S°98 14g Z'8Q 6'bg 0'06 b'06 $38 aol rz LL g'gd €-L9 ols 0°99 S*g6 sae ene te ww ee ee ee judy 9°36 v'S6 S248 9°98 z68 9°98 3°06 1'06 8°88 zoL LiL rb gL SL vrIg Lv9 z'96 . ad . yoreyy 0°86 g'b6 Z'QS Eg 1°68 9°48 4:06 4°63 Lg tp Lol aod Ez Lgb reg £29 9°96 see eee eee mee ¥ wee *‘€reniqa gq 6'46 o'b6 9°88 6°38 £68 1°88 L16 £06 b-zg Lek eel, Eps pil fob f-bg 6°39 9°46 wee e ae . eee ew wees Avenuef glgr | 2égr | gégx | SLgr | égr | ELgx | zlgr | rZgr | oLgr | Gogr | gogr | Zogx | gggx | Sogr | Fogr | Eogr | zogz spollag *gL4gI-zogl ‘LUMUVN MYOA MAN AHL NI AONTUAAD NI OOI¥Y AO GION NI ANTVA—'6I [*gtS aged ‘S6gr raqopg ,,‘uolerdtwU] pue adiourWOD ‘aoueUry ,, ‘soNsHeIg Jo neaing] ON APPENDIX 563 No. 20.— REDEMPTIONS IN GOLD OF UNITED STATES NOTES AND TREASURY NOTES AND EXPORTS OF GOLD BY FISCAL YEARS 1879-1897. [Finance Report, 1897, p. 140.] Fiscal year a ia Se Total Exports of gold 1879... esse ee ee eee $7,976,698 $7,976,698 $4,557,674 TOSCO) aioteiinceiemea te 3,780,638 3,780,638 3,639,025 ISB. ae sivsrcaesicwes 271,750 271,750 2,565,132 BBE) acs sicisiccnrnaiasa 40,000 40,000 32,587,880 1889 sa.ae siya esac 75,000 75,000 11,600,888 TSB A oe oiscneish asain 590,000 590,000 41,081,957 BOE Siege eena seis 2,222,000 2,222,000 8,477,892 1886), aii serscietasie nee 6,863,699 6,863,699 42,952,191 1887. 4,224,073 4,224,073 9,701,187 YBBB oi cessiceermanicesensts 6925500? fave soncawaveseee 692,596 18,376,234 WBEQ aie semsceaierree 730,143 730,143 59,952,285 18Q0 sis, assexanawas 732,386 732,386 17,274,491 BEGRveacensvaassnte 5,986,070 ese Sse 5,986,070 86,362,654 a 593521243, $3,773,600 9,125,843 50,195,327 1803 ecisieideGadulqaies 55)319,125 46,781,220 102,100,345, 108,680,844 PBOA wisw scotia ers wiecnarare 68,242,408 16,599,742 84,842,150 76,978,061 18Q 5 ieee. wien wisreisietiiore 109,783,800 75570 ,398 117,354,198 66,468,481 BQO isx as arian eisisuoracers 15353075591 5,348,365 158,655,956 112,409,947 1869 cs eeaiewerecges 68,372,923 9,828,991 78,201,914 40,357,780 Total.......+... 494,563,143 89,902,316 584,465,459 794;249,820 No. 21,.—REDEMPTIONS IN GOLD OF UNITED SYATES NOTES AND TREASURY NOTES BY MONTHS, JANUARY 1892 TO DECEMBER 1897. [Finance Report, 1897, p. 139.] United Treasu: United Treasury Month States notes o: Total Month States notes of Total notes 1890 notes 18g0 r8g2—Jan.....| $152,093 | $159,960 | $312,053 |/1895—Jan . .| $43,415,283 | $1,702,455 | $45,117,738 b. 205,830 270,370 476,200 Feb. 4,784,907 776,045 5,560,952 470,401 256,330 7325731 Mar . 809,495 279,590 1,089,085 438,156 258,570 696,726 Apr.. 7331525 284,046 | 1,017,571 334,823 287,300 622,123 May . 7345747 431,745 | 1,166,492 568,326 | 1,854,200 | 2,422,526 June. 644,621 401,575 1,046,196 4,086,055 | 5,148,650 | 9,234,705 July .| 3,122,620 704,175 | 3,826,795 1,049,414 | 5,091,460 | 6,140,874 Aug .| 16,218,875 345,252 | 16,564,067 2,264,089 | 1,823,710 | 4,087,799 Sept..] 17,119,814 257,670 | 17,377,484 282,665 316,200 598,865 Oct...} 1,849,018 317,865 2,166,883 406,206 291,940 698,146 Nov..| 15,616,190 418,400 | 16,034,590 516995755 | 45538,057 | 10,237,812 Dec..} 19,787,952 4245744 | 20,212,695 6,359,126 | 5,137,491 | 21,496,617 ||1896—Jan ..| 15,686,024 762,484 | 16,448,508 5,811,299 | 8,017,365 | 13,828,664 Feb ..} 21,080,551 656,325 | 21,736,876 «| 1,641,923 | 3,284,530 | 4,926,453 Mar..} 6,381,296 4755250 | 6,856,546 + | 72,568,555 | 7,483,355 | 20,051,910 Apr..| 6,754,718 3751900 | 7,130,618 «| 12,076,934 | 4,470,915 | 16,547,849 May .| 21,726,600 312,947 | 22,039,547 3,073,104 | 1,177,547 | 4,250,651 June .| 7,963,994 297,353 | 8,261,347 773,935 264,080 | 1,036,015 July..| 16,275,406 | 1,009,672 | 17,285,078 1,189,757 | 1,158,465 | 2,348,222 Aug .| 11,388,806 980,919 | 12,369,725 143,592 197,135 340,727 Sept..| 3,436,733 | 1,224,723 4,061,446 262,512 432,880 695,392 Oct,..} 9,906,832 | 2,167,003 | 12,073,835 299,252 217,120 516,372 Nov 351375149 925,261 | 4,062,410 295,523 221,895 517,418 Dec. 858,444 273,402 | 1,137,846 118,847 237,515 356,356 ||1897—Jan 594,412 351,056 946,068 10,982,624 | 8,210,730 | 19,193,354 ‘eb 521,355 402,769 9245124 2,266,426 | 1,194,766 | 3,461,192 Mar 679,382 569,047 1,249,329 6,072,042 | 1,594,085 | 7,066,127 Apr. 6,934,575 567,433 | 75502,008 ++. | 25,132,412 | 1,409,670 | 26,541,082 May 8,044,965 837,635 8,882,600 | 20,708,492 | 1,461,401 | 22,169,893 June 6,594,864 518,582 75213445 + | 131367,864 555,51I | 13,923,375 July..| 5,072,208 202,935 51275143 41209,853 531,560 | 4,743,4 Aug 2,875,606 240,670 | 3,116,271 636,031 300,487 936,51 Sept 2,598,140 144,033 | 2,742.173 2,542,719 505,171 | 3,047,890 Oct. 2,484,182 191,338 2,675,520 7,085,133 714,614 | 7,799,747 Nov 1,812,909 321,145 251341054 +| 30,819,622 | 1,087,599 | 32,907,221 Dec..| 1,980,396 197,220 | 2,177,601 564 REPORT OF THE MONETARY COMMISSION No. 22.—NET GOLD RESERVE AND NET CASH BALANCE IN THE TREASURY AT THE END OF EACH MONTH FROM JANUARY 1893.? Total gold in Treasury—coin Gold certificates Net gold in the Net U. S. notes and treasury Net cash balance anid bullion’ in circulation Treasury notes in Treasury| i” Treasury $228,827,532 $120,645,819 $108,181,713 $ 16,556,021 $125,265,067 217,672,948 114,388,729 103,284,219 18,676,514 124,128,089 218,378,233 111,486,009 106,892,224 19,751,069 125,630,728 202,283,359 105,272,029 97,011,330 21,324,574 121,482,903 196,518,610 Tor, 469,969 95,048,641 21,388,384 121,565,155 188,455,433 92,970,019 951485 ,414 20,398,866 122,462,290 186,813,962 87,611,029 99,202,933 18,943,822 117,887,566 176,423,172 80,414,049 96,009,123 13,899,705 107,283,910 173,209,771 79,027,599 93,582,172 8,746,951 106,875,632 163,274,172 78,889,309 84,384,863 4,380,594 102,294,291 November . 161,122,128 78,163,079 82,959,049 4,890,567 95,199,616 December ...... 158,303,779 77,412,179 }0,891,600 6,289,086 90,375,555 142,665,594 77 015,419 65,650,175 4,682,696 84,082,098 177,462,797 7059355729 106,527,068 175227 ,906 138,662,364 £76, 456,045 79,306,909 166,149,136 14,953,122 133,950,026 170,192,458 69,990,449 100,202,009 16,754,286 125,097,787 148,067,816 6913741549 78,693,267 29,445,979 127,854,335 131,217,434 66,344,409 64,873,025 36,696,053 117,584,437 120,922,836 65,947,229 54,975,607 42.950,390 119,065,351 August......-..] 120,885,869 65,668,969 55,216,900 52,439,842 127,148,096 September .....] 123,665,756 64,790,439 58,875,317 53,750,428 119,919,718 October ........ 125,613,896 64,252,069 61,361,827 40,586,483 107,340,146 November 164,350,468 58,925,899 105,424,569 39,039,691 144,507,606 perc teteee 139,606,354 535361909 86,244,445 63,284,108 353)337:579 1895 January ........ 9753531776 52,647,809 44,705,967 85,627,989 144,603,302 February. 138,593,280 51,507,769 87,085,511 84,223,215 178,197,587 March ......... 139,486,496 48,843,189 90,643,307 81,792,746 187,917,260 139,998,154 48,751,009 97,247,145 69,736,082 180,817,916 147,690,978 48,539,569 99,151,469 61,587,457 185,370,101 155,893,932 48,381,569 107,512,363 56,276,252 195,240,153 155,354,006 48,117,579 107,236,487 49,897,588 187,149,532 149,410,926 49,081,089 100,329,837 57;647,881 184,039,157 September...... 14355575513 50,645,539 92,911,974 793107 ,454 185,405,365 ctober..... 143,360,839 50,477,059 92,943,180 775520347 179,947,999 November ......] 129,567,045 50,233,979 791333,966 90,156,477 177,406,386 December....... 113,198,707 49,936,439 3,262,268 106,264,654 178,027,200 1896 ‘ January ......-. 99,693,357 49,847,849 49,845,508 99,113,271 171,591,780 February. .. ..| 167,695,999 43733,019 123,962,980 104,042,173 262,707,007 March.... .... 171,885,710 43,239,249 128,646,461 112,284,848 271,641,748 April. 0.2.2... 168,446,459 43,052,559 125,393,900 108,549,890 270,090,662 May ... 151,307,143 42,961,909 108,345,234 120,993,035 267,193,210 June, .......... 144,020,304 42,320,759 101,699,605 123,855,577 267,432,097 July.. 150,012,225 3932935479 110,718,746 102,125,226 256,158,473 August. 139,825,200 38,867,639 100,957,561 111,800,038 243,346,404 September...... 162,771,311 38,736,639 124,034,672 98,868,949 241,154,457 ctober 155,323,833 38,197,309 117,126,524 96,535,206 233,572,763 ' November ...... 169,527,102 38,016,749 131,510,353 751034912 225,357,100 Diesemiee seen 175,203,983 37:887,439 137,316,544 70,628,317 228,320,382 1897 Jannary ee 182,387,122 37,586,629 144,800,493 48,509,678 215,362,421 ebruary ....... 186,206,028 373544,819 148,661,209 41,425,059 212,837,256 March .. +| 189,242,803 37456,339 151,786,464 50,593,849 222,045,606 April.. 190,762,889 3714215999 153,340,890 53,480,533 228,090,518 181,707,391 37,387,829 144,319,562 61,188,187 230,113,813 178,076,657 37,285,919 140,790,738 67,929,521 240,137,627 178,044,578 37,226,879 140,817,699 64,306,457 233,016,458 ‘ 181,234,165 37,017,789 144,216,376 58,500,670 218,561,207 September... ... 184,561,664 36,898,559 147,663,105 63,578,689 215,192,788 October... 190,387,257 36,814,109 153,573,148 46,952,343 207,756,099 November i 194,089,260 36,725,409 157,363,851 38,974,898 220,663,560 December. ..... 197,469,236 36,557,089 160,911,547 43,789,433, 23514741769 «Corresponding figures for the end of each month from 1878 to 1892 inclusive can be found in the Finance Report, 1897, tables 28, 29, and 31, at pp. 50-61. 565 APPENDIX -SINQSIP $9}¥1g paylug jo s}Isodap ‘sytsodap sayeig paitug ‘sytsodap fenplarput Surpnpouy ‘2 “Burpuejsyno uorepnoso yueq aeiS ‘9 ‘payisodap useq sey ADUOUE [NJMET YOIYA Jo JWOUWIAITJII 9Y} IO} Jey} SuLpnypour you ynq ‘atqeiy ae Ady} YOIM Joy syueq ay} Aq ponsst uoTe[NIIID ‘vy ‘UOTJBINIIID Yue ajeys Sarpnypouy | ‘TEuoIeU UY} 194} SyUe 0} oNp sjuNOWe pue UOIyLNIIID YUEq 2383S Burpnpouy » ROLEET'SOL‘E| LSO'SEZE | o1S6bS‘z1| gbo‘goz‘Z | zoF‘P£e‘14g‘1| Sgg'€go‘Lez| zgz‘Prg'gih| oLg‘0z6'g6r| 100'zSL*PEL| S6o'ggr‘1£g] O19*E| °° L6gr bIESgg€gz‘€| LSESILE | Leb‘1€b‘oz| 190°1gg*h1| 6or‘gzL'P19'1| POL‘gSo‘ghI| LEe‘Ebo‘bgz| 610'hh6‘6oz| SEg*zhE“QEE| SzE‘OPS‘gbg] gL9‘E|* -Q6gT bhEGzg‘EcH‘E| gLz‘11I'h | OOF E1g‘d1| gor‘g6E‘E1] QgL‘Sgg‘giL'1| ELO‘goL‘bL1| LLo'gzz‘ozE| 119‘1gQh*zQr| 1S€*Qgg‘QEE| 66P‘SEI‘LSO] ZIL‘€}° *S6QI SSo'zz6'ELbE| PEg*boO'E | gLz‘cSSie1] gzb‘ESh'r1| Z1S‘OELHHL'1| OgLLoI‘EQ1| LIE‘zOg‘EVE| QLOIEE*zL1| cQo‘'1z1‘PEE| LPg‘19g‘ggg| SSL*E|* POgT bgz‘EgS6or‘€| zzb*LoL'1£| LE6‘gzb‘Lz| LEL‘ggo‘1z| cog‘ 1zE‘ggv'1| g6o'16g‘zz1| 6L6‘Ezb‘gzz| gzL‘6S6'zgr| PhPSzz‘oSE| 6EE‘orS‘gLg] IgL‘€|*C6gr LOg‘P60‘01S‘€| bzghSo‘z | Pg1‘6PS‘g | ggr*zl1‘L1| gzd‘Pgre8L‘1| grotLog‘gl1] PEI‘gho'zS€| g6z‘Ecb‘Ebr| ogr‘tzS‘obE| S1O‘ELS‘ggq| ELLE] * -c6gr 1Lz‘ogo‘€rz‘€| 611'bLg | SPO*gLd‘or| £96'196‘1z] OS1'6E0%O1g‘I| OLO'gIo‘zh1| COL‘gLS*ggz| ZOLETEIET| OgI‘1gg‘0FE| OLg‘gzh‘LLg] LL9*E|*- 16gT SOp‘Agh1br‘€| PEELLG | bI6‘10€‘O1| OFC‘0gg'Ez| zgo‘oLO‘L6S‘1| LeL‘oSE‘1P1} 6Sz‘1g0'Sgz| Sgo‘gz6‘zz1| I€S‘OLS‘or€| SEz‘Lbb‘oSg| OFS ‘t|* * o6gT gbg‘o6z*g66‘z| 11bogg =| gEz‘g61‘L | T1S‘zgd‘gr| PLg‘zOS‘SzS‘1| POo'LzE‘zE1) €61‘S 10‘E6z| oog‘oS P‘gz1| Of 9‘1gz‘zgz| S60'PgS‘zI19g| O6z‘f |: “Oger IPEISLS1Q‘z| SSEZQg | ErgS19%9 | 1SL4‘SOE‘L1| oog‘Etg‘gor'1| LOE‘QE6‘HII| 696‘L69‘0gz| O1g‘zOL‘1S1] 166'FS6‘zgz| 9S9‘1zg‘z6S| OIE]: “geet gLb‘€61‘0zg‘z| 669'96 9 opp ggg'h | Log‘z1€‘L1| Soz‘g61‘Ldz‘1| gzg‘v6o'zo1| Pg616b‘Lez| EVEEgz‘Lg1| Sog‘hge‘Shz| SQL‘zob‘glS| Gbo‘t|: -Lggt ISL*bSQE1S*z} zoo'Sz1g | €69‘Lg0%% | LAr‘b6S‘o1| ozh6SL‘'161'1) Egb‘gbz‘06 | 190°S6E*g1z| o19‘zLo‘gzz| 9gO‘zSL'Ezz| OF Liobe‘ghS| zSg‘z|* -gggT zoo‘ 16°zE ‘zl g6g‘of1g | oge16r'z | C6L*zEb'g | L6L‘Lb1‘oz1‘1| 1g0‘'S11‘9g | gob'hES*E1z| LOS*6gg‘gqz| 191 ‘0g6‘Soz| OI Ph HcS‘ZzS| VIL‘z|* “Sger ogg‘t6r6Lz'z| ES9°6L19 | zggtogS*P | S6S‘goo'r1| oL9‘100°E66 | Loz‘gob‘zl | oS16L6°EL1| Ez1‘SLL‘6gz| SLz‘6gz‘o1z| SPE‘1LzbzS] Pgg‘z|* “Pggi SQE‘gSQ‘zLE‘z| LSE‘bgIg | ESz‘ESo'h | LES*LQEL | EgE‘ofg‘gg0‘1| ELo‘zog‘eg | LLo‘gzg‘ogr| LSg‘A1S‘o1€| Ibb‘zSS‘Eoz| 48Z*669'60S| 10S*z|° -€ ger LLOEEQ*66Ez Lh ‘1zzq | grSgbgth | S1gtLbL's | LLL‘rLo‘ger‘1| zSo‘Sge*6L | oSL‘SLo‘og1| Siz‘tzL‘Pr€| IgA'LS1‘E61| Crz‘bor‘Egrl 6gz‘z\" -zggr ZOE*LEEQSE‘z| 66Ebbzg | LLo‘rgg’h | SgI‘IG60'E | OLE‘zh6‘ggo'1| ILb‘Lb0'6g | gh6‘zgQg‘Soz| 6g0‘o0z‘ozE| b0g‘zIS‘ber| Sg6‘1zgQ‘CQh| zE1‘z “*Iggr gzg'9gd‘Sor‘z] Sho'rdzg | Sog‘1€o's | EEz*gLIE | Loo‘Egg‘ége | glo‘SEL‘SL | SoL‘Pz1‘z61| QEO‘OSE'LIE| bAz‘gSQ‘gg1| SQ6‘ESS*LSF| O60'z|* “OgeT 6zr Lgl ggg't| PS6'SzE 7 | zoz‘goz‘h | gtoSoz‘z | 69E‘Pgg‘geL | PSb*zzo'zS J LSz‘ooz‘6b1| zHE‘Qgd‘E1€]| OLP‘Lg0‘gS1| SQE‘Lgo'PSF| ghotz|* -6Lg1 CEr6Le‘Lol‘t| ELHEIVG | Ege*zoS*h | GzE‘Loo‘€e | PLI‘zSE*goq | CoL‘o€gizh | P1S*g6h‘zz1| zOo‘geg‘ro€| PO6‘EER‘LS1| QEP‘LEI‘Qgh] ESo'z|* “QLer bog‘bgo'iblit| gtdirgbhg | Lr1‘LEr‘g | ozz‘16L'€ | ggE*LLEOEg | ob ZLS‘gh | bS6‘gzo‘S11] gEz‘bLg‘16z| oog’ghE‘Lg1| ILL‘Lor‘6LP| ogo'z|* * LLg1 sf Soz‘dzg‘t| Lhg‘gzgg | bgLbSi‘g | gob‘hobh | 66PLEz‘qgq | z11‘oSz‘gh | GQ6‘SES*IET| OzohhS‘16z| g6b‘Abo‘gd1| zEz‘zog‘66b| 6go‘z|* *gLgI Bok Goz‘zge‘t| ghE‘cLLg | vEzOOS'g | HShSz'S | 1gg‘IQE6Lq | 1€S*g16'6P | zgo‘org‘6z1) GLE‘OSE‘gI£| O€o'Izl‘Lgr} 69L‘6zg'vOS) ggotz!: *SLer zr6‘ogr‘ZLe‘t| LoS‘rq69 | gzL‘oS6'r | cLE‘L6r'h | SSz‘SIgtEgg | goo’grZ‘oS | oSo'zor‘Sz1| gbz‘Szz‘ECE| PeS‘zbb‘og1| 1z1‘SgL‘€6b| boo'z|* -PLg1 gbg‘Lzg‘oFg‘1| ESggr‘t 9] PSS‘ogh'S | ZI1S‘ZgQ6'S | 666°S10‘0bg | Qhr‘g6z‘6E | EEL‘ZLO‘EEI| O6L‘1Q0°6EE| 1€9*6zg‘hL1] 919‘zL0'16b| 9L6'1|° *ELgr BO0‘LSQSSL‘1) EVI‘LOS‘I 9] EQS‘obo'g | cE OPS'S | Lzo‘gSg‘gzg | Pgo*6gLEE | ghE*Lho‘orr| LzoS6P ECE] 10€*1gg‘gS1| PL1‘6zg‘6LP| 616'1|* “zLgr 668‘99S ‘oF L‘1| QSO'IZ6‘I 9] T6r‘gzS‘h | ESS*PQGE | gIz‘PIEIEQ | cL6‘riz‘oh | EITL‘OEL Er] Lr161S‘S1E] gge‘tz1‘Cb1| g6g‘SSz‘gSh| LgL‘1|°IZgT LESEILOIS‘1} BvS'gEr‘z 9] o1g*zOS‘v | BLSES‘E | 66z°gez‘S1S | 116°€69‘6z | zOz‘ghE‘oor| Obg‘g6L‘16z| gSo‘oLg‘zE1} 10L66£‘O£b| S1g‘r]* *oLgr Sog‘gzz‘L6b‘r| L69‘PS Hz 9] Eg€‘ob1‘zg] LSEOES*EY| 16V6zO'EZS | zLE‘GPR‘EZ | C6*L90'SE | ShO‘E6S*E6z| SEQ‘zSQ‘gz1] 191°66E‘gzb| L19‘I|* *69gI ELL'1Z9°6SG‘1| ZSE‘QO6'T 9] wo ttt | OSS*bgO%EOg | bzg‘ozL‘Ez | LOEHI1b‘66 | 6gb‘69L‘S6z| Sho‘160'h11| 11S‘PEQ‘ozb| Ebg‘I|* - gogt 090°69h66h‘1| £S1‘z60'r 9 repossess | LEE SIZ RS | 1h6'bhg‘6r | Ibe‘r11€6 | Ih6‘Lgg‘e6z| C€O‘LPb‘oor| SIP‘ Lo‘ozb| zhg‘1|* * Logz S0g‘zg6‘gzS‘1| Szo‘ghl‘6 9] ° rrpsressses | PoS*ATOR6S | g1E‘gg6‘gz | LS6‘TES‘oII| gIg‘ESzogz| FOL‘zS6'SQ | 6OF‘zLp‘Srb| PhO‘I|" *QOg1 SLo‘ggL‘6SE‘r| bSo'bh6 sr[tttsstss | pSz*rgo6bs |legr'SSibgg) LEg*pbho'o6 | Co6'1zE‘1L1) 6S9‘EgQo'IL | goz‘4S1°E6E| E1S‘1]° “Sogr g6r‘gor's6z | o6z°eh oo] epee ees EEG QOT eer. | te shes SQE‘ZOQPE | POS‘ogz‘Sbg} glo‘z66°L | zog‘zgl‘gg | gos |°-Pogr bbeo‘L6L‘gr ¢ 19£‘z ¢ does) eerie aS, zgq°L6r‘g ¢ sees eR L11g6 ¢ OS a5ars Serie o€0'gzi ¢ €6E*ger'Z ¢ 99 --€ogr siayueq sjyoid syueq Teoh ERE | MBBS | Cee’ |store]: -eeea | ee teeh, [Metta | 7semerer | jeriagen, | mo Len | a0 . “L6gI-€OSI ‘SLNAWALVIS MNVEH IVNOILWN SO SWALI IVdIONINd —*EZ “ONT REPORT OF THE MONETARY COMMISSION 566 “syueq 9})S WOI oNp JuNoOUTe OS]e Sepnpouy x bS6‘obg‘£z1 | Leb‘Lib‘gor | r1E‘o1bth | gbb‘ogo'sS1 | gog*d10‘L6z | Pgd‘zbo‘gzz | oSL‘o6b‘zE | OS6‘Egb*Lzz | bII‘QLL‘gg0% |°* - LOgI gbS‘EL9'06 EL6Obr Sor | OO€ERS*6z | g€6‘oSg*1I1 | EES*LLO‘061 | ghE‘Szg‘goz | ooS*SEr'Sz | oSg‘16z°LEz O£g9‘ggz‘C6giT |°*-96gT E1z‘EQS‘oL LLgtLLEor | Egbofgto€ | LgotrzS‘Ez1 | 1Sz‘dge‘eze | S61‘L6b‘11z | OSE‘grI‘gz | SQA‘zgo‘goz zor‘gor‘6So‘z |°* -S6gr gzo‘ror‘vor | LE1‘z6g‘L6 z1O'EL6‘Lz | ggo‘6Lb‘zz1 | gog6rgghz | 1S€*Pz6‘Loz | ooz‘ggg‘Sz | ooS‘zbg‘661 | 161‘zzr‘Loo%e |.° *b6gI OSr'1pS‘iz1 | gLL‘1S1‘6g Lov6zz'bz | S10‘oPL'h6 | bro6bgS1 | gigttSS‘zgI | OS6‘QLS‘L1 | OSg*EQh‘g0z | goI‘*PEg‘Erg‘r |° “C691 ELo*gcz‘Cz1 | z16‘19g‘Lg oFLizlSze_ | ES€‘qrS‘obr | rEPEr‘g£e | 1€1*S9S*gor | oSz‘bgr‘oz | oo€'SLz‘Egr | ggo‘IvoO‘ILr‘c |*° *ZO6QI Levizi1e'Ser | zz1‘oL7eg 66g'tLb6z | zgo‘g6r'SIr | Ezeo66E6r | LLL‘hgg'6Er | oS6‘rZg*hz | O0g‘SEo‘OSI | goz‘Egh‘Sooe |*--16gT $66‘g96Ezr | g1ESER*OL €zz'Sghgz | zrg'6gz‘gir | ggd‘tSb‘6gi | GEP*LLL‘6z1 | Ooo'Pgg‘OE | OSo‘6Q6°6EI | OzE*gSo‘gg6‘I |°* -O6gT ObOzrg‘esi | PLILLE‘69 11Sdibigz | 6PLi6ggtdir | 1gz‘o€r‘6gr | ESS*Lz6'Sz1 | ooz‘10S‘gh | ood‘ Lp‘gbr | COL*ASz‘Lig‘ |**-6ggr gLliorS*lir | z6L‘beg‘zg 1gz‘LoLcz | 100‘1zg‘66 bOS*QSFOLI | zofggf‘L11 | oSo‘Srd‘og | ooz‘dgg‘141 | bzg‘ogr‘hgg‘r |**-gggr TEg‘QQhEor | 0g1'gg6‘LS LLoeor'ze | bibtzoe‘e6 QgS‘ELgiobI | 1gL4611‘901 | OSE‘ILO‘PE | oor‘Egot6gr | PEI‘6FS‘AgS*I |°--Lggr I1r‘vig‘gor | 1Z0‘060'bS gSz‘ori‘oz | 919'9zS‘0g 6LS‘vgLiobi | g6L‘gz1‘96 oob‘zepze | oS6'g6b‘gSz | SSo‘LS6%0Sh'I |" -QggI OIf'bgt‘oor | 1og*e6z‘1S 16g‘LZg6‘41 | g69‘L96%g4 GIS‘QLE‘gEx | bgS‘go0‘06 OogogL1€ | OSo‘LSQ‘L0€ | 066‘EbI‘QOE‘1 |** Sgr Liz‘oSo'1g 238°006'6P EQOEL RSI | SHSSES'O ozo‘€66'111 | 601‘966'Zg o00g‘61P0€ | ooo'SEb‘LzE | C60'v6z‘Sbz‘1 |°*-PggI 19z‘vVE6‘6o1 | SQQ‘LEL‘*Qh Ghz‘ggz‘gt | bzz‘hr ‘Sg 6zL'gi6vz1 | Sor‘gdr‘6L oSo'PLg‘o€ | oSgizib'1S€ | zgl‘brz‘6ok1 |: * Eger SgS‘oSt‘€zz | ggo‘LES‘gb gor‘sor‘dr | 1hg‘91S‘g9 gezLleerr | zlo‘bggizl oSLSzrLe | oSL‘IEQ‘LSE | o1z‘€oz‘ebe'r |* + zger SE1bSo'bor | 1116ze‘Lb Lzg‘got‘61 | gbb‘SoS‘gZ Egr‘gg6‘zEI | 6gg‘060‘99 oSLigob‘gS | o0S‘Sgt‘Eg€ | EQo‘QOL‘ELI‘1 |" -1ggI zSe'pzg‘Eer | CEg*Sbo‘gb g61‘1ggst | L6L‘Ezo‘tg 6LLizgS‘vEr | ozg‘rse‘2S oorozg‘eh | oS€6gZ‘LSE | goz‘LL6‘obo'r |-* Oger L60%1Lz‘be 691‘L1 ‘Lb ELLIO€g‘Er | S66‘z69‘Qv LvS‘€zo'Lor | gf€‘boothy oSLiopr‘tZ | oo€€1€‘ZS€ | L6o‘EoS‘g4g | -- -6Lgr oLOPSEE6 § | gLb‘zoL‘gb gbg'hie‘c1 | 616'z6bIb | 61bEgo‘Se TLz‘v66'eh oSb*zzl'b6 | oSg‘QSS‘ZbE | 1Sb*gg6‘EEQ |-*- ger £og‘661‘gg | €gb6‘6zz‘Sy zoLlsSibiir | Lbztdiessh | €€1bgz‘EL | oL1‘SSo‘er ooL'166‘bh | oS6‘o1g‘geE | POS‘oz6‘16g =| + LLgr1 LS6'€16'66 =| zh6‘iz1‘€v Egzirgo'z1 | o60'SzS‘Lb | oS6‘gzE‘4g | gob‘og1‘Sh oSriobeZr | ooboL1‘ZEE | brL‘hoe'1€6 |°*-gLgr SEL‘106‘L9 gbo‘ggt ‘cb 6gL‘EQg6‘11 | 69L‘gzotLb ogz‘10L'Sg | gf1'Sdi‘zh oS1‘Lgo%gz | ood‘1ze‘oL€ | PEh‘169'hg6 | °* SLgr vor‘ogg‘6or | Lz6‘z11‘gt ZIg‘Q6I'I1 | 60£‘S6g6E | Lz‘Segitg | ogb*bgr‘o£ oSz‘Soo'gz | ooghSz‘Ege | cOLPOEPS6 = |°--blgr L16‘6SE‘oo1 | EzgQ‘IQO'PE ELgizzoczr1 | oggserb‘1h 1zi‘ver'96 §=| gle‘rob rf oSg‘6zg‘Ez | oobofE*ggt | gri‘oze‘bh6G = |**-ELgr oor‘€o0'Sz1 | gob‘glz‘zt gLgigl6z1 | p6S‘ggh‘be tLo‘L41L‘0g | o00%0go‘o£ oo€‘zzg‘Lz | oob‘gbro‘zge | €z6‘L61‘ZLg [++ -zAgr Czr‘becSr1 | bgl‘6go‘ok oLgizLLizi | zg€SzS‘eb | 6o9‘glg‘gg | oS6‘L10‘0£ OS1‘IbgSh | oogSAP bok | orz‘zSS‘1€g |* -rAgr Zot ‘9zg‘16 LbLioLb‘Lz L6b‘zoz‘6 gog‘gho'ce 699'S 4z‘99 EP6‘Sor‘gz OoFSOL‘LE | oSP*LSQtob€ | ogo‘gz6‘S1Z ‘oler Lig‘6og‘gor | 6g1‘6g1‘Sz 61b'06L'g EQgS‘E6E'SE £9S‘699‘9S zQo‘e bebe oS6‘Log‘hh | oorfogr6ee | Lo1‘egg‘zgo ‘6981 Socrbeebr | SLg*LbLizz ZEQ‘QHSL gbSighzizor | sorte | zeeterS‘ez oSLiLLi‘bL | oSotLgr‘or€ | gbhg‘gqg‘LSo “SOI zEzCogvEr | gol‘6eg‘oz gzz‘6gt'g o1g9‘L12‘S6 pepee reese | egotgleke o06‘zzf‘0g | oS1‘obg‘gee | Srz‘SLo‘609_ = |*** Logr 6bz‘rgg'Cor | CoovEI‘LI Lur'rreS1 | pLr‘oSofZor | «csc ttt te | poztrgt gi oSgPL6'P6 | ooz‘ErgR‘tE€ | SoLh1E‘E0g |***9QggT bSg60k'zh zQz‘CoL hr ZEz EOS LI 126°9L6°68 seen eee 10g‘gIf‘ofh sees seen eee gf1‘oL1‘Leb ++ Sggr 691‘obo‘d gif‘zoz‘z g6£‘1S0'F1 ozZ‘Sg6‘61 wee eee oo‘bgo‘gor pene eens wee tee gS9‘gbz‘e6 oe “PogT 6f1'z6P SoS‘LL1 eee ey L6S‘Sz9‘z x 128 ee oe bPor‘Sgg‘S eee eee ie a SRE ggo‘ggh's “+ €QQ1 Sure USES, asnoy suryu syue ueq [vuoneu uae sAlasal | saryJinzas pue spuoq saye: WOfe [NOaTS) s}uno0o mee O82 dale pon ues pue sais oe 2783s rote ang ie ion BG. sy woxy ang oe pees net ano oF prea spee q -sIp nue suto’y rae -panurzu07—' L6QI-£9QI ‘SINYNALVLS MNVH IVNOILVN JO SWALI TvdIONIad—'E% *0 (Panui 8 567 APPENDIX , Aouad peuoroesy,, sapnpouy | ,AIUOU! [NJMET 194}0,, OST SapNpoU] » PTS OCs eSS‘Ezgiir aes See seaees 6z6'b6r‘6rr zoL‘Lg£‘6fz Szg'z96 ozbhSdS‘oz =| L6g1 ee ie SS6‘zgS‘Ir ea REPS ESS’ of L°VEE thr z£Q‘g08‘00z SEg°996 geS‘SSo'gr ***Q6gI ai re sue obr‘rZ€‘or oi BRR a NaS Sg9‘99g‘Cb1 TIE‘LEz‘Q61 bet‘gf6 oolZES‘St |***S6gr eee eae g98'0z9'6 ae . stew eee gzo'bbg'Sor SSg%0Sz‘Lez €€6'zS6 LLS‘ogS‘g1 oe *bOQI L66‘1tLo‘I1 bol‘obz‘o1 PERO eae PHENO SS zeSe6zl 171 og9g‘tod‘bez vIg‘QzO'r 119‘zob‘zz 295 2 GOF Szr‘Lif‘or ESS‘gbz‘g RR ERs Ot Ses ERE e Sb6‘zgz‘gIr 6LE‘91 1602 gro're6 bLb‘LSS‘61 VEN ZOQT 1€z‘619'6 6EL'P66°. Rae eye gog See err gLo‘siS‘€gr zgb‘L98 LZg1‘16661 |" 16g1 zob‘660‘6 1zS‘0b6‘g eee BREED SG 1€Z‘6SL‘9g 659°g06'S61 Lrg ggl ZOE ‘z6b'g1 “+ 06gI $z6‘SzS‘9 g6L‘1gF*Z (508 Sees Seeiwalpiye TeetaNe €60‘L69'66 6bbgzE ‘bor S€o%zgg gzS‘SL3%oz wee 6gQI gSL‘g6r'g 10z‘16b'g weve tees see eee 19b‘bS0‘06 g£z‘g60'g41 ggz‘beg Q19‘009'1z + 99QT 16g‘ESz‘g zSQ'S6z‘6 Retr g un Res Rea Sears SSz‘1b6‘6L bg6‘Sgo‘Sor SOS‘obS pegle6'1z = |-- Leger IDL°gep‘. goo'oS6‘E1 : Pee3 HOOTERS zzE‘L99'R9 16b‘LLz'QS1 1z2‘ver Sgo‘bedizz |***Qg8gr £6EES 99 brr‘'L6g'b1 . viene ae Ores, 61 1'°QES‘°9g QfEgLb‘oL1 SSO‘LLY SgLizgo'ez waa Sg 60S‘E 169 go6‘6EL‘L£1 a Bees ec RPaD an ae ee 6So‘bbz'16 SLb‘609‘gz1 bz0'69b bSg*eSzes r* bee? Lz£*g08'9 E1L‘98S‘o1 . Sem tot ENG Parnes L66‘zb9‘0g bg6‘Lig‘Lor IS6‘Ebd LbpsSlofez = |* Egger olz‘gtztl gge‘rgr'dt . tee a Nie ore dare tee L1S‘gS6‘IL gLL‘LSg'zor BQE‘Q6E Szb‘6gq‘oz “+ Zggr gt 6'1EL‘9 g6S‘*zLP‘L1 s a See ae Ibb‘g69‘6S geLivee bir gbOe le cILizEL‘Lt “+ 1QQgI ZEI‘Qgt‘O g9g‘Cor‘L1 SRE Peas SARE RSet gsb‘s6z'bo 60S ‘gbhf‘601 ZLi‘Lo€ Cv6%o1z‘QI “* Oggi LSz‘111'9 $90°6zo'L1 esti Silsnay ayaa eidire sshanene 969'996'S6 TELE LU zy $90‘96£ 0SS‘LoL‘g1 o “6LQ1 LoS‘zlz'9 bLoebS‘o1 8 abate SOFELER 009‘gI 1‘L6 L09‘gg9‘0f 199‘S1S 12L'626‘91 oe “QLQI £6L5S16‘9 €SL‘1z0‘91 22 Fsmteaene aed Sane bgq°0f£'66 079'8S9‘zz S08‘006 Lop reso “LLG bbg‘Lg6'9 S69‘EbL‘Q1 eee eS SEREY See Leg iozrer1 LoL‘ogt‘1z voz dip‘t S1e‘o16Sr = |**-gLgr Crz‘1bgss 096‘9g9‘61 Rea soe sree eae a vELggz'Sz1 o£€‘0S0%g z£Q‘S6S‘z Leg*gzS‘gr =| * SLer 6EL°9S9°L 0S6‘6bE'0z SENOS sheet SS SeEIe gb6‘Qrg‘zz1 Sb6‘obe'1z Eb6be7'~e C1o‘oSh*g1 ++ DLQI LEv‘S96'9 eee eee Bebe wees tee eee Egg‘zE ‘E11 69h‘g98'61 SLLizol‘e zhg‘€org1 ‘Lor 6zb‘ort‘g SS isepegiseels ooo‘orr‘s a ROT RR borI€gQ‘1i1 LSL‘6zz‘o1 grdisi‘z goe‘LglS1 |" zlgr oLEES1‘9 A segs sensi er o00‘S Lo‘Sz Se ain Sena SEL‘VIP‘601 go6‘eSz‘er ggh‘S60% €So'L61b1 | ** - ILQT oSL*TLg‘S BR o00'ShE ‘er SARE TESS LLS*bze‘6L TI0‘OQh‘gI gLi‘glo'z Lz6‘e1S‘e1 = |* * -oLgr EgE‘QbO‘S sa sdab quasi o00Srg‘sr SAPS ease S6z‘61L'€Q gob‘zo0‘ez LzL‘o60'z Ezo‘gLL‘or |***69gr 116'gLz'S eee dovane ane 000'0g0‘6S ofZ‘E1G‘b SLYES P26 E1rL‘€00€1 z6L‘zgz'z zbo‘Sgo‘zr =|" * *gggt bor‘ L6z's see ww twee ‘ we wwe 0Sz‘ggg‘oS 0S9‘0SS‘oo1 bho'g6L‘zi ee ECISVLrz1 ae “Logi Eseries ee ee eee ee twee ete ee wee 6L5°C6L‘Soz ZEQ‘Qzz‘O we ee tee 6LLSLEVSLI ***QQQI geo'ggs‘tz re ey ed etme ee . 96'996'6g1 E10‘zLo‘g1 ee 1be‘Lbz‘o1 "+ *SogQr 60£‘9S bz ete ew meee eee ee eee wees t a x LOb‘10g‘bb eee tee LzL‘Lgoqv ***Pogr gig‘6St ed eee ree ene ane . er * 809‘QbPIT Pe ey SzL‘bol "**€QQr ‘ qreaf yoeo seomosal 191309 eutn ae aney just Bdeay puricdatosy.” $9}00 Japua}_[esoT apedg -an3 sca soqpo Jo SS10N "©2180 *panu1uoj— L6gI-€OQI ‘SLNAWALVIS HNVd& IVNOILWN 40 SWAHILI ‘IvdIONIdd—"ES *ONT 568 REPORT OF THE MONETARY COMMISSION No. 24.— ABSTRACT OF REPORTS OF THE NATIONAL BANKS OF THE UNITED STATES ON OCTOBER 5, 1897. [Total Number of Banks, 3,610.] RESOURCES. Goan’ abd DIStouite.cacnnkeae teed ueeaa wees nine Tans $2,051,009,438.17 Overdraits 0 sivicwaasasiciiw Seaside tnebaels cas 15,766,675.73 U.S. Bonds to secure circulation... 0.0... . eee cece eee 227,483,950.00 U.S. Bonds to secure U.S. Deposits..............0456- 17,003,000.00 i, BS Bonds On Randy <.ssvecees veentus caoedernceases 15,487,750.00 Premiums on U.S. Bonds .......... eee cece eee eens 17,261,220.25 otoeks, SQQUTlies, BIC... .c4icnccdee os aoe s owed exee eR eS 208,831,563.40 Banking House, Furniture and Fixtures.............-06. 79,113,954.38 Other Real Estate and Mortgages owned ............5. 29,303,532.43 Due from National Banks ........ 0... 0... cece eee eee 155,980,447.58 Due from State Banks and Bankers...............005- 41,410,311.27 Due from approved Reserve Agents .........00--eeeuee 297,017,805.64 Checks and other Cash Items................ qerisneare? 15.535.418.93 Exchanges for Clearing House.............. BMocwaas x 112,305,535.60 Bills of other National Banks. .... 2... 0... eee cee eee 20,575,420.00 Fractional Currency, Nickels and Cents... ..........0. 962,824.72 Lawful Money Reserve on hand: GOld Com viv cuiainad as Gane acecmers dus $118,856,207.65 Gold Certificates .......... 0... 00000- 17,513,900.00 Gold Clearing House Certificates...... 59,525,000.00 Total Gold isccsies ac van aie saves 195,895,107.65 Silver Dollars: ssi sa-carsiei neces ont eas $ 6,476,504.00 Silver Certificates... 0... ccc cece cues 31,593,302.00 Fractional Silver..... 0... 0.000000 0eue 5:422,788.40 Total: SUVer weer ecasae vesseee css 43:492,594.40 Total. Spe clesscsesas scares s kaeeamnw tina oases 239,387,702.05 Ihegal “Pendersh ss as-is cones aie esas 107,219,929.00 Currency Certificates............. 0.4. 42,275,000.00 Total Legal Tenders. ............ 0000. ceceauee 149,494,929.00 Five per cent. Redemption Fund.................00005 10,021,689.08 Due from Treasurer U.S. .... 0... ccc cece cece cece ens 1,180,539.48 GOUT adore daivt ania apientyeiattoatal od tune Slater tse eons $3,705,133,707-71 LIABILITIES, Capital Stock paid in... 0.0... cee cece cceccees 631,488,095.00 Surplus um dis. cipaeiehy ge o-0.4 ae wa daesormacere ad ¥ ooo eeacnseieies 246,345,020.33 Undivided Profits, less Expenses and Taxes............ 88,406,980.50 National Bank Notes issued........... $204,097,905.00 Less amount on hand................ 5,177,235.00 198,920,670.00 State Bank Notes outstanding .......... 00.00. c0c sees 60,380.50 Due to other National Banks...........0. 0 cececuusece. 418,644,281.57 Due to State Banks and Bankers...............0.0000, 227,063,685.28 Dividends unpaid ..,,.,..... 00 ..ccsevececeeeeeeeeees 1,783,051.38 Individual Deposits.....,.....c 0c cece cece uccec evens 1,853,349,128.50 U.S. Deposits.....,.. wid aoa vccmeoan Sacra Metedeanae 5 5 FREAD 12,081,247.69 Deposits of U, S. Disbursing Officers..............000. 4,060,933.96 Notes and Bills rediscounted....... 0... 0.0000. ceueees 7,206,046.17 Bills payable Moiaheh mae Dlgcinldajch SE GR Go Dip TA Ri gabe uw arden adh oar 12,549,510.47 Liabilities other than those above stated................ 3,174,676.36 Mota, neve ative nts Rauch ha aadian wabawn Bae ee $3,705,133,707.71 No. 25— CLASSIFICATION OF STATE BANKS BY CAPITAL STOCK IN EACH STATE AND GEOGRAPHICAL DIVISION.! 2 Over $10,000 | Over $20,000 Over $50,000 States and Terri- | $1¢,000 or less and not and not and not Over $100,000 , ties over $20,000 over $50,000 over $100,000 No.| Capital |No,) Capital |No.} Capital |No.| Capital |No,.} Capital Maine... | > A New Hampshire .... 2 y Vermont..... 7 a re Loe : : ia Rhode Island... & tp oteee eee Jee neiescsareert Connecticut y pee 2 320,000 Total New Eng- ‘ 23002 land:States 00 [ices |) e8ticeie fl sec | awa eae 3 2 200,000 | 8 2,410,000 New York...... 61 1,703,000 | 8 ogo 6 New Jersey, .--.+- 2 * 60,000 i ier : Bed ss Penney ave aera 33 1,523-735 | 35 3,126.985 | 17 4,100,150 datiioyavesidial nets I 25,000 | .. | ....0. eee 3 580,000 Maryland .... 7 198,720 | 1 I : District of Columbia. vee . Ce FM eee ace = a ate Total East’n States 36,710 |104 | __3,50.455 |z39 |_12,255,735 | 89 | 28,327,850 Virginia sdsieh 262,100 | 24 883,300 | 11 868 L 6 West Virginia. 53,086 | 37 1,217,440 | 8 646;f00 é 7085.00 North Carolina...... 131,025 | 15 575,100 | 8 655,000 | 3 546,000 South Carolina 40,000 | 24 884,000 | 20 1,535,400 | 2 286,700 Georgia ......+ +5655 See - 7a5+695 29 aacence 20 45732400 . 10,000 I 10,000 oe ae Es Mae alee Alabama oe 32,500 20 840,500 10 725,200 2 350,000 Mississippi .....--+- 3 169,750 | 38 1,402,200 | 17 1,399,966 | 2 361,500 Louisiana. oa: bo 25,800 | 10 142,400 | 17 649,000 | 2 190,000 | 4 1,055,200 Texas..... : cuiayae ee I 20,000 I 50,000 2 200,000 I 200,000 Arkansas Ir 86,000 | 14 231,225 | 10 1,252,825 | rz 1,038,630 | 2 350,000 Kentucky. 3 27,500 | 33 542,515 | 32 1,043,410 | 14 1,067,700 | 16 9,489,500 Tennessee... 6 52,700 | 25 415,095 | 52 1,847,025 | x11 889,650 5 1,650,000 Total Sou’rn States | 45 365,940 | r40| 2,251,496 [338 | 13,720,435 |t44 |_ 12 583 o21 | 77 23,136,907 Ohio esteayanagjanarieane eens 8 141,250 | 49 1,716,750 | 14 1,167,500 | 9 1,844,000 Indiana ciatiarecaeveta rae a4. | aS A ee 81 2,754,500 | 14 1,145,000 | 3 750,000 Illinois i ont (Hama aces 85 2,640,000 | 8 800,000 | 14 41772000 Michigan Cidjge RIES I 13 213,000 | 45 1,840,000 | 13 1,165,000 | 3 500,000 Wisconsin as A) ea aie OY ie aebneisine 103 3,325,700 | 21 1,830,000 6 1,700,000 Minnesota is 20 17 274,200 95 3,171,000 z 571,000 5 2,050,000 Towa . ee? edie ayes | space see 171 6,011,300 | 34 2,439,000 3 460,500 Missouri ........... ]132 | 1:303,650 | 139 | 2403,000 |157 59753500 | 34 3,135,000 | 20 71385 ,000 Total Middle States |153 | 1,508,650 | 177 | 3,032,45° 786 | 27,212,750 |145 | _121252,500 63 19,461,500 North Dakota 392,000 | 11 184,500 | 14 g8000 | an | does South Dakota . 419,750 | 21 330,960 | 27 8r1,400 | 1 60,000 wn he treks Nebraska. 1,037,950 | 95 | 1,481,000 | 98 3,120,900 | 12 914,100 | 1 110,000 Kansas 80g,0r3 | 65 | 1,092,885 | 34 2,621,140 | 9 695,000 | 1 350,000 Montana...... .2.. | 00 | verre eee I 20,000 | 4 130,000 | 2 175,000 | 1 200,000 Wyoming 3 30,000 | 12,000 | 1 30,000 | | weee errr Colorado .......2.0. | | cree eee I 15,000 | 20 745,000 | 3 210,000 New Mexico........ | «2 | seeeces en er 5 190,000 | I 71,790 Oklahoma .. 13 97,000 | 6 92,700 | 9 255,000 i Indian Territory .. i SV Seed secrete Nt dace | ees Mets Ido] ieee oie |) Bee eS Total West’n States |344 | 2,781,713 |2or | 3,278,045 |262 | _ 8,460,440 28 | 2,125,800 | 3 Washington 2 20,000 | 6 96,000 | 15 503,300 | 4 270,000 | + Oregon. 3 at || sergio eteete 3 59,000 | 15 547300 3 275,000 California... 2 16,000 | 8 131,404 | 50 1,905,915 | 49 4,100,867 | 64 Idaho ... 1 t0,000} 4 70,350 | 4 172,500 | . sek we : Utahle ci siccmseaetan | ce. | seaeeaae | 8 | ques ee 4 125,000 | I 100,000 | 3 Nevada a I 10,000 1 20,000 I 50,000 I 100,000 | 2 Arizona .........-5 en ee 3 57,000 | 3 97,500 | 1 100,000 56,000 | 25 | 433,754 | 92 | 3.407515 | 59 4,945,867 | 70 | 28,628,545 Total Pacific States} 6 Total United States |549 | 457185553 |545 | 8,981,455 |1585| 55,830,595 |517 43,362,923 |310 | 102,624,892 We 1 This table has been compiled chiefly from information kindly furnished by the bank examiners of the several states in response to the request of the Commission. In the case of some states where there was no bank examiner, or it was impossible to obtain official information, an estimate based upon the figures given in Rand, McNally & Company's Bankers’ Directory (July 1897) has heen made. 569 57° REPORT OF THE MONETARY COMMISSION No. 26—CLASSIFICATION OF NATIONAL BANKS BY CAPITAL STOCK, IN EACH STATE AND GEOGRAPHICAL DIVISION, OCTOBER 31, 1897. Between Between $50,000 banks $50,000 and | $z00,000 banks | $100,000and | $200,000 banks States and Terri- $100,000 banks $200,000 banks tories No. | Capital |No.| Capital |No.| Capital -|No.| Capital |No.| Capital Maine....... fev ie 31 | $1,550,000 | 6 | $456,000 | 21 | $2,100,000 | 10 | $1,365,000 | 4 |$ 800,000 New Hampshire. Io 500,000 | 6 435,000 | 13 | 1,300,000 | 15 2,195,000 | 7 | 1,400,000 Vermont. ..... 7 350,000 5 375,000 | 18 | 1,800,000 8 1,160,000 3 100,000 Massachusetts, .....] 14 700,000 | 4 2775500 | 54 | 5,400,000 | 37 | 5,370,000 | 43 | 8,600,000 Rhode Island. ... I 50,000 2 135,000 | II 1,100,000 | 10 1,380,250 6 1,200,000 Connecticut ........ 3 1§0,000 | 3 225,000 | 19 | 1,900,000 | 10 | 1,415,000 | 8 1,600,000 Total New Eng- — — — land States.. ...| 66 | 3,300,000 | 26 | 1,903,500 136 | 13,600,000 | go | 12,885,250 | 71 | 14,200,000 New York ..s+| 79 | 395,000 | 21 | 34444,500 | 80 | 8,000,000 | 45 | 6,333,440 | 27 | 5,400,000 New Jersey... 3x | 1,550,000 | 6 425,000 | 28 | 2,800,000 | ro | 1,410,000 | rz 2,200,000 Pennsylvania. . 120 | 6,000,000 | 29 | 2,084,220 |105 | 10,500,000 | 44 | 6,184,150 | 43 | 8,600,000 Delaware ..... 5 250,000 7 510,800 I 100,000 I TIOjOOO: |e sei Possess euerorscavers Maryland. 21 | 1,050,000 | 7 460,000 | 13 | 1,300,000 | 3 400,000 | 3 600,000 Vistrict of Columbia,|.....- Se épamenvesilles: lleceecke Nextel |e 100,000 |,... ead 6 1,200,000 Total East’n States} 256 | 12,800,000 | 70 | 4,924,520 |228 | 22,800,000 |103 | 14,437,590| 90 | 18,000,000 Virginia. eee 12 600,000 2 141,000 | II 1,I00,000 I 150,000 3 600,000 West Virg accaiasa te 8 400,000 8 570,000 | IO | 1,000,000 / 3 431,000 } 2 400,000 North Carolina . 12 600,000 I 51,000 | 6 100,000 5 725,000 I 200,000 South Carolina...... I 50,000 | 5 348,000 | 6 600,000 | 1 150,000 | r 200,000 Georgia .... Ir 550,000 | 2 116,0co 5 500,000 4 600,000 | 3 600,000 Florida .. S 8 400,000 |...) vee 6 600,000 | 1+ 150,000"|..0. [ices aces Alabama . 8 400,000 | 3 205,000 | 7 700,000 | x 125,000 Mississippi.. . 3 150,000 | 1 75;000 | 5 500,000 | 1X 130,000 Louisiana 8 400,000 | I 60,000 | 2 200,000 |....]....00. 000. Texas .... 84 | 4,200,000 | 30 | 2,040,000 | 49 | 4,900,000 | 18 2,545,000 Arkansas . . 2 T00,000 |... | aes Leas 3 300,000 I 120,000 Kentucky..... . 14 Joo,oco | 8 537,000 | 19 | 1,900,000 | 13 | 1,847,900 Tennessee...... 13 650,000 | 12 785,000 | 9 900,000 ie ; Total Sou’rn States] 184 | 9,200,000 , 73 | 4,928,000 |138 | 13,800,000 | 52 | 7,448,900 Ohio... 60 | 3,000,000 | 22 | 1,421,100 | 65 | 6,500,000 | 31 | 4,380,000 Indiana 29 | 1,450,000 8 567,070 | 47 | 4,700,000 | to 1,345,000 Illinois .. 87 | 4,350,000 | 24 | 1,673,000 | 59 | 5,900,000 | 33 | 1,748,000 Michigan 28 | 1,400,000 | 6 420,000 | 27 | 2,700,000 | g | 1,325,000 Wisconsin .... ..... 30 | 1,500,000 | 9 610,000 | 20 | 2,000,000 | g | 1,300,000 Minnesota, dot 37 | 1,850,0v0 | ro 690,000 | 6 600,000 | 2 300,000 Towa ....... sessee++| TOO | 5,000,000 | 10 690,000 | 39 | 3:900,000 | 4 595,000 Missouri..... -.-| 26 | 1,300,000 | 4 265,000 | 19 | 1,900,000 |]... ].......... Total Middle States} 397 | 19,850,000 | 93 | 6,336,100 |282 | 28.200,000 | 78 | 10,993,000 North Dakota...... 21 | 1,050,000 | 1 60,000 | 4 400,000 | 1x 150,000 South Dakota. ‘ 19 950,000 | 3 195,000 4 400,000 I 150,000 Nebraska..... 64 | 3,200,000 | 13 875,000 | 14 | 1,400,000 2 300,000 Kansas .. 64 | 3,200,000 9 632,100 | 21 2,100,000 4 535,000 Montana 7 350,000 2 155,000 3 300,000 4 550,000 Wyoming.. 3 150,000 3 210,000 5 500,000 |... Colorado. . 19 950,000 | 4 282,000 | 10 | 1,000,000 |,,,, New Mexico. 2 100,000 2 200,000 2 Oklahoma. ... 6 300,000 2 Silauatilenne sie: | wekoueheeeaass : . Indian Territory.... 8 400,000 I 2 200,000 | , Total West’n States, 213 | 10,659,000 | 36 | 2,469,100 | 65 | 6,500,000 | 34 Washington......... 13 650,000 | 3 180,000 | 9 900,000 | 3 Oregon mare 18 go0,000 | 6 420,000 2 200,000 California 5 250,000 | 1 Ir | 1,100,000 | 4 Idaho 8 400,000 ].... 2 Utah 4 200,000 2 Nevadaics oe iciscns se heae es tay satracgeics, I eieia Arizona ............ 2 100,000 3 ee Total Pacific States} 50 | 2,500,000 | 11 757,000 | 29 | 2,900,000 | g Total United States}1,166 | 58,300,000 |309 | 21,318,220 |878 | 87,800,000 345 | 48,978,740 APPENDIX 571 No. 26—CLASSIFICATION OF NATIONAL BANKS BY CAPITAL STOCK, IN EACH STATE AND GEOGRAPHICAL DIVISION, OCTOBER 31, 1897 — Continued. ce i $ ‘ Between $ Between 200,000 al 500,000 banks $500,000 and 1,000, 1,000,000 and $500,000 banks , $1,000,000 banks mieeoiece banks $5,000,000 (inclu- Total | Total au- B ; num- | thorized sive) banks ‘ per cf capital : : anks tock No.| Capital | No Capital |No.| Capital ||No.| Capital |No.| Capital Bie 8 }2y500,000 |... [eee veer eee Pie Rice ine uel eres Cee ele ee By | bari raese 1 aa 1 |$ 500,000 ].... [oes eeeseeee elise amet dealt St §:830,000 54 | 16,180,000 | 15 71500,000 | II 8,200,000 | 26 26,000,000 -| 6 2 pees 1o | 3,224,950 | rx | 5,500,000 | x "606,000" |; 2a" 3je00,000 2 $ re ges 267 | 94,327,500 ie ke eee eee ee me a 2541, 103_ 31,381,020 | 35 17,500,000 | 17 11,975,000 | 32 32,000,000 | 12 20,446,850 588 | 159,191,620 2,000 | 8 Se | ele ci ey ee eel eee eee 49 | 15,165,020 | 20 | 10,000,000 6 A | 6,200,000 2 AO =) 2 2 613,185 | x *500,000 |, Ra es ies De = ee he sie ai ah Lee cae et istava wot aPeaslenes 145 laa sienas ¢ o} a | eh Ses ee | ee) 8 ee 23h caups [ae meee ee ye aia Page tevetep anette eb [havea aegis 13 3,127,000 133 |_33,718,908 |_41_|_ 20,500,000 |_22 15,422,560 | 15 | 1,000,000 | 18 | 37,520,700 | _gs6 | 195,124,275 1 Rerere) 3 ees 600,000 35 4,646,000 z #254000 33 35351,000 7 eee 27 Soe te 1 6 1,898,000 4 1,150,000 ‘ore; teen teem eae ee oF aS gat0 900 : oer 5 1,150,000 ee 39355,000 i Hise ste 10 ; 35,000 2 oe 19 3,160,000 : oe 202 | 19,985-000 ; ; a 9 1,220,000 1580, 11,664,900 3 850,000 re ast 3 49 8,760,000 pau 13,885,000 546 | 66,761,900 25 | 7,634,867 5,400,000 249 | 45,235,967 u apa igs ile 6/3. ceive 11S 14,312,000 aie BSS 9,000,000 | 220 | 37,296,000 3000, j 12,145,000 ee 1eribe G06 000 13,165,000 4 1,250,000 13)035,000 3 750,000 14,815,000 59 17,384,867 20,050,000 | 1,046 |160,163,967 1,660,000 1,695,000 10,325,000 8,667,100 2,655,000 860,000 5232,000 eee 100,000 be 300,000 Ae 660,000 ae 4,150,000 _32;654,00_ 3 g00,000 4,238,000 3 500,000 3,020,000 4 1,250,000 71375,000 oe 600,000 I 1,750,000 1% 2,000 aise ye -20_|_2:950,000 | _ 5 2,500,000 | 528,000 | 1 1,000,000 | 1 1,500,000 124 | 17,465,000 345 | 103,469,792 |x2x | 60,300,000 | 55 | 37,875,560 | 78 | 78,000,000 | 42 | 79,527,550 | 3,617 631,360,862 a Includes two $5,000,000 banks in New York City. 572 REPORT OF THE MONETARY COMMISSION Wo. 27.—ABSTRACT OF REPORTS OF NATIONAL BANKS, OCTOBER 5, 1897, BY STATES. Num- : National us ber of Aer stock Ten and bank notes ie banks palesm secon outstanding ‘pos! CENTRAL RESERVE CITIES, New York City ......-.0...0000. 48 | B 48,600,000 |$ 408,335,475.15 |B 16,183,457.50 | $341,886,866.23 CHicaP OM iol is kocsis faded 19 19,700,000 86,832,905.67 616,365.00 70,692,162,85 Sh Douissy,eccvameersinnancetinn 6 8,400,000 32,060,316.20 | 1,852,200.00 21,676,339.80 Total of central reserve cities..| 73 76,700,000 527,228,697.02 | 18,652,022.50 4345255,368,88 OTHER RESERVE CITIES. Boston ........... 54 50,350,000 164,807,923.87 | 7,576,892.50 120,934,342.12 Albany.. 6 1,550,000 8,303,279.94 349,590.00 6 808,166.19 Brooklyn .... 5 1,352,000 125357;365.76 5731030,00 17393,868.96 Philadelphia. . 41 21,915,000 102577)519-47 | 7,184,875.00 1035701,935.10 Pittsburg .... 30 12,300,000 451599,629.32 | 4,727,372.50 40,398,688.95 Baltimore... 22 13,243,260 33:076,943.27 | 2,433,060.00 24)734,818.03 Washington, 12 2,875,000 8,842,737.16 672,745.00 13,837,279.14 Savannah, .... 2 750,000 1,174,800.91 90435500 5431444.24 New Orleans. . 7 2,300,000 11,630,881.62 758,045.00 13,380,301.27 Louisville... 6 3,000,c00 7:444,660.81 | 1,413,320.00 45366,158.50 Houston. 5 1,150,000 2,029,754.00 139,680.00 25772,032.19 Cincinnati. 13 7,800,000 23,778,025.25 4,820,450,00 19,244,420.35 Cleveland... 12 9,550,000 28,471,475-47 | 1,332,810.00 21,683,266,89 Detroit.,..... 6 3,300,000 14,398,492.12 989,790.00 10,916,819.87 Milwaukee . 5 3,250,000 155522,444.32 623,380.00 22,534,159.68 Des Moines, 4 800,000 2,651,371.74 259,137.50 1,582,470.63 St. Paul.... 5 3,800,000 8,803,064.16 212,550.00 9,506,325.61 Minneapolis . 6 4,500,000 95320,950.15 206,347.50 8,305,070.27 Kansas City...... ‘ 5 2,300,000 15,006,761.56 225,000,00 11,368,177.89 St. Joseph... 4... 2 350,000 1,906,847.73 134,100.00 1,934,953.60 Lincoln......... 3 800,000 1,796, 169.69 135,000.00 1,360,852.92 Omaha......... 8 31750,000 95147,574.35 531,605.00 7,864,990.78 San. Francisco... ..00e<.ssse+ 40 2 2,500,000 9,183,555-70 90,000,00 6,811,962.47 Total of other reserve cities....|| 261 153,485,260 536,832,108.37 | 351479,135.00] —_471,984,505.65 Total of all reserve cities...... 334 230,185,260 | 1,064,060,805.39 | 54,131,157.50 906 239,874.53 COUNTRY BANKS, Maine sean sinc Sanas - sthinlvaneanse 83 11,171,000 23,558,869,02 | 5,218,253.00 175370)759-19 New Hampshire ............ 50 51830,000 11,025,416.51 | 3,514,295.00 9,658,708.78 Vermonticecacacistertesccicneanes| 49 6,985,000 12,292,381.33 | 3,765,422.50 9:267,640.55 Massachusetts ..............+. 213 43,972,600 II0,420,250.31 | 19,774,224,50 84,193,457.04 Rhode Island............ 000005 87 19,337,050 34,589)409-75 | 7,0535495.00 19,523,347.16 Connecticut..............0.0.00. 8x 214,541,070 44,615,900.71 8,064,704.50 345853,964.72 Total of New England States. 533 108,836,720 236,502,227.63 | 47,390,394.50 174,867 ,877.44 New York............ 0 6. see, 267 31,657,940 92,782,676.03 | 15,084,910,00 93,036,579-65 New Jersey . 103 145445000 52,105,939.06 | 5,013,609.50 57,772,946,63 Pennsylvania 356 40,969,790 I11,725,265.54 | 17,174,565.00 118,319,190.81 Delaware .......0 2 0... 18 2,083,985 5,634,105.60 698,137.50 5,210,817.96 Maryland aish2ia gee CTs 46 3,811,700 10,267,949.25 1,733 740.00 11,256,143.37 District of Columbia ... I 252,000 604,285.22 220,200.00 830,020.33 Total of Eastern States........ 791 93,220,415 273,120,220,70 | 39,925,162.00 285,825,698.75 APPENDIX 573 No. 27.—ABSTRACT OF REPORTS OF NATIONAL BANKS, OCTOBER 5, 1897, BY STATES.— Continued. Reserve held ieesere Redemption Ratio of required Specie Legal tenders | Due sual s| fund with Tata) eset e reserve to treasurer deposits 25 per cent. Ses bas $126,724,386.29 |$ 82,388,877.65 | $54,127,648 $ 843,022.50 |$137,349,548.15| 27.10 26,428,631.73 | 21,730,387.55 16,328,145 58,500.00 | 38,127,032.55 36.06 8,255,349-26 | 2,341,991.10 51736,688 93,417.50] — 8,172,096.60 24.75 161,408,367.18 | 106,461,256.30 JOIBB AIT | pee cen nese 994,940.00 | 183,638,677.30 28.44 38,491,875-83 | 11,120,216.89 9,015,894 |$ 27,676,135.37 394,965.00 | 48,207,211.26 31.31 2,600,381.02 918,286.50 420,103 25573725.24 18,000.00 3)920,114.74 37.78 4,160,285.23 1,110,918.89 880,854 2,644,785.68 28,890.00 4,665,448.57 28,04 29,803,110.33 | 12.428,038.55 9,788,719 | 15:627,737.39 368,923.32 | 38,313,418.26 32.05 11,413,771.87 5,088,981,10 2,164,795 6,826,725.10 237,721.25 | 14,318,222.45 31.36 75159,634.05 3,591,862.87 254765775 B/OEO 292 59 121,605.00 | 9,200,535.46 93.13 39427 698.37 2,482,415.60 497,031 2,120,706,80 34,954.50 | 5,135,107.90 37-45 * 146,487.00 118,500,00 71,000 131,817.02 4543.00 325,860.02 55.61 3,465,497-69 | 1,404,981.99 1,760,588 985,842.44 39,240.00 | — 4,190,652.43 30.23 2,202,067.08 625,704.09 558,721 2,167,848.05 70,695.00} —3,422,968,14 38.86 848,658.12 746.822.80 1,215,564 679,848.16 9,000.00] — 2,651,234.96 78,10 71410,799.65 | 1,931,303.42 2,658,053 | 41865,032.61 241,990.00 | 9,696,379.03] 32.77 6,206,197.99 1,935,286,00 1,076,290 4,926 644.08 68,380.00] 8,006,600.08 32.25 455153454-70 1,617,601,85 632,479 3,9895412.66 50,641.68} — 6,290,135.19 34.83 5,940,681.56 2,015,690,00 1,313,917 7,006, 590-11 32,400,00 | 10,368,597.11 43.63 827,612.27 189,287.25 225,028 719,405-57 13,094.00 1,146,814.76 34.64 3:379,677-46 2,545,258.68 634,897 45123,972.18 13,293.00] —7,315,420,86 54.11 2,388,884,18 958,497.70 1,093,740 2,531,664.52 13,500.00 4,597;402.22 48,11 5)694,606.44 1,487,818,22 1,300,000 6,213.533.03 11,250,00| — 9,012,601,25 30.57 702,354.90 211,464.10 146,827 818,342.56 6,705.00 | 1, 183,338,66 42,12 411,000, 46 186,797.00 52,671 264,030.46 6,750.00 510,248.46 31.04 3,308.763.09 | __1,188,795.73 9721944 | 31364,710.78 27,000.00 | 5553,450.5t | 4.96 2,104,813.83 2,651,088.07 2,000 240,291.16 6,750.00 | — 2,900,129,23 34645 146,610,313.12 | 56,555,617.30 37,958,890 | 104,509,093-5° 1,818,290.75 | 200,841,891.55 34.25 308,018,680.30 | 163,016,873.60 II4,141,371 | 1O4,509,093.50 2,813,230.75 | 384,480,568.85 31.21 15 per cent, 2,780,657.87 1,241,876.69 338,754 451371350+45 258,756.25 | 5,976,737-39 32.24 1,671,129,09 634. 914.76 242,457 2,474,548.90 168,893.75 | 3,520,814.41 31.60 1,413,585.45 638,412.02 215,846 1,967,264.76 178,067.50 2,999,590.28 31.83 13,083,311,82 4,819,135-10 2,492,459 | 14390,184.15 980,303.50 | 22,682,081.75 26.00 3,181,315.09 1,143,588.06 672,385 31641,378.62 355,000.00 | §,812,351.68 27.41 5y341,044,86 2,995,544.14 719,910 6,461,922 69 402,892.50 | 10,580,269.33 29.71 27,471,044.18 | 11,473,470.77 4,681,811 | 33,0721649.57 2,343,913.50 | 51,577,844.84 28.16 14,012,238.34 | 5,456,907.57 2,608,579 | 17-0359422.75 756,021.75 | 25,856,931.07 27.68 8,732,764.57 3,371,814.00 2,096,436 | 11,570,153-89 248,753.75 | 17,287,157.64 29.69 17,633,923.23 8,644,019.21 3,720,051 | 21,511,798.64 851,684.80 | 34,717,553-65 29.53 789,874.22 346,728.37 131,685 | 1,044,263.05 385725.00 | 1,558,401.42, 29.59 1,692,401.97 729,226.53 435,274 2,068,489.21 81,962.88 34314,952.62 29.38 126,016,65 270,194.80 93711 73,309.82 11,250.00 364,465.62 43.38 42,987,218.92 | 18,818,890.48 8,991,736 | 53,303,437-36 | 1,985,398.18 | 83,099,462.02 29,00 574 REPORT OF THE MONETARY COMMISSION Wo. 27.—ABSTRACT OF REPORTS OF NATIONAL BANKS, OCTOBER 5, 1897, BY STATES.— Continued, aaa Capital Loans and ee Individual banks stock paid in discounts outstanding deposits VITBINIa os wes xeireeeent eae 35 $ 4,646,300 |$ 15,268,383.59 |$ 1,993.442.50]$ 15,347,290.31 West Virginia..............00806+ 33 3)451,000 8,570,845.29 1,236,192.50 8,373,395-57 North Carolina.............0068 27 2,701,000 6,770,283.87 643,492.50 51340,321.69 South Carolina...............06 16 1,890,100 51943 9367-76 451,025.00 31495,333-21 Georg ial: ii 4 cacsond ea eeasitaeiae 28 3,266,000 8,613,652.81 898,657.50 6,707 489,11 Florida.... 000 cee eee eres 15 1,150,000 3,242,704.73 300,830.00 3,905,048.13 Alabama: sisiessciecs sieicar ean s) eevee 26 3,355,000 6,570,755.06 1,053,170.00 6,113,411.15 Mississippi ...-.......see cee cues Io 855,000 2,504,410.73 216,410,00 2,034,435-04 Louisiana sesivavvders vs kilesne des 12 860,000 2,405 626.81 237,857.50 1,920,454.37 TOXAS sy, is sions vai eaesle agaliacace's 196 18,781,200 375331,789.36 4,187,932.50 32,100, 403.04 Arkansas aiscviistae Harr auaeie 9 1,220,000 2,329,403.95 258,890.00 1,805,345.14 Kentucky... ........+- 2 eee ee eee 69 8,727,900 17,103 ,605.77 3,259,260.00 12,346,839,10 Tennessee........0..0. ene cone 49 8,760,000 21,148,631.29 14542,805.00 17,219,151.53 Total of Southern States,. 325 59,663,500 137,803,461.02 | 16,279,965.00 116,708,916.29 ONG sayes Sy uaae Seok Moku teenie 223 27,830,100 © 66,570,637.93 10,559,780.00 64,308,142.55 Indiana... er 113 14,057,000 31,876,859.61 4.633,573.00 34,450,004.38 Illinois... 202 17776000 46,863,899.28 | 5,484,937.50 48,035,386.79 Michigan... 78 8,845,000 26,529,187.83 2,589,380.00 27,546,761.42 WiscOnsiteies ccija cine na sedcieioates 74 6,910,000 19)545,362.47 1,973,695.00 21,209,646.28 Minnesota.,........... Gide seas 60 4,865,000 13,618,347.90 1,131,265.00 15,991,212.92 Towa........ ia cit ahaa btetenaion 161 12,220,000 29,599,784.99 3,349,250,00 25,919,830.62 IMISSOUT Is 6/4507 cotsest oc e-ae 04 Mane ee 5° 3,765,000 71795 9723-45 1,018,790.00 71913 1592.20 Total of Middle States.,...... 96 96,268,100 242,399,803.46 30,740,670.50 245,374,577-16 North Dakota... .ccaieccck 3 s+ 27 1,635,000 4)3215771.40 417,657.50 5,6895171.75 South Dakota.. 27 1,695,000 3,080,170. 47 427,532.50 4,215, 569.22 Nebraska .... 93 51925;000 11,983,099-97 1,362,288.00 11,066,244.58 Kansas..... 103 8,567,100 18,682,122.94 | — 2,111,455.00 19,187,549.02 Montana.. er 2,655,000 7,088,229.28 533)237-50 10,456,949.03 Wyoming. Ir 860,000 1,827,242.18 192,345.00 2,651,526.27 Colorad6 io son and ceanitountie soe 4r 5,232,000 18,4945475-74 | 1,131,885.00| - 28.154,527-37 New Mexico... 6 600,000 T,551,07%.31 303,760.00 257751904+23 Oklahoma........ 0.2... 5 250,000 427551347 54,970.00 675,808.91 Indian Territory..... ; ro 595,000 1,084,917.33 127 ,660,00 1,165,204.73 Total of Western States.......] 344 28,014,100 68,540,614.09 6,662,790,50 86,038,545-11 Washington......... . elsidasaece eet 35 4,388,000 6,795,943-30 839,997.50 10,109,342.88 Oregon siccicsoscre nie atacdsdeacs 30 3,020,000 6,351,552.12 818,157.50 8,625,950.45 California............. eeavers 30 5,060,000 10,896,318.41 1,3771445.00 12,099,856.65 Wdahoye cc ssismnrarieunteeewoes Io 600,000 1,066,699.04 164,210.00 2,270,243.44 Utah sss set deccu cia ik ace eae Ir 1,750,000 2,461 804.30 425,640.00 3,801.728.92 NGvadarece sc i0.3G sanwisceteca teen I 82,000 212,164.71 18,450.00 251,037-95 Arizona........ Beel@aGia dibh te wien 5 400,000 797,824.00 146,630.00 1,1355478.93 Total of Pacific States........ 122 15,300,000 28, 582,305.88 3790,530.00 38,293,639.22 Total of Country Banks...... 3276 401,302,835 986,948,632.78 | 144,789,512.50 947,109,253.97 Total of United States..... ..} 3610 631,488,095 | 2,051,009,438.17 | 198,920,670,00 | 1,853,349,128.50 APPENDIX 575 No. 27.— ABSTRACT OF REPORTS OF NATIONAL BANKS, OCTOBER 5, 1897, BY STATES.— Continued. Reserve held Reserve 2 7 ; Redemption Ratio of required Specie Legal tenders ee fund with oleae © | reserve to 8 treasurer © deposits $ 2,372,065.47 |$ 937,839.90] $ 758,562 | 3.038,512.57 |$ 99,200.24 |% 4,834,123.71 30.57 1,263,395.96 654,579.33 361,568 1,536,068. 61 61,498.50 2,613,714.44 31.03 819,374.58 435,356.66 235,583 741,411.78 33,380.75 1,445,732.19 | 26,47 601,136.70 266,871.65, 349,228 305,053.12 21,641.25 942.794.02 23.53 953,211.02 569,153.08 534,908 550,161.93 43,350.44 1,697,579.45, 26.71 585,275.95 269,478.30 286,253 639,516.35 14,240.00 1,209,487.65 31.00 907,122.18 566,680.80 426,050 912,955.72 54,090.00 1,959,776.52 32.41 303,776.39 145,290.40 159,512 253,653.39 10,675.50 569,131.29 28.10 285,680.46 188,437.45 112,561 272,299.65 11,925.00 585,223.10 30.73, 45743,037.9T 32170,930.17 2,490,764 59143,522.23 209,935-25 11,015,151.65 34.84 267,430.62 162,976.54 95,870 285,207.88 12,659.50 556,713.92 31.23 1,966,345-17 934,024.75 423,829 2,990,700.67 163,401.94 41511,956.36 34-42 2,708,755-71 1,933,883.79 961,796 2;690,058.55 79)5T4.50 5,665,252.84 31-37 17,776,608.12 10,235,502.82 7,196,484 19,359,122.45 815,527.87 37,606.637.14 31.73 91475,190.01 4,828,614.40 31527,702 13,210,055.03 516,045.15 | 22,072,416.58 34-94 4,947:899.89 | 4,456,391.62 1,653,000 7,263,167.21 223,290.80 | 13,595,849.63 41.22 71443575818 319445548.63 1,811,718 12,741,167.21 275,800.75 | 17,773.234-59 35-82 451545721.07 1,864,437.26 706,086 6,543,245.48 131,187.50 9244,956.24 33-38 39174,330.05 1,725,278.85 583,606 §,012,253.46 97,337.00 75418,475.31 35.06 2,355,393+25 1,072,725.56 393,089 45359,664.25 56,675.00 5,882,153.8r 37-46 45257 581.37 2,216,723.69 1,091,428 6,040,890.26 164,901.50 9,513,943-45 33-52 1,168,484.47 516,192.78 295,389 1,719,453.08 51,460.75 2,582,495. 61 33-15, 36,977,358.29 | 20,624,912.79 10,052,018 55,889,895.98 | 1,516,698.45 | 88,083,525.22 35-73 843,877.29 242,521.20 289,843 1,708,277.87 20,924.50 2,261,566.57 40.20 647,210,62 346,452.32 189,985 1,153,763.01 21,323.75 1,711,524.08 39.67 1,7515723.19 724,048.72 438,558 2,808,248.86 67,924.00 4,038,779.58 34.58 2,929,68.40 1,488,740.86 706,754 51550,958.89 103,527.58 7,849,981.33 40.19 1,552,363.18 839,961.75 432,526 3)239,730.87 27,357.00 4,539,575.62 43.86 3951457-04 200,037.75, 53,102 866,356.44 9,652.25 1,129,148.44 42.83 41982,689.68 | 4,342,325.65 1,745,388 7573440815 56,880.75 | 13,879,002.55 45-43 435,079.42 142,455.40 68,110 747,850.61 15,188.00 973,604.01 33.57 97,011.94 41,271.46 46,000 211,841.34 2,812.50 30,925.30 46.68 172,560.12 78,813.30 71,763 392,381.16 6,403.00 549,360.46 47-75 13,407,593.88 8,446,628. 41 4,042,029 24,413,817.20 331,993.33 | 375234,467.04 41.66 1,501,618,92 1,620,236.58 170,664 1,749,081.81 42,040.00 3,582,022.39 35.78 » 1,452,396.73 1,770,880.95 36,458 1,324,623.34 46,453.50 35178,415-79 32.83 1,839,138.76 2,252,952.85 52,579 1,583,729.49 73,631.00 3,962,892.34 32.32 3445147.85 214,634.25 61,458 644,733-97 7,987.50 928,813.72 40.48 575,463.08, 751,497-95 29,344 837,542.39 36,062.50 1,654,446.84 43.12 37,655.69 20,056.00 840 37,834.83 922.50 59,653.33 23.76 169,108.47 141,164.60 38,137 292,243.75 7,830.00 479)375-35 42.52 51919,529.50 6,771,423.18 389,480 6, 469,789.58 214,927.00 13,845,619.76 35.08 14455395352-89 | 76,370,828.45 38,353,558 | 192,508,712.14 | —7,208,458.33 | 311,441,556.92 32.32 452,558,033.19 | 239,387,702.05 149,494,929 | 297 017,805.64 10,021,689.08 | 695,922,125.77 31.70 576 REPORT OF THE Mi ONE TARY COMMISSION No. 28.—DISTRIBUTION OF COIN RESERVES OF NATIONAL BANKS, OCTOBER 5, 1897. 7 Total gol Deposits, (Gece ceeaits Silver dol- | Total gold and silver tae October 5, 1897 icates) lars held silver held required by Sec. 32 of plan New York City. $ 506,897,545.15 |$77,993,560.50 |$ 92,988 |$ 78,086,548.50 /$ 31,681,096.57 Chicago 105,71 4,526.92 17,178,670.00 182,103 17,360,773.06 6,607,157.93 St. Louisecicce sires esses 33,021,396.66 1,591,142.50 23,916 1,615,058.50 2,063,837.29 otal sce Consanae asd 645,633,468.73 96,763,373.00 299,007 97,062,380.00 40,352,091.79 Boston vyias se eccieenees 153,967,503.31 8,579,075.50 74,451 8,653,526.50 9,622,968.95 Albanyjs oj Saree: (ap iiiteres bint Wiesioae SSR Scare ih iol So MS hae meter vet ieee i ppigirarortai hese th rhcmrooe whet} Ao Sere Set OI Ororpe atte on re a hart te eae ede semana ara ee Sasa: iad ? ae * Reerne pst ¥ . aoe Saintes tae: ere eee 5 a ao ae ce Anew ~ a ad aa sh cate ah Ree race couthoniete nagen nearest Oe rle PNY ar pibiees Dee hein bois pprertrie Pry SO a are gos sa oe mute es coe eepaie eee aes ire eileen iin don ckceenr a: oer Soro Se! ae ie igee at esitten rie me SEPA, eS adie cnn meetaney Pesee serene San ene ee Sere Le een oe > pare * pore a Gen dav tpkeie oe t eter Rats ton nate nce na thn as ie See Se ipo nage eee ent S, ones SS aS = pate Sees aera SSS tig maemo ee ve RE Raa pete terse Poe er reecenetmenererarearet Spero pte eracen tees Sg ee ee oo aA cd sete a erence Kigeinenin ace ttes 3 aes wi celeritete Sacaereteicemnoaaen Leer St el eae ees Mae hal cial aay Petpet 2 oe ae a nie ir ee. won LSM cn cote ee np cme wi ata one eta ihe Oe al tal Paar bes Seaweomes ne ne